-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IgTlqX7fBvluyOiVYTsxWJHlymguhFYF9kfFS5ZSwZkuyIQ8pvWKzGa3dvOv/7GB axixFFC3V4vmKx1s6vXpkA== 0000950131-99-006184.txt : 19991115 0000950131-99-006184.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950131-99-006184 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDCARE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001002422 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 870429962 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-90729 FILM NUMBER: 99746375 BUSINESS ADDRESS: STREET 1: 1515 WEST 22ND STREET STREET 2: STE 101 CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 8006113388 MAIL ADDRESS: STREET 1: 400 BURRARD STREET STREET 2: SUITE 1408 CITY: VANCOUVER STATE: A1 ZIP: 00000 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on November 10, 1999 Registration No. __________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- MEDCARE TECHNOLOGIES, INC. -------------------------- (Exact name of registrant as specified in its charter) DELAWARE 87-0429962B -------- ----------- (State or other jurisdiction (IRS Employer of incorporation or organization Identification Number) 1515 West 22nd Street, Suite 1210 Oak Brook, Illinois 60523 (630) 472-5300 (Address, including zip code, and telephone number, including area code, registrant's principal executive offices) -------------------------- Corporate Creation Enterprises, Inc. 686 North DuPont Boulevard, Suite 302 Milford, Delaware 19963 (302) 424-4866 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of all communications to: Michael J. Legamaro Barack Ferrazzano Kirschbaum Perlman & Nagelberg 333 West Wacker Drive, Suite 2700 Chicago, Illinois 60606 (312) 629-5181 Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement, as determined by market conditions. 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
Title of each Proposed class of Amount maximum Proposed Amount of securities to to be offering price maximum aggregate registration be registered registered (1) per share (2) offering price (2) fee - ---------------------------------------------------------------------------------------- Common Stock par value $0.001, underlying Series B 4,679,562 $1.50 $7,019,343 $1,951 Preferred Stock TOTAL: 4,679,562 - ----------------------------------------------------------------------------------------
(1) 1,600,000 shares of Common Stock were previously registered on Form S-3 (file number 333-81219), filed with the Securities and Exchange Commission on June 21, 1999 and declared effective on July 9, 1999. Of the 1,600,000 shares of Common Stock previously registered, 69,562 shares have been sold. Due to a recent decrease in the market price of the Common Stock, the Company is required by the Registration Rights Agreement dated May 18, 1999 to register an additional 4,679,562 shares of Common Stock. In accordance with Rule 429 of Regulation C of the Securities and Exchange Act of 1933, the Company is presenting a combined prospectus. The Company previously paid a filing fee of $2,448 with the earlier registration statement. (2) Estimated solely for calculation of the amount of the registration fee calculated pursuant to Rule 457(c), based on the average high and low prices of the registrant's Common Stock as reported by the Nasdaq SmallCap Market on November 8, 1999. 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 SEC, acting pursuant to said Section 8(a), may determine. PROSPECTUS MEDCARE TECHNOLOGIES, INC. 1515 West 22nd Street, Suite 1210 Oak Brook, Illinois 60523 (630) 472-5300 6,210,000 SHARES COMMON STOCK This prospectus relates to the resale by the selling stockholders of up to 6,210,000 shares of Common Stock of Medcare Technologies, Inc., a Delaware corporation. We may issue these shares pursuant to the conversion of 400 shares of our Series B Convertible Preferred Stock and the exercise of related warrants to purchase 240,000 shares of Common Stock, which we sold through a private placement on May 18, 1999. The number of shares that we actually issue may be more or less than the 6,210,000 shares being offered by the selling stockholders through this prospectus, because the conversion of the Series B Preferred Stock is based on a formula that is dependent upon the market price of our Common Stock. Pursuant to this prospectus, the selling stockholders may offer the Common Stock from time to time on the Nasdaq SmallCap Market, in privately negotiated transactions or otherwise. Any of the stockholders may sell their Common Stock at the then-market price or at a price greater or less than market price, which may affect the market for our Common Stock. We will not receive any of the proceeds from the resale of Common Stock by the selling stockholders. Our Common Stock is currently listed on the Nasdaq SmallCap Market under the symbol "MCAR." On November 8, 1999, the last reported sale price of the Common Stock was $1.47 per share. -------------------------- There are certain risk factors that you should consider before purchasing shares in this Offering. We urge you to carefully read the "RISK FACTORS" section beginning on page 5. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is _______, 1999. -1- TABLE OF CONTENTS
Page ---- PROSPECTUS SUMMARY..................................... 3 The Company.......................................... 3 The Offering......................................... 3 RISK FACTORS........................................... 5 No Market Studies.................................... 5 Lack of Operating History............................ 5 Inability to Obtain Funding.......................... 5 Continued Control by Existing Management............. 5 Dividends............................................ 5 Dependence on Executive Officers and Key Personnel.................................. 6 Dilution............................................... 6 Other Adverse Effects of Series B Preferred Stock and Warrants......................... 6 Nasdaq Eligibility and Maintenance..................... 6 Risk of Low Priced Stocks.............................. 7 Adverse Effect of Shares Eligible for Future Sale.......................................... 7 Protection of Proprietary Treatment Program.............................................. 7
Page ---- Reimbursement and Related Matters...................... 7 Regulation by Federal and State Government............. 8 Potential Fluctuations in Quarterly Results............ 8 RxSheets.com........................................... 8 Competition............................................ 9 THE COMPANY............................................ 9 USE OF PROCEEDS........................................ 9 DETERMINATION OF OFFERING PRICE........................ 9 SELLING STOCKHOLDERS...................................10 PLAN OF DISTRIBUTION...................................12 DESCRIPTION OF SECURITIES Common Stock.........................................13 Preferred Stock......................................14 Warrants.............................................19 EXPERTS AND LEGAL MATTERS..............................20 INCORPORATION BY REFERENCE.............................20 AVAILABLE INFORMATION..................................21 FORWARD-LOOKING STATEMENTS.............................21 INDEMNIFICATION........................................22
-------------------------- We have not authorized any person to make a statement that differs from what is in this prospectus. If any person does not make a statement that differs from what is in this prospectus, you should not rely on it. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is complete and accurate as of its date, but the information may change after that date. -2- PROSPECTUS SUMMARY Throughout this prospectus, the words "we," "our," "ours" and "us" refer to Medcare Technologies, Inc. together with its subsidiaries, MedCare Technologies, Corporation and RxSheets.com, Inc. The items in the following summary are described in more detail later in this prospectus. Therefore, for a complete understanding of this offering, we encourage you to read the more detailed information set forth in this prospectus, our financial statements and the other information that is incorporated by reference in this prospectus. The Company We are a Delaware corporation engaged in the business of managing and/or supporting urinary incontinence clinics throughout the United States. Our principal business activity is the development and expansion of the MedCare Program, which is a proprietary product of our company. The MedCare Program consists of software and services which we have developed in order to assist physicians in providing non-pharmaceutical, non-invasive treatment to individuals suffering from urinary incontinence and other pelvic disorders. Our executive offices are located at 1515 West 22nd Avenue, Suite 1210, Oak Brook, Illinois 60523. Our telephone number is (630) 472-5300. The Offering Description and Amount of Securities to be Offered The shares offered by this prospectus consist of up to 6,210,000 shares (the "Conversion Shares") of our Common Stock, par value $0.001 per share, which we may issue to certain stockholders (the "Selling Stockholders") upon conversion of 400 shares of Series B Convertible Preferred Stock and exercise of Warrants to purchase 240,000 shares of Common Stock. We issued the Series B Preferred Stock and the Warrants in a private placement on May 18, 1999, pursuant to a Securities Purchase Agreement between us and the Selling Stockholders. 1,600,000 shares of Common Stock were previously registered on Form S-3 (file number 333-81219), filed with the Securities and Exchange Commission on June 21, 1999 and declared effective on July 9, 1999. Of the 1,600,000 shares previously registered, 69,562 shares have been sold. Due to a recent decrease in the market price of the Common Stock, the Company is required by the Registration Rights Agreement to register an additional 4,679,562 shares of Common Stock. In accordance with Rule 429 of Regulation C of the Securities and Exchange Act of 1933, the Company is presenting a combined prospectus. For a further description of the terms of the Series B Preferred Stock and the Warrants, see "DESCRIPTION OF SECURITIES." We determined the number of shares of Common Stock to be offered for resale by this prospectus by doubling the approximate number of shares that could be issued upon conversion of the Series B Convertible Preferred Stock and exercise of the Warrants (based on the market price of our Common Stock as of November 8, 1999). The number of Conversion Shares that will actually be issued may be more or less than the 6,210,000 shares being offered by this prospectus, because the conversion of the Series B Preferred Stock into Common Stock is based on a formula that depends upon the market price of our Common Stock. If the market price of our Common Stock falls, we will be required to issue more shares of Common Stock upon conversion of the Series B Preferred Stock. We determined the number of shares covered by this prospectus in order to adequately cover a reasonable increase in the number of shares required. See "SELLING STOCKHOLDERS." This prospectus does not cover the initial issuance of the Conversion Shares to the Selling Stockholders. Rather, this prospectus covers only the resale of the Conversion Shares by the Selling Stockholders. We will not receive any proceeds from the sale of the Conversion Shares by the Selling Stockholders. Distribution of Securities The Selling Stockholders have not advised us of any specific plans for the distribution of the Common Stock covered by this prospectus. However, we anticipate that the Conversion Shares will be sold from time to time, -3- primarily in transactions on the Nasdaq SmallCap Market at the then-current market price, although sales may also be made in negotiated transactions or otherwise. See "PLAN OF DISTRIBUTION." Offering Price This prospectus relates only to the resale of the Conversion Shares. Therefore, the Selling Stockholders will determine the offering price on an individual basis. Common Stock Outstanding As of November 8, 1999, we had 7,900,722 shares of Common Stock outstanding. Because this prospectus relates only to the resale of Common Stock previously issued to the Selling Stockholders, this offering will not result in the introduction of any new shares into the marketplace. However, the conversion of the Series B Preferred Stock and the exercise of the Warrants will introduce additional shares of Common Stock in the market. For the purposes of this prospectus, we have assumed that 6,210,000 shares will enter the market as follows: Shares issued upon conversion of the Series B Preferred Stock 5,970,000 Shares issued upon exercise of the Warrants 240,000 --------- Total 6,210,000 =========
Because the number of shares issuable upon conversion of the Series B Preferred Stock is based on a variable formula that depends on the market price of our Common Stock, the number of shares that we will ultimately issue upon conversion of the Series B Preferred Stock may be higher or lower than the 5,970,000 shares indicated. In addition, we have other convertible securities, options and warrants outstanding that could bring additional shares of Common Stock into the marketplace. See "DESCRIPTION OF SECURITIES." -4- RISK FACTORS An investment in our Common Stock is speculative and involves a high degree of risk of loss of part or all of your investment. You should carefully consider the following factors and other information in this Prospectus before deciding to invest in our Common Stock. No Market Studies--We may not be able to successfully market the MedCare Program. In formulating our business plan, we have relied on the judgment of our officers, directors and consultants but have not conducted any formal independent market studies concerning the demand for our services. To achieve significant revenues and profitable operations in the future, we must successfully develop and market the MedCare Program. Inability to successfully market the MedCare Program to additional physicians would have an adverse effect on our revenues, operations and financial condition. Lack of Operating History--We have a limited operating history and have not been profitable. Although Medcare was organized in 1986, we did not become active until 1995 and have been continually developing our MedCare Program since that time. As a result, our business is subject to the risks inherent in the establishment of a new business. We have only limited experience in managing the clinics in the MedCare Program and are currently expanding operations, which may or may not provide profits. In addition, the business model for RxSheets.com is evolving and relies substantially upon the sale of products and advertising on the Internet, which is a developing industry in which we have no prior experience. We had no revenues in 1995 or 1996 and $91,802 in 1997. In 1998, we had revenues of $786,586. We have not been profitable, experiencing an accumulated loss of $2,721,918 in 1997, which increased to an accumulated loss of $6,491,871 in 1998. Even if we become profitable in the future, we cannot accurately predict the level of, or our ability to sustain, profitability. Because we have not yet been profitable and cannot predict any level of future profitability, you bear the risk of a complete loss of your investment in the event our business plan is unsuccessful. Inability to Obtain Funding--We may not be able to obtain additional funding when needed. We may require additional financing to expand and market the MedCare Program and RxSheets.com. The resale of the Common Stock offered by the Selling Stockholders may cause difficulty in our ability to obtain financing. In total, if all of the currently outstanding options, warrants and Preferred Stock had been exercised or converted into Common Stock, 14,441,213 shares of Common Stock would have been outstanding as of November 8, 1999. These exercises and conversions could cause a decrease in the market price of the Common Stock. If the market price of the Common Stock declines, some potential financiers may either refuse to offer us any financing or will offer financing at unacceptable rates or unfavorable terms. If we are unable to obtain financing on favorable terms, or at all, such unavailability could prevent us from expanding and marketing the MedCare Program and therefore have an adverse effect on our revenues, operations and financial condition. See "DESCRIPTION OF SECURITIES." Continued Control by Existing Management--You may lack an effective vote on corporate matters. Our management currently owns a substantial amount of our outstanding Common Stock. As a result, new stockholders may lack an effective vote with respect to the election of directors and other corporate matters. Dividends--We have not paid and do not currently intend to pay dividends. Since inception, we have paid no dividends to our stockholders. Future dividends on our Common Stock, if any, will depend on our future earnings, capital requirements, financial condition and other factors. We currently intend to retain earnings, if any, to increase our net worth and reserves. Therefore, we do not anticipate that any holder of Common Stock will receive any cash, stock or other dividends on his shares of Common Stock at any time in the near future. -5- Dependence on Executive Officers and Key Personnel--The success of our business plan depends on attracting qualified personnel We are highly dependent on the services of our executive officers and other key personnel. Except for an employment agreement with our President, we do not have any employment agreements with our executive officers and other key personnel. Attracting and retaining qualified personnel is critical to our business plan. Should we be unable to attract and retain the qualified personnel necessary, our ability to implement our business plan successfully would be limited. Dilution--The market price of your shares of Common Stock may decrease as more shares of Common Stock become available for trading The market price of our Common Stock may decrease as more shares of Common Stock become available for trading. The number of shares of Common Stock that the Selling Stockholders will receive upon conversion of their Series B Preferred Stock is based on a formula, and under the formula there is no limit on the number of shares of Common Stock that we may be required to issue. As detailed elsewhere in this prospectus (see "SUMMARY--THE OFFERING" AND "DESCRIPTION OF SECURITIES"), if all of the options, warrants and preferred stock, including those not subject to this Prospectus, had been exercised or converted, 14,441,213 shares of Common Stock would have been outstanding as of November 8, 1999, as opposed to a total of 7,900,722 shares of Common Stock that were actually outstanding on November 8, 1999. The issuance of any or all of these additional shares upon exercise of options or warrants or conversion of Preferred Stock will dilute the voting power of our current stockholders on corporate matters and, as a result, may cause the market price of our Common Stock to decrease. Other Adverse Effects of Series B Preferred Stock and Warrants--Conversions of Series B Preferred Stock and exercise of Warrants may cause other detrimental effects. Change in Control. If the market price of the Common Stock declines significantly, we could be required to issue a number of shares of Common Stock sufficient to result in our current stockholders not having an effective vote in the election of directors and other corporate matters. Issuances at Less than Market Price. We are required to convert Series B Preferred Stock based on a formula that applies the lesser of 125% of an approximation of the market price of our Common Stock when the Series B Preferred Stock was issued and an approximation of the market price of our Common Stock at the time of conversion of the Series B Preferred Stock. As a result, if the market price of our Common Stock increases after issuance of the Series B Preferred Stock, we will be required to issue shares of Common Stock based on 125% of the approximate market price of the Common Stock at the time of issuance of the Series B Preferred Stock--in other words, possibly at a discount to the then-current market price of the Common Stock. In addition, the Warrants are exercisable at a fixed price. If the market price of our Common Stock increases above the Warrant exercise price, we will be required to issue shares of Common Stock upon exercise of the Warrants at a discount to the then-current market price. Redemption at the Option of the Selling Stockholders. If certain events occur, the Selling Stockholders have the right to require us to redeem all or a portion of their Series B Preferred Stock at a premium. See "DESCRIPTION OF SECURITIES." Such a redemption would have an adverse effect on the financial condition of the Company. Nasdaq Eligibility and Maintenance--If we do not maintain our Nasdaq SmallCap Market listing, you may have difficulty selling your shares Our Common Stock is currently listed on the Nasdaq SmallCap Market. Under the current rules for listing on that market, a company must maintain at least $2,000,000 in net tangible assets, a market capitalization of $35 million or have net income of $500,000. In addition, a company must maintain at least $1,000,000 in market value of public float and a minimum bid price of $1.00 per share. If we experience losses from operations, we may be unable to maintain the standards for continued listing and our Common Stock could be delisted from the Nasdaq SmallCap Market. Investors would thereafter be forced to trade our Common Stock in the over-the-counter market on an electronic bulletin board established for securities that do not meet the listing requirements or in what are -6- commonly referred to as the "pink sheets." As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our Common Stock. Risk of Low Priced Stocks--If our Common Stock is considered a "penny stock," transactions in the Common Stock will be subject to additional regulations. If the Nasdaq SmallCap Market delists our Common Stock and the Common Stock did not fit into any other exclusion from the definition of a "penny stock" under applicable SEC regulations, our Common Stock would become subject to the penny stock rules that impose additional sales practice requirements on broker- dealers who sell such stock to persons other than established customers and accredited investors (generally defined as investors with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with a spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase and must have received the purchaser's written consent to the transaction prior to sale. Adverse Effect of Shares Eligible for Future Sale--Future sales of large amounts of Common Stock could adversely effect the market price and our ability to raise capital. Future sales of our Common Stock by existing stockholders pursuant to Rule 144 under the Securities Act, or following the exercise of outstanding options, warrants, registration rights or otherwise, could adversely affect the market price of our Common Stock. On November 8, 1999, we had 7,900,722 shares of Common Stock outstanding. If all of the options, warrants and other convertible securities outstanding had been exercised for Common Stock, an additional 6,540,491 shares of our Common Stock would have been outstanding as of November 8, 1999. Substantially all of the outstanding shares of our Common Stock are freely tradable, without restriction or registration under the Securities Act (other than the sales volume restrictions of Rule 144 applicable to shares held beneficially by persons who may be deemed to be affiliates). Our directors and executive officers and their family members are not under lockup letters or other forms of restriction on the sale of their Common Stock. Sales of a large number of shares of Common Stock in the public market could adversely affect the market price of the Common Stock and could materially impair our future ability to generate funds through sales of Common Stock or other equity securities. See "DESCRIPTION OF SECURITIES." Protection of Proprietary Treatment Program--Our ability to effectively compete depends on protection of proprietary aspects of the MedCare Program. Our ability to compete and expand effectively will depend, in part, on our ability to develop and maintain proprietary aspects of the MedCare Program and our business and marketing models. We rely on an unpatented proprietary treatment protocol, and others may independently develop the same or a similar program or otherwise obtain access to this protocol. We cannot ensure that the confidentiality agreements between us and our employees will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of their unauthorized use or disclosure. Reimbursement and Related Matters--Market acceptance of the MedCare Program depends in part on whether governments and third-party insurers provide reimbursement. Our ability to successfully market the MedCare Program will depend, in part, on whether physicians using our program are reimbursed for the costs of the program by third parties such as government health administration authorities and private health coverage insurers. In the United States and in some foreign countries, third-party reimbursement is currently generally available for certain procedures, such as surgery and biofeedback training by EMG application, and generally unavailable for patient management products such as diapers, pads and urethral plugs. Governments and other third parties are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement. We cannot ensure that adequate third-party coverage will remain in effect in the future, and if such coverage is not maintained, market acceptance of the MedCare Program could decline. -7- Regulation by Federal and State Government--Unfavorable governmental regulation in the future could threaten our viability. Our business is heavily regulated at a federal and state level. Legislators continually enact new legislation relating to the manner in which patients receive treatment. The process of obtaining regulatory approvals can be lengthy and expensive, and the issuance of such approvals is uncertain. We may not be able to obtain any necessary approvals on a timely basis, or at all, and failure to comply with regulatory requirements can, among other things, result in fines, suspensions of regulatory approvals, operating restrictions and criminal prosecution. We cannot predict whether any health care reforms will be enacted or the effect of any enacted reform on our business. Should legislators enact new legislation that is unfavorable to our business, this would pose a serious risk to the viability of our business. Potential Fluctuations in Quarterly Results--Significant variations in our quarterly operating results may adversely affect the market price of our Common Stock. Our operating results have varied on a quarterly basis during our limited operating history, and we expect to experience significant fluctuations in future quarterly operating results. Such fluctuations have been and may in the future be caused by numerous factors, many of which are outside of our control. We believe that period-to-period comparisons of our results of operations will not necessarily be meaningful and that you should not rely upon them as an indication of future performance. Also, it is likely that our operating results could be below the expectations of public market analysts and investors. In such an event, the market price of our Common Stock may be adversely affected. RxSheets.com--The Internet is a new and rapidly evolving market, and we may not be able to create a market for RxSheets.com's services. RxSheets.com will operate in a new and rapidly evolving market. RxSheets.com's business may be adversely affected if usage of the Internet or other online services does not continue to grow. The Internet as an advertising medium has not been available for enough time to gauge its effectiveness as compared with traditional advertising media. Therefore, the Internet is an unproven medium for advertising-supported services. As a result, RxSheets.com's future operating results will depend substantially upon the increased use of the Internet for information, publication, distribution and commerce and the emergence of the Internet as an effective advertising medium. RxSheets.com's ability to generate significant advertising revenues will also depend on, among other things, the development of a large base of the types of users that are attractive to advertisers, the ability of RxSheets.com to accurately measure its user base and the ability of RxSheets.com to develop or acquire effective advertising systems. Many of RxSheets.com's potential advertisers have only limited experience with the Internet, have not yet devoted a significant portion of their advertising to the Internet, and may not find Internet advertising to be effective for promoting their products and services compared to traditional media. The adoption of Internet advertising requires the acceptance of a new way of conducting business and exchanging information. The market for Internet advertising may not continue to emerge. If the market fails to develop or develops more slowly than expected, RxSheets.com's business may be materially and adversely affected. In addition, there is intense competition in the sale of advertising on the Internet, resulting in a wide range of rates and pricing. This makes it difficult to project future revenues and rates. As a result of these risks, RxSheets.com may not generate significant future advertising revenues from Internet-based advertising. The failure to do so may have a material adverse affect on our business. In addition, the success of RxSheets.com will depend, in part, on its ability to generate a high volume of traffic to its website. Therefore, the performance of the website is critical to RxSheets.com's reputation and its ability to attract advertisers and achieve market acceptance of RxSheets.com. Any system failure that causes interruptions in the availability or that increases response time of RxSheets.com's services could reduce user satisfaction and traffic to the website, and if the interruption is lengthy or repeated, would reduce the attractiveness of RxSheets.com to advertisers and consumers. -8- Competition--In the evolving healthcare field, if we do not continually develop the MedCare Program, it could become uncompetitive or obsolete. Healthcare is a rapidly evolving field in which other companies may have greater financial and research and development resources than we do. We compete directly with a number of small incontinence clinics, offered by doctors, hospitals or therapists, that use a combination of non-invasive alternative treatment options to treat urinary incontinence. We expect that better financed and more sophisticated competition will emerge in the future. In addition, we compete with other alternative treatments to urinary incontinence, including absorbent products and diapers, surgery, indwelling catheters, implanting devices, injectable materials, electrical stimulation, mechanical devices and drugs. Our ability to compete effectively will depend, in part, on our ability to develop and maintain a treatment program that offers therapeutic or cost advantages over competitive offerings. Developments by others could render the MedCare Program uncompetitive or obsolete. THE COMPANY We are a Delaware corporation engaged in the business of managing and/or supporting urinary incontinence clinics throughout the United States. Our principal business activity is the development and expansion of the MedCare Program. The MedCare Program, a proprietary product of our company, is made up of equipment, software and services which we have developed in order to assist physicians in providing non-pharmaceutical, non-invasive treatment to individuals suffering from urinary incontinence and other pelvic disorders. We were originally incorporated in Utah in 1986, and changed our domicile to Delaware in 1996 through a migratory merger. In 1995, we acquired the MedCare Program, which we began to offer to doctors in 1996. We launched the MedCare Program nationally in 1998. During 1998, our sole business was the offering of the MedCare Program. Doctors in private offices, clinics and hospitals are the main users of the MedCare Program. These physicians use the MedCare Program to support a treatment plan based primarily on behavioral modification techniques and to help their patients activate and strengthen the body's various sensory response mechanisms that maintain bladder and bowel control. Recent technological developments and studies indicate that such behavioral techniques are effective methods in treating urinary incontinence. Our goal is to continue to promote general awareness of incontinence and to show that an effective treatment program is readily available. We believe that our company is the leading source of conservative incontinence treatment support systems in the country. Our continued ability to compete and expand effectively will depend, in part, on our ability to develop and maintain certain proprietary aspects of our treatment program. In October 1999, we announced the launch of our new web site, RxSheets.com (www.rxsheets.com), which supersedes our previously planned Physician Virtual Office and is directed exclusively at the physician and pharmaceutical marketplace. RxSheets.com offers a wide array of compelling and focused information and services that will enable physicians to more efficiently and effectively manage the sampling of pharmaceutical drugs. In addition, we changed the name of our wholly-owned subsidiary from Medcareonline.com to RxSheets.com. As of September 30, 1999, we have not generated any revenues from RxSheets.com. USE OF PROCEEDS This prospectus applies only to the resale of Conversion Shares, which consist of previously issued shares of Common Stock. Therefore, we will not receive any proceeds from the sale of the Conversion Shares by the Selling Stockholders. DETERMINATION OF OFFERING PRICE Because this prospectus relates only to the resale of previously issued shares of Common Stock, we did not determine an offering price. The Selling Stockholders will individually determine the offering price of the Conversion Shares as they sell them. The sale price to the public may be the market price prevailing at the time of -9- the sale, a price related to such prevailing market price or such other price as each Selling Stockholder determines from time to time. SELLING STOCKHOLDERS The Conversion Shares being offered by the Selling Stockholders are issuable (1) upon conversion of the Series B Preferred Stock or (2) upon exercise of the Warrants, both of which were issued pursuant to the Securities Purchase Agreement. We are registering the Conversion Shares in order to permit the Selling Stockholders to offer these shares for resale from time to time. Except for the ownership of the Series B Preferred Stock, the Warrants and any Conversion Shares, the Selling Stockholders have not had any material relationship with us within the past three years. The table below lists the Selling Stockholders and other information regarding the beneficial ownership of the Common Stock by each of the Selling Stockholders. The second column lists, for each Selling Stockholder, the number of shares of Common Stock (based on its ownership of Series B Preferred Stock and Warrants) which would have been issuable to the Selling Stockholder on November 8, 1999 upon conversion of all of the Series B Preferred Stock (including any shares of Common Stock that were payable as dividends on the outstanding Series B Preferred Stock) and exercise of the Warrants held by such Selling Stockholder on that date. Our calculations of the number of shares of Common Stock into which the Selling Stockholders may convert the Series B Preferred Stock or exercise the Warrants in the second column assumes a conversion price for the Series B Preferred Stock of $1.4375 (which represents the lesser of (a) the average of the ten lowest closing bid prices during the 40 consecutive trading days immediately prior to November 8, 1999 and (b) the closing bid price on November 8, 1999). Because the conversion of the Series B Preferred Stock is based on a formula that is dependent upon the market price of our Common Stock, the numbers listed in the second column may fluctuate from time to time. The third column lists each Selling Stockholder's pro rata portion (based on its ownership of Series B Preferred Stock) of the 6,210,000 shares of Common Stock being offered by this prospectus. We determined the number of shares of Common Stock to be offered for resale by this prospectus by doubling the approximate number of shares that could be issued upon conversion of the Series B Preferred Stock and exercise of the related warrants (based on the market price as of November 8, 1999). The number of shares that will actually be issued may be more or less than the 6,210,000 shares being offered by this prospectus, because the conversion of the Series B Preferred Stock into Common Stock is based on a formula that depends upon the market price of our Common Stock. We determined the number of shares covered by this prospectus in order to adequately cover a reasonable increase in the number of shares required. 1,600,000 shares of Common Stock were previously registered on Form S- 3 (file number 333-81219), (filed with the Securities and Exchange Commission on June 21, 1999 and declared effective on July 9, 1999) of which 69,562 shares have been sold. Due to a recent decrease in the market price of the Common Stock, the Company is required by the Registration Rights Agreement to register an additional 4,679,562 shares of Common Stock. In accordance with Rule 429 of Regulation C of the Securities and Exchange Act of 1933, the Company is presenting a combined prospectus. The fourth column assumes the sale of all of the shares offered by each Selling Stockholder. Under the Certificate of Designations for the Series B Preferred Stock, no Selling Stockholder can convert Series B Preferred Stock to the extent such conversion would cause such Selling Stockholder's beneficial ownership of our Common Stock (other than shares deemed beneficially owned through ownership of unconverted shares of the Series B Preferred Stock or unexercised Warrants) to exceed 4.99% of the outstanding shares of our Common Stock. We obtained the information provided in the table below from the Selling Stockholders. The Selling Stockholders may sell all, some or none of their shares in this offering. See "Plan of Distribution." -10-
Common Preferred Shares of Common Shares Shares Owned Stock Beneficially Shares of Owned Prior to Owned on Common Stock After Name Offering November 8, 1999 Offered Hereby Offering ---- ------------ ------------------ -------------- -------- HFTP Investment L.L.C. (1) 189 1,392,821 3,017,198 0 Leonardo, L.P. (2) 110 809,356 1,756,042 0 GAM Arbitrage Investments, Inc. (2) 15 110,367 239,460 0 AG Super Fund International Partners L.P. (2) 15 110,367 239,460 0 Raphael, L.P. (2) 20 147,156 319,280 0 Ramius Fund, Ltd.(3) 40 294,311 638,560 0
(1) Promethean Investment Group, LLC, a New York limited liability company ("Promethean"), serves as investment advisor to HFTP Investment, L.L.C. ("HFTP") and may be deemed to share beneficial ownership of the shares beneficially owned by HFTP by reason of shared power to vote and to dispose of the shares beneficially owned by HFTP. Promethean disclaims beneficial ownership of the shares beneficially owned by HFTP. Mr. James F. O'Brien, Jr. indirectly controls Promethean. Mr. O'Brien disclaims beneficial ownership of the shares beneficially owned by Promethean and HFTP. Shares of Common Stock beneficially owned on November 8, 1999 includes 40,000 shares of Common Stock issuable upon exercise of the Warrants that were vested as of November 8, 1999. The remaining portion of such Warrants do not vest within 60 days of November 8, 1999. (2) Angelo, Gordon & Co., L.P. ("Angelo Gordon") is a general partner of AG Super Fund International Partners, L.P., Leonardo, L.P. and Raphael, L.P., and is the investment advisor of GAM Arbitrage Investment, Inc. (collectively, the "Angelo Gordon Entities") and consequently has voting control and investment discretion over securities held by the Angelo Gordon Entities. The ownership information for each of the Angelo Gordon Entities does not include the ownership information for the other Angelo Gordon Entities. Angelo Gordon and each of the Angelo Gordon Entities disclaim beneficial ownership of the shares held by the other Angelo Gordon Entities. Mr. John M. Angelo, the Chief Executive Officer of Angelo Gordon, and Mr. Michael L. Gordon, the Chief Operating Officer of Angelo Gordon, are the sole general partners of A.G. Partners, L.P., the sole general partner of Angelo Gordon. As a result, Mr. Angelo and Mr. Gordon may be considered beneficial owners of any shares deemed to be beneficially owned by Angelo Gordon. Shares of Common Stock beneficially owned on November 8, 1999 includes 32,000 shares of Common Stock issuable upon exercise of the Warrants that were vested as of November 8, 1999. The remaining portion of such Warrants do not vest within 60 days of November 8, 1999. (3) AG Ramius Partners, LLC ("AG Ramius") is the investment advisor to Ramius Fund, Ltd. ("Ramius Fund"), and consequently has voting control and investment discretion over securities held by Ramius Fund. AG Ramius Fund disclaims beneficial ownership of the shares held by Ramius Fund. Mr. John M. Angelo and Mr. Michael Gordon are sole general partners of AG Partners, L.P., the sole general partner of Angelo Gordon (which is the investment managing member of AG Ramius). As a result, Mr. Angelo and Mr. Gordon may be considered beneficial owners of any shares deemed to be beneficially owned by AG Ramius. Shares of Common Stock beneficially owned on November 8, 1999 includes 8,000 shares of Common Stock issuable upon exercise of the Warrants that were vested as of November 8, 1999. The remaining portion of such Warrants do not vest within 60 days of November 8, 1999. -11- PLAN OF DISTRIBUTION The Selling Stockholders (or, subject to applicable law, their pledgees, donees, distributees, transferees or successors in interest) are offering shares of Common Stock, which are issuable to them upon conversion of the Series B Preferred Stock and exercise of Warrants that they acquired from us in a private placement transaction pursuant to the Securities Purchase Agreement. This prospectus covers the Selling Stockholders' resale of up to 6,210,000 shares of Common Stock that we may issue to them upon conversion of the Series B Preferred Stock and exercise of the Warrants, as well as any additional shares that may become issuable upon conversion of the Series B Preferred Stock or exercise of the Warrants because of stock splits, stock dividends and other similar transactions. Because the conversion of the Series B Preferred Stock into Common Stock is based on a formula that depends upon the market price of our Common Stock, we may issue to the Selling Stockholders more than the 6,210,000 shares of Common Stock and the additional shares that may become issuable because of stock splits, stock dividends and other similar transactions. This prospectus does not cover any additional shares of Common Stock (in excess of the 6,210,000 shares) that we may issue to the Selling Stockholders as a result of fluctuations in the market price of our Common Stock. In connection with our issuance to the Selling Stockholders of the Series B Preferred Stock, we provided to them certain registration rights and have subsequently filed two registration statements on Form S-3 with the SEC. This prospectus forms a part of those registration statements. We have also agreed to prepare and file any amendments and supplements to the registration statements as may be necessary to keep them effective until this prospectus is no longer required for the Selling Stockholders to sell their shares of Common Stock and to indemnify and hold the Selling Stockholders harmless against certain liabilities under the Securities Act that could arise in connection with the Selling Stockholders' sale of their shares. We have agreed to pay all reasonable fees and expenses incident to the filing of the registration statement, except that we have agreed to pay the fees and disbursements of legal counsel to the Selling Stockholders only up to an aggregate of $10,000. The Selling Stockholder may sell the shares of Common Stock described in this prospectus directly or through underwriters, broker-dealers or agents. The Selling Stockholders may also transfer, devise or gift their shares by other means not described in this prospectus. As a result, pledgees, donees, transferees or other successors in interest that receive such shares as a gift, partnership distribution or other non-sale related transfer may offer shares of Common Stock. In addition, if any shares covered by this prospectus qualify for sale pursuant to Rule 144 under the Securities Act, the Selling Stockholders may sell such shares under Rule 144 rather than pursuant to this prospectus. The Selling Stockholders may sell shares of Common stock from time to time in one or more transactions: . at fixed prices that may be changed, . at market prices prevailing at the time of sale, or . at prices related to such prevailing market prices or at negotiated prices. The Selling Stockholders may offer their shares of Common Stock in one or more of the following transactions: . on any national securities exchange or quotation service on which the Common Stock may be listed or quoted at the time of sale, including the Nasdaq SmallCap Market, . in the over-the-counter market, . in privately negotiated transactions, . through options, -12- . by pledge to secure debts and other obligations, . to cover short sales made pursuant to this prospectus, or . by a combination of the above methods of sale. In effecting sales, brokers or dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate in the resales. The Selling Stockholders may enter into hedging transactions with broker-dealers, and in connection with those transactions, broker-dealers may engage in short sales of the shares. The Selling Stockholders also may sell shares short and deliver the shares to close out such short positions. The Selling Stockholders also may enter into option or other transactions with broker-dealers that require the delivery to the broker-dealer of the shares, which the broker-dealer may resell pursuant to this prospectus. The Selling Stockholders also may pledge the shares to a broker, dealer or financial institution and upon a default, the broker, dealer or financial institution may effect sales of the pledged shares pursuant to this prospectus. In order to comply with the securities laws of certain states, the Selling Stockholders may need to offer or sell the shares only through registered or licensed brokers or dealers. The SEC may deem the Selling Stockholders and any underwriters, broker- dealers or agents that participate in the distribution of the shares of Common Stock to be "underwriters" within the meaning of the Securities Act. The SEC may deem any profits on the resale of the shares of Common Stock and any compensation received by any underwriter, broker-dealer or agent to be underwriting discounts and commission under the Securities Act. Under the Exchange Act, any person engaged in the distribution of the shares of Common Stock may not simultaneously engage in market-making activities with respect to the Common Stock for five business days prior to the start of the distribution. In addition, each Selling Stockholder and any other person participating in a distribution will be subject to the Exchange Act, which may limit the timing of purchases and sales of Common Stock by the Selling Stockholder or any such other person. DESCRIPTION OF SECURITIES Common Stock This prospectus relates to the issuance of up to 6,210,000 shares of our Common Stock upon conversion of the Series B Preferred Stock and exercise of the related Warrants. Our authorized capital stock includes 100,000,000 shares of Common Stock, with a par value of $0.001. As of November 8, 1999, 7,900,722 shares of Common Stock were outstanding. The Common Stock currently outstanding is, and the Common Stock offered hereby will be when issued, validly issued, fully paid and nonassessable. Holders of the Common Stock are entitled to one vote for each share held by them of record on all matters to be voted on by the stockholders. Subject to the preferences that may be applicable to the holders of any outstanding shares of preferred stock (described below under "DESCRIPTION OF SECURITIES--Preferred Stock"), holders of Common Stock are entitled to receive, out of legally available funds, such dividends as our Board of Directors may declare from time to time. Our decision to declare dividends depends upon a number of factors, including our future earnings, capital requirements and financial condition. We have not declared dividends on our Common Stock in the past, and we currently anticipate that we will retain future earnings, if any, to increase our net worth and reserves rather than to pay dividends. The holders of Common Stock have no preemptive or conversion rights and are not subject to further calls or assessments. There are no redemption or sinking fund provisions applicable to the Common Stock. -13- Upon our liquidation, dissolution or winding up, all assets legally available for distribution to stockholders are distributable ratably among the holders of outstanding Common Stock, subject to the prior rights of our creditors and the preferential rights of any of our preferred stockholders. Preferred Stock We are authorized to issue up to 1,000,000 shares of Preferred Stock, with a par value of $0.25 per share. We may issue the Preferred Stock, without further action by the stockholders, in one or more series. We may fix the rights, preferences, privileges and restrictions granted to or imposed on any wholly unissued shares of undesignated Preferred Stock, and we may fix the number of shares constituting any series and the designation of such series. The issuance of Preferred Stock, while providing flexibility in connection with the expansion of our business, possible acquisitions and other corporate purposes, could, among other things, have a detrimental effect on the rights of holders of the Common Stock. Of the 1,000,000 shares of Preferred Stock authorized, (1) 1,000 shares have been designated as Series A Preferred Stock, of which 50 shares were outstanding as of November 8, 1999 and (2) 800 shares have been designated as the Series B Preferred Stock, of which 389 shares were outstanding as of November 8, 1999. The rights and preferences of each series are discussed further below. The Series A Preferred Stock Pursuant to a Certificate of Designations filed with the State of Delaware on July 7, 1997, 1,000 shares of our authorized Preferred Stock have been designated as Series A Preferred Stock, with an 8% annual interest rate. This stock ranks senior to all Common Stock, senior to any series or class of stock so designated in the future, junior to any series or class of stock designated as such in the future, and on parity with any series or class of stock so designated in the future (including the Series B Preferred Stock). There are no dividends or dividend rights provided for the Series B Preferred Stock. The holders of the Series A Preferred Stock also have no voting rights, but must receive notice of all stockholders' meetings. The liquidation ranking of the Series A Preferred Stock is after any senior securities, prior to any junior securities and on a par with any other preferred stock (including the Series B Preferred Stock). Upon liquidation, holders of the Series A Preferred Stock will receive an amount per share equal to the original issue price per outstanding share plus an amount equal to 8% of the original Series A Preferred Stock issue price per year for the period that has passed since that date in connection with the consummation of the purchase by the holder of shares of the Series A Preferred Stock. If we do not possess sufficient funds, assets and other holdings to provide for the complete liquidation price, holders of the Series A Preferred Stock will receive funds based upon the ranking of the stock. The Series A Preferred Stock is described further in our Registration Statement on Form SB-2 (Reg. No. 333-41611). The Series B Preferred Stock Designation and Amount Pursuant to a Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock, filed with the State of Delaware on May 17, 1999, 800 shares of our Preferred Stock have been designated as Series B Preferred Stock. We issued 400 shares of the Series B Preferred Stock (along with Warrants to purchase Common Stock, described below) under the Securities Purchase Agreement. The aggregate purchase price of each share of the Series B Preferred Stock (along with the related Warrants) is $10,000. In addition, at any time from May 18, 2000 through June 7, 2000, the Selling Stockholders will have the right to purchase up to an additional 400 shares of the Series B Preferred Stock and up to 240,000 additional Warrants. Each Selling Stockholder will be entitled to purchase a number of additional shares of Series B Preferred -14- Stock equal to the sum of (1) the number of shares of Series B Preferred Stock held by such stockholder on May 18, 2000 and (2) the number of shares of Series B Preferred Stock converted by such stockholder before May 18, 2000 at the Fixed Conversion Price (as defined below). The terms of these as-yet issued shares and warrants would be identical to the terms described in this prospectus. Dividends The holders of the Series B Preferred Stock are entitled to receive a 6% annual dividend, which is cumulative and accrues daily from the date of issuance. The dividend will be payable, at our option, either (1) in shares of Common Stock upon conversion of the Series B Preferred Stock or (2) in cash on the first day of each calendar quarter. Voting Rights Holders of the Series B Preferred Stock are not entitled to any voting rights on any matter submitted to a vote of our stockholders, except as required by law. Rank The Series B Preferred Stock ranks senior to the Common Stock, and on parity with the Series A Preferred Stock, in respect to dividend preferences and payments upon liquidation and dissolution. Restrictions on Future Issuances We have agreed not to issue any additional or other capital stock that is senior to or on parity with the Series B Preferred Stock without the prior written consent of the holders of at least two-thirds of the Series B Preferred Stock. Under the Securities Purchase Agreement, we have also made the following covenants restricting our right to issue any additional equity securities: . Until May 18, 2000, we may not issue any equity securities or securities convertible or exchangeable into equity securities (a "Future Offering"). other than a Variable Convertible Offering (as defined below), without the prior approval of at least two-thirds of the holders of the Series B Preferred Stock, unless we first offer each holder of the Series B Preferred Stock the option to purchase a stated percentage of the shares to be issued in the Future Offering. . Until January 5, 2000 we may not, without prior written approval of at least two-thirds of the holders of the Series B Preferred Stock, issue any convertible securities which have a conversion price based on the trading price of the Common Stock (a "Variable Convertible Offering"), unless we offer each holder of the Series B Preferred Stock the option to purchase a stated percentage of such securities. The above covenants do not apply to certain traditional financing methods, such as commercial financing with no equity component. -15- Conversion by Holders Subject to certain limitations discussed below, holders of the Series B Preferred Stock may convert their shares into shares of Common Stock at a variable conversion rate (the "Conversion Rate") equal to the Conversion Amount (as defined below) divided by the applicable Conversion Price (as defined below). . The "Conversion Price" is the lesser of the following: (a) The Fixed Conversion Price: Equal to 125% of the average of the closing bid prices for our Common Stock during the five consecutive trading days immediately preceding the issuance date of the applicable shares of the Series B Preferred Stock. The Fixed Conversion Price for the 400 Series B Preferred Stock issued on May 18, 1999 is $7.80. (b) The Variable Conversion Price: Equal to the lower of (1) the closing bid price on the day the holder delivers to us the required notice of its intention to convert and (2) the average of the ten lowest closing bid prices in the 40 trading days immediately preceding the date such notice is given. . The "Conversion Amount" per share of Series B Preferred Stock is $10,000, plus any dividends that have accrued but have not been paid, plus any default interest (equal to 15% per annum) for dividends which we elected to pay in cash but have failed to pay on a timely basis. Limitations on Holders' Right to Convert As of the date of this prospectus, the holders may convert all of their shares of the Series B Preferred Stock. However, no holder may convert any shares of the Series B Preferred Stock in excess of the number of shares which, upon giving effect to such conversion, would cause the beneficial ownership of the stockholder to exceed 4.99% of the Common Stock then issued and outstanding (excluding shares of Series B Preferred Stock which have not been converted and warrants which have not been exercised). Adjustment of Conversion Price We will adjust the Variable Conversion Price and the Fixed Conversion Price of the Series B Preferred Stock in the event that we fail to obtain and/or maintain the effectiveness of a registration statement covering the resale of all applicable securities, which could have the effect of increasing the number of shares of Common Stock issuable upon conversion. In addition, the Conversion Price of the Series B Preferred Stock is subject to customary anti-dilution provisions which take effect upon such events as the issuance of Common Stock, options or other convertible securities, the subdivision or combination of outstanding shares of Common Stock, our recapitalization, merger or other reorganization, or any other similar events. However, we will not make any such adjustment unless the adjustment would result in a cumulative increase or decrease of at least 1% in the Conversion Price. Maturity and Mandatory Conversion The shares of Series B Preferred Stock mature five years after they are issued, and any shares of the Series B Preferred Stock outstanding on the applicable maturity date automatically convert into shares of Common Stock. Redemption at the Option of Holders The holders may redeem any outstanding share of the Series B Preferred Stock in the event of any of the following transactions (each, a "Major Transaction"): . our consolidation, merger or other business combination with another entity; -16- . the sale or transfer of all or substantially all of our assets; or . a purchase, tender or exchange offer made to and accepted by the holders of more than 50% of the outstanding shares of Common Stock. Any such Major Transaction must have occurred or have been the subject of a public announcement during the period beginning on the date of issuance of the Series B Preferred Stock and ending on May 18, 2000. In the event of a Major Transaction, the redemption price per share will be the greater of (1) 115% of the Liquidation Amount (as defined below) and (2) the product of (a) the applicable Conversion Rate and (b) the closing bid price on the date of the public announcement of the event. In addition, in the event of the occurrence of certain events (the "Triggering Events"), including the failure to maintain the effectiveness of the registration statement, the delisting of the Common Stock for a period of five consecutive days and our breach of any representations, warranties or covenants in the Securities Purchase Agreement or an related documents, the holders have the right to require us to redeem all or a portion of their Series B Preferred Stock. The redemption price per share is the same as the redemption price per share in the event of a Major Transaction. Conversion at Our Election We have the right to require conversion, at the applicable Conversion Rate, of any or all of the outstanding shares of the Series B Preferred Stock on any day immediately following an event where the closing bid price of our Common Stock on each trading day during the 30 consecutive trading day period is at least 200% of the applicable Fixed Conversion Price in effect on the first day of such 30 trading day period. Among the conditions to our ability to so convert the shares are the following: . a registration statement covering the resale of at least 100% of the number of shares issued and issuable upon conversion of the Series B Preferred Stock and exercise of the related Warrants has been effective for at least 90 days; . the Common Stock has been listed on a national market or exchange for at least the 30 trading days prior to such conversion; and . we have, from the date of issuance through the date we deliver the notice of our election to convert, timely delivered the shares of Common Stock upon conversion of the Series B Preferred Stock. Redemption in Lieu of Conversion We may elect to redeem shares of Series B Preferred Stock submitted for conversion, provided that we have given an appropriate notice to the holders of the shares and provided that the Conversion Price for such shares is less than the market price on the issuance date. The redemption price per share in this case will be equal to the product of the applicable Conversion Rate and the closing bid price on the conversion date. We may only elect to redeem in lieu of conversion if we have given proper notice to the holders of the Series B Preferred Stock, specifying the maximum number of shares to be so redeemed and confirming the time period during which we may redeem the shares. If we fail to redeem the shares in accordance with this provision, we may not submit another notice of our election to redeem in lieu of conversion without the prior written consent of the holders of at least two-thirds of the shares of Series B Preferred Stock then outstanding. -17- Redemption at Our Election Provided certain conditions are satisfied, we have the right, from the third anniversary of the effective date of the registration statement for the applicable shares of Series B Preferred Stock through maturity of the Series B Preferred Stock, to require the redemption of all outstanding shares of the Series B Preferred Stock at a redemption price of 115% of the Liquidation Amount. The conditions to our right to redeem the shares include, among others: . a registration statement covering the resale of at least 100% of the number of shares issued or issuable upon conversion of the Series B Preferred Stock and exercise of the related Warrants has been effective for at least 30 trading days; . the Common Stock has been listed on a national market or exchange for at least the 30 trading days prior to such conversion; and . we have, from the date of issuance through the date we deliver the notice of our intention to redeem, timely delivered the shares of Common Stock upon conversion of the Series B Preferred Stock by the holders thereof. Reservation of Shares To ensure that the Series B Preferred Stock and the Warrants can at all times be properly converted, while shares of the Series B Preferred Stock are outstanding, we are required to reserve a number of shares of Common Stock equal to the sum of (1) at least 200% of the number of shares of Common Stock for which the Series B Preferred Stock is convertible and (2) at least 100% of the number of shares of Common Stock for which the Warrants may be exercised. Liquidation, Dissolution or Winding Up In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, the holders of Series B Preferred Stock are entitled to receive, out of our assets, an amount per share (the "Liquidation Amount") equal to $10,000 plus any stock dividends that have accrued but have not been paid, plus any default interest (equal to 15% per year) for dividends which we elected to pay in cash but failed to pay on a timely basis. Amendment to the Certificate of Designations We may not change the Certificate of Designations relating to the Series B Preferred Stock without the affirmative vote of at least two-thirds of the holders of the outstanding shares of Series B Preferred Stock. Restrictions on Transfer There will be no more than seven holders of the Series B Preferred Stock at any one time. Therefore, with one limited exception, shares of the Series B Preferred Stock may not be transferred, except to (1) an existing holder of the Series B Preferred Stock, or (2) to any transferee who obtains all the shares of the transferor. Warrants Previously Issued Options and Warrants In connection with the issuance of the Series A Preferred Stock, we issued warrants for the purchase of our Common Stock. As of November 8, 1999, warrants to purchase 208,251 shares of Common Stock were outstanding. In addition, as of November 8, 1999, there were options to purchase 2,436,000 shares of our Common Stock outstanding, which options were issued in connection with our employee stock option plans. These options and warrants are described further in our Registration Statement on Form SB-2 (Reg. No. 333-41611). -18- Warrants Issued with the Series B Preferred Stock Under the Securities Purchase Agreement, along with the Series B Preferred Stock, we issued the Warrants to the Selling Stockholders. All Warrants issued in connection with the Series B Preferred Stock expire five years after issuance. Vesting Schedule The Warrants entitle the holders to 200 shares of Common Stock for (1) each issued share of the Series B Preferred Stock held on the applicable vesting date and (2) each share of the Series B Preferred Stock converted prior to the applicable vesting date at the Fixed Conversion Price. The vesting dates of the Warrants are (a) September 15, 1999, (b) March 13, 1999 and (c) September 9, 1999. Exercise Price The exercise price of each Warrant is 125% of the average of the closing bid prices of our Common Stock for the five consecutive trading days immediately preceding the applicable vesting date. The exercise price of the Warrants is subject to customary anti-dilution adjustments upon such events as the issuance of Common Stock for a per-share price less than the exercise price in effect immediately prior to such issuance, the subdivision or combination of the Common Stock, our distribution of assets to holders of Common Stock, and other similar events. Cashless Exercise Option If the Common Stock to be issued in exchange for the Warrants is not properly registered for resale, or if a Triggering Event has occurred, the Warrant holders are entitled to a "cashless exercise" option. This option entitles the Warrant holders to elect to receive fewer shares of Common Stock (the number of shares to be determined by a formula based on the total number of shares to which the Warrant holder is entitled, the last reported sale price of the Common Stock and the applicable exercise price of the Warrants) without paying the cash exercise price. Covenants We made certain customary covenants with respect to the Warrants, including, among others: (1) the Warrants, and any Common Stock to be issued upon exercise of the Warrants, are and will be duly authorized and validly issued; (2) we will reserve at least 100% of the number of shares of Common Stock issuable upon exercise of the Warrants; (3) the Common Stock issuable upon exercise of the Warrants will be listed on each national securities exchange or automated quotation system on which our Common Stock is then issued; and (4) we will act in good faith in carrying out the provisions of the Warrants. Amendment The provisions of the Warrants may be amended only after we obtain the written consent of Warrant holders representing a majority of the shares of Common Stock issuable upon exercise of the Warrants then outstanding. However, we may not increase the exercise price of the Warrants or decrease the amount of Common Stock issuable upon exercise of any Warrant without the written consent of the holder of such Warrant. EXPERTS AND LEGAL MATTERS Our financial statements for the years ended December 31, 1998 and December 31, 1997, which are incorporated into this prospectus by reference, were audited by Clancy & Co., P.L.L.C., independent auditors, as set forth in their report thereon and incorporated herein -19- by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. Legal matters will be passed upon by Barack Ferrazzano Kirschbaum Perlman & Nagelberg, 333 W. Wacker Drive, Suite 2700, Chicago, Illinois 60606. INCORPORATION BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring to those documents. The information incorporated by reference is considered to be a part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. The following documents, which we have filed with the SEC, are incorporated herein by reference: 1. Our Annual Report on Form 10-K for the year ended December 31, 1998; 2. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999; 3. Our Current Report on Form 8-K filed on February 9, 1999 regarding the formation of Medcareonline.com, Inc.; 4. Our Current Report on Form 8-K, as amended, originally filed on May 17, 1999 regarding the change in our certifying accountants; 5. Our Current Report on Form 8-K, as amended, originally filed June 2, 1999 regarding the issuance of the Series B Preferred Stock and the Warrants; 6. Our Proxy Statement dated June 4, 1999 regarding our 1999 Annual Meeting of Stockholders; and 7. All other reports filed pursuant to Sections 13(a) or 15(d) of the Exchange Act since December 31, 1998. In addition, all documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") after the date of this prospectus and before the termination of this offering will be deemed to be incorporated by reference into this prospectus and to be a part hereof from the date of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any subsequently filed document that also is or is deemed to be incorporated by reference modifies or replaces such statement. We will provide to each person (including any beneficial owner) to whom this prospectus is delivered a copy of any document incorporated by reference (other than exhibits to such documents not specifically incorporated by reference), at no cost, upon the oral or written request of any such person. In addition, we will furnish you with a copy of our most recent annual report, at no cost, on oral or written request. You may direct any requests for such documents to us at Medcare Technologies, Inc., 1515 West 22nd Avenue, Suite 1210, Oak Brook, Illinois 60521, (630) 472-5300, Attention: Jeffrey S. Aronin. AVAILABLE INFORMATION This prospectus is a part of a Registration Statement on Form S-3 we filed with the SEC under the Securities Act. Statements contained herein concerning the provision of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the SEC. -20- We are subject to the informational requirements of the Exchange Act. In accordance with the Exchange Act, we file reports, proxy statements and other information with the SEC. You may read and copy any document we file with the SEC at the Public Reference Room of the SEC at: Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 and at the following regional offices of the SEC: Midwest Regional Office Citicorp Center 500 West Madison Street Suite 1400 Chicago, Illinois 60661-2511 Northwest Regional Office 7 World Trade Center Suite 1300 New York, New York 10048 Copies of our filings under the Exchange Act can also be obtained at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC- 0330 for further information. Reports, proxy statements and other information filed with the SEC is also available at the SEC's site on the World Wide Web at http://www.sec.gov. FORWARD-LOOKING STATEMENTS We have made statements in this prospectus and the documents we incorporate by reference that are considered "forward-looking statements" within the meaning of the Exchange Act. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward looking statements. These statements are based on our current expectations, assumptions and projections about the healthcare industry and are not guarantees of future performance. Therefore, actual events and results are subject to risks, uncertainties and other important factors that could cause our actual performance to differ materially from that expressed or forecasted in the forward looking statements. These risks, uncertainties and factors include: . the effect of changing economic conditions; . conditions in the overall healthcare market; . the impact of new healthcare legislation; . risks associated with product demand and market acceptance risks; . the impact of competitive products and pricing; . delays in new product development and technological risks; and . other risk factors identified in this prospectus. INDEMNIFICATION We have indemnified all of our officers, directors and controlling persons against all liabilities from the sale of securities which might arise under the Securities Act other than as stated under Delaware law. Insofar as -21- indemnification for liabilities arising under the Securities Act may be permitted to such persons pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. -22- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses relating to this registration, other than underwriting discounts and commissions, if any, will be borne by the registrant. The following table shows the amount of such expenses in connection with this registration.
Item Amount ---- -------- Securities and Exchange Commission Registration Fee $1,951 Estimated Legal Fees and Expenses 500 Printing and Engraving Expenses 500 Miscellaneous Expenses 2,500 ------ Total $5,451 ======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The officers and directors of the registrant are indemnified as provided under the Delaware General Corporation Law. No additional indemnification has been authorized. ITEM 16. EXHIBITS Exhibit Description - ------- ----------- 3. Articles of Incorporation and Bylaws* 3a. Articles of Incorporation and Amendments* 3b. Bylaws* 4. Series B Preferred Stock Agreements* 4a. Certificate of Designation* 4b. Securities Purchase Agreement* 4c. Registration Rights Agreement* 4d. Form of Warrant* 4e. Escrow Agreement* 5. Opinion re Legality 5a. Opinion of Counsel regarding Registration 10. Material Contracts* 10a. Certificate of Designation* 10b. Subscription Agreement* 10c. Nine-Month Warrant* 10d. Twelve-Month Warrant* 10e. Fifteen-Month Warrant* 10f. Preferred Warrants* 10g. Registration Rights* 10h. Instructions to Transfer Agent* 10i. Agreement and Amendment* 10j. Agreement and Amendment for Queensway Financial Holdings Limited* 10k. Three-Month Warrant* 10l. Swartz Warrant* 10m. Program Management Agreement with Amendment* 10n. Employment and Stock Agreement, dated as of December 9, 1998 between Medcare Technologies, Inc. and Jeffrey S. Aronin* 10o. Sublease dated as of December 31, 1997 between Medcare Technologies, Inc. and Delta Dental Association* 10p. Stock Option Plan 1995* 10q. Stock Option Plan 1996* 10r. Stock Option Plan 1997 -- $4.50 options* 10s. Stock Option Plan 1997 -- $6.50 options* 10t. Stock Option Plan 1998* 10u. Stock Option Plan 1999* 16. Letter from the Former Accountant* 23. Consent of Experts and Counsel 23a. Consent of Independent Auditor 23b. Consent of Counsel (included in Exhibit 5a) 27. Financial Data Schedule* * indicates previously submitted exhibit ITEM 17. UNDERTAKINGS 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 foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The registrant will file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to include any additional or changed material information on the plan of distribution. For the purposes of determining liability under the Securities Act, the registrant will treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. The registrant will file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies 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 Oak Brook, State of Illinois on November 8, 1999. MEDCARE TECHNOLOGIES, INC. /s/ Jeffrey S. Aronin --------------------- Jeffrey S. Aronin CEO, President and Director (principal executive officer) /s/ Alan Jagiello ----------------- Alan Jagiello CFO, Treasurer, Secretary and Director (principal financial and accounting officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeffrey S. Aronin and Alan Jagiello and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him, and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on November 9, 1999, by the following persons in the capacities indicated:
Signatures Capacity ---------- -------- /s/ Jeffrey S. Aronin President, Chief Executive Officer - -------------------------- and Director (principal executive officer) Jeffrey S. Aronin /s/ Alan P. Jagiello Chief Financial Officer, Secretary, Treasurer - -------------------------- and Director (principal financial and accounting Alan P. Jagiello officer) /s/ Gregory Wujek Vice President of Managed Care and Director - -------------------------- Gregory Wujek Director - -------------------------- Dr. Michael M. Blue Director - -------------------------- Harmel S. Rayat
EXHIBIT INDEX Exhibit Description - -------- ----------- 3. Articles of Incorporation and Bylaws* 3a. Articles of Incorporation and Amendments* 3b. Bylaws* 4. Series B Preferred Stock Agreements* 4a. Certificate of Designation* 4b. Securities Purchase Agreement* 4c. Registration Rights Agreement* 4d. Form of Warrant* 4e. Escrow Agreement* 5. Opinion re Legality 5a. Opinion of Counsel regarding Registration 10. Material Contracts* 10a. Certificate of Designation* 10b. Subscription Agreement* 10c. Nine-Month Warrant* 10d. Twelve-Month Warrant* 10e. Fifteen-Month Warrant* 10f. Preferred Warrants* 10g. Registration Rights* 10h. Instructions to Transfer Agent* 10i. Agreement and Amendment* 10j. Agreement and Amendment for Queensway Financial Holdings Limited* 10k. Three-Month Warrant* 10l. Swartz Warrant* 10m. Program Management Agreement with Amendment* 10n. Employment and Stock Agreement, dated as of December 9, 1998 between Medcare Technologies, Inc. and Jeffrey S. Aronin* 10o. Sublease dated as of December 31, 1997 between Medcare Technologies, Inc. and Delta Dental Association* 10p. Stock Option Plan 1995* 10q. Stock Option Plan 1996* 10r. Stock Option Plan 1997 -- $4.50 options* 10s. Stock Option Plan 1997 -- $6.50 options* 10t. Stock Option Plan 1998* 10u. Stock Option Plan 1999* 16. Letter from the Former Accountant* 23. Consent of Experts and Counsel 23a. Consent of Independent Auditor 23b. Consent of Counsel (included in Exhibit 5a) 27. Financial Data Schedule* * indicates previously submitted exhibit EX-5.A 2 OPINION OF COUNSEL Exhibit 5a. November 9, 1999 Medcare Technologies, Inc. 1515 West 22nd Street, Suite 1210 Oak Brook, IL 60523 Ladies and Gentlemen: We have acted as special counsel to Medcare Technologies, Inc., a Delaware corporation (the "Company"), in connection with the offering (the "Offering") by certain stockholders of the Company of the Company's common stock, par value $0.001 per share (the "Common Stock") as described in the Company's Registration Statement on Form S-3 (the "Registration Statement"). At your request, this letter is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Incorporation of the Company, as amended, and the Company's by-laws; (b) The Registration Statement, including the prospectus constituting a part thereof; (c) Minutes and records of the corporate proceedings of the Company relating to the Offering; and (d) A form of stock certificate representing the Common Stock. We have made such legal investigation as we deemed necessary for purposes of this opinion. In that investigation, we have assumed the genuineness of all signatures, the proper execution of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, and the authenticity and proper execution of the originals of such copies. We have not made any independent factual investigation, have relied without such investigation on all the listed documents, and disclaim any duty to make such an independent factual investigation. Our opinion expressed below is subject to the qualifications that we express no opinion as to the applicability of, compliance with, or effect of (i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar law affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), (iii) public policy considerations which may limit the rights of parties to obtain certain remedies and (iv) any laws except the laws of the State of Illinois, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. Based upon and subject to the foregoing qualifications, assumptions and limitations and the further limitations set forth below, we are of the opinion that when (i) the Registration Statement becomes effective and (ii) the shares of Common Stock to be sold thereunder have been issued upon the terms and conditions set forth in the Registration Statement (including, in the case of shares issued pursuant to the exercise of warrants or options, the receipt by the Company of payment therefor in accordance with the terms thereof), then such shares of Common Stock will be legally issued, fully paid and non-assessable. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Experts and Legal Matters" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion is based upon our knowledge of the law and facts as of the date hereof, and we assume no duty to communicate with you with respect to any matter that comes to our attention hereafter. Very truly yours, /s/ Barack Ferrazzano Kirschbaum Perlman & Nagelberg BARACK FERRAZZANO KIRSCHBAUM PERLMAN & NAGELBERG EX-23.A 3 CONSENT OF INDEPENDENT AUDITORS Exhibit 23a CONSENT OF INDEPENDENT AUDITORS ------------------------------- As independent auditors, we hereby consent to the inclusion in this Form S-3 our reports, relating to the consolidated financial statements of Medcare Technologies, Inc. for the years ended December 31, 1998 and 1997 and any amendments thereto. We also consent to the reference to this firm under the heading "Experts" in this Registration Statement. /s/ Clancy and Co. ------------------ CLANCY AND CO., P.L.L.C. Certified Public Accountants November 9, 1999 -----END PRIVACY-ENHANCED MESSAGE-----