PROSPECTUS
[MEDQUIST LOGO]
917,400 Shares
Common Stock
This Prospectus relates to the sale by certain shareholders of the
Company (the "Selling Shareholders") of 917,400 shares (the "Offered Shares") of
MedQuist Inc.'s (the "Company" or "MedQuist") common stock, no par value per
share ("Common Stock").
The Company will not receive any proceeds from the sale of the Offered
Shares of Common Stock by the Selling Shareholders.
No underwriter is initially being utilized in connection with this
offering. The Company will pay all expenses incurred in connection with this
offering other than fees and expenses (including underwriting fees and selling
commissions) of the Selling Shareholders. See "Plan of Distribution."
See "Risk Factors" beginning on page 4, for a discussion of certain factors
that should be considered by prospective purchasers of the shares of Common
Stock offered hereby.
The sale, transfer and/or distribution of the Offered Shares of Common
Stock by the Selling Shareholders, or by their pledgees, donees, transferees or
other successors in interest, may be effected from time to time through brokers,
agents, dealers or underwriters in one or more transactions (which may involve
crosses and principal trades, including block transactions), in special
offerings, negotiated transactions, exchange distributions or secondary
distributions, or in connection with short-sale transactions, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In addition, any Offered Shares of Common Stock that qualify for sale
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), may be sold under Rule 144 rather than pursuant to this
Prospectus. The Selling Shareholders may pay commissions or other compensation
to broker-dealers in connection with such sales, which may be in excess of
customary commissions charged for Nasdaq National Market transactions. See "Plan
of Distribution."
The Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol "MEDQ." On July 31, 1998, the last sale
price of Common Stock, as reported by the Nasdaq National Market, was $23.125
per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August 3, 1998.
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AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-3 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") relating to the shares of Common Stock offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement and in the amendments, exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
amendments, exhibits and schedules thereto for further information with respect
to the Company and the securities offered hereby. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement shall be qualified in its entirety by
such reference.
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 and information statements, and other
information with the Commission. Proxy and information statements concerning the
Company, reports and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices in New York (Seven World Trade Center, Suite 1300, New York, New York
10048) and Chicago (Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511). Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, including
MedQuist, that file electronically with the Commission.
The Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol "MEDQ". Report, proxy statements and other
information concerning the Company may be inspected at the offices of The Nasdaq
Stock Market, Inc. located at 1735 K Street NW, Washington, DC 20006-1500.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WITH RESPECT TO
MEDQUIST WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY
SUCH DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS STATEMENT IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST. WRITTEN REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED
TO THE CORPORATE SECRETARY, MEDQUIST INC., FIVE GREENTREE CENTRE, SUITE 311,
MARLTON, NEW JERSEY 08053, AND TELEPHONE REQUESTS MAY BE DIRECTED TO THE
CORPORATE SECRETARY AT (609) 596-8877.
The following documents previously filed with the Commission pursuant
to the Exchange Act are incorporated herein by this reference: (i) MedQuist's
Annual Report on Form 10-K for the year ended December 31, 1997 (including those
portions of MedQuist's proxy statement for its 1998 annual meeting of
shareholders incorporated by reference therein) ("MedQuist's Annual Report");
(ii) MedQuist's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; (iii) MedQuist's Current Reports on Form 8-K dated May 11, 1998 and May
28, 1998; (iv) MedQuist's Current Report on Form 8-K/A dated June 29, 1998; and
(v) the description of MedQuist Common Stock in MedQuist's Registration
Statements filed pursuant to Section 12 of the Exchange Act, and any amendment
or report filed for the purpose of updating any such description.
All documents filed by MedQuist pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date any such document is filed.
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 hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall be deemed, except as so modified or superseded, to
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constitute a part hereof. 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,
except to the extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS OTHER THAN THE
INFORMATION CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MEDQUIST.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION WHERE IT IS UNLAWFUL
TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY ISSUANCE OF ANY SECURITIES DESCRIBED HEREIN SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CORPORATION SUBSEQUENT TO THE RESPECTIVE DATES AS OF WHICH
INFORMATION IS GIVEN HEREIN.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this Prospectus, the
words "anticipate," "believe," "estimate," "expect" and similar expressions, as
they relate to MedQuist or its management, are intended to identify such
forward-looking statements. MedQuist's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed below. See "Risk Factors." Prospective
investors should carefully consider such factors as well as the other
information set forth in this Prospectus in evaluating the shares of Common
Stock offered by this Prospectus.
THE COMPANY
MedQuist is a leading national provider of electronic transcription and
information management solutions to the healthcare industry. Through its
proprietary software, open architecture environment and network of more than
2,800 trained transcriptionists, MedQuist converts free-form medical dictation
into electronically formatted patient records which healthcare providers use in
connection with patient care and for other administrative purposes. MedQuist's
customized outsourcing services enable clients to improve the accuracy of
transcribed medical reports, reduce report turnaround times, shorten billing
cycles and reduce overhead and other administrative costs.
MedQuist was incorporated in New Jersey in 1987 as a group of
out-patient healthcare businesses affiliated with a non-profit healthcare
provider. By the end of 1995, MedQuist had divested all of its non-medical
transcription businesses. Since the acquisition of Transcriptions, Ltd. ("TL")
(a wholly-owned subsidiary of MedQuist) in 1994, MedQuist has acquired 15
smaller medical transcription companies, including Digital Dictation, Inc.
("DDI") on May 28, 1998.
MedQuist's executive offices are located at Five Greentree Centre,
Suite 311, Marlton, New Jersey 08053 and the telephone number for MedQuist is
(609) 596-8877.
RISK FACTORS
Risks Associated With Acquisitions Generally
MedQuist acquired TL in May 1994 and since that time has made 15 other
acquisitions of smaller transcriptions companies. MedQuist's continued growth
strategy anticipates additional acquisitions. In connection with that strategy,
MedQuist has registered an additional 1,000,000 shares of its common stock in a
delayed or continuous offering to provide registered shares for future
acquisitions. The success or failure of such a strategy will depend on many
factors, including MedQuist's ability to identify suitable acquisition
candidates, the purchase price, the availability and terms of financing, and
management's ability to integrate effectively the acquired businesses or
technologies into MedQuist's operations. In addition, MedQuist may be required
to incur additional indebtedness or other liabilities, which could have a
material adverse effect on MedQuist's liquidity and capital resources, or issue
shares of its capital stock, which could result in dilution to its shareholders.
There can be no assurance that MedQuist will be successful in its efforts to
identify suitable acquisition candidates, finance such acquisitions, negotiate
terms favorable to MedQuist for, or to consummate, any such acquisition or, if
any such acquisition is consummated, to integrate the acquired businesses into
MedQuist's operations. In addition, MedQuist cannot assure that a given
acquisition, if consummated, will not have a material adverse effect on
MedQuist's business, financial condition and results of operations.
Risks Associated With The Acquisition of DDI
One of the reasons for the acquisition of DDI was the opportunity to
achieve operating efficiencies as a result of the combination of the two
companies. No assurance can be given that difficulties will not be encountered
in the integration of the operations of DDI into TL, or that the benefits and
attendant cost savings possible from such integration ultimately will be
realized. Any delays or unexpected costs incurred in connection with such
integration could have a material adverse effect on the results of operations or
financial condition of MedQuist. In addition, because DDI maintains a
centralized processing system, if DDI's facility in Vienna, Virginia is
destroyed, DDI would be unable to provide services to its customers.
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Dependence on Key Personnel
MedQuist's success is dependent, in part, upon its ability to attract
and retain its key managerial personnel. The loss of services of certain of
MedQuist's executive officers for any reason or the inability of MedQuist to
attract additional management personnel could have a material adverse effect
upon MedQuist's business, financial condition or results of operations. MedQuist
does not have key-man insurance on any of its executive officers.
Rapid Technological Change
The healthcare information services industry is characterized by rapid
technological change, evolving customer needs and emerging technical standards.
The introduction of competing services or products incorporating new
technologies, such as voice recognition capabilities, and the emergence of new
technical standards could render some or all of MedQuist's services as
unmarketable. MedQuist believes that its future success is dependent in part on
its ability to enhance its current services and develop new services that keep
pace with technological developments and emerging technical standards, and that
address the increasingly sophisticated needs of its customers. There can be no
assurance that MedQuist will be successful in developing and marketing
enhancements to its existing services or new services that respond to
technological developments, emerging technical standards, or evolving customer
needs, on a timely basis or at all, or that any such enhancements or new
services, if developed and introduced, will achieve market acceptance. The
failure of MedQuist to develop and introduce service enhancements and new
services in a timely and cost-effective manner in response to changing
technologies or customer requirements, would have a material adverse effect on
MedQuist's business, financial condition and results of operations.
Ability to Attract Qualified Transcriptionists
MedQuist's success is also dependent, in part, upon its ability to
attract and retain qualified transcriptionists, who can provide the accuracy and
turnaround time required by MedQuist's customers. Competition for
transcriptionists is intense. No assurance can be given that MedQuist will be
successful in attracting and retaining the personnel necessary to conduct its
business successfully. The inability of MedQuist to attract, hire, assimilate
and retain such personnel would have a material adverse effect upon MedQuist's
business, financial condition and results of operations.
Potential Additional Employment Costs
MedQuist and DDI take the position that its transcriptionists are
independent contractors for state tax, benefits and unemployment purposes and
statutory employees for federal income tax and social security tax purposes.
Each of MedQuist's and DDI's position may be disputed by federal and state
officials, which, if successful, could result in the incurrence of additional
employment costs and penalties by MedQuist, and could have a material adverse
effect on MedQuist's business, financial condition and results of operations.
Potential for Significant Fluctuations in Quarterly Operating Results
MedQuist may, in the future, experience significant quarter to quarter
fluctuations in its results of operations. Such fluctuations may result in
volatility in the price of MedQuist Common Stock. Quarterly results of
operations may fluctuate as a result of a variety of factors, including demand
for MedQuist's services, the timing of introduction of new services and service
enhancements by MedQuist or its competitors, market acceptance of new services,
the size and timing of individual customer contracts, changes in customer
budgets, the size and timing of acquisitions, the integration of acquired
businesses into MedQuist's operations, the number and timing of new hires,
competitive conditions in the industry and general economic conditions. Further,
MedQuist's contracts generally involve a significant commitment and may require
time-consuming authorization procedures within the customer's organization. For
these and other reasons, the sales cycles for MedQuist's services are typically
lengthy and subject to a number of factors outside of MedQuist's control. As a
result, MedQuist's revenues are difficult to forecast. Accordingly, MedQuist
believes that period to period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
results of operations. In addition, MedQuist's transcription business has
experienced growth in recent periods as a result of both internal growth and
acquisitions, and there can be no assurance that the rate of growth in revenues
and profits achieved by MedQuist's transcription business in recent periods can
be maintained in the future. Due to the foregoing factors, it is possible that
in future quarters MedQuist's operating results will be below the expectations
of public market analysts and investors. Such an event would have a material
adverse effect on the price of MedQuist Common Stock.
Potential Volatility of Stock Price
The market price of the Common Stock has been, and may in the future
be, highly volatile. Factors such as announcements with respect to healthcare
reform measures, acquisitions and operating results, announcements of
technological innovations or new products or services by MedQuist or its
competitors, government regulation, healthcare
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legislation, fluctuations in MedQuist's operating results and general market and
economic conditions could cause the market price of the Common Stock to
fluctuate substantially. In addition, the stock market in general has
experienced extreme price and volume fluctuations which has resulted in
substantial volatility of healthcare service companies that has often been
unrelated to the operating performance of these companies. These or other
factors may adversely affect the market price of MedQuist Common Stock.
Dependence on Single Line of Business
MedQuist anticipates that its future revenues will be derived solely
from the business of providing electronic transcription services to hospitals
and other healthcare organizations on an outsourced basis. MedQuist's future
success will depend in part on the continued market acceptance of its
transcription services and the continued trend towards outsourcing of
transcription services to third-party providers such as MedQuist. A reduction in
demand or increase in competition in the market for its transcription services,
or decline in sales of its transcription services, would have a material adverse
effect on MedQuist's business, financial condition and results of operations, if
not replaced with another line of business.
Changes in the Healthcare Industry
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the outsourcing arrangements of healthcare
providers. Many federal and state legislators from time to time announce
proposed programs to reform the United States healthcare system at both the
federal and state level. These programs may contain proposals to increase
governmental involvement in healthcare, lower reimbursement rates and otherwise
change the environment in which providers operate. Healthcare providers may
react to these proposals and the uncertainty surrounding such proposals by
curtailing outsourcing arrangements or deferring decisions regarding the use of
outsourced services. In response to this environment, many healthcare providers
are consolidating to create larger healthcare delivery organizations. This
consolidation reduces the number of potential customers for MedQuist's services,
and the increased bargaining power of these organizations could lead to
reductions in the amounts paid for MedQuist's services. The impact of these
developments in the healthcare industry is difficult to predict and could have a
material adverse effect on MedQuist's business, operating results and financial
condition.
Inability to Expand Into New Markets
To date, MedQuist's services have been purchased primarily by the
medical records departments of hospitals. However, healthcare services are
increasingly being provided at sites other than hospitals, such as outpatient
clinics and physician practice groups. MedQuist intends to attempt to increase
its limited presence in these alternate site markets. In addition, MedQuist
intends to market its services to direct patient care departments within
hospitals. Because MedQuist has limited experience in non-hospital markets and
in direct patient care departments within hospitals, it may find that
significant modifications to its services are necessary before they become
useful to a customer or that pricing may have to be adjusted downward. Further,
because MedQuist intends to market its services to more departments within
hospitals, and to hospital related clinics and physician practice groups,
purchases of MedQuist's services to these new clients will require approval by
different managers at the customer as opposed to the medical records department
managers by whom MedQuist is better known. MedQuist's business, operating
results and financial condition may be materially and adversely affected if such
efforts are not successful.
Competition
The transcription services industry remains highly fragmented and
primarily consists of small, local or regional companies. As a result, MedQuist
competes with a large number of third party transcription companies that offer
services that are similar to MedQuist's services and that target the same
customers and qualified transcriptionists as MedQuist. MedQuist believes that
its ability to compete depends upon many factors within and outside of its
control, including the timing and market acceptance of new services and service
enhancements developed by MedQuist and its competitors, service quality,
performance, price, reliability, customer service and support and ability to
attract qualified transcriptionists. In addition, the potential exists for large
companies that do not currently provide transcription services, but which
currently provide other services to the healthcare industry, to enter the
transcription services field. Such potential competitors could have
substantially greater financial, technical and marketing resources than
MedQuist. As a result, such potential competitors, if they were to enter the
transcriptions business, could be able to respond more quickly to evolving
technological developments, changing customer needs or emerging technical
standards or to devote
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greater resources to the development, promotion or sale of their services.
MedQuist's services also compete with the in-house transcription staffs of
potential customers. While MedQuist believes that its growth and earnings have
significantly benefited from the outsourcing by healthcare providers of
non-patient care functions, including transcription services, the current trend
could change direction and cause such healthcare providers to bring all or some
of those services in-house. Competition may increase due to consolidation of
transcription companies. In addition, current and potential competitors may
establish cooperative relationships among themselves or with third parties to
increase the ability of their services to address the needs of MedQuist's
current and prospective customers. Increased competition may result in price
reductions for MedQuist's services, reduced operating margins and the inability
of MedQuist to increase its market share, any of which would have a material
adverse effect on MedQuist's business, financial condition and results of
operations. There can be no assurance that MedQuist will be able to compete
successfully against current or future competitors or that competitive pressures
will not have a material adverse effect on MedQuist's business, financial
condition and results of operations.
Dependence on Proprietary Rights; Risks of Infringement
MedQuist's success is dependent upon its proprietary technology.
MedQuist regards the software underlying its services as proprietary, and relies
primarily on a combination of contract, copyright and trademark law, trade
secrets, confidentiality agreements and contractual provisions to protect its
proprietary rights. MedQuist has no patents or patent applications pending, and
existing trade secrets and copyright laws afford only limited protection.
Despite MedQuist's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of MedQuist's software or to obtain and use
information that MedQuist regards as proprietary. Policing unauthorized use of
MedQuist's software is difficult. There can be no assurance that the obligations
to maintain the confidentiality of MedQuist's trade secrets and proprietary
information will effectively prevent disclosure of MedQuist's confidential
information or provide meaningful protection for MedQuist's confidential
information if there is unauthorized use of disclosure, or that MedQuist's trade
secrets or proprietary information will not be independently developed by
MedQuist's competitors. There can be no assurance that any copyrights owned by
MedQuist will provide competitive advantages for MedQuist's products or will not
be challenged or circumvented by its competitors. Litigation may be necessary to
defend against claims of infringement, to enforce copyrights of MedQuist, or to
protect trade secrets and could result in substantial cost to, and diversion of
efforts by, MedQuist. There can be no assurance that MedQuist would prevail in
any such litigation.
MedQuist is not aware that any of its software, trademarks, or other
proprietary rights infringe the proprietary rights of third parties. However,
there can be no assurance that third parties will not assert infringement claims
against MedQuist in the future. Any such claims, with or without merit, can be
time consuming and expensive to defend or require MedQuist to enter into royalty
or licensing agreements or cease the infringing activities. The failure to
obtain such royalty agreements, if required, and MedQuist's involvement in such
litigation, could have a material adverse effect on MedQuist's business, results
of operations and financial condition.
Confidentiality Requirements
The medical information transcribed by MedQuist is of an extremely
sensitive nature. In providing its services, MedQuist is subject to certain
contractual, statutory, regulatory and common law requirements regarding the
confidentiality of such medical information. MedQuist requires its personnel to
agree to keep all medical information confidential and monitors compliance with
applicable confidentiality requirements. Failure to comply with such
confidentiality requirements could result in material liability to MedQuist.
Year 2000
There are numerous issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "year 2000 problem"
is pervasive and complex as virtually every computer operation will be affected
in some way by the rollover of the two-digit year value to 00. The significant
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. MedQuist relies on its systems in operating and monitoring all aspects of
its business. MedQuist also relies on the external systems of its customers,
suppliers and other organizations with which it does business. Management is in
the process of assessing its internal and external systems to assure MedQuist is
prepared for the year 2000. Management does not anticipate that MedQuist will
incur significant expenses or be required to invest heavily in computer systems
improvements to be year 2000 compliant. However, significant uncertainty exists
concerning the potential costs and effects associated with any year 2000
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compliance. To date, no material issue has been identified as they relate to
MedQuist's efforts to identify year 2000 issues. However, despite MedQuist's
efforts thus far to address year 2000 compliance, MedQuist cannot guarantee that
all internal or external systems will be compliant, or that its business will
not be materially adversely affected by any such non-compliance.
Certain Anti-Takeover Provisions
The New Jersey Shareholders Protection Act prohibits MedQuist from
entering into certain business combination transactions with any stockholder of
MedQuist which owns 10% or more of the outstanding voting securities of
MedQuist, except under certain limited circumstances. In addition, MedQuist's
Amended and Restated Certificate of Incorporation gives the Board of Directors
the authority without stockholder approval to issue shares of Preferred Stock,
in one or more series, with rights, preferences and privileges that could
adversely affect the voting power and the other rights of the holders of the
Common Stock. MedQuist's Certificate of Incorporation provides for staggered
terms for the members of the Board of Directors such that no more than one-third
of its members stands for reelection in any one year. MedQuist has also entered
into certain severance arrangements which provide for payments to certain of its
officers upon a "change in control" (as defined therein) of MedQuist. Moreover,
the terms of the 1992 Option Plan provide that outstanding options automatically
vest and become exercisable upon a change in control. These provisions and
arrangements may have the effect of delaying, deferring or making more costly a
change in control of MedQuist including transactions in which stockholders might
otherwise receive a premium for their shares over the then current market price
and, therefore, could adversely effect the market price of the Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Offered
Shares of Common Stock.
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SELLING SHAREHOLDERS
The following table sets forth the names of the Selling Shareholders
and certain information regarding the beneficial ownership of Common Stock by
the Selling Shareholders as of June 29, 1998, and as adjusted to reflect the
sale of all of the Offered Shares of Common Stock. However, there can be no
assurance that any of the Selling Shareholders will in fact sell any or all of
the Offered Shares of Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership
After Offering (1)
Number of --------------------
Shares
Beneficially Percent of
Owned Prior Number of Class (if
to Shares Number Greater
Registration Registered of Shares than 1%)
------------ ---------- --------- ----------
<S> <C> <C> <C> <C>
Richard D. Cameron (2) 441,231 430,424 10,807 --
Deborah Ann Hamilton (3) 14,726 14,726 0 --
Proactive Partners, L.P. (4) 268,922 268,922 0 --
Lagunitas Partners, L.P. (4) 122,954 122,954 0 --
Gruber & McBaine International (4) 14,350 14,350 0 --
Margaret Denekas 33,012 33,012 0 --
Toni Carlton 33,012 33,012 0 --
</TABLE>
- ---------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes voting or investment power with respect to the shares
beneficially owned. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days after June 29, 1998 are
deemed outstanding for computing the percentage ownership of the person holding
such options or warrants, but are not deemed outstanding for computing the
percentage ownership of any other person.
(2) Includes 10,807 shares of Common Stock issuable upon the exercise of stock
options that will be exercisable within 60 days of June 29, 1998. Does not
include 14,724 shares of Common Stock held by Deborah Ann Hamilton. Mr. Cameron
is the husband of Ms. Hamilton, and Mr. Cameron may be deemed to beneficially
own the shares of Common Stock held by Ms. Hamilton. Mr. Cameron, the former
Chairman and Chief Executive Officer of DDI, has entered into a one year
employment agreement with TL pursuant to which he will earn a base salary of
$100,000.
(3) Does not include 441,231 shares of Common Stock held by Richard D. Cameron.
Deborah Ann Hamilton is the wife of Richard D. Cameron, and therefore may be
deemed to beneficially own the shares of Common Stock held by Mr. Cameron.
(4) The number of shares indicated for each of Proactive Partners, L.P.,
Lagunitas Partners, L.P. and Gruber & McBaine International includes only the
shares of Common Stock held in the name of such entity. Each of Proactive
Partners, L.P., Lagunitas Partners, L.P. and Gruber & McBaine International are
affiliates of each other, and each may be deemed to beneficially own the shares
of Common Stock held by each other. Proactive Partners, L.P., Lagunitas
Partners, L.P. and Gruber & McBaine International are affiliates of Charles C.
McGettigan and Myron A. Wick, III, former directors of DDI.
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The Offered Shares being registered hereunder on behalf of Richard D.
Cameron, Deborah Ann Hamilton, Proactive Partners, L.P., Lagunitas Partners,
L.P. and Gruber & McBaine International are all of the shares of Common Stock
received by such shareholders in connection with the May 28, 1998 exchange of
shares of Digital Dictation, Inc. ("DDI") previously held by such shareholders.
The Offered Shares being registered hereunder on behalf of Margaret Denekas and
Toni Carlton are all of the shares of Common Stock received by such
shareholders in connection with the May 26, 1998 merger of Med-Line
Transcription, Inc and TL. Each of the Selling Shareholders received
registration rights in connection with the aforementioned transactions.
PLAN OF DISTRIBUTION
The Selling Shareholders or their pledgees, donees, transferees or
other successors in interest, may sell all, a portion or none of the securities
offered by them hereby from time to time. Any such sales may be in one or more
transactions on the Nasdaq National Market at prices prevailing at the times of
such sales or in private sales of the securities at prices related to the
prevailing market prices or at negotiated prices. The sales may involve (a) a
block transaction in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (b) a purchase by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus, or (c) ordinary brokerage transactions in which the broker solicits
purchasers. Broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions (which compensation may be in excess of
customary commissions). The Selling Shareholders and any broker-dealers that
participate in the distribution of the shares may be deemed to be underwriters
and any commissions received by them and any profit on the resale positioned by
them might be deemed to be underwriting discounts and commissions under the
Securities Act.
There can be no assurance that the Selling Shareholders will sell any
or all of their shares of Common Stock offered hereby. The Company will receive
no proceeds from any sales of Common Stock hereunder by the Selling
Shareholders.
The Registration Statement of which this Prospectus is a part has been
filed with the Commission by the Company in accordance with an agreement between
the Company and the Selling Shareholders, pursuant to which the Company has
agreed to pay the filing fees, costs and expenses associated with the
Registration Statement.
In addition, any Offered Shares that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus. The Selling Shareholders have advised the Company that they or
their pledgees, donees, transferees or other successors in interest may sell all
or a portion of the securities covered by this Prospectus pursuant to Rule 144
under the Securities Act.
Each of the Selling Shareholders is obligated not to sell, assign or
otherwise transfer the Offered Shares until such time as MedQuist has reported
financial results that cover at least thirty (30) days of consolidated
operations of MedQuist from the date such shareholders received the shares of
Common Stock registered hereunder.
At the time a particular offer of the Offered Shares is made, to the
extent required, a Prospectus Supplement will be distributed which will set
forth the number of shares of Common Stock being offered and the terms of the
offering, including the name or names of any underwriters, brokers, dealers or
agents (whether such party is acting as a principal or as a agent for the
Selling Shareholders), any discounts, commissions or concessions and other items
constituting compensation from the Selling Shareholders and any discounts,
commissions or concessions allowed or re-allowed or paid to dealers.
To comply with securities laws of certain states, if applicable, the
Offered Shares will be sold in such states only through registered or licensed
brokers or dealers. In addition, in certain states the Offered Shares may not be
sold unless they have been registered or qualified for sale in such states or an
exemption from registration or qualification is available or is complied with.
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LEGAL MATTERS
The validity of Common Stock offered hereby has been passed upon for
the Company by Pepper Hamilton LLP.
EXPERTS
The Consolidated Financial Statements and Schedule of the Company
incorporated by reference in this Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The audited financial statements of DDI incorporated by reference in
this Registration Statement have been audited by Hozik & Chanin, independent
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing.
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that information contained herein is correct as of any
time subsequent to its date or that there has not been any change in the facts
set forth in this Prospectus or in the affairs of the Company since the date
hereof.
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TABLE OF CONTENTS
Page
----
Available Information ................ 2
Incorporation of Certain
Information by Reference ......... 2
Special Note Concerning Forward-
Looking Statements ................... 4
The Company .......................... 4
Risk Factors ......................... 4
Use of Proceeds ...................... 8
Selling Shareholders ................. 9
Plan of Distribution ................. 10
Legal Matters ........................ 11
Experts .............................. 11
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MEDQUIST INC.
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PROSPECTUS
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August 3, 1998
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