<PAGE> 1
As filed with the Securities and Exchange Commission on July 9, 1997.
Registration No. 333- .
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE COMPANY DOCTOR
(Exact name of registrant as specified in its charter)
Delaware 72-1234136
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Donald F. Angle, M.D.
5215 North O'Connor Boulevard, Suite 1800 5215 North O'Connor Boulevard, Suite 1800
Irving, Texas 75039 Irving, Texas 75039
Telephone: (972) 401-8300 Telephone: (972) 401-8300
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone number,
including area code, of registrant's principal including area code, of agent for service)
executive offices)
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Copies to:
Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
Suite 4700, 1700 Lincoln Street
Denver, Colorado 80203
Telephone: (303) 830-1700
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Approximate date of commencement of proposed sale to public:
As soon as practicable 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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE
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Warrants to Purchase Common Stock........ 400,000 $ .625(1) $ 250,000(1) $ 75.76
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Common Stock Underlying Warrants......... 400,000 $ 7.00(2) $ 2,800,000(2) $ 848.48
Total............................. $ 3,050,000 $ 924.24
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g).
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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 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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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED JULY 9, 1997
[COMPANY DOCTOR LETTERHEAD]
400,000 REDEEMABLE WARRANTS
AND 400,000 SHARES OF COMMON STOCK
This Prospectus relates to 400,000 redeemable Warrants to purchase Common
Stock (the "Warrants") and the 400,000 shares of Common Stock (the "Shares")
issuable upon exercise of the Warrants of The Company Doctor (the "Company").
The Warrants were issued to HealthCare Financial Partners-Funding II, L.P. (the
"Selling Securityholder") in April 1997 in connection with certain credit
facilities made available by an affiliate of the Selling Securityholder to the
Company. The Company will receive the $7.00 per share exercise price of the
Warrants, to the extent exercised, but will not receive any of the proceeds
from the sale of the Warrants or the sale of the Shares. The Company has agreed
to pay the expenses of registering the Warrants and Shares offered hereby,
estimated at $10,000.
The Warrants are issued on terms and conditions which are identical to the
redeemable Common Stock purchase warrants which were issued in the Company's
initial public offering in February 1996. Each Warrant entitles the holder
thereof to purchase, at any time until February 6, 1999, subject to the
Company's earlier right of redemption as described herein, one share of Common
Stock at a price of $7.00. See "Description of Securities." The Selling
Securityholder has advised the Company that it intends to sell the Warrants and
the Shares offered hereby as principal for its own account from time to time in
the over-the-counter market or in negotiated transactions or a combination of
such methods of sale. Sales may be made at fixed prices which may be changed,
at market prices prevailing at the time of sale or at negotiated prices. The
Registration Statement of which this Prospectus forms a part must be current at
the time of exercise of the Warrants and at the time of sale of the Shares and
Warrants. See "Plan of Distribution."
On July 3, 1997, the closing bid price of the Common Stock was $3.75 per
share and the closing bid price of the Warrants was $.625 per Warrant. The
Company's Common Stock and Warrants are traded on The Nasdaq SmallCap Market
under the symbols "CDOC" and "CDOCW" and on the Boston Stock Exchange under the
symbols CDR and CDRW, respectively.
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SEE "RISK FACTORS" ON PAGE 5 FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED
WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997.
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<PAGE> 3
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"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained from the public reference facility
in Washington, D.C. 20549 at prescribed rates. The Company became an electronic
filer in April 1996. The Commission maintains a Web site that contains reports,
proxy statements and registration statements that have been filed
electronically with the Commission. The address of such site is
http://www.sec.gov. The Company's Common Stock and Warrants are listed on the
Boston Stock Exchange and reports and other information concerning the Company
may be inspected at such exchange.
The Company has filed with the Commission a registration statement
(together with all amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Common Stock offered hereby. This Prospectus, filed as part of the Registration
Statement, omits certain information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. A complete copy of
the Registration Statement may be inspected and copied in the manner and at the
sources described above. Any statements contained herein concerning the
provisions of any document are not necessarily complete and in each instance,
reference is made to the copy of such document as filed with the Commission and
each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-KSB filed on October 16, 1996, for
the fiscal year ended June 30, 1996, the quarterly reports on Form 10-QSB filed
on November 14, 1996, as amended by Form 10- QSB/A-1 filed on May 16, 1997;
February 14, 1997, as amended by Form 10-QSB/A-1 filed on March 28, 1997, Form
10-QSB/A-2 filed on April 9, 1997 and Form 10-QSB/A-3 filed on May 15, 1997;
and May 22, 1997 for the quarters ended September 30, 1996, December 31, 1996
and March 31, 1997, respectively, and the proxy statement filed on October 28,
1996, as amended on February 11, 1997 are hereby incorporated by reference in
this Prospectus. The description of the Company's capital stock contained in
the Company's Registration Statement on Form 8-A filed December 29, 1995, which
Form 8-A incorporated by reference the description of the Company's capital
stock contained in the Company's Registration Statement on Form SB-2, as
amended (S.E.C. File No. 333-99530-D) (the "IPO Registration Statement") filed
with the Commission on November 16, 1995, is hereby incorporated by reference
into this Prospectus.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act 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 into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded to the extent that a statement contained herein or in any other
document subsequently filed and 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.
Any person receiving a copy of this Prospectus may obtain without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, other than exhibits to such documents. Requests for such
copies should be directed to Mr. Fred Parrish, The Company Doctor, 5215 North
O'Connor Boulevard, Suite 1800, Irving, Texas 75039, Telephone: (972) 401-8300.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus and in documents incorporated herein by
reference. See "Risk Factors" for information prospective investors should
consider. Unless the context otherwise requires, the term "Company" refers to
The Company Doctor and its wholly-owned subsidiaries, Emergency Occupational
Physicians Services ("EOPS"), Andicare, Inc. ("Andicare") and Risk Management
Assurance Company ("RMAC").
THE COMPANY
The Company manages the non-medical portions of medical practices within
facilities that provide occupational and industrial medical and related
services exclusively to employees and prospective employees of corporate
customers located in the states of Texas, Louisiana and Arkansas. With recent
additions to its management portfolio, the Company currently manages eleven
occupational and industrial medicine facilities servicing over approximately
4,000 employers and clients including local offices of such corporations as
Blockbuster Video, Excel Telecommunications, Fibrebond Corp., Interceramic
Tile, Southwest Airlines, U-Haul Corporation, Levi Strauss, the U.S. Postal
Service and Atlantic Richfield Co. (ARCO). At these facilities prospective
employees of the corporate customer can be pre-screened and work-related
injuries and medical conditions arising from employment can be diagnosed and
treated by physicians affiliated with The Physician Group, P.A., a Texas
professional association of physicians ("The Physician Group"). The Physician
Group is owned and controlled by the Company's President, Dr. Donald F. Angle.
The laws in the states in which the Company operates limit the practice of
medicine to licensed individuals or professional organizations comprised of
licensed individuals. Accordingly, the Company must depend on licensed
professionals to render the actual medical services provided to employees and
prospective employees of its clients at the Company's facilities. Currently,
the Company's operating revenues are derived primarily through a non-exclusive
Practice Management Agreement with The Physician Group, which is paid for
services either on a fee-for-service basis or on a prepaid "capitated" basis (a
fixed monthly fee for each employee). The Company receives a management fee for
the provision of non-medical services, including marketing, management of the
practice and facilities, and provision of non-medical procedures and programs.
The Company is expanding geographically in areas contiguous to existing
markets in order to increase its market penetration within areas in which a
patient base is currently served. To the extent permitted by applicable law,
the Company and The Physician Group pursue affiliations with physicians,
hospitals or other providers which have established occupational medicine
practices or patient populations that can be served in an occupational medical
setting. Since its public offering, the Company and The Physician Group have
added medicine practices in Lancaster, Texas (a suburb of Dallas), Baytown,
Texas (a suburb of Houston), El Paso, Texas, Carrollton, Texas and Fort Worth,
Texas. The Company and The Physician Group financed these transactions through
the issuance of the Company's Common Stock and options to purchase Common
Stock, payment of cash, and/or delivery of secured promissory notes. In each
transaction, the Company and The Physician Group amended their Practice
Management Agreement to provide that the Company has the sole right to manage
the acquired practice for a minimum of ten years in accordance with the terms
and conditions of the existing Practice Management Agreement. Each of the
physicians who previously owned the acquired practice entered into a standard
staff physician employment agreement with The Physician Group and a standard
agreement to serve as Regional Medical Director of the acquired practice at or
about the time of the respective acquisition. The Company has implemented its
cost containment program and other methods of operation at its facilities,
including these newly acquired facilities.
The Company believes its management techniques and cost containment
strategies have in many cases resulted in reductions in loss ratios by workers'
compensation insurers and, thereafter, in reduced insurance premiums charged to
employers. To benefit directly from the cost containment strategies utilized in
its practice management activities, the Company acquired a Texas domiciled,
multi-line insurance company, now known as Risk Management Assurance
Corporation ("RMAC"), effective June 30, 1996. Through RMAC, the Company
intends to enter the workers' compensation insurance market by participation in
insurance policies with other workers' compensation insurers that will serve as
the issuing carriers. RMAC expects to market these insurance policies to the
Company's clients at premiums which are comparable to or less than those
offered by other workers' compensation insurers.
The Company's business strategy is based upon The Physician Group or
similar entities providing actual medical services, the Company providing
management of the practices and facilities, while RMAC and/or the issuing
carrier will provide risk management, claims administration and other
insurance-related services.
<PAGE> 5
THE OFFERING
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Securities offered by the Selling 400,000 Warrants and up to 400,000 Shares of Common
Securityholder ................................... Stock issuable upon exercise of the Warrants
Common Stock outstanding on June 30, 1997 5,057,749 shares(1)
Use of proceeds................................... The Company will not receive any proceeds from sale of the
Warrants or Shares. However, the Company will receive the
proceeds, if any, from exercise of the Warrants. See "Use of
Proceeds."
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Symbols: Nasdaq SmallCap Market Boston Stock Exchange
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Common Stock.................................... CDOC CDR
Warrants........................................ CDOCW CDRW
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________________________
(1) Gives effect to the cancellation of 150,000 shares of Common Stock as
a result of the Company's failure to satisfy certain earnings per share
requirements in the calendar year ended December 31, 1996. Excludes (i)
3,810 shares issuable upon exercise of an outstanding option, (ii) up to
1,040,875 shares of Common Stock reserved for issuance under the Company's
option plan, (iii) 1,839,600 shares of Common Stock issuable upon the
exercise of outstanding Warrants sold in the Company's initial public
offering, (iv) 320,000 shares of Common Stock issuable on full exercise of
the Unit Purchase Option and underlying Warrants granted to the
representative of the several underwriters in connection with the Company's
initial public offering and (v) the 400,000 Shares issuable upon exercise
of the Warrants.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
The following consolidated selected financial data is derived from the
Consolidated Financial Statements and related Notes thereto appearing in the
Company's Form 10-KSB for the year ended June 30, 1996 and the Form 10-QSB for
the nine months ended March 31, 1997. The consolidated statements of operations
data for each of the years in the two-year period ended June 30, 1996 and the
balance sheet data at June 30, 1996 are derived from the consolidated financial
statements of the Company which have been audited by Ehrhardt Keefe Steiner &
Hottman PC, the Company's independent auditors, as indicated in their report
included herein. The selected consolidated balance sheet data as of March 31,
1997 and the consolidated statements of operations data for the nine-month
periods ended March 31, 1996 and 1997 have been derived from the Company's
unaudited consolidated financial statements which, in the opinion of
management, reflect all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation of the results for these periods
and as of that date. The pro forma unaudited statements of operations for the
years ended June 30, 1995 and 1996 were prepared assuming the acquisitions of
the Baytown and El Paso clinics and RMAC had been completed on July 1, 1994.
The revenues and expenses represent the predecessor entities' year ended
December 31, 1995 and 1994 revenues and expenses. The operations of Lancaster
are not included in the pro forma statements of operations as their effect is
immaterial. The selected financial data provided below is not necessarily
indicative of the future results of operations or financial performance of the
Company.
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PRO FORMA (UNAUDITED) NINE MONTHS
YEAR ENDED JUNE 30, YEAR ENDED JUNE 30, ENDED MARCH 31,
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1996 1995 1996 1995 1997 1996
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STATEMENTS OF OPERATIONS DATA:
Revenues..................................... $ 4,194 $ 3,006 $ 8,479 $ 6,355 $ 8,289 $ 2,976
Operating expenses........................... 4,267 3,094 7,545 6,964 8,877 2,866
Income (loss) from operations................ (73) (88) 934 (610) (588) 110
Net income (loss) before tax benefits (17) (194) 1,076 (755) (623) 84
Income tax benefit........................... 100 --- (366) --- 148 30
Net income (loss)............................ $ 83 $ (194) $ 710 $ (755) $ (475) $ 114
Net income (loss) per share.................. $ .02 $ (.09) $ .16 $ (.30) $ (.09) $ .03
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JUNE 30, 1996 MARCH 31, 1997
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BALANCE SHEET DATA:
Working capital................................... $ 5,781 $ 27
Current assets.................................... 8,780 5,355
Total assets...................................... 13,540 18,795
Total liabilities................................. 4,472 6,852
Stockholders' equity ............................. 9,068 11,943
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The Company was incorporated in Delaware in June 1992. Its principal
executive offices are located at Suite 1800, 5215 North O'Connor Boulevard,
Irving, Texas 75039, and its telephone number is (972) 401-8300.
<PAGE> 6
RISK FACTORS
Investment in the Company's securities involves substantial risks, some of
which are summarized below. Prospective investors should carefully consider the
following risk factors, among others, prior to making an investment.
PRIOR LOSSES AND ACCUMULATED DEFICIT
The Company was incorporated in June 1992 and commenced operations after
acquiring all of the outstanding stock of Andicare and EOPS, which had been
operating since 1987 and 1990, respectively. Accordingly, the Company has had a
limited operating history. In the fiscal years ended June 30, 1995 (the "1995
Fiscal Year") and June 30, 1996 (the "1996 Fiscal Year"), the Company incurred
losses of approximately $(194,000) and $(17,000), respectively, although an
income tax benefit of $100,000 in the 1996 Fiscal Year resulted in the Company
reporting net income of approximately $83,000. The Company incurred a loss from
operations of approximately $(588,000) in the nine months ended March 31, 1997
and, after taking into account an income tax benefit, incurred net loss of
approximately $(475,000) for the nine months. At March 31, 1997, the Company
had an accumulated deficit of approximately $(1,708,000). The Company
experienced severe cash flow difficulties and a corresponding lack of liquidity
during the 1995 Fiscal Year. The lack of liquidity was addressed through
receipt of approximately $398,000 in net proceeds from a private placement in
November 1995 and receipt of approximately $7.9 million in net proceeds from
the Company's initial public offering in February 1996. The Company has not
achieved profitable operations and there is no assurance that profitability can
be achieved or maintained in the future. The Company's operating expenses are
based in part on its estimate of future revenues and, therefore, the Company
may be unable to adjust spending in a timely manner to compensate for a
shortfall in revenues. Furthermore, there can be no assurance that the
expansion of the Company's operations which is now underway will result in the
Company achieving and maintaining consistent profitability. The Company's
operating results have fluctuated in the past and may continue to fluctuate
significantly in the future.
NEED FOR ADDITIONAL FINANCING
The Company has experienced rapid growth as a result of the increase in
the number of practices it manages which are attributable to the acquisitions
conducted by The Physician Group. The Company has also experienced growth in
the number of corporate customers serviced by the occupational medicine clinics
managed by the Company. This growth has placed additional demands on the
Company's working capital, which decreased to approximately $27,000 at March
31, 1997. In an effort to address its working capital needs, the Company
established two credit facilities with an affiliate of the Selling
Securityholder on April 15, 1997, consisting of a $1.5 million term loan and a
$5 million revolving line of credit. As of June 30, 1997, borrowings under the
term loan and revolving line of credit were approximately $1.5 million and
$1.279 million, respectively. There can be no assurance that such credit
facilities will continue to satisfy the Company's capital requirements, and the
failure to raise additional capital which the Company may require in the future
could have a material adverse affect on the Company's liquidity and operating
results. See "Recent Events."
UNCERTAINTIES RELATED TO CHANGING HEALTHCARE ENVIRONMENT
Legislative and regulatory focus on healthcare, as well as public
concern, has caused insurers, health maintenance organizations ("HMOs") and
other providers in the healthcare industry to reevaluate cost effective means
of delivering healthcare services and has led to substantial changes in the
healthcare industry in recent years, including the introduction of managed
care, capitation programs and other means of cost containment. The occupational
healthcare segment of the healthcare industry has been slower than other
segments to adopt and implement some of these cost containment strategies.
Although the Company believes that capitation programs and other cost
containment strategies, including combined occupational healthcare and
insurance
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<PAGE> 7
products, will play an increasing role in the delivery of occupational
healthcare, the pace of change and market acceptance of new programs in the
occupational healthcare segment of the industry is uncertain. Changes in the
occupational healthcare environment may have significant impact on the success
of the Company's proposed insurance products and the financial results achieved
by the Company. There is no assurance the Company will be successful in the
changing healthcare environment or that the Company's strategy to manage
capitation programs and develop insurance policies addressed to the
occupational healthcare industry will succeed in meeting employers' and
workers' occupational healthcare requirements.
Legislative reforms in some states permit employers to designate health
plans such as HMOs to cover workers' compensation claimants. Because many
health plans have the capacity to manage healthcare for workers' compensation
claimants, such legislation may intensify competition in the market served by
the Company. Within the past few years, several states have experienced
decreases in the number of workers' compensation claims and the average cost
per claim, which has resulted in workers' compensation insurance premium rates
having fallen in those states. The Company believes that declines in workers'
compensation costs in these states are due principally to intensified efforts
by payors to manage and control claim costs, to improved risk management by
employers and to legislative reforms. If declines in workers' compensation
costs occur in many states and persist over the long-term, they may have an
adverse impact on the Company's business and results of operations.
GOVERNMENT REGULATION OF BUSINESS
General. The Company is subject to various federal and state laws,
including those specified herein with respect to RMAC and those set forth below
with respect to healthcare. Many of the applicable laws are enforced by
regulatory authorities with broad discretion to interpret such laws, promulgate
corresponding regulations and enforce such regulations. Violations of these
laws and regulations may result in substantial penalties. Moreover, legislative
or administrative changes could have a material adverse financial effect on the
Company. The Company believes that its operations are in material compliance
with existing laws and regulations. There can be no assurance, however, that a
court or regulatory authority will not determine that the Company's operations
are not in compliance with applicable laws or regulations or that any such
determination will not have a material adverse effect on the Company. Moreover,
the Company cannot predict what, if any, legislative changes may occur within
such laws or regulations, or the impact of changes in such laws or regulations,
if any, on the Company.
Workers' Compensation Regulation. State and federal workers' compensation
laws and federal Medicare laws control many aspects of providing occupational
healthcare services including, in many cases, the amounts that may be charged
for those services. Management estimates approximately 33% of the Company's
revenues in the 1996 Fiscal Year were subject to state-mandated fee schedules
prescribing maximum reimbursable amounts for designated medical procedures
provided by The Physician Group. In addition, workers' compensation coverage is
mandated in most states. Any change which would require employers to
participate in state-sponsored funds or reduce premiums could have a material
negative impact on The Physician Group's practices and on the Company's results
of operations.
Healthcare Regulation. State laws generally prohibit anyone other than a
licensed physician from engaging in acts that constitute or contribute to the
practice of medicine and also prohibit physicians from "splitting" their fees
with other persons. Many states also limit the practice of medicine to licensed
individuals or professional organizations comprised of licensed individuals,
such as The Physician Group. The Company does not believe that its arrangements
with The Physician Group constitute the corporate practice of medicine, because
(i) they are distinctly divided into The Physician Group providing all medical
services and the Company providing non-medical services; (ii) the Company has
no right to any portion of The Physician Group's profits derived from its
medical practice except for those fees outlined in the Practice Management
Agreement which relate to the provision of non-physician services and which are
calculated to represent the reasonable and historic cost of the provision of
such non-physician services; (iii) the Company has no right
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<PAGE> 8
to trade and commercialize on any physician's license; and (iv) the
Company has no right to select medical staff in The Physician Group. Any
finding to the contrary by a court of law or a state regulatory authority could
have a material adverse impact on the Company and its operations.
HMO Regulation. A number of states have varying definitions of HMOs and
similar entities and different licensure requirements with respect to them. The
Company believes that its current operations in Texas and Arkansas do not
constitute it as an HMO under applicable state insurance laws or regulations.
It will be necessary for the Company to comply with the laws and regulations of
each state in which it has a facility with respect to HMOs. In the event that a
state in which the Company has established operations should change its laws
and regulations or interpretation of such laws and regulations so as to
constitute the Company as an HMO, or should a state in which it has such
operations assert that the Company is an HMO under existing laws and
regulations, it could result in the inability of the Company to continue
operations in that state unless and until it complies with applicable laws and
regulations, the cost of which could be prohibitive.
A number of the Company's customers now utilize the Preferred Employee
Plan ("PEP"), a capitated plan under which a variety of services are provided
through The Physician Group. At the time the Company entered into contracts
with its existing customers who utilize the PEP, the Company believed that
because it was substantially controlled by Dr. Angle and two former directors
of the Company who are also physicians, the PEP could be provided through the
Company. The Company's healthcare counsel has recommended that the Company
amend its contracts with its PEP customers to clarify that all medical services
will be provided by The Physician Group and that The Physician Group enter into
and market capitated plans in the future. The Company has not yet obtained
signed amendments from its PEP customers. Failure to obtain any amendment could
result in a finding that the Company was offering or arranging for a capitated
plan, which in turn could cause the Company to be classified as an HMO under
Texas law. The Company intends to obtain the necessary addendums to its PEP
contracts and expects it will be successful in so doing. Nonetheless, should
the Company be classified as an HMO under Texas law, it could be subject to
fines, administrative regulation, additional licensing requirements and
substantial additional costs of operation.
EXPANSION INTO INSURANCE BUSINESS
The Company expects to benefit from its management techniques and cost
containment strategies and to expand its business by entering the workers'
compensation insurance market through RMAC. Although the Company is familiar
with workers' compensation insurance as a result of its management of
occupational and industrial healthcare facilities and has employed an
individual who has over 35 years' experience in the insurance industry as
RMAC's President, the Company may be unable to implement effectively its plan
for institution of insurance operations through RMAC. The Company has initiated
several marketing efforts in order to capitalize on its recent acquisition of
RMAC, including a quota share arrangement with Old Republic General Insurance
Group, Inc., a company listed on the New York Stock Exchange with assets of
$6.1 billion, surplus of $1.6 billion and an A+ rating from A.M. Best Company
("Old Republic Insurance"). See "Dependence on Independent Insurance Agencies
and Insurance Companies." The Company has not written an individual account
(defined as the Company's participation in an individual quota share policy)
under its agreement with Old Republic Insurance. The Company believes that
additional quota share arrangements will be concluded with issuing carriers in
the future, although there can be no assurance the Company will be successful
in this effort. Failure to maintain or conclude quota sharing arrangements with
issuing carriers could require the Company to identify other means of offering
workers' compensation insurance, the availability of which is not assured, or
could effectively prevent RMAC from entering into the workers' compensation
insurance market. Any of the factors described below could also negatively
impact the development of RMAC's business.
Reserve Policy. RMAC is required to establish reserves for estimated claim
and claim settlement expenses after each accounting period, which reserves are
based upon the prior claims paid, the industry in
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which the customer operates and the risks associated with that industry.
The ability to estimate reserves accurately depends upon a number of factors,
including timely notification of injuries by customers, the nature of the
injury, and the length of time a claim remains open. The Company has placed
internal restrictions on cash and investments for payment of the estimated
liability for unpaid losses from workers' compensation claims of approximately
$1,750,000, which represents estimates of the unpaid losses of RMAC as of June
30, 1996, at which time the Company acquired RMAC. There can be no assurance
the Company's reserves will be adequate to address future claims. To the extent
actual claims exceed estimated reserves, the Company's operations will be
adversely affected.
Lack of Rating. Insurance ratings are based on a comparative analysis of
the financial condition and operating performance of insurance companies. RMAC
was a dormant insurance company when it was acquired and was not rated by a
nationally-recognized insurance rating organization. The Company believes RMAC
will not be eligible to receive a rating until it has been in operation for a
minimum period of five years. Certain insurance carriers that write umbrella
policies will not provide coverage to an employer if any portion of the
employer's underlying insurance policy, such as the workers' compensation
portion, is issued by an unrated carrier. The Company will endeavor to
affiliate with rated insurers, but the inability to obtain a rating may deter
market acceptance of RMAC's products.
Limitation on Distributions. Under Texas law, without obtaining prior
approval of the Commissioner of Insurance, dividends or distributions by RMAC
to the Company are limited to the greater of 10% of RMAC's statutory surplus or
the statutory net income from operations of RMAC for the year ending December
31. Distributions in excess of this limitation are subject to review and
approval of the Commissioner of Insurance of Texas. RMAC may be subject to
similar restrictive limitations on distributions if and when it commences
operations in other states. Accordingly, even if RMAC's operations are
profitable, the Company may have a limited ability to receive distributions
from RMAC for use in other operations.
Regulation. Insurance companies are subject to substantial regulation in
each state in which they provide workers' compensation insurance products.
These regulations are primarily intended to protect covered employees and
policy-holders rather than insurance companies. State regulatory agencies have
broad, often discretionary, administrative powers with respect to all aspects
of operations of insurance companies, including the power to determine
licensing requirements, premium rates, benefit levels, policy forms, dividend
payments, capital adequacy, and the amount and type of investments. In
addition, workers' compensation coverage is mandated in most states and state
agencies regulating such coverage also have broad administrative powers. Both
the statutes and regulations governing insurance companies and workers'
compensation coverage are subject to change. The Company is unable, at this
time, to predict the likelihood that any insurance or workers' compensation
legislation will be enacted which will affect the proposed operations of RMAC.
Competition. RMAC is subject to competition from a variety of sources,
including large insurance companies, managed healthcare companies,
state-sponsored insurance pools and risk management consultants. These
competitors may offer additional insurance products or services to employers
and, as a consequence, may have certain advantages in pricing their workers'
compensation products. The Company is aware of one competitor now offering a
managed care approach to cost containment combined with workers' compensation
insurance. In addition, certain of the Company's competitors in the
occupational healthcare industry may in the future choose to enter the workers'
compensation insurance market. Many of these competitors have greater financial
and operating resources than the Company. The Company believes that several
large insurance companies have recently entered the workers' compensation
market in different states as a result of more favorable regulatory
environments or increases in permissible premium rates. The entry of large
insurance companies into markets in which RMAC conducts business may have a
material adverse effect on RMAC's results of operations.
Dependence on Independent Insurance Agencies and Insurance Companies. RMAC
intends to offer workers' compensation insurance products through independent
insurance agencies and insurance agents
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employed by workers' compensation insurers with which the Company
implements alliances or arrangements. In 1995, the Company implemented an
arrangement with Employers General Insurance Group ("EGIG"), a subsidiary of
Old Republic Insurance, to develop and offer a fully-guaranteed cost product,
known as Comp2000, that included the Company and its affiliate's capitated
preventive healthcare services and insurance underwritten by Old Republic
Insurance. The Company's arrangement with EGIG which was negotiated in 1995 did
not allow the Company to participate in the underwriting risk of workers'
compensation insurance or to share in premium revenues. RMAC, in consultation
with EGIG, has recently redesigned the Comp2000 product in order for RMAC to
participate in premiums and risk with EGIG. RMAC is also negotiating potential
affiliations with various other established issuing carriers of workers'
compensation insurance. The Company currently has no formal agreement with any
independent insurance agency or workers' compensation insurer to promote RMAC's
insurance products, nor is there any assurance that such agreements will be
secured in the future. It is likely that any such agreement will not preclude
agencies and agents from selling competitors' insurance products as well as
those of RMAC. Any such arrangements will also, in all likelihood, be
terminable on short notice at the agent or insurer's discretion. RMAC's success
will depend in part on its ability to offer workers' compensation insurance
products that meet the requirements of insurance companies, agencies and their
customers. Failure to secure affiliations to market RMAC's products could have
a material adverse effect on the Company.
Reinsurance and Quota Sharing. Guaranteed cost workers' compensation
insurance policies may be either (i) policies whereby the employer purchases an
insurance policy written by the insurer and pays a premium based on the
employer's aggregate payroll, and the insurers (including RMAC, to the extent
of its quota share or reinsurance) assume responsibility for all indemnity and
medical costs associated with injuries and manage the employer's entire
workers' compensation program, including all expenses related to workplace
injuries, or (ii) policies with a higher deductible, under which the employer
is responsible for all medical and indemnity expenses up to a specific dollar
amount, while the insurers are responsible for medical and indemnity expenses
over this level. RMAC intends to become a participant in the workers'
compensation risk by reinsuring a layer of losses corresponding to the medical
and indemnity costs of a primary care level of losses. The policy issuing
company will retain losses above the reinsurance assumption by RMAC. The
Company has no reinsurance contract now in effect and there can be no assurance
RMAC will be successful in securing reinsurance at a reasonable cost, if at
all. Even in the event RMAC obtains reinsurance, possible failure of a
reinsurer could subject RMAC to exposure for the payment of all claim and claim
settlement expenses covered by workers' compensation policies that RMAC has
underwritten. Although reinsurance arrangements will protect RMAC against
catastrophic claims that exceed the excess of loss limits, a significant number
of multiple large claims could have a material adverse effect on the reserves
of RMAC and on the Company's results of operations.
The Company anticipates that RMAC will seek to share in the risks and
benefits of the insurance it underwrites on a quota share basis with
established workers' compensation insurers. Under a quota share arrangement,
RMAC will share in a stated percentage of all written premium dollars, as well
as the same percentage of all risks and related costs. The Company has a quota
share arrangement with Old Republic Insurance but has not yet written an
individual account (defined as the Company's participation in an individual
quota share policy) under such agreement.
DEPENDENCE UPON PHYSICIAN GROUP; CONFLICTS OF INTEREST
Pursuant to a Practice Management Agreement between the Company and The
Physician Group, professional medical services are provided by physicians and
licensed professionals employed by The Physician Group at the facilities
managed by the Company. The Practice Management Agreement is terminable upon a
change in majority ownership of The Physician Group or upon the death or
disability of The Physician Group's sole shareholder. The Physician Group
exercises full control over the medical services rendered at the Company's
facilities, while the Company performs non-medical functions including
management and administration. Under the Practice Management Agreement, the
Company is required to pay The Physician
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Group a fee for its services based on certain costs of The Physician
Group. These costs include any salaries,bonuses and benefits of the physicians
and other expenses excluded as clinic expenses as defined by the Practice
Management Agreement. The minimum fee is $210,000 per region on an annual
basis. The Practice Management Agreement does not establish a maximum fee
payable to The Physician Group. For the year ended June 30, 1996, the Company
paid fees of approximately $1,150,000 for the existing two regions. Based upon
calculations from historical data and costs associated with administration and
management of The Physician Group, certain excess adjusted gross revenue is
paid to the Company as compensation for services provided under the Practice
Management Agreement, which includes management fees and ancillary revenues
from non- medical services. Based on the Company's own review of The Physician
Group's financial statements and review of all compensation paid by The
Physician Group to physicians affiliated with The Physician Group, the Company
believes the arrangements with The Physician Group are fair and reasonable. Dr.
Angle, the President of the Company, was the founder, and is the sole
stockholder, of The Physician Group. Based upon information available to it,
the Company believes that physicians employed by The Physician Group own a
total of approximately 1,660,000 shares, or 34% of the Company's outstanding
Common Stock. Although no independent third party was retained by the Company
to render an opinion as to the fairness and reasonableness of the terms of the
arrangements between the Company and The Physician Group, such terms were
approved by the disinterested directors of the Company. The Company anticipates
that most, if not all, of its facilities will be provided medical services by
The Physician Group. Because of Dr. Angle's affiliations with the Company and
The Physician Group, there may have existed in the past, and may develop in the
future, conflicts of interest between the Company and The Physician Group. Such
conflicts of interest may include, but are not necessarily limited to, the
terms under which The Physician Group will be compensated, the duties of The
Physician Group and the Company, the amount of ancillary revenues or management
fees to which the Company is entitled, and liability for claims made against
the Company and The Physician Group in excess of liability insurance limits.
Although the disinterested members of the Board of Directors will pass upon any
changes in the terms of the Practice Management Agreement, there can be no
assurance that existing or future conflicts of interest will be resolved to the
Company's benefit. Although the interests of the Company and The Physician
Group are similar in certain respects, the Company's interests are not
identical to those of The Physician Group, which may cause conflicts of
interest between the Company and The Physician Group to arise or increase in
the future. Should such conflicts not be resolved in the Company's favor, then
civil or regulatory action might be taken against the Company, resulting in the
potential for damages or fines being assessed against the Company.
The Company is also dependent upon Dr. Angle and The Physician Group to
recruit and retain physicians with experience in occupational medicine and the
ability to understand and implement the Company's cost containment management
strategies. The Physician Group has encountered significant competition for
experienced doctors and other medical personnel with backgrounds in
occupational healthcare. The inability of The Physician Group to retain
experienced and qualified physicians for any reason could have a material
adverse impact on the Company's operations. While the Company's agreement with
The Physician Group is not exclusive and permits the Company to enter into
practice management agreements with other physicians, there can be no assurance
the Company would be successful in contracting with other physicians or groups
of physicians should it seek to do so.
RISKS INHERENT IN PROVISION OF MEDICAL SERVICES
The Physician Group is involved in the delivery of healthcare services to
the public and, therefore, is exposed to the risk of professional liability
claims. Claims of this nature, if successful, could result in substantial
damage awards which may exceed the limits of any applicable insurance coverage.
Insurance against losses related to claims of this type can be expensive and
varies widely from state to state. The Company is indemnified under its
Practice Management Agreement with The Physician Group for claims against The
Physician Group, maintains liability insurance for itself and negotiates
liability insurance for The Physician Group. Although the Company maintains
insurance providing coverage for certain negligent acts of its employees and
The Physician Group maintains malpractice insurance, there can be no assurance
that the
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<PAGE> 12
insurance policies carried by the Company or by The Physician Group will
be sufficient so as to offset any claims made. Moreover, costs of insurance may
escalate beyond anticipated levels, or certain types of losses may be
uninsurable or may exceed available coverage. Successful claims could have a
material adverse effect on the Company's financial condition and profitability.
Additionally, the nature of the Company's business necessitates communication
between the Company and The Physician Group, on the one hand, and employers
with respect to health and physical conditions of employees and prospective
employees, on the other. The Company has established procedures to attempt to
ensure (i) no privileged patient/physician information is communicated to the
employer without the prior authorization of the employee, (ii) information
released to an employer relates only to health problems that are significant in
nature and that either could impact or be impacted by the employee's or
prospective employee's job, and (iii) information that is not job related is
not communicated to the employer. The Company also performs drug screen tests
for employers and communicates the results to the employers. There have not
been any claims against the Company due to actions taken or not taken by
employers as a result of these types of communications between the Company and
its clients, nor has any claim been made against it or The Physician Group for
unauthorized disclosure of privileged patient/physician information. However,
since employers may make employment job assignment and termination decisions
based upon these communications, it is possible that the Company or The
Physician Group could be held liable in connection with these communications.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent on Donald F. Angle,
M.D., the Company's Chairman of the Board and President and principal of The
Physician Group. The loss of Dr. Angle would have a material adverse effect on
the progress and ultimate likelihood of the Company's success. Conflicts of
interest could develop between the Company and The Physician Group, which
maintain a working relationship pursuant to the Practice Management Agreement.
Moreover, if for any reason Dr. Angle became unaffiliated with The Physician
Group, the new management of The Physician Group could seek to negotiate
changes in the Practice Management Agreement with the Company or the Company
could be required to seek another professional association to obtain
physicians' services. The Company has obtained a key-man life insurance policy
on the life of Dr. Angle in the amount of $2 million and has entered into an
employment agreement for non-physician services with Dr. Angle.
RMAC's success will be partially dependent on W. Howard Haun, who is a
member of the Board of Directors of the Company and president of RMAC. Mr. Haun
has over 35 years experience in the insurance business and has contributed
significantly in the acquisition of RMAC and the commencement of its
operations. However, there can be no assurance the Company will be successful
in recruiting other individuals with workers' compensation insurance experience
to assist Mr. Haun in managing the day-to-day operations of RMAC or, if
recruited, that such persons will be successful in establishing profitable
operations for RMAC.
COMPETITION
The market for occupational healthcare services is highly competitive.
Some of the Company's current and potential competitors are significantly
larger, have longer operating histories and have greater financial and
marketing resources than the Company. Although the Company believes that the
particular collection of medical services offered by The Physician Group,
management services and insurance has enabled the Company, and will in the
future enable it, to offer corporate clientele certain advantages over managed
occupational healthcare services provided by others, the Company anticipates
that healthcare providers, including hospitals and other occupational medicine
groups, as well as others, may attempt to penetrate the Company's markets by
offering comparable management programs. As managed care evolves, the Company
anticipates its competitors will increasingly consist of specialized provider
groups, insurance companies, HMOs and other significant providers of managed
care products. The Company currently recognizes OccuSystems,
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<PAGE> 13
Inc., CRA Managed Care, Inc., Atlantic Health Group, U.S. Healthworks and
Meridian, among others, as competitors in its existing markets. There can be no
assurance the Company will be successful in competing effectively in its
existing markets or in markets it may enter in the future.
CUSTOMER CONCENTRATION
Although none of the Company's existing customers accounts for 5% or more
of the Company's revenues, each of the Company's facilities are dependent on
certain significant customers. The loss of one or more significant customers at
an individual facility may have a material adverse effect on the ability of the
Company to achieve profitability at an individual facility and could impact the
Company's profitability on an overall basis. To the extent the Company's client
base continues to include large corporate customers, the Company will be
subject to an increased risk that the loss of any such customer will have a
material adverse impact on the Company's results of operations.
EXPANSION INTO ADDITIONAL GEOGRAPHIC AND CUSTOMER MARKETS
Future growth of the Company's operations depends, in part, on its ability
to manage workers' compensation programs for customers in additional states. In
each additional state, the Company must obtain all necessary regulatory
approvals, achieve acceptance of the Company in the local market, adapt its
procedures to that state's workers' compensation system and establish internal
controls that enable it to conduct operations in several locations. The length
of time required and the expense involved will vary from state to state. In
order to reduce the cost and time required to enter new markets, the Company
may seek to enter these markets through joint ventures, as was the case in
Arkansas. There can be no assurance that the Company can obtain approval in
every state it may seek to enter or that it can successfully utilize joint
ventures to reduce the time required for, and costs of, expansion.
The Company has focused its operations on managing workers' compensation
programs for employers in industries that have relatively high workers'
compensation costs and for employers with higher than average claims experience
in their industries. Although the Company intends to continue to focus on these
market segments, it intends to market its services to industries with lower
workers' compensation costs and to employers with lower claims experience. The
Company anticipates greater competition in the future for employers with lower
claims experience. There can be no assurance that expansion into these
additional market segments will be successful.
UNSPECIFIED ACQUISITIONS AMD ABSENCE OF STOCKHOLDER APPROVAL
As part of its business strategy, the Company has pursued, and intends to
continue to pursue, growth by adding established physicians' practices to The
Physician Group's practices and to the Company's management portfolio. Any such
transaction involves amendment of the Company's agreement with The Physician
Group to include the new practice and requires expanded client services and
support, increased personnel throughout the Company, expanded operational and
financial systems and the implementation of new control procedures. Failure to
implement financial controls and to address operational constraints which may
arise from time to time could adversely affect the Company's ability to fulfill
customer demands. Such acquisitions could involve a number of risks, including
the diversion of management's attention to the assimilation of the acquired
entities, adverse short-term affects on the Company's operating results and the
amortization of acquired intangible assets. Acquisitions have in some cases
included and may in the future include the issuance of shares of Common Stock
of the Company as a portion of the consideration paid. Stockholders will in all
likelihood be unable to review the financial statements of the acquisition
candidate or vote upon the terms of any such transaction because the Board of
Directors will in almost all cases have the authority to conclude the
transaction.
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<PAGE> 14
CONTROL BY EXISTING STOCKHOLDERS
The Company's executive officers, directors and principal stockholders
beneficially own approximately 35% of the Company's outstanding shares of
Common Stock, assuming the exercise of their currently exercisable (or
exercisable within 60 days of the date of this Prospectus) options to purchase
the Company's Common Stock. These stockholders, if acting together, would
likely be able effectively to control most matters requiring approval by the
stockholders of the Company, including the election of a majority of the
directors. The voting power of these stockholders under certain circumstances
could have the effect of delaying or preventing a change in control of the
Company. See "Description of Securities."
PRICE FLUCTUATIONS
The market prices of the Company's securities do not necessarily bear any
relationship to assets, book value, earnings history or other investment
criteria. Factors such as quarterly fluctuations in results of operations,
announcements of new insurance products or occupational healthcare programs by
the Company or its competitors, market conditions in the occupational
healthcare segment of the healthcare industry or market conditions in general,
may cause the market prices of the Company's securities to fluctuate, perhaps
substantially. Sales of a substantial number of shares of Common Stock in
future periods could adversely affect the market price of the Common Stock.
Holders of 2.3 million restricted shares entered into lock-up agreements at or
prior to the date of the Company's initial public offering which restrict the
sale or disposition of such shares until February 1998. The sale of these
shares could have a material adverse effect on the price of the Company's
Common Stock. In addition, in recent years the stock market has experienced
significant price and volume fluctuations. These fluctuations, which are often
unrelated to the operating performance of specific companies, have had a
substantial effect on the market price for many small capitalization companies.
Factors such as those cited above, as well as other factors which may be
unrelated to the operating performance of the Company, may adversely affect the
price of the Company's securities.
RIGHTS OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of up
to 5,000,000 shares of Preferred Stock. The Preferred Stock may be issued in
series with the rights and preferences determined by the Board of Directors.
Such rights and preferences could include, among other things, preferential
voting rights, conversion rights, dividend payment requirements, redemption
provisions, and preferences as to dividends and distributions. The issuance of
Preferred Stock with such rights could have the effect of limiting stockholder
participation in certain transactions such as mergers or tender offers or could
discourage or prevent a change in management or control of the Company. As of
the date of this Prospectus, no Preferred Stock is outstanding and the Company
has no present intention to issue any Preferred Stock.
SECURITIES ISSUABLE PURSUANT TO OPTIONS AND WARRANTS
At the date of this Prospectus, the Company had reserved an aggregate of
2,956,660 shares of Common Stock for issuance on exercise of outstanding
options and warrants. To the extent the market price of the Common Stock
underlying such options and warrants exceeds the exercise price, the holders
can profit from the exercise and sale of the Common Stock, and their exercise
may dilute the ownership interest of existing stockholders. In addition, the
existence of the options and warrants may affect adversely the terms on which
the Company may obtain additional equity financing. Moreover, the holders are
likely to exercise their rights to acquire Common Stock at a time when the
Company would otherwise be able to obtain capital on terms more favorable than
could be obtained through the exercise of such securities. See "Description of
Securities."
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LIMITATION OF LIABILITY
The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable for monetary damages to the Company or
its stockholders for a breach of fiduciary duty as a director, subject to
limited exceptions. Although such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission, the
presence of these provisions in the Certificate of Incorporation could prevent
the recovery of monetary damages against directors of the Company.
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The Company intends to retain profits, if any,
to fund growth and expansion.
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The statements contained in this Prospectus or incorporated by reference
herein that are not purely historical are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions or strategies regarding the future. All
forward-looking statements included herein are based on information available
to the Company on the date hereof, and the Company assumes no obligation to
update any such forward-looking statements. It is important to note that the
Company's actual results could differ materially from those in such
forward-looking statements. Among the factors that could cause actual results
to differ materially are the risk factors which may be listed from time to time
in the Company's reports on Form 10-QSB, 10-KSB and registration statements
filed under the Securities Act of 1933, including this Registration Statement.
Forward-looking statements encompass the (i) expectation that the Company will
be successful in securing additional capital, (ii) the operations of RMAC and
its ability to enter into quota sharing arrangements with issuing carriers,
(iii) the continued expansion of the Company's operations through joint
ventures and acquisitions, (iv) success of existing and new marketing
initiatives undertaken by the Company, (v) the retention of physicians, through
The Physician Group, and the Company's success in generating revenue increases
through the retention of such physicians and an increase in their practices,
(vi) the Company's success, in connection with The Physician Group, in
concluding acquisitions at prices which permit the Company to achieve
reasonable rates of return on such acquisitions, (vii) the Company's success in
expanding service to regional and national customers which can be serviced
through existing facilities and facilities the Company may be successful in
acquiring, and (viii) success in controlling the cost of services provided and
general administrative expenses as a percentage of revenues.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements were based on assumptions that the Company would
continue to expand, that capital will be available to fund the Company's growth
at a reasonable cost, that competitive conditions within the industry would not
change materially or adversely, that demand for the Company's services would
remain strong, that there would be no material adverse change in the Company's
operations or business, and that changes in laws and regulations or court
decisions will not adversely or significantly alter the operations of the
Company. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive, regulatory and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of
the Company. Although the Company believes that the assumptions underlying the
forward- looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
information will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Warrants or Shares offered hereby. However, the Company will receive proceeds
from any Warrants which are exercised up to a maximum of $2.8 million. Such
proceeds, if any, will be used as working capital and for general corporate
purposes, including administrative costs and expenses. Any proceeds not
immediately required will be invested principally in U.S. government
securities, short-term certificates of deposit, money market funds or other
short-term, interest-bearing securities.
PRICE RANGE OF COMMON STOCK AND WARRANTS
The Company's Common Stock and Warrants have been quoted on The Nasdaq
SmallCap Market under the trading symbols CDOC and on the Boston Stock Exchange
under the symbol CDR since the Company's initial public offering in February
1996. The following table sets forth the range of high and low closing bid
prices of the Company's Common Stock and Warrants, as reported by The Nasdaq
Stock Market, from February 7, 1996 through March 31, 1997. The prices set
forth below reflect interdealer quotations, without retail markups, markdowns
or commissions, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
------------------ ----------------
FISCAL YEAR 1996: HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
Third Quarter (commencing February 7, 1996) $10.25 $8.50 $3.50 $2.25
Fourth Quarter .............................................. 10.87 9.37 4.25 3.00
FISCAL YEAR 1997:
First Quarter................................................. 10.00 8.87 4.00 3.12
Second Quarter................................................ 8.87 5.87 3.12 1.50
Third Quarter................................................. 6.50 5.50 1.62 1.00
Fourth Quarter................................................ 6.00 3.50 1.00 .50
</TABLE>
The last reported bid price of the Common Stock on July 3, 1997 was $3.75
per share. The last reported bid price of the Warrants on July 3, 1997 was
$.625 per Warrant.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock. The
Company anticipates that for the foreseeable future all earnings will be
retained for use in the Company's business and no cash dividends will be paid
to stockholders.
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RECENT EVENTS
On March 27, 1997, the Company accepted two financing commitments from
HealthCare Financial Partners, an affiliate of the Selling Securityholder
("HCF"). On April 15, 1997, the Company closed on the credit arrangements
contemplated by the HCF financing commitments. The first HCF credit facility
consists of a $5 million revolving line of credit secured by a first lien on
all accounts receivable (the "Accounts Receivable Facility"). The Accounts
Receivable Facility provides for a two-year term, interest at the rate of prime
plus 2%, a .083% monthly collateral management fee and a $25,000 commitment
fee. The second HCF credit facility consists of a $1.5 million term loan
secured by all of the Company's assets, including an assignment of the
Company's practice management agreement (the "Term Loan"). The Term Loan
provides for a two-year term, interest at the rate of prime plus 4%, a 2%
commitment fee and issuance of the Warrants. The Company borrowed $2.9 million
under the HCF credit facilities at the time of closing. As of June 30, 1997,
borrowings in the aggregate amount of $2.779 million were outstanding under the
HCF credit facilities.
A Registration Statement filed by the Company under the Securities Act
covering 502,227 shares of Common Stock was declared effective by the
Commission on April 10, 1997. All of the shares included on such Registration
Statement are owned and may be offered and sold by seven existing
securityholders of the Company. Six of the selling securityholders are
physicians who acquired an aggregate of 498,417 shares of Common Stock in
connection with the sale of their medical practices to The Physician Group.
Each physician has agreed to restrict the number of shares he will sell in any
given month until February 28, 1998, at which time the restriction will
terminate. As a result of such restrictions, the Company expects that monthly
sales by the physicians prior to February 28, 1998 will not exceed 41,000
shares.
SELLING SECURITYHOLDER
The following table sets forth certain information concerning the Shares
being registered for the benefit of the Selling Securityholder. All of such
shares are issuable upon exercise of the Warrants. The Company has been advised
that the Selling Securityholder has sole voting and investment power with
respect to all of the Shares listed below.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
OWNERSHIP
--------------------------- NUMBER OF SHARES
NAME NO. OF SHARES % OF CLASS BEING OFFERED
- ---- ------------- ---------- ----------------
<S> <C> <C> <C>
HealthCare Financial Partners-Funding II, L.P........... 400,000 7.4 400,000
</TABLE>
-16-
<PAGE> 18
PLAN OF DISTRIBUTION
The Selling Securityholder may sell the Warrants or Shares from time to
time in transactions (which may include block transactions by or for the
account of the Selling Securityholder) in the over-the-counter market or in
negotiated transactions or a combination of such methods of sale. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale or at negotiated prices. The Selling Securityholder may effect
such transactions by selling its securities directly to purchasers, through
broker-dealers acting as agents for the Selling Securityholder or to
broker-dealers who may purchase securities as principals and thereafter sell
the securities from time to time in the over-the-counter market in negotiated
transactions or otherwise. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholder or the purchasers for whom such broker-dealers may act
as agents or to whom they may sell as principals or otherwise (which
compensation as to a particular broker-dealer may exceed customary
commissions). The Company will not receive any proceeds from the sale of
securities by the Selling Securityholder, but will receive the proceeds, if
any, from the exercise of Warrants. The Registration Statement of which this
Prospectus forms a part must be current at the time the Selling Securityholder
sells its securities and also at the time the Warrants are exercised.
Broker-dealers who participate in the distribution of the Shares or
Warrants and who currently act as market makers for the Company's Common Stock
may engage in "passive market making" in the Company's securities on the Nasdaq
National Market in accordance with Rule 103 of Regulation M under the Exchange
Act. Subject to certain conditions, Rule 103 permits persons participating in a
distribution to engage in limited market making transactions during the period
when Regulation M would otherwise prohibit such activity. Rule 103 generally
prohibits persons engaged in passive market making activity from entering a bid
or effecting a purchase at a price which exceeds the highest bid by a market
maker not participating in the distribution. Rule 103 also limits the volume of
purchases which may be made by a person in passive market making activities.
Subject to these limitations, certain broker dealers participating in the
distribution of the Warrants or Shares may engage in passive market making in
the Company's Common Stock.
-17-
<PAGE> 19
DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $.01 per share, and 5,000,000 shares of Preferred Stock, par value $.01
per share. As of the date of this Prospectus, 5,057,749 shares of Common Stock
were issued and outstanding and no Preferred Stock was issued or outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. The Company's
Certificate of Incorporation denies cumulative voting rights in the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that are applicable to
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of
funds legally available therefor. In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share
ratably in the assets remaining after payment of liabilities and the
liquidation preference of outstanding Preferred Stock, if any. Holders of
Common Stock have no preemptive, conversion or redemption rights. All of the
outstanding shares of Common Stock are fully paid and non-assessable.
OUTSTANDING WARRANTS AND OPTIONS
The Units offered in the Company's public offering each consisted of one
share of Common Stock and one Warrant. The Warrants were immediately separately
transferable from the Common Stock and in March 1996, the Units were delisted
from trading. Each Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $7.00 until February 6, 1999, subject to the
Company's redemption rights described below. The 1,839,600 Warrants were issued
pursuant to the terms of a Warrant Agreement between the Company and
Continental Stock Transfer & Trust Company (the "Warrant Agent").
The Warrants issued to the Selling Securityholder and offered hereby are
issued pursuant to the Warrant Agreement and are currently identical in all
respects to the Warrants issued in the Company's public offering. As a result,
the Warrants offered hereby will trade on The Nasdaq SmallCap Market and the
Boston Stock Exchange under the symbols "CDOCW" and "CDRW."
The Company, in its discretion, may redeem outstanding Warrants, in whole
but not in part, upon not less than 30 days' notice, at a price of $.05 per
Warrant, provided that the closing bid price of the Common Stock equals or
exceeds $10.00 for 20 consecutive trading days ending five days immediately
prior to such notice. The Warrants will be exercisable until the close of
business on the date fixed for redemption in such notice. Any Warrant not
exercised by the date fixed for redemption will cease to be exercisable and the
holder thereof will be entitled only to the redemption price.
In addition to the Warrants issued in the initial public offering, the
Company issued to the representative of the several underwriters in such
offering a Unit Purchase Option exercisable through February 5, 2001 to
purchase 320,000 shares of Common Stock on full exercise of the Unit Purchase
Option and underlying Warrants. The Unit Purchase Option and the shares
underlying such Unit Purchase Option were registered on the IPO Registration
Statement.
Pursuant to agreements between the Company and one of the physicians, the
Company is obligated to grant to such physician an option on September 20 of
each year for so long as the physician is employed by The Physician Group as
either a Staff Physician or a Regional Medical Director to purchase that number
of shares of Common Stock of the Company which has a total market value (based
on the average closing trading price of the Common Stock during the five
trading days prior to September 20 of each respective year) of $100,000. Each
option will be valid for a period of six years from its respective September 20
grant date.
-18-
<PAGE> 20
As of the date of this Prospectus, a total of 393,250 options of the
1,040,875 options available for issuance under the Company's 1995 Omnibus Stock
Option Plan, as amended (the "Plan"), are outstanding, each with an exercise
price of $5.25 (except in the case of Dr. Angle, the Company's President, whose
exercise price is $5.78). All such plan options vest over a period of 18 months
generally commencing two to six months from the date of grant.
PREFERRED STOCK
The Board of Directors has the authority, without further stockholder
approval, to issue up to 5,000,000 shares of Preferred Stock from time to time
in one or more series, to establish the number of shares to be included in each
such series, and to fix the preferences and rights of the shares of each such
series. The issuance of Preferred Stock could delay or prevent a change in
control, decrease the amount of earnings and assets available for distribution
to the holders of Common Stock, if any, adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock, or in certain
circumstances, decrease the market price of the Common Stock.
The Company designated 400,000 shares as Series A Convertible Preferred
Stock and sold such shares in a private offering in November 1995. The
remaining 4,600,000 shares of authorized Preferred Stock have not been
designated by the Company. The Series A Convertible Preferred Stock
automatically converted into shares of Common Stock on a one-for-one basis on
the effective date of the Company's initial public offering and accordingly, no
Preferred Stock is currently outstanding. The Company registered the Common
Stock into which the Series A Convertible Preferred Stock was converted and the
holders of the converted shares may therefore sell or otherwise dispose of
their shares of Common Stock without restriction.
DELAWARE BUSINESS COMBINATION PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which regulates large
accumulations of shares, including those made by tender offers. Section 203 may
have the effect of significantly delaying a purchaser's ability to acquire the
entire interest in the Company if such acquisition is not approved by the
Company's Board of Directors. In general, Section 203 prevents an "Interested
Stockholder" (defined generally as a person with 15% or more of a corporation's
outstanding voting stock) from engaging in a "Business Combination" (defined
below) with a Delaware corporation for three years following the time that such
person became an Interested Stockholder. For purposes of Section 203, the term
"Business Combination" is defined broadly to include mergers and certain other
transactions with or caused by the Interested Stockholder; sales or other
dispositions to the Interested Stockholder (except proportionately with the
corporation's other stockholders) of assets of the corporation or a subsidiary
equal to 10% or more of the aggregate market value of the corporation's
consolidated assets or its outstanding stock; the issuance or transfer by the
corporation or a subsidiary of stock of the corporation or such subsidiary to
the Interested Stockholder (except for transfers in a conversion or exchange or
a pro-rata distribution or certain other transactions, none of which increase
the Interested Stockholder's proportionate ownership of any class or series of
the corporation's or such subsidiary's stock); or receipt by the Interested
Stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on Business Combinations by Section 203
does not apply if: (a) prior to the time that a stockholder becomes an
Interested Stockholder, the Board approves either the Business Combination or
the transaction which resulted in the person becoming an Interested
Stockholder; (b) the Interested Stockholder owns at least 85% of the
corporation's voting stock outstanding upon consummation of the transaction
which made him or her an Interested Stockholder (excluding from the 85%
calculation shares owned by directors who are also officers of the corporation
and shares held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (c) at or
-19-
<PAGE> 21
subsequent to such time a person becomes an Interested Stockholder, the Board
approves the Business Combination, and it is also approved at a stockholder
meeting by 662/3% of the outstanding voting stock not owned by the Interested
Stockholder.
Under Section 203, the restrictions described above do not apply if, among
other things, the corporation's original certificate of incorporation or any
amendment to its certificate of incorporation contains a provision expressly
electing not to be governed by Section 203. The Company's Certificate of
Incorporation does not contain such a provision. The restrictions described
above also do not apply to certain Business Combinations proposed by an
Interested Stockholder following the announcement or notification of one of
certain extraordinary transactions involving the corporation and a person who
had not been an Interested Stockholder during the previous three years or who
became an Interested Stockholder with the approval of a majority of the
corporation's directors.
LEGAL MATTERS
The validity of the Common Stock offered will be passed upon for the
Selling Stockholders by Berliner Zisser Walter & Gallegos, P.C., Denver,
Colorado.
EXPERTS
The financial statements for the fiscal years ended June 30, 1995 and 1996
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-KSB for the year ended June 30, 1995 and 1996, have been so included in
reliance on the report of Ehrhardt Keefe Steiner & Hottman PC, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
With respect to information contained in the Company's quarterly reports
on Form 10-QSB, Ehrhardt Keefe Steiner & Hottman PC has not audited or reviewed
such information and accordingly, such firm does not express an opinion or any
other form of assurance on that information.
-20-
<PAGE> 22
================================================================================
NO DEALER, SALESPERSON OR OTHER 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 REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS. 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 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.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................ 2
Incorporation of Certain Information
by Reference....................................... 2
Prospectus Summary................................... 3
Risk Factors......................................... 5
Use of Proceeds...................................... 15
Price Range of Common Stock.......................... 15
Dividend Policy...................................... 15
Recent Events........................................ 16
Selling Securityholder............................... 16
Plan of Distribution................................. 17
Description of Securities............................ 18
Legal Matters........................................ 20
Experts.............................................. 20
</TABLE>
================================================================================
THE COMPANY DOCTOR
400,000 Redeemable Warrants
and
400,000 Shares of Common Stock
------------
PROSPECTUS
------------
, 1997
----------
================================================================================
-21-
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with this offering which will be paid by The
Company Doctor (hereinafter in this Part II, the "Company") are estimated to be
substantially as follows:
<TABLE>
<CAPTION>
AMOUNT PAYABLE
BY THE
ITEM COMPANY
- ---- --------------
<S> <C>
S.E.C. Registration Fees...................................................................... $ 924.24
Legal Fees.................................................................................... 5,000.00*
Accounting Fees and Expenses.................................................................. 3,000.00*
Miscellaneous Expenses........................................................................ 1,075.76*
---------
Total.................................................................................... $ 10,000.00*
=========
</TABLE>
- ------------------
* Estimated for the purpose of this filing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Certificate of Incorporation which
provide that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law; (iii) an act related to the unlawful stock repurchase or
payment of a dividend under Section 174 of Delaware General Corporation Law;
and (iv) transactions from which the director derived an improper personal
benefit. Such limitation of liability does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, by bylaws, agreements or
otherwise, to the full extent permitted under Delaware law. The Company
intends to enter into separate indemnification agreements with its directors
and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as directors or officers (other
than liabilities arising from willful misconduct of a culpable nature), to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.
<PAGE> 24
ITEM 16. EXHIBITS.
The following is a complete list of Exhibits filed herewith or which are
incorporated herein by reference thereto.
EXHIBIT NO.
1. Not applicable.
2. Not applicable.
# 4.1 Form of specimen certificate for Common Stock of the Company.
# 4.2 Form of specimen certificate for Warrants of the Company.
# 4.4 Form of Unit Purchase Option of the Company.
# 4.5 Form of Warrant Agreement by and among the Company, Continental
Stock Transfer & Trust Company and the Representative.
* 4.6 Letter Agreement dated April 15, 1997, by and between the
Company and HealthCare Financial Partners-Funding II, L.P.
* 5. Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding
legality of the securities covered by this Registration
Statement.
8. Not applicable.
15 Not applicable.
* 23.1 The consent of Berliner Zisser Walter & Gallegos, P.C., to the
use of its opinion with respect to the legality of the
securities covered by this Registration Statement and to the
references to such firm in the Prospectus filed as part of this
Registration Statement is included in Exhibit 5.
* 23.2 Consent of Ehrhardt Keefe Steiner & Hottman PC, independent
certified public accountants for the Company.
24. Not applicable.
25. Not applicable.
26. Not applicable.
27. Not applicable.
- --------------------------------
* Filed herewith.
# Incorporated by reference from the Registrant's Registration
Statement on Form SB-2 (S.E.C. File No. 33-74876-D) as declared
effective on February 6, 1996.
II-2
<PAGE> 25
ITEM 17. UNDERTAKINGS.
(a) Rule 415.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to:
(iii) Include any material additional or changed
information on the plan of distribution.
(2) For determining liability under the Securities Act of
1933 (the "Securities Act"), treat each post-effective amendment as a
new registration statement of securities offered, and the offering
of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of
the offering.
(e) Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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 small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer 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.
(i) Rule 430A.
The undersigned small business issuer hereby undertakes that it will:
(1) For determining any liability under the Securities Act,
treat 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 small business issuer
under Rule 424(b)(1) or (4) or 497(h) under the Securities Act as
part of this Registration Statement as of the time the Commission
declared it effective.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of Prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
II-3
<PAGE> 26
SIGNATURES
In accordance with 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-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Irving, State of Texas, on July 9, 1997.
THE COMPANY DOCTOR
By: /s/ Donald F. Angle, M.D.
--------------------------------------------
Donald F. Angle, M.D., Chairman of the Board
and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donald F. Angle, M.D. Chairman of the Board and July 9, 1997
- ------------------------------------------ President (Principal Executive Officer)
Donald F. Angle, M.D.
/s/ Fred G. Parrish Chief Operating Officer and July 9, 1997
- ------------------------------------------ Acting Chief Financial Officer
Fred G. Parrish
- ------------------------------------------ Director
Carl S. Luikart
/s/ John P. Kennedy Director July 9, 1997
- ------------------------------------------
John P. Kennedy
/s/ Dale W. Willetts Director July 9, 1997
- ------------------------------------------
Dale W. Willetts
/s/ W. Howard Haun Director July 9, 1997
- ------------------------------------------
W. Howard Haun
/s/ Stephen W. Cavanaugh Director July 9, 1997
- ------------------------------------------
Stephen W. Cavanaugh
</TABLE>
II-4
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ---------- -------------------
<S> <C>
1. Not applicable.
2. Not applicable.
# 4.1 Form of specimen certificate for Common Stock of the Company.
# 4.2 Form of specimen certificate for Warrants of the Company.
# 4.4 Form of Unit Purchase Option of the Company.
# 4.5 Form of Warrant Agreement by and among the Company, Continental
Stock Transfer & Trust Company and the Representative.
* 4.6 Letter Agreement dated April 15, 1997, by and between the
Company and HealthCare Financial Partners-Funding II, L.P.
* 5. Opinion of Berliner Zisser Walter & Gallegos, P.C., regarding
legality of the securities covered by this Registration
Statement.
8. Not applicable.
15 Not applicable.
* 23.1 The consent of Berliner Zisser Walter & Gallegos, P.C., to the
use of its opinion with respect to the legality of the
securities covered by this Registration Statement and to the
references to such firm in the Prospectus filed as part of this
Registration Statement is included in Exhibit 5.
* 23.2 Consent of Ehrhardt Keefe Steiner & Hottman PC, independent
certified public accountants for the Company.
24. Not applicable.
25. Not applicable.
26. Not applicable.
27. Not applicable.
</TABLE>
- --------------------------------
* Filed herewith.
# Incorporated by reference from the Registrant's Registration
Statement on Form SB-2 (S.E.C. File No. 33-74876-D) as declared
effective on February 6, 1996.
<PAGE> 1
EXHIBIT 4.6
HEALTHCARE FINANCIAL PARTNERS
April 15, 1997
Donald F. Angle, President
The Company Doctor
5215 North O'Connor, Suite 1800
Irving, Texas 75039
Dear Don:
This letter confirms the agreement between HealthCare Financial
Partners - Funding II. L.P. ("Lender") and The Company Doctor ("Borrower") with
regard to the warrants to purchase Borrower's stock to be issued to Lender in
conjunction with the term loan to be funded today. In this regard, Borrower and
Lender agree:
1. Lender will receive 450,000 warrants to purchase Borrower's stock.
Such warrants will be unregistered but, with the exception of the
terms listed below, will be identical to those warrants currently
traded on Nasdaq under the symbol "CDOCW." Borrower shall have same
right to redeem the warrants as it has with the public warrants.
2. If Borrower registers the warrants within 120 days from the date
this letter agreement. Lender shall reduce its warrant position to
400,000 warrants.
3. During the period that Lender's warrants remain unregistered, the
warrants shall contain the following provisions:
a. If Borrower exercises its call option under all or any of the
publicly traded warrants, Lender shall have a demand
registration rights with respect to the common stock issuable
on exercise of the warrants.
b. A put option to be exercised at Lender's discretion any time
on or after the current maturity date of the term loan or on or
after the repayment of the loan, whichever is earlier. The
price to be paid pursuant to this put option shall be 5/6th of
the closing price of the public warrants. In lieu of paying the
"put," Borrower may provide Lender a demand registration right
with respect to the common stock issuable on the exercise of
the warrants.
c. Piggyback registration rights.
<PAGE> 2
Donald F. Angle, President
April 15, 1997
Page 2
Nothing in this letter shall be construed to alter Section 10(j) of the term
loan (related to the performance of Borrower during the fourth quarter of
Borrower's current fiscal year). In the event of any conflict between this
letter agreement and the registration rights agreement between the parties, the
terms of this letter agreement should govern.
The terms outlined shall be documented in full as quickly as possible
following the closing of the term loan and Borrower's accounts receivable
facility.
We are excited about the prospects of The Company Doctor and look
forward to a mutually beneficial relationship.
Sincerely,
/s/ Howard Widra
Howard Widra
Vice President/Senior Analyst
AGREED AND ACCEPTED:
THE COMPANY DOCTOR
By: /s/ Donald F. Angle
-------------------------------
Donald F. Angle, President
<PAGE> 1
EXHIBIT 5
[BERLINER ZISSER WALTER & GALLEGOS LETTERHEAD]
July 9, 1997
The Company Doctor
5215 N. O'Connor Boulevard, Suite 1800
Irving, Texas 75039
Re: Registration Statement on Form S-3 (S.E.C. File No. 33-98010)
Covering 400,000 Shares of Common Stock of The Company Doctor
Ladies and Gentlemen:
We have acted as counsel to The Company Doctor, a Delaware corporation
(the "Company"), in connection with the proposed offering by certain
warrantholders of the Company of 400,000 shares of Common Stock (the "Shares"),
in accordance with the registration provisions of the Securities Act of 1933,
as amended.
In such capacity, we have examined, among other documents, the
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission on July 9, 1997 (as may be amended from time to time, the
"Registration Statement"), covering the offering of the Shares.
Based on the foregoing and on such further examination as we have deemed
relevant and necessary, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware.
2. The Shares of Common Stock have been legally and validly authorized
under the Certificate of Incorporation of the Company, and on receipt of the
consideration required by, and when issued in accordance with the description
set forth in, the Registration Statement, the Shares will constitute duly and
validly issued, outstanding, and fully paid and nonassessable securities of the
Company.
We hereby consent to the use of our name and to the references to our firm
in the Prospectus forming a part of the Registration Statement, and to the
filing of a copy of this opinion as Exhibit No. 5 thereto.
Very truly yours,
/s/ BERLINER ZISSER WALTER & GALLEGOS, P.C.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The Company Doctor on Form S-3, of our report dated July 26, 1996 (except for
Note 2 as to which the date is August 23, 1996) appearing in the annual report
on Form 10-KSB of The Company Doctor and Subsidiaries for the year ended June
30, 1996 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Ehrhardt Keefe Steiner & Hottman PC
July 8, 1997
Denver, Colorado
