As filed with the Securities and Exchange Commission on March 5, 1999
Registration No. 333-69687
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MEDQUIST INC.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-2531298
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Five Greentree Centre
Suite 311
Marlton, New Jersey 08053
(609) 596-8877
------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------
John M. Suender
Senior Vice President, General Counsel and Secretary
MedQuist Inc.
Five Greentree Centre
Suite 311
Marlton, New Jersey 08503
---------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
---------------
Approximate date of commencement of proposed sale of the securities
to the public:
As soon as practicable after the
Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. /_/
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /_/
<PAGE>
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. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================
Title Of Each Class Amount of Additional Proposed Maximum Proposed
Of Securities To Securities To Be Offering Price Maximum Amount Of
Be Registered Registered Per Unit Offering Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 142,030 (1)(2) $34.09 (3) $4,842,803 (3)(4) $1,347 (4)
====================================================================================================================
</TABLE>
(1) This Registration Statement covers shares owned by certain selling
shareholders which shares may be offered from time to time by the selling
shareholders.
(2) This Amendment No. 2 relates to an additional 142,030 shares to be offered
pursuant to this Registration Statement on Form S-3. A total of 942,030
shares of MedQuist Common Stock will be registered pursuant to this
Registration Statement on Form S-3. A filing fee for 800,000 of the 942,030
shares to be offered pursuant to this Registration Statement on Form S-3
was previously paid on December 24, 1998 in connection with the
Registrant's filing of this Registration Statement on Form S-3. Such filing
fee was $6,776.53 and was based upon the average of the bid and asked price
of the Common Stock on the Nasdaq National Market on December 17, 1998,
estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
(3) Based upon the average of the bid and asked price of the Common Stock on
the Nasdaq National Market on March 2, 1999, estimated solely for the
purpose of calculating the registration fee in accordance with Rule 457(c)
under the Securities Act of 1933, as amended.
(4) The proposed maximum offering price and the amount of the registration fee
relate to the 142,030 additional shares to be offered pursuant to this
Registration Statement on Form S-3.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(A) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(A), may
determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated March 5, 1999
PROSPECTUS
[MEDQUIST LOGO]
942,030 Shares
Common Stock
Mr. Jeffrey Krieger and Medico Transcription Services, Inc., shareholders
of MedQuist Inc., are offering and selling 942,030 shares of MedQuist common
stock pursuant to this prospectus. MedQuist will not receive any proceeds from
the sale of common stock by Mr. Kreiger or Medico.
Prospective purchasers should consider the "Risk Factors" beginning on
page 2.
Mr. Krieger and Medico may sell their MedQuist common stock in one or more
transactions on the Nasdaq National Market at market prices prevailing at the
time of sale or in private transactions at negotiated prices.
MedQuist common stock trades on the Nasdaq National Market under the symbol
"MEDQ".
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March ___, 1999.
<PAGE>
Table of Contents
Page
----
The Company...................................................................1
Risk Factors..................................................................2
Forward-Looking Statements....................................................8
Where You Can Find More Information...........................................9
Selected Supplemental Financial Data.........................................11
Use of Proceeds..............................................................14
Selling Shareholders.........................................................14
Plan of Distribution.........................................................14
Legal Matters................................................................16
Experts......................................................................16
You should rely only on the information incorporated by reference or
provided in this prospectus. MedQuist has not authorized anyone else to provide
you with different information. Neither Mr. Krieger nor Medico will make an
offer of these shares in any state where the offer is not permitted. You should
not assume that the information in this prospectus is accurate as of any date
other than the date on the front page of this prospectus.
<PAGE>
The Company
Background
MedQuist is a leading national provider of transcription services to the
healthcare industry. MedQuist employs more than 6,000 trained transcriptionists
who utilize MedQuist's proprietary software to convert medical dictation into
electronically formatted patient records which health care providers use in
connection with patient care and for other administrative purposes. MedQuist's
customized 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 1984 and reorganized in 1987 as
a group of out-patient healthcare businesses affiliated with a non-profit health
care provider. By the end of 1995, MedQuist had divested all of its non-medical
transcription businesses. Since May 1994, MedQuist has acquired 18 medical
transcription companies.
Address and Telephone Number of MedQuist
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.
<PAGE>
Risk Factors
In considering whether to acquire MedQuist common stock, you should
consider carefully the risks associated with the ownership of MedQuist common
stock. These risks are described in detail below.
Our growth strategy includes acquisitions and if we are unable to make
acquisitions, or if those acquisitions are not successful, it could have a
material adverse effect on our business, financial condition and results of
operations
As part of our growth strategy, we have made, and plan to continue to make
acquisitions of other companies. We may not be able to make acquisitions in the
future. In addition, any acquisition that we make could have a material adverse
effect on our business, financial condition and results of operations. Future
acquisitions are subject to many risks, including the risks that
o we may not be able to identify suitable companies to buy;
o we may not be able to purchase companies at favorable prices, or at
all;
o we may not be able to obtain financing on favorable terms, or at all,
to pay for future acquisitions and;
o we may not be able to effectively integrate the acquired businesses or
technologies into our operations.
In addition, in order to consummate future acquisitions, we may be required to
borrow money or incur other liabilities, which could have a material adverse
effect on our liquidity and capital resources. We may also be required to issue
additional shares of stock, which could result in dilution to our shareholders.
Our success depends on our key personnel and, if we are not able to retain
them, it could have a material adverse effect upon our business, financial
condition or results of operations
We believe that our success is dependent upon the continued employment of
our senior management team. The loss of services of David A. Cohen, our chief
executive officer, or John A. Donohue, our chief operating officer, for any
reason could have a material adverse effect upon our business, financial
condition or results of operations.
2
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New services or products using new technologies, such as voice recognition,
could render our services obsolete
The introduction of competing services or products incorporating new
technologies, such as voice recognition capabilities or other alternative means
of data entry, could render some or all of our services obsolete. If we are not
successful in improving our current services and developing new services that
keep pace with technological developments on a timely basis, our business,
financial condition and results of operations will be materially and adversely
affected. In addition, we cannot assure you that any improvements or new
services will achieve market acceptance.
Our success depends upon qualified transcriptionists and if we are not able
to hire and retain qualified transcriptionists, it could have a materially
adverse effect on our business
Our success also depends, in part, upon our ability to attract and retain
qualified transcriptionists who can provide the accuracy and turnaround time
required by our customers. Competition for transcriptionists is intense. If we
are not able to attract and retain qualified transcriptionists, it could have a
materially adverse effect on our business, financial condition and results of
operations.
If federal or state officials successfully challenge our treatment of our
at-home transcriptionists as independent contractors, we may have to pay or
incur additional employment costs, taxes and penalties which could have a
material adverse effect on our business, financial condition and results of
operations
We treat most of our at-home transcriptionists as independent contractors
for state tax, benefits and unemployment purposes and as statutory employees for
federal income tax and social security tax purposes. However, we treat at-home
transcriptionists who came to work for us as a result of our acquisition of MRC
as employees for state tax, benefits, unemployment, federal income tax and
social security tax purposes. If federal or state officials successfully
challenge our position regarding treatment of at-home transcriptionists as
independent contractors, we may have to pay or incur additional employment
costs, taxes and penalties which could have a material adverse effect on our
business, financial condition and results of operations.
3
<PAGE>
We may experience significant quarterly fluctuations in our operating
results which could adversely affect the market price of our common stock.
Our operating results have fluctuated from quarter to quarter in the past
and may continue to do so in the future. These fluctuations adversely affect the
market price of our common stock. Quarterly operating results may fluctuate as a
result of a variety of factors, including:
o changes in demand for our services;
o the size and timing of individual customer contracts;
o changes in customer budgets;
o the size and timing of acquisitions;
o the integration of acquired businesses into our operations;
o the number and timing of new hires;
o long lead-times required to generate revenues from new clients;
o competitive conditions in the industry; and
o general economic conditions.
Because of the foregoing factors, it is possible that in future quarters our
operating results may be below the expectations of stock market analysts and
investors which could have a material adverse effect on the price of our common
stock.
If we are not able to maintain our current rate of growth in revenues and
profits, it could adversely affect the market price of our common stock.
Our revenue and profits have grown in recent periods as a result of both
internal growth and acquisitions. If we are not able to maintain our current
rate of growth in revenues and profits, it could adversely affect the market
price of our common stock.
The market price of our common stock may be volatile
The market price of our common stock has been, and in the future may be,
volatile. Our common stock price may be affected by many factors, including the
following:
o fluctuations in our operating results;
o acquisitions;
o technological innovations or new products or services by us or our
competitors;
o government regulation;
o health care legislation and reforms; and
o general market and economic conditions.
4
<PAGE>
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations. This has resulted in substantial volatility of health
care 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 our common stock.
We depend on a single line of business and any reduction in demand or
increase in competition for our services could have a material adverse effect on
our business, financial condition and results of operations
We anticipate that we will continue to derive our future revenues solely
from providing transcription services to hospitals and other health care
organizations. A reduction in demand or an increase in competition in the market
for our transcription services could have a material adverse effect on our
business, financial condition and results of operations.
Changes in the health care industry could adversely affect the demand for
our services or the amounts we are paid for our services
The health care industry is subject to changing political, economic and
regulatory influences that could adversely affect the demand for our services or
the amounts we are paid for our services. Many federal and state legislators
from time to time propose programs to reform the United States health care
system at both the federal and state level. These programs may contain proposals
to increase governmental involvement in health care, lower reimbursement rates
and otherwise change the environment in which providers operate. Health care
providers may react to these proposals and the uncertainty surrounding these
proposals by curtailing outsourcing arrangements or deferring decisions
regarding the use of outsourced services.
In addition, in response to the changes in the health care industry, many
health care providers are consolidating to create larger health care delivery
organizations. This consolidation reduces the number of potential customers for
our services and increases the bargaining power of these organizations. This
increased bargaining power could reduce the amounts we are paid for our
services. The impact of these developments in the health care industry is
difficult to predict and could have a material adverse effect on our business,
operating results and financial condition.
Our plans to expand into new markets, such as outpatient clinics and
physician practice groups and direct patient care departments within hospitals,
may not be successful
We plan to expand into new markets such as outpatient clinics and physician
practice groups and direct patient care departments within hospitals. Our
business, operating results and financial condition may be materially and
adversely affected if our efforts to expand into new
5
<PAGE>
markets are not successful. To date, our services have been purchased primarily
by the medical records departments of hospitals. However, health care services
are increasingly being provided at sites other than hospitals, such as
outpatient clinics and physician practice groups. We intend to attempt to
increase our limited presence in these non-hospital markets. In addition, we
intend to market our services to direct patient care departments within
hospitals. Our plans to expand into these new markets may not be successful for
many reasons, including the following:
o we have limited experience in these new markets;
o we may find that significant modifications to our services are
necessary in order for our services to be useful to customers in these
new markets;
o we may have to reduce our prices; and
o we will have to establish new contacts.
We compete with many suppliers in the transcription services industry
We compete with over an estimated 1,500 medical transcription service
companies in the United States. These companies offer services that are similar
to ours and compete with us for the same customers and qualified
transcriptionists. We also compete with the in-house transcription staffs of
potential customers. Increased competition may result in lower prices for our
services, higher payroll costs, reduced operating margins and the inability to
increase our market share, any of which would have a material adverse effect on
our business, financial condition and results of operations.
Although many of our competitors are small local or regional companies,
several of our competitors are large national companies including Transcend
Services, Inc., Rodeer Systems, Inc., and a subsidiary of Harris Corp. In
addition, we anticipate increasing competition from other large companies that
were not traditionally in the medical transcription business, such as IDX
Systems Corporation. These current and potential competitors may have
substantially greater financial, technical and marketing resources than us. As a
result, these competitors may be able to respond more quickly to evolving
technological developments or changing customer needs or to devote greater
resources to the development, promotion or sale of their services.
In addition, competition may increase due to consolidation of transcription
companies. Current and potential competitors may establish cooperative
relationships with third parties to increase the ability of their services to
address the needs of our current and prospective customers.
We may not be able to protect our proprietary rights
Our success depends on the software underlying our services. We consider
this software to be proprietary. If our competitors copy our software or
independently develop software
6
<PAGE>
similar to ours, it could materially adversely affect our business,
financial condition and results of operations. Although we seek to protect
this software by a combination of copyright and trademark law, trade
secrets, confidentiality agreements and contractual provisions,
unauthorized parties may attempt to copy some or all of our software or to
obtain and use information that we regard as proprietary. We have no
patents or patent applications pending, and existing trade secrets and
copyright laws afford only limited protection. Policing unauthorized use of
our software is difficult. We may have to resort to litigation to enforce
our proprietary rights. This litigation could be very expensive and divert
our management and key personnel from their normal responsibilities. We
cannot assure you that we would prevail in any litigation.
We may infringe the proprietary rights of others
Other persons or companies may claim that we are violating their
proprietary rights. Any claims, with or without merit, can be time-consuming and
expensive to defend. In addition, we may be required to enter into royalty or
licensing agreements or cease the infringing activities. If we fail to obtain
those agreements or become involved in claims or litigation, it could have a
material adverse effect on our business, results of operations and financial
condition.
We may be subject to material liability if we fail to comply with
confidentiality requirements
We are subject to various laws, regulations and contractual provisions
regarding the confidentiality of medical information. We may be subject to
material liability if we fail to comply with confidentiality requirements.
Our systems may not be Year 2000 compliant which could result in an
inability to transcribe medical records, send invoices or engage in similar
normal business activities for a period of time after January 1, 2000 which
could materially and adversely affect our business, operating results and
financial position
We may experience system failures and disruptions of operations if the
systems on which we depend to conduct our operations are not Year 2000
compliant. This could result in an inability to transcribe medical records, send
invoices or engage in similar normal business activities for a period of time
after January 1, 2000 . We rely on our computer, digital dictation, software,
telephone and other systems in operating and monitoring all aspects of our
business. We also rely heavily on the systems of our customers, suppliers and
other organizations with which we do business. If these systems are not Year
2000 complaint, our business, operating results and financial position could be
materially and adversely affected.
7
<PAGE>
Anti-takeover provisions may make it more difficult for a third party to
acquire control of us, could adversely affect the market price of our common
stock and could reduce the amount that shareholders might receive if we are sold
Anti-takeover provisions contained in New Jersey law and in our charter,
bylaws and contracts could make it more difficult for a third party to acquire
control of us, even if that change in control would be beneficial to
shareholders. These provisions could adversely affect the market price of our
common stock and could reduce the amount that shareholders might receive if we
are sold. These anti-takeover provisions include the following:
o New Jersey law prohibits us from entering into certain business
combination transactions with any shareholder which owns 10% or more
of our outstanding voting securities, except under limited
circumstances.
o Our charter gives our board of directors the authority to issue shares
of preferred stock without shareholder approval. Any preferred stock
could have rights, preferences and privileges that could adversely
affect the voting power and the other rights of the holders of our
common stock.
o Our charter provides for staggered terms for the members of the board
of directors, with each board member serving a staggered three year
term.
o We have entered into severance arrangements with most of our senior
management which provide for payments upon a change in control.
o Options to purchase our stock will immediately become exercisable upon
a change in control.
Forward-Looking Statements
Some of the information in this prospectus may contain forward-looking
statements. Forward-looking statements can be identified by the use of
forward-looking language such as "will likely result," "may," "are expected to,"
"is anticipated," "estimate," "projected," "intends to" or other similar words.
MedQuist's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Forward-looking statements are subject to certain risks and uncertainties,
including but not limited to the risks described below. See "Risk Factors" on
page 2. When considering these forward-looking statements, you should keep in
mind these risk factors and other cautionary statements in this prospectus. You
should not place undue reliance on any forward-looking statement which speaks
only as of the date made.
8
<PAGE>
Where You Can Find More Information
MedQuist Inc. files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements and other information MedQuist files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. MedQuist's SEC filings are also available on the SEC's
Internet site (http://www.sec.gov).
MedQuist has filed a registration statement on Form S-3 to register the
shares of MedQuist common stock offered under this prospectus. This prospectus
is a part of the registration statement on Form S-3 and constitutes a prospectus
of MedQuist. As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement on Form S-3 or the
exhibits to the registration statement on Form S-3.
The SEC also allows MedQuist to "incorporate by reference" the information
it files with the SEC, which means MedQuist can disclose information to you by
referring you to another document filed separately with the SEC. Information
incorporated by reference is deemed to be part of this prospectus. Later
information filed by MedQuist with the SEC updates and supersedes this
prospectus.
This prospectus incorporates important business and financial information about
MedQuist that is not included in or delivered with this prospectus. Copies of
any of that information are available without charge to any person to whom this
prospectus is delivered, upon written or oral request. Written requests for
those 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 by MedQuist with the SEC pursuant
to the Exchange Act are incorporated herein by this reference:
SEC Filings Period
- ----------------------------------------------- ----------------------------
Annual Report on Form 10-K (including those Year ended December 31, 1997
portions of MedQuist's proxy statement for its
1998 annual meeting of shareholders
incorporated by reference to the Annual Report
on Form 10-K)
Quarterly Reports on Form 10-Q (as amended) Quarters ended March 31,
1998, June 30, 1998 and
September 30, 1998
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SEC Filings Period
- ----------------------------------------------- ----------------------------
Current Reports on Form 8-K Filed on May 13, 1998,
June 12, 1998, June 29,
1998, September 29, 1998,
December 15, 1998 and
March 1, 1999
Registration Statement on Form 8-A filed Filed on March 11, 1992
pursuant to Section 12(g) of the Exchange Act
All documents filed by MedQuist pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offering will be deemed to be incorporated by reference
in this prospectus and to be a part of this prospectus from the date that
document is filed.
10
<PAGE>
Selected Supplemental Financial Data
(In thousands, except per share data)
The following data is supplemental to reflect the retroactive restatement
of MedQuist's financial statements for its November 30, 1998 acquisition of TL
of Florida and its December 10, 1998 acquisition of MRC, both of which were
accounted for as pooling of interests and does not include (i) the transaction
costs of approximately $9,500 related to the TLF and MRC acquisitions or (ii)
the restructuring costs associated with severance for former MRC employees and
the closing of duplicate facilities of approximately $6,500, which was charged
to expense in the quarter ended December 31, 1998. Signal and TL of Florida were
"S" corporations prior to their mergers with MedQuist, and accordingly, the
supplemental statements of operations data does not include a provision for
income taxes on their income. See Note 1 to the Supplemental Consolidated
Financial Statements.
MedQuist derived the following financial information from the audited
supplemental financial statements for the years ended December 31, 1995, 1996
and 1997 and from the unaudited supplemental financial statements for the years
ended December 31, 1993 and 1994 and for the nine months ended September 30,
1997 and 1998. Operating results for the nine months ended September 30, 1998
are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1998. This information is only a summary and you
should read it in conjunction with MedQuist's supplemental financial statements
and related notes included elsewhere in this Prospectus and other information
MedQuist has filed with the SEC. See "Where You Can Find More Information."
11
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<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operation Data:
Revenues.............................. $29,738 $59,228 $109,657 $152,109 $216,158 $158,182 $199,790
------- ------- -------- -------- -------- -------- --------
Costs and expenses:
Costs of revenues..................... 24,404 46,873 86,265 118,359 168,596 123,112 154,041
Selling, general and administrative... 5,635 6,184 9,144 12,527 15,001 10,692 12,831
Depreciation.......................... 3,205 2,581 5,752 7,372 10,339 7,454 9,470
Amortization.......................... 12 264 896 3,150 5,652 4,090 2,794
Nonrecurring merger costs............. -- -- 347 644 2,075 -- 2,182
------- ------- -------- -------- -------- -------- --------
Total operating expenses... 33,256 55,902 102,404 142,052 201,663 145,348 181,318
------- ------- -------- -------- -------- -------- --------
Operating income (loss)............... (3,518) 3,326 7,253 10,057 14,495 12,834 18,472
Interest expense (income), net........ 1,689 2,648 4,252 2,049 469 362 (211)
------- ------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes................. (5,207) 678 3,001 8,008 14,026 12,472 18,683
Income tax provision (benefit)........ (1,290) (529) 640 2,720 5,293 4,573 6,935
------- ------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations.......................... (3,917) 1,207 2,361 5,288 8,733 7,899 11,748
Discontinued operations............... 3,746 1,612 (1,729) -- -- -- --
Extraordinary item.................... -- -- (545) -- -- -- --
------- ------- -------- -------- -------- -------- --------
Net income(loss)...................... (171) 2,819 87 5,288 8,733 7,899 11,748
Inducement deduction.................. -- -- -- (707) -- -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss) available to common
shareholders........................ $(171) $2,819 $87 $4,581 $8,733 $7,899 $11,748
======= ======= ======== ======== ======== ======= ========
Basic income (loss) per commons share:
Continuing operations............... $(0.33) $.12 $0.23 $0.22 $0.28 $0.25 $0.36
Discontinued operations............. .32 0.17 (0.17) -- -- -- --
Extraordinary item.................. -- -- (0.05) -- -- -- --
Inducement deduction................ -- -- -- (0.03) -- -- --
------- ------- -------- -------- -------- ------- --------
$(0.01) $(0.29) $0.01 $(0.19) $0.28 $0.25 $0.36
======= ======= ======== ======== ======== ======= ========
Diluted income (loss) per common share:
Continuing operations............... $(0.33) $0.12 $0.22 $0.20 $0.26 $0.24 $0.34
Discontinued operations............. 0.32 0.17 (0.16) -- -- -- --
Extraordinary item.................. -- -- (0.05) -- -- -- --
Inducement deduction................ -- -- -- (0.03) -- -- --
------- ------- -------- -------- -------- -------- --------
$(0.01) $(0.29) $0.01 $(0.17) $0.26 $0.24 $0.34
======= ======= ======== ======== ======== ======= ========
Balance Sheet Data:
Working capital..................... $10,499 $6,453 $13,142 $33,483 $36,302 $31,157 $45,714
Total assets........................ 49,742 85,811 91,191 158,551 173,467 163,987 190,799
Long-term debt, net of current
portion........................... 13,480 39,577 23,342 9,964 7,589 8,515 4,982
Shareholder' equity................. 8,884 12,096 13,065 120,710 131,373 77,061 151,282
</TABLE>
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<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Data:
Income (loss) reported from continuing
operations before income taxes, as
presented........................... $(5,207) $678 $3,001 $8,008 $14,026 $12,472 $18,683
Income tax provision (benefit)........ (1,045) (40) 1,312 3,357 5,975 5,132 7,405
------- ------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations ......................... $(4,162) $718 $1,689 $4,651 $8,051 $7,340 $11,278
======= ======= ======== ======== ======== ======= ========
Income (loss) from continuing
operations per share:
Basic............................... (0.36) 0.07 0.16 0.19 0.25 0.23 0.34
Diluted............................. (0.36) 0.07 0.16 0.18 0.24 0.23 0.33
</TABLE>
13
<PAGE>
Use of Proceeds
All net proceeds from the sale of MedQuist common stock will go to Mr.
Jeffrey Krieger and Medico. Accordingly, MedQuist will not receive any proceeds
from the sale of the shares by Mr. Krieger or Medico.
Selling Shareholders
The following table provides certain information as of the date of this
prospectus regarding Mr. Jeffrey Krieger's and Medico's beneficial ownership of
MedQuist common stock prior to and after the sale of the shares offered under
this prospectus. Beneficial ownership is determined under the rules of the SEC,
and generally includes voting or investment power with respect to securities.
All of the shares being offered by Mr. Krieger were acquired by him as a result
of MedQuist's acquisition of Transcriptions Limited of Florida, Inc. Mr. Krieger
is the former president and former sole shareholder of Transcriptions Limited of
Florida, Inc. 80,000 of the 809,000 shares beneficially owned by Mr. Krieger
prior to the offering are owned of record by MD Oppenheim, as escrow agent. All
of the shares being offered by Medico were acquired by it as a result of
MedQuist's acquisition of Medico. 14,203 of the 142,030 shares beneficially
owned by Medico are owned of record by Mackie & Reilly, as escrow agent. After
the offering, Mr. Krieger and Medico will each own less than one percent of the
outstanding MedQuist common stock.
<TABLE>
<CAPTION>
# of Shares Owned # of Shares Being # of Shares Owned
Prior to the Offering Offered for Sale After the Offering
--------------------- ----------------- ------------------
<S> <C> <C> <C>
Jeffrey Krieger 809,000 800,000 9,000
Medico Transcription Services, Inc. 142,030 142,030 -0-
</TABLE>
Plan of Distribution
Mr. Krieger and Medico may offer their shares of MedQuist common stock at
various times in one or more of the following transactions:
o on the Nasdaq National Market;
o in the over-the-counter market;
o in negotiated transactions;
o in connection with short sales of the MedQuist common stock;
14
<PAGE>
o by engaging in transactions using options to buy or sell shares of
MedQuist common stock;
o in a combination of any of the above transactions.
Mr. Krieger and Medico may sell their shares at market prices prevailing at
the time of sale, at prices related to those prevailing market prices or at
negotiated prices.
Mr. Krieger and Medico may use broker-dealers to sell their shares. If this
happens, broker-dealers will either receive discounts or commissions from Mr.
Krieger or Medico, or they will receive commissions from purchasers of shares
for whom they acted as agents.
Because Mr. Krieger and Medico may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, Mr. Krieger and Medico will
be subject to the prospectus delivery requirements of the Securities Act.
MedQuist has informed Mr. Krieger and Medico that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market.
Upon MedQuist being notified by Mr. Krieger or Medico that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
MedQuist common stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker-dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act disclosing:
o the name of each selling shareholder and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which those shares were sold;
o the commissions paid or discounts or concessions allowed to those
broker-dealer(s), where applicable;
o that those broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
C other facts material to the transaction.
In addition, upon MedQuist being notified by Mr. Krieger or Medico that a
donee or pledgee intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
15
<PAGE>
Legal Matters
John M. Suender, MedQuist's Senior Vice President and General Counsel has
given his opinion that the shares offered by Mr. Jeffrey Krieger and Medico are
legally issued, fully paid and non-assessable. As of the date of this
prospectus, Mr. Suender beneficially owns 47,320 shares of MedQuist's common
stock.
Experts
The audited supplemental consolidated financial statements of MedQuist Inc.
and subsidiaries and the audited consolidated financial statements of MedQuist
Inc. and subsidiaries incorporated by reference in this prospectus and elsewhere
in this registration statement of which this prospectus is a part, have been
audited by Arthur Andersen LLP, independent public accounts, as indicated in
their reports with respect thereto, and are included herein and incorporated by
reference, respectively, in this prospectus in reliance upon the authority of
said firm as experts in giving said reports.
The audited financial statements of The MRC Group, Inc. and subsidiary and
Medical Records Corp. incorporated by reference in this prospectus and elsewhere
in this registration statement of which this prospectus is a part, have been
audited by Arthur Andersen LLP, independent public accounts, as indicated in
their reports with respect thereto, and are incorporated by reference in this
prospectus in reliance upon the authority of said firm as experts in giving said
reports.
The combined restated financial statements of Medical Records Corp. and
affiliate, incorporated by reference in this prospectus and elsewhere in the
registration statement of which this prospectus is a part, have been audited by
Skoda, Minotti, Reeves & Co., independent public accounts, as indicated in their
report with respect thereto, and are incorporated by reference in this
prospectus in reliance upon the authority of said firm as experts in giving said
reports.
16
<PAGE>
PART II
Information not Required in the Prospectus
Item 14. Other Expenses of Issuance and Distribution.
The following table shows the estimated expenses of the issuance and
distribution of the securities offered.
SEC Registration Fee $ 8,124*
Legal fees and expenses 2,000**
Accounting fees and expenses 2,000**
Transfer agent and registrar fees 1,000**
Printing and Miscellaneous 1,000**
-------
TOTAL $14,124
=======
-------------------
* Actual
** Estimated.
Item 15. Indemnification of Directors and Officers
Section 14A:3-5 of the Business Corporation Act of the State of New Jersey
("NJBCA") permits each New Jersey business corporation to indemnify its
directors, officers, employees and agents against expenses and liability for
each such person's acts taken in his or her capacity as a director, officer,
employee or agent of the corporation if such actions were taken in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
proceeding, if he or she had no reasonable cause to believe his or her conduct
was unlawful. Article 10 of the Company's Bylaws provides that the Company, to
the full extent permitted by Section 14A:3-5 of the NJBCA, shall indemnify all
past and present directors or officers of the Company and may indemnify all past
or present employees or other agents of the Company. To the extent that a
director, officer, employee or agent of the Company has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
such Article 10, or in defense of any claim, issue, or matter therein, he or she
shall be indemnified by the Company against expenses in connection therewith.
Such expenses shall be paid by the Company in advance of the final disposition
of the action, suit or proceeding as authorized by the Company's Board of
Directors upon receipt of an undertaking to repay the advance if it is
ultimately determined that such person is not entitled to indemnification.
The Company has a policy insuring it and its directors and officers against
certain liabilities, including liabilities under the Securities Act.
II-1
<PAGE>
Reference is made to Item 17 of this Registration Statement for additional
information regarding indemnification of directors and officers.
Item 16. Exhibits
4.1 Specimen Stock Certificate (Incorporated by reference to Exhibit 4.1 of
the Company's Registration Statement on Form S-1 (No. 333-3050) filed
with the Commission on April 1, 1996).
5.1 Opinion of John M. Suender, Senior Vice President and General Counsel.*
23.1 Consent of Arthur Andersen LLP, filed herewith.
23.2 Consent of Arthur Andersen LLP, filed herewith.
23.3 Consent of Skoda, Minotti, Reeves & Co., filed herewith.
23.4 Consent of John M. Suender, Senior Vice President and General Counsel.*
24.1 Powers of Attorney. *
- ----------------------------------
* Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20
II-2
<PAGE>
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 paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Marlton, State of New Jersey, on March 4, 1999.
MEDQUIST INC.
By: *
------------------------------------
David A. Cohen
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on March 4, 1999
in the capacities indicated:
Signatures Title
---------- -----
* Chairman and Chief Executive Officer
- --------------------------------------- (principal executive officer)
David A. Cohen
/s/ John R. Emery Senior Vice President, Treasurer and
- --------------------------------------- Chief Financial Office
John R. Emery (principal financial officer and
principal accounting officer)
* President, Chief Operating Officer
- --------------------------------------- and Director
John A. Donohoe, Jr.
* Director
- ---------------------------------------
James R. Emshoff
* Director
- ---------------------------------------
William T. Carson
II-4
<PAGE>
* Director
- ---------------------------------------
Richard J. Censits
* Director
- ---------------------------------------
John T. Casey
* Director
- ---------------------------------------
A. Fred Ruttenberg
* Director
- ---------------------------------------
John H. Underwood
* Director
- ---------------------------------------
Terrence J. Mulligan
* Director
R. Timothy Stack
- ---------------------------------------
* Director
- ---------------------------------------
Edward L. Samek
* Director
- ---------------------------------------
Bruce K. Anderson
* Director
- ---------------------------------------
Richard H. Stowe
* By: /s/ John R. Emery
- ---------------------------------------
John R. Emery as Attorney-in-Fact
II-5
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated December 22,
1998 on MedQuist Inc.'s supplemental consolidated financial statements included
in MedQuist Inc.'s Form 8-K filed on March 1, 1999 and to the incorporation by
reference in this registration statement of our report dated September 18, 1998
on the restated consolidated financial statements included in Item 5 in MedQuist
Inc.'s Form 10-Q for the period ended September 30, 1998, and to all references
to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, PA
March 4, 1999
EXHIBIT 23.2
CONSENT OF ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports (i) dated March 3, 1998
(except with respect to the matters discussed in Note 11, as to which the date
is September 18, 1998), on the consolidated financial statements of The MRC
Group, Inc. and Subsidiary included on pages F-27 through F-46 of the S-4
Registration Statement of MedQuist Inc. for the years ended December 31, 1995,
1996 and 1997 and (ii) dated May 1, 1998, on the financial statements of Medical
Records Corp. included on pages F-60 through F-66 of the S-4 Registration
Statement of MedQuist Inc. for the period ended July 19, 1996, all of which are
incorporated by reference in the Form 8-K of MedQuist Inc. dated December 15,
1998 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Cleveland, Ohio,
March 4, 1999
EXHIBIT 23.3
Consent of Skoda, Minotti, Reeves & Co.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 16, 1996
(except with respect to the matters discussed in Note 2, as to which the date is
May 26, 1998) on the combined financial statements of Medical Records Corp. and
Affiliate included on pages F-53 through F-59 of the S-4 Registration Statement
of MedQuist Inc. for the year ended December 31, 1995, all of which are
incorporated by reference in the Form 8-K of MedQuist Inc. dated December 15,
1998, and to all references to our Firm included in this registration statement.
/s/ SKODA, MINOTTI, REEVES & CO.
Mayfield Village, Ohio,
March 4, 1999
