<PAGE>
As filed with the Securities and Exchange Commission on June 20, 1996.
Registration No. 333-04939
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________
PRE-EFFECTIVE AMENDMENT
NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________
LIFERATE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1682994
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
__________
7210 METRO BOULEVARD
MINNEAPOLIS, MINNESOTA 55439
(612) 844-0599
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
__________
WILLIAM W. CHORSKE
7210 METRO BOULEVARD
MINNEAPOLIS, MINNESOTA 55439
(612) 844-0599
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_______________
Copies to:
Thomas A. Letscher, Esq.
Oppenheimer Wolff & Donnelly
3400 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
(612) 344-9300
_______________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
_______________
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. [__]
_______________________
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 SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
LIFERATE SYSTEMS, INC.
1,738,211 SHARES OF COMMON STOCK
This Prospectus relates to 1,738,211 shares (the "Shares") of Common
Stock, no par value (the "Common Stock), of LifeRate Systems, Inc. (the
"Company") that may be offered for sale for the account of certain
shareholders of the Company as stated herein under the heading "Selling
Shareholders." The Shares being offered by the Selling Shareholders
hereunder consist of (i) 155,555 shares of Common Stock originally issued in
connection with the Company's private placement of Common Stock and warrants
in December 1994, (ii) 155,555 shares of Common Stock issuable upon exercise
of warrants originally issued in connection with the Company's private
placement of Common Stock and warrants in December 1994, (iii) 49,154 shares
of Common Stock issued in private transactions during 1994, (iv) 858,399
shares of Common Stock originally issued in connection with the Company's
private placement of Common Stock in December 1995 and January 1996, (v)
342,707 shares of Common Stock originally issued to Donald B. Olson and Merry
M. Olson and subsequently sold in a private transaction in February 1996,
(vi) 91,000 shares of Common Stock issuable upon exercise of warrants
originally issued in March 1995 to the underwriter of the Company's initial
public offering of Common Stock and (vii) 85,841 shares of Common Stock
issuable upon exercise of warrants originally issued in December 1995 and
January 1996 to the selling agent in connection with the Company's private
placement of Common Stock. The period of time which has been fixed within
which the Shares covered by this Prospectus may be offered or sold is the
shorter of three (3) years, until all Shares have been sold or until all
Shares are eligible for resale under Rule 144 under the Securities Act of
1933, as amended (the "Securities Act").
The Selling Shareholders have advised the Company that sales of the Shares
offered hereunder by them, or by their pledgees, donees, transferees or other
successors in interest, may be made from time to time in the over-the-counter
market, through negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices. The Shares may be sold
by one or more of the following methods: (a) a block trade in which the broker
or dealer so engaged will attempt to sell the Shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; and (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. Sales
may be made pursuant to this Prospectus to or through broker-dealers who may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders or the purchasers of Shares for whom such broker-dealer
may act as agent or to whom they may sell as principal, or both (which
compensation as to a particular broker-dealer may be in excess of customary
commissions). One or more supplemental prospectuses will be filed pursuant to
Rule 424 under the Securities Act of 1933, as amended (the "Securities Act") to
describe any material arrangements for the sales of the Shares offered hereunder
when such arrangements are entered into by any of the Selling Shareholders and
any other broker-dealers that participate in the sale of the Shares. In
addition, any Shares that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold, under Rule 144 rather than pursuant to this
Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
The Selling Shareholders and any broker-dealers or other persons acting on
their behalf in connection with the sale of Shares hereunder may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit realized by them on the resale of Shares as
principals may be deemed to be underwriting commissions under
<PAGE>
the Securities Act. As of the date hereof, there are no special selling
arrangements between any broker-dealer or other person and any Selling
Shareholder.
The Company will not receive any part of the proceeds of any sales of
Shares pursuant to this Prospectus. Pursuant to the terms of the subscription
agreements relating to the sale of the Shares (the "Subscription Agreements"),
the Company will pay all the expenses of registering the Shares, except for
selling expenses (including any fees and commissions payable to broker-dealers
or other persons) incurred by the Selling Shareholders, which will be borne by
the Selling Shareholders. In addition, the Subscription Agreements provide for
certain other usual and customary terms, including indemnification by the
Company of the Selling Shareholders against certain liabilities arising under
the Securities Act.
The Company's Common Stock is traded on the Nasdaq SmallCap Market under
the symbol "LRSI." On June 18, 1996, the closing bid price of the Common Stock
on the Nasdaq SmallCap Market was $8.125 per share.
_______________________
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.
_______________________
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. Neither the delivery of
this Prospectus nor any sale made under this Prospectus shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
THE DATE OF THIS PROSPECTUS IS JUNE 20, 1996.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act. This Prospectus does not contain all of the
information, exhibits and undertakings set forth in the Registration Statement,
certain portions of which are omitted as permitted by the Rules and Regulations
of the Commission. Copies of the Registration Statement and the exhibits are on
file with the Commission and may be obtained, upon payment of the fee prescribed
by the Commission, or may be examined, without charge, at the offices of the
Commission set forth above. For further information, reference is made to the
Registration Statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
0-25530) are incorporated into this Prospectus by reference: (a) Annual Report
on Form 10-KSB for the year ended December 31, 1995, as amended; (b) Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1996; (c) Current Report
on Form 8-K, dated April 24, 1996; (d) all other reports filed by the Company
pursuant to Sections 13(a) or 15(d) of the Exchange Act since March 31, 1996;
and (f) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A and any amendments or reports filed for the
purpose of updating such description.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which are incorporated by
reference in this Prospectus, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Written
requests for such copies should be directed to LifeRate Systems, Inc., 7210
Metro Boulevard, Minneapolis, Minnesota 55439, Attention: Bruce T. Klein, Chief
Financial Officer; telephone number: (612) 844-0599.
3
<PAGE>
THE COMPANY
LifeRate Systems, Inc. (the "Company" or "LifeRate") has developed and is
marketing a proprietary software system that stores, retrieves, integrates and
analyzes data to produce information for health care providers and payors to
better manage and control how they do business and how they deliver care. The
Company's first application of its software system, LifeRate-TM- Cardiovascular,
has been developed for outpatient cardiology applications. This information --
generally called "clinical information and outcomes" -- is used to measure and
quantify the quality and cost of medicine. Today's health care environment
increasingly requires that physicians and provider organizations document and
report clinical outcomes to prove to the payors and buyers of care that they are
delivering the highest quality care at the most cost-effective price. Both
parties, the Company believes, will continue to be required to provide this type
of information in order to compete effectively in this rapidly changing market.
The Company's activities during 1995 and through the first quarter of 1996
primarily consisted of completing development of its core software system,
completing the outpatient application of LifeRate Cardiovascular, developing
applications of LifeRate Cardiovascular for use in the cardiac catheterization
laboratory and operating room, building its National Cardiology Data base,
establishing its sales, marketing, clinical and system support functions,
focusing its product development and marketing efforts on the cardiology market,
and installing the system at cardiology practice groups. The Company also
established strategic relationships with Medtronic, Inc. and Pfizer, Inc. in
December 1995.
The Company installed its core software system at a customer site for Beta
testing in April 1995. Following testing, the Company made a number of
improvements and enhancements to its core system and developed the outpatient
application of LifeRate Cardiovascular. LifeRate released demonstration
versions of the core system, along with the outpatient application, in August
1995 and commercial versions in December 1995. The Company accepted its first
orders for the core system and the outpatient application of LifeRate
Cardiovascular in the third quarter and began installation in the fourth quarter
of 1995. To date, the Company has entered into agreements for the sale and
installation of the LifeRate Cardiovascular outpatient application with five
cardiovascular practice groups. LifeRate is also developing the cath lab and
operating room applications of LifeRate Cardiovascular, which integrate to form
one cardiovascular continuum of care. The initial cath lab application was
completed in May 1996 for Beta test site installation, and the operating room
application is expected to be available for general commercial release in August
1996. The Company's National Cardiology Data base, which integrates with
LifeRate's cardiovascular outpatient, cath lab, and operating room software
applications, included over 4,500 lives at March 31, 1996.
In April 1996, the Company made key management changes and made two new
significant appointments. David Haskin resigned as Chairman of the Board, Chief
Executive Officer and a director of the Company; Donna Edmonds resigned as
President, Chief Operating Officer and a director of the Company; and Jeffrey
Comer resigned as Executive Vice President of Sales and Marketing. David D.
Koentopf was elected Chairman of the Board. Mr. Koentopf, a Twin Cities-based
private investor and business consultant, has been a member of the Board of
Directors of the Company since 1993. The Board also elected William W. Chorske
as President and Chief Executive Officer and a member of the Board. Prior to
joining the Company, Mr. Chorske had been employed since 1987 by Medtronic, Inc.
in a variety of capacities, including Senior Vice President and Chief Financial
Officer from 1987 to 1991 and most recently as President, Medtronic Europe.
4
<PAGE>
The Company was incorporated in Minnesota on July 18, 1990. The Company's
offices are currently located at 7210 Metro Boulevard, Minneapolis, Minnesota
55439. The Company's telephone number is (612) 844-0599.
RISK FACTORS
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND MAY NOT BE
APPROPRIATE FOR INVESTORS WHO CANNOT AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
PROSPECTIVE PURCHASERS OF THE SHARES SHOULD BE FULLY AWARE OF THE RISK FACTORS
SET FORTH HEREIN.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT. The Company was formed in
July 1990, and has had limited sales to date. As of March 31, 1996, the Company
had an accumulated deficit of $8,673,900. The Company believes that its future
success will be dependent on the successful marketing and sale of LifeRate's
system. There can be no assurance that the Company will generate sufficient
sales to achieve positive cash flow or profitable operations in 1996 or ever.
FUTURE CAPITAL NEEDS. Although the Company has not generated significant
sales to date, based on its current plan, the Company estimates that cash and
cash equivalents on hand as of March 31, 1996 will be sufficient to fund
operations through the end of 1996. The Company has, however, failed to meet
its business plan in the past and there can be no assurance that it will meet
its current plan. The Company may require additional capital earlier than
planned. In any event, the Company will require substantial additional capital
to fund operations after the end of 1996. Required additional capital would be
sought from a number of sources and could include sales of additional shares of
capital stock or other securities or loans from banks or other sources. Any
additional sales of capital stock could be dilutive to investors who purchase
the shares. The Company's ability to obtain additional funding will depend
substantially on operating results in future periods. The Company will be
materially adversely affected if it is not able to achieve positive cash flow or
profitability or to obtain any necessary financing on satisfactory terms.
LIMITED SALES. To date, the Company has entered into agreements for the
sale and initial installation of its cardiovascular clinical information system
at five practice groups, and the Company's revenues were $263,300 and $109,200
for the year ended December 31, 1995 and the quarter ended March 31, 1996,
respectively. The Company believes that its future success will be dependent on
the successful marketing and sale of the LifeRate system. There can be no
assurance that the Company will generate sufficient sales to achieve positive
cash flow or profitable operations in 1996 or thereafter.
LIMITED HISTORY OF MARKETING AND DISTRIBUTION. To date, the Company has
sold a limited number of systems. The Company's early marketing strategy was to
focus on key nationally recognized leaders in the five medical specialties that
the Company believed would provide the most significant opportunities for sales
of its system. During 1995, the Company revised its marketing strategy to focus
on cardiology physician practice groups which the Company believes will provide
the most significant opportunities for sales of its system. Beginning in 1994
and continuing through 1995, the Company had relied on Clinical Sales and
Services, Inc. ("CSSI") to provide substantially all of the Company's sales,
marketing, clinical and systems support functions. Effective January 1, 1996,
the employees of CSSI became employees of the Company, and the agreement with
CSSI was terminated. Since January 1, 1996, the Company has directly employed
its sales, marketing, clinical and systems support personnel. Donna J. Edmonds,
a former officer and director of the Company, Jeffrey B. Comer, a former officer
of the Company, and William Knopf, M.D., a current officer and
5
<PAGE>
director of the Company, are all principals of CSSI. In April 1996, Ms.
Edmonds and Mr. Comer resigned their positions as officers and directors of
the Company. The Company currently intends to conduct its sales and marketing
efforts with its own direct employees. In addition, the Company's pricing
strategy includes one-time fees for installation and related services of
LifeRate's system and recurring monthly license fees based on the usage of
the system. The Company believes that the amount of such fees will depend,
in part, on the level of service that it provides to users of the system
after it is installed. There can be no assurance that the Company's
marketing and distribution strategy will be successful.
NEED TO RENEGOTIATE ROYALTY ARRANGEMENTS. The Company is currently
obligated to pay royalties to third parties based on revenues, consisting of an
obligation to pay royalties equal to 10% of sales of LifeRate Cardiovascular and
7.5% of sales of LifeRate's system for all medical applications. The Company is
also obligated to pay royalties equal to 2% of revenues from sales of LifeRate's
National Cardiology Database from August 1, 1996 through July 30, 2001. The
Company believes that it is necessary to renegotiate these royalty rates on
terms that are more favorable to the Company and is currently engaged in the
process of renegotiating with other parties to these agreements. However, there
can be no assurance that the Company will be able to renegotiate these royalty
rates on more favorable terms. If the Company is unable to do so, its ability
to obtain additional financing and to achieve profitability in the future would
be adversely affected.
NEED TO DEVELOP MARKET PRESENCE. The Company believes that its ultimate
success will be highly dependent on its ability to capitalize on the currently
existing market opportunity for computer-based health care information systems,
like LifeRate's system, that integrate financial information, clinical
information and patient outcome information in a single database. The Company
believes that it has an opportunity to obtain a significant market presence in
the health care information industry if it is able to demonstrate the value of
its system to health care providers and payors and install a significant number
of systems. The Company does not believe that it will be able to maintain its
technical superiority over competing information systems for an indefinite
period of time and believes that it will need to obtain a significant market
presence to achieve long-term success. LifeRate has limited experience in
marketing its system. There can be no assurance that the Company's marketing
strategy will be successful.
SUCCESS DEPENDENT ON MARKET ACCEPTANCE. The Company's future success will
also depend in large part on its ability to gain acceptance by physicians for
sophisticated computer-based health care information systems that can integrate
clinical practice guidelines and patient outcome information. Certain
physicians may perceive such computer-based systems to infringe on their
discretion in providing medical treatment and, accordingly, may be reluctant to
accept such computer-based systems. In addition, payors with significant
investments in other hardware and software systems may be reluctant to abandon
those systems for LifeRate's system. The Company believes, however, that the
demands of payors and buyers of health care and various health care legislation
will ultimately lead to the wide-spread use of computer-based systems, like
LifeRate's system, that integrate financial, clinical and patient outcome data
in a single database. There can be no assurance, however, that the Company will
be able to obtain sufficient acceptance by providers and payors of its system
to achieve profitable operations.
COMPETITION. The health care information industry, of which the Company is
a part, is characterized by intense competition. An extremely large number of
companies provide computer-based health care information systems that provide
partial solutions to some or all of the types of
6
<PAGE>
health care information needs that LifeRate's system addresses. In addition,
the Company anticipates that new competitors will attempt to enter the market
and that existing or new competitors will develop information systems in the
future that duplicate or improve on LifeRate's system. Many of the Company's
competitors are well established, better known and significantly larger with
substantially greater technical, manufacturing, marketing and financial
resources than the Company. The Company's ultimate ability to compete in the
market will depend upon a number of factors, including its success in generating
market acceptance of LifeRate's system and the success of its marketing efforts.
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on its key
management, technical and sales personnel and recently made significant
management changes. In April 1996, David Haskin and Donna Edmonds resigned
from their positions as officers and directors of the Company and Jeffrey
Comer resigned his position as an officer of the Company. Following their
resignations, William W. Chorske was elected as President and Chief Executive
Officer and a member of the Board. In addition, the Company's Chief
Financial Officer joined the Company in the first quarter of 1996. The
Company's future success will depend in part upon the ability of new
management to execute the Company's business strategy, increase sales and
market presence of the Company's products, control expenses, and continue
product development. The Company will also need to attract and retain highly
qualified personnel. The Company competes for such personnel with other
companies, and there can be no assurance that the Company will be successful
in hiring or retaining qualified personnel. The loss of key personnel or the
inability to hire or retain qualified personnel could have a material adverse
effect on the Company. The Company does not maintain key-man insurance on any
of its employees.
TECHNICAL OBSOLESCENCE. Computer-based technology in all industries is
undergoing, and is expected to continue to undergo, rapid and significant
technical change. While LifeRate believes that its system is technically
superior to other computer-based health care information systems, LifeRate
expects future technology to be superior to the technology currently used in its
system. Although LifeRate's system has been designed to assimilate future
technical advancements, there can be no assurance that any such future
advancements or the development of new or competitive products by others will
not render LifeRate's system less competitive or obsolete. The greater
financial as well as other resources of many of the Company's present and
potential competitors may permit such competitors to respond more rapidly than
the Company to changes in the product needs and servicing requirements of health
care providers and payors.
LIMITED PROPRIETARY PROTECTION. The Company currently relies solely on
common law copyrights and trade secrets for proprietary protection of its
system. LifeRate does not currently have patent protection with respect to any
aspect of its system. Although it may file patent applications on certain
aspects of its system, there can be no assurance that the Company's measures to
protect its proprietary information will be successful, that it will be granted
any patents, or that any patents that may be granted will be of value to the
Company. In the absence of meaningful intellectual property protection, the
Company may be vulnerable to competitors who could lawfully attempt to copy the
Company's products. Moreover, there can be no assurance that other competitors
may not independently develop the same or similar technology. Similarly, while
LifeRate believes that it has all rights necessary to market and sell its system
without infringement of intellectual property rights held by others, the Company
has not conducted a formal infringement search and there can be no assurance
that such conflicting rights do not exist.
7
<PAGE>
NO PRODUCT LIABILITY INSURANCE. The Company has not obtained product
liability insurance relating to sales of its system because the clinical
practice guidelines that are embedded into its system are not developed by the
Company. These guidelines are generally developed by the user or adapted by the
user from existing guidelines. Accordingly, the Company believes that its risk
of loss for a product liability claim based on the use of its system is remote.
However, there can be no assurance that the Company will not be found liable for
a product liability claim which, if significant, could have a material adverse
affect on the Company.
RIGHT TO DESIGNATE DIRECTOR. The Company has entered into an Investor
Agreement with Medtronic, Inc., pursuant to which Medtronic has the right to
designate one director to the Board of Directors of the Company. The Company
has also agreed to use its best efforts to cause such designee to be elected by
the Company's shareholders at any meeting of shareholders at which directors are
elected. In addition, certain current and former officers and directors of the
Company have agreed to vote their shares of Common Stock of the Company for
Medtronic's designee to the Board.
QUOTATION BY NASDAQ. The Company's Common Stock is currently traded in the
national over-the-counter market and quoted on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market System.
Nasdaq rules require that companies quoted on the Nasdaq SmallCap Market System
maintain assets of at least $2,000,000 and capital and surplus of at least
$1,000,000. As of March 31, 1996, the Company had total assets of $8,647,700
and capital and surplus of $7,388,500. There can be no assurance, however, that
the Company will be able to meet the applicable requirements for maintaining its
Nasdaq SmallCap Market quotation in the future. If the Company's Common Stock
is not quoted by the Nasdaq SmallCap Market in the future, it will be quoted in
the local over-the-counter "pink sheets" and may also be reported on the Nasdaq
OTC Bulletin Board. In such event, the public trading market for the Company's
Common Stock could be adversely affected.
APPLICABILITY OF "PENNY STOCK RULES." If, during the time in which the
Common Stock is quoted on the Nasdaq SmallCap Market, the Common Stock is priced
below $5.00 per share, trading of the Common Stock will be subject to certain
federal regulations governing "penny stocks" (the "Penny Stock Rules"). The
Penny Stock Rules require brokers to confirm certain information regarding
purchasers of Common Stock and to meet certain other requirements when executing
trades. If the Common Stock becomes subject to the Penny Stock Rules, it may be
more difficult for shareholders to sell their shares.
POSSIBLE VOLATILITY OF STOCK PRICE. The trading price of the Common Stock
could be subject to significant fluctuations in response to quarterly variations
in operating results, announcements of technological innovations or new products
by the Company or its competitors and other events or factors. In addition, the
stock market has experienced extreme price and volume fluctuations that have
particularly affected the market price of many companies for reasons unrelated
to the operating performance of the companies, and these broad market
fluctuations may adversely affect the market price of the Company's Common
Stock.
8
<PAGE>
UNDESIGNATED PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS. The Board of
Directors of the Company is authorized to issue undesignated preferred stock
("Undesignated Stock") in one or more series, and to determine the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms or conditions of redemption of each series
without any vote or action of the shareholders of the Company. No shares of
Undesignated Stock or other senior equity securities have been established or
issued, and there is no plan to establish or issue any such securities in
foreseeable future. However, the issuance of Undesignated Stock with
preferential rights could adversely affect the voting power and other rights of
the holders of Common Stock. Also, the Company is subject to certain provisions
of the Minnesota Business Corporation Act which limit the voting rights of
shares acquired in "control share acquisitions" and restrict certain "business
combinations." The ability to issue Undesignated Stock and the foregoing
provisions of the Minnesota Business Corporation Act could, in certain
circumstances, have the effect of delaying or preventing a change in control of
the Company.
LACK OF DIVIDENDS. The Company has not paid dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company intends to retain any earnings to finance the development of its
business. There can be no assurance that the Company will ever pay cash
dividends.
CERTAIN TRANSACTIONS
In June 1996, the Company entered into a settlement agreement with
Jeffrey Comer in connection with his resignation as Executive Vice President
of Sales and Marketing of the Company in April 1996. Under the terms of the
settlement agreement, the Company and Mr. Comer released each other from any
potential claims relating to or arising out of his employment with the
Company and his relationship with Clinical Sales and Services, Inc., a
company which provided sales and marketing consulting services to the Company
during 1994 and 1995. In conjunction with the settlement agreement, the
Company and Mr. Comer entered into a consulting agreement, which expires on
December 1, 1996, whereby the Company will pay Mr. Comer $10,000 per month to
act as a consultant to the Company. Pursuant to the terms of the consulting
agreement: (i) Mr. Comer is eligible for a bonus of $100,000 on January 29,
1997 and (ii) the Company granted to Mr. Comer an option to purchase 51,000
shares of Common Stock at an exercise price per share equal to the fair
market value of the Common Stock on May 31, 1996. The option becomes
exercisable in two equal installments on June 1, 1996 and December 1, 1996
and expires on June 1, 2006.
SELLING SHAREHOLDERS
Appendix A to this Prospectus sets forth certain information regarding the
Selling Shareholders. The Shares are being registered to permit the public
resale of the Shares, and the Selling Shareholders may offer the Shares for
resale from time to time. See the cover page of this Prospectus. Of the Shares
being offered by the Selling Shareholders, (i) 155,555 shares of Common Stock
were originally issued in connection with the Company's private placement of
Common Stock and warrants in December 1994, (ii) 155,555 shares of Common Stock
are issuable upon exercise of warrants originally issued in connection with the
Company's private placement of Common Stock and warrants in December 1994, (iii)
49,154 shares of Common Stock issued in private transactions during 1994,
(iv) 858,399 shares of Common Stock were originally issued in connection with
the Company's private placement of Common Stock in December 1995 and January
1996, (v) 342,707 shares of Common Stock were originally issued to Donald B.
Olson and Merry M. Olson and subsequently sold in a private transaction in
February 1996, (vi) 91,000 shares of Common Stock are issuable upon exercise of
warrants originally issued in March 1995 to the underwriter of the Company's
initial public offering and (vii) 85,841 shares of Common Stock are issuable
upon exercise of warrants originally issued in December 1995 and January 1996 to
the selling agent in connection with the Company's private placement of Common
Stock. The table in Appendix A sets forth certain information, as of April 25,
1996, and as adjusted to reflect the sale of the Shares offered hereby, with
respect to the beneficial ownership of the Common Stock by the Selling
Shareholders.
VALIDITY OF SHARES
Certain legal matters with respect to the validity of the Shares offered
hereby will be passed upon for the Company by Oppenheimer Wolff & Donnelly,
Minneapolis, Minnesota.
9
<PAGE>
EXPERTS
The financial statements of the Company appearing in the Company's Annual
Report (Form 10-KSB), as amended, for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein in reliance upon the
reports of Ernst & Young LLP pertaining to such financial statements (to the
extent covered by consents filed with the Securities and Exchange Commission)
given upon the authority of such firm as experts in accounting and auditing.
10
<PAGE>
APPENDIX A
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES OF COMMON COMPLETION OF
STOCK BENEFICIALLY THE OFFERING (3)
OWNED PRIOR TO THE NUMBER OF SHARES -------------------
SELLING SHAREHOLDER OFFERING (1)(2) BEING OFFERED NUMBER PERCENT (4)
- ------------------- ------------------ ---------------- ------ -------
<S> <C> <C> <C> <C>
Wells Fargo Bank & Trust NA 376,000 150,000 226,000 6.0%
David W. Haskin 191,555 (5) 31,555 160,000 4.2%
The Perkins Opportunity Fund 165,000 100,000 65,000 1.7%
Special Situations Fund III LP 153,846 153,846 0 0
Curran Partners LP 115,384 115,384 0 0
John P. Curran 23,077 23,077 0 0
Retirement Trust
John P. Curran 15,385 15,385 0 0
Aaron Boxer Rev Trust 110,000 (6) 110,000 0 0
Aaron Boxer TTEE u/a
Dtd 8/1/89
John R. Albers 102,819 (7) 102,819 0 0
Okabena Partners K 83,537 83,537 0 0
Paul R. Kuehn 66,315 (8)(9) 66,315 0 0
David B. Johnson 66,315 (9)(10) 66,315 0 0
John O. Hanson 65,000 (11) 65,000 0 0
Kenneth K. Cheng 53,077 53,077 0 0
James R. Decker and 45,000 45,000 0 0
Gail L. Decker, JT TEN
Brightstone Fund IV 44,444 (12) 44,444 0 0
Dr. Richard A. Dubow and 40,066 (13) 35,000 5,066 *
Tami S. Dubow
Twin Cities Carpenter's 40,000 (14) 40,000 0 0
Pension Fund
Brightstone Fund 7 30,770 30,770 0 0
Donald V. Roberts & 25,000 25,000 0 0
Maria Roberts, JT TEN
</TABLE>
A-1
<PAGE>
SELLING SHAREHOLDERS (CONTINUED)
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES OF COMMON COMPLETION OF
STOCK BENEFICIALLY THE OFFERING (3)
OWNED PRIOR TO THE NUMBER OF SHARES -------------------
SELLING SHAREHOLDER OFFERING (1)(2) BEING OFFERED NUMBER PERCENT (4)
- ------------------- ------------------ ---------------- ------ -------
<S> <C> <C> <C> <C>
William D. Corneliuson 23,077 23,077 0 0
Stanley D. Rahn 22,106 (9)(15) 22,106 0 0
Eldon C. Miller 22,105 (9)(16) 22,105 0 0
Julie T. Berlacher 20,000 20,000 0 0
Ila M. Waseka 24,500 10,000 14,500 *
Jeff Dobbs 20,000 (17) 20,000 0 0
Kevin McHale 20,000 (18) 20,000 0 0
Jeffry Comer 17,599 (19) 17,599 0 0
Steve Romanek 17,200 17,200 0 0
Vico Assoc. Inc. Pft Sharing 16,900 (20) 16,900 0 0
Plan & Trust Account FBO
Frederic D. Edmonds
Thomas M. Niccum 16,667 (21) 10,000 6,667 *
Alan Metcalf & Corrine 15,500 15,500 0 0
Metcalf Jt. Ten.
John A. Murray & Coralie 15,000 15,000 0 0
Eddy Murray TTEES,
ua dtd 5/9/94, as amended
creating the Murray Family Trust
Gary W. Ross 15,000 15,000 0 0
Joan C. Loe 13,500 10,000 3,500 *
Bennett Ringrose Wolsfeld 12,000 12,000 0 0
Jarvis Gardner Inc. Pft. Sharing
Trust Richard P. Wolsfeld &
Peter E. Jarvis dated 9/13/85
Gerald J. Bratter 10,000 10,000 0 0
W. Harold Davis, D.V.M. and 10,000 10,000 0 0
Joyce Lee Davis, JT TEN
Everett Jensen Rev. Trust 10,000 10,000 0 0
Everett Jensen TEE dtd 3/7/95
Thomas J. Kumbatovic 10,000 10,000 0 0
</TABLE>
A-2
<PAGE>
SELLING SHAREHOLDERS (CONTINUED)
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES OF COMMON COMPLETION OF
STOCK BENEFICIALLY THE OFFERING (3)
OWNED PRIOR TO THE NUMBER OF SHARES -------------------
SELLING SHAREHOLDER OFFERING (1)(2) BEING OFFERED NUMBER PERCENT (4)
- ------------------- ------------------ ---------------- ------ -------
<S> <C> <C> <C> <C>
Clint Hill Partners 10,000 (22) 10,000 0 0
John H. Jungbauer 10,000 5,000 5,000 *
Mark Ratner 10,000 (23) 10,000 0 0
C. Fred Toney, JR 9,000 9,000 0 0
Richard H. Osgood 7,500 7,500 0 0
Gerald R. Nelson 6,500 5,000 1,500 *
Steven K. Case 5,000 5,000 0 0
Daniel C. McCulloch 5,000 5,000 0 0
Vico Assoc. Inc. Pft Sharing 4,700 4,700 0 0
Plan & Trust 12/31/81
FBO Paul Monfardini
Larry Haimovitch 4,500 4,500 0 0
TH Partnership 4,000 4,000 0 0
Richard Hume 2,000 2,000 0 0
Alexandra E. McIntyre 2,000 2,000 0 0
Robert Katz 1,500 1,500 0 0
---------
1,738,211 (24)
---------
---------
</TABLE>
______________________________________
* Less than one percent (1%).
(1) Based upon questionnaires received from each Selling Shareholder, or a
representative of the Selling Shareholder, in connection with the
preparation of the Registration Statement on Form S-3, of which this
Prospectus is a part, showing beneficial ownership as of April 25, 1996.
(2) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or member of a group to acquire them within 60 days are treated
as outstanding only when determining the amount and percentage owned by
such person or group.
(3) Assumes that all Shares being offered and registered hereunder are sold,
although no Selling Shareholder is obligated to sell any Shares.
(4) Based upon 3,811,339 shares of Common Stock outstanding as of April 25,
1996.
(5) Prior to April 24, 1996, Mr. Haskin was the Chairman of the Board, Chief
Executive Officer and a Director of the Company.
(6) Includes 20,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
A-3
<PAGE>
(7) Includes 28,333 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(8) Includes 66,315 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(9) Such individual is a principal of Miller, Johnson & Kuehn, Incorporated
("MJK"), which has acted as the Company's underwriter in connection with
its initial public offering of Common Stock and as placement agent in
connection with private sales of the Company's Common Stock. Such warrants
were issued in connection with such financing activities. MJK also makes a
market in the Company's Common Stock.
(10) Includes 66,315 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(11) Includes 20,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(12) Includes 22,222 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(13) Includes 10,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(14) Includes 20,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(15) Includes 22,106 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(16) Includes 22,105 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(17) Includes 10,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(18) Includes 10,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(19) Prior to April 24, 1996, Mr. Comer was an Executive Officer of the
Company.
(20) Includes 5,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(21) Includes 6,667 shares of Common Stock which may be acquired upon
exercise of outstanding warrants.
(22) Includes 5,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(23) Includes 5,000 shares of Common Stock which may be acquired upon the
exercise of outstanding warrants.
(24) Includes an aggregate of 332,396 shares of Common Stock which may be
acquired upon the exercise of outstanding warrants.
A-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The table below sets forth the estimated expenses in connection with the
offer and sale of the shares of the Common Stock of the Registrant covered by
this Registration Statement. All of such expenses are estimates, except for the
SEC registration fee.
SEC registration fee. . . . . . . . . . . . . . . . . . . $ 5,130.72
----------
Fees and expenses of counsel for the Company. . . . . . . 10,000.00
----------
Fees and expenses of accountants for the Company. . . . . 2,000.00
----------
Blue Sky fees and expenses. . . . . . . . . . . . . . . . 2,500.00
----------
Printing expenses . . . . . . . . . . . . . . . . . . . . 500.00
----------
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 1,000.00
----------
*Total . . . . . . . . . . . . . . . . . . . . . . $21,130.72
----------
----------
___________________
* None of the expenses listed above will be borne by the Selling
Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Minnesota Business Corporation Act requires that the Company indemnify
any director, officer or employee made or threatened to be made a party to a
proceeding, by reason of the former or present official capacity of the person,
against judgments, penalties, fines, settlements and reasonable expenses
incurred in connection with the proceeding if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including a derivative
action in the name of the Company. Reference is made to the detailed terms of
the Minnesota indemnification statute (Minn. Stat. Section 302A.521) for a
complete statement of such indemnification rights. The Company's Amended and
Restated Articles of Incorporation also require the Company to provide
indemnification to directors of the Company to the fullest extent of the
Minnesota indemnification statute.
Article IX of the Company's Amended and Restated Bylaws provides that the
Company shall indemnify such persons, for such expenses and liabilities, in such
manner, under such circumstances, and to such extent as permitted by the
Minnesota indemnification statute, as now enacted or hereafter amended, provided
that a determination is made in each case, in the manner required by such
statute, that the person seeking indemnification is eligible therefor.
The Company maintains a directors' and officers' liability insurance,
including a reimbursement policy in favor of the Company.
ITEM 16. EXHIBITS
II-1
<PAGE>
4.1 Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form SB-2
(File No. 33-89016C)).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly (previously
filed).
23.1 Consent of Ernst & Young LLP (previously filed).
23.2 Consent of Oppenheimer Wolff & Donnelly (previously filed).
24.1 Power of Attorney (previously filed).
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering price range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement
II-2
<PAGE>
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota, on June 20, 1996.
LIFERATE SYSTEMS, INC.
By /s/ William W. Chorske
--------------------------------------
William W. Chorske
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on June 20, 1996
in the capacities indicated.
Signature Title
--------- -----
/s/ William W. Chorske
- ------------------------- President, Chief Executive Officer and Director
William W. Chorske (Principal Executive Officer)
*
- ------------------------- Executive Vice President and Chief Financial
Bruce T. Klein Officer (Principal Financial and Accounting
Officer)
*
- ------------------------- Director
Stanley R. Cowle
- ------------------------- Director
William D. Knopf, M.D.
*
- ------------------------- Director * By /s/ William W. Chorske
David D. Koentopf ---------------------------
William W. Chorske
Pro se and attorney-in-fact
*
- ------------------------- Director
Daniel A. Pelak
*
- ------------------------- Director
Kevin L. Roberg
*
- ------------------------- Director
Carl J. Schramm, Ph.D.
*
- ------------------------- Director
Donald C. Wegmiller
II-4
<PAGE>
LIFERATE SYSTEMS, INC.
EXHIBIT INDEX TO REGISTRATION STATEMENT ON FORM S-3
Item No. Item Method of Filing
- -------- ---- ----------------
4.1 Form of Common Stock Certificate Incorporated by reference to
Exhibit 4.1 of the Company's
Registration Statement on Form
SB-2 (File No. 33-89016C).
5.1 Opinion and Consent of Previously filed
Oppenheimer Wolff & Donnelly
23.1 Consent of Ernst & Young LLP Previously filed
23.2 Consent of Oppenheimer Wolff & Previously filed
Donnelly
24.1 Power of Attorney Previously filed
