<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1996
-------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
US Diagnostic Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
11-3146389
(I.R.S. employer identification no.)
777 South Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices)
Consulting Agreements
(Full title of plan)
Jeffrey A. Goffman, Chairman and Chief Executive Officer
US Diagnostic Inc.
777 South Flagler Drive
West Palm Beach, Florida 33401
(Name and address of agent for service)
(561) 832-0006
(Telephone number, including area code, of agent for service)
Copy to:
Michael D. Karsch, Esq.
US Diagnostic Inc.
777 South Flagler Drive
West Palm Beach, Florida 33401
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities to be Price Per Offering Registration
to be Registered Registered Share(1) Price Fee
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 93,000 $9.75 $906,750 $313
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Estimated in accordance with Rule 457(h) solely for the purpose
of calculating the registration fee. The price shown is the
average of the high and low prices of the Common Stock on
November 22, 1996 as reported on the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The documents listed below are hereby incorporated by reference
into this Registration Statement, and all documents subsequently filed by US
Diagnostic Inc. (the "Registrant") pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934, as amended, prior to the filing
of a post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement and to be
part hereof from the date of filing such documents:
(a) The Registrant's Annual Report on Form 10-KSB (File
No. 1-13392) for its year ending December 31, 1995;
(b) The Registrant's quarterly report on form 10-QSB for
the quarterly period ended September 30, 1996; and
(c) The Registrant's Registration Statement on Form 8-A
declared effective on October 20, 1994, registering the
Common Stock, $.01 par value, under the Securities
Exchange Act of 1934, as amended.
Item 4. Description of Securities
No response is required to this item.
Item 5. Interests of Named Experts and Counsel
The legality of the securities offered hereby has been passed
upon by Michael D. Karsch, Executive Vice President and General Counsel.
Michael D. Karsch beneficially owns 75,000 shares of Common Stock.
Item 6. Indemnification of Directors and Officers.
The Amended Certificate of Incorporation and By-Laws of the
Company provide that the Company shall indemnify any person to the full extent
permitted by the Delaware General Corporation Law.
Reference is hereby made to Section 145 of the Delaware General
Corporation Law relating to the indemnification of the officers and directors,
which Section is hereby incorporated herein by reference.
The Registrant also has Indemnification Agreements with each of
its executive officers and directors.
Item 7. Exemption from Registration Claimed
No response is required to this item.
Item 8. Exhibits
5 Opinion of Michael D. Karsch, with
respect to the legality of the Common Stock to be
registered hereunder
23.1 Consent of Moore Stephens
23.2 Consent of Michael D. Karsch (contained in
Exhibit 5)
99.1 Selling Stockholder Prospectus
<PAGE>
Item 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this
Registrant Statement;
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933;
(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;
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at the time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from the registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned Registration hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 ( 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) 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 the time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 nay be permitted to directors, officers and controlling
persons of the Registrant as described above, or otherwise, the Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<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-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of West Palm Beach, State of Florida, on the 25th
day of November 1996.
US DIAGNOSTIC INC.
By: /s/ Jeffrey A. Goffman
------------------------------------------
Jeffrey A. Goffman
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and as of the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Jeffrey A. Goffman Chairman and Chief Executive November 25, 1996
- ----------------------------------- Officer
Jeffrey A. Goffman
/s/ Amos F. Almand, III Senior Vice President and November 25, 1996
- ------------------------------------ Director
Amos F. Almand, III
/s/ Joseph A. Paul President and Director November 25, 1996
- --------------------------------------
Joseph A. Paul
/s/ C. Keith Hartley Director November 25, 1996
- --------------------------------------
C. Keith Hartley
/s/ Charles Jacobson Director November 25, 1996
- -----------------------------------
Charles Jacobson
/s/ Michael D. Karsch Director November 25, 1996
- -----------------------------------
Michael D. Karsch
/s/ Laurans Mendelson Director November 25, 1996
- -----------------------------------
Laurans Mendelson
- ----------------------------------- Director November 25, 1996
Gordon Rausser, Ph.D.
/s/ Paul Andrew Shaw Vice President and November 25, 1996
- -----------------------------------
Paul Andrew Shaw Chief Financial Officer
</TABLE>
<PAGE>
INDEX TO EXHIBITS
US DIAGNOSTIC INC.
<TABLE>
<CAPTION>
Exhibit Sequentially Numbered
No. Description Page
<S> <C>
5 Opinion of Michael D. Karsch, with respect to the
legality of the Common Stock to be registered
hereunder
23.1 Consent of Moore Stephens, P.C.
23.2 Consent of Michael D. Karsch (contained in Exhibit 5)
99.1 Selling Stockholder Prospectus
</TABLE>
<PAGE>
EXHIBIT 5
[U.S. DIAGNOSTIC INC. Letterhead]
November 25, 1996
U.S. Diagnostic Inc.
777 South Flagler Drive
West Palm Beach, Florida 33401
Re: US Diagnostic Inc. (the "Company")
Registration Statement for Offering
of 93,000 Shares of Common Stock
Ladies and Gentlemen:
I refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1993, as amended, of 93,000 shares of
Common Stock of US Diagnostic Inc. (the "Company") that have been issued to
certain persons under a consulting agreement and are being registered for
resale. I advise you that, in my opinion, such shares have been validly issued,
fully paid and non-assessable shares of the Company's Common Stock.
I hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
Michael D. Karsch
Executive Vice President
and General Counsel
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form S-8
Registration Statement of our report dated February 20, 1996 on the
consolidated financial statements included or incorporated by reference in the
U.S. Diagnostic Labs Inc. annual on Form 10-K for the year ended December 31,
1995.
On July 1, 1996, the firm of Mortenson and Associates, P.C.
changed its name to Moore Stephens, P.C.
MOORE STEPHENS, P.C
Certified Public Accountants
Cranford, New Jersey
November 22, 1996
<PAGE>
EXHIBIT 99.1
PROSPECTUS
US DIAGNOSTIC INC.
93,000 shares of Common Stock
This Prospectus relates to the resale (the "Offering") by three
stockholders (the "Selling Stockholders") of US Diagnostic Inc. (the "Company")
of up to 93,000 shares of the Company's Common Stock, par value $.01 per share
("Common Stock"). The Common Stock is quoted on the Nasdaq National Market (the
"NNM") under the symbol "USDL". On November 20, 1996, the last reported sale
price of the Common Stock on the NNM was $9.50 per share.
The securities offered by this Prospectus may be sold from time to
time by the Selling Stockholders, or by their transferees. The distribution of
the securities offered hereby may be effected in one or more transactions that
may take place on the over-the-counter market, including ordinary broker
transactions, privately negotiated transactions or through sales to one or more
dealers for resale of such securities as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders.
The Selling Stockholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.
All expenses of the registration of securities covered by this
Prospectus, estimated to be $2,000, will be borne by the Company, except that
Selling Stockholders will pay any commissions and fees applicable to Common
Stock sold by a Selling Stockholder and fees of others employed by a Selling
Stockholder, including attorneys' fees.
The Company will not receive any of the proceeds from the sale of the
Common Stock offered hereby.
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is November 27, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. (the "SEC"), a Registration Statement on Form S-8 under the
Act, covering the securities offered by this Prospectus. For further
information with respect to the Company and the securities offered, reference
is made to the Registration Statement and the exhibits filed as part thereof,
which may be examined without charge and copies of such material can be
obtained at prescribed rates from the Public Reference Section maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Statements contained
in this Prospectus as to the contents of any contract or other document
referred to are not necessarily complete. In each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports and other information with the SEC. The
Company is also required to file proxy statements with the SEC. Such reports
and other information filed by the Company with the SEC in accordance with the
Exchange Act may be inspected, without charge, at the Public Reference Section
of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of all or any portion of the material may be
obtained from the Public Reference Section of the SEC upon payment of the
prescribed fees. Materials can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (File No. 1-13392) pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act") are incorporated herein by reference, except as
superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB and 10KSB/A for the
year ended December 31, 1995, including any documents or portions thereof
incorporated by reference therein and all amendments thereto;
2. The Company's Reports on Form 8-K dated March 29, 1996, May 28,
1996; June 5, 1996, June 28, 1996 and July 24, 1996;
3. The Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1996;
4. The Company's Registration Statement on Form 8-A declared
effective on October 20, 1994, registering the Common Stock under the
Exchange Act;
and all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of this offering.
Any statement contained in any 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
such statement so modified or superseded shall not be deemed, except as
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents which are not
specifically incorporated by reference into such documents). Requests for such
documents should be directed to the Company, 777 S. Flagler Drive, West Palm
Beach, Florida 33401, Attention: President, telephone (407) 832-0006.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Unless the context otherwise
requires, all references in this Prospectus to the "Company" include US
Diagnostic Inc. and its consolidated subsidiaries.
The Company
US Diagnostic Inc. is the leading provider specializing in the
acquisition, operation and management of multi-modality diagnostic imaging
centers ("Imaging Centers") and related medical facilities in the United
States. Diagnostic imaging procedures are used to diagnose various diseases and
physical injuries through the use of magnetic resonance imaging, computed axial
tomography, mammography, X-ray, ultrasound and other technologies. The use of
non-invasive diagnostic imaging has grown rapidly in recent years because it
allows physicians to quickly and accurately diagnose a wide variety of diseases
and injuries without exploratory surgery or other invasive procedures, which
are usually more expensive, risky and debilitating for patients.
The Company's objective is to become the leading network provider of
outpatient imaging services in the United States. The Company believes that the
highly fragmented nature of the diagnostic imaging industry provides a
significant opportunity to build rapidly through acquisitions a
multi-regional company focused primarily on this industry. The Company
believes that managed care and other third-party payors will increasingly
prefer to contract for service on a national or regional basis, and that the
Company's development of a multi-regional network of centers will permit
it to obtain such contracts on favorable terms. Industry sources estimate
that there are over 2,200 Imaging Centers currently operating in the U.S.,
the substantial majority of which are owned and operated on an independent
basis. The Company believes that there are and will continue to be many
attractive acquisition opportunities because Imaging Center operators
are finding it more difficult to compete independently as managed care
becomes more prevalent. The Company currently owns 112 diagnostic imaging
facilities and manages 19 other radiology facilities in 16 states.
The Imaging Centers acquired by the Company generally are the dominant
or sole non-hospital-affiliated outpatient facility in their geographic
markets and have a strong physician referral base and/or numerous managed care
contracts. Following acquisition, the Company provides management and
administrative systems, marketing and technical support, centralized billing,
collection and payable services, and often is able to renegotiate debt,
equipment leasing, radiology and supply agreements to increase cash flow and
operating efficiency at its Imaging Centers. Each acquired Imaging Center has
been profitable immediately following acquisition and the Company is typically
able to increase the profit level of acquired facilities over historical
levels. The Company offers state-of-the-art diagnostic imaging technologies,
has upgraded the imaging equipment at several locations following acquisitions,
and is adding new modalities and procedures at most locations.
The Company was incorporated in Delaware on June 17, 1993. The
Company's executive offices are located at 777 S. Flagler Drive, Suite 1006
West, West Palm Beach, Florida 33401 and its telephone number is (407)
832-0006/(800) 7 USDLAB.
<PAGE>
Summary Financial Information
<TABLE>
<CAPTION>
Actual Pro Forma(2)
---------------------------------------------------- ----------------------------
Period From Nine Months Nine Months
June 17, 1993 Year Ended Ended Year Ended Ended
to December December 31, September 30 December September 30,
31, 1993(1) 1994 1995 1995 1996 31, 1995 1996
-------- ---------- ----------- ---------- ----------- ----------- -----------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 338 $ 5,082 $ 28,839 $ 17,875 $ 66,269 $ 17,875 $ 144,217
-------- ---------- ----------- ---------- ----------- ----------- -----------
Net income (loss) before
extraordinary item (194) (640) 3,025 2,026 7,121 2,707 13,202
Net income (loss) after
extraordinary item (194) (640) 3,331 2,026 7,121 7,121 13,584
Per Share (3):
Primary:
Earnings before extraordinary
item $ (.29) $ (.48) $ .61 $ .43 $ .53 $ .86 $ .93
Extraordinary item -- -- .06 -- -- .04 --
-------- ---------- ----------- ---------- ----------- ----------- -----------
Net earnings (loss) $ (.29) $ (.48) $ .67 $ .43 $ .53 $ .90 $ .93
======== ========== =========== ========== =========== =========== ===========
Fully diluted:
Earnings (loss) before
extraordinary item $ (.29) $ (.48) $ .57 $ .43 $ .47 $ .71 $ .77
Extraordinary item -- -- .03 -- -- .02 --
-------- ---------- ----------- ---------- ----------- ----------- -----------
Net earnings (loss) $ (.29) $ (.48) $ .60 $ .43 $ .47 $ .73 $ .77
======== ========== =========== ========== =========== =========== ===========
Weighted average shares outstanding:
Primary............................. 674,542 1,328,033 4,996,021 4,662,733 13,321,161 7,882,247 14,617,549
Fully diluted....................... 674,542 1,328,033 11,761,427 4,662,733 18,625,386 20,509,947 19,921,774
<CAPTION>
December 31, 1995 September 30, 1996
----------------- ----------------------------
Actual Actual Pro Forma(4)
<S> <C> <C> <C>
Balance Sheet Data:
Working Capital............................................ $ 5,946 $ 92,599 $42,472
Total assets............................................... 57,279 271,916 333,077
Long-term liabilities...................................... 21,653 102,857 133,703
Minority interest.......................................... 716 2,573 3,663
Shareholders' equity....................................... 24,493 141,944 150,092
</TABLE>
---------------------------
(1) The Company commenced operations on June 17, 1993.
(2) Assumes all 1996 acquisitions and pending acquisitions to be completed in
1996 were completed as of July 1, 1996 for the three months ended
September 30, 1996 and January 1, 1996 for the nine months ended
September 30, 1996.
(3) No cash dividends have been declared or paid by the Company.
(4) Assumes all pending acquisitions were completed as of September 30, 1996.
The Offering
<TABLE>
<S> <C>
Securities Offered by the Company............. None.
Common Stock Offered by the Selling
Stockholders................................ 93,000 shares
Common Stock Outstanding at
October 31, 1996............................. 23,440,201 shares
Nasdaq National Market Symbol................. USDL
</TABLE>
(1) Includes 1,163,853 shares of Common Stock are being held in escrow (the
"Escrow Shares") that are expected to be forfeited and contributed to the
capital of the Company if the Company does not attain certain earnings levels
does not achieve certain targets by March 31, 1997.
-4-
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following considerations
before purchasing the Debentures offered hereby.
No Assurance of Continued Rapid Growth. The Company commenced
operations in June 1993, completed its first clinical laboratory acquisition in
October 1993 and its first imaging acquisition in June 1994. The Company has
grown primarily through acquisitions, of which 10 were completed in 1995 and
several of which are expected to be completed by June 30, 1996. The Company's
ability to meet its objective to become the leading network provider of imaging
services is dependent to a large extent upon its continuing ability to continue
to consummate acquisitions of Imaging Centers and Therapy Centers and to
increase revenues after completion of each such acquisition. The process of
identifying suitable acquisition candidates and proposing, negotiating and
completing acquisitions is lengthy and complex. In certain markets there is
substantial competition for potential acquisitions. There can be no assurance
that the Company will be able to sustain its rapid rate of growth.
Management of Planned Rapid Growth. The Company's financial
performance is substantially dependent upon its ability to integrate the
operations of acquired Imaging Centers and Therapy Centers into the Company's
infrastructure, reduce operating expenses of acquired entities, its ability to
deliver equivalent service to clients immediately after an acquisition without
significant interruption or inconvenience and various other risks associated
with the acquisition of businesses, including expenses associated with the
integration of the acquired businesses. In order to manage its planned
continuing rapid growth, the Company will be required to hire additional
management and implement new systems. Although to date the acquired entities
have been operated by the Company on a profitable basis and successfully
integrated into the Company, there can be no assurance that the Company will be
able to successfully operate these and other operations that may be acquired in
the future. Several potential acquisitions being considered by the Company are
substantially larger than those acquired in the past, which will substantially
increase revenues but may also pose additional operational issues. If the
Company is unable to manage growth effectively, the Company's operating results
could be materially adversely affected.
Dependence on Third Party Reimbursement. Approximately 95% all of the
Company's revenues are derived from third party payors. For 1995, the Company
derived approximately 69% of its revenues from non-government payors and
approximately 26% from government sponsored healthcare programs (principally,
Medicare and Medicaid). The Company's revenues and profitability may be
materially adversely affected by the current trend in the healthcare industry
toward cost containment as government and private third party payors seek to
impose lower reimbursement and utilization rates and negotiate reduced payment
schedules with services providers. Continuing budgetary constraints at both the
federal and state level and the rapidly escalating costs of healthcare and
reimbursement programs have led, and may continue to lead, to significant
reductions in government and other third party reimbursements for certain
medical charges and to the negotiation of reduced contract rates or capitate or
other financial risk-shifting payment systems by third party payors with
service providers. Both the federal government and various states are
considering imposing limitations on the amount of funding available for various
healthcare services. The Company cannot predict whether or when any such
proposals will be adopted or, if adopted and implemented, what effect, if any,
such proposals would have on the Company. In addition, rates paid by private
third party payors, including those that provide Medicare supplemental
insurance, are generally higher than Medicare payment rates. Changes in the mix
of the Company's patients among the non-government payors and government
sponsored healthcare programs, and among different types of non-government
payors and government sponsored healthcare programs, and among different types
of non-government payor sources, could have a material adverse effect on the
Company. Further reductions in payments to physicians or other changes in
reimbursement for healthcare services could have a material adverse effect on
the Company, unless the Company is otherwise able to offset such payment
reductions through cost reductions, increased volume, introduction of new
procedures or otherwise.
Reliance and Restrictions on Patient Referrals. The Company is highly
dependent on referrals from physicians who have no contractual or economic
obligation to refer patients to the Company's facilities. If a sufficiently
large number of physicians elected at any time to stop referring patients to
with the Company, it would have a material adverse effect on the Company's
results of operations. In particular, due to the potential for disruption of
the physician relationship in connection with the assumption of control of a
facility, there can be no assurance that the Company will retain all of the
business conducted by that facility at the time of the acquisition. To date,
the Company has experienced a decline in referrals only to its clinical
laboratory business
-5-
<PAGE>
and one Imaging Center, although this Center is still profitable.
Federal and state laws generally restrict physicians from referring
their patients to entities, including diagnostic testing and radiation oncology
therapy facilities, in which the physicians have a financial interest. This
precludes physicians from referring Medicare patients to the Company if the
physician has any financial relationship with the Company. Violations of the
law may result in denial of payments for the service, requirement to refund
payment for the service, assessment of civil monetary penalties, and exclusion
of the physicians from the Medicare and Medicaid programs. Such self-referral
prohibitions apply in certain states to additional third party payors,
including private insurance companies and workers' compensation programs.
Further, the federal anti-kickback statute prohibits persons or entities from
offering or receiving remuneration for the referral of patients or the
inducement of the purchase of a service covered by Medicare, Medicaid or other
state healthcare programs, including payments for the referral of patients to
clinical laboratories or radiology centers.
Federal and state self-referral and anti-kickback laws may also affect
the Company's ability to structure future acquisitions of physician-owned
businesses. Although these laws have created new business opportunities in that
physicians must divest their financial interests in imaging centers and therapy
centers, these laws also may have an adverse impact on the Company's ability to
acquire new operations while maintaining the former physician-owners as part of
the referral base. Many of these restrictions will no longer apply if the
Company meets certain size criteria, which it expects to reach in 1997. In the
past, Congress has considered legislation that could expand the self-referral
ban from Medicare and Medicaid to all payors. There can be no assurance that
such legislation will not be adopted or if adopted will not have a material
adverse effect on the Company.
Violations of the anti-kickback and other statutes could result in
significant civil or criminal penalties, which could have a material adverse
effect on the Company. The Company is unaware of any current regulatory
investigations or regulatory or judicial proceedings pending against it or any
of its facilities alleging material violations of any such laws. Nevertheless,
while the Company endeavors to comply with all laws, regulations and other
legal requirements applicable to its operations, there is no assurance that
applicable statutes and regulations might not be interpreted by a regulatory or
judicial authority in a manner that would adversely affect the Company.
Effect of Cost Containment on Referrals. In an effort to control
costs, non-governmental healthcare payors have implemented cost containment
programs which could limit the ability of physicians to refer patients to the
Company's facilities. For example, persons enrolled in prepaid healthcare
plans, such as health maintenance organizations ("HMOs"), often are not free to
choose where to obtain imaging, laboratory or radiation oncology therapy
services. Rather, the health plan provides these services directly or contracts
with providers at favorable rates and requires its enrollees to obtain such
services only from such providers. Some insurance companies and self-insured
employers also limit testing services to contracted providers. Such "closed"
payment systems are now common to combat the rising cost of healthcare. As a
result, the Company actively seeks and has obtained managed care contracts to
provide imaging and clinical testing services. The Company seeks acquisitions
in geographic areas in which in currently has Imaging Centers in order to
create networks which it believes will make it more attractive to obtain
exclusive contracts with managed care providers. There can be no assurance that
the Company will be able to compete successfully in the managed care arena
against larger companies with greater resources.
Future Sales of Common Stock. Of the 23,440,201 shares of Common Stock
outstanding at October 31, 1996, approximately 4 million shares are "restricted
securities" as that term is defined in Rule 144 promulgated under the
Securities Act, and under certain circumstances may be sold without
registration pursuant to such Rule. Such shares are eligible for sale under
Rule 144 at varying periods and all have registration rights. The Company is
unable to predict the effect that sales made under Rule 144 or otherwise may
have on the then prevailing market price of the Common Stock although any
substantial sale of restricted securities pursuant to Rule 144 may have an
adverse effect. The sale, or the availability for sale, of substantial amounts
of the Company's securities in the public market at any time could adversely
affect the prevailing market price of such securities.
Possible Issuance of Additional Common Stock in Acquisitions; Charge
to Earnings for Amortization of Goodwill from Acquisitions. A major element of
the Company's business strategy is to acquire additional medical service
facilities. The consideration for these acquisitions may involve cash, notes
and a significant number of shares of Common Stock, depending on the size of
the acquisition. In connection with acquisitions, on a pro forma basis at
September 30, 1996 the Company had approximately $145.0 million of goodwill and
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other intangibles on its balance sheet, which will be amortized over varying
periods of up to 20 years and will result in annual charges to income of
approximately $7.2 million in 1997. Future acquisitions will most likely result
in additional amortization charges. There can be no assurance that the value of
such goodwill will ever be realized by the Company.
Broad Discretionary Use of Funds; Absence of Substantive Disclosure
Relating to Acquisitions. The Company has broad discretion with respect to the
specific application of its working capital, which are intended to be used for
acquisitions of Imaging Centers and for working capital. The Company also
intends to use excess working capital for acquisitions. Although the Company
will endeavor to evaluate the risks inherent in any particular facility, there
can be no assurance that the Company will properly ascertain all such risks.
The Company will have virtually unrestricted flexibility in identifying and
selecting a prospective acquisition candidate. The Company does not intend to
seek stockholder approval for any acquisitions unless required by applicable
law or regulations and stockholders will most likely not have an opportunity to
review financial information on an acquisition candidate prior to consummation
of an acquisition.
Substantial Competition. The market for imaging services is highly
fragmented, with over 2,200 outpatient diagnostic Imaging Centers nationwide
and no dominant national or regional imaging services provider. Competition
varies by market and is generally higher in larger metropolitan areas where
there is likely to be more facilities and more managed care organizations
putting pricing pressure on the market. The Company competes with larger
healthcare providers, such as hospitals, as well as other private clinics and
radiology practices that own diagnostic imaging equipment. Competition often
focuses on physician referrals at the local market level. Successful
competition for referrals is a result of many factors, including participation
in healthcare plans, quality and timeliness of test results, type and quality
of equipment, facility location, convenience of scheduling and availability of
patient appointment times. Many competitors are larger and have greater
financial resources than the Company. The Company competes primarily on the
basis of quality of equipment and service. There can be no assurance that
competition in existing or new markets of the Company will not have a material
adverse effect on the Company's results of operations. In addition, changes in
the regulatory environment in which the Company operates and governmental and
private reimbursement policies have increased competition in the industry and
could thereby have a material adverse effect on the Company's results of
operations.
Dependence on Key Personnel. The Company's success depends upon the
continued contributions of its executive officers and key operating personnel.
The Company has entered into employment agreements with each of its executive
officers. The loss of services of, or a material reduction in the amount of
time devoted to the Company by either of such individuals or certain other key
personnel could adversely affect the business of the Company. The Company has
obtained key-man life insurance on the lives of its executive officers naming
the Company as beneficiary.
Governmental Regulation, Quality Assurance and Licenses. There are
numerous federal and state laws that regulate Imaging Centers and require
certification by the federal government and various state and local
instrumentalities. The Company believes that it is in compliance with all
relevant federal and state rules and regulations. Imaging Centers performing
mammography services must meet federal, and in some jurisdictions state,
standards for quality, as well as certification requirements, in order to
receive reimbursement.
In some instances, the Company is also subject to licensing and/or
regulation under federal and/or state laws relating to the handling and
disposal of hazardous waste and radioactive materials, as well as to the safety
and health of employees. In addition, the Company is subject to state
regulation, such as personnel licensing requirements, which may include
qualifying examinations and continuing education requirements. The failure of
the Company to remain in compliance with applicable laws and regulations could
have a material adverse effect on its business and financial condition.
Potential Liability and Insurance. The provision of medical services
entails an inherent risk of professional malpractice and other similar claims.
The Company believes that it does not engage in the practice of medicine;
however, the Company could be implicated in a medical malpractice action
through one of its providers, and there can be no assurance that claims, suits
or complaints relating to services delivered by a radiologist or medical
service provider will not be asserted against the Company. Although the Company
maintains insurance it believes is adequate both as to risks and amounts, there
can be no assurance that any claim asserted against the Company for
professional or other liability will be covered by, or will not exceed the
coverage limits of, such insurance. In addition, the availability and cost of
professional liability insurance has been affected by various factors, many of
which are beyond the control of the Company. The Company currently
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maintains liability coverage and requires all of its affiliated physicians to
maintain malpractice and other liability coverage. There can be no assurance
that the Company will be able to maintain insurance in the future at a cost
that is acceptable to the Company or at all. Any claim made against the Company
not fully covered by insurance could have a material adverse effect on the
Company.
Possible Volatility of Stock Price. Market prices for the Company's
securities are influenced by a number of factors, including quarterly
variations in the financial results of the Company and any competitors, changes
in earnings, estimates by analysts, conditions in the digital information
market, the overall economy and the financial markets.
Substantial Indebtedness. The Company has indebtedness that is
substantial in relation to its stockholder's equity. The indenture relating to
the Debentures imposes significant operating and financial restrictions on the
Company. Such restrictions affect, and in many respects significantly limit or
prohibit, among other things, the ability of the Company to incur additional
indebtedness and pay dividends. These restrictions, in combination with the
leveraged nature of the Company, could limit the ability of the Company to
effect future financings or otherwise may restrict corporate activities. The
indenture permits the Company to incur additional indebtedness under certain
conditions, and the Company expects to obtain additional indebtedness as so
permitted.
The Company's leverage could have important consequences including the
following: (i) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate purposes or
other purposes may be impaired in the future; (ii) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds
available to the Company for other purposes; (iii) the Company's leverage may
hinder its ability to adjust rapidly to changing market conditions; and (iv)
the leverage could make the Company more vulnerable in the event of a downturn
in general economic conditions or its business.
Possible Adverse Effects of Authorization of Preferred Stock;
Anti-Takeover Provisions. The Company's Certificate of Incorporation authorizes
the issuance of 5,000,000 shares of "blank check" preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval (but subject to applicable government regulatory
restrictions), 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 Company's Common Stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future. The issuance of such preferred stock could make the possible
takeover of the Company or the removal of management of the Company more
difficult, discourage hostile bids for control of the Company in which
stockholders may receive premiums for their shares of Common Stock or otherwise
dilute the rights of holders of Common Stock and the market price of the Common
Stock. The Company's Certificate of Incorporation and Bylaws also contains
certain provisions which could discourage a hostile bid for the Company.
Further, the Company is subject to the Delaware General Corporation Law
provisions that may have the effect of discouraging persons from pursuing a
non-negotiated takeover of the Company and preventing certain changes of
control. As a result, potential acquirors may be discouraged from seeking to
acquire control of the Company through the purchase of Common Stock, which
could have a negative effect on the price of the Company's securities.
Dividends Unlikely. The Company does not intend to declare or pay
cash dividends in the foreseeable future. Earnings are expected to be
retained to finance and expand the Company's business. The Company's
revolving line of credit prohibits the payment of dividends without the consent
of the lender. See "Dividend Policy."
Forward-Looking Statements. Prospective investors are cautioned that
the statements in this Prospectus that are not descriptions of historical facts
may be forward looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to
a number of factors, including those identified under "Risk Factors" and
elsewhere in this Prospectus or documents incorporated by reference herein.
SELLING STOCKHOLDERS
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This Prospectus covers the resale by the holders identified herein of
up to 93,000 shares of Common Stock. Each Selling Stockholder is registering
for sale all shares of Common Stock held by him. Upon the sale by each Selling
Stockholder of the shares registered for sale, such holder will not hold any
shares.
Each Selling Stockholder acquired the shares directly from the Company
as full payment of consulting fees that were payable by the Company in
connection with a consulting agreement entered into in June 1994 at the time of
the purchase of Computerized Medical Imaging Center by the Company. Each
Selling Stockholder was a general partner of the former owner.
The following table includes information furnished to the Company on
behalf of the Selling Stockholders. Based on such information, after the sale
by it of the shares of Common Stock hereby registered for sale, no Selling
Stockholder will own, as of October 31, 1996, any shares of Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Before Shares to Owned After
Selling Stockholder the Offering be Offered the Offering
- ------------------- ------------------------------ ---------- ---------------------------
Number Percentage(1) Number Percentage(1)
------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C>
Robert Cohenour, M.D. 31,000 * 31,000 0 *
Morris Loffman, M.D. 31,000 * 31,000 0 *
Steven Novom, M.D. 31,000 * 31,000 0 *
- ------------------------
</TABLE>
* less than 1%.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell their securities from time to time.
Shares of Common Stock being sold hereby may be offered to purchasers directly
by any of the Selling Stockholders or through underwriters, brokers, dealers or
agents from time to time in one or more transactions (which may include "block"
transactions) on NNM in the over-the-counter market, or in transactions other
than in the over-the-counter market. Any of such transactions may be at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices, in each case as determined by the Selling
Stockholders or by agreement between the Selling Stockholders and such
underwriters, brokers, dealers or agents or purchasers. If the Selling
Stockholders effect such transactions by selling shares to or through
underwriters, brokers, dealers or agents, such underwriters, brokers, dealers,
or agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of securities
for whom they may act as agent (which discounts, concessions or commissions as
to particular underwriters, brokers, dealers or agents may be in excess of
those customary in the types of transactions involved). The Selling
Stockholders and any dealers or agents that participate in the distribution of
securities offered hereby may be deemed to be underwriters, and any profit on
the sale of such securities by them and any discounts, commissions, or
concessions received by any such dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
The securities offered hereby may be sold pursuant to this Prospectus
or pursuant to an available exemption from the registration requirements of the
Securities Act, such as the provisions of Rule 144 promulgated under the
Securities Act, to the extent applicable. Under the securities laws of certain
states, the securities offered hereby may be sold in such states only through
registered or licensed brokers or dealers. In addition, in certain states the
securities may not be sold unless the securities have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The Company will pay substantially all of the expenses incident to
this Offering, other than commissions and fees and fees of others employed by a
Selling Stockholder, including attorneys' fees. Under agreements entered into
with the Company, certain of the Selling Stockholders and any broker-dealer
they may utilize will be indemnified by the Company against certain civil
liabilities, including liabilities under the Securities Act. The Company will
not receive any of the proceeds from the sale of any of the securities by the
Selling Stockholders.
Each Selling Stockholder will be subject to applicable provisions of
the Exchange Act and rules and regulations thereunder, including, without
limitation, Rules 10b-2, 10b-6 and 10b-7 which provisions may limit the timing
of
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purchases and sales of any of the securities by the Selling Stockholders.
All of the foregoing may affect the marketability of the securities.
LEGAL MATTERS
The validity of the Securities offered hereby has been passed upon
for the Company by Michael Karsch, Executive Vice President and General
Counsel of the Company. Mr. Karsch beneficially owns 75,000 shares of Common
Stock of the Company
ACCOUNTANTS
The financial statements of the Company included in this Prospectus
have been audited by Moore Stephens, P.C., independent public accountants, for
the periods and to the extent set forth in their reports incorporated by
reference herein and are included in reliance upon such report and upon the
authority of that firm as experts in accounting and auditing.
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No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Initial Purchaser. 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 where such offer would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
herein is correct at any time subsequent to the date hereof or that there has
been no change in the circumstances of the Company since the date hereof.
TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION.......................................2
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE................................................2
PROSPECTUS SUMMARY..........................................3
RISK FACTORS................................................6
SELLING STOCKHOLDERS........................................9
PLAN OF DISTRIBUTION........................................9
LEGAL MATTERS..............................................10
ACCOUNTANTS................................................10
US DIAGNOSTIC INC.
93,000 Shares
Common Stock
PROSPECTUS
November 27, 1996
