<PAGE>
As filed with the Securities and Exchange Commossion on April 16, 1997
Registration Statement No. 33-______________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
_________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
MEDICALCONTROL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
75-2297429
(I.R.S. Employer Identification No.)
_________________________
8625 KING GEORGE DR., SUITE 300
DALLAS, TEXAS 75235
(214) 630-6368
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_________________________
JOHN WARD HUNT, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MEDICALCONTROL, INC.
8625 KING GEORGE DR., SUITE 300
DALLAS, TEXAS 75235
(214) 630-6368
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
_________________________
Copies of all communications to:
STEPHANIE L. MCVAY, ESQ.
MEDICALCONTROL, INC.
8625 KING GEORGE DR. SUITE 300
DALLAS, TEXAS 75235
TELEPHONE: (214) 630-6368
FACSIMILE: (214) 689-6949
________________________________________________________________________________
Approximate date of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interested 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]
__________________
<TABLE>
<CAPTION>
________________________________________________________________________________
CALCULATION OF REGISTRATION FEE
________________________________________________________________________________
TITLE OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED AMOUNT OF
SECURITIES TO BE REGISTERED (1) OFFERING MAXIMUM REGISTRATION
REGISTERED PRICE AGGREGATE FEE
PER SHARE (2) OFFERING
PRICE (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commmon Stock,
$.01 par value 500,000 shares $5.1875 $2,593,750 $786.00
- --------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to Rule 416, this Registration Statement covers any
additional shares of Common Stock ("shares") which become issuable by reason of
any stock dividend, stock split, recapitalization or any other similar
transaction without receipt of consideration which results in an increase in the
number of shares outstanding.
(2) Estimated solely for the purpose of computing the amount of the
registration fee under Rule 457 of the Securities Act of 1933, as amended, based
on the last sales price of the Common Stock of MedicalControl, Inc. as reported
on the Nasdaq National Market within five business days prior to the date of
filing of the Registration Statement.
THE REGISTRATION 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 SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE 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 SECRITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
500,000 Shares
of Common Stock
MEDICALCONTROL, INC.
This Prospectus relates to the public offering by the Seller Stockholder
(as hereinafter defined) of up to 500,000 shares of common stock, $.01 par value
per share (the "Common Stock"), of MedicalControl, Inc., a Delaware corporation
(the "Company"). The 500,000 shares of Common Stock (collectively, the
"Shares"), when sold, will be sold by and for the account of the Selling
Stockholder named herein (the "Seller Stockholder"). See "Selling Stockholder."
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Stockholder.
The Selling Stockholder directly or through agents, dealers or underwriters
may sell the Shares from time to time on terms to be determined at the time of
sale. To the extent required, the Shares to be sold, purchase price, offering
price, the name of any agent, dealer or underwriter and any applicable
commission or discount with respect to a particular offer or sale will be set
forth in an accompanying prospectus supplement. The aggregate proceeds to the
Selling Stockholder from the sale of the Shares sold by it pursuant to this
Prospectus will be the purchase price of such Shares less any commissions. See
"Plan of Distribution." The Selling Stockholder reserves the sole right to
accept or to reject, in whole or in part, any proposed purchase of its Shares.
All expenses relating to the distribution of the Shares are to be borne by the
Company, other than commissions, concessions and discounts of underwriters,
dealers or agents of the Selling Stockholder.
The Selling Stockholder, and any dealers, agents or underwriters that
participates with the Selling Stockholder in the distribution of the Shares, may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Common Stock is listed on the Nasdaq National Market. On April 11,
1997, the closing sales price of the Common Stock as reported on the Nasdaq
National Market was $5.1875 per share.
PURCHASE OF THE SHARES IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND SHOULD
BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. SEE "RISK FACTORS" ON PAGE 4 OF THIS PROSPECTUS.
________________________________________________________________________________
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 _________________, 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the Shares offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and exhibits thereto, certain items of which are omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to such Registration Statement and the exhibits
thereto. Each statement made in this Prospectus concerning a document filed as
an exhibit to the Registration Statement is qualified in its entirety by
reference to such exhibit for a complete statement of its provisions.
The Company is subject to the informational reporting 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 Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 219 South Dearborn Street, Chicago,
Illinois 60604; 7 World Trade Center, New York, New York 10048; and 5757
Wilshire Boulevard, Los Angeles, California 90036. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company furnishes annual reports to its stockholders which include
audited financial statements. The Company may also furnish quarterly financial
statements to its stockholders and such other reports as may be authorized by
its Board of Directors.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are hereby incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996 (including its consolidated balance sheets as of December 31,
1996 and 1995, consolidated statements of operations, stockholders' equity and
cash flows for the years then ended, together with the report of independent
public accountants, contained on pages F-1 through F-15) filed pursuant to
Section 13 (a) of the Exchange Act;
(2) The Company's definitive Proxy Statement for the Annual Meeting of
Stockholders of the Company held May 15, 1996;
(3) The description of the Common Stock that is contained in the Company's
Registration Statement on Form 8-A, as amended, under the Exchange Act (File No.
1-11922) and its Registration Statement on Form SB-2 under the Securities Act
(File No. 33-58334-FW), including any amendments or reports filed for the
purpose of updating such descriptions; and
(4) All other reports and subsequent reports filed pursuant to Section
13(a) or 15(d) of the Exchange Act.
All documents 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 Shares shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the respective
dates of filing of such documents, excluding those portions of such documents
not deemed filed. Any statement contained in this Prospectus, in a supplement to
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, in any
subsequently filed supplement to this Prospectus or in any subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents. Written or oral requests for such
copies should be directed to Stephanie L. McVay, Secretary, MedicalControl,
Inc., 8625 King George Dr., Suite 300, Dallas, Texas 75235, telephone (214) 630-
6368.
-3-
<PAGE>
RISK FACTORS
The Shares being offered by this Prospectus involve a high degree of risk.
Prior to investing in the Shares, prospective investors should consider
carefully the following risks and speculative factors, together with other
information in this Prospectus.
RECENT REVENUE DECLINE
For the year ended December 31, 1996, the Company had a 14% decline in
revenues compared to the year ended December 31, 1995. There can be no assurance
that revenue will not further decline or profitable operations can be sustained
on a quarterly or annual basis in the future. The Company completed three
acquisitions in 1994 (one of which was subsequently sold) which expanded the
nature and scope of the Company's operations. In view of the Company's
significant growth by acquisitions during 1994 and subsequent sale of a
subsidiary in 1995, the Company believes that period-to-period comparisons of
its financial results may not be necessarily meaningful and should not be relied
upon as an indication of future performance.
DEPENDENCE ON KEY CLIENTS
The Company has contracts with several clients which account for a
substantial portion of its total revenues. The Company's two largest clients, in
the aggregate, accounted for approximately 17%, 12%, and 16%, respectively, of
the Company's net revenues for the fiscal years ended December 31, 1996, 1995
and 1994. The loss of any one or more of these principal customers could have a
material adverse effect on the operating results of the Company.
COMPETITION
The Company competes with national and local organizations who have
developed PPOs and TPAs as well as with major insurance carriers. The industry
is highly competitive and significant consolidation has occurred within the
industry, creating stronger competitors. The current competitive environment may
limit the Company's ability to price its products at levels the Company believes
are appropriate. The Company's managed care division also faces competition from
hospitals, healthcare facilities and other healthcare providers who have
combined and formed their own networks to contract directly with employer groups
and other prospective customers for the delivery of healthcare services. Large
employer groups have demanded a variety of healthcare options, such as
traditional indemnity insurance, HMOs, point-of-service plans and PPOs, offered
either through self-funding or third parties. The Company competes with
providers of all of these products, many of which have substantially greater
financial resources than the Company. The Company believes that a limited number
of companies provide all of the services offered by the Company within the
geographic areas in which the Company presently operates. The Company's managed
care division may encounter competition from companies with broader networks,
narrower networks (which allow for greater cost control and lower prices),
greater market share or more established marketplace name or reputation. These
competitive factors could adversely effect the Company's financial results. The
Company's TPA division may encounter competition from larger TPAs with greater
resources and regional TPAs with greater market penetration. Both divisions of
the Company will be subject to significant competition in any new geographic
areas they may enter.
"Indemnity insurance" is the "traditional" insurance plan that pays
specific benefit to an insured individual to reimburse them for a portion of the
cost of medical care. Reimbursement for medical care in this situation is based
on the providers' regular charges to the public and the insureds are not limited
with
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<PAGE>
regard to choice of providers. "Health maintenance organizations" ("HMOs") are
managed healthcare plans that require its members, with the exception of certain
medical emergency situations, to use the services of specific designated
physicians, hospitals or other providers for their healthcare needs.
Restriction of access to a limited number of providers allows the HMO to control
the utilization of services and resources in the delivery of care. One of the
methodologies employed by HMOs to reward providers with cost-effective
management of care is through "capitation." "Capitation" is a provider payment
methodology that reimburses each provider a fixed monthly fee per member per
month for the total cost of all care for enrolled patients regardless of
utilization. "Point of service" plans offer an individual the choice to seek
services from a participating provider or any other provider of their choice
each time services are rendered. Utilization of a participating provider will
provide the member with a higher level of reimbursement than the use of a non-
participating provider. "Preferred provider organizations", including the
Company, offer employers and healthcare purchasers access to a broad network of
facilities and physicians who have agreed, by contract, to provide services at a
fixed rate or at discounted rates from their standard fees. In such PPO
arrangements, the cost of care is borne by the self-insured employer or benefit
plan and not the PPO.
The major competitors of the Company vary depending on the market served by
the Company on behalf of its particular clients. In general, the Company
typically encounters competition from large insurance companies and Blue Cross
plans when the Company solicits new clients for business.
GOVERNMENT REGULATION AND HEALTHCARE REFORM
The managed healthcare industry is not highly regulated at present. Since
1993, many competing proposals have been introduced in Congress and various
state legislatures have called for general healthcare market reforms to increase
the access and availability of group health insurance and to require that all
businesses offer health insurance coverage to their employees. It is uncertain
what additional healthcare reform legislation, if any, will ultimately be
implemented or whether other changes in the administration or interpretation of
governmental healthcare programs will occur. It is impossible to predict if
proposals calling for broad insurance market reform will be reintroduced in
Congress or in any state legislature in the future, or if any such proposal may
be enacted. Additionally, the adoption of a publicly-financed, single payor,
national or state health plan may have a material adverse effect on the
Company's business. At both the federal and state levels, there is also growing
interest in legislation to regulate how managed care companies interact with
providers and health plan members. The Company cannot predict what effect
federal or state healthcare legislation or private sector initiatives will have
on its PPO or TPA operations, although management of the Company believes the
Company may benefit from some proposals which favor the growth of managed care.
There can be no assurance that future healthcare reforms or PPO regulations will
not be adopted which would have a material adverse effect on the Company.
The Employee Retirement Income Security Act of 1974 ("ERISA"), governing
employee benefit plans, permitted employers, among other mandates, to self-
insure their health insurance by acting as a quasi-insurer. Employers viewed
the ability to underwrite their own health claims as a result of ERISA as an
opportunity to better control health costs. Regulation of TPAs falls under the
auspices of the United States Department of Labor, which has strict, enforceable
guidelines relative to the operation of TPAs. In addition, TPAs are subject to
licensing and regulation on the state level. Typically, the only state
requirements are a completed application and proof of a fidelity bond in the
amount of $500,000. The Company's wholly owned subsidiary, Diversified Group
Administrators, Inc. ("DGA") is licensed as a TPA in the states of Texas,
Pennsylvania, Tennessee, California, Illinois, Kentucky, West Virginia and New
Mexico and has filed for ERISA exemptions where required.
-5-
<PAGE>
The Company anticipates that federal and state legislatures will continue
to review and assess alternative healthcare systems and payment methodologies.
The Company is unable to determine to what extent PPOs and TPAs will be part of
any managed care initiatives of the federal and state governments or private
sector initiatives, as there is increasing emphasis on market-driven
modifications. Further, the Company is unable to determine the favorable or
unfavorable impact, if any, they would have on the Company's operations.
DEPENDENCE ON HEALTHCARE PROVIDERS
The Company's PPO profitability and long-range business plans are dependent
upon attracting and retaining qualified physicians, hospitals and other
healthcare providers under discount and other pricing terms which permit the
Company to compete with other managed care companies and insurance companies on
favorable terms. The Company believes there is increasing competition from HMOs,
PPOs and other healthcare plans for physicians, hospitals and other healthcare
providers. There can be no assurance that the Company will be successful in
maintaining existing relationships or attracting necessary healthcare providers.
CANCELLATION RIGHTS ON CONTRACTS
Although the Company generally enters into written contracts with its
clients, the majority of such contracts, including the contracts with the
Company's major clients, permit cancellation upon 30 to 90 days' notice.
Additionally, the Company's contracts with its clients do not require minimum
payments or minimum levels of services. The exercise of such cancellation rights
by, or a significant reduction in the volume of services requested by, the
Company's largest clients or by a number of the Company's other clients could
have a material adverse effect on the Company. Two clients comprising 3% of
revenue in 1995 terminated in 1996. Another client comprised of 4% of revenue in
1996 has given the Company notice that it has terminated its contract with the
Company effective May 1997. There can be no assurance that the Company will
maintain its current client relationships or that the clients will not decrease
its volume or change its fee structure.
DEPENDENCE ON COMPANY'S SENIOR MANAGEMENT
The Company's success depends to a significant extent upon J. Ward Hunt,
President and Chief Executive Officer and Robert O. Brooks, Executive Vice
President and Chief Operating Officer. Neither Mr. Hunt nor Mr. Brooks is
currently subject to an employment agreement and there can be no assurance that
either of them will remain in the employ of the Company in the future. The loss
of Mr. Hunt's or Mr. Brooks' services could have a material adverse effect on
the Company. The Company does not carry key man life insurance on the life of
Mr. Hunt or Mr. Brooks. The Company believes that its future success will also
depend on its ability to continue to attract and retain key employees.
Competition for qualified personnel in the Company's industry is intense.
MANAGEMENT INFORMATION SYSTEMS; PROPRIETARY TECHNOLOGY
The Company's management information systems (the "MIS") is a critical
component in its operations because the information processed and derived
through the MIS enables the Company to negotiate price discounts for provider
services and monitor utilization and other cost factors. In addition, the MIS is
critical to the timely, efficient processing and/or review of provider claims.
The Company relies on a combination of trade secrets and copyright protections
to establish and protect its proprietary rights to the MIS. There can be no
assurance, however, that the legal protections and the precautions taken by the
Company will be adequate to prevent misappropriation of the Company's
technology. In addition, these protections and precautions will not prevent
development by independent third parties of
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<PAGE>
competitive technology or products, and some companies have already developed
products which, to some extent, perform functions similar to those performed by
the MIS.
RELIANCE ON DATA PROCESSING
Certain aspects of the business of the Company are dependent upon its
ability to store, retrieve, process and manage data and to maintain and upgrade
its data processing capabilities. Interruption of data processing capabilities
for any extended length of time, loss of stored data, programming errors or
other computer problems could have a material adverse effect on the business of
the Company. There can be no assurance that the Company will not experience
problems, delays or unanticipated costs in the use of its current system. Any
difficulties in reviewing claims in a timely manner may adversely affect the
Company's ability to attract and retain clients and/or healthcare providers and
may also adversely affect the Company's ability to monitor its financial and
operational performance.
CONTROL OF THE COMPANY
Currently, The Answer Partnership, Ltd. (the "Parent") owns 2,640,000
shares, or 67.6%, of the Common Stock. As a result, the Parent in essence elects
the entire Board of Directors of the Company and controls the direction and
operations of the Company. Following completion of this offering, the Parent's
ownership interest will continue to permit the Parent to control the governance
of the Company and to elect all of its directors. J. Ward Hunt, President of the
Company, controls the Parent due to his position as its managing partner.
CONFLICTS OF INTEREST
The Company is a party to a loan arrangement with Mr. Hunt, the Company's
Chairman of the Board, principal shareholder, President and Chief Executive
Officer, as more particularly described in "Certain Transactions". From time to
time during the term and course of such arrangement, the officers and directors
of the Company may be faced with potential conflicts of interest between the
Company and Mr. Hunt. The officers and directors of the Company are limited
only by their fiduciary duty under Delaware law to conduct themselves in a
manner that is fair to the shareholders of the Company, the requirements under
Delaware law of disclosure to the Board of Directors of transactions that
involve interested director(s) and approval by a majority of the disinterested
directors, and disclosure of interested transactions to shareholders (for
transactions that require shareholder approval) and approval by a majority of
the disinterested shareholders (for transactions that require shareholder
approval). Management undertakes to abide by Delaware law and its fiduciary
duty of fairness to shareholders if faced with conflicts in this ongoing
relationship with Mr. Hunt. The Company has established no other guidelines or
procedures for resolving potential conflicts. Failure by management to resolve
conflicts of interest in favor of the Company may have a materially adverse
affect on the Company.
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that may discourage acquisition bids for the Company. The Company has
substantial authorized but unissued capital stock available for issuance. The
Company's Certificate of Incorporation contains provisions which authorize the
Board of Directors, without the consent of stockholders, to issue additional
shares of Common Stock and issue shares of Preferred Stock in series, including
establishment of the rights, powers and preferences, including voting rights, of
holders of the Preferred Stock, and grant authority to the Board to amend the
Company's Bylaws. Additionally, the Company's Bylaws empower the Board to
increase or decrease the number of directors, subject to certain limitations,
and specify that directors will generally
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hold office until the next annual meeting of stockholders. These provisions may
have the effect, either alone or in combination with each other, of (i) limiting
the price that certain investors might be willing to pay in the future for the
Common Stock, (ii) delaying, deferring or otherwise discouraging an acquisition
or change in control of the Company deemed undesirable by the Board of Directors
or (iii) adversely affecting the voting power of stockholders who own Common
Stock.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 2,640,000 shares of Common Stock owned by the Parent are
eligible for sale under the Securities Act and Rule 144 promulgated thereunder.
In addition, the Company has registered the sale of an aggregate of 571,225
unregistered shares of Common Stock on behalf of selling stockholders. Any
future sales of substantial amounts of Common Stock in the open market or the
availability of such shares could adversely affect the market for the Common
Stock.
AUTHORIZATION OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
4,000,000 shares of Preferred Stock. The Board of Directors is empowered,
without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Common Stock. The Preferred
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
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<PAGE>
THE COMPANY
MedicalControl, Inc. (the "Company") is a healthcare cost management and
administrative services company. The Company is comprised of two divisions, one
providing managed care services, primarily through its preferred provider
networks, and the other providing third party administration ("TPA") services.
In fulfilling its role as a preferred provider organization ("PPO"), the Company
contracts with hospitals, physicians and ancillary providers to provide access
to comprehensive healthcare services on behalf of its clients and their
employees or members at negotiated, discounted rates. The Company also reprices
resulting network provider claims to reflect negotiated terms as well as
providing healthcare data analyses, reporting and related healthcare cost
containment programs. In addition, the Company, through its wholly owned TPA
subsidiary, provides employers that self-fund their employee benefit plans a
complete range of administrative and consulting services supporting such benefit
plans.
Prior to the Company's expansion into claims administration services, the
Company had derived its revenues primarily from PPO network access fees. In
1994, the Company expanded its products and service offerings to clients through
the acquisition of two third party administrators. By offering TPA services and
other managed care services, the Company positioned itself to more effectively
compete with larger insurance companies and other managed care companies by
integrating its products so that clients may choose to purchase most of their
healthcare services from one company. The TPA division also offers the managed
care division access to a cluster of self-insured clients who are candidates for
the Company's preferred provider networks.
Over the past two years, MedicalControl's managed care division has
experienced significant change. The Company has hired a new management team
focused on expanding its products and service offerings as well as improving
efficiencies and operations. The Company believes one of the keys to meeting its
goals for growth is delivering the highest levels of quality customer service.
The Company is attempting to meet and to exceed the needs of its customers,
while also achieving the Company's internal goals and objectives.
The Company intends to expand the managed care division through internal
growth of the PPO, through acquisitions and by entering new markets.
MedicalControl intends to increase the penetration of its target markets by
offering clients a more complete range of managed healthcare services designed
to minimize the cost of providing employee healthcare and other health benefit
programs. The Company is also seeking to expand its managed care division
through acquisitions of other PPOs or related managed care services companies.
There can be no assurance that the Company will be able to increase revenues or
earnings through acquisitions, operating efficiencies or otherwise.
The TPA division provides services to self-funded benefit plans, insurance
companies, provider-based organizations, and other benefit management
organizations. The TPA division provides complete benefit review, design and
administration services to assist and direct comprehensive employee benefit
programs and risk management activities. The division currently administers
over 300 self-funded plans, one fully-insured plan, and over 50 risk management
plans, with clients ranging from 50 to 3,000 employees. Current total covered
lives exceed 80,000 located in 49 states. The TPA division intends to continue
to market its products to self-insured employers. In the first quarter of 1997,
the TPA division introduced a new fully-insured product available through an
insurance company.
MedicalControl is a Delaware corporation, incorporated in October 1989.
Unless the context otherwise requires, the term the "Company" refers to
MedicalControl, Inc. and its wholly-owned subsidiary and the term
"MedicalControl" refers to the Company's managed care division. The Company's
executive offices are located at 8625 King George Drive, Suite 300, Dallas,
Texas 75235 and its telephone number is (214) 630-6368.
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<PAGE>
USE OF PROCEEDS
The Shares offered hereby may be offered for sale from time to time by the
Selling Stockholder. The Company will not receive any proceeds from the sale of
the Shares. The following table provides certain information with respect to the
shares of Common Stock of the Company (including the Shares) held by the Selling
Stockholder.
SELLING STOCKHOLDER
The Shares offered hereby may be offered for sale from time to time by the
Selling Stockholder. The following table provides certain information with
respect to the shares of Common Stock of the Company (including the Shares) held
by the Selling Stockholder.
<TABLE>
<CAPTION>
Number of Shares Number of Shares Shares Beneficially Owned
Name of Beneficially Owned Registered for After the Offering (3)
Selling Shareholder As of April 11, 1997 Sale Hereby Number Percent (4)
- ------------------- ------------------ ----------- ----------------------
<S> <C> <C> <C>
J. Ward Hunt 3,185,000(2) 500,000 2,685,000 60.4
And
The Answer
Partnership, Ltd. (1)
</TABLE>
______________
(1) J. Ward Hunt has served as President of the Company since January 1989 and
as Chief Executive Officer and Chairman of the Board of Directors since December
1989. The Answer Partnership, Ltd. (the "Partnership") is a Texas limited
partnership that is owned 62.5% by J. Ward Hunt and 37.5% by The Essential
Endowment Trust (the "Trust"). Each of them owns a 1% general partnership
interest in the Partnership, with the balance of their respective interests
being held as limited partnership interests. The Partnership was organized
effective as of July 3, 1992, for purposes of acquiring all of the then-issued
and outstanding Common Stock of the Company. Mr. Hunt, President and Chief
Executive Officer of the Company, is the Managing Partner of the Partnership and
controls the day-to-day management of the Partnership. The Trust is a Texas
irrevocable trust which was formed effective as of July 2, 1992, for the primary
benefit of the three children of Mr. Hunt and for purposes of acquiring an
interest in the Partnership. The Trust serves as a non-managing general partner
of the Partnership. In the event that Mr. Hunt should withdraw, or cease to
serve, as Managing Partner, the successor Managing Partner under the terms of
the partnership agreement for the Partnership would be Hilre Lucille Hunt and
Thomas R. Corbett, as Co-Trustees of the Trust. The Partnership is authorized to
invest generally in any type of property and to hold or develop and to sell,
exchange or otherwise dispose of all or any part of the Partnership property and
carry on any other business or businesses and exercise any and all powers as may
be permitted by law.
(2) Includes 300,000 shares of Common Stock which Mr. Hunt has the right to
acquire within 60 days of April 11, 1997 by the exercise of vested stock options
and 240,000 shares of Common Stock which The Answer Partnership, Ltd. has the
right to acquire within 60 days of April 11, 1997 by the exercise of vested
stock options and 5,000 shares owned individually by Mr. Hunt.
-10-
<PAGE>
(3) Assumes the sale of all the Shares offered hereby.
(4) The percentage shown includes shares of Common Stock actually owned and
shares of Common Stock that the person had the right to acquire within 60 days
of April 11, 1997. In calculating the percentage of ownership, all shares of
Common Stock that the person had the right to acquire within 60 days of April
11, 1997 are deemed to be outstanding for the purpose of computing the
percentage of shares of Common Stock owned by such person.
PLAN OF DISTRIBUTION
The Company will receive none of the proceeds from this offering. The
Shares may be sold from time to time to purchasers directly by the Selling
Stockholder. Alternatively, the Selling Stockholder may from time to time offer
the Shares through underwriters, dealers or agents, who may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Selling Stockholder or the purchasers of Shares for whom they may act as agent.
The Selling Stockholder and any underwriters, dealers or agents that participate
in the distribution of Shares may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on the sale of 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 offering of Shares is made, a Prospectus
Supplement, if required, will be distributed which will set forth the number of
Shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Stockholder and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. The Selling
Stockholder may use brokers or dealers in connection with the sale of Shares
contemplated by this Prospectus and such brokers or dealers may receive fees or
commissions in connection therewith. The Shares may be sold from time to time in
one or more transactions at a fixed offering price, which may be changed, at
varying prices (including market prices or prices related thereto) determined at
the time of sale or at negotiated prices.
To comply with the securities laws of certain jurisdictions, if applicable,
the Shares will be offered or sold in such jurisdictions only through registered
or licensed brokers or dealers.
-11-
<PAGE>
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Common Stock of the Company may not
simultaneously engage in market-making activities with respect to such Common
Stock of the Company during such distribution or for a period of two business
days prior to the commencement of such distribution. In addition to and without
limiting the foregoing, the Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of any of the Common Stock of the Company by
the Selling Stockholder.
The Company will pay the expenses incident to the offering and sale of the
Shares to the public, other than commissions, concessions and discounts of
underwriters, dealers or agents.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITY.
The Company has agreed to indemnify its directors in their capacity as
directors of the Company against any and all liability and reasonable expense
that may be incurred by the director or directors in connection with or
resulting from (a) any threatened, pending or completed action, claim, suit or
proceeding, whether civil, criminal, administrative or investigative (each, a
"Proceeding"), (b) an appeal in such a Proceeding or (c) any inquiry or
investigation that could lead to such a Proceeding, all to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
Company, the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the act and is, therefore, unenforceable.
LEGAL MATTERS
Stephanie L. McVay, Dallas, Texas, the Company's General Counsel, has acted
as securities counsel to the Company in connection with this Prospectus.
-12-
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person is authorized to give any
information or to make any representations other than contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell, or the solicitation of an offer to buy, the
securities offered hereby to any person in any state or other jurisdiction in
which such offer of solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale hereunder shall, under any circumstances, create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporate of Certain
Documents by Reference................................................. 3
Risk Factors.............................................................. 4
The Company............................................................... 9
Use of Proceeds........................................................... 10
Selling Stockholder....................................................... 10
Plan of Distribution...................................................... 11
Disclosure of Commission Position on Indemnification for
Securities Act Liability............................................... 12
Legal Matters............................................................. 12
</TABLE>
500,000 Shares of
Common Stock
MEDICALCONTROL, INC.
__________________
PROSPECTUS
__________________
__________, 1997
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee............................................$ 786
*Printing Expenses............................................... 1,000
*Legal Fees and Expenses......................................... 3,000
*Accounting Fees and Expenses.................................... 3,000
*Miscellaneous Expenses.......................................... 2,214
TOTAL...................................................$10,000
</TABLE>
______________
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Delaware GCL")
empowers a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorney's fees, judgments,
fines and certain settlements) actually and reasonably incurred by them in
connection with any suit or proceeding to which they are a party so long as they
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to a criminal action
or proceeding, so long as they had no reasonable cause to believe their conduct
to have been unlawful. The Registrant's By-laws provide that the Registrant
shall indemnify its employees and agents as the Board of Directors may determine
from time to time, to the fullest extent permitted by Section 145 of the
Delaware GCL.
Section 102 of the Delaware GCL permits a Delaware corporation to include
in its certificate of incorporation a provision eliminating or limiting a
director's liability to a corporation or its stockholders for monetary damages
for breaches of fiduciary duty. The enabling statute provides, however, that
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or involving intentional misconduct, or knowing violations of the law, and
the unlawful purchase or redemption of stock or payment of unlawful dividends or
the receipt of improper personal benefits cannot be eliminated or limited in
this manner. The Registrant's Certificate of Incorporation includes a provision
that eliminates, to the fullest extent permitted, director liability for
monetary damages for breaches of fiduciary duty.
The Company has also agreed to indemnify its directors in their capacity as
directors of the Company against any and all liability and reasonable expense
that may be incurred by the director or directors in connection with or
resulting from (a) any threatened, pending or completed action, claim, suit or
proceeding, whether civil, criminal, administrative or investigative (each, a
"Proceeding"), (b) an appeal in such a Proceeding or (c) any inquiry or
investigation that could lead to such a Proceeding, all to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law.
ITEM 16. EXHIBITS
5.1 Opinion of Stephanie L. McVay, Esq., securities counsel for the
Registrant, as to the legality of the securities being registered.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2 Consent of Stephanie L. McVay, Esq. (included in her opinion filed as
Exhibit 5.1).
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
(a) RULE 415 OFFERINGS.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(b) REQUEST FOR ACCELERATION OF EFFECTIVE DATE.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3SB and has dully caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on April 16, 1997.
Registrant:
Date: April 16, 1997 MedicalControl, Inc.
By: /s/ John Ward Hunt
______________________________
John Ward Hunt, President and
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints J. Ward Hunt and Robert O. Brooks,
and each of them, as attorney and agent for the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to sign
and file with the Securities and Exchange Commission under the Securities Act of
1933 any and all amendments (including post-effective amendments) and exhibits
to this Registration Statement and any and all applications, instruments, and
other documents to be filed with the Securities and Exchange Commission
pertaining to the registration of the securities covered hereby, with full power
and authority to do and perform any and all acts and things whatsoever requisite
or desirable.
In accordance with the Securities Act of 1933, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ John Ward Hunt President, Chief Executive Officer April 16, 1997
_________________________________ Chief Financial Officer, and Chairman
John Ward Hunt of the Board of Directors (principal
executive officer)
/s/ Robert O. Brooks Executive Vice President and April 16, 1997
_________________________________ Chief Operating Officer
Robert O. Brooks
/s/ David A. Hanson Vice President, Finance and Accounting April 16, 1997
_________________________________ (principal accounting officer)
David A. Hanson
/s/ Robert W. Phillip Director April 16, 1997
_________________________________
Robert W. Philip
_________________________________ Director April 16, 1997
William L. Amos, Jr., M.D.
/s/ D. Samuel Coats
_________________________________ Director April 16, 1997
D. Samuel Coats
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT PAGE
NUMBER NUMBER
<S> <C> <C>
5.1 Opinion of Stephanie L. McVay, Esq.,
securities counsel for the Registrant, as
to the legality of the securities being
registered....................................
23.1 Consent of Arthur Andersen LLP,
independent public accountants................
23.2 Consent of Stephanie L. McVay, Esq.
(included in their opinion filed as
Exhibit 5.1...................................
</TABLE>
<PAGE>
EXHIBIT 5.1
STEPHANIE L. McVAY, ESQ
ATTORNEY AT LAW
8625 King George Dr. Suite 300
TELEPHONE (214) 630-6368
FACSIMILE (214) 689-6949
April 16, 1997
MedicalControl, Inc.
8625 King George Dr., Suite 300
Dallas, Texas 75235
Re: MedicalControl, Inc.
Registration Statement on Form S-3
File No. 333-______________
Gentlemen:
I have acted as securities counsel to MedicalControl, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the above-
referenced Registration Statement on Form S-3 (the "Registration Statement"),
filed by the Company with the Securities and Exchange Commission (the
"Commission") on or about April __, 1997. The Registration Statement relates to
the registration under the Securities Act of 1933, as amended (the "Act"), of
500,000 shares of Common Stock, $.01 par value (the "Shares"), to be sold on
behalf of the Selling Stockholder. Capitalized terms used herein and not
otherwise defined have the meanings given to them in the Registration Statement.
In connection with this opinion, I have examined and am familiar with originals
or copies, certified or otherwise identified to my satisfaction, of (i) the
Restated Certificate of Incorporation and the Amended and Restated Bylaws of the
Company, (ii) certain resolutions of the Board of Directors of the Company
relating to the registration of the Shares, (iii) the Registration Statement,
and (iv) such other documents as I have deemed necessary or appropriate as bases
for the opinion set forth below. In such examination, I have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to me as originals, the conformity to
original documents of all documents submitted to me as certified or photocopies
and the authenticity of the originals of such latter documents. As to any facts
material to this opinion which I do not independently establish or verify, I
have relied upon statements and representations of officers and other
representatives of the Company and others.
I am admitted to the practice of law in the State of Texas, and I express no
opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, I am of the opinion that the Shares
have been validly issued and fully paid and are nonassessable under Delaware
law.
<PAGE>
April 16, 1997
Page 2
This opinion is furnished to you solely for your benefit in connection with the
filing of the Registration Statement and is not to be used, circulated, quoted
or otherwise referred to for any other purpose without my prior written consent.
Notwithstanding the foregoing, I hereby consent to the filing of this opinion
with the Commission as Exhibit 5.1 to the Registration Statement. I also
consent to the reference to my name under the caption "Legal Matters" in the
Registration Statement. In giving this consent, we do not thereby admit that we
are included in the category of persons whose consent is required under Section
7 of the Act or the rules and regulations of the Commission.
Very truly yours,
/s/ STEPHANIE L. McVAY, ESQ.
Stephanie L. McVay, Esq.
<PAGE>
EXHIBIT 23.1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 18, 1997,
included in MedicalControl, Inc.'s Form 10-KSB for the year ended December 31,
1996, and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Dallas, Texas
April 16, 1997
