<PAGE>
As filed with the Securities and Exchange Commission on July 23, 1996
Registration No. 333-01750
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MHM SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1223048
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7601 LEWINSVILLE ROAD, SUITE 200
MCLEAN, VIRGINIA 22102
(703) 749-4600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MICHAEL S. PINKERT, PRESIDENT
7601 LEWINSVILLE ROAD, SUITE 200
MCLEAN, VIRGINIA 22102
(703) 749-4600
(Name, address, zip code and telephone number,
including area code, of agent for service)
Copy to:
Michael P. Gallagher, Esq. Steven J. Feder, Esq.
Ballard Spahr Andrews & Ingersoll Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor 1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599 Philadelphia, PA 19103-7599
(215) 665-8500 (215) 665-8500
Fax: (215) 864-8999 Fax: (215) 864-8999
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
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.
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SUBJECT TO COMPLETION, DATED _______, 1996
PROSPECTUS
330,000 SHARES
MHM SERVICES, INC.
COMMON STOCK
This Prospectus relates to 330,000 shares of common stock, par value $.01
per share (the "Common Stock"), of MHM Services, Inc. (the "Company") held by
the selling stockholders named herein, which may be offered for sale from time
to time by such selling stockholders, or by their pledgees, donees, transferees
or other successors in interest (the "Selling Stockholders"). The Company will
not receive any proceeds from the sale of the shares of the Common Stock by the
Selling Stockholders. The Company will bear the costs relating to the
registration of the shares of the Common Stock, estimated to be approximately
$12,000.
The Selling Stockholders may offer shares of the Common Stock for sale from
time to time through agents in one or more transactions on the American Stock
Exchange or such other exchange on which such shares are then listed, in one or
more private transactions, or in a combination of such methods of sale, at
prices and on terms then prevailing or at prices and terms then obtainable. See
"Plan of Distribution." The Selling Stockholders and any agents through whom
the shares of Common Stock are made may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended, and the commissions or
discounts and other compensation paid to such persons may be regarded as
"underwriter's compensation."
The Common Stock is quoted on the American Stock Exchange under the
symbol "MHM." On __________, 1996, the closing price of the Common Stock as
reported by the American Stock Exchange was $_____.
___________________________
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION
UNDER "RISK FACTORS" ON PAGE 3.
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 COMMIS-
SION 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 ___________, 1996
<PAGE>
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 concerning the Company filed with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at its office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission at
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-
2551 and 7 World Trade Center, 13th Floor, New York, NY 10048. 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 Common
Stock is quoted on the American Stock Exchange. Such reports, proxy and
information statements and other information can also be inspected and copied at
the offices of the American Stock Exchange, 86 Trinity Place, New York, NY
10006-1881.
The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits thereto, referred to as the
"Registration Statement"), under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered pursuant to this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement and the exhibits filed as a part
thereof. Statements contained herein concerning any document filed as an
exhibit are not necessarily complete and, in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration Statement.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission (File No. 1-12238)
pursuant to the Exchange Act, are hereby incorporated by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995; (ii) the Company's Current Report on Form 8-K filed
November 9, 1995; (iii) the Company's first amendment to its Annual Report,
filed on Form 10-K/A on January 29, 1996; (iv) the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1995; (v) the Company's
Current Report on Form 8-K filed February 12, 1996; (vi) the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (vii) the
Company's Current Report on Form 8-K filed April 17, 1996 (as amended by the
Company's Current Report on Form 8-K/A filed June 19, 1996); (viii) the
Company's Current Report on Form 8-K filed May 31, 1996; (ix) the Company's
Current Report on Form 8-K filed June 17, 1996 (as amended by the Company's
Current Report on Form 8-K/A filed June 25, 1996); and (x) the description of
the Company's Common Stock contained in the Company's Registration Statement
on Form 8-B, filed with the Commission by the Company on January 27, 1995 (by
which the Company succeeded to a Registration Statement on Form 10, filed
with the Commission on August 19, 1993).
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Common Stock pursuant to this Prospectus
shall be deemed to be incorporated by reference herein and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained
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 or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon oral or written request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests should be directed to
MHM Services, Inc., 7601 Lewinsville Road, Suite 200, McLean, Virginia 22102,
Attn: Investor Relations, telephone (703) 749-4600.
[INSIDE FRONT COVER]
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FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS BASED ON THE COMPANY'S
CURRENT PLANS AND EXPECTATIONS RELATING TO, AMONG OTHER MATTERS, THE ANTICIPATED
USE OF PROCEEDS FROM THE SALE OF CERTAIN ASSETS OF THE COMPANY, THE PROPOSED
BUSINESS ACTIVITIES OF THE COMPANY AND THE PROPOSED ACTIVITIES OF THE COMPANY
RELATING TO IMPROVING ITS LIQUIDITY. SUCH STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES WHICH MAY CAUSE ACTUAL FUTURE ACTIVITIES AND RESULTS OF OPERATIONS
TO BE MATERIALLY DIFFERENT FROM THAT SUGGESTED IN THIS PROSPECTUS, INCLUDING,
AMONG OTHERS, THE POSSIBLE NEED TO USE THE NET CASH PROCEEDS FROM THE SALE OF
CERTAIN COMPANY ASSETS FOR THE RETIREMENT OF CERTAIN INDEBTEDNESS. FOR
ADDITIONAL INFORMATION, SEE "RISK FACTORS" AND "THE COMPANY."
RISK FACTORS
PRIOR LOSSES. The Company incurred losses of $4,023,000 for the fiscal
year ended September 30, 1995, and there can be no assurance that the Company
will return to profitability, or that the losses will not be higher for fiscal
year 1996 and future periods.
CHANGES IN MENTAL HEALTH INDUSTRY. Recently, the health care industry, in
general, and the mental health industry, in particular, have been the subject of
substantial uncertainty as a result of anticipated and on-going governmental and
other third-party payor efforts to contain health care costs. The Company's
management believes that a fundamental change has already occurred in the mental
health industry, reflecting a permanent departure from inpatient
hospitalization, upon which the Company's business has been substantially
dependent, as the primary service method in favor of more cost-effective
alternatives. This change is reflected in decreases in patient days, occupancy
rates, lengths of stay, and reimbursement rates for inpatient care. The
resulting impact has materially adversely affected the Company's operating
results as well as the Company's efforts to expand its present operations.
While the Company is taking steps to contain present and future operating costs,
there can be no assurance that such cost containment efforts will not have
further material adverse effects on the Company. See "The Company."
UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN. As a result of the
Company's continued negative operating results, as well as reduced collections
of accounts receivable, the Company has been experiencing difficulty generating
sufficient cash flows to meet its obligations and sustain its operations. The
report of the Company's independent auditors on the Company's financial
statements at September 30, 1995, included an explanatory paragraph which stated
that such conditions raise substantial doubt as to the Company's ability to
continue as a going concern. In an effort to improve this situation for both
the immediate future and the long-term, the Company has sold certain assets
relating to its Hospital Division, taking steps to reduce operating expenses,
attempting to raise additional capital, and working to improve its cash flows.
Nevertheless, there can be no assurance that the Company's efforts will result
in positive effects on the Company's financial condition. See "The Company."
INCREASED DEPENDENCE ON EXTENDED CARE SERVICES DIVISION. Of the
Company's two operating divisions, the Company's Hospital Division and the
operation of its seven freestanding behavioral healthcare treatment
facilities historically represented the majority of the Company's business.
Overall, the freestanding facilities represented 87%, 67%, and 59% of the
Company's net revenues in the fiscal years ended September 30, 1995, 1994,
and 1993, respectively, and 77%, 65%, and 67% of the Company's total assets
as of September 30, 1995, 1994, and 1993, respectively. The Company's
freestanding facilities contributed significantly to the Company's cash flows
and helped to absorb certain corporate-related expenses.
Recently, in an attempt to improve the Company's financial condition, the
Company sold six of its seven freestanding facilities and is currently pursuing
opportunities to sell the remaining facility. Upon the sale of the seventh
freestanding facility, the Company's only remaining business will be the
Extended Care Services Division. If the Extended Care Services Division is
unable to accomplish its growth objectives or produce positive earnings, the
sale of the Hospital Division's
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freestanding facilities could be disadvantageous to the stockholders of the
Company and could have a materially adverse effect on the result of the
Company's operations. The Company's Extended Care Services Division, since its
founding in October 1993, has generated only 13% and 3% of net revenues for the
years ended September 30, 1995 and 1994, respectively and 26% of net revenues
for the first six months of fiscal 1996. In addition, the rapid expansion of
the Extended Care Services Division has resulted in increased costs, and thus,
with the allocation of overhead related to the operations of the Extended Care
Services Division, the Extended Care Services Division has not yet achieved
profitable results. The Company formed its Extended Care Services Division to
pursue opportunities to provide on-site care to nursing home residents and other
patients needing less acute care. In November 1993, the Company acquired the
assets of Atlanta-based ICH Services, L.L.C. (successor to HCI Services, Inc.),
which provides behavioral health and other specialized medical services to
residents of extended care facilities, such as nursing homes, skilled nursing
facilities, and assisted living facilities. The focus of the Company's on-site
medical and behavioral healthcare service programs is to arrange for the
provision of clinically-appropriate cost-effective care to residents of extended
care facilities.
While the Company intends to utilize a portion of the proceeds from the
sale of the freestanding facilities to expand the Extended Care Services
Division through acquisitions and internal growth, no assurances can be given
that the Company will have funds available for such purpose or that the Company
will be successful in selling its remaining freestanding facility, or in the
event acquisitions are consummated that the Company will be successful in
generating profits from the Extended Care Services Division, or that the
strategy of focusing on growing the Extended Care Services Division through
internal expansion and acquisitions will not result in further increased costs.
See "The Company."
POSSIBLE NEED TO USE PROCEEDS FROM THE SALE OF THE FREESTANDING FACILITIES
TO REPAY THE MEDIQ NOTE. As of July 10, 1996, the Company had $10,861,110
outstanding under its note payable to MEDIQ Incorporated ("MEDIQ") (original
principal amount of $11,500,000) that was executed in connection with the
distribution of the Company's stock to MEDIQ's stockholders (the "MEDIQ Note").
The MEDIQ Note bears interest at prime plus 1.5% per annum, with monthly
payments of interest only through September 1995, and then monthly principal and
interest payments for the following three years, based on a fifteen year
amortization period, with the remaining balance due in August 1998. The MEDIQ
Note may be prepaid in whole or in part without penalty. The MEDIQ Note is
collateralized by a note receivable obtained by the Company as partial
consideration for the sale of the Oakview Treatment Center, one of the Company's
former freestanding facilities. The Company pledged the note receivable to
MEDIQ in connection with obtaining a waiver from MEDIQ of an event of default
provision of the MEDIQ Note relating to the sale of the assets of a significant
subsidiary. See "The Company."
The Company does not anticipate that cash flows from operations will be
sufficient to repay the MEDIQ Note upon maturity in 1998. In addition, as
reflected in the financial statements of the Company for the fiscal year ended
September 30, 1995, and the report of the Company's independent auditors
thereon, the Company has been experiencing difficulty generating sufficient cash
flows to meet its obligations and sustain its operations and, as a result, may
not be able to meet the monthly principal and interest obligations under the
MEDIQ Note. A portion of the net proceeds from the BHC Sale (as hereinafter
defined; see "The Company") is available to the Company to fund the monthly
obligations and a portion of the principal obligations upon maturity, if
necessary, of the MEDIQ Note. MEDIQ has pledged the MEDIQ Note as collateral
for certain of its indebtedness to a third party unaffiliated with MEDIQ or the
Company. In the event of default by MEDIQ on such indebtedness, such third
party would obtain all of MEDIQ's rights under the MEDIQ Note, including the
right to the payment of principal and interest as and when due in accordance
with the terms of the MEDIQ Note.
The MEDIQ Note also provides for certain events of default, including:
"The . . . sale of all or substantially all of the assets of [the Company]
. . ." In an attempt to preclude the possibility of a dispute as to whether the
BHC Sale constitutes the sale of all or substantially all of the assets of the
Company for purposes of the MEDIQ Note, the Company, prior to the sale, sent
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MEDIQ a letter requesting a waiver of this provision in connection
therewith. MEDIQ sent the Company a letter in which MEDIQ declined to grant
such a waiver. Since the completion of the BHC Sale, the Company has not
received any notice of default under the MEDIQ Note on this basis.
Nevertheless, in the event MEDIQ attempts to accelerate the MEDIQ Note, the
Company intends to aggressively defend its position in any legal proceeding.
There can be no assurances that the Company would be able to obtain a
favorable decision in such a legal proceeding. In the event the Company were
to receive an adverse decision on this matter, the outstanding principal
balance on the MEDIQ Note would become immediately due and payable in full.
In that event, the Company may be required to apply the remainder of the net
proceeds from the BHC Sale toward the repayment of the outstanding principal
of the MEDIQ Note, obtain alternative sources of cash with which to satisfy
such obligation, or obtain from MEDIQ a modification to the MEDIQ Note. The
current balance of the net proceeds from the BHC Sale is insufficient to
repay the entire outstanding principal balance of the MEDIQ Note. There can
be no assurance that the Company will have sufficient cash to repay the
outstanding principal balance of the MEDIQ Note or that other sources of cash
will be available to the Company in the event the Company was to receive an
adverse decision on such matter. In such event, the Company may be unable to
fulfill its debt obligations and also sustain operations at a level at which
the Company could continue as a going concern.
RELATIONSHIPS OF CERTAIN PERSONS WITH MEDIQ. Michael F. Sandler, in
addition to being a member of the Company's Board of Directors, is also a
director, Senior Vice President - Finance, Treasurer, and Chief Financial
Officer, and a stockholder of MEDIQ. In addition, H. Scott Miller, also a
member of the Company's Board of Directors, is a director of MEDIQ and provides
financial advisory services to the trust described in the next paragraph.
Consequently, Mr. Sandler's and Mr. Miller's relationships with MEDIQ may be
adverse to the interests of stockholders of the Company generally.
In addition, approximately 29% of the outstanding shares of the Common
Stock are beneficially owned by Bessie G. Rotko. Mrs. Rotko is the lifetime
income beneficiary of a trust which holds approximately 19% and 56% of MEDIQ's
outstanding common stock and preferred stock, respectively. The Trustees,
Bessie G. Rotko, Michael J. Rotko, Judith M. Shipon, John Iskrant and PNC Bank,
National Association, share voting and investment power with respect to the
shares in the trust. As a result, Mrs. Rotko, together with several other
trustees, may have effective control over all matters requiring approval by the
stockholders of the Company. The address of the trustees is c/o MEDIQ
Incorporated, One MEDIQ Plaza, Pennsauken, NJ 08110. Mrs. Rotko is the mother
of Michael J. Rotko and Judith M. Shipon. In addition, Michael J. Rotko and
Judith M. Shipon each own approximately 2% and 7% of MEDIQ's outstanding common
stock and preferred stock, respectively. Michael J. Rotko is also the Chairman
of the Board of Directors of MEDIQ.
REIMBURSEMENT FOR MENTAL HEALTH SERVICES. A significant portion of the
Company's revenues are derived from reimbursement from government programs such
as Medicare and Medicaid, which are highly regulated and subject to change.
Future changes in reimbursement could have a material effect on the Company's
operating results.
COMPETITION. Competition in the mental health industry is intense. The
Company currently competes with companies that are larger and have greater
resources than the Company. Any material adverse change in the competitive
environment could have a material adverse effect on the Company's results of
operations and financial condition.
DILUTION. The Company's business strategy includes pursuing possible
acquisition opportunities, which has involved, and may involve in the future,
using shares of the Common Stock as consideration for business transactions.
The issuance of additional shares of the Common Stock in such transactions could
have a dilutive effect on the shares outstanding.
DEPENDENCE UPON EXISTING MANAGEMENT. The Company's business and operations
are dependent, in part, upon the continued services of existing senior
management, in particular Michael
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S. Pinkert, President, Chief Executive Officer and a Director. The loss of Mr.
Pinkert's services would have a material adverse effect on the Company.
DIVIDEND POLICY. The Company has not declared any dividends on the Common
Stock and does not anticipate the declaration and payment of cash dividends in
the future. It is the present intention of the Company to retain any future
earnings to support the continued growth of the business. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, capital requirements and such other factors as the Board of
Directors shall deem relevant.
THE COMPANY
The Company offers, arranges for and manages behavioral healthcare services
primarily through extended care treatment settings. Since its founding, the
Company's goal has been to offer the highest quality, cost-effective care in the
industry. Prior to the recent sales of six of the Company's freestanding
facilities, the Company's Hospital Division operated seven psychiatric and
substance abuse facilities, delivering a full spectrum of behavioral health
services ranging from traditional inpatient care to alternative care programs,
such as partial hospitalization and outpatient treatment. These seven
freestanding facilities generated 87% of net revenue for fiscal 1995 and
comprised 77% of the Company's total assets at the end of fiscal 1995. The
Company's Extended Care Services Division provides specialized medical and
behavioral health services to approximately 795 nursing homes in twelve states.
The Extended Care Services Division also provides behavioral health care to more
than 2,000 Medicaid patients residing in nursing homes under a contract with the
State of Georgia.
Historically, the Company's principal businesses were the operation of
freestanding behavioral healthcare facilities and the management of behavioral
healthcare programs under contracts with acute care hospitals. The market for
behavioral healthcare has undergone dramatic changes in recent years. Pressure
on providers to reduce costs has resulted in an increase in the development and
utilization of alternatives to long-term in-patient care, and a decrease in the
utilization of in-patient care and reimbursement rates. With market forces
emphasizing managed care approaches to healthcare, this trend is anticipated to
continue.
In response to these changes and their adverse impact on the Company's
operating results, significant changes have been made in the structure of the
Company's operations. In August 1994, the Company merged its contract
management business (which represented 29% of the Company's net revenues in
fiscal 1994) with a competitor through the creation of a joint venture. In
March 1995, the Company sold its interest in the joint venture to such
competitor. In addition, the Company decided to pursue a growth strategy
focused on its Extended Care Services Division (which represented 13% of the
Company's net revenues in fiscal 1995) through the pursuit of non-physician
practice acquisition and management opportunities. Finally, the Company is
pursuing opportunities to sell its remaining freestanding behavioral healthcare
facility.
On April 5, 1996, the Company sold Oakview Treatment Center to a non-profit
corporation affiliated with a privately-owned operator of two psychiatric
hospitals for $50,000 in cash and $2,150,000 evidenced by two promissory notes
payable to the Company. The notes are payable in monthly installments of
principal and interest (at prime) based on a fifteen year amortization, with the
remaining principal due in five years (or earlier under certain circumstances).
In connection with obtaining a waiver from MEDIQ of an event of default
provision of the MEDIQ Note relating to the sale of the assets of a significant
subsidiary, the Company pledged one of the notes receivable (with a principal
balance of $1,875,000) as collateral for the Company's obligations under the
MEDIQ Note.
On May 31, 1996, the Company sold certain assets, consisting principally of
five of its freestanding behavioral healthcare facilities, to Behavioral
Healthcare Corporation ("BHC"), a Delaware corporation, with its principal
offices located in Nashville, Tennessee, pursuant to an
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Asset Purchase Agreement, dated as of January 24, 1996, and amended as of April
11, 1996, by and between the Company and BHC (the "BHC Sale"). The Hospitals
were sold for approximately $10,222,700, consisting of $8,864,500 in cash and
$1,358,200 in assumed liabilities of the freestanding facilities. The sale
price is subject to certain post-closing adjustments, pursuant to the terms of
the Agreement.
The Company used a portion of the proceeds from the BHC Sale for (i) the
repayment of the principal amount outstanding under the Company's revolving
credit facility ($2,515,000, including related early termination fees of
$174,000); (ii) the extinguishment of a portion of the indebtedness not to be
assumed by BHC paid at the closing of the sale ($692,000, including early
termination fees of $139,000), which consisted primarily of indebtedness secured
by certain of the assets (particularly a facility and certain equipment)
acquired by BHC; and (iii) the funding of the Company's obligation to complete
repairs to two of the freestanding facilities in the amount of $284,000 (which
amount was placed in escrow). The Company anticipates using the remainder of
the proceeds from the BHC Sale for general working capital, which the Company
anticipates will include expansion of the Extended Care Services Division. See
"Risk Factors - POSSIBLE NEED TO USE PROCEEDS FROM THE SALE OF THE FREESTANDING
FACILITIES TO REPAY THE MEDIQ NOTE."
The Company has not entered into any definitive agreement to sell its
remaining freestanding facility. Accordingly, there can be no assurance that
the Company will be successful in selling the facility.
The Company was incorporated in 1981 in Virginia, and changed its state of
incorporation to Delaware in 1994. From 1986 to August 1993, the Company was a
wholly-owned subsidiary of MEDIQ. In August 1993, MEDIQ distributed the stock
of the Company to MEDIQ's stockholders. The Company's principal executive
offices are located at 7601 Lewinsville Road, Suite 200, McLean, Virginia 22102,
and its telephone number is (703) 749-4600.
USE OF PROCEEDS
The net proceeds from the sale of shares of the Common Stock will be
received by the Selling Stockholders. The Company will not receive any proceeds
from any sale of shares of the Common Stock by the Selling Stockholders.
SELLING STOCKHOLDERS
In November 1993, the Company acquired substantially all of the assets and
assumed certain liabilities (collectively, the "ICH Assets") of ICH Services,
L.L.C. ("ICH"). ICH acquired the ICH Assets from HCI Services, Inc. ("HCI").
The consideration for the acquisition consisted of an aggregate of 330,000
shares of the Company's Common Stock. Additional consideration in cash or
additional shares of the Company's Common Stock, at the option of the seller,
may be payable in the future based upon twenty percent of the fair market value
of the assets acquired after three (3) years, or earlier under certain
circumstances, such as the sale or merger of the Company. The shares of the
Company's Common Stock issued in connection with the acquisition of the ICH
Assets were also subject to the terms of a certain Registration Rights
Agreement, dated November 18, 1993, (the "Registration Rights Agreement") which
provided certain demand and incidental registration rights under the Securities
Act.
Pursuant to the terms of the Registration Rights Agreement, the persons
listed below have proposed to sell the shares indicated below pursuant to the
plan of distribution described elsewhere herein.
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The following table provides the names and addresses of each Selling
Stockholder and the amount of the Common Stock offered hereby and the amount of
the Common Stock owned beneficially by each of such Selling Stockholders.
Name and Address Shares Owned Shares Offered
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CIBC Trust Company (Bahamas) 26,373 26,373
Limited, Trustee
Shirley Street, P.O. Box N-3933
Nassau, Bahamas
W.C. McGraw 15,675 15,675
P.O. Box 888670
Atlanta, GA 30356
H. Charles Mohler, D.D.S. 495 495
706 Douglas Drive
Johnson City, TN 37604
Thomas Newbill 9,075 9,075
7205 Riverside Drive
Atlanta, GA 30328
Point Venture Partners, L.P. (1) 118,854 118,854
2970 USX Tower
600 Grant Street
Pittsburgh, PA 15219
Point Venture Partners Pennsylvania, L.P.(1) 6,600 6,600
2970 USX Tower
600 Grant Street
Pittsburgh, PA 15219
Carol Skiba 27 27
7425 E. Portland Street
Scottsdale, AZ 85257
James D. Strausburg 19 19
1490 Moores Mill Road
Atlanta, GA 30327
Walnut Capital Corp. 82,455 82,455
8000 Towers Crescent Drive, Suite 1070
Vienna, VA 22182
Windy City, Inc. 20,354 20,354
8000 Towers Crescent Drive, Suite 1070
Vienna, VA 22182
David C. Winters 573 573
1506 Holly Banks Circle
Dunwoody, GA 30338
Venture First II, L.P. 49,500 49,500
4811 Thornwood Drive
Acworth, GA 30102
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(1) Point Venture Partners, L.P. and Point Venture Partners Pennsylvania, L.P.
are managed by the same general partner.
In addition to their role as members of ICH, certain of the Selling
Stockholders were formerly officers and directors of HCI. None of such persons
is currently an officer or director of HCI. Except as described above, none of
the Selling Stockholders listed above has held any position, office or other
material relationship within the past three years with the Company or any of its
predecessors or affiliates.
PLAN OF DISTRIBUTION
Any distribution of the shares of the Common Stock by the Selling
Stockholders, or by pledgees, donees, transferees or other successors in
interest, may be effected from time to time in one or more of the following
transactions: (a) to underwriters who will acquire shares of the Common Stock
for their own account and resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale (any public offering price and any discount or
concessions allowed or re-allowed or paid to dealers may be changed from time to
time); (b) through brokers, acting as principal or agent, in transactions (which
may involve block transactions) on the American Stock Exchange, or on one or
more exchanges on which the Common Stock is then listed, in special offerings,
exchange distributions pursuant to the rules of the applicable exchanges or in
the over-the-counter market, or otherwise, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices; or (c) directly or through brokers or agents in
private sales at negotiated prices, or by any other legally available means.
The shares of the Common Stock may be sold by the Selling Stockholders pursuant
to this Prospectus or otherwise pursuant to Rule 144, promulgated under the
Securities Act.
The Selling Stockholders and such underwriters, brokers, dealers or agents,
upon effecting a sale of shares of the Common Stock, may be considered
"underwriters" as that term is defined by the Securities Act.
Underwriters participating in any offering made pursuant to this Prospectus
(as amended or supplemented from time to time) may receive underwriting
discounts and commissions, and discounts or concessions may be allowed or re-
allowed or paid to dealers, and brokers or agents participating in such
transaction may receive brokerage or agent's commissions or fees.
At the time a particular offering of shares of the Common Stock is made, to
the extent required, a Prospectus Supplement will be distributed which will set
forth the amount of shares of the Common Stock being offered and the terms of
offering, including the purchase price or public offering price, the purchase
price paid by an underwriter for shares of the Common Stock purchased from the
Selling Stockholders, the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
re-allowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the shares of the Common Stock will be sold in such jurisdictions,
if required, only through registered or licensed brokers or dealers. In
addition, in certain states, the shares of the Common Stock may not be sold
unless the shares of the Common Stock have been registered or qualified for sale
in such state or an exemption from registration or qualification is available
and complied with.
The Company and the Selling Stockholders have agreed that the Company will
bear all costs, expenses and fees in connection with the registration of the
shares of the Common Stock. The Selling Stockholders will bear the cost of all
commissions and discounts, if any, attributable to the sale of the shares of the
Common Stock. The Selling Stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
of the Common Stock against certain liabilities, including liabilities arising
under the Securities Act. The Company and the Selling
9
<PAGE>
Stockholders have agreed to indemnify each other and certain other persons
against certain liabilities in connection with the offering of the shares of the
Common Stock, including liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, 1735 Market Street, Philadelphia,
Pennsylvania 19103.
EXPERTS
The financial statements and the related financial schedule incorporated
in this Prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended September 30, 1995 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to the Company's ability to
continue as a going concern), and have been so incorporated in reliance upon the
report of such firm, given upon their authority as experts in accounting and
auditing.
10
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company,
the Selling Stockholders or any underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs of
the Company since such date.
Until __________, 1996 ( __ days after the date of this Prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in the distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
__________, 1996
MHM SERVICES, INC.
330,000 Shares
Common Stock
($.01 par value)
P R O S P E C T U S
___________________
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 2
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares of the
Common Stock being registered hereby.
SEC Registration Fee $ 184.91
Accountants' Fees and Expenses 1,500.00*
Legal Fees 7,000.00*
Blue Sky Filing Fees and Expenses 2,500.00*
Miscellaneous 1,000.00*
----------
Total $12,184.91*
----------
----------
* Estimated, subject to change
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has adopted the provisions of Section 102(b)(7) of the Delaware
General Corporation Act (the "Delaware Act") which eliminate or limit the
personal liability of a director to the Company or its stockholders for monetary
damages for breach of fiduciary duty under certain circumstances. Furthermore,
under Section 145 of the Delaware Act, the Company shall indemnify each of its
directors and officers against expenses (including reasonable costs,
disbursements and counsel fees) in connection with any proceeding involving such
person by reason of having been an officer or director, to the extent such
person acted in good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be made by a majority of a quorum
of disinterested members of the Company's Board of Directors, independent legal
counsel or the stockholders of the Company. The Company has purchased
directors' and officers' liability insurance in an amount totalling $5,000,000,
subject to certain deductibles.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibit
Number Description
- ------- -----------
2 Agreement by and between the Company and ICH Services, L.L.C., dated
November 18, 1993 (incorporated by reference to the Company's Form 8-K
report, dated October 2, 1993)
4 Specimen copy of Common Stock Certificate (incorporated by reference
to the Company's Registration Statement on Form 8-B, filed with the
Commission by the Company on January 27, 1995 (by which the Company
succeeded to a Registration Statement on Form 10 filed with the
Commission on August 19, 1993))
4.2 The Company's Restated Certificate of Incorporation (incorporated
by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30,1995, as amended)
4.3 The Company's Amended Bylaws (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, as amended)
5 Opinion of Ballard Spahr Andrews & Ingersoll (previously filed)
23.1 Consent of Deloitte & Touche LLP (filed herewith)
23.2 Consent of Ballard Spahr Andrews & Ingersoll
(included in Exhibit 5)
24 Power of Attorney (included on signature page)
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended) 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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934, as amended; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is,
II-3
<PAGE>
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended,
shall be deemed to be part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 to be signed on its behalf by the undersigned, thereunto duly
authorized in the County of Fairfax, Commonwealth of Virginia.
Dated: July 23, 1996 MHM SERVICES, INC.
By: /s/ Michael S. Pinkert
--------------------------
Michael S. Pinkert, President
and Chief Executive Officer
By: /s/ Carolyn Zimmerman
--------------------------
Carolyn Zimmerman
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons, in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael S. Pinkert President and Chief July 23, 1996
- ------------------------- Executive Officer
Michael S. Pinkert
* Director
- -------------------------
Abraham D. Gosman
* Director
- -------------------------
Kenneth A. Kessler, M.D.
/s/ H. Scott Miller Director July 23, 1996
- -------------------------
H. Scott Miller
* Director
- -------------------------
Michael F. Sandler
* /s/ Michael S. Pinkert July 23, 1996
----------------------
Michael S. Pinkert,
as attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------- ----------- ----
2 Agreement by and between the Company and ICH Services, L.L.C.,
dated November 18, 1993 (incorporated by reference to the
Company's Form 8-K report, dated October 2, 1993)
4 Specimen copy of Common Stock Certificate (incorporated by
reference to the Company's Registration Statement on Form 8-B,
filed with the Commission by the Company on January 27, 1995 (by
which the Company succeeded to a Registration Statement on Form
10 filed with the Commission on August 19, 1993))
4.2 The Company's Restated Certificate of Incorporation (incorporated
by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30,1995, as amended)
4.3 The Company's Amended Bylaws (incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, as amended)
5 Opinion of Ballard Spahr Andrews & Ingersoll (previously filed)
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Ballard Spahr Andrews & Ingersoll
(included in Exhibit 5)
24 Power of Attorney (included on signature page)
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of MHM Services, Inc. on Form S-3 (File No. 333-1750) of
our report dated January 12, 1996 (which report expresses an unqualified opinion
and includes an explanatory paragraph relating to the Company's ability to
continue as a going concern), on our audit of the consolidated financial
statements and financial statement schedule appearing in the Annual Report on
Form 10-K of MHM Services, Inc. (formerly "Mental Health Management, Inc.") for
the year ended September 30, 1995 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Washington, D.C.
July 19, 1996
