<PAGE>
As filed with the Securities and Exchange Commission on April 17, 1998
Registration No. 333-
__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________
DIAGNOSTIC HEALTH SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
8071
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBERS)
22-2960048
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
2777 STEMMONS FREEWAY, SUITE 1525
DALLAS, TEXAS 75207
(214) 634-0403
(Address, Including Zip Code, and Telephone Number,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MAX W. BATZER
Chairman of the Board and Chief Executive Officer
DIAGNOSTIC HEALTH SERVICES, INC.
2777 STEMMONS FREEWAY, SUITE 1525
DALLAS, TEXAS 75207
(214) 634-0403
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SHAHE SINANIAN, ESQ.
GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL
METLIFE BUILDING
200 PARK AVENUE
NEW YORK, NEW YORK 10166
TELEPHONE: (212) 801-9200
TELECOPIER: (212) 801-6400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
(continued on following page)
<PAGE>
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. ____
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities Amount To Offering Price Aggregate Offering Registration
To Be Registered Be Registered (1) Per Share(2) Price Fee
- ------------------------------------------ ----------------- ----------------- ------------------ ------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share 501,163 shares $11.60 $5,813,490.80 $1,714.98
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving common stock, par value $.001 per share (the "Common Stock")
of the Registrant, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover the additional
shares of Common Stock in accordance with Rule 416(a) under the
Securities Act of 1933, as amended (the "Securities Act").
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act. Represents the
average of the high and low prices (rounded to the nearest tenth) of
the Common Stock as of April 13, 1998, as reported by the Nasdaq
National Market System.
_____________________
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, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time that the Registration Statement
becomes effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, Dated April 17, 1998
501,163 SHARES OF COMMON STOCK
DIAGNOSTIC HEALTH SERVICES, INC.
This Prospectus relates to an aggregate of 501,163 shares of common stock,
par value $.001 per share (the "Common Stock"), of Diagnostic Health Services,
Inc. (the "Company"), consisting of (i) the proposed offer and resale from time
to time by a stockholder of the Company (the "Selling Stockholder"), subject to
certain restrictions and limitations, of an aggregate of up to 327,250 shares of
Common Stock (the "Resale Shares") which were previously acquired by the Selling
Stockholder in connection with the acquisition by the Company of certain assets
of the Selling Stockholder, and (ii) the possible issuance by the Company and
resale by the recipient(s), subject to certain restrictions and limitations, of
173,913 shares of Common Stock in connection with a proposed business
acquisition (the "Transaction Shares" and, together with the Resale Shares, the
"Shares"). See "PLAN OF DISTRIBUTION." The Resale Shares registered hereby
have been registered pursuant to the Company's obligations contained in a
written agreement with the Selling Stockholder. The Company is registering the
Transaction Shares to provide the holders of such Shares, other than affiliates
of the Company, upon issuance, with fully tradeable shares of Common Stock.
There can be no assurance, despite registration of the Shares hereunder, that
any of the Resale Shares will be sold by the Selling Stockholder or that the
Transaction Shares will be issued by the Company or be offered and sold by the
holder(s) thereof.
The Company will not receive any proceeds from the sale of the Resale
Shares by the Selling Stockholder or from the resale of the Transaction Shares,
when and if issued, by the holder thereof. The Company will pay all of the
expenses, estimated to be approximately $35,000, in connection with this
offering, other than underwriting and brokerage commissions, discounts, fees and
counsel fees and disbursements and expenses attributed solely to the Selling
Stockholder. See "USE OF PROCEEDS," "SELLING STOCKHOLDER" and "PLAN OF
DISTRIBUTION."
The Company's publicly traded Common Stock is currently quoted on the Nasdaq
National Market ("Nasdaq") under the symbol "DHSM." On April 13, 1998, the last
sale price of the Common Stock as quoted on Nasdaq was $11.50 per share.
The Company has registered (i) 327,250 Resale Shares under the Securities Act
of 1933, as amended (the "Securities Act"), for resale by the Selling
Stockholder, and (ii) 173,913 Transaction Shares for the possible issuance
thereof by the Company in connection with a proposed business acquisition and
the subsequent resale thereof by the recipient(s) in such acquisition. The
Selling Stockholder has advised the Company that it may from time to time sell
all or part of the Shares in one or more transactions on Nasdaq. The Resale
Shares may also be offered in negotiated transactions, at fixed prices which may
be changed, at market prices prevailing at the time of sale, or at negotiated
prices. The Selling Stockholder may effect such transactions by selling the
Resale Shares in negotiated transactions, on Nasdaq or through broker-dealers,
and such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholder and/or the purchasers of
the Resale Shares for whom such broker-dealers may act as agents or to whom they
sell as principal, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). Alternatively, the Selling
Stockholder may from time to time offer the Resale Shares through underwriters,
dealers or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling
1
<PAGE>
Stockholder and/or the purchasers of securities for whom they act as agents.
Pursuant to a written agreement with the Company, the Selling Stockholder has
agreed to certain restrictions and limitations on its sale of the Resale Shares.
See "SELLING STOCKHOLDER" and "PLAN OF DISTRIBUTION."
The Resale Shares being offered hereby by the Selling Stockholder have not
been registered for sale under the securities laws of any state or jurisdiction
as of the date of this Prospectus. Brokers or dealers effecting transactions in
the Resale Shares should confirm the registration thereof under the securities
laws of the state in which such transactions occur, or the existence of any
exemption from registration.
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK,
SEE "RISK FACTORS" COMMENCING ON PAGE 8 HEREOF.
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.
The date of this Prospectus is April 17, 1998
2
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR
PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY 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 ITS DATE.
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 at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such materials can be obtained upon written request
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. For further information, reference is hereby made to the
Registration Statement. Each statement made in this Prospectus concerning a
document filed as part of the Registration Statement is qualified in its
entirety by reference to such document for a complete statement of its
provisions. Copies of the Registration Statement may be inspected, without
charge, at the offices of the Commission, or obtained at prescribed rates from
the Public Reference Section of the Commission, at the address set forth above,
or on the World Wide Web through the Commission's Internet address at
"http://www.sec.gov."
This Prospectus contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations and business of the Company,
including statements under the caption "SUMMARY." These forward-looking
statements involve certain risks and uncertainties. No assurance can be given
that any such matters will be realized. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking statements
include, among others, the following possibilities: (i) competitive conditions
in the industries in which the Company operates; and (ii) general economic
conditions that are less favorable than expected. Further information on other
factors which could affect the financial results of the Company and such
forward-looking statements is included in the section herein entitled "Risk
Factors."
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-21758) pursuant
to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Reports on Form 10-KSB for the fiscal years ended
December 31, 1996 and December 31, 1997;
2. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1996, consisting of (i)
the Company's Quarterly Reports on Form 10-QSB for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997, (ii) the
Company's Current Report on Form 8-K, including the exhibits thereto,
dated April 4, 1997, (iii) the Company's Current Report on Form 8-K,
including the exhibits thereto, dated May 2, 1997, (iv) the Company's
Amendment on Form 8-K/A-1 to the Current Report dated April 4, 1997 as
filed on June 20, 1997, including the exhibits thereto, and (v) the
Company's Amendment on Form 8-K/A-1 to the Current Report dated May 2,
1997 as filed on July 1, 1997, including the exhibits thereto; and
3. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, dated May 11, 1993.
All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made hereby shall be deemed incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference, or contained in this Prospectus, 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 shall not
be deemed to constitute a part of this Prospectus except as so modified, and any
statement so superseded shall not be deemed to constitute a part of this
Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner of the Shares, to whom a copy of this Prospectus is delivered,
upon the written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference (other than exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to: Stockholder
Relations Department, Diagnostic Health Services, Inc., 2777 Stemmons Freeway,
Suite 1525, Dallas, Texas 75207, telephone: (214) 634-0403.
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to, and should
be read in conjunction with, the more detailed information appearing elsewhere
in this Prospectus or incorporated herein by reference. Investors should also
carefully consider the information set forth under the heading "Risk Factors."
All references to fiscal years refer to the fiscal year of the Company ending
December 31. Unless the context otherwise requires, all references in this
Prospectus to the "Company" refer to Diagnostic Health Services, Inc., its
subsidiaries and predecessors.
THE COMPANY
The Company is a leading outsource provider of medical services to hospitals,
physicians' offices and other healthcare facilities primarily in the Midwest and
South Central United States. The Company provides radiology and cardiology
diagnostic services and equipment, as well as departmental management services
to healthcare facilities on an in-house and shared basis. The Company is
committed to offering a broad range of services in a manner responsive to the
healthcare industry's increased focus on cost containment without compromising
the quality of patient care.
The market for the Company's services consists of hospitals, physicians and
other healthcare providers. According to the American Hospital Association there
are more than 5,000 hospitals, and according to the American Medical Association
there are more than 18,300 physician group practices, in the United States. As
of December 31, 1997, the Company provided services to approximately 579
hospital customers. Additional customers include long-term care facilities,
sub-acute care facilities and the expanding managed care marketplace.
The Company currently provides shared diagnostic services, and staffs, equips,
operates and/or manages in-house radiology or cardiology departments, for
approximately 1,536 customers. The Company has achieved this market presence
through internal growth and strategic acquisitions. The Company's strategy is
to capitalize, within its business lines, on its demonstrated ability to reduce
the costs of providing radiology and cardiology services and to consolidate
providers of these services. The Company intends to implement this strategy by
continuing its aggressive acquisition and development program with a strong
geographic focus, cross-marketing its service lines across its customer base to
generate internal growth, pursuing the conversion of shared service arrangements
to in-house service agreements, and offering ancillary services to complement
its core radiology and cardiology services. The Company also intends to pursue
acquisitions of other service providers, as this highly fragmented sector of the
healthcare industry continues to consolidate.
Since 1991, the Company has significantly expanded the breadth of its
radiology and cardiology services. From 1991 to 1997, through internal growth
and the acquisitions, the Company's gross revenues increased from approximately
$3.5 million to approximately $52.9 million, and income from operations
increased from approximately $0.4 million to $5.4 million. During the same
period, the Company's customer base increased from 323 to 1,536.
The Company was incorporated in Texas in 1983 and was reincorporated in
Delaware in 1992. Its principal executive office is located at 2777 Stemmons
Freeway, Suite 1525, Dallas, Texas 75207, and its telephone number is (214) 634-
0403.
5
<PAGE>
RECENT MATERIAL DEVELOPMENTS
DIAGNOSTIC IMAGING SERVICES, INC. TRANSACTIONS
DIS Ultrasound Division
On March 21, 1997 (effective as of March 1, 1997), the Company,
through SoCal Diagnostic Services, Inc., an indirect wholly-owned
subsidiary of the Company ("SoCal"), purchased substantially all of the
operating assets of the ultrasound division of Diagnostic Imaging Services,
Inc., a California corporation ("DIS-California"). The consideration paid
for the assets of DIS-California was approximately $6,519,475 in cash
(subject to adjustment). As additional consideration for the purchased
assets, the Company agreed to issue to the Selling Stockholder, as assignee
of DIS-California, subject to certain contingencies, certain warrants to
purchase shares of Common Stock (the "Post-Closing Warrant Payment").
Southern California MRI Centers
On April 17, 1997 (effective as of March 1, 1997), the Company,
through its SoCal subsidiary, purchased from the Selling Stockholder all of
the issued and outstanding capital stock of DIS-California (collectively,
with its wholly-owned subsidiaries, the "DIS Companies"). The business of
the DIS Companies consists of the ownership and operation of four hospital-
based magnetic resonance imaging (MRI) centers located in Southern
California.
The purchase included $15,130,620 of various assets (including
goodwill), including approximately $7,281,842 of equipment, furniture and
fixtures, and $7,911,778 of goodwill. The purchase price paid to the
Selling Stockholder was approximately $9,083,865 (subject to adjustment),
of which $7,583,865 was paid in cash and the remaining $1,500,000 of which
is payable either in cash or (at the Selling Stockholder's option) in
Common Stock in three equal annual installments of $500,000 each on April
17 of each of 1998, 1999 and 2000 (the "Post-Closing Stock Purchase
Payments" and, together with the Post-Closing Warrant Payment, the "Post-
Closing Payments"). In addition, the DIS Companies were acquired subject
to capital lease obligations, financing agreements and other commitments in
respect of fixed assets of the DIS Companies in the aggregate principal
amount of $6,046,755.
Scripps Chula Vista Imaging Center, L.P.
Effective as of January 1, 1998, SoCal purchased from the Selling
Stockholder all interests of the Selling Stockholder in Scripps Chula Vista
Imaging Center, L.P. In payment for such interests, the Company issued to
the Selling Stockholder 127,250 shares of Common Stock. The Company agreed
to use its good faith reasonable efforts to register the shares of Common
Stock issued to the Selling Stockholder (the "First Resale Shares"). This
Prospectus pertains to the resale of those Shares by the Selling
Stockholder. However, regardless of the effectiveness of such
registration, the Selling Stockholder has agreed that its sale of the First
Resale Shares will be subject to certain restrictions and limitations. See
"PLAN OF DISTRIBUTION."
Post-Closing Payment Agreement
On April 7, 1998, the Company, SoCal and the Selling Stockholder
entered into an agreement (the "Post-Closing Payment Agreement") whereby
the Selling Stockholder was issued 200,000 shares of Common Stock (the
"Second Resale Shares," and, collectively with the First Resale Shares, the
"Resale Shares") in full payment and satisfaction of the Post-Closing
Warrant Payment and all Post-Closing Stock Purchase Payments. The Company
agreed to use its good faith reasonable efforts to register the Second
Resale Shares. This Prospectus relates to the resale of those Shares by
the Selling Stockholder. However, regardless of the effectiveness of such
registration, the Selling Stockholder has agreed that the sale of the
Second Resale Shares will be subject to certain restrictions and
limitations. See "PLAN OF DISTRIBUTION."
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED.................................. 501,163 shares of Common Stock, consisting of (i) 327,250
shares of Common Stock for sale by the Selling
Stockholder; and (ii) 173,913 shares of Common Stock for
possible issuance by the Company in connection with a
potential business acquisition and subsequent resale
thereof by the recipient(s). See "PLAN OF DISTRIBUTION"
and "DESCRIPTION OF COMMON STOCK."
COMMON STOCK OUTSTANDING PRIOR
to the Offering (1)................................. 11,339,249 shares of Common Stock
COMMON STOCK TO BE OUTSTANDING
after the Offering (1).............................. 11,840,412 shares of Common Stock
USE OF PROCEEDS..................................... The Company will not receive any proceeds from the sale of
the Resale Shares by the Selling Stockholder or from the
resale of the Transaction Shares, when and if issued, by
the holder thereof. See "USE OF PROCEEDS."
TRADING SYMBOL...................................... The Common Stock is traded on Nasdaq under the symbol DHSM.
</TABLE>
(1) Does not include, as of April 13, 1998, (i) 1,673,151 shares of Common
Stock issuable upon exercise of outstanding options granted under the
Company's stock option plans, (ii) 10,000 shares of Common Stock issuable
upon exercise of certain warrants, (iii) 11,111 shares of Common Stock
reserved for issuance to certain former stockholders of the Company's
subsidiaries subject to such subsidiaries' achievement of certain financial
goals, and (iv) 695,593 shares of Common Stock issuable upon conversion of
outstanding preferred stock of the Company.
7
<PAGE>
RISK FACTORS
In considering the matters set forth in this Prospectus, prospective
purchasers should carefully consider the matters set forth below as well as
other information set forth in this Prospectus.
RISKS INHERENT IN GROWTH STRATEGY
A significant component of the Company's historical growth has come through
acquisitions of other healthcare service providers, and the Company intends to
continue to seek acquisition opportunities in the future. This growth strategy
is dependent on the continued availability of suitable acquisition candidates.
As of the date of this Prospectus, although the Company has one letter of intent
for a proposed acquisition, the Company has no binding commitments or agreements
with respect to any acquisitions, and there can be no assurance that the Company
will be able to identify or come to agreement with any future acquisition
candidates. The Company may also find itself in competition for acquisition
candidates with competitors who have greater financial and other resources than
the Company and who may be willing to pay higher prices for acquisition targets.
In addition, even if the Company is successful in consummating future
acquisitions, there can be no assurance that any such acquisitions will be
beneficial to the Company. Any growth or success through acquisitions will be
dependent upon a number of factors, including the Company's ability to evaluate
properly the potential benefits of each prospective acquisition, the Company's
ability to consummate the acquisition on terms favorable to the Company, and the
Company's ability to promptly and profitably integrate the acquired operations
and retain key personnel and customer relations. Acquisitions also place
significant demands on the Company's financial and management resources, which
can divert management's attention from other business concerns. Furthermore, the
Company generally records significant amounts of goodwill in connection with
acquisitions, and if the Company were to determine that the carrying value of
goodwill was impaired, the Company would be required to write down such carrying
value, which would result in a charge to earnings that could have a material
adverse effect on the Company's financial results.
UNCERTAINTIES SURROUNDING DILUTIVE IMPACT OF AND CAPITAL REQUIREMENTS RELATING
TO GROWTH STRATEGY
In order to grow its business by means of acquisitions, the Company will
require significant capital resources, both for the payment of the cost of
acquiring businesses, and for the effective integration, operation and expansion
of the acquired businesses. In the past, the Company has utilized its Common
Stock as a means of making payment for acquired businesses. Depending on the
agreed-upon value of the acquired business and the value of the Common Stock,
the Company may be required to issue a large number of additional shares of
Common Stock, thereby diluting existing stockholders. Alternatively, to avoid
such dilution, or if the acquisition candidate is unwilling to accept Common
Stock as all or part of the consideration for the transaction, the Company might
be required to utilize more of its cash resources (if available), or may be
required to seek additional capital. There can be no assurance that such
additional capital, if and when required, will be available on terms acceptable
to the Company, if at all. If the Company is unable to obtain required capital
resources, its growth could be limited, and its existing operations could be
impaired.
DECREASE IN POTENTIAL ACQUISITION CANDIDATES
As the current consolidation trend in the healthcare services industry
continues, the Company can expect to encounter greater difficulty in identifying
suitable acquisition candidates, and in consummating acquisitions
8
<PAGE>
of such businesses on terms favorable to the Company. Failure to identify and
consummate favorable acquisitions could have a material adverse effect on the
Company's business.
REDUCED CUSTOMER BASE DUE TO INDUSTRY CONSOLIDATION
As consolidation among healthcare providers continues, the Company's customer
base may be reduced either because customers are consolidated or acquired by
other entities, or because outsourcing decisions shift to individuals with whom
the Company has not had a prior relationship. There can be no assurance that the
Company will be able to maintain relationships with its customers following such
an acquisition or consolidation. Any significant reduction in the Company's
customer base would have a material adverse effect on the Company's business.
RELIANCE ON KEY EMPLOYEES
The Company is substantially dependent on the personal efforts and abilities
of Max W. Batzer (Chairman and Chief Executive Officer) and Brad A. Hummel
(President and Chief Operating Officer). Each is a substantial stockholder of
the Company and has an employment agreement with the Company. Although Mr.
Batzer now devotes substantially all of his business time to the Company, he is
permitted to devote a portion of his business time to non-Company matters, but
is prohibited from engaging in any other business activities which are
competitive with the business of the Company, or which materially interfere with
the performance of his duties and responsibilities to the Company. The loss or
unavailability of either of these officers or certain other key employees for
any significant period of time could have a material adverse effect on the
Company's business prospects or earning capacity. In addition to $1.0 million
per individual of key man life insurance payable to the Company's commercial
lender pursuant to a loan agreement, the Company maintains and is sole
beneficiary of key man life insurance policies on the lives of Messrs. Batzer
and Hummel in the amount of $500,000 per individual.
POTENTIAL FOR PROFESSIONAL LIABILITY CLAIMS
The nature of the Company's business and services entails the risk of
professional liability claims, which could arise, for example, out of faulty
testing procedures or mishandling of test results. This concern is heightened as
the Company is called upon to perform services that might be deemed to be
"invasive" in nature (entering or placing objects inside a patient's body). The
Company maintains professional liability insurance coverage with limits of $5.0
million per occurrence and $5.0 million in the aggregate in respect of such
contingencies. However, there can be no assurance that claims will not be
asserted in the future, or that any damages assessed against the Company will
not exceed the limits of available insurance coverage. In addition, the
potential negative publicity that could arise from a professional liability
claim could have a material adverse effect on the Company, even if the Company
were ultimately to prevail in the defense of the claim.
POSSIBLE SHORTAGE OF QUALIFIED PERSONNEL
From time to time, the Company has experienced difficulties in obtaining
and/or retaining qualified healthcare professionals, and shortages of such
personnel may be expected from time to time in the future. The Company will be
competing for qualified personnel with numerous other healthcare providers, many
of whom have substantially greater financial and other resources than the
Company.
9
<PAGE>
COMPETITION
Radiology and cardiology diagnostic services are characterized by a high
degree of competition. This competition comes from a number of independent local
operators specializing in one or two clinical applications, and from a few large
diversified healthcare companies (primarily larger hospitals having the
resources and capability to provide shared diagnostic services to other
healthcare facilities) which provide these services as part of their overall
business. Although the Company believes that it has a competitive advantage over
most of the small operators (primarily because most of them do not provide the
full range of services offered by the Company, and do not have the same volume
of revenues to absorb necessary fixed overhead costs), the Company may be
vulnerable to competition from the larger healthcare companies, at least one of
which can be found in each of the Company's geographic markets, and all of which
are substantially larger and possess greater financial resources than the
Company. There can be no assurance that the Company will be able to compete
successfully in its markets.
GOVERNMENT REGULATION; POTENTIAL NATIONAL HEALTHCARE REFORM
Many aspects of the medical industry in the United States are presently
subject to extensive federal and state governmental regulation, including
reimbursement rates and policies imposed by Medicare and other third-party
reimbursement programs (from which the Company receives a small portion of its
revenues). Laws and regulations affecting the Company's business include federal
and state "kickback laws," conflict of interest laws (such as the federal "Stark
laws"), and requirements relating to the operation of independent diagnostic
testing facilities and the handling of nuclear materials. In addition, both the
Clinton Administration and the Congress have periodically asserted a need to
overhaul or reform the nation's healthcare system. Such legislative initiatives,
if enacted, could impose pressures on the pricing structures applicable to the
Company's services. In particular, there is a possibility that a significant
portion of healthcare services will be rendered and administered through managed
care systems, which could have the effect of forcing price concessions and
reductions on the part of service providers such as the Company. Moreover,
healthcare reform could also entail a greater analysis of each patient's need
for diagnostic testing, with the aim of reducing the total volume of testing and
the overall cost of medical care. Depending on the nature and extent of any new
laws and/or regulations, or possible changes in the interpretation of existing
laws and/or regulations, any such changes may have a material adverse effect on
the Company's revenues, operating margins and profitability.
LIMITATIONS BROUGHT ON BY REIMBURSEMENT PROGRAMS
In 1996 and 1997, the Company derived approximately 15% and 9%, respectively,
of its total revenues from third-party indemnity payors. Also, many of the
Company's customers are dependent on third-party payors for a significant
portion of their revenue collections. In January 1992, the federal government
implemented, through the Medicare program, a resource-based relative value scale
("RBRVS") payment methodology. Implementation of RBRVS reduced reimbursement
rates for certain of the Company's diagnostic procedures. Policymakers have from
time to time advocated that a RBRVS type of reimbursement system be imposed on
private-sector third-party payors. Implementation of such a program would reduce
reimbursements by private third-party payors, and would adversely affect the
Company's operating margins to the extent that costs on these procedures could
not be concomitantly reduced. There can be no assurance that some or any of
these reduced operating margins could be recouped through cost reductions or
otherwise.
10
<PAGE>
TECHNOLOGICAL CHANGE AND OBSOLESCENCE
Diagnostic imaging technology is constantly undergoing development and change.
New technologies may be developed, or existing technologies refined, which could
render the Company's existing equipment technologically or economically
obsolete. Due to cost factors, competitive considerations or other constraints,
there can be no assurance that the Company will be able to acquire or have
access to any new or improved equipment that the Company may need in order to
serve its clients and customers.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been and may continue to be volatile,
and could in the future be subject to wide fluctuations in response to the
timing and size of acquisitions, quarter to quarter variations in operating
results, changes in earnings estimates by analysts, market conditions in the
industry, prospects of healthcare reform, changes in government regulation, and
general economic conditions. In addition, the stock market has from time to time
experienced significant price and volume fluctuations that have been unrelated
to the operating performance of particular companies. Investors in the Common
Stock must be willing to bear the risk of such fluctuations in earnings and
stock price.
SHARES RESERVED AND AVAILABLE FOR RESALE
In excess of 90% of the outstanding Common Stock may currently be resold
without restriction under federal or state securities laws. In addition, the
Company has outstanding options under its stock option plans for an aggregate of
1,673,151 shares of Common Stock, and has reserved an additional 724,974 shares
of Common Stock for future issuances of options under such plans. All of the
Company's current stock option plans are covered by an effective registration
statement, permitting the resale of shares acquired pursuant to options
thereunder. All of the currently outstanding options have exercise prices that
are substantially less than the current market price of the Common Stock. The
existence of such options may hinder future equity financing by the Company.
Further, the holders of such warrants and options may exercise them at a time
when the Company would otherwise be able to obtain additional equity capital on
terms more favorable to the Company. Further, the offer for resale of large
quantities of Common Stock could have the effect of holding down or depressing
the market price of the Common Stock.
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Certificate of Incorporation, By-Laws,
Delaware law and certain executive employment agreements could, together or
separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company, and limit the price that certain investors
might be willing to pay in the future for the Company's Common Stock. These
provisions include a classified board of directors and the issuance, without
further stockholder approval, of preferred stock with rights and preferences
which could be senior to the Common Stock. The Company is also subject to
Section 203 of the Delaware General Corporation Law, which may also inhibit a
change in control of the Company. In addition, the provisions of certain
executive employment agreements and stock option agreements may result in
economic benefits to the holders thereof upon the occurrence of a change in
control.
NO ANTICIPATED DIVIDENDS
The Company has not previously paid any dividends on its Common Stock and for
the foreseeable future intends to continue its policy of retaining any earnings
to finance the development and expansion of its
11
<PAGE>
business. In addition, the outstanding loan agreement between the Company and
its senior commercial lender prohibits the payment of dividends.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Resale Shares
being offered by the Selling Stockholder hereunder nor will it receive any
proceeds from the resale of the Transaction Shares, when and if issued, by the
holder(s) thereof. The Transaction Shares will most likely be issued by the
Company in consideration for assets to be acquired by the Company. The proceeds
to be received upon any such issuances will, therefore, be in the form of
acquired assets rather than cash proceeds. Expenses expected to be incurred by
the Company in connection with this offering are estimated at approximately
$35,000.
12
<PAGE>
SELLING STOCKHOLDER
Of the 501,163 Shares offered hereby, 327,250 Resale Shares have been issued
by the Company to the Selling Stockholder and are outstanding as of the date of
this Prospectus. The following table sets forth (i) the name of the Selling
Stockholder, (ii) the aggregate number of Shares of Common Stock beneficially
owned by the Selling Stockholder as of April 13, 1998, (iii) the aggregate
number of Shares of Common Stock which may be offered for sale for the account
of the Selling Stockholder from time to time pursuant to this Prospectus, and
(iv) the amount and percentage of Shares of Common Stock which would be
beneficially owned by the Selling Stockholder pursuant to this Prospectus, if
they are all offered and sold, and assuming the Selling Stockholder does not
acquire any additional shares of Common Stock. All beneficial ownership consists
solely of Resale Shares. Because the Selling Stockholder may offer all, some or
none of the Shares it holds, and because there are currently no agreements,
arrangements or understandings with respect to the sale of the Shares, no
definitive estimate as to the number of Shares that will be held by the Selling
Stockholder after such offering can be provided, and the following table was
prepared on the assumption that all Shares sold under this Prospectus will be
sold to parties unaffiliated with the Selling Stockholder.
Pursuant to Rule 416 of the Securities Act, the Selling Stockholder may also
offer and sell shares of Common Stock issued as a result of stock splits, stock
dividends and anti-dilution provisions. To the knowledge of the Company, the
Selling Stockholder referred to herein has not held any position, office or had
any other material relationship with the Company or any predecessor in the past
three years.
Persons who receive Transaction Shares upon issuance by the Company and who
are not now or at the time of issuance affiliates of the Company, are not
considered "Selling Stockholders" because resale by them of any Transaction
Shares issued to them by the Company will not be restricted by the Securities
Act.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK TO BE
BENEFICIAL OWNERSHIP OFFERED FOR THE SELLING BENEFICIAL OWNERSHIP
PRIOR TO OFFERING STOCKHOLDER'S ACCOUNT AFTER OFFERING (2)
----------------------- --------------------- --------------------
NAME SHARES PERCENTAGE (1) SHARES PERCENTAGE SHARES PERCENTAGE
---- ------ -------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Diagnostic Imaging Services, Inc. 327,250 2.9% 327,250 2.9% 0 0
</TABLE>
___________
(1) Percentage based on 11,339,249 shares of Common Stock outstanding as
of April 13, 1998.
(2) Assumes the Selling Stockholder disposes of all Resale Shares covered
by this Prospectus and does not acquire any additional shares of
Common Stock.
13
<PAGE>
PLAN OF DISTRIBUTION
The Company has registered under the Securities Act (i) 327,250 Resale
Shares for resale by the Selling Stockholder, and (ii) 173,913 Transaction
Shares for possible issuance by the Company in connection with a proposed
business acquisition and subsequent resale by the recipient(s).
The Resale Shares registered hereby have been registered pursuant to the
Company's obligations contained in a written agreement with the Selling
Stockholder. The Company has agreed to keep the Registration Statement of which
this Prospectus is a part effective for a period of not less than nine months
after the Resale Shares may first be publicly sold. In connection with this
offering, the Company has agreed to indemnify the Selling Stockholder against
certain liabilities, including certain liabilities under the Securities Act.
Pursuant to a written agreement between the Company and the Selling
Stockholder, regardless of the filing or effectiveness of this registration, the
sale of the Resale Shares is subject to certain restrictions. During the period
ending on March 5, 1999, with respect to 127,250 Resale Shares (the "First
Resale Shares"), unless DIS receives the prior written consent of the Company,
sales of the First Resale Shares may not exceed (i) one-third (1/3) of the total
First Resale Shares in any period of sixty (60) consecutive calendar days; (ii)
one-third (1/3) of the total First Resale Shares in any period of fourteen (14)
consecutive calendar days; or (iii) fifteen thousand (15,000) First Resale
Shares in any period of two (2) consecutive trading days. Also, during the
period ending March 5, 1999, all sales, transfers or other dispositions of the
First Resale Shares must be effected through a broker designated by the Company.
Similar restrictions apply to the other 200,000 Resale Shares (the "Second
Resale Shares") during the period ending on April 7, 1999. A legend may be
placed on the Resale Shares giving notice of these restrictions.
In addition, the Selling Stockholder may be subject to 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 Resale Shares by the Selling
Stockholder. The foregoing may limit the marketability of the Shares.
In order to comply with the securities laws of certain states, if
applicable, the Resale Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Resale Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available.
The Resale Shares offered hereby may, upon compliance with applicable state
securities laws, be sold from time to time to purchasers directly by the Selling
Stockholder or by pledgees, donees, transferees or other successors in interest,
or in negotiated transactions and on Nasdaq through brokers or dealers, or
otherwise. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholder for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
Alternatively, subject to the selling restrictions described above
(including volume restrictions and use of designated brokers), the Selling
Stockholder may from time to time offer the Resale Shares offered hereby through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts,
14
<PAGE>
concessions or commissions from the Selling Stockholder and/or the purchasers of
Resale Shares for whom they may act as agents.
The Selling Stockholder and any underwriters, dealers or agents that
participate in the distribution of Resale Shares offered hereby may be deemed to
be "underwriters" within the meaning of the Securities Act, and any profit on
the sale of such Resale Shares by them and any discounts, commissions or
concessions received by any such underwriters, dealers or agents might be deemed
to be underwriting discounts and commissions under the Securities Act.
At the time a particular offer of Resale Shares is made, to the extent
required, a supplement to this Prospectus, if required, will be filed with the
Commission which will set forth the aggregate amount of Resale Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, and discounts, commissions and other items
constituting compensation from the Selling Stockholder and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The Resale Shares offered hereby may be sold from time to time in one or
more transactions at market prices prevailing at the time of sale, at a fixed
offering price, which may be changed, at varying prices determined at the time
of sale or at negotiated prices. The Selling Stockholder will pay the
commissions and discounts of underwriters, dealers or agents, if any, incurred
in connection with the sale of the Resale Shares.
The Company may issue 173,913 Transaction Shares in connection with a
proposed business acquisition by the Company. The Company is registering the
Transaction Shares to provide the holder(s) of such Shares, other than
affiliates of the Company, upon issuance, with freely tradeable shares of Common
Stock. Following the issuance thereof, it is expected that the Transaction
Shares will be subject to transfer restrictions which are similar to those
applicable to the Resale Shares.
The Company will not receive any proceeds from the sale of the Resale
Shares being offered by the Selling Stockholder hereunder nor will it receive
any proceeds from the resale of the Transaction Shares, when and if issued, by
the holder(s) thereof. There can be no assurance that any of the Resale Shares
will be sold by the Selling Stockholder or that the Transaction Shares will be
issued by the Company or resold by the holder(s) thereof.
The Company has agreed to pay all of the expenses, estimated to be
approximately $35,000, in connection with this offering, other than underwriting
and brokerage commissions, discounts, fees and counsel fees and disbursements
attributed solely to the Selling Stockholder and any recipient(s) of Transaction
Shares.
DESCRIPTION OF COMMON STOCK
GENERAL
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, par value $.001 per share. As of April 13,
1998, an aggregate of 11,339,249 shares of Common Stock was outstanding.
15
<PAGE>
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders of the Company. In addition, such holders
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available therefor.
In the event of the dissolution, liquidation or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of all liabilities of the Company. All outstanding shares of
Common Stock are fully paid and nonassessable.
The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to elect to sell additional shares of Common Stock following this
offering, persons acquiring Common Stock in this offering would have no right to
purchase additional shares, and as a result, their percentage equity interest in
the Company would be reduced.
Pursuant to the Company's By-Laws, except for any matters which, pursuant to
the Delaware General Corporation Law ("Delaware Law"), require a greater
percentage vote for approval, the holders of one-third of the outstanding Common
Stock, if present in person or by proxy, are sufficient to constitute a quorum
for the transaction of business at meetings of the Company's stockholders.
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to the vote of Company stockholders. Except as to any matters
which, pursuant to Delaware Law, require a greater percentage vote for approval,
the affirmative vote of the holders of a majority of the Common Stock present in
person or by proxy at any meeting (provided a quorum as aforesaid is present
thereat) is sufficient to authorize, affirm or ratify any act or action,
including the election of directors.
The holders of Common Stock do not have cumulative voting rights. Accordingly,
the holders of more than half of the outstanding shares of Common Stock can
elect all of the Directors to be elected in any election, if they choose to do
so. In such event, the holders of the remaining shares of Common Stock would not
be able to elect any Directors. The Board is empowered to fill any vacancies on
the Board created by the resignation, death or removal of Directors.
In addition to voting at duly called meetings at which a quorum is present in
person or by proxy, Delaware Law and the Company's By-Laws provide that
stockholders may take action without the holding of a meeting by written consent
or consents signed by the holders of a majority of the outstanding shares of the
capital stock of the Company entitled to vote thereon. Prompt notice of the
taking of any action without a meeting by less than unanimous consent of the
stockholders will be given to those stockholders who do not consent in writing
to the action. The purposes of this provision are to facilitate action by
stockholders and to reduce the corporate expense associated with annual and
special meetings of stockholders. Pursuant to the rules and regulations of the
Commission, if stockholder action is taken by written consent, the Company will
be required to send to each stockholder entitled to vote on the matter acted on,
but whose consent was not solicited, an information statement containing
information substantially similar to that which would have been contained in a
proxy statement.
CLASSIFIED BOARD OF DIRECTORS AND RELATED PROVISIONS
The Company's Certificate of Incorporation provides that the Board of
Directors is divided into three classes, and that the directors serve staggered
terms of three years each. The purpose of the classified board is to promote
conditions of continuity and stability in the composition of the Board of
Directors and in the
16
<PAGE>
policies formulated by the Board of Directors, by insuring that in the ordinary
course, at least two-thirds of the directors will at all times have at least one
year's experience as directors. However, the classified board structure may
prevent stockholders who do not approve of the policies of the Board of
Directors from removing a majority of the Board of Directors at a single annual
meeting, because it will normally take two annual meetings of stockholders to
elect a majority of the Board. Directors of the Company may be removed from
office by stockholders prior to the expiration of their terms only for cause.
DELAWARE ANTI-TAKEOVER LAW
Section 203 of the Delaware Law prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to the date of the business
combination, the transaction is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owns
at least 85% of the outstanding voting stock, or (iii) on or after such date,
the business combination is approved by the board of directors and by the
affirmative vote of at least 662/3% of the outstanding voting stock that is not
owned by the interested stockholder. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person, who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, New York, New York.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries as
of December 31, 1996 and 1997, the Statements of Assets Acquired and Liabilities
Assumed from DIS as of December 31, 1996 and 1995, and the Statements of
Operations and Cash Flows related to Assets Acquired and Liabilities Assumed
from DIS for the years ended December 31, 1996 and 1995, have been incorporated
by reference in this Prospectus and Registration Statement from the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997, and
from the Company's Amendments on Form 8-K/A-1 to the Current Reports on Form 8-K
dated April 4, 1997 and May 2, 1997, in reliance upon the reports of Simonton,
Kutac & Barnidge, L.L.P., independent certified public accountants, which are
incorporated herein by reference, and upon the authority of said firm as experts
in accounting and auditing.
17
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any information
or to make any representation not contained in this Prospectus in connection
with this offering, and any information or representation not contained herein
must not be relied upon as having been authorized by the Company or any other
person. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any securities other than the registered securities to which
it relates or an offer to or solicitation of any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus at any time nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein contained is
correct as of any time subsequent to the date of this Prospectus.
_____________
TABLE OF CONTENTS
PAGE
----
Available Information................................................... 3
Incorporation of Certain
Documents by Reference................................................ 4
Summary................................................................. 5
Risk Factors............................................................ 8
Use of Proceeds......................................................... 12
Selling Stockholder..................................................... 13
Plan of Distribution.................................................... 14
Description of Common Stock............................................. 15
Legal Matters........................................................... 17
Experts................................................................. 17
501,163 SHARES
DIAGNOSTIC HEALTH
SERVICES, INC.
COMMON STOCK
__________________________
PROSPECTUS
__________________________
APRIL 17, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates (subject to future contingencies) that expenses in
connection with the offering described in this Registration Statement other than
underwriting and brokerage discounts, commissions and fees and counsel fees and
disbursements attributed solely to the Selling Stockholder, if any, payable by
such Selling Stockholder will be as follows:
Securities and Exchange Commission registration fee ..... $ 1,715*
Listing fees ............................................ 7,500*
Legal fees and expenses ................................. 17,500*
Accounting fees and expenses ............................ 5,000*
Printing expenses ....................................... 2,285*
Miscellaneous ........................................... 1,000*
-------
Total .............................................. $35,000*
=======
___________
* All amounts are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ninth of the Certificate of Incorporation of Diagnostic Health
Services, Inc., (the "Registrant" or the "Company") eliminates the personal
liability of directors and/or officers to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director; provided that such
elimination of the personal liability of a director and/or officer of the
Registrant does not apply to (i) any breach of such person's duty of loyalty to
the Registrant or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
actions prohibited under Section 174 of the Delaware General Corporation Law
(i.e., liabilities imposed upon directors who vote for or assent to the unlawful
payment of dividends, unlawful repurchases or redemption of stock, unlawful
distribution of assets of the Registrant to the stockholders without the prior
payment or discharge of the Registrant's debts or obligations, or unlawful
making or guaranteeing of loans to directors and/or officers), or (iv) any
transaction from which the director derived an improper personal benefit. In
addition, Article Tenth of the Registrant's Certificate of Incorporation, and
Article IV of the Registrant's By-Laws, provides that the Registrant shall
indemnify its corporate personnel, directors and officers to the fullest extent
permitted by the Delaware General Corporation Law, as amended from time to time.
II-1
<PAGE>
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel.
23.1 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel (included
in Exhibit 5.1).
23.2 Consent of Simonton, Kutac & Barnidge, L.L.P.
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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on this 17th day of
April, 1998.
DIAGNOSTIC HEALTH SERVICES, INC.
By: /s/ Max W. Batzer
-------------------------
Max W. Batzer,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title DATE
--------- ----- ----
<S> <C> <C>
/s/ Max W. Batzer Chairman of the Board and Chief April 17, 1998
- -------------------------------------------- Executive Officer (principal executive
Max W. Batzer officer)
/s/ Brad A. Hummel President, Chief Operating Officer and April 17, 1998
- -------------------------------------------- Director
Brad A. Hummel
/s/ Christopher L. Turner Chief Financial Officer and Chief April 17, 1998
- -------------------------------------------- Accounting Officer
Christopher L. Turner
/s/ Bo W. Lycke Director April 17, 1998
- --------------------------------------------
Bo W. Lycke
</TABLE>
II-3
<PAGE>
EXHIBIT 5.1
-----------
April 17, 1998
Diagnostic Health Services, Inc.
2777 Stemmons Freeway, Suite 1525
Dallas, Texas 75207
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Diagnostic Health Services, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") to be filed
under the Securities Act of 1933, as amended (the "Securities Act"), covering up
to 501,163 shares of the Company's common stock, par value $.001 per share (the
"Shares"), which are being registered in connection with (i) the proposed sale
of 327,250 Shares by the selling stockholder named therein (the "Resale Shares")
and (ii) the possible issuance by the Company of 173,913 Shares in connection
with a proposed business acquisition (the "Transaction Shares").
In connection with this opinion, we have examined the Registration
Statement, the Company's Certificate of Incorporation, By-Laws and minutes, and
such other documents and records as we have deemed relevant. In our
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with the originals of all documents submitted to us as copies. In addition, we
have made such other examinations of law and of fact as we have deemed
appropriate in order to form a basis for the opinion hereinafter expressed.
We have been informed by the Company that the Resale Shares have been
issued, and the certificates evidencing the same have been duly delivered,
against receipt of the consideration stipulated therefor, which was not less
than the par value of the Resale Shares, and that the Transaction Shares, if
issued, will be issued, and the certificates evidencing the same will be duly
delivered, against receipt of the consideration stipulated therefor, which will
not be less than the par value of the Transaction Shares.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and have been, or when issued, delivered and paid for in
accordance with the foregoing assumptions will be, validly issued, fully paid
and non-assessable.
<PAGE>
Diagnostic Health Services, Inc.
Registration Statement on Form S-3
April 17, 1998
Page 2
The opinion set forth above is limited to the Delaware General Corporation
Law, as amended.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this opinion and consent, we do not hereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT CERTIFED PUBLIC ACCOUNTANTS
--------------------------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated March 12, 1998 relating to the consolidated financial statements of
Diagnostic Health Services, Inc. ("DHS") and its subsidiaries (collectively, the
"Company") which appears at page F-2 of DHS' Annual Report on Form 10-KSB for
the year ended December 31, 1997, and our reports dated June 16, 1997 and June
19, 1997 appearing in DHS' Current Reports on Form 8-K/A filed on June 20, 1997
and July 1, 1997, respectively. We also consent to the reference to us under
the caption "Experts" in such Prospectus.
/s/Simonton, Kutac & Barnidge, L.L.P.
Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas
April 17, 1998
