RegistrationNo. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
RESPONSE USA, INC.
(Exact Name Of Registrant As Specified In Its Charter)
11-H Princess Road
Lawrenceville, New Jersey 08648
(address of principal executive
office including zip code)
Delaware 22-3088639
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
Response USA, Inc.
1994 Stock Option Plan
(full title of plan)
____________________
Richard M. Brooks, President
Response USA, Inc.
11-H Princess Road
Lawrenceville, New Jersey 08648
(609) 896-4500
(Name, address and telephone number of agent for service)
With Copies To:
Felice F. Mischel, Esq.
Thomas A. Rose, Esq.
Schneck Weltman Hashmall & Mischel LLP
1285 Avenue of the Americas
New York, New York 10019
(212) 956-1500
________________
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------
Title of Proposed Proposed Proposed
Each Class Maximum Maximum Amount of
of Securities Amount of Offering Aggregate Regis-
To Be Shares To Be Price Per Offering tration
Registered Registered(1) Security(1) Price(1) Fee
- ------------------------------------------------------------------------------
Common Stock,
par value $.008
per share ("Common Stock")
issuable upon exercise of
incentive options 66,550 $2.625 $174,694 $52.94
Common Stock issuable upon
exercise of non-incentive
options 105,208 $.10 $10,520 $3.19
Common Stock issuable upon
exercise of options (2) 600,000 $2.50 $1,500,000 $454.55
Resale of Common Stock
issuable upon exercise
of options 771,758 $3.125 $2,411,744 $730.83
Total $1,241.51
- ------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457 (c) and (h) based on the
high bid price of the Common Stock as reported on the Nasdaq
SmallCap Market on March 12, 1997.
(2) For shares issuable pursuant to stock options outstanding
at April 4, 1996, calculated pursuant to Rule 457(h) based on the
exercise price of such options.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities Exchange
Commission (the "Commission") are incorporated in this Registration
Statement by reference:
The Registrant's Annual Report on Form 10-KSB\A for the year
ended June 30, 1996, and the Registrant's Quarterly Reports on Form
10-QSB\A for the Quarters ended September 30, 1996 and December 31,
1996.
All documents subsequently filed by the Company pursuant to
Sections 12(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to
be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
The validity of the securities registered hereby is being
passed upon for the Company by Schneck Weltman Hashmall & Mischel
LLP, 1285 Avenue of the Americas, New York, New York 10019.
Item 6. 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 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
10(a) - 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(b) - Restricted Stock Option Plan of the Company adopted
August 20, 1990, as amended August 30, 1991, January 2,
1992 and March 18, 1992(1)
5 - Opinion of Schneck Weltman Hashmall & Mischel as to
legality of securities being registered
24(a) - Consent of Fishbein & Company, P.C.
(included in Exhibit 5)
24(b) - Consent of Schneck Weltman Hashmall & Mischel
(included in Exhibit 5)
Item 9. Undertakings.
1. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1993, 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 Securities
Exchange Act of 1934) that this is incorporated by reference in the
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
2. The undersigned Registrant hereby undertakes:
(a) 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 of 1933;
ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration;
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 2 (a)(1)(i) and 2 (a)(1)(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 herein.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities that
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) 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.
3. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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-8
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 13th day of March,
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-8 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 March 18, 1997
- -------------------- Executive Officer (Principal
Richard M. Brooks Executive, Financial
Accounting Officer)
/s/Ronald A. Feldman Director, Vice President and March 18, 1997
- -------------------- and Chief Operating Officer
Ronald A. Feldman
Director March 18, 1997
- -------------------
Sheldon Lieberbaum
Director March 18, 1997
- -------------------
Jeffrey S. Budin
/s/Stuart Levin Director March 18, 1997
- -------------------
Stuart Levin
/s/Robert M. Rubin Director March 18, 1997
- -------------------
Robert M. Rubin
Director March 18, 1997
- -------------------
Todd E. Herman
EXHIBIT 5.1
SCHNECK WELTMAN HASHMALL & MISCHEL LLP
1285 Avenue of the Americas
New York, New York 10019
Tel 212-956-1500
Fax 212-956-3252
March 12, 1997
Response USA, Inc.
11-H Princess Road
Lawrenceville, New Jersey 08642
Re: Response USA, Inc.
Registration of 771,758 Shares
of Common Stock on Form S-8
-------------------------------
Gentlemen:
We have acted as counsel for Response USA, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and
filing of the Registration Statement on Form S-8 (the "Registration
Statement"), pursuant to which the Company proposes to register 771,758
shares of the Company's common stock, $.01 par value per share ("Common
Stock"). We are familiar with the proceedings by which the Common Stock
has been authorized and issued and have reviewed and are familiar with
the Certificate of Incorporation and the By-laws of the Company, and such
other corporate records and documents as we have deemed necessary to
express the opinion herein stated. We have assumed the genuineness of
all signatures and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity
of the originals of such latter documents.
Based upon the foregoing, and having regard to legal
considerations we deem relevant, we are of the opinion that the upon
exercise of the options and payment of the exercise price therefor, the
Common Stock will be duly and validly authorized and issued by the
Company, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5(a) to
the Registration Statement and to the inclusion of our name under the
section of the Prospectus entitled "Legal Matters."
Very truly yours,
/s/SCHNECK WELTMAN HASHMALL & MISCHEL LLP
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-8
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.
/s/Fishbein and Company, P.C.
- -----------------------------
Fishbein and Company, P.C.
Elkins Park, Pa.
March 17, 1997
RESPONSE USA, INC.
771,758 Shares of Common Stock Issuable
upon Exercise of Stock Options
This Prospectus relates to the sale of 771,758 shares of
common stock, $.008 par value per share (the "Common Stock"), of
Response USA, Inc. (the "Company"). Such shares of Common Stock
are issuable upon exercise of currently issued stock options.
The Common Stock is traded on The Nasdaq SmallCap Market
("Nasdaq"), under the symbol RUOK. On March 12, 1997, as
reported by Nasdaq, the closing bid price for the Common Stock
was $3.125.
_________________________________
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 March 19, 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\A for its fiscal
year ended June 30, 1996, and the Quarterly Report on Form 10-QSB\A
for the quarter ended September 30, 1996 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 Report on Form 8-K, dated as
of September 30, 1996, 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 February 28, 1997, the Company has
drawn upon approximately $9,650,000 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 "Series
A Preferred Stock"), for an aggregate of $7,500,000. Each share
of Series A 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 10% multiplied by the number of days
from the date the purchaser deposited funds for the purchase of
the Series A Preferred Stock through and including the date of
conversion divided by 365, and (b) 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. Each holder may, in their sole
discretion, elect to convert up to 50% of the shares of Series A
Preferred Stock held beginning August 16, 1996 and may convert
the balance beginning September 10, 1996. After June 1, 1999,
the Company may require conversion of the Series A Preferred
Stock upon the foregoing conversion terms.
In September 1996, as a result of then current market
conditions for the Common Stock, the Company suspended conversion
of the Series A Preferred Stock. The Company believes that it is
not in the best interests of the Company to allow conversions
which could result in a precipitous drop in the market value of
the Common Stock. The Company and certain holders of the Series
A Preferred Stock have been actively negotiating an alternative
to the prescribed conversion. The Company intends to use a
substantial portion of the proceeds from the exercise of
Warrants, if any, to repurchase some or all of the outstanding
Series A Preferred Stock. There can be no assurance that any
holders of the Series A Preferred Stock will accept an offer for
repurchase of their shares. Furthermore, the Company may again
permit the conversion of Series A Preferred Stock into shares of
Common Stock at any time. As of December 31, 1996, 6,890 shares
of Series A Preferred Stock remain outstanding. See "Risk
Factors - Conversion of Series A Preferred Stock."
On January 2, 1997, Lake Management LDC and KA Investments LDC,
each holders of Preferred Stock, 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 a Certificate of Designation 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.
On February 18, 1997, Halifax Fund, L.P., holder of the Preferred
Stock, filed a Complaint, a Motion for a Preliminary Injunction and a Motion
for Expedited Proceedings in the Court of Chancery of the State of Delaware
against the Company also challenging, among other things, the Company's
decision to suspend conversion and seeking, among other things, specific
performance under a Certificate of Designation 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. On March 5, 1997, the
Court held a conference and denied plaintiff's request for a hearing on
plaintiff's motion for a preliminary injunction. On March 11, 1997, plaintiff
filed a second Motion for a Preliminary Injunction. The Court held a tele-
phonic conference on March 12, 1997 and denied plaintiff's request for a
hearing on its second preliminary injunction motion. Plaintiff has indicated
that it intends to file a motion for summary judgement, and the Court has
scheduled a hearing on that motion for May 13, 1997.
The Company continues to believe that suspension of the conversion is
warranted for various reasons, including without limitation, the unusual
trading activity in the Company's Common stock following the issuance of the
Preferred Stock, coupled with the substantial conversions of the Preferred
Stock at conversion prices linked to the market price of the Common Stock.
The Company intends to take whatever action is required to protect the
interests of the Company, its Stockholders generally and its Preferred
Stockholders, which may include renegotiation of the terms and conditions of
the Preferred Stock, and intends to vigorously defend its decision to
suspend conversion of the 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: 771,758 shares of Common Stock issuable upon
the exercise of currently outstanding stock
options
Use of Proceeds: The Company will not receive any proceeds of
this offering
Risk Factors: The securities offered hereby involve a high
degree of risk. See "RISK FACTORS."
Nasdaq Trading
Symbols: Common Stock - RUOK
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 $3,158,260
for the years ended June 30, 1995 and June 30, 1996, and the
three months ended September 30, 1996, 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
Series A 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 Series A Preferred Stock In
September 1996, as a result of then current market conditions for
the Common Stock, the Company suspended conversion of the Series
A Preferred Stock. The Company and certain holders of the Series
A Preferred Stock have been actively negotiating an alternative
to the prescribed conversion. The Company intends to offer to
repurchase some or all of the outstanding Series A Preferred
Stock. There can be no assurance that any holders of the Series
A Preferred Stock will accept an offer for repurchase of their
shares. If the Series A Preferred Stockholders do not accept
such an offer, they may seek to compel the Company to allow
conversion to Common Stock and/or seek monetary damages resulting
from their inability to convert their shares. Furthermore, the
Company may again permit the conversion of Series A Preferred
Stock into shares of Common Stock at any time.
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 December 31, 1996, the
Company had outstanding 4,130,908 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 $3.50 per share, (iii) 49,700 shares
issuable upon exercise of Class C Warrants, (iv) 2,868,400 shares
issuable upon exercise of options issued to officers, directors
and employees of the Company, (v) 12,500 shares issuable upon
conversion of convertible debentures, (vi) 175,000 shares
issuable upon exercise of the warrants at $4.50 per share, (vii)
1,032,135 shares issuable at a price of $3.25 per share in
connection with the Mellon financing, (viii) 2,870,833 shares
issuable upon conversion of the Series A 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 Series A 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 the Common Stock.
PLAN OF DISTRIBUTION
The shares offered hereby may be offered and sold from time
to time by the 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 trans-
actions. The methods by which the shares may be sold may include, but not
be limited to, the following: a block trade in which the broker or dealer
so engaged will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
(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 stockholders
may receive commissions or discounts from the stockholders or
from the purchasers in amounts to be negotiated immediately prior
to the sale. The stockholders may also sell such shares in
accordance with Rule 144 under the Securities Act.
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 Warrantholders.
Beneficial Ownership
-----------------------------
Name Shares Offered Prior to Sale After Sale
- ---- -------------- ------------- ----------
Adrienne Ammirata 600 600 -
Anthony Lopez 600 600 -
Arline Cheever 1,000 1,000 -
Beverly Silver 600 600 -
Robert Miller 700 700 -
Brenda Blanc 500 500 -
Brinda Carpenter 700 700 -
Carol Buchko 1,200 1,200 -
Chester Bukowski 500 500 -
Charles Weber Jr. 1,800 1,800 -
Daniel Gladstone 600 600 -
Dana Molfetto 6,500 6,500 -
David Maher 500 500 -
Debbie Magante 1,400 1,400 -
Don Williams 500 500 -
Donald McHugh 1,500 1,500 -
Donna Dorris 4,000 4,000 -
Donna Hettinger 3,000 3,000 -
Edna Johnson 700 700 -
Edwin Sadinsky 700 700 -
Eugene Recanzone 500 500 -
Fabio Ziccardi 1,000 1,000 -
Florestine Labeaud 500 500 -
Frank Costantino 1,000 1,000 -
Frank Fishman 6,000 6,000 -
Guadalupe Rodriguez 600 600 -
Isai Cancel 700 700 -
Jake Jones 600 600 -
Janet Connor 500 500 -
Janet Roszel 600 600 -
Jennifer Lombardi 500 500 -
Joseph Rutkowski 500 500 -
Jorge Rivera 600 600 -
Joseph Miri 600 600 -
Josephe Sanfedele 500 500 -
Judith Cancel 2,500 2,500 -
Keith Campbell 500 500 -
Kevin Doyle 5,500 6,700 1,200
Larry Wilson 2,200 2,200 -
Rodgers L. King 2,000 2,000 -
Leslie Gasden 500 500 -
Lillian Lotitto 700 700 -
Linda Schuler 600 600 -
Elizabeth Schaeffer 700 700 -
Lorraine Coley 1,500 1,500 -
Luz Didenko 500 500 -
Lynn McNellis 1,800 1,800 -
Marc Gilbert 35,000 35,000 -
Marie Pie 4,350 4,350 -
Mark Schwartz 2,400 2,400 -
Michael Henderson 500 500 -
Michelle Malek 2,300 2,300 -
Ozzie Durbin 2,700 2,700 -
Patricia Douglas 700 700 -
Paula Maraspin 1,200 1,200 -
Randi Silverman-Nwigwe 500 500 -
Randy Carpenter 500 500 -
Reide Fishman 1,200 1,200 -
Robert Bailey 1,500 1,500 -
Robert New 600 600 -
Scott Affrime 35,858 35,858 -
Scott Bonetz 1,100 1,100 -
Solange Nelson 1,000 1,000 -
Stuart Levin 14,500 14,500 -
Susan Hearn 2,000 2,000 -
Tom Hayes 500 500 -
Tom Vogt 1,450 1,450 -
Walter Haenish 600 600 -
Todd Herman 300,000 309,972 9,972
John Colehower 300,000 312,000 12,000
LEGAL MATTERS
The validity of the shares of Common Stock under
applicable state law will be passed upon for the Company by
Schneck Weltman Hashmall & Mischel 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
he 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.
