<PAGE>
Registration No. 333-34059
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
REGISTRATION STATEMENT ON FORM S-3
Under
The Securities Act of 1933
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RESPONSE USA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-3088639
(State or jurisdiction of incorporation (I.R.S. Employer
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
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:
Kenneth R. Koch, Esq.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
(212) 661-6500 / (212) 697-6686 (Fax)
Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
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, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1)(2) SHARE(3) PRICE(3) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.008 per share
("Common Stock"), issuable upon
conversion of 1996 Series A Convertible
Preferred Stock ("Preferred Stock")..... 1,659,788(4) $ 7.16 $11,884,082 $3,601.24
Common Stock issuable upon exercise of
Preferred Warrants issued to the holders
of the Preferred Stock (the "Preferred
Warrants").............................. 114,839 $ 6.00 $ 699,034 $ 211.83
Common Stock issuable upon exercise of
additional Preferred Warrants issued to
the holders of the Preferred Stock (the
"Additional Preferred Warrants")........ 147,250 $ 10.125 $ 1,490,907 $ 451.79
Common Stock............................ 269,416 $ 7.10 $ 1,912,854 $ 579.66
TOTAL................................... 2,191,293 $4,844.52(5)
</TABLE>
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(1) Determined pursuant to Rule 457 under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.
(2) All share and share price information gives effect to a one-for-three
reverse stock split of the Company's Common Stock effective January 9,
1998.
(3) For purposes of calculating the registration fee, the maximum offering
price per share has been estimated at $7.10 with respect to 269,416 shares
of Common Stock to be offered at prices computed on the basis of
fluctuating market prices pursuant to Rule 457(c) under the Securities Act
of 1933, as amended. With respect to 1,659,788 shares of Common Stock
underlying the Preferred Stock, a maximum offering price of $7.16 per
share, the assumed conversion price, has been used to calculate the
registration fee. With respect to 114,839 shares of Common Stock
underlying the Preferred Warrants, a maximum offering price of $6.00 per
share, the exercise price of such warrants, has been used to calculate the
registration fee. With respect to 147,250 shares of Common stock
underlying the Additional Preferred Warrants, a maximum offering price of
$10.125 per share, the exercise price of such warrants, has been used to
calculate the registration fee.
(4) Assuming a conversion price of $7.16 (which price represents 80% of the
average closing bid price of the Company's Common Stock for a recent
five-day period), representing 150% of the Common Stock issuable upon
conversion of the Preferred Stock.
(5) $5,631.58 was previously paid on August 20, 1997, accordingly, no
additional amount is due.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
Subject to Completion, dated February 6, 1998
PROSPECTUS
RESPONSE USA, INC.
2,191,293 Shares of Common Stock
This Prospectus relates to the offering of 2,191,293 shares (the
"Shares") of Common Stock, par value $.008 per share (the "Common Stock"), of
Response USA, Inc., a Delaware corporation (the "Company"). The Shares may
be offered from time to time for the accounts of holders of Shares named
herein or in supplements to this Prospectus (the "Selling Stockholders").
See "Plan of Distribution." The Shares being offered by the Selling
Stockholders consist of: (i) 1,659,788 shares, which represents 150% of
shares which may be sold after issuance upon conversion of the Company's 1996
Series A Convertible Preferred Stock (the "Series A Preferred Stock") (based
upon a conversion price of $7.16 (which price represents 80% of the average
closing bid price of the Company's Common Stock for a recent five-day
period), (ii) 114,839 shares of Common Stock which may be resold after
issuance upon exercise of certain common stock purchase warrants (the
"Preferred Warrants") issued to the holders of the Series A Preferred Stock,
(iii) 147,250 shares of Common Stock which may be resold after issuance upon
warrants issued to the holders of the Series A Preferred Stock (the
"Additional Preferred Warrants"), (iv) 102,319 shares of Common Stock which
may be resold after issuance upon conversion of the Company's Series B
Preferred Stock (the "Mellon Preferred Stock") issued in connection with the
Company's revolving credit facility, (v) 107,263 shares of Common Stock
issued in connection with the exercise of common stock purchase warrants
issued in connection with the Company's revolving credit facility, (vi) up to
40,000 shares of Common Stock to be issued in connection with the Company's
amended and restated loan agreement, (vii) 15,000 shares of Common Stock to
be issued in connection with the Company's amended and restated loan
agreement and (viii) 4,834 shares of Common Stock issued by the Company in
connection with an acquisition. Pursuant to Rule 416 of the Securities Act of
1933, as amended (the "Securities Act"), this registration statement also
registers such additional number of Shares as may become issuable upon
conversion of the Series A Preferred Stock or the Mellon Preferred Stock or
upon exercise of the Preferred Warrants or the Additional Preferred Warrants
as a result of stock splits, stock dividends or similar transactions and
pursuant to the anti-dilution provisions of the Series A Preferred Stock,
Mellon Preferred Stock, Preferred Warrants and Additional Preferred Warrants
(including by reason of any reduction in the conversion price of the Series A
Preferred Stock or exercise price of the Preferred Warrants or the Additional
Preferred Warrants in accordance with the terms thereof if the market price
of the Common Stock declines). Information concerning the Selling
Stockholders may change from time to time and will be set forth in
supplements to this Prospectus. The Company will not receive any proceeds
from the sale of shares of Common Stock by the Selling Stockholders, but will
receive the exercise prices payable upon the exercise of the Preferred
Warrants and the Additional Preferred Warrants. There can be no assurance
that all or any part of the Preferred Warrants or the Additional Preferred
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.
All of the outstanding Shares were issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof or Regulation D thereunder
and, to the Company's knowledge, were issued to the Selling Stockholders meeting
the definition of accredited investors under the Securities Act.
The Selling Stockholders, acting as principals for their own account,
directly, through agents designated from time to time, or through brokers,
dealers or agents also to be designated, may sell all or a portion of the
<PAGE>
Shares which may be offered by them from time to time on terms to be determined
at the time of sale. The aggregate proceeds to the Selling Stockholders from
the sale of Common Stock which may be offered hereby by the Selling Stockholders
will be the purchase price of such Common Stock less commissions, if any. For
information concerning indemnification arrangements between the Company and the
Selling Stockholders, see "Plan of Distribution."
The Selling Stockholders and any brokers, dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which case any commissions received by such broker, dealers, agents or
underwriters and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol "RSPND". Commencing February 9, 1998, the Common Stock will
trade on the Nasdaq SmallCap Market under the symbol "RSPN." On February 4,
1998, the closing price of the Common Stock as reported by the Nasdaq SmallCap
Market was $7.0625.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREOF FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy the
securities described herein by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Under no circumstances shall the delivery of
this Prospectus or any sale made pursuant to this Prospectus create any
implication that the information contained in this Prospectus is correct as of
any time subsequent to the date of this Prospectus.
The date of this Prospectus is February 6, 1998
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-3 (Registration No. 333-34059) (the "Registration
Statement") under the Securities Act with respect to the offering and sale from
time to time of the Shares. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto, as
permitted by the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement and to the exhibits
filed therewith. Statements contained in this Prospectus as to the contents of
any contract or other document which has been filed or incorporated by reference
as an exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for a complete statement of their terms and
conditions. Additionally, the Company is subject to the informational
requirements of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, files reports, proxy statements,
and other information statements with the Commission. Copies of such materials
may be inspected without charge at the offices of the Commission, and copies of
all or any part thereof may be obtained from the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington D.C. 20549 or at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon
payment of the fees prescribed by the Commission. In addition, the Commission
maintains a Web Site that contains reports, proxy and information statements and
other information regarding the Company (http://www.sec.gov). The Common Stock
is quoted on the Nasdaq SmallCap Market under the symbol "RSPND." Commencing
February 9, 1998 the Common Stock will be quoted on the Nasdaq SmallCap Market
under the symbol "RSPN." Reports and other information concerning the Company
may be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus are the
following:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997 (including Amendment No. 1 thereto on Form 10-KSB/A,
other than the financial statements for the fiscal year ended June
30, 1997 contained on pages F-2 through F-33 thereto);
(2) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A (file no. 0-20770) filed with the
Commission on October 22, 1992;
(3) the Company's Proxy Statement on Schedule 14A filed with the
Commission on December 11, 1997;
(4) the Company's financial statements for the fiscal year ended
June 30, 1997 contained on pages F-2 through F-33 of the
Registration Statement on Form SB-2, as amended
(File No. 333-37595); and
(5) all other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since June 30, 1997, consisting of (i) the
Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997; and (ii) the Company's Current Report on Form 8-K
dated July 9, 1997.
All documents subsequently filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering made hereby will
be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the respective dates of filing of such documents.
3
<PAGE>
Any statement contained in any document incorporated by reference shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in
the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding statement.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits
to the information that is incorporated by reference herein). Requests for
such information should be directed to: Response USA, Inc., 11-H Princess
Road, Lawrenceville, New Jersey 08648; Attention: Richard M. Brooks. The
Company's telephone number is (609) 896-4500.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the
following: History of Significant Losses; Working Capital Deficit; Uncertain
Future Profitability; Assets Encumbered; High-Leveraged Structure, Risk
Related to Growth Through Acquisitions, Potential Need for Additional
Financing, Attrition of Subscriber Accounts, Competition, Dependence on the
Monitoring Station, Dependence on Suppliers and Manufacturers, Product
Liability and Availability of Insurance, Possible Adverse Effect of "False
Alarms" Ordinances and Government Regulations, Geographic Concentration,
Dependence on Key Personnel, Control by Directors and Executive Officers,
Possible Volatility of Stock Price, No Dividends, Shares Eligible for Future
Sale; Effect of Previously Issued Options; Registration Rights, Delaware
Anti-Takeover Statute; Limitation of Liability of Directors and Officers;
Possible Adverse Effects Associated with the Issuance of "Blank Check"
Preferred Stock, Certain Non-Cash Charges and other factors referenced in
this Prospectus.
4
<PAGE>
THE COMPANY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements and the related notes
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context otherwise requires, all references herein to the Company
refer to Response USA, Inc, its subsidiaries and HealthLink, Ltd.
("HealthLink"), an entity in which the Company has a 50% equity interest.
Each prospective investor is urged to read this Prospectus in its entirety.
Investment in the securities offered hereby involves a high degree of risk.
The information in this Prospectus gives effect to the one-for-three reverse
stock split effective January 9, 1998. See "Risk Factors," starting on page 8
hereof.
The Company is a fully-integrated security systems provider engaged in
the monitoring, sale, installation and maintenance of residential and
commercial security systems and personal emergency response systems ("PERS").
The Company is a regional provider of security alarm monitoring services for
residential and small business subscribers operating in the states of New
York, New Jersey, Pennsylvania, Delaware and Connecticut. The Company is also
a nationwide provider of PERS products which enable individual users, such as
elderly or disabled persons, to transmit a distress signal using a portable
transmitter. The Company currently has an aggregate of approximately 48,000
alarm and PERS subscribers for which it provides monitoring services. As a
result of the Company's acquisitions of subscriber account portfolios, the
Company's monthly recurring revenue ("MRR") has grown by 60%, to
approximately $800,000 for the month ended September 30, 1997 from
approximately $500,000 for the month ended June 30, 1995. According to a May
1997 report published by Security Distributing and Marketing ("SDM"), an
organization which publishes industry reports, as of December 31, 1996, the
Company is the 31st largest electronic security company in the United States,
based on total revenues, and the 25th largest electronic security company,
based on recurring annual revenues.
The Company's electronic security systems business utilizes electronic
systems installed in businesses and residences to provide (i) detection of
events such as intrusion or fire, (ii) surveillance and (iii) control of
access to property. The detection devices are currently monitored by a
third-party monitoring station located in Euclid, Ohio (the "Monitoring
Station"). The Monitoring Station personnel verify the nature of the
emergency and contact the appropriate emergency authorities in the user's
area. 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.
The Company's PERS is an electronic device which is designed to monitor,
identify and electronically report emergencies requiring medical, fire or
police assistance, to help elderly, disabled and other individuals. When
activated by the pressing of a button, or automatically, in the case of
certain environmental temperature fluctuations, 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 the Monitoring Station which
provides continuous monitoring services. In addition, this signal establishes
two-way voice communication between the user and the Monitoring Station
personnel directly through the PERS unit, thereby avoiding any need for the
user to access a telephone.
The electronic security services industry is highly fragmented and the
Company's strategy is to grow by acquisition, as well as by offering new
products and services. According to an industry report published in 1996,
there are approximately 12,000 separate security services companies
nationally, and according to the May 1997 SDM Report, the electronic security
industry generates an aggregate of approximately $13
5
<PAGE>
billion in revenues annually. The Company believes that there is an
industry-wide trend towards consolidation due, in part, to the relatively
high fixed costs of maintaining a centralized monitoring station and the
relatively low incremental cost of servicing additional subscribers. The
Company completed the acquisition of an aggregate of 38 subscriber account
portfolios (a total of approximately 25,000 subscriber accounts) during the
three fiscal years ended June 30, 1997.
The Company has entered into an agreement with Triple A Security
Systems, Inc. ("Triple A"), pursuant to which the Company will acquire
substantially all of the assets of Triple A upon the consummation of this
offering. Triple A is engaged in the monitoring, sale and installation of
residential and commercial security systems, principally in northeastern
Pennsylvania. Triple A currently services approximately 14,000 subscriber
accounts which are monitored by its central monitoring station, and the
Company anticipates transferring all of its subscriber accounts from the
Monitoring Station to Triple A's monitoring station following consummation of
the Triple A acquisition.
In March 1997, the Company acquired a 50% interest in HealthLink.
HealthLink markets a low-cost PERS product containing basic one-way
transmission features (the "HealthLink System"). The HealthLink System is
distributed nationally through retail stores, including Target Stores (808
stores), Long's Drugs, a west-coast regional chain (305 stores), Fred Myer, a
northwest regional chain (104 stores), Fry's, a southwest regional chain (51
stores) and Bergen Brunswick's west-coast Good Neighbor Pharmacies (429
stores), accounting for distribution through a total of approximately 1,700
stores as of the date of this Prospectus. The Company is negotiating with
several other chain stores to further increase distribution. The Company
provides monitoring and related services to HealthLink System customers, is
responsible for billing and collecting from such customers and receives a
portion of the recurring revenue as a fee for providing these services.
In November 1996, the Company entered into a two-year agreement granting
it the exclusive worldwide distribution rights within the health care
industry to WanderWatch,-TM- a monitoring system designed to assist in the
care of patients with Alzheimer's disease, autism, head injury, dementia or
other diseases or injuries which may involve memory loss. WanderWatch-TM- is
similar to PERS, except that the transmitter is designed to be continuously
activated and transmits a signal to the base unit. If the base unit does not
receive the requisite number of transmissions, it indicates that the patient
may have wandered outside the "safety range," and triggers an alarm in the
home base unit. If the alarm is not disabled, a signal is automatically
transmitted to the Monitoring Station, whose personnel will then place calls
based upon a set protocol established by the caregivers. The license
agreement for WanderWatch-TM- provides for automatic one-year renewals and
the Company's exclusive rights to the license are subject to forfeiture under
certain circumstances. WanderWatch-TM- is currently being test-marketed by
the Company and the Company does not anticipate commencing distribution of
the product prior to July 1, 1998.
The Company is a Delaware corporation, organized in March 1992. The
Company's principal executive offices are located at 11-H Princess Road,
Lawrenceville, New Jersey 08648, and its telephone number is 609-896-4500.
6
<PAGE>
The Offering
Securities Offered 2,191,293 shares of Common Stock.
Use of Proceeds The Company will not receive any of the proceeds
from the sale of Common Stock offered by the
Selling Stockholders hereby. Any money received
by the Company upon exercise of the Preferred
Warrants or the Additional Preferred Warrants will
be used for working capital purposes.
Risk Factors The securities offered hereby involve a high
degree of risk. See "RISK FACTORS."
Offering Price All or part of the shares of Common Stock offered
hereby may be sold from time to time in amounts
and on terms to be determined by the Selling
Stockholders at the time of sale.
Nasdaq Trading
Symbol "RSPND" ("RSPN" Commencing February 9, 1998).
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock being offered hereby is
highly speculative, involves a high degree of risk and should be made only by
investors who can afford the loss of their entire investment. The following
risk factors should be considered carefully in addition to the other
information in this Prospectus before purchasing the shares of Common Stock
offered hereby. It must be recognized that other unforseen risks might arise
in the future and affect the Company to a greater extent than could ever be
anticipated.
Except for the historical information contained herein, this Prospectus
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, such as statements of the Company's
plans, objectives, expectations and intentions. All such forward-looking
statements involve risks and uncertainties, accordingly, the Company's actual
results could differ materially from those discussed in the forward-looking
statements. All cautionary statements made in this Prospectus should be read
as being applicable to all related forward-looking statements wherever they
appear in this Prospectus. See "Special Note Regarding Forward-Looking
Statements."
History of Significant Losses; Substantial Accumulated Deficit; Working Capital
Deficit; Negative Cash Flow and Uncertain Future Profitability
The Company has incurred net losses of $3,030,830, $4,411,898,
$18,054,144 and $1,029,953 (inclusive of dividends and accretion on preferred
stock of $6,876,521 and $335,272 for the fiscal year ended June 30, 1997 and
the three months ended September 30, 1997, respectively) for the three fiscal
years ended June 30, 1995, 1996 and 1997, and the three months ended
September 30, 1997, respectively and an accumulated deficit of $32,471,902 at
September 30, 1997 and negative cash flow of $1,228,215 for the fiscal year
ended June 30, 1997 and $15,738 for the three months ended September 30,
1997. It is anticipated that such losses will continue for the foreseeable
future. The Company had a net working capital deficit of $1,023,805 as at
June 30, 1997 and $841,753 as at September 30, 1997. In addition, the
Company's future plans are subject to known and unknown risks and
uncertainties that may cause the Company to continue to incur substantial
losses from operations. There can be no assurance that the Company's
operations will ever become profitable or that, if it is successful in doing
so, it will be able to maintain profitability.
Assets Encumbered; Highly-Leveraged Structure
On June 30, 1996, the Company completed a restructuring of its long-term
debt and obtained a $15,000,000 credit line (the "Credit Line") from Mellon
Bank, N.A. (the "Bank"), which was increased to $15,500,000 on January 14,
1998. As of January 30, 1998, $190,000 was available for borrowing under the
Credit Line. On December 10, 1997, the Bank issued a commitment letter to the
Company to increase the Credit Line to $18,000,000. The increase in the
Credit Line is subject to the satisfaction of a number of conditions,
including the Company's receipt of a minimum of $7,000,000 of net proceeds
from its proposed secondary offering (after giving effect to the redemption
of the Series A Preferred Stock, and there can be no assurance that all of
such conditions will be satisfied or that the Company will receive such
increase in the Credit Line. As a result of such borrowings, the Company's
capital structure is highly leveraged. The Company's indebtedness requires
that a significant amount of its cash flow from operations be applied to the
payment of interest, and there can be no assurance that the Company's
operations will generate sufficient cash flow to service this indebtedness.
Borrowings under the Credit Line are at variable rates of interest, which
subjects the Company to fluctuations in interest rates.
8
<PAGE>
The Credit Line is secured by all of the assets of the Company, and
includes financial and other covenants that restrict the operational and
financial flexibility of the Company, including restrictions on indebtedness,
liens, acquisitions and other significant corporate events. Failure to comply
with certain covenants would, among other things, permit the Bank to
accelerate the maturity of the obligations thereunder and could result in
cross-defaults permitting the acceleration of debt under other Company
agreements and the foreclosure on all of the assets of the Company. In
addition, the Company is required to obtain the consent of the Bank under the
Credit Line and to maintain certain financial ratios in order to undertake
significant acquisitions. The Company's highly-leveraged capital structure
could impair its ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, or other purposes, to
compete effectively or to operate successfully in the future. As of March 31,
1997, June 30, 1997 and September 30, 1997, the Company was not in compliance
with certain financial covenants under the Credit Line. The Company
subsequently entered into amendments to the Credit Line which amended the
covenants for the third and fourth quarters of the fiscal year ended June 30,
1997 and the first quarter of fiscal 1998 such that the Company was then in
compliance with the Credit Line. While the Company believes that it will be
able to maintain compliance with the financial covenants under the Credit
Line, there can be no assurance that the Company will maintain compliance
with such financial covenants, or that the Company will be able to obtain
necessary consents, waivers or amendments to the Credit Line in the future.
Certain Non-Cash Charges
The Company may incur certain non-cash charges (i) of up to $900,000 for
the fiscal year ended June 30, 1998, as deferred compensation expense
relating to certain performance options granted to two officers of USS, based
upon fluctuations in the market price of the Common Stock, and (ii) for the
fiscal year ended June 30, 1998 in connection with the issuance of a certain
performance warrant issued to BKR, Inc. in connection with the Company's
investment in HealthLink, based upon the value of such warrant. Such charges
could have a material adverse effect on the Company's results of operations.
Risks Related to Growth Through Acquisitions; Risks Associated with Triple A
Acquisition
Since fiscal year end 1994, substantially all of the Company's growth
has been through acquisitions. One of the Company's primary strategies is to
continue to increase its revenues and the markets it serves through the
acquisition of other companies in the electronic security services industry
and portfolios of alarm monitoring accounts. During the fiscal years ended
June 30, 1995, 1996 and 1997, the Company consummated eight acquisitions (an
aggregate of 10,700 subscriber accounts), 16 acquisitions (an aggregate of
9,200 subscriber accounts) and 14 acquisitions (an aggregate of 5,300
subscriber accounts), respectively. In the event that the Company targets
larger acquisitions, such as the acquisition of Triple A, such acquisitions
can be expected to involve significant expenditures of capital and time,
whether or not consummated. Such acquisitions may involve certain unknown
risks and uncertainties in addition to those identified herein, which could
have a material adverse effect on the Company's financial condition and
results of operations. In addition, the acquisition of electronic security
service companies may become more expensive in the future, to the extent that
demand and competition increases. There can be no assurance that the Company
will be able to identify acquisition candidates, successfully consummate such
acquisitions, acquire or profitably manage such acquisition candidates or
successfully integrate such businesses into its operations without
substantial costs, delays or other problems. In addition, the Company is
unable to predict the size or frequency of any future acquisitions, and there
can be no assurance that any businesses acquired will be profitable at the
time of their acquisition or will achieve sales and profitability that
justify the investment therein or that the Company will be able to realize
expected operating and economic efficiencies following such acquisitions.
Acquisitions may involve a number of special risks, including (i) adverse
effects on the Company's reported operating results, (ii) diversion of
management's attention, (iii) increased
9
<PAGE>
burdens on the Company's management resources and financial controls, (iv)
dependence on retention and hiring of key personnel, (v) risks associated
with unanticipated problems or legal liabilities and (vi) amortization of
acquired intangible assets, some or all of which could have a material
adverse effect on the Company's operations and financial performance.
Furthermore, significant acquisitions, such as the acquisition of Triple A,
require consent of the Bank under the Credit Line and there can be no
assurance that the Bank will consent to such acquisitions. Failure to receive
any such consent of the Bank could have a material adverse effect on the
Company's operations and financial performance.
The Company has entered into an agreement to acquire The Jupiter Group,
Inc. ("Jupiter"), a company engaged in the patrol service business. The
Company has no experience in the patrol service business and such industry
may involve risks and uncertainties which are unknown to the Company and
which could have a material adverse effect on the Company's financial
condition and results of operations. In addition, the patrol service business
has a significantly lower profit margin than the other services provided by
the Company, which could also have a material adverse effect on the Company's
results of operations and financial performance.
Since the Company's primary consideration in making an acquisition is
the amount of MRR associated with the seller's subscriber accounts, the price
paid by the Company is customarily directly tied to such MRR. No audited
historical financial information was available for any of the Company's
acquisitions made since 1994, except Triple A and Jupiter, if consummated.
Therefore, the actual MRR acquired may be less than the Company anticipated.
Thus, the Company must rely on management's knowledge of the industry, due
diligence procedures, and representations and warranties of the sellers. In
the event the Company's assessment of the MRR of an acquired company is
higher than actual MRR for an acquired company, the Company's financial
condition and results of operations could be materially adversely affected.
A difference between the accounting treatment of the purchase of
subscriber accounts and the accounting treatment of the generation of
subscriber accounts through direct sales by the Company's sales force has a
significant impact on the Company's results of operations. The costs of
monitoring contracts (acquired either through the Company's dealer program or
through the acquisition of subscriber account portfolios) are capitalized and
amortized over estimated lives ranging from five to ten years on a
straight-line basis for alarm and PERS accounts. Included in capitalized
costs are acquisition transition costs that reflect the Company's estimate of
costs associated with incorporating the acquired subscriber accounts into its
operations. In contrast, all of the Company's costs related to the marketing,
sales and installation of new alarm monitoring systems generated by its sales
force are expenses in the period in which such activities occur. The
Company's marketing, sales and installation expenses for new systems
generally exceed installation revenues. Such accounting treatment could
adversely affect the Company's financial condition and results of operations.
Risks Associated with Preferred Stock Settlement Agreement
The Company has entered into a Settlement Agreement with the holders of
the Preferred Stock. Pursuant to the Settlement Agreement, the Company is
required to redeem all of the Preferred Stock on February 2, 1998, subject to
extension under certain circumstances. While the Company has received
confirmation from a majority of the holders that the date of redemption has
been extended until February 10, 1998, the Company has not received
confirmation from all of the holders as to such extension and in the event
the holders were to disagree with the Company, the holders might declare the
Company to be in breach of the Settlement Agreement and could attempt to
convert their shares of Preferred Stock and/or reinstitute
10
<PAGE>
an action against the Company, which could have a material adverse effect on
the Company and on the market price of the Common Stock.
Potential Need for Additional Financing; Potential Dilutive Impact of
Acquisitions
Based on the Company's operating plan, the Company may require
additional financing. The Company has filed a registration statement with
respect to a proposed underwritten public offering of Common Stock. Upon
consummation of such proposed secondary offering, of which there can be no
assurance, the Company believes that the net proceeds from such contemplated
offering together with cash on hand and available debt financing under the
Credit Line, will be sufficient to satisfy its current capital requirements
for at least 12 months following such offering. However, in the event that
the offering is not consummated, or if consummated, in the event that
following such offering the Company were to make significant acquisitions for
cash consideration, the Company may require additional capital before such
time. Sources of funds may include the issuance of Common Stock or preferred
stock sold in a public offering or in private placements, debt securities or
bank financing. Historically, the Company has utilized its Common Stock to
pay a portion of the consideration of its acquisitions. To the extent the
Company continues to use its Common Stock in connection with acquisitions,
the issuance of such shares could have a dilutive impact on the Company's
existing stockholders, including investors in this offering. Alternatively,
to avoid such dilution, or if the acquisition candidate is unwilling to
accept Common Stock as all or a portion of the consideration for such
acquisition, the Company may be required to utilize more of its cash
resources, if available, or may be required to seek additional funding. There
can be no assurance that the Company would be able to obtain capital on a
timely basis, on favorable terms, or at all. If the Company is unable to
obtain such financing, or generate funds from operation sufficient to meet it
needs, the Company may be unable to implement its current plans for expansion
and development.
Attrition of Subscriber Accounts
The Company is heavily dependent on its recurring monitoring and service
revenues. Given the relatively fixed nature of monitoring and service
expenses, increases and decreases in monitoring and service revenues have a
significant impact on the Company's financial performance. Substantially all
of the Company's monitoring and service revenues are derived from recurring
charges to subscribers for the provision of various services. Although no
single subscriber represents more than one-half of one percent of the
Company's recurring revenue base, the Company is vulnerable to subscribers
canceling their contracts. In recent years, lost recurring revenues from such
cancellations have exceeded the new recurring revenues added by the Company's
internal sales efforts.
At September 30, 1997, the cost of subscriber accounts and intangible
assets, net of previously accumulated amortization, was $18,045,284, which
constituted 59.6% of the book value of the Company's total assets. The
Company's acquired subscriber accounts are amortized on a straight-line basis
over the estimated life of the related revenues. The Company's assumed
attrition rate for all of its subscriber accounts, expressed as total
accounts lost per year, net of new accounts from subscribers who move into
premises previously occupied by Company subscribers and accounts for which
the Company is reimbursed by virtue of a guarantee by the seller of the
account, is approximately 10%. It is the Company's policy to review
periodically actual account attrition and, when necessary, adjust the
remaining estimated lives of the Company's acquired accounts to reflect
assumed future attrition. There could be a material adverse effect on the
Company's results of operations and financial condition if actual account
attrition significantly exceeds assumed attrition and the Company has to make
further adjustments with respect to the amortization of acquired subscriber
accounts.
11
<PAGE>
Competition
The electronic security services industry is highly competitive and
fragmented. The Company competes with national and regional companies, as
well as smaller local companies, in all of its operations. Furthermore, new
competitors continue to enter the industry and the Company may encounter
additional competition from such future industry entrants. Subject to
regulatory compliance, certain companies engaged in the telephone and cable
business are competing in the electronic security services industry and other
such companies may, in the future, enter the industry. Certain of the
Company's current competitors have, and new competitors may have,
substantially greater financial resources than the Company. There can be no
assurance that the Company will be able to compete successfully in the
electronic security services industry. The Company's principal competitors
with respect to its PERS are other national or regional emergency response
providers and burglar alarm companies that offer medical emergency features
in addition to their home protection systems. Many of these companies have
greater financial resources than the Company and may enjoy a particular
competitive advantage due to their access to a larger client base. There can
be no assurance that the Company will be able to compete successfully in the
PERS industry.
Dependence on the Monitoring Station
The Company is dependent on an independent third-party monitoring
station to monitor substantially all of its subscriber accounts. The
Company's agreement with the Monitoring Station expires in April 2000 and is
terminable sooner under certain circumstances. Although the Company believes
that alternative monitoring stations are available on commercially reasonable
terms, any termination or temporary interruption of services by the
Monitoring Station for any reason including a catastrophic event such as
tornado, hurricane, earthquake, fire or other disaster which rendered the
Monitoring Station temporarily or permanently inoperable could adversely
affect the Company's financial condition and results of operations. The
Company anticipates transferring all of its subscriber accounts from the
Monitoring Station to Triple A's monitoring station following consummation of
the Triple A acquisition.
Dependence on Suppliers and Manufacturers
The Company does not manufacture any of the equipment or components that
it designs and installs. Although the Company believes that a variety of
alternative sources of supply are available on commercially reasonable terms,
the Company has no guaranteed supply arrangements with its suppliers and
purchases components pursuant to purchase orders placed from time to time in
the ordinary course of business. There can be no assurance that shortages of
components will not occur in the future. Failure of sources of supply and the
inability of the Company to develop alternative sources of supply, if
required in the future, could have a material adverse effect on the Company's
operations.
Product Liability and Availability of Insurance
The nature of the security services provided by the Company potentially
exposes it to greater risk of liability claims for employee acts or omissions
or system failure than may be inherent in many other service businesses.
Although (i) substantially all of the Company's customers have subscriber
agreements which contain provisions for limited liability and predetermined
liquidated damages and (ii) the Company carries insurance which provides
coverage against certain of such liabilities, there can be no assurance that
such existing arrangements will prevent the Company from being adversely
affected as a result of damages arising from the acts of its employees,
defective equipment, the acts or omissions of the Monitoring Station or
because some jurisdictions prohibit or restrict limitations on liabilities
and liquidated damages. In addition, certain of the Company's insurance
policies and the laws of some states may limit or prohibit
12
<PAGE>
insurance coverage for punitive damages and for certain other kinds of
damages arising from employee misconduct. In addition, in some states, the
contractual limitation on liability and indemnification provisions may be
ineffective in cases of gross negligence or intentional misconduct and in
certain other situations.
The sale and service of the Company's products entails the risk of
product liability claims. In addition, many of the companies with which the
Company does or may do business may require financial assurances of product
reliability. The Company has product liability insurance, but may be required
to pay higher premiums associated with new product development. Product
liability insurance is expensive and there can be no assurance that
additional insurance will be available on acceptable terms, if at all, or
that it will provide adequate coverage against potential liabilities. The
inability to obtain additional insurance at an acceptable cost or to
otherwise protect against potential product liability could prevent or
inhibit commercialization of the Company's products. A successful claim
brought against the Company in excess of its insurance coverage could have a
material adverse effect on the Company.
Possible Adverse Effect of "False Alarms" Ordinances and Government Regulations
The Company believes that approximately 97% of alarm activations that
result in the dispatch of police or fire department personnel are not
emergencies, and thus are "false alarms." Significant concern has arisen in
certain municipalities about this high incidence of false alarms. This
concern could cause a decrease in the likelihood or timeliness of police
response to alarm activations and thereby decrease the propensity of
consumers to purchase or maintain alarm monitoring services.
A number of local governmental authorities have considered or adopted
various measures aimed at reducing the number of false alarms. Such measures
include (i) subjecting alarm monitoring companies to fines or penalties for
transmitting false alarms, (ii) licensing individual alarm systems and the
revocation of such licenses following a specified number of false alarms,
(iii) imposing fines on alarm subscribers for false alarms, (iv) imposing
limitations on the number of times the police will respond to alarms at a
particular location after a specified number of false alarms and (v)
requiring further verification of an alarm signal before the police will
respond. Enactment of such measures could adversely affect the Company's
future business and operations.
The Company's operations are also subject to a variety of federal,
state, county and municipal laws, regulations and licensing requirements.
Many of the states in which the Company operates, as well as certain local
authorities, require the Company to obtain licenses or permits to conduct a
security alarm services business. Certain governmental entities also require
persons engaged in the security alarm services business to be licensed and to
meet certain standards in the selection and training of employees and in the
conduct of business. The loss of such licenses, or the imposition of
conditions on the granting or retention of such licenses, could have a
material adverse effect on the Company.
The Company's advertising and sales practices are regulated by both the
Federal Trade Commission (the "FTC") and state consumer protection laws. Such
regulations include restrictions on the manner in which the Company promotes
the sale of its products and the obligation of the Company to provide
purchasers of its products with certain rights. While the Company believes
that it has complied with these regulations in all material respects, there
can be no assurance that none of these regulations were violated in
connection with the solicitation of the Company's existing subscriber
accounts, particularly with respect to accounts acquired from third parties,
or that no such violations will occur in the future.
13
<PAGE>
Geographic Concentration
The Company's existing alarm subscriber base is geographically
concentrated in New York, New Jersey, Connecticut, Delaware and Pennsylvania.
Accordingly, the performance of the Company may be adversely affected by
regional or local economic conditions. The Company may from time to time make
acquisitions in regions outside of its current operating area. The
acquisition of companies in other regions, or in metropolitan areas in which
the Company does not currently have subscribers, requires an investment by
the Company. In order for the Company to expand successfully into a new area,
the Company must acquire companies with a sufficient number and density of
subscriber accounts in such area to support the investment. There can be no
assurance that the Company will find such opportunities or that an expansion
into new geographic areas will generate operating profits.
Dependence on Key Personnel and Management
The Company's success depends to a significant degree upon the
continuing contributions of its senior management and other key employees,
particularly its only two current executive officers, Richard M. Brooks, the
Company's Chief Executive Officer, President, Chief Financial Officer and
Chairman of the Board, and Ronald A. Feldman, the Company's Chief Operating
Officer, Vice President, Secretary and Treasurer, the loss of either of whom
might have a material adverse effect on the Company's financial condition and
results of operations. Although the Company has employment agreements with
Messrs. Brooks and Feldman and certain other employees, there can be no
assurance that the Company will be able to retain the services of such
individuals. It is an event of default under the Credit Line if Messrs.
Brooks, Feldman or Todd Herman, President of United Security Systems, Inc.
("USS"), a subsidiary of the Company, are not employed in certain management
positions. The Company has key-man life insurance policies on the lives of
Messrs. Brooks and Feldman in the amount of $3,000,000 and $1,000,000,
respectively.
Control by Directors and Executive Officers
The Company's directors and executive officers will beneficially own
approximately 28.1% of the outstanding shares of Common Stock (excluding
shares of Common Stock to be issued to one of the directors upon consummation
of the Triple A and Jupiter acquisitions and including shares of Common Stock
issuable upon exercise of options which the Company has agreed to grant to
certain officers and directors) and, accordingly, will have substantial
influence over the outcome of any matter submitted to a vote of stockholders,
including the election of directors and the approval of significant corporate
transactions (such as acquisitions of the Company or its assets). Such
influence could delay or prevent a change of control of the Company.
Possible Volatility of Stock Price
The stock market has from time to time experienced extreme price and
volume fluctuations that have been unrelated to the operating performance of
particular companies. The market price of the Common Stock may be
significantly affected by quarterly variations in the Company's operating
results, changes in financial estimates by securities analysts or failure by
the Company to meet such estimates, litigation involving the Company, general
trends in the security alarm industry, actions by governmental agencies,
national economic and stock market conditions, industry reports and other
factors, many of which are beyond the control of the Company.
14
<PAGE>
No Dividends
The Company has never paid any cash or other dividends on its Common
Stock. Payment of dividends on the Common Stock is within the discretion of
the Board of Directors and will depend upon the Company's earnings, its
capital requirements and financial condition, and other relevant factors. For
the foreseeable future, the Board intends to retain future earnings, if any,
to finance its business operations and does not anticipate paying any cash
dividends with respect to the Common Stock. Pursuant to the terms of the
Credit Line, the Company may not declare any dividends while any outstanding
balance exists under the Credit Line.
Shares Eligible for Future Sale; Effect of Previously Issued Options and
Warrants; Registration Rights
The Company has outstanding 2,212,596 shares of Common Stock, all of
which are freely tradeable without restriction or further registration under
the Securities Act. Upon consummation of the Company's proposed secondary
offering, an additional 3,000,000 shares of Common Stock will also be freely
tradeable. The Company may issue in the future options or shares of Common
Stock which are "restricted securities" (as that term is defined in Rule 144
under the Securities Act) and in the future may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. In general, under Rule 144, as currently in effect, a person
(including a person who may be deemed an "affiliate" of the Company as that
term is defined under the Securities Act) who has beneficially owned such
shares for at least one year would be entitled to sell within any three-month
period a number of shares beneficially owned for at least one year that do
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock or (ii) the average weekly trading volume of the Common Stock during
the four calendar weeks preceding such sale. Sales under Rule 144 are further
subject to certain restrictions relating to the manner of sale, notice and
the availability of current public information about the Company. After two
years have elapsed from the date of the issuance of restricted securities by
the Company or their acquisition from an affiliate, such shares may be sold
without limitation by persons who have not been affiliates of the Company for
at least three months. The sale, or availability for sale, of substantial
amounts of Common Stock in the public market pursuant to Rule 144 or
otherwise could materially adversely affect the market price of the Common
Stock and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing.
The Company has reserved from the authorized, but unissued, Common
Stock, 2,967,086 shares of Common Stock issuable upon exercise of options,
warrants and convertible securities. The existence of such outstanding
securities may prove to be a hindrance to future financings, since the
holders of such securities may be expected to exercise them at a time when
the Company would otherwise be able to obtain additional equity capital on
terms more favorable to the Company. Certain of the holders of such
securities have registration rights with respect to such securities. No
prediction can be made as to the effect, if any, that sales of such
securities, or the availability of such securities for sale, will have on the
market prices prevailing from time to time for the Common Stock. However,
even the possibility that a substantial number of the Company's securities
may, in the near future, be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
Delaware Anti-Takeover Statute; Limitation of Liability of Directors and
Officers
The Company is a Delaware corporation and is subject to the prohibitions
imposed by Section 203 of the Delaware General Corporate Law ("DGCL"), which
is generally viewed as an anti-takeover statute. In general, this statute
will prohibit the Company from entering into certain business combinations
without
15
<PAGE>
the approval of its Board of Directors and, as accordingly, could prohibit or
delay mergers or other attempted takeovers or changes in control with respect
to the Company. Such provisions may discourage attempts to acquire the
Company. A change of control of the Company would also cause a default under
the Credit Line which could accelerate the maturity of the obligations
thereunder.
The Company's Certificate of Incorporation includes provisions to
eliminate, to the full extent permitted by the DGCL as in effect from time to
time, the personal liability of directors of the Company for monetary damages
arising from a breach of their fiduciary duties as directors. The Certificate
of Incorporation also includes provisions to the effect that (subject to
certain exceptions) the Company shall, to the maximum extent permitted from
time to time under the law of the State of Delaware, indemnify, and upon
request shall advance expenses to, any director or officer to the extent that
such indemnification and advancement of expenses is permitted under such law,
as it may from time to time be in effect. In addition, the Company's Bylaws
(the "Bylaws") require the Company to indemnify, to the full extent permitted
by law, any director, officer, employee or agent of the Company for acts
which such person reasonably believes are not in violation of the Company's
corporate purposes as set forth in the Certificate of Incorporation. As a
result of such provisions in the Certificate of Incorporation and the Bylaws,
stockholders may be unable to recover damages against the directors and
officers of the Company for actions taken by them which constitute
negligence, gross negligence or a violation of their fiduciary duties, which
may reduce the likelihood of stockholders instituting derivative litigation
against directors and officers and may discourage or deter stockholders from
suing directors, officers, employees and agents of the Company for breaches
of their duty of care, even though such action, if successful, might
otherwise benefit the Company and its stockholders.
Possible Adverse Effects Associated with the Issuance of "Blank Check" Preferred
Stock
The Company's Certificate of Incorporation authorizes the Company's
Board of Directors to issue up to 250,000 shares (of which 239,430.42 remain
available) of "blank check" preferred stock, from time to time, in one or
more series, solely on the authorization of its Board of Directors. The Board
of Directors will thus be authorized, without further approval of the
stockholders, to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each new
series of preferred stock. The issuance of such stock could, among other
results, adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Common Stock at a
premium, or otherwise adversely affect the market price of the Common Stock.
16
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from any sale of the Shares.
Any proceeds realized by the Company from the exercise of the Preferred
Warrants or the Additional Preferred Warrants will be used for working
capital purposes.
Proceeds from the private placement of the Series A Preferred Stock were
used for the acquisition of monitoring accounts and for general working
capital purposes.
SELLING STOCKHOLDERS
The following table sets forth information concerning Shares
beneficially owned as of January 28, 1998. Other than their ownership of the
Company's securities, none of the Selling Stockholders has had any material
relationship with the Company within the past three years, other than as
described in the footnotes to the table. The table has been prepared based on
information furnished to the Company by American Stock Transfer & Trust
Company and/or by or on behalf of the Selling Stockholders.
Any or all of the Shares listed below may be offered for sale by the
Selling Stockholders from time to time and therefore no estimate can be given
as to the number of Shares that will be held by the Selling Stockholders upon
termination of this offering. Except as otherwise indicated, the Selling
Stockholders listed in the table have sole voting and investment powers with
respect to the Shares indicated.
Of the securities offered hereby (i) 1,659,788 shares of Common Stock
(representing 150% of the Common Stock issuable upon conversion of the
Preferred Stock, based upon an assumed conversion price of $7.16) may be
resold after issuance upon conversion of the Series A Preferred Stock, (ii)
114,839 shares of Common Stock may be resold after issuance upon exercise of
the Preferred Warrants, (iii) 147,250 shares of Common Stock may be resold
after issuance upon exercise of the Additional Preferred Warrants, (iv)
102,319 shares of Common Stock may be resold after issuance upon conversion
of the Mellon Preferred Stock and (v) up to 55,000 shares of Common Stock may
be resold after issuance by the Company. Pursuant to Rule 416 of the
Securities Act, as amended, this registration statement also registers such
additional number of Shares as may become issuable upon conversion of the
Series A Preferred Stock or the Mellon Preferred Stock or upon exercise of
the Preferred Warrants or the Additional Preferred Warrants as a result of
stock splits, stock dividends or similar transactions and pursuant to the
anti-dilution provisions of the Series A Preferred Stock, Mellon Preferred
Stock, Preferred Warrants and Additional Preferred Warrants (including by
reason of any reduction in the conversion price of the Series A Preferred
Stock or exercise price of the Preferred Warrants or the Additional Preferred
Warrants in accordance with the terms thereof if the market price of the
Common Stock declines). As of the date hereof, none of the Preferred Warrants
or the Additional Preferred Warrants have been exercised and none of the
Mellon Preferred Stock has been converted.
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 Series A 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)
the Fixed Price (as defined in the Certificate of Designation of the Series A
Preferred Stock) 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, but in no event greater than $15.00, 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
Series A 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. The Fixed
17
<PAGE>
Price is also subject to reset each month following the first conversion in
the event that the market price of the Common Stock declines. In addition,
the number of shares issuable upon the conversion of the Series A Preferred
Stock is subject to adjustment upon the occurrence of certain dilutive
events. The 1,659,788 shares of Common Stock issuable upon conversion of the
Series A Preferred Stock and offered hereby represents 150% of the number of
shares which would be issuable if the Series A Preferred Stock were converted
at a conversion price equal to $7.16 per share (which price represents 80% of
a recent five-day average closing bid price of the Company's Common Stock)
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 for the entire period which the Series A Preferred Stock may be
outstanding.
<TABLE>
<CAPTION>
Beneficial Ownership
Stockholder Offered Prior to Sale After Sale
----------- ------- -------------- ----------
<S> <C> <C> <C>
A.J. Gesundheit 80,808(1) 80,808 0
AG Super Fund International Partners, L.P. 16,162(1) 16,162 0
GAM Arbitrage Investments, Inc. 16,162(1) 16,162 0
Leonardo, L.P. 48,485(1) 48,485 0
Raphael, L.P. 16,162(1) 16,162 0
Ailouros Ltd. 80,809(1) 80,809 0
Capital Ventures International, Inc. 371,716(1) 371,716 0
Charles B. Krusen 64,648(1) 64,648 0
Wood Gundy London Ltd. 484,846(1) 484,846 0
Darisco Diversified Investments Inc. 80,808(1) 80,808 0
Deere Park Partners, L.P. 10,726(1) 10,726 0
Halifax Fund, L.P. 16,667(2) 16,667 0
KA Investments LDC 48,485(1) 48,485 0
Lake Management LDC 161,616(1) 161,616 0
The Otato Limited Partnership 155,151(1) 155,151 0
UC Financial Ltd. 58,525(1) 58,525 0
Zanett Lombardier Ltd. 210,102(1) 210,102 0
APT Holdings Corporation 249,582(3) 249,582 0
4R Security, Inc. 4,834(4) 4,834 0
Berwind Financial Group, L.P. 15,000(5) 15,000 0
</TABLE>
- -------------------
(1) Includes (i) 150% of the shares of Common Stock issuable upon conversion
of shares of Series A Preferred Stock and shares of Common Stock
issuable upon conversion of the Premium if such Premium is not redeemed,
and (ii) shares of Common Stock issuable upon exercise of the Preferred
Warrants and the Additional Preferred Warrants at exercise prices of
$6.00 and $10.125, respectively. Assumes that all shares of Series A
Preferred Stock are converted at a conversion price of $7.16 (which
price represents 80% of a recent five day average closing bid price of
the Company's Common Stock) with the Company redeeming the shares
otherwise issuable in respect of the Premium. Pursuant to the terms of
the Series A Preferred Stock, the Series A 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 Series A 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
18
<PAGE>
Stock that such Selling Stockholder could own beneficially at any given
time through its ownership of the Series A Preferred Stock.
(2) Represents shares of Common Stock issuable upon exercise of Preferred
Warrants at an exercise price of $6.00.
(3) Includes 107,263 shares of Common Stock issued in connection with the
exercise of common stock purchase warrants issued in connection with the
Company's revolving credit facility, 102,319 shares of Common Stock
issuable upon conversion of the Mellon Preferred Stock and up to 40,000
shares of Common Stock to be issued in connection with the Company's
amended and restated loan agreement.
(4) Shares issued in connection with an acquisition.
(5) Represents shares of Common Stock to be issued by the Company in
connection with the Company's amended and restated loan agreement.
19
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered and sold from 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 the Nasdaq SmallCap Market 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 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; 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.
In order to comply with certain state securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Shares may not be sold
unless such Shares have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is
complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage
in market-making activities with respect to such Shares for a period of one
or five business days prior to the commencement of such distribution. In
addition to, and without limiting, the foregoing, each of the Selling
Stockholders and any other person participating in a distribution will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of any of the Shares
by the Selling Stockholders or any such other person. All of the foregoing
may affect the marketability of the Shares.
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 Preferred Warrants and the
Additional Preferred 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 Series A 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
20
<PAGE>
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 under applicable state law has been passed
upon for the Company by Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New
York, New York 10176.
EXPERTS
The financial statements incorporated in this prospectus by reference
from the Company's annual report on Form 10-KSB as of and for the year ended
June 30, 1997 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated by reference, and
are incorporated by reference in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of the Company incorporated by reference in
this prospectus as of and for the years ended June 30, 1996 and 1995 have
been audited by Fishbein & Company, PC, independent auditors, as stated in
their report which is incorporated by reference, and are incorporated by
reference in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Triple A and Jupiter incorporated by reference
in this prospectus as of and for the years ended December 31, 1996 and 1995 have
been audited by Terry H. Jones, CPA, independent auditor, as stated in his
report which is incorporated by reference, and are incorporated in reliance upon
the report of such person given upon his authority as an expert in accounting
and auditing.
21
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offering made hereby, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
an offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as
of any time subsequent to the dates as of which such information is
furnished.
____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.......................................................3
Incorporation of Certain Documents by Reference.............................3
Special Note Regarding Forward
Looking Statements.....................................................4
The Company.................................................................5
The Offering................................................................7
Risk Factors................................................................8
Use of Proceeds............................................................17
Selling Stockholders.......................................................17
Plan of Distribution.......................................................20
Legal Matters..............................................................21
Experts....................................................................21
</TABLE>
RESPONSE USA,
INC.
--------------
COMMON STOCK
--------------
PROSPECTUS
--------------
February 6, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in
connection with the issuance and distribution of the securities being offered
hereby (items marked with an asterisk (*) represent estimated expenses):
SEC Registration Fee.....................................$ 4,845
Legal Fees and Expenses..................................$12,500*
Accounting Fees and Expenses.............................$ 7,500*
Miscellaneous............................................$ 5,155
Total....................................................$30,000*
* Estimate
Item 15. Indemnification of Officers and Directors
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation, or an amendment
thereto validly approved by stockholders, to eliminate or limit personal
liability of members of its Board of Directors for violations of a director's
fiduciary duty of care. However, the elimination or limitation shall not
apply where there has been a breach of the duty of loyalty, failure to act in
good faith, intentional misconduct or a knowing violation of a law, the
payment of a dividend or approval of a stock repurchase which is deemed
illegal or an improper personal benefit is obtained. The Company's
Certificate of Incorporation includes the following language:
"No director of the Corporation shall be liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director; provided that this provision does not eliminate the liability of
the director (i) for 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 Title 8 of the Delaware Code, or (iv) for
any transaction from which the director derived an improper personal
benefit."
Article Ninth of the Certificate of Incorporation of the Company permits
indemnification of directors of the Corporation. Such Article provides as
follows:
"A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for 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 occurring prior to such repeal or modification.
II-1
<PAGE>
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 extent 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."
Additionally, 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
II-2
<PAGE>
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.
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.
II-3
<PAGE>
Item 16. Exhibits
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
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 Merger dated March 18, 1992 by and between
Response USA, Inc. (Delaware) and Lifecall America, Inc.(1)
2(c) 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(d) Nevada Articles of Merger of Response USA, Inc. (formerly Lifec
all America, Inc.), a Nevada corporation, into Response USA,Inc.,
a Delaware corporation(1)
4(a) Form of Common Stock Certificate(1)
4(b) Form of Warrant Agreement(1)
4(c) Form of Class A Warrant Certificate(1)
4(d) Form of Class B Warrant Certificate(1)
4(e) Form of Class C Warrant Certificate(1)
4(f) Form of Preferred Warrant Certificate(2)
4(g) 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 1992(1)
4(h) Restricted Stock Option Plan of the Company adopted by the
Company's Board on August 20, 1990, as amended August 30, 1991,
January 2, 1992 and March 18, 1992(1)
4(i) 1997 Stock Option Plan of the Company adopted by the Company's
Board in September 1997(3)
5 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Fishbein & Company, PC
23(c) Consent of Terry H. Jones, CPA
23(d) Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP
(contained in the Opinion filed as Exhibit 5)
24 Power of Attorney (included on the signature pages hereto)
</TABLE>
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (registration number 33-47589).
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1997 (as amended by the Company's
Annual Report on Form 10-KSB/A).
(3) Incorporated by reference to the Company's Registration Statement on Form
SB-2, as amended (registration number 333-37595).
II-4
<PAGE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"table in
the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, and 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 Exchange Act, that are incorporated by reference in
the registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any lability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer, or
controlling person of Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in
II-5
<PAGE>
connection with the securities being registered, Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with 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 this Registration Statement on Form S-3
("Registration Statement") and authorized this Registration Statement to be
signed on its behalf by the undersigned, in the City of Lawrenceville, State
of New Jersey, February 3, 1998.
RESPONSE USA, INC.
By: /s/ Richard M. Brooks
-----------------------------------------------
Richard M. Brooks
President, Chief Executive Officer, Chief
Financial Officer and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard M. Brooks and Ronald A. Feldman, or
either one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign (i) any and all pre- or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, and (ii) any
registration statements, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act,
with the Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with to the requirements of the Securities Act, this
Amendment No. 1 to this Registration Statement has been signed by the following
persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard M. Brooks Chief Executive Officer,
- ----------------------- President, Chief Financial
Richard M. Brooks Officer and Chairman of the
Board (Principal Executive
Officer) (Principal Accounting
and Financial Officer) February 3, 1998
/s/ Ronald A. Feldman Vice President, Chief Operating
- ----------------------- Officer, Secretary, Treasurer
Ronald A. Feldman and Director February 3, 1998
/s/ Robert L. May Director February 3, 1998
- -----------------------
Robert L. May
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
- -----------------------
A. Clinton Allen Director February __, 1998
/s/ Robert M. Rubin Director February 3, 1998
- -----------------------
/s/ Stuart Levin Director February 3, 1998
- -----------------------
Stuart Levin
Todd E. Herman Director February __, 1998
- -----------------------
- -----------------------
Bruce Luehrs Director February __, 1998
/s/ Stuart R. Chalfin
- -----------------------
Stuart R. Chalfin Director February 3, 1998
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
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 Merger dated March 18, 1992 by and between
Response USA, Inc. (Delaware) and Lifecall America, Inc.(1)
2(c) 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(d) Nevada Articles of Merger of Response USA, Inc. (formerly Lifecall
America, Inc.), a Nevada corporation, into Response USA, Inc., a Delaware
corporation(1)
4(a) Form of Common Stock Certificate(1)
4(b) Form of Warrant Agreement(1)
4(c) Form of Class A Warrant Certificate(1)
4(d) Form of Class B Warrant Certificate(1)
4(e) Form of Class C Warrant Certificate(1)
4(f) Form of Preferred Warrant Certificate(2)
4(g) 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
1992(1)
4(h) Restricted Stock Option Plan of the Company adopted by the Company's
Board on August 20, 1990, as amended August 30, 1991, January 2, 1992 and March
18, 1992(1)
4(i) 1997 Stock Option Plan of the Company adopted by the Company's Board
in September 1997(3)
5 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Fishbein & Company, PC
23(c) Consent of Terry H. Jones, CPA
23(d) Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in
the Opinion filed as Exhibit 5)
24 Power of Attorney (included on the signature pages hereto)
</TABLE>
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 (registration number 33-47589).
(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1997 (as amended by the Company's Annual
Report on Form 10-KSB/A).
(3) Incorporated by reference to the Company's Registration Statement on Form
SB-2, as amended (registration number 333-37595).
II-9
<PAGE>
Exhibit 5
[SEPS LETTERHEAD]
February 6, 1998
Response USA, Inc.
11-H Princess Road
Lawrenceville, New Jersey 08648
Re: Registration Statement on Form S-3 (Registration No. 333-34059)
Ladies and Gentlemen:
You have requested our opinion, as counsel for Response USA, Inc., a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-3 (No. 333-34059) (the "Registration Statement"), filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act").
The Registration Statement relates to the registration by the Company of
the sale by certain Selling Stockholders of up to 2,191,293 shares of common
stock, par value $.008 per share, of the Company, including shares of Common
Stock issuable upon conversion or exercise of Warrants and convertible
securities.
We have examined such records and documents and made such examinations of
law as we have deemed relevant in connection with this opinion. Based upon such
examinations, it is our opinion that, when there has been compliance with the
Act and the applicable state securities laws, the Shares, when issued, delivered
and paid for in accordance with the terms thereof, will be validly issued, and
the Shares, when so issued, delivered and paid for will also be fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Squadron, Ellenoff, Plesent & Sheinfeld, LLP
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Response USA, Inc. on Form S-3 of our report dated October 8,
1997 (January 9, 1998 as to the second to the last paragraph of Note 16)
appearing on page F-2 of the Registration Statement on Form SB-2, as amended
(No. 333-37595), relating to 3,000,000 shares of Common Stock of Response
USA, Inc. and to the reference to us under the heading "Experts" in the
Prospectus, which is a part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE
Philadelphia, Pennsylvania
February 2, 1998
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Response USA, Inc. of our report dated August 22, 1996
(January 9, 1998 as to the last paragraph thereof) on the consolidated financial
statements of Response USA, Inc. contained in the Annual Report on Form 10-KSB/A
and to the reference to use, as appearing under the heading "Experts" in the
Prospectus, which is a part of this Registration Statement.
FISHBEIN & COMPANY, P.C.
Elkins Park, PA
January 29, 1998
<PAGE>
Exhibit 23(c)
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of our report dated March 27, 1997, appearing in the Annual Report
on Form 10-KSB/A, relating to the financial statements of Triple A Security
Systems, Inc. and our report dated November 21, 1997, appearing in the Annual
Report on Form 10-KSB/A relating to the financial statements of The Jupiter
Group, Inc.
We also consent to the reference to our firm under the caption "Experts" in
the Prospectus, which is part of this Registration Statement.
TERRY H. JONES, CPA
West Hazelton, Pennsylvania
January 29, 1998
