As filed with the Securities and Exchange Commission on August 20, 1997
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
RESPONSE USA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-3088639
------------------------- ----------------
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
11-H Princess Road
Lawrenceville, New Jersey 08648
(609) 896-4500
(Address, Including Zip Code, and Telephone Number, Including
Area Code. of Registrant's Principal Executive Offices)
Richard M. Brooks, President
Response USA, Inc.
11-H Princess Road
Lawrenceville, New Jersey 08648
(609) 896-4500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
___________
Copies to:
Thomas A. Rose, Esq.
Schneck Weltman & Hashmall LLP
1285 Avenue of the Americas
New York, New York 10019
(212) 956-1500
Approximate date of proposed sale to the public: From time to
time after the effective date of this registration statement, as
determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of 1933,
please check the following box and list the Securities Act of
1933 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 of 1933, check the following
box and list the Securities Act of 1933 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. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
Title of Proposed Maximum
Each Class Maximum Aggregate Amount of
of Securities Amount Offering Offering Regis-
To Be To Be Price Per Price Per tration
Registered Registered(1) Security(2) Security(2) Fee
- ------------- ------------- ----------- ----------- ---------
Common Stock, par 4,965,270 $3.50 $17,378,445 $5,266.20
value $.008 per share
("Common Stock") issuable
upon conversion of 1996
Series A Convertible
Preferred Stock
("Preferred Stock")
Common Stock 344,500 $3.50 $1,205,750 $ 365.38
issuable upon
exercise of
Common Stock
purchase warrants
("Warrants")
Total Registration Fee $5,631.58
- ----------------------
(1) Pursuant to Rule 416, the Registration Statement also relates to
an indeterminate number of additional shares of Common Stock
issuable upon the conversion of the Preferred Stock or upon
exercise of the Warrants pursuant to anti-dilution provisions
contained therein, which shares of Common Stock are registered
hereunder.
(2) Estimated solely for purposes of calculating the registration fee.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933,
or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a) may determine.
RESPONSE USA, INC.
5,309,770 Shares of Common Stock
This Prospectus relates to the sale of 5,309,770 shares of common
stock, $.008 par value per share (the "Common Stock"), of Response USA,
Inc. (the "Company"), by certain selling stockholders (the "Selling
Stockholders"). Of such shares of Common Stock (i) 4,965,270 shares may
be sold after issuance upon conversion of the Company's 1996 Series A
Convertible Preferred Stock (the "Preferred Stock"), and (ii) 344,500
shares of Common Stock may be resold after issuance upon exercise of
certain common stock purchase warrants (the "Warrants") issued to the
holders of the Preferred Stock. Additional shares of Common Stock that
may become issuable as a result of the antidilution provisions of the
Preferred Stock and the Warrants are offered hereby pursuant to Rule 416
under the Securities Act of 1933, as amended (the "Securities Act").
The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Stockholders, but will receive the exercise
price payable upon the exercise of the Warrants, if exercised. There can
be no assurance that all or any part of the Warrants will be exercised.
All expenses incurred in connection with this offering are being borne
by the Company (which expenses are estimated to be approximately $30,000),
other than any commissions or discounts paid or allowed by the Selling
Stockholders to underwriters, dealers, brokers or agents.
The Selling Stockholders have not advised the Company of any
specific plans for the distribution of the shares of Common Stock being
offered by them hereby, but it is anticipated that such shares of Common
Stock may be sold from time to time in transactions (which may include
block transactions) on The Nasdaq Small Cap Market ("Nasdaq") at the
market prices then prevailing. Sales of the shares of Common Stock may
also be made through negotiated transactions or otherwise. The
Selling Stockholders and the brokers and dealers through which the sales
of the shares of Common Stock may be made may be deemed to be"underwriters"
within the meaning set forth in the Securities Act, and their commissions
and discounts and other compensation may be regarded as underwriters'
compensation. See "Plan of Distribution."
The Company has informed the Selling Stockholders that the
antimanipulative rules under the Securities Exchange Act of 1934, and
Regulation M, may apply to their sales in the market and has furnished
the Selling Stockholders with a copy of these rules. The Company has
also informed the Selling Stockholders of the need for delivery of copies
of this Prospectus.
The Common Stock is traded in the over-the-counter market and is
quoted on The Nasdaq SmallCap Stock Market ("Nasdaq") under the symbol
RUOK. On August 18, 1997, as reported by Nasdaq, the closing bid price
for the Common Stock was $3.50 per share.
_________________________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS
OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS." (PAGE 5)
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission, Washington, D.C. (the "Commission") a Registration
Statement on Form S-3 under the Securities Act of 1933 (the
"Act") with respect to the securities offered by this Prospectus.
For further information with respect to the securities offered
hereby, reference is made to the Registration Statement and to
the exhibits listed in the Registration Statement.
The Company is subject to the information requirements of
the Securities Exchange Act of 1934 and in accordance therewith
files reports, proxy statements and other information with the
Commission. Reports, Proxy Statements and other information can
be inspected and copies made at the public reference facilities
of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices:
7 World Trade Center, New York, New York, 10007, and Room 1204 Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago,
Illinois, 60604. Copies can also be obtained at prescribed rates from
the Commission's Public Reference Section, Judiciary Plaza, 450 Fifth
Avenue, N.W., Washington, D.C. 20549. The Commission also maintains
a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrant's that
file electronically.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for its
fiscal year ended June 30, 1996,(including Amendments No. 1
and 2 thereto), the Quarterly Reports on Form 10-QSB for the
quarters ended September 30, 1996 (including Amendments No. 1
and 2 thereto), December 31, 1996 (including Amendments No. 1
and 2 thereto), and March 31, 1997, and the description of the
Company's Common Stock contained in its Registration Statement
on Form S-3 filed with the Commission on April 11, 1996, as
amended, and the Company's Reports on Form 8-K, dated as of
September 30, 1996, March 12, 1997 and July 9, 1997 (including
Amendment No. 1), all of which have been previously filed
with the Commission, are incorporated in this Prospectus
by reference. All documents filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date hereof and prior to the
termination of the offering made hereby are also incorporated
by reference herein and made a part hereof from the date of
filing of such documents. Any statement contained in a
document incorporated by reference herein is modified or
superseded for all purposes to the extent that the statement
contained in this Prospectus or in any other
subsequently filed document which is incorporated by
reference modifies or replaces such statement. The Company
will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a
copy of all documents incorporated herein by reference (not
including the exhibits to such documents, unless such
exhibits are specifically incorporated by reference in such
documents).
PROSPECTUS SUMMARY
The following is a summary of certain
information contained in this Prospectus and is qualified in
its entirety by the more detailed information, Consolidated
Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
The Company
Response USA, Inc. (the "Company"), through its wholly-
owned subsidiaries, Response Ability Systems, Inc.
("Systems") and Emergency Response Systems, Inc. ("ERS"),
markets a personal emergency response system, ("PERS") which
enables users, such as elderly or disabled persons, to
transmit a distress signal using a portable transmitter which
is part of the PERS. When activated by the pressing of a
button, the transmitter sends a radio signal to a receiving
base installed in the user's home. The receiving base relays
the signal over telephone lines to a monitoring station
which provides continuous monitoring services. The
monitoring station personnel verify the nature of the
emergency and contact the appropriate emergency authorities in
the user's area. The Company, through its wholly-owned
subsidiary United Security Systems, Inc. ("USS"), is also
engaged in the sale, installation, continuous monitoring and
maintenance of electronic security systems.
Systems commenced operations in 1985 and, by 1987,
had sold over 4,000 franchises in 42 states for the distribution
of PERS. Systems marketed the franchises to individuals who
purchased such franchises as a part-time business or second
source of income. The Company believes such franchisees were
poorly capitalized. Systems incurred substantial losses in
its franchise operations as costs to establish, maintain,
promote and service the franchise network exceeded the revenues
from the sale of the franchises. Such losses resulted in
Systems filing a petition for reorganization under Chapter
11 of the Federal Bankruptcy Act in October 1987. While in
reorganization, Systems discontinued its franchise sales
operations, and the Company has no intention of resuming new
franchise sales, although a number of its original franchisees
are still actively utilizing the Company's monitoring and
purchasing its PERS. Since the confirmation of Systems' Plan of
Reorganization in January 1990, Systems has devoted substantial
efforts to broadening and diversifying its marketing programs to
sell PERS units through national pharmacy chains including Revco
D.S., Inc and K-Mart pharmacies, rather than direct marketing.
The Company sells its PERS products directly to
the consumer and through franchisees in the United States
and a distributor in Canada under the "Instant Response" and
"Response Ability" trade names. The Company also sells and
leases PERS through its institutional division to hospitals
and home health care agencies. In addition, the Company
provides monitoring services through a third-party
monitoring station located in Euclid, Ohio, to tens of
thousands of users of the Company's PERS. The Company also
sells PERS and related accessories, which are manufactured
by a contractor located in Florida, to independent home
alarm and other vendors under private label programs.
The Company's electronic security business
utilizes electronic devices installed in customers' businesses
and residences to provide detection of events, such as intrusion
or fire, surveillance and control of access to property.
The detection devices are monitored by the same third-
party monitoring station which monitors the Company's PERS units.
In some instances, commercial customers may monitor these devices
at their own premises or the devices may be connected to local
fire or police departments. The products and services marketed
in the electronic security services industry range from
residential systems that provide basic entry and fire protection
to more sophisticated commercial systems. USS commenced operation
in March 1994, upon the acquisition of substantially all of the
assets of two companies engaged in the electronic security
business.
The Company, then known as Larsen Software Corporation
and originally incorporated in Utah in June 1984 for the purpose of
acquiring computer software, consummated an intra-state offering
in 1985 in which it issued 184,642 shares of common stock and
received proceeds of $25,850 which were utilized principally to
pay accounting and administrative costs. The Company, which changed
its state of incorporation to Nevada in September 1989, did not
engage in any significant business operations until August 1990 when
it acquired all of the outstanding common stock of Systems. In
connection with its acquisition of Systems, the Company changed its
name to Lifecall America, Inc. Systems was incorporated in Delaware in
1985 to do business as a franchisor of direct sellers of PERS, and
engaged principally in such business until October 1987, when it filed
a petition for reorganization under Chapter 11 of the Federal
Bankruptcy Act. Systems' plan of reorganization (the "Plan of
Reorganization") was confirmed by the U.S. Bankruptcy Court in
January 1990, and became effective in February 1990. In March
1992, the Company changed its name to Response USA, Inc. and
its state of incorporation from Nevada to Delaware. ERS was
incorporated in Delaware in 1994. References to the Company
include Systems, ERS and USS.
The Company's executive offices are located at 11-H
Princess Road, Lawrenceville, New Jersey 08648, and its telephone
number at that address is (609) 896-4500.
Recent Developments
The Company completed a financing agreement with
Mellon Growth Finance, a division of Mellon Bank, N.A.
("Mellon") on June 30, 1996, providing the Company with a
revolving term loan of up to $15,000,000. As of June 30,
1997, the Company has drawn upon approximately $12,235,000 of
such available credit. The loan bears interest at 1.75% above
Mellon's prime interest rate and matures on June 30, 2000.
Concurrently with the closing of the Mellon
financing, the Company completed the private placement of
7,500 shares of 1996 Series A Redeemable Convertible
Preferred Stock (the "Preferred Stock"), for an aggregate of
$7,500,000.
In September 1996, as a result of then current
market conditions for the Common Stock, the Company suspended
conversion of the Preferred Stock. In particular, there was
a dramatic increase in the "short" position for the Common
Stock from July through August, 1996. During this same
period, the price of the Common Stock declined from $7.375
to $4.656. The Company commenced an investigation into the
trading activity, including discussions with some of the
Company's market-makers and a review of trading activity, the
Company could find no basis for the increase in the short
position or the decline in the price. Lacking any other
explanation, and based upon a practice sometimes used by
investors after the purchase of convertible securities, the
Company believed that certain investors may have been selling
the Common Stock short in anticipation of the effectiveness
of the registration statement which registered the sale of the
Common Stock issuable upon conversion of the Preferred Stock.
In the weeks that followed the effectiveness of the registration
statement, the Company received requests for significant
conversions into shares of Common Stock.
The Company believed that it was not in the best
interests of the Company to allow conversions which could
result in a further precipitous drop in the market value of
the Common Stock. Although the Company was concerned about
this trading activity, and in fact retained the services of
an expert (a University of Virginia professor of law who
regularly provides expert testimony with respect to such
matters), to review the trading activity to determine if
there were any improprieties, the Company did not believe
that it had a sufficient basis to advise the Securities and
Exchange Commission ("SEC") or The Nasdaq Stock Market of the
source of the trading activity. Furthermore, the Company
was concerned about the impact on the overall market
for its securities. The Company sold the Preferred Stock with
the belief that the investors in the offering would hold their
preferred stock as an investment rather than selling at
the first opportunity. The unusual trading activity was not
necessarily illegal or improper under the rules and regulation
of either the SEC or Nasdaq.
On January 2, 1997, Lake Management LDC ("Lake") and
KA Investments LDC, each Holders of the Preferred Stock,
together filed a Complaint in the Court of Chancery of the
State of Delaware against the Company challenging, among other
things, the Company's decision to suspend conversion rights
and seeking, among other things, specific performance under
the Certificate of Designations to convert their Preferred
Stock to Common Stock of the Company. The case is captioned
Lake Management LDC and KA Investments LDC v. Response USA,
Inc., Civil Action No. 15449. On February 10, 1997, the
Company responded to the Complaint by filing an Answer,
Defenses and Counterclaim. A Reply to the Counterclaim was
filed on March 3, 1997. Lake participated in a group
settlement with the other Preferred Holders, and dismissed the
foregoing action. The Company also agreed to the payment to
Lake of attorneys' fees.
On February 18, 1997, Halifax Fund L.P., a holder of
the Preferred Stock ("Halifax"), filed a Complaint in the
Court of Chancery of the State of Delaware against the Company
challenging, among other things, the Company's decision
to suspend conversion and seeking, among other things,
specific performance under the Certificate of Designations to
convert its Preferred Stock to Common Stock of the Company.
The case is captioned Halifax Fund, L.P. v. Response USA, Inc.,
Civil Action No. 15553. Halifax also filed a Motion for a
Preliminary Injunction and a Motion for Expedited Proceedings.
On March 5, 1997, the Court held a conference and denied
Halifax's request for a hearing on its motion for a
preliminary injunction. On March 11, 1997, Halifax filed a
second Motion for a Preliminary Injunction. The Court held a
telephonic conference on March 12, 1997 and denied Halifax's
request for a hearing on its second preliminary injunction
motion. Halifax filed a motion for partial summary judgment.
On May 13, 1997, the Court orally granted partial summary
judgment to Halifax solely with respect to its right to convert
Preferred Stock into Common Stock. On May 28, 1997, the Court
entered its Order granting partial summary judgment to Halifax,
including among other things, specific performance of Halifax's
right to convert and permanently enjoining the Company from
denying the right to convert the Preferred Stock.
Prior to June 30, 1997, the Company reached
an agreement with the holders of the Preferred Stock (other
than Halifax)(the "Holders"), pursuant to which the Holders
agreed to refrain from all conversions of the Preferred
Stock for the periods set forth below, and the Company agreed
to issue to the Holders certain warrants as described below
and to amend (subject to stockholder approval), the terms of
the Preferred Stock by the filing of an Amended and Restated
Certificate of Designation (the "Agreement").
Pursuant to the terms of the Agreement, on June
26, 1997, each Holder received five thousand warrants
(the "Warrants") for each 100 shares of Preferred Stock held
as of June 26, 1997. The Warrants, which will not be
redeemable by the Company, will be exercisable at a price per
share of $2.00 to purchase one share of Common Stock. Fifty
percent (50%) of the Warrants are exercisable after one (1)
year from issuance; the remaining fifty percent (50%) shall be
exercisable two (2) years from issuance. The term of the
Warrants shall be ten years. The Common Stock issuable upon
exercise of the Warrants is being registered with the
Securities Exchange Commission ("SEC") hereby.
In consideration of the issuance of the Warrants,
and subject to the terms and conditions set forth in the
Agreement, each Holder agreed (a) to give its proxy and its
consent in favor of an Amended and Restated Certificate of
Designation (the "Amendment"), and (b) to refrain from any and
all conversions of such Holder's Preferred Stock, pursuant
to the terms of the original Certificate of Designations,
until the earlier of November 30, 1997 or upon the
occurrence of default dates ("Trigger Dates"). If the
Company fails to comply with the Trigger Dates, the Holders'
right to convert its Preferred Stock shall be activated if and
only if a majority of the Holders as of such Trigger Date have
collectively provided appropriate written notice exercising such
right. The Trigger Dates are comprised of the following:
(1) the filing with the Securities and Exchange Commission ("SEC")
of a Proxy Statement on or before July 10, 1997 (which filing
was completed); (2) the mailing of a definitive proxy statement
to the Company's stockholders for the Stockholders' Meeting on or
before August 4, 1997, plus such additional time as may be
required for the SEC to complete its review of the Proxy
material; (3) the filing by the Company of this registration
statement on Form S-3 with respect to the registration for
resale of the shares issuable upon exercise of the Warrants
and other shares of Common Stock issuable to the Holders, on
or before August 21, 1997; (4) the filing by the Company of
the Amendment and an amendment to the Company's Certificate
of Incorporation to increase the Company's authorized Common Stock
to at least 37,500,000 shares, on or before September 18,
1997 (subject to extension in the event the SEC conducts a review
of this Proxy Statement); (5) the filing by the Company of a
registration statement with the SEC for the primary issuance by
the Company of securities to generate approximately $8,750,000
of net proceeds for use by the Company to redeem all of the
Preferred Stock (the "Registration Statement"), on or before
October 1, 1997; and (6) upon such applicable date as the Company
abandons or withdraws the Registration Statement prior to the
Registration Statement being declared effective for use by the
Company on or before November 30, 1997.
The Amendment gives the Company the right to redeem
the Preferred Stock ("Redemption") for payment of the
following to the Holders:
1.Cash in an amount equal to One Thousand Three
Hundred Fifty Dollars ($1,350) per share of
Preferred Stock (the "Redemption Price"); and
2.Interest at a rate of twelve percent (12%) per
annum on the Redemption Price from May 12,
1997 until consummation of the Redemption.
The Amendment provides that the suspension of conversion
rights would no longer be effective and the right to
convert the Preferred Stock shall be effective commencing
on and after November 30, 1997, in accordance with the terms
set forth in the Amended and Restated Certificate of
Designations. In addition, pursuant to the Agreement,
effective as of June 18, 1997, each Holder agrees to refrain
from conversions of the Preferred Stock until the earlier of
November 30, 1997 or certain other specified dates.
Under the terms of the Certificate of Designations
in effect prior to the Amendment, each share of Preferred
Stock is convertible into shares of Common Stock, at the sole
option of the Holder, based upon the following formula:
The Premium + 1,000
-------------------
Conversion Price
where: (a) the Premium equals (i) 10% multiplied by (ii) the
number of days from the date the purchaser deposited funds
for the purchase of the Preferred Stock through and including
the date of conversion divided by 365 and multiplied by (iii)
one thousand (1,000); (b) 1,000 represents the face value of
the Preferred Stock; and (c) the Conversion Price is equal to
the lesser of (i) 80% of the average closing bid price of the
Common Stock as reported by NASDAQ for the five trading days
preceding the date of conversion or (ii) $5.00 per share.
The Company may redeem all or any portion of the Premium for
cash in lieu of converting such Premium into shares of Common
Stock upon the foregoing conversion terms. A Holder is not
entitled, however, to convert shares of the Preferred Stock which
would result in such Holder and his affiliates beneficially owning
more than 4.9% of the outstanding Common Stock. After a certain
period of time after June 1, 1999, the Company may require
conversion of the Preferred Stock upon the foregoing conversion terms.
The Amendment provides that the 1,000 face value of
the Preferred Stock utilized in the Conversion formula shall be
increased to 1,200. In addition, the fixed price shall initially
mean $5.00 and shall be reset on December 1, 1997 to the closing
price of the Company's Common Stock on November 30, 1997, as
reported by the NASDAQ Small Cap Stock Market ("NASDAQ") (or
if not reported by NASDAQ, as reported by such other exchange
or market where traded) (the "Fixed Price") and shall be reset
on the first day (each a "Reset Date") of each month thereafter,
beginning January 1, 1998, to an amount equal to the lower of
(x) the Fixed Price in effect on the day immediately preceding
such Reset Date and (y) the lowest closing price of the Company's
Common Stock as reported by NASDAQ (or, if not reported
by NASDAQ, as reported by such other exchange or market where
traded) for any day during the calendar month immediately
preceding such Reset Date. The Fixed Price and the amounts
set forth in clauses (x) and (y) of the definition thereof shall
be subject to equitable adjustments from time to time for stock
splits, stock dividends, recapitalizations, reorganizations and
similar transactions. The redemption price of the Preferred
Stock was determined by negotiation between the Company and the
holders of the Preferred Stock. Factors considered by the
Company in agreeing to the redemption price included (i) the
value to the Company and its stockholders in causing the holders
of the Preferred Stock to refrain from converting until November 30,
1997, and (ii) the likelihood of additional legal actions by holders
of Preferred Stock seeking to recover damages from the Company,
the probability of success of such legal actions, as well as the
potential recoveries by the holders in such legal actions.
On or before the opening of the market on Monday,
December 1, 1997, the Company shall deposit into escrow, that
number of shares of Common Stock reserved or required to be
reserved pursuant to Section 5(c) of the Certificate of
Designations and necessary and sufficient for the purpose
of effecting conversion of the Preferred Stock on or after
November 30, 1997, in accordance with the terms of the Amended
and Restated Certificate of Designations. Pursuant to
the Amendment, the Company is required to reserve for issuance
a sufficient number of shares of Common Stock to effect the
conversion of all outstanding Preferred Stock, and shall have
reserved for issuance 200% of shares then issuable upon
conversion of the outstanding Preferred Stock (based upon the
conversion price then in effect and assuming that the Preferred
Stock is fully convertible. The escrow shall be established
pursuant to an Escrow Agreement by and among the Company, the
remaining Holders as of November 30, 1997 and American Registrar &
Transfer Company, independent escrow agent (the "Agent")
("Escrow Agreement"). The Agent shall process any and all
conversion requests made by or on behalf of the Holders on or after
December 1, 1997, and ending upon such date that no Preferred
Stock is outstanding, pursuant to the terms of the Amended and
Restated Certificate of Designations and the Escrow Agreement.
On June 30, 1997, after the Company concluded
the Agreement with the Holders, the Company agreed to convert
1000 shares of Preferred Stock owned by Halifax and issue to
Halifax 900,000 shares of the Company's Common Stock.
The Company assisted in locating EC Capital, Inc., a market
maker in the Company's securities as a purchaser for the
Common Stock received by Halifax upon conversion of its
Preferred Stock. Halifax's Common Stock was purchased for an
aggregate price of $1,500,000, comprised of $1,350 per share for
each share of Preferred Stock, plus $150,000 for reimbursement of
attorneys' fees. The Company issued to Halifax 5,000 Warrants
for each 100 shares of Preferred Stock held. The litigation
between Halifax and the Company was dismissed with prejudice
upon receipt by Halifax of the full purchase price. In the
event that the Company settles with any other Preferred Holder
on terms which Halifax in its sole discretion believes are
better than those received by Halifax in the settlement, Halifax
has the right to elect the alternative settlement.
As of July 11, 1997, 5,890 shares of Preferred Stock
remain outstanding. Based on the current market price for the
Common Stock and the original conversion terms of the Preferred
Stock, such shares would convert into an aggregate of 2,326,006
shares of Common Stock. See "Risk Factors - Conversion of
Preferred Stock."
The Company has been considering a number of
additional alternatives to provide financing for the
Company's growing operations. As of the date hereof,
none of these financing opportunities are probable.
The Offering
Securities Offered 5,309,770 shares of Common Stock,
of which 4,965,270 shares are issuable
upon conversion of the Preferred Stock
and 344,500 shares are issuable upon
the exercise of the Warrants.
Use of Proceeds The Company will not receive any proceeds
from the sale of Common Stock by the
Selling Stockholders.
Risk Factors The securities offered hereby involve a
high degree of risk. See "RISK FACTORS."
Nasdaq Trading Symbol Common Stock - RUOK
Class A Warrants - RUOKW
Class B Warrants - RUOKZ
RISK FACTORS
THIS OFFERING INVOLVES SUBSTANTIAL INVESTMENT RISK
AND COMMON STOCK SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN EVALUATING AN
INVESTMENT IN THE COMPANY AND ITS BUSINESS PRIOR TO PURCHASE,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS AS WELL AS OTHER INFORMATION SET FORTH ELSEWHERE
IN THIS PROSPECTUS:
Unprofitable Operations; Significant Obligations.
The Company incurred losses of $3,030,830, $4,411,898 and
$5,148,494 for the years ended June 30, 1995 and June 30, 1996,
and the nine months ended March 31, 1997, respectively.
The Company is required to pay the long-term
indebtedness of Systems in connection with Systems Plan of
Reorganization, through the year 2000. The Company has funded
its operations through various private placements of its
securities, including the sale of the Preferred Stock, and
through debt financing, including the Mellon financing. In this
regard, the Company expects to incur significant interest
expense as a result of the Mellon financing. In the past, the
Company has used external sources of funding to finance its
operations (including its debt service requirements) and expects
to continue to use external sources of funding for such purpose
until the Company's operations become profitable. However, there
can be no assurance that such funds will continue to be available
if needed. The inability to provide for its working capital
needs would seriously inhibit the Company's development
and adversely affect its results of operations and prospects.
Possible Conversion of Preferred Stock In September
1996, as a result of then current market conditions for the
Common Stock, the Company suspended conversion of the Preferred
Stock. The Company and the holders of the Preferred Stock have
entered into the Agreement which prohibits conversion until after
November 30, 1997, subject to the Company's compliance with
certain conditions. The Company intends to offer to repurchase
some or all of the outstanding Preferred Stock. If the Company is
in default with respect to the Agreement, the holder may
convert their Preferred Stock to Common Stock. Based on
the current market price for the Common Stock and the
original conversion terms of the Preferred Stock, such shares
would convert into an aggregate of 2,326,006 shares of Common
Stock.
Consequences of Default under Plan of Reorganization.
The Company's wholly-owned subsidiary, Systems, filed a petition
for reorganization under Chapter 11 of the Federal Bankruptcy Act
in October 1987. Systems' Plan of Reorganization was confirmed
by the U.S. Bankruptcy Court in January 1990, and became
effective in February 1990. The Plan of Reorganization provides
for, among other things, long-term payments totalling
approximately $2.8 million to secured and unsecured pre-
petition creditors and for unpaid state and federal taxes. As
of June 30, 1996, deferred payment obligations to such pre-
reorganization creditors totalled $374,058, which are
payable in varying installments (assuming the adherence to
the repayment schedule), through the year 2000, as long as there
are no defaults (failure to make timely payments) under the Plan
of Reorganization. In the event that the Company should default
in payment of these deferred obligations, Systems' pre-reorganization
creditors could seek appropriate relief in the bankruptcy court, the
result of which could range from dismissal or conversion
of Systems' bankruptcy to a Chapter 7 proceeding requiring liquidation
of Systems, or modification of Systems' Plan of Reorganization,
which could have a material adverse effect upon the Company. Any such
modified plan could require the Company to pay more to prepetition
creditors than the amounts required under the existing Plan of
Reorganization. To date, payments under the Plan of Reorganization
have been made in a timely fashion.
Dependence on Key Personnel. The Company believes
that it is dependent to a significant degree on the services of
Richard M. Brooks, its President, Chief Executive and Financial
Officer and Ronald A. Feldman, its Chief Operating Officer. The
Company has purchased key person insurance on the lives of
Messrs. Brooks and Feldman in the amounts of $3,000,000 (payable to
Mellon Bank) and $1,000,000 (payable to the Company) respectively.
There can be no assurance that such insurance would be sufficient
to compensate the Company in the event of the death of Mr. Brooks or
Mr. Feldman. In addition, the Company has entered into five-year
employment agreements with Messrs. Brooks and Feldman, effective on
October 23, 1992, as amended to expire on June 30, 2000, but there can be
no assurance that Mr. Brooks will remain with the Company during such
term or thereafter. In the event that Mr. Brooks or Mr. Feldman or
other key personnel should die, become incapacitated, resign, otherwise
not remain with the Company or for any other reason be unable to perform
their duties, there can be no assurance that the business and
operations of the Company would not be adversely affected.
Competition and Markets. The personal emergency response
and electronic security services industries are highly competitive.
There are numerous companies of comparable size to, or larger than, the
Company and many smaller companies that sell PERS and electronic security
service equipment and offer monitoring services. Many of the
Company's competitors have significantly greater financial resources
and a larger sales organization than the Company. In addition, while
the Company generally competes with sellers of PERS and security services,
there are numerous large national and multinational companies, with
far greater resources than the Company, that compete in the information
services industry and the electronic security services industry.
The Company competes for the acquisition of new accounts on the basis of
its reputation in the industry. The Company also competes in connection
with the acquisition of blocks of existing accounts based on the
financial package its offers the acquirees. There is no assurance that
such larger companies will not attempt to enter the PERS market in
the future, or, if they do, that the Company will be able to compete
successfully.
State and Federal Regulation. As a seller of personal
emergency response units and electronic security systems, the
Company is subject to laws and regulations administered by
various states, the Federal Communications Commission, the Food
and Drug Administration and the Federal Trade Commission.
Some states require licenses or permits to sell PERS and
electronic monitoring systems and to provide security services.
In addition, federal and state regulations, including
without limitation, consumer protection laws, govern the promotion
and advertising activities of the Company and other sellers of the
Company's products and services. The Company's relationship
with its franchisees also is subject to regulation under federal
and state franchise laws. Compliance with such laws and
regulations is costly, and changes in laws and regulations could
increase the cost of compliance and materially affect the Company
in other respects not presently foreseeable. In the past,
Systems has been the subject of enforcement actions brought under
state and federal law to enforce certain of these laws and
regulations concerning the sales of franchises. The Company believes
that it is in compliance with all material state and Federal regulations.
There can be no assurance that the Company will not be subjected to
enforcement actions in the future.
Products Liability and Errors and Omissions.
The Company is subject to claims by customers that a PERS unit
was defective, that the Company has failed to provide
monitoring services as required, or that some action or
inaction by the Company or failure of its products or
services has caused or contributed to injury to the
customer. While the Company has liability insurance which
it deems adequate ($1,000,000 per occurrence and $5,000,000
in the aggregate), there can be no assurance that the Company
will be able to maintain such insurance or will not be
subjected to claims in excess of its insurance coverage.
Prior Sale of Unregistered Securities. In
February 1996, the Company consented to the issuance of
an Order Instituting Proceedings pursuant to the Securities
Act of 1933 (the "Securities Act") and the Securities Exchange
Act of 1934 and Findings and Order of the Securities and Exchange
Commission (the "Finding"), without admitting or denying any
allegations or facts contained therein. In July 1993, the Company
sold 60,000 shares of Common Stock pursuant to what it claimed to
be an exemption from registration under Regulation S of the Securities
Act. The Finding stated that such sales were made under
circumstances in which the Company knew or should have known that such
exemption was not available. Consequently, the Finding stated, the
sales were made in violation of the registration provisions of the
Securities Act. The Company consented to permanently cease and
desist from committing or causing any violation, and any future
violation, of Section 5 of the Securities Act.
Limitation of Directors' Liability. The Company's
Certificate of Incorporation limits the liability of the
Company's directors for breach of their fiduciary duty of care
to the Company. The effect of this provision is to eliminate
the directors' liability for monetary damages resulting from
negligent or grossly negligent conduct in most situations.
A director remains responsible for damages to the Company
resulting from a breach of his duty of loyalty to the Company,
a failure to act in good faith, intentional misconduct, a knowing
violation of law, receipt of an improper personal benefit, or
approval of an illegal dividend or stock purchase. Liabilities
under the federal securities laws also are not affected by this
provision, as the SEC views such provisions as unenforceable.
Authorization and Discretionary Issuance of Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of
"blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which would adversely affect the
voting power or other rights of the holders of the Company's Common
Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company, which could
have the effect of discouraging bids for the Company and thereby
prevent stockholders from receiving the maximum value for their shares.
There can be no assurance that preferred stock of the Company will not
be issued at some time in the future.
Shares Eligible for Future Sale; Market Overhang from
Outstanding Warrants and Options. As of March 31, 1997, the Company
had outstanding 5,304,356 shares of Common Stock, substantially all
of which shares are freely transferable without restriction or further
registration under the Securities Act. For the "restricted securities,"
under Rule 144, if certain conditions are met, persons who satisfy
a two year "holding period" may sell within any three-month period
a number of such shares which does not exceed the greater of one percent
of the total number shares outstanding or the average weekly trading
volume of such shares during the four calendar weeks prior to such
sale. After a three-year holding period is satisfied, persons who
are not "affiliates" of the issuer of the securities are permitted to
sell such shares without regard to these volume restrictions.
Warrants and options to purchase the following number of
shares of Common Stock are outstanding: (i) 1,233,381 shares issuable
upon exercise of Class A Warrants at a price of $2.50 per share,
(ii) 1,481,950 shares issuable upon exercise of Class B Warrants at
a price of $3.25 per share, (iii) 49,700 shares issuable upon exercise
of Class C Warrants, (iv) 1,868,400 shares issuable upon exercise of
options issued to officers, directors and employees of the Company,
(v) 175,000 shares issuable upon exercise of the warrants at $4.50
per share, (vi) 1,032,135 shares issuable at a price of $1.50 per
share in connection with the Mellon financing, (vii) 2,326,006
shares issuable upon conversion of the Preferred Stock (based on
the current price of the Common Stock and assuming the Company
redeems the shares otherwise issuable with respect to the Premium),
assuming the Preferred Stock is not repurchased by the Company.
No prediction can be made as to the effect, if
any, that sales of shares of Common Stock or the availability
of such shares for sale will have on the market prices of the
Company's securities prevailing from time to time. The
possibility that substantial amounts of currently restricted
shares or newly issued shares of Common Stock into the
public market may adversely affect prevailing market prices for
the Common Stock and could impair the Company's ability to raise
capital in the future through the sale of equity securities.
Nasdaq Maintenance Requirements; Possible Delisting
of Securities from Nasdaq System. The Board of Governors of
the National Association of Securities Dealers, Inc. has
established certain standards for the continued listing of a
security on Nasdaq. The maintenance standards require, among other
things, that an issuer have total assets of at least $2,000,000
and capital and surplus of at least $1,000,000; that the minimum
bid price for the listed securities be $1 per share; and that
the minimum market value of the "public float" be at least
$1,000,000. A deficiency in either the market value of
the public float or the bid price maintenance standard will be
deemed to exist if the issuer fails the individual stated
requirement for ten consecutive trading days. If an issuer falls
below the bid price maintenance standard, it may remain on Nasdaq
if the market value of the public float is at least $1,000,000
and the issuer has $2,000,000 in equity. The Company's current
Common Stock price is above $1 per share, however, there can
be no assurance that the Company will continue to satisfy
the requirements for maintaining a Nasdaq listing. If the Company's
securities were excluded from Nasdaq, it would adversely affect
the prices of such securities and the ability of holders to sell
them.
Penny Stock Regulation. In the event that the Company
is unable to satisfy Nasdaq's maintenance requirements, trading
would be conducted in the "pink sheets" or the NASD's Electronic
Bulletin Board. In the absence of the Common Stock being quoted
on Nasdaq, or the Company having $2,000,000 in net tangible
assets, trading in the Common Stock would be covered by Rules 15g-1
through 15g-6 promulgated under the Securities Exchange Act of 1934
for non-Nasdaq and non-exchange listed securities. Under such
rules, broker/dealers who recommend such securities to persons
other than established customers and accredited investors must make
a special written suitability determination for the purchaser
and receive the purchaser's written agreement to a transaction
prior to sale. Securities also are exempt from these rules if the
market price is at least $5.00 per share.
The SEC adopted regulations that generally define
a penny stock to be any equity security that has a market price
of less than $5.00 per share, subject to certain exceptions
(such exceptions including an equity security listed on Nasdaq
and an equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has
been in continuous operation for three years, (ii) net tangible
assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years).
Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and
the risks associated therewith.
If the Company's Common Stock were subject to
the regulations on penny stocks, the market liquidity for
the Company's Common Stock could be severely affected by
limiting the ability of broker/dealers to sell the Company's
Common Stock and ability of purchasers in this offering to
sell their securities in the secondary market. There is no
assurance that trading in the Company's securities will not be
subject to these or other regulations that would adversely
affect the market for such securities.
Lack of Dividends. The Company has never paid and
does not plan to pay in the foreseeable future any dividends
on its Common Stock, although it is not restricted from doing
so.
USE OF PROCEEDS
The Company will not receive any proceeds from the
sale of Common Stock by the Selling Stockholders. Any
proceeds received by the Company upon the exercise of the
Warrants will be used for working capital. There can be no
assurance that any of the Warrants will be exercised.
PLAN OF DISTRIBUTION
Of the securities offered hereby (i) 2,986,230
shares of Common Stock may be resold after issuance upon
conversion of the Preferred Stock, and (ii) 344,500 shares of
Common Stock may be resold after issuance upon exercise
of the Warrants. Additional shares of Common Stock that may
become issuable as a result of the anti-dilution provisions of
the Preferred Stock or the Warrants are also offered hereby
pursuant to Rule 416 under the Securities Act. As of the date
hereof, none of the Preferred Stock set forth below has been
converted and none of the Warrants have been exercised.
Upon conversion of the Series A Preferred Stock,
holders will be entitled to receive a number of shares of
Common Stock determined by dividing the stated value of the
Preferred Stock ($1,200 per share), plus the Premium (unless
the Company chooses to redeem the shares otherwise issuable
in respect of that Premium), by a conversion price equal to
the lesser of (i) $5.00 and (ii) 80% of the average of the
closing bid prices for shares of Common Stock for the five
trading day period immediately prior to conversion, subject
to adjustment upon the occurrence of certain dilutive
events. Under the applicable conversion formula, the number
of shares of Common Stock issuable upon conversion of the
Preferred Stock will be higher if the market price of the Common
Stock at the time of conversion is lower, and there is no cap on
the number of shares of Common Stock which may be issuable. In
addition, the number of shares issuable upon the conversion of
the Preferred Stock is subject to adjustment upon the occurrence
of certain dilutive events. The 2,986,230 shares of Common Stock
issuable upon conversion of the Preferred Stock and offered hereby
represent the number of shares which would be issuable if the
Preferred Stock were converted at a conversion price equal to $2.70
per share and no limitations or adjustment were applicable, plus
additional shares of Common Stock issuable upon conversion of the
Premium if such Premium is not redeemed.
Shares
Offered(1)
---------------------------
Upon Upon
Conversion Exercise of
of Preferred Warrants Beneficial Ownership
Stock ----------- -------------------------
------------ Prior to Sale After Sale
Beneficial ------------- ----------
Stockholder
- -----------
A.J. Gesundheit 210,750 12,500 223,250 0
AG Super Fund
International
Partners, L.P. 42,150 2,500 44,650 0
GAM Arbitrage
Investments, Inc. 42,150 2,500 44,650 0
Leonardo, L.P. 126,450 7,500 133,950 0
Raphael, L.P. 42,150 2,500 44,650 0
Ailouros Ltd. 210,750 12,500 223,250 0
Capital Ventures
International, Inc. 969,450 57,500 1,026,950 0
Charles B. Krusen 168,600 10,000 178,600 0
Wood Gundy London Ltd. 1,264,500 75,000 1,339,500 0
Darisco Diversified
Investments Inc. 210,750 12,500 223,250 0
Deere Park Partners, L.P. 25,290 1,500 26,790 0
KA Investments LDC 126,450 7,500 133,950 0
Lake Management LDC 421,500 25,000 446,500 0
The Otato
Limited Partnership 404,360 24,000 428,640 0
UC Financial Ltd 151,740 9,000 160,740 0
Zanett Lombardier Ltd 547,950 32,500 580,450 0
Halifax Fund, L.P. 0 50,000 50,000 0
(1) Assumes that all shares of Preferred Stock are converted
at a conversion price of $2.70 with the Company redeeming
the shares otherwise issuable in respect of the
Premium. Pursuant to the terms of the Preferred Stock,
the Preferred Stock is convertible only to the extent
that the number of shares of Common Stock thereby
issuable, together with the number of shares of Common
Stock then held by such holder and its affiliates
(not including shares underlying unconverted shares
of Preferred Stock) would not exceed 4.9% of the then
outstanding Common Stock as determined in accordance
with Section 13(d) of the Securities Exchange Act of
1934, as amended. Accordingly, the number of shares of
Common Stock set forth above for each Selling
Stockholder may exceed the actual number of shares
of Common Stock that such Selling Stockholder could
own beneficially at any given time through its ownership of
the Preferred Stock.
The shares offered hereby may be offered and sold from time
time to time by the Selling Stockholders, or by pledgees, donees,
transferees or other successors in interest. Such offers and sales
may be made from time to time on Nasdaq or otherwise, at prices
and on terms then prevailing or at prices related to the then-
current market price, or in negotiated transactions. The methods
by which the shares may be sold may include, but not limited to,
the following: a block trade in which a 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;
(a) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account; an exchange distribution in
accordance with the rules of such exchange; ordinary brokerage
transactions and transactions in which the broker solicits purchasers;
privately negotiated transactions; short sales; and a combination of
any such methods of sale. In effecting sales, brokers or dealers
engaged by the Selling Stockholders may receive commissions or
discounts from the Selling Stockholders or from the purchasers in
amounts to be negotiated immediately prior to the sale. The
Selling Stockholders may also sell such shares in accordance with
Rule 144 under the Securities Act.
The Company has agreed to use its best efforts to maintain
the effectiveness of the registration of the shares offered hereby
until the earlier of the date upon which all of the shares offered
hereby have been sold or the date on which the shares offered hereby,
in the opinion of counsel, may be immediately sold by the Selling
Stockholders without registration.
The Selling Stockholders and any brokers participating in such
sales may be deemed to be underwriters within the meaning of the
Securities Act. There can be no assurances that the Selling Stockholders
will sell any or all of the shares offered hereby.
The Company is bearing all of the costs relating to
the registration of the shares. Any commissions, discounts or
other fees payable to the broker, dealer, underwriter, agent
or market maker in connection with the sale of any of the
shares will be borne by the Selling Stockholders. The
Company will not receive any of the proceeds from this
offering, but will receive the exercise price payable upon
the exercise of the Warrants if they are exercised.
Pursuant to the registration rights granted to the
Selling Stockholders in connection with the sale by the
Company of the Preferred Stock, the Company has agreed to
indemnify the Selling Stockholders, any person who controls a
Selling Stockholder, and any underwriters for the Selling
Stockholders, against certain liabilities and expenses
arising out of or based upon the information set forth
or incorporated by reference in this Prospectus, and the
Registration Statement of which this Prospectus forms a
part. Any commissions paid or any discounts or concessions
allowed to any broker, dealer, underwriter, agent or market
maker and, if any such broker, dealer, underwriter, agent or
market maker purchases any of the shares as principal, any
profits received on the resale of such shares, may be deemed
to be underwriting commissions or discounts under the
Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock and
Warrants under applicable state law will be passed upon for the
Company by Schneck Weltman & Hashmall LLP, 1285 Avenue of the
Americas, New York, New York 10019.
EXPERTS
The financial statements and schedules incorporated
by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Fishbein &
Company, P.C., Independent Certified Public Accountants, to
the extent indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said
firms as experts in accounting and auditing in giving said
reports.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Company
and to the Selling Stockholders pursuant to the
provisions of the Company's Certificate of Incorporation,
the Company 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 Company of expenses incurred or paid by a
director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is
asserted by such officer, director or controlling person
in connection with the securities being registered, the
Company 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 of
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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The amount of expenses (other than
underwriting discounts and commissions) in connection with the
issuance and distribution of the shares registered hereby are
set forth in the following table. All the amounts are
estimates, except the registration fee and the NASD filing
fee.
Registration Fee $5,632
Legal fees and expenses 8,000
Accounting fees and expenses 6,000
Miscellaneous 10,368
Total $30,000
Item 15. Indemnification of Directors and Officers.
Article V of the Company's Bylaws provides
the following:
5.1 Right to Indemnification. The
Corporation shall indemnify any person who was or is a party or
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (collectively, a
"proceeding"), by reason of the fact whether civil,
criminal, administrative or investigative (collectively, a
"proceeding"), by reason of the fact such person is or was a
director or officer of the Corporation or a constituent
corporation absorbed in a consolidation or merger
(hereinafter, a "constituent corporation"), or is or was
serving at the request of the Corporation or a constituent
corporation as a director, officer, partner, employee or
agent of another corporation, partnership, joint venture or
other enterprise or entity, or is or was a director or
officer of the Corporation serving at its request as an
administrator, trustee or other fiduciary of one or more of
the employee benefit plans, if any, of the Corporation or
another entity which may be in effect from time to time (any
such person, an "Authorized Representative"), against all
expenses, liability and loss actually and reasonably incurred
or suffered by such Authorized Representative in
connection with such proceeding, whether or not the
indemnified liability arises or arose from any proceeding by or
in the right of the Corporation, to the extent that
such Authorized Representative is not otherwise indemnified
and to the extent that such indemnification is not
prohibited by law as it presently exists or may hereafter
be amended.
5.2 Advance of Expenses. The Corporation
shall pay all reasonable expenses incurred by an
Authorized Representative in defending a Proceeding in advance
of the final disposition of such Proceeding, upon receipt by
the Corporation of a written undertaking by or on behalf
of such Authorized Representative to repay all amounts
advanced (without interest unless a court of competent
jurisdiction determined the payment of interest is required
by law) if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation.
5.3 Procedure for Determining Permissibility.
To determine whether any indemnification under this Article
V is permissible, the Board by a majority vote of a quorum
consisting of directors not parties to such proceeding may,
and on request of any Authorized Representative seeking
indemnification shall be required to, determine in each
case whether the applicable standards in any applicable
statute have been required to, determine in each case
whether the applicable standards in any applicable statute
have been met, or such determination shall be made (a) the
stockholders of the Corporation or (b) by independent
legal counsel in a written opinion if such quorum is not
obtainable, or, even if obtainable, a majority vote of a
quorum of disinterested directors so directs; provided that,
if there has been a change in control of the Corporation
between the time of the action or failure to act giving rise to
the claim for indemnification and the time such claim is made,
at the option of the Authorized Representative seeking
indemnification, the permissibility of indemnification
shall be determined by independent legal counsel. If a claim
for indemnification under this Article is not paid in full
within ninety (90) days after a written claim therefor has
been received by the Corporation, the claimant may file
suit to recover the unpaid amount of such claim, and the
Corporation shall have the burden of proving that the
claimant was not entitled to the requested indemnification
under applicable law. The reasonable expenses of any
Authorized Representative in prosecuting a successful claim
for indemnification, and the fees and expenses of any
independent legal counsel engaged to determine
permissibility of indemnification, shall be borne by the
Corporation. For purposes of this paragraph, "independent
legal counsel" means legal counsel other than that regularly
or customarily engaged by or on behalf of the Corporation.
5.4 Proceedings Initiated by
Authorized Representatives. Notwithstanding any other
provision of this Article V, the Corporation shall be
requested to indemnify an Authorized Representative in
connection with a proceeding initiated by such
Authorized Representative only if the proceeding was
authorized by the Board.
5.5 Indemnification Not Exclusive; Inuring
of Benefit. The indemnification provided by this Article V
shall not be deemed exclusive of any other right to which one
seeking indemnification may have or hereafter acquired under
any statute, provision of the Certificate of Incorporating,
these Bylaws, agreement, vote of stockholders or
disinterested directors of otherwise, and shall inure to the
benefit of the heirs, executors and administrators of any
person.
5.6 Insurance and Other Indemnification.
The Board shall have the power to (i) authorize the Corporation
to purchase and maintain, at the Corporation's expenses,
insurance on behalf of the Corporation and on behalf of
others to the extent that power to do so has not been
prohibited by applicable law, and (ii) give other
indemnification to the extent not prohibited by applicable
law.
5.7 Modification or Repeal. Any modification
or repeal of any provision of this Article V shall not
adversely affect any right or protection of an Authorized
Representation existing hereunder with respect to any act or
omission occurring prior to such modification or repeal.
Article Nine of the Company's Certificate
of Incorporation provides the following:
A director of the Corporation shall not
be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by a
director except for (i) any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section
174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper
personal benefit. Any repeal or modification of this
paragraph shall not adversely affect any right or
protection of a director of the Corporation existing
hereunder with respect to any act or omission of occurring
prior to such repeal or modification.
If the Delaware General Corporation Law
is hereafter amended to authorize the further elimination
or limitation of the liability of a director, then the liability
of a director of the Corporation shall be eliminated or limited
to the fullest extend permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this
paragraph shall not adversely affect any right or protection of a
director of the corporation existing hereunder with respect to
any act or omission occurring prior to such repeal or modification.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
2(a) - Agreement and Plan of Reorganization dated
August 9, 1990, by and among the Company
(Corsica Capital Corp.), Management of
Corsica Capital Corp. and Lifecall Systems,
Inc.(1)
2(b) - Plan and Agreement of Reorganization dated
May 13, 1991, by and among the Company,
Lifecall Systems, Inc., Monitor Emergency
Alert Lifecall Systems, Inc., and its sole
stockholder(1)
2(c) - Plan and Agreement of Merger dated March 18,
1992 by and between Response USA, Inc.
(Delaware) and Lifecall America, Inc.(1)
2(d) - Delaware Certificate of Ownership and Merger
Merging Response USA, Inc., a Nevada
Corporation with and into its wholly-owned
subsidiary Response USA, Inc., a Delaware
corporation(1)
2(e) - Nevada Articles of Merger of Response USA,
Inc. (Formerly Lifecall America, Inc.), a
Nevada corporation, into Response USA, Inc., a
Delaware corporation(1)
3(a) - Certificate of Incorporation of the Company(1)
3(b) - Bylaws of the Company(1)
3(c) - Certificate of Designation of 1996 Series A
Preferred Stock
4(a) - Form of Common Stock Certificate(1)
4(b) - Form of Class A Warrant Certificate(1)
4(c) - Form of Class B Warrant Certificate(1)
4(d) - Form of Class C Warrant Certificate(1)
4(e) - Form of Warrant Agreement(1)
5 - Opinion of Schneck Weltman & Hashmall LLP
as to legality of securities being registered
10(a) - Lifecall Systems, Inc. Third Amended Plan of
Reorganization with Order affirming Third
Amended Plan of Reorganization dated January 9,
1990(1)
10(c) - Agreement dated October 31, 1991, by and
between Bucks County Bank & Trust Company
and Lifecall Systems, Inc.(1)
10(d) - Distributorship Agreement, dated October 6,
1987 and as amended December 31, 1990,l by
and between Lifecall systems, Inc. and Teck
World Industries, Inc.(1)
10(i) - Emergency Backup Service Agreement dated
June 13, 1991, by and between Lifecall
Emergency Response Center, Inc., and the
Emergency Response People, Inc.(1)
10(j) - First Amended and Restated License and Royalty
Agreement dated as of July 1, 1991, by and
between Lifecall Systems, Inc. and the Emergency
Response People, Inc.(1)
10(l) - Master Agreement dated September 6, 1991, by
and between Visiting Nurse Associations of
America and Lifecall Systems, Inc. and
attached Member Agency Form Agreement(1)
10(m) - Agreement dated March 17, 1992 by and between
Synchronal Marketing, Inc. and Lifecall
Systems Inc.(1)
10(s) - Employment Agreement dated August 28, 1992, by
and between the Company and Richard R. Brooks,
and Addendum thereto dated October 1, 1992(1)
10(t) - Employment Agreement dated August 28, 1992, by
and between the Company and Ronald A. Feldman,
and Addendum thereto dated October 1, 1992(1)
10(u) - Consulting Agreement dated January 2, 1992 by
and among the Company, Lifecall Systems, Inc.
and Scott Affrime(1)
10(v) - Consulting Agreement dated May 22, 1986 by and
between LC Products, Inc. and Nevin Jenkins,
as amended(1)
10(w) - Incentive Stock Option Plan of the Company
adopted by the Company's Board on March 18,
1992 and approved by the Company's
stockholders on March 30, 1992(1)
10(x) - Restricted Stock Option Plan of the Company
adopted August 20, 1990, as amended August
30, 1991, January 2, 1992 and March 18, 1992(1)
11 - Calculation of Earnings (Loss) Per Share
22 - Subsidiaries of the Company
24(a) - Consent of Fishbein & Company, P.C.
24(b) - Consent of Schneck Weltman Hashmall & Mischel
(included in Exhibit 5)
1. Filed with the Registrant's registration
statement on Form S-1 (File No. 33-47589),
and incorporated by reference herein.
Item 17. Undertakings.
A. Certificates
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers
or sells securities, a post-effective amendment to this
Registration Statement: (i) to include any prospectus
required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement; (iii) to
include any additional or changed material information on
the plan of distribution; provided, however, that paragraph (i)
and (ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, to treat each
post effective amendment as 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 file a post-effective amendment to remove
from registration any of the securities that remain unsold at
the end of the Offering.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officer and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of
the Commission such indemnification is against public
policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the
small business issuer 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 small business issuer 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.
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 Lawrenceville and
State of New Jersey on the 20th of August, 1997.
RESPONSE USA, INC
By:/s/RICHARD M. BROOKS
--------------------
Richard M. Brooks,
Chief Executive Officer
Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement on Form S-3 has been
signed by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/RICHARD M. BROOKS Director, President, Chief August 20, 1997
- -------------------- Executive Officer (Principal
Richard M. Brooks Executive, Financial
Accounting Officer)
/s/RONALD A. FELDMAN Director, Vice President August 20, 1997
- -------------------- and Chief Operating Officer
Ronald A. Feldman
/s/STUART LEVIN Director August 20, 1997
- ---------------
Stuart Levin
_______________ Director
Robert M. Rubin
/s/TODD HERMAN Director August 20, 1997
- --------------
Todd E. Herman
We hereby consent to the use in this Registration Statement on Form
S-3 of Response USA, Inc. of our report dated August 22, 1996 on
the consolidated financial statements of Response USA, Inc. contained
in such Registration Statement, and to the reference to us, as appearing
under the headings of "Experts" in the Prospectus, which is a part of
such Registration Statement.
Fishbein & Company, P.C.
Elkins Park, PA
August 20, 1997
