Rule 424(b)(2); Registration
Statement Number 333-27289
PROSPECTUS
IMNET SYSTEMS, INC.
429,292 SHARES OF COMMON STOCK
$.01 PAR VALUE
This Prospectus relates to an aggregate of 429,292 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of IMNET Systems, Inc., a Delaware
corporation ("IMNET" or the "Company"). All of the Common Stock offered hereby
may be sold from time to time by and for the account of the Selling Stockholders
named in this Prospectus (the "Selling Stockholders"), or for the account of
pledgees, donees, transferees or other successors in interest of the Selling
Stockholders. See "Selling Stockholders" herein.
The methods of sale of the Common Stock offered hereby are described under the
heading "Plan of Distribution." The Company will receive none of the proceeds
from such sales. The Company will pay all expenses (other than underwriting and
brokerage expenses, fees, discounts, and commissions, all of which will be paid
by the Selling Stockholders) incurred in connection with the offering described
in this Prospectus.
The Selling Stockholders and any broker-dealers that participate in the
distribution of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"1933 Act"), and any commission or profit on the resale of shares received by
such broker-dealers may be deemed to be underwriting commissions and discounts
under the 1933 Act. Upon the Company's being notified by the Selling
Stockholders that any material arrangement has been entered into with a broker
or dealer for the sale of the shares through a secondary distribution, or a
purchase by a broker or dealer, a supplemented Prospectus will be filed, if
required, disclosing among other things the names of such brokers and dealers,
the number of shares involved, the price at which such shares are being sold and
the commissions paid or the discounts or concessions allowed to such
broker-dealers.
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors" beginning on page 4.
Sales of Stock may also be made for the account of the Selling Stockholders, or
for the account of donees, transferees or other successors in interest of the
Selling Stockholders, pursuant to Rule 144 under the 1933 Act. The Common Stock
of the Company is listed on the Nasdaq Stock Market's National Market System
(Symbol: IMNT). On May 26, 1997, the closing price of the Common Stock was
$23.875 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS MAY 27, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at regional
offices of the Commission at the Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, New York, New York 10048.
Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material may also be inspected and copied at the offices
of the Nasdaq Stock Market, 1735 K Street, Washington, D.C. 20006-1500, on which
the Company's Common Stock is listed. In addition, the Commission maintains a
site on the World Wide Web portion of the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement on Form S-3,
as amended (the "Registration Statement"), of which this Prospectus is a part.
For further information with respect to the Company and the Common Stock,
reference is made to the Registration Statement and the exhibits thereto.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete; and while the Company believes
the descriptions of the material provisions of such contracts, agreements and
other documents contained in this Prospectus are accurate summaries of such
material provisions, reference is made to such contract, agreement or other
document filed as an exhibit to the Registration Statement for a more complete
description of the matter involved, and each such statement is qualified in its
entirety by such reference.
Note:The discussions in this Prospectus contain forward looking statements that
involve risks and uncertainties. Statements contained in this Prospectus that
are not historical facts are forward looking statements that are subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995. A
number of important factors could cause the Company's actual results for fiscal
1997 and beyond to differ materially from past results and from those expressed
or implied in any forward looking statements made by, or on behalf of, the
Company. These factors include, without limitation, those listed in "Risk
Factors".
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the following
documents previously filed with the Commission pursuant to the Exchange Act: (i)
Annual Report of the Company on Form 10-K for the fiscal year ended June 30,
1996, filed on September 30, 1996, as amended by Form 10-K/A Amendment No. 1
dated and filed on November 8, 1996 and Form 10-K/A Amendment No. 2 dated
November 11, 1996 and filed on November 12, 1996, (ii) Quarterly Reports of the
Company on Form 10-Q for the fiscal quarters ended September 30, 1996 (filed on
November 14, 1996), December 31, 1996 (filed on February 14, 1997), and March
31, 1997 (filed on May 2, 1997), (iii) the Current Report on Form 8-K of the
Company dated September 30, 1996, filed on October 15, 1996, as amended by Form
8-K/A Amendment No. 1 filed on December 12, 1996, (iv) the Current Report on
From 8-K of the Company dated March 18, 1997 and filed on April 2, 1997, (v) the
Current Report on Form 8-K of the Company dated May 15, 1997, and filed on May
15, 1997, and (vi) the description of the Company's Common Stock contained in
the Company's registration statement filed under Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock pursuant hereto shall be deemed
to be incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of the Registration Statement and this Prospectus to the extent that a
statement contained in this Prospectus or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this Prospectus
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 the Registration Statement or this Prospectus.
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The Company will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of any such person, a copy of any
or all of the documents that are incorporated by reference in this Prospectus,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
IMNET Systems, Inc., Attn: Chief Financial Officer, 3015 Windward Plaza,
Windward Fairways II, Alpharetta, Georgia 30202, telephone 770-521-5600.
THE COMPANY
IMNET develops, markets, installs and services electronic information
and document management systems to meet the needs of the healthcare industry and
other document-intensive businesses. The Company's systems electronically
capture, index, store and retrieve information which is resident on most storage
media, including magnetic disk, optical disk, microfilm, paper and x-ray film.
IMNET's fully integrated information storage system, the IMNET Electronic
Information Warehouse, allows users to re-engineer their information management
processes to access information on a cost-effective basis and to achieve
immediate cost savings through productivity increases. The IMNET Electronic
Information Warehouse is used by healthcare providers and healthcare information
systems ("HCIS") vendors to create an electronic medical record ("EMR") by
integrating current and historical patient information with existing information
management systems. By providing access to information that is not otherwise
available electronically, the Company believes that the IMNET Electronic
Information Warehouse is a necessary component to create a complete healthcare
information system solution. Since September 1994, the Company has entered into
agreements to supply its systems through its HCIS Distribution Partners: Cerner
Corporation, HBO & Company ("HBOC"), IDX Systems Corporation and PHAMIS, Inc.
(collectively the "HCIS Distribution Partners").
Businesses and other organizations have made significant investments
over the years in information technology with the goal of creating a "paperless"
work environment in which information is made available electronically through
computers. Despite dramatic advances in computer technology, only a small amount
of current and historical information used by certain businesses today is
accessible by computer. Most of the critical information used by businesses and
other organizations continues to reside on non-electronic storage media such as
paper, creating costly information management problems including: (i) delays in
accessing information; (ii) space and personnel costs to store paper-based
records; (iii) lost and misfiled documents; (iv) single user access to relevant
data; and (v) errors in entering and reading information. While electronic
document imaging systems have been developed by several companies, no single
platform has emerged as a standard for enabling efficient, cost-effective
electronic access to all information stored on most types of storage media.
The need to access information by computer on a real-time basis is
particularly evident in the healthcare industry where the vast majority of
patient records are stored in paper files and other formats. Electronic access
through computers to current and historical patient information contained in the
patient file permits physicians and other care providers to make informed
decisions regarding patient care, while avoiding unnecessary costs and delays
such as performing multiple tests already administered by other groups in the
healthcare organization. Furthermore, market-driven efforts to contain rising
healthcare costs have resulted in an increasing demand for sophisticated
healthcare information systems that capture patient data on a real-time basis in
an EMR. In order to control healthcare costs while improving the quality of care
provided, physicians need immediate electronic access to patient information.
IMNET's Electronic Information Warehouse provides healthcare
organizations and other document-intensive businesses with a complete electronic
information management solution by integrating current and historical data,
regardless of storage media, with currently installed information management
systems. IMNET's systems electronically capture, store and retrieve scanned,
microfilmed, or computer-generated documents, utilizing third party hardware
devices, while structuring the flow of information to achieve increases in
productivity. IMNET's hierarchical information storage management system
provides necessary patient information on-line while adding the capability to
access less essential information contained in a more cost-effective storage
medium, such as microfilm. The IMNET Electronic Information Warehouse provides a
complementary extension of existing healthcare information systems and clinical
databases, thereby enabling the creation of a complete EMR.
IMNET Systems, Inc. was incorporated in Delaware in May 1992. On
October 5, 1992, the Company acquired substantially all of the assets (the "1992
Acquisition") of the electronic imaging business of IMGE, Inc. and certain of
its subsidiaries (collectively, "IMGE"). The Company's principal executive
offices are located at 3015 Windward Plaza, Windward Fairways II, Alpharetta,
Georgia 30202, and the Company's telephone number is 770-521-5600.
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Recent Developments
In April 1997 IMNET signed a multi-year Strategic Business Agreement
with Tenet Healthcare Corporation ("Tenet"). Tenet, which is based in Santa
Barbara, California, through its subsidiaries owns or operates 127 acute care
hospitals and numerous related healthcare services from coast to coast. Under
the agreement, IMNET will become the exclusive distributor of certain electronic
healthcare information and document management system technology to Tenet and
its affiliated entities.
RISK FACTORS
This Prospectus contains forward looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
past results, and from results indicated by such forward looking statements.
Factors that may cause such differences include, but are not limited to, those
discussed below.
Limited Operating History; Lack of Profitable Operations. The Company
commenced operations in 1992 and has sustained substantial losses in recent
years, even though the Company's net income for the nine months ended March 31,
1997 was $3.7 million ($.37 per share). These amounts reflect non-recurring
charges of $2.6 million comprised of (i) $750,000 related to acquisition costs
associated with the Hunter International, Inc. acquisition, completed during the
three month period ended September 30, 1996; (ii) $1.4 million related to the
write-down of assets associated with its MedVision product line, due to the
Value Added Reseller Agreement entered into with ISG Technologies, Inc. in March
1997; and (iii) $468,000 related to relocation costs associated with the
Company's move to its new corporate headquarters, which was completed in the
three month period ended March 31, 1997. The Company's net loss for fiscal 1996
was $6.0 million ($0.69 per share) primarily as a result of $10.4 million of
non-recurring charges comprised of: (1) $5.7 million related to in-process
research and development associated with the Company's acquisitions of Evergreen
Technologies, Inc. and Quesix Software, Incorporated completed during the second
quarter of fiscal 1996 and (2) a $4.6 million non-recurring charge related to
the Company's business alliance with HBO & Company recorded in the third quarter
of fiscal 1996. Exclusive of the non-recurring charges, the Company reported
earnings of $4.3 million for fiscal 1996. Previously, the Company had incurred a
net loss of approximately $4.1 million ($0.77 per share) for fiscal 1995, and a
net loss of approximately $5.4 million ($1.38 per share) for fiscal 1994. As of
March 31, 1997, the Company had an accumulated deficit of approximately $16.8
million. In addition, the Company will require significant funds to implement
its business strategies. The Company may experience losses in the future due to
the following factors: (i) the Company's operating expenses are budgeted on
anticipated revenues; (ii) the Company incurs significant expenses in connection
with research and development, and, more recently, the development of its direct
and indirect selling and marketing efforts; (iii) a high percentage of the
Company's expenses are fixed, and (iv) the Company may incur additional charges
relating to acquisitions and business alliances. As a result, there can be no
assurance that the Company will be profitable in the future, or that funds
provided by operations and present capital will be sufficient to fund the
Company's ongoing operations. The Company believes its current operating funds
will be sufficient to finance its cash requirements for at least the next 12
months. If the Company has insufficient funds, there can be no assurance that
additional financing can be obtained on acceptable terms, if at all. The absence
of such financing would have a material adverse effect on the Company's
business, including a possible reduction or cessation of operations.
Variability in Quarterly Operating Results; Volatility of Stock Price.
Results of operations have fluctuated and may continue to fluctuate
significantly from quarter to quarter as a result of a number of factors,
including: (i) contract terms and the volume and timing of system sales and
customer acceptances; (ii) customer purchasing patterns, long sales cycles,
order cancellations and rescheduling of system installations; (iii) the mix of
direct and indirect sales; (iv) the mix of higher-margin software revenues and
lower-margin hardware revenues; and (v) the actions of competitors. In addition,
the Company believes that sales generated to and by its HCIS Distribution
Partners and its general business distribution partners, which are harder to
predict, will increase as a percentage of total revenues. In fiscal 1996 and the
first nine months of fiscal 1997 the Company recognized revenue from large
multi-site licenses and from transactions in which the Company's distribution
partners purchased software licenses in quantity for resale. These transactions,
which typically had higher margins, are difficult to predict, particularly as to
when a distribution partner will acquire additional licenses, and the quantity
such partner will purchase. Accordingly, the Company's future operating results
are likely to be subject to significant variability from quarter to quarter and
could be adversely affected in any particular quarter. The Company's total
revenues and results of operations may also be affected by seasonal trends
including the possibility of higher revenues in the
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Company's second and fourth fiscal quarters and lower revenues in its first and
third fiscal quarters as a result of many customers' annual purchasing and
budgetary practices and the Company's sales commission practices relying in part
on annual quotas. As a result, the Company believes that period-to-period
comparisons of its revenues and results of operations are not necessarily
meaningful and should not be relied upon as indicators of future performance.
Due to the foregoing factors, among others, it is possible that the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock could be
materially and adversely affected. In addition, the market price for the
Company's Common Stock has been volatile and in the future could be adversely
affected by general trends in the Company's industry, changes in general market
conditions and other factors.
Customer Concentration. The Company's product sales have been
concentrated in a small number of customers, and the Company has historically
derived a substantial percentage of its total revenues from a relatively small
number of customers. For the nine months ended March 31, 1997, two customers
accounted for approximately 51% of the Company's total revenues. For the year
ended June 30, 1996, two customers accounted for approximately 32% of the
Company's total revenues. In fiscal 1995, four customers accounted for 41% of
the Company's total revenues. In fiscal 1994, two customers accounted for 27% of
the Company's total revenues. Furthermore, the Company has granted extended
payment terms in several instances. Developments adverse to the financial
condition of any of these customers, their failure to honor payment obligations,
or the inability to replace any such customer with significant new customers
would have a material adverse effect on the Company's financial position and
results of operations.
Product Acceptance and Market Development; Dependence on Distribution
Partners. The market for electronic information and document management systems,
as it relates to integrated mixed-media healthcare information systems, is still
relatively new and may not develop as expected. The Company's success is
dependent upon market acceptance of its products in preference to competing
products and products that may be developed by others. There can be no assurance
that the Company's products will achieve a sufficient level of market acceptance
to result in long-term profitable operations. The Company's success is also
dependent on the success of its marketing and distribution strategy which
involves, to a significant degree, a reliance upon HCIS vendors to sell the
Company's electronic information and document management systems as a necessary
component of the integrated systems being marketed by such distribution
partners. If the HCIS Distribution Partners or future distribution partners
elect not to include the Company's products as components in their integrated
systems or are unsuccessful in achieving significant sales of those systems, the
Company's business would be materially and adversely affected.
Long Sales and Delivery Cycle; Dependence on Future Systems Sales. The
decision by a healthcare provider to replace or substantially upgrade its
information systems typically involves a major commitment of capital and an
extended review and approval process. Accordingly, the sales and delivery cycle
for the Company's system is typically eight to 24 months from initial contact to
delivery and acceptance of the products. The time required from initial contact
to contract execution is typically six to 12 months. During these periods, the
Company may expend substantial time, effort and funds preparing a contract
proposal and negotiating the contract. Under customary system sales agreements,
the Company does not record revenues on products until they have been delivered
and accepted by the customer. The length of time between contract execution and
acceptance typically ranges from two to 12 months for an end-user depending on
the size of the order, the products ordered and delivery terms. At March 31,
1997, the Company had approximately $40.0 million of signed sales contracts for
systems and services which had not yet been delivered. This amount includes
contracts for software license fees, hardware sales and services that may
include cancellation provisions that do not pertain to IMNET's performance, and
contracts that are expected to result in revenues over periods of as much as
five years. Over time, the proportion of such signed sales contracts represented
by long-term contracts is expected to increase. Any significant or ongoing
failure to achieve signed contracts and subsequent customer acceptance after
expending time, effort and funds could have a material adverse effect on the
Company's business.
Ability to Manage Growth. As a result of both internal development and
expansion into additional applications and markets, the Company is currently
experiencing a period of rapid growth and expansion. Such growth and expansion
has placed and could continue to place a significant strain on the Company's
services and support operations, sales and administrative personnel and other
resources. The Company's ability to manage such growth effectively will require
the Company to continue to improve its operational, management and financial
systems and controls and to train, motivate and manage its employees. As a
result, IMNET is subject to certain
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growth-related risks, including the risk that it will be unable to retain the
necessary personnel or acquire other resources necessary to service such growth
adequately.
Risks Associated with Acquisitions. As part of the Company's strategy
to enhance and maintain its competitive position, IMNET has consummated the
acquisitions of several companies and continues to evaluate potential
acquisitions of businesses, products and technologies. In considering an
acquisition, the Company may compete with other potential acquirors, many of
which may have greater financial and operations resources. Further, the
evaluation, negotiation, and integration of such acquisitions may divert
significant time and resources of the Company, particularly of management. There
can be no assurance that suitable acquisition candidates will be identified,
that any acquisitions can be consummated or that any acquired businesses or
products can be successfully integrated into the Company's operations. In
addition, there can be no assurance that the completed acquisitions or any
future acquisitions will not have a material adverse effect upon the Company,
particularly in the fiscal quarters immediately following the consummation of
such transactions due to operational disruptions, unexpected expenses and
accounting charges which may be associated with the integration of such
acquisitions.
Risks Associated with HBOC Distribution Partner Relationship. The
Company entered into a definitive agreement with HBOC in the third quarter of
fiscal 1996, whereby the Company will assume responsibility for providing
maintenance and support to certain HBOC customers, and for converting such
customers to use of IMNET's products. There can be no assurance that the Company
will recover its investment in this relationship, or that the maintenance,
support and conversion will be successfully accomplished or profitable.
Risks Associated with Outsourcing of IMNET MegaSAR Microfilm Jukebox.
In the fourth quarter of fiscal 1996 the Company granted to SoftNet Systems,
Inc. ("SoftNet") worldwide, exclusive manufacturing rights and non-exclusive
distribution rights for the MegaSAR Microfilm Jukebox and its associated
technology. The Company retained the right to distribute the product to
healthcare customers. Failure by SoftNet to provide this product to IMNET as
required under the agreement, or to otherwise satisfy its obligations, including
future payment obligations, could have an adverse effect on the Company's
business.
Technological Changes; Competition. The market for the Company's
products is characterized by continued and rapid technological advances in both
hardware and software development requiring ongoing expenditures for research
and development and the timely introduction of new products. Compatibility with
existing and emerging industry standards is essential to the Company's marketing
strategy and research and development efforts. The establishment of standards is
largely a function of user acceptance, and standards are therefore subject to
change. IMNET's products are dependent upon a number of advanced technologies,
including those relating to computer hardware and software, storage devices,
robotics systems and other peripheral components, all of which are subject to
rapid change. To be competitive, IMNET must respond effectively to technological
changes by continuing to enhance its existing products to incorporate emerging
or evolving standards. There can be no assurance that the Company will be able
to respond effectively to technological changes or new product announcements or
introductions by others. Furthermore, there can be no assurance that the Company
will be able to access the needed new technology at an acceptable price. The
market for healthcare information systems is intensely competitive. Certain of
the Company's competitors have significantly greater financial, technical,
research and development and marketing resources than the Company. Competitors
vary in size and in the scope and breadth of the products and services offered.
The Company's products compete both with other technologies as well as similar
products developed by other companies, and other major information management
companies may enter the market in which the Company competes. Competitive
pressures and other factors, such as new product introductions by the Company or
its competitors, or the entry into new geographic markets, may result in
significant price erosion that could have a material adverse effect on the
Company's business.
Uncertainty in Healthcare Industry; Government Healthcare Reform
Proposals. The healthcare industry is subject to changing political, economic
and regulatory influences that may affect the procurement practices and
operation of healthcare providers. Many lawmakers have announced that they
intend to propose programs to reform the U.S. healthcare system. These programs
may contain proposals to increase governmental involvement in healthcare, lower
reimbursement rates and otherwise change the operating environment. Healthcare
providers may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including those for the
Company's products and related services. Cost containment measures instituted by
healthcare providers as a result of regulatory reform or otherwise could result
in greater selectivity in the allocation of capital funds. Such selectivity
could have a material adverse effect on the Company's ability to sell its
products and related services.
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The FDA has issued a draft guidance document addressing the regulation
of certain computer products as medical devices under the Federal Food, Drug,
and Cosmetic Act (the "FDC Act"). Medical devices are subject to regulation by
the FDA which requires, among other things, premarket notifications or approvals
and compliance with labeling, registration and listing requirements, good
manufacturing practices and records and reporting requirements. The FDA
currently regulates the Company's MedVision product line.
Dependence on Key Personnel. Kenneth D. Rardin and certain other
executive officers have been primarily responsible for the development and
expansion of the Company's business, and the loss of the services of one or more
of these individuals could have a material adverse effect on the Company. In
addition, the Company believes that its future success will be dependent in part
on its continued ability to recruit, motivate and retain qualified personnel.
There can be no assurance the Company will be successful in this regard. The
Company maintains a $2.0 million key man life insurance policy on the life of
Mr. Rardin.
Dependence on Proprietary Rights and Patents. To develop and maintain
its competitive position, IMNET relies primarily upon the technical expertise
and creative skills of its personnel, confidentiality agreements and, to some
degree, patents and copyrights. The Company owns patents and has license rights
to certain patents held by third parties. These patents and patent rights relate
to aspects of the technology used in certain of the Company's products.
Successful litigation against the Company regarding its patents or patent
rights, or infringement by the Company of the patent rights of others, could
have a material adverse effect on the Company's business. There can be no
assurance that patents issued to or licensed by the Company will not be
challenged or circumvented by competitors or be found to be sufficiently broad
to protect the Company's technology or to provide it with any competitive
advantage. In addition, there can be no assurance that confidentiality
agreements will not be breached or that the Company will have adequate remedies
for any such breach.
There has been substantial litigation regarding patent and other
intellectual property rights in the computer industry. Although to the knowledge
of the Company there are no claims pending against or involving the Company,
there can be no assurance that such claims will not be instituted. Adverse
determinations in any such claim could subject the Company to significant
liabilities to third parties and could require the Company to seek licenses from
third parties. There can be no assurance that any such licenses will be
available on commercially reasonable terms.
Product Liability. The Company's products are used to provide
information that relates to healthcare enterprise operations and information
that may be used in other critical applications. Any failure by the Company's
systems to provide accurate and timely information could result in claims
against the Company. The Company maintains insurance to protect against claims
associated with the use of its products, but there can be no assurance that its
insurance coverage would adequately cover any claim asserted against the
Company. A successful claim brought against the Company in excess of its
insurance coverage could have a material adverse effect on the Company. Even
unsuccessful claims could result in the Company's expenditure of funds in
litigation and management time and resources. There can be no assurance that the
Company will not be subject to product liability claims, that such claims will
not result in liability in excess of its insurance coverage or that the
Company's insurance will cover such claims or that appropriate insurance will
continue to be available to the Company in the future at commercially reasonable
rates.
Foreign Operations. Approximately 8% of the Company's total revenues
for the fiscal year ended June 30, 1996, and 4% of the Company's total revenues
for the nine-month period ended March 31, 1997, were attributable to sales
outside the United States. Sales to customers outside the United States are
subject to incremental risks, including the following: (i) agreements may be
more difficult to enforce and receivables more difficult to collect through
foreign legal systems; (ii) to the extent the Company invoices in foreign
currencies in the future, exchange rate fluctuations could adversely affect the
Company's results of operations; (iii) foreign customers often have longer
payment cycles; and (iv) foreign countries could impose withholding taxes or
otherwise tax the Company's foreign income, impose tariffs, embargoes or
exchange controls or adopt other restrictions on foreign trade. To date, the
Company's results of operations have not been adversely affected by currency
exchange rate fluctuations because the Company has invoiced all of its sales in
United States dollars. The Company anticipates that revenues attributable to
sales outside the United States will decline as a percentage of total revenues.
Shares Eligible for Future Sale. A substantial number of shares of
Common Stock are currently available and will become available for sale in the
public market at prescribed times following the completion of this offering.
Sales of substantial amounts of Common Stock in the public market after the
offering under Rule 144 promulgated
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under the Securities Act of 1933, as amended (the "Securities Act") or
otherwise, or the perception that such sales could occur, may adversely affect
prevailing market prices of the Common Stock and could impair the future ability
of the Company to raise capital through an offering of its equity securities. In
addition, certain stockholders have the right to demand registration under the
Securities Act of additional shares of Common Stock and to have additional
shares of Common Stock included in future registered public offerings of Common
Stock. This right has been exercised in part in connection with this offering.
Certain Anti-Takeover Considerations. The Company's Bylaws contain
certain provisions that could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. Certain of such provisions will allow the Company to
issue Preferred Stock with rights senior to those of the Common Stock and to
impose various procedural and other requirements which could make it more
difficult for shareholders to effect certain corporate actions.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered by the Selling Stockholders.
SELLING STOCKHOLDERS
The IMNET Common Stock to which this Prospectus relates is being
offered by Larry C. Hunter and Paul Sherman (the "Selling Stockholders"). On
September 30, 1996, IMNET Oregon Acquisition Corporation ("IMNET Oregon"), a
wholly owned subsidiary of the Company, was merged (the "Hunter Merger") with
and into Hunter International, Inc. ("Hunter") pursuant to an Agreement and Plan
of Merger dated as of September 30, 1996, between the Company, IMNET Oregon,
Hunter and the Selling Stockholders (the "Hunter Merger Agreement"). An
aggregate of 429,292 shares were issued to the Selling Stockholders, in
connection with the Hunter Merger. The Selling Stockholders received and
exercised demand registration rights with respect all of the shares of IMNET
stock received by them pursuant to the Hunter Merger Agreement.
The following table states the number of shares of the outstanding
Common Stock of the Company owned by the Selling Stockholders as of March 31,
1997, the number of such shares which may be sold for the account of the Selling
Stockholders.
<TABLE>
<CAPTION>
Beneficial Ownership
Beneficial Owner Prior to the Offering(1)
--------------------------------------------
Shares Percentage
---------------- ---------------------
<S> <C> <C> <C>
Larry C. Hunter(2)................................... 321,969(4) 3.4%
Paul Sherman(3)...................................... 107,323(5) 1.1%
- ----------------
<FN>
(1) Percentage is the percentage of outstanding shares of each class of Common Stock beneficially owned as of March 31,
1997. As of such date, 9,634,714 shares of Common Stock were outstanding. Upon completion of this offering, if all
offered securities are sold, the Selling Stockholders will not own any shares of Common Stock.
(2) Prior to the Hunter Merger, Mr. Hunter was an officer, director and stockholder of Hunter. Mr. Hunter is an employee of the
Company.
(3) Prior to the Hunter Merger, Mr. Sherman was an officer, director and stockholder of Hunter. From the date of the Hunter
Merger until December 31, 1996, Mr. Sherman was an employee of the Company.
(4) Includes 32,197 shares held in escrow pursuant to the Hunter Merger Agreement. Such shares will not be available for sale
until September 30, 1997.
(5) Includes 10,732 shares held in escrow pursuant to the Hunter Merger Agreement. Such shares will not be available for sale
until September 30, 1997.
</FN>
</TABLE>
438894.1
8
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised that the distribution of the Common Stock
by the Selling Stockholders may be effected from time to time in one or more
transactions (which may involve block transactions) (i) on the Nasdaq National
Market on which the Company's Common Stock are listed, in transactions that may
include special offerings and exchange distributions pursuant to and in
accordance with the rules of such exchanges, or (ii) in transactions otherwise
than on the Nasdaq National Market, or in a combination of any such
transactions. Such transactions may be effected by the Selling Stockholders at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices. The Selling
Stockholders may effect such transactions by selling the Common Stock to or
through broker-dealers and such broker-dealers will receive compensation in the
form of discounts or commissions from the Selling Stockholders and may receive
commissions from the purchasers of the Common Stock for whom they may act as
agent (which discounts or commissions from the Selling Stockholders or such
purchasers will not exceed those customary in the type of transactions
involved).
Any broker-dealers that participate with the Selling Stockholders in
the distribution of the Common Stock, may be deemed to be "underwriters" within
the meaning of the 1933 Act, and any commissions or discounts received by such
broker-dealers and any profit on the resale of the Common Stock by such
broker-dealers might be deemed to be underwriting discounts and commissions
under such act.
Upon the Company's being notified by the Selling Stockholders that any
material arrangement has been entered into with a broker or dealer for the sale
of the Common Stock through a secondary distribution, or a purchase by a broker
or dealer, a supplemented Prospectus will be filed, if required, pursuant to
Rule 424(b) under the 1933 Act, disclosing (a) the names of such broker-dealers,
(b) the number of shares involved, (c) the price at which such shares are being
sold, (d) the commission paid or the discounts or concessions allowed to such
broker-dealers, (e) where applicable, that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this Prospectus, as supplemented, and (f) other facts material to the
transaction.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock covered by
this Prospectus are being passed upon by Arnall Golden & Gregory, LLP.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1996 and 1995, and for each of the years in the three-year period ended
June 30, 1996, included in the Company's Form 10-K for the fiscal year ended
June 30, 1996 have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, dated August 13, 1996, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of the Company as of
June 30, 1996 and 1995, and for each of the years in the three-year period ended
June 30, 1996 included in the Company's Current Report on Form 8-K dated May 15,
1997, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, dated February 27, 1997, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
438894.1
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