As filed with the Securities and Exchange Commission on October 30, 2001
Registration No.
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
CARESIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 3841 23-2863507
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
6100 Bristol Parkway, Culver City, CA 90230
(310) 338-6767
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
___________________
W. Vickery Stoughton
Chairman of the Board of Directors and
Chief Executive Officer
Careside, Inc.
6100 Bristol Parkway
Culver City, CA 90230
(310) 338-6767
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________
With copies to:
Barry M. Abelson, Esq.
Julia D. Corelli, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
(215) 981-4000
____________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(C)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Share Offering Price Fee
---------------- ---------- --------- -------------- ---
Common Stock, par value $.01 12,894,155 (1) $2.245(2) $28,947,378(2) $5,789.48(2)
(1) All of the shares of Common Stock offered hereby are being sold for the
accounts of selling security holders named herein. See "Selling Security
Holders" herein.
(2) This registration fee of $5,789.48 is calculated in accordance with Rule
457(c) under the Securities Act. It is offset in its entirety by the
registration fee of $8,743.96 that was previously paid in connection with
Careside, Inc.'s filing of the registration statement for the registration
of 14,482,743 shares of Common Stock on June 11, 2001 (Registration No.
333-62770) based on a proposed maximum offering price per share of $2.415
and a proposed maximum aggregate offering price of $34,975,824.35,
calculated at that time in accordance with Rule 457(c) under the
Securities Act. That registration statement was withdrawn on October 10,
2001.
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
-2-
12,894,155 Shares Of Common Stock
[LOGO]
CARESIDE
The selling stockholders named in this prospectus are offering or may offer
in the future 12,894,155 shares of our common stock which we have issued or
which we may issue when selling stockholders exercise warrants to purchase our
common stock.
The selling stockholders may sell these shares from time to time in
brokers' transactions, negotiated transactions, or otherwise at prices current
at the time of sales. We will not receive any proceeds from these sales.
We will pay all expenses of the registration of these shares, except
brokerage commissions and transfer taxes, which will be paid by the selling
stockholders. We estimate that the expenses will be $50,000.
Our common stock is listed on the American Stock Exchange under the symbol
"CSA." On October 26, 2001, the closing sale price of our common stock as
reported by the American Stock Exchange was $2.29 per share.
Investing in our common stock involves significant risks. See "Risk
Factors" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
October 30, 2001
1
================================================================================
-----------------
TABLE OF CONTENTS
-----------------
. ABOUT CARESIDE ..................................................... 2
. THE OFFERING ....................................................... 4
. RISK FACTORS ....................................................... 5
. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS .................. 14
. USE OF PROCEEDS .................................................... 14
. DILUTION ........................................................... 15
. SELLING SECURITY HOLDERS ........................................... 16
. CARESIDE'S CAPITAL STRUCTURE ....................................... 21
. PLAN OF DISTRIBUTION ............................................... 22
. LEGAL MATTERS ...................................................... 23
. EXPERTS ............................................................ 23
. WHERE YOU CAN GET MORE INFORMATION ................................. 24
. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .................... 24
-i-
ABOUT CARESIDE
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including the "Risk Factors" section, the financial
statements and the notes to those financial statements.
Careside has developed and sells a proprietary blood testing system
called the Careside system. It is designed to decentralize laboratory
operations. The system consists of two blood testing devices and disposable
cartridges and reagents used in the devices as well as a computer link. The
Careside Analyzer(R) tests each of the three components of blood - whole blood,
serum and plasma. It uses our proprietary disposable test cartridges and
performs 41 different tests. The H-2000 performs 18 hematology tests on whole
blood. The Careside Connect facilitates data interchange between the two devices
and other medical information systems.
The Careside system performs blood tests in the same location as the
patient, or what is commonly called point-of-care testing. Blood testing is a
significant part of routine and critical patient care. Today, almost all blood
testing is done by sending the blood samples to hospital or commercial
laboratories. Because of transportation time and several processing steps, these
central laboratories generally take between 4 and 24 hours to provide test
results to the doctor. We believe the Careside system is a platform for solving
the limitations of central blood testing laboratories and redefines the market
for point-of-care testing. Our goal is to make decentralized testing with the
Careside system the standard for routine and critical care blood testing.
As of August 2001, the FDA has cleared or exempted the Careside Analyzer
for all 41 blood tests for professional laboratory use and the H-2000 for 18
additional hematology tests. The Careside system's 59 different blood tests
represent most of the routine blood tests ordered by physicians. In addition,
the FDA has cleared the Careside Analyzer as a "point-of-care" device. This
clearance means that properly trained non-technical personnel can operate the
Careside Analyzer, eliminating the need for a lab specialist to oversee each
test. We intend to seek the same designation for the H-2000 in 2002.
Our commercial product launch occurred in December 1999, at which time
the Careside system offered 53 tests. By the beginning of the second quarter of
2000, we were experiencing issues in both the software and hardware of the
Careside Analyzer that made us question the reliability of the device in the
field. We also experienced technical problems with electrochemistry tests. As a
result, we pulled back from the market and corrected the issues that gave rise
to the reliability concerns. We did not lose any customers or have to repurchase
any devices or have to seek any additional governmental approvals as a result of
these technical difficulties. Rather, we worked with our customers to ensure the
reliability of the test results each customer received from the Analyzer. We
completed the revisions to the electrochemistry tests and modifications to the
Analyzer by November 2000. The revisions were made and verified in the fourth
quarter of 2000. The changes delayed our ability to market the Analyzer and its
disposable cartridges. As a result, our sales through early 2001 were
predominantly H-2000s.
At present, we sell the components of the Careside system separately in
the United States through our own sales force. We have distribution agreements
with third party distributors to supplement our sales force. We have entered
into several distribution agreements and expect to finalize others in 2001. To
date, our H-2000 sales have been weighted towards foreign markets and veterinary
use. We are focusing our 2001 and 2002 marketing efforts on the U.S. human
market.
Our concept and technology originated with SmithKline Beecham Clinical
Laboratories, Inc. (SBCL). In 1993, SBCL conducted extensive surveys of the
point-of-care market. As a result, in 1994, SBCL started our predecessor
business to develop the technology we use today. In November 1996, we acquired
the assets and contracts used in the predecessor business, including
intellectual property, equipment and other assets to continue the development of
point-of-care diagnostic technology and to create a commercial product. Several
senior members of our management team worked on this point-of-care project at
SBCL, including W. Vickery Stoughton, our Chief Executive Officer, and Thomas H.
Grove, Executive Vice President--Chief Technology Officer. Quest Diagnostics
Incorporated later acquired SBCL.
-2-
Our publicly-traded common stock is listed on the American Stock Exchange
under the ticker symbol "CSA," and our publicly-traded warrants under the symbol
"CSA.WS". Our principal executive offices are located at 6100 Bristol Parkway,
Culver City, California 90230. Our telephone number is (310) 338-6767.
-3-
THE OFFERING
Shares offered by selling ................ 12,894,155 (1)
security holders:
Use of Proceeds: ......................... We will not receive any of the
proceeds from the sale of shares of
common stock by the selling
stockholders, but we could receive
up to approximately $14.4 million
from the exercise of warrants with
underlying common stock registered
on this registration statement,
(see "Dilution" on page 13). Any
proceeds will be used for working
capital purposes. (2)
(1) Of these shares, approximately
. 7,115,920 are shares of common stock held by the selling stockholders.
Of these,
5,173,716 shares of common stock were issued on October 26, 2001
to convert the outstanding shares of our series C convertible
preferred stock through an exchange of common stock for our
series C convertible preferred stock at a price of $1.94 per
common share,
199,253 shares of common stock were issued upon conversion of
shares of our series B preferred stock and were not previously
registered, and
1,742,951 shares were issued in a private placement to a single
investor in December 2000 and January 2001.
. 41,324 shares of common stock are issuable upon exercise of warrants
exercisable at $2.75 per share,
. 45,824 shares of common stock are issuable upon exercise of warrants
exercisable at $2.25 per share,
. 5,173,716 shares of common stock are issuable upon exercise of
outstanding warrants issued in connection with the sale of our series
C convertible preferred stock at an exercise price of $2.55 per share,
and
. 517,371 shares of common stock are issuable upon exercise of
outstanding warrants issued to our placement agent in connection with
the sale of our series C convertible preferred stock at an exercise
price of $1.94 per share.
(2) This figure assumes that those warrants are exercised without using their
cashless exercise feature.
-4-
RISK FACTORS
An investment in our common stock involves many risks. These risks may
be substantial and are inherent in the business of Careside. You should
carefully consider the following information about these risks, together with
the other information in this prospectus, before buying common stock.
If any of the following risks actually occurs, our business and
prospects could be materially adversely affected, the trading price of our
common stock or warrants could decline, and you might lose all or part of your
investment.
We Have A Limited Operating History By Which To Evaluate Our Business
We have no history which would demonstrate an ability to generate
revenue. Since our inception, we have incurred significant losses. Through
December 31, 2000 and June 30, 2001 our accumulated losses have totaled $45.2
million and $52.2 million, respectively. We have generated only a small amount
of revenue from product sales and will continue to incur significant additional
operating losses until we have sold a sufficient number of our products. Because
we have a limited operating history, we have not demonstrated an ability to:
. respond to competitive developments;
. develop new relationships and maintain existing relationships
with suppliers, distributors and potential customers;
. attract, retain and motivate qualified employees; and
. produce, distribute and market our product.
We May Never Be Profitable
Even if we are able to generate revenue from sales of our products, we
may never be profitable. There are several reasons why this might happen:
. We may not be able to reduce our manufacturing costs to levels
necessary for profitability.
. We may have to lower our prices to remain competitive.
. We may experience delays in developing additional tests or
product upgrades.
. We may experience problems in production, distribution or
marketing.
Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis in the future.
Given Our Limited Operating History And Recurring Losses, We May Be Unable To
Continue As A Going Concern.
Since our inception, we have generated minimal revenues, incurred significant
losses from operations and accumulated some debt. We anticipate that we will
incur additional losses over at least the next year. Our consolidated financial
statements for each of the three years in the period ended December 31, 2000
have been prepared assuming that we will continue as a going concern. As
indicated in our consolidated financial statements for the year ended December
31, 2000, we incurred a net loss for 2000 of $16,703,485 and used cash for
operating activities of $15,661,957. Our accumulated deficit was $45,199,361.
Careside's independent accountants have stated in their audit opinion that these
factors raise substantial doubt about Careside's ability to continue as a going
concern. Further, additional financing will be needed by Careside to fund its
operations. If we seek additional debt or equity financing in the future, these
factors, including the going-concern language in our independent accountant's
audit opinion, might hinder our ability to do so. In the event our operations
are not profitable or do not generate sufficient cash to fund our business,
there will be substantial doubt about our ability to continue as a going
concern.
-5-
Unavailability Of Additional Funding May Adversely Affect Our Business
At June 30, 2001, our principal source of liquidity was approximately
$5.6 million in cash and cash equivalents. Our current liquidity and sales
revenue expected in 2001 are projected to be sufficient to fund our operating
expenses and capital requirements for at least two months. However, certain
uncertainties may impact our ability to fund our planned operations and to meet
our operating objectives. Our future liquidity and capital funding requirements
will depend on numerous factors, including:
. the extent to which our products gain market acceptance;
. the exercise of outstanding warrants to purchase common stock;
. the timing of regulatory actions regarding our products; and
. the costs and timing of expansions of sales, marketing and
manufacturing activities.
Additional capital may not be available on terms acceptable to us, if it is
available at all. If adequate funds are not available, our business, results of
operations and financial condition could be materially and adversely affected.
We may be required to delay, reduce or eliminate product development programs or
to sell our business. We may also have to reduce our planned marketing and sales
activities, or license to third parties rights to commercialize our products or
technologies. These reductions could, in turn, affect our relationships with our
clients and threaten our ability to continue as a going concern.
The Medical Community May Not Accept the Careside System
The Careside Analyzer and our patented test cartridges, the H-2000 and
the Careside Connect are our only products. We will not be able to operate
profitably unless these products achieve a significant level of market
acceptance. The following factors are the greatest risks to our market
acceptance:
We May Fail to Develop the Comprehensive Test Menu Needed to Sell Our Product
If we are not able to fully develop further tests to complete our
proposed comprehensive test menu, customers may not buy our products. One of our
major selling points to potential customers will be the breadth of our menu.
We May Be Unable to Change How Tests Are Ordered
We may not be able to demonstrate the economic or clinical benefits of
the Careside system sufficiently to convince members of the medical community to
change the way they order tests. Currently, physicians and hospitals typically
order blood tests from central laboratories.
Managed Care Contracts May Limit Our Market Penetration
Our ability to sell to healthcare providers may be limited by managed
care relationships. Many health maintenance and managed care organizations have
exclusive contracts with laboratories that require participating or employed
physicians to send patient specimens only to contracted laboratories.
Consequently, these physicians may be precluded from using Careside's products
unless they obtain a waiver from the relevant health maintenance or managed care
organization.
We May Be Unable to Keep Pace With Changing Technology
Blood testing technology is evolving. Other companies may develop
products in response to technological changes that make our products
noncompetitive.
-6-
CLIA May Discourage Healthcare Providers from Using Point-of-Care Testing
Careside system users will have to be licensed under the Clinical
Laboratory Improvement Amendments of 1988. While the Careside system is designed
to make licensure easy, CLIA licensing requirements may make healthcare
providers reluctant to initiate, continue or expand patient testing using the
Careside system.
We May Not Be Able to Further Develop Our Products
In order for us to expand our test menu, we must complete the
development of one of the four types of disposable cartridges. The
immunochemistry cartridge has been designed but has not undergone testing.
Factors outside our control may delay our proposed development schedule for this
cartridge. These factors include:
. delays in regulatory clearance
. technological difficulties
. restrictions on access to proprietary technology of strategic
partners, and
. changes in the healthcare, regulatory or reimbursement
environment.
Reductions in Third-Party Reimbursement for Tests May Hurt Our Business
We believe that decreases in third-party reimbursement amounts for
diagnostic tests may reduce the demand for diagnostic tests performed by our
products at the point of care. Government authorities, private health insurers
and other third-party payers, such as health maintenance organizations, have the
power to determine reimbursement amounts paid to test providers for diagnostic
tests. Historically, they have decreased these reimbursement amounts more often
than they have increased them. While we have no knowledge of any upcoming
decreases, the potential for them exists. Providers would earn less revenue from
testing if reimbursement rates decrease. Because it may not be profitable enough
in light of reimbursement rates, providers could choose to cease or not to start
conducting point-of-care testing. This could, in turn, decrease the demand for
our products or force us to lower our sales prices. This could lower our
revenues.
Our Limited Sales, Marketing and Distribution Experience May Hurt Our Sales
We may not be able to recruit or retain direct sales and marketing
personnel who will successfully implement our marketing strategy. We intend to
distribute our products in the United States through our own sales force and
domestic distributors, and internationally through distributors. Establishing a
sales and marketing capability will require substantial efforts and significant
resources.
Ineffectiveness of Third-Party Distributors May Hurt Our Sales
We will depend on third party distributors to assist us in promoting
market acceptance and creating demand for our products. We have granted Fuji
Photo Film Co. Ltd. a right of first refusal to distribute the Careside system
exclusively in Japan and non-exclusively in some of the other Asian countries.
Our existing arrangements to distribute our products worldwide may not be
sufficient. We may not be able to maintain these arrangements or enter into
additional distribution arrangements. In addition, we have little control over
the resources that distributors will devote to the marketing of our products.
Our Contract Manufacturers May Not Adequately Meet Our Future Product Demand
We will depend upon outside vendors to manufacture most of the
Careside system, including the Careside Analyzer and components of the
disposable testing cartridges. We have only limited control over third-party
manufacturers as to quality control and timing of production and delivery. We
cannot be certain that outside manufacturers will be able to provide us with a
sufficient number of instruments and cartridge components on a timely basis.
At present, we depend on UMM Electronics, Inc. for the manufacture and
supply of Analyzers and Fuji Photo Film Co., Ltd. for dry film used in our
cartridges. Each of those suppliers has contracted to supply to us all of
-7-
the products we order from them. If we do not negotiate extensions, our contract
with UMM will expire in the first quarter of 2004 and our contract with Fuji
will expire on December 31, 2003. There are alternative suppliers to UMM and
Fuji. However, if we are required to switch manufacturers or suppliers on short
notice, the manufacture of our products could be delayed and the supply of our
products could be interrupted. This could reduce our revenues.
Our Inability To Forecast Our Dry Film Requirements Could Result in Excess Film
Inventory
Our contract with Fuji requires us to forecast our requirements for
dry film on a periodic basis. If we do not accurately forecast our needs, we may
end up with too much or too little supply of dry film. Excess film inventory
could result in obsolescence since dry film has a limited shelf life. Too little
inventory could hurt our ability to meet our customers' orders.
Our Lack Of Manufacturing Experience Could Prevent Us From Meeting Cartridge
Demand
We will be assembling the cartridges at Careside. We limited
experience operating manufacturing/assembly business. We will need to assemble
significant and increasing quantities of test cartridges on a timely basis,
while maintaining strict quality standards. We have converted from manual
production of cartridge components and assembly to an automated system to
produce cartridge components. We may not be able to achieve and maintain product
accuracy and reliability when producing the cartridges in the quantities
required, on a timely basis or at an acceptable cost.
Loss Of Our CEO or Other Key Personnel Would Hinder The Success Of Our Business
The loss of key employees or unsuccessful recruiting efforts will harm
us. Competition for qualified and talented individuals with experience in
point-of-care testing is intense. Our success depends on our ability to retain
the services of Mr. Stoughton, our Chairman of the Board of Directors and Chief
Executive Officer. Mr. Stoughton has over 20 years experience as a senior
executive of several large hospitals and over four years experience as President
of SmithKline Beecham Clinical Laboratories, Inc. We also need to attract
additional sales and marketing, research and development, and experienced
manufacturing personnel.
Failure To Manage The Expansion Of Our Operations May Hurt Our Business
We will need to expand our operations if we are successful in
achieving market acceptance for the Careside system. This expansion will result
in additional responsibilities for management and place significant demand upon
our management, our operating and financial systems and our resources. To
accommodate this growth and to compete effectively, we will need to implement
and improve our internal operating systems and controls, and to hire and train
additional personnel. Failure to do so may impede our success.
Our Competitors Have Advantages Over Us
Our business may fail because our market is highly competitive. Our
primary competitors are large diagnostic device manufacturers, commercial and
hospital laboratories and other point-of-care device manufacturers. The large
device manufacturers and commercial and hospital laboratories have significant
marketing, manufacturing, financial and managerial resources, and have
substantially greater research and development capabilities than we do. We
expect that manufacturers of conventional blood testing products used in
centralized laboratories will compete intensely with us to maintain their market
share. Commercial and hospital laboratories may try to influence providers
against the Careside system to protect their revenue. Other point-of-care
companies have already sold their product in the marketplace. We anticipate
competition from these manufacturers in discrete testing areas such as critical
care testing. Many of these companies offer tests that will cost less than the
Careside system and so may be attractive to some of our customers.
-8-
Failure To Protect Our Proprietary Technology May Hurt Our Business
The success of our business will depend on our ability to protect our
proprietary technology. Our business may fail if we are not able to do so.
We currently have four U.S. patents granted on our cartridge
technology, one U.S. design patent covering the Careside Analyzer and one patent
held jointly with International Technidyne Inc. that covers a coagulation
reagent that was co-discovered . As we develop new technology, we may file
additional patents in the future. International patent appications have also
been filed. We cannot be certain that international patent applications will be
granted or that our patents will withstand any challenges by third parties.
Factors impacting our proprietary technology, which may ultimately impact our
success, include:
Our Technology May Infringe on the Proprietary Rights of Third Parties
Universities and government laboratories, physicians and other
corporations are conducting substantial research in point-of-care diagnostic
blood testing technology. Given the nature of our industry, it is possible that
patent applications have been filed by others, and patents may be issued to
them, relating to specific diagnostic products and processes. Patent
applications in the U.S. are secret until the patent is issued. We cannot know
whether competing applications have been filed. A prior conflicting patent
application would detract from the value of our patents. In addition, if we use
technologies, products or processes covered by patent applications filed by
others, or by patents issued to others, we may have to obtain licenses. We may
not be able to obtain such licenses on reasonable terms, or at all.
We May Be Unable to Build Brand Loyalty Because Our Trademarks and Trade
Names May Not Be Protected
Our registered or unregistered trademarks or trade names may be
challenged, canceled, infringed, circumvented or declared generic or determined
to be infringing on other marks. We may not be able to protect our rights to
these trademarks and trade names, which we need to build brand loyalty. Brand
recognition is critical to our short term and long term marketing strategies.
Our Trade Secrets May Be Disclosed
We also rely on unpatented trade secrets to protect our proprietary
technology. We attempt to protect our proprietary technology through an employee
handbook and agreements with our executive officers. Our employees have not
signed confidentiality agreements. The confidentiality provisions in the
handbook and executives' agreements may not be enforceable under applicable law.
Other companies may independently develop or otherwise acquire equivalent
technology or gain access to our proprietary technology.
Our Proprietary Rights May Fail to Protect Our Business
We may have to resort to litigation to protect or defend our rights.
This could result in substantial costs and the diversion of management's
attention. If we lost any such litigation, we could lose our competitive
position, be required to obtain licenses from third parties or be prevented from
manufacturing, selling or using certain of our products.
We Do Not Own All Necessary Intellectual Property
The film in all of our test cartridges and the electrochemistry slide
in our electrochemistry test cartridge is manufactured by and is based on
patents owned by Fuji Photo Film Co., Ltd. Fuji may terminate its contract with
us upon one year's notice if it discontinues manufacturing and marketing this
film. It also may terminate the contract if we become bankrupt or insolvent or
if we transfer significant assets to a third party, if there is a material
change in control of us, or if we breach the agreement and the breach is not
cured within thirty days. If our access to these Fuji products terminated, we
would have to use other products that would be based on alternative technology.
We would not be able to utilize Fuji's patents to manufacture our own film and
electrochemistry slide because we do not have a perpetual license to Fuji's
patents if Fuji terminates its contract with us. We believe that such other
products do
-9-
exist, but we cannot be sure that we would be able to achieve access to any such
technology on a timely basis. Conversion to the alternative technology could not
start until we achieve access to the alternative technology. If we have to use
products based on alternative technology, we may have to modify our product to
accommodate this new technology. This could cause substantial delay and cost. If
alternative technology is unavailable, we would have to change our testing
methodologies. This could also cause substantial delay and cost. We presently
have no indication that our access to the Fuji products is threatened and we
believe that there is only a small risk that we would be denied access to
alternative technologies.
Extensive Government Regulation May Increase Our Expenses and Cause Delays In
Our Product Commercialization
Our products are medical devices subject to extensive regulation by
the FDA, similar agencies in other countries, and to a lesser extent, by state
regulatory authorities. The following are the greatest regulatory risks we face:
We May Incur Substantial Expenses to Comply With Good Manufacturing Practices
(GMP) and Other Manufacturing Regulations
Our manufacturing facilities and processes will be required to comply
with strict federal regulations, including Good Manufacturing Practices, or GMP,
and quality system requirements, regarding validation and quality of
manufacturing. We have limited experience in complying with regulations
governing our products and manufacturing facilities. We must devote substantial
resources and management attention to monitoring and maintaining compliance with
governmental regulations. If we, or our manufacturing partners, violate
applicable regulations, we may be sanctioned and our production or distribution
may be suspended. In addition, the FDA may withdraw the approval or clearance to
market of any of our products.
We May Need to Apply for Additional FDA Pre-Market Clearances if We
Significantly Modify Our Products or Add to Our Test Menu, Which May Result
in Rejections or Delays
We are continuously subject to FDA regulations regarding laboratory
and clinical testing. When we seek to improve our product and add additional
tests to our test menu, we may be required to submit new applications for
pre-market clearance. We cannot be certain that we will be able to obtain all
necessary approvals for product improvements or additional tests on a timely
basis, or at all. Such delays or rejections could adversely affect our business.
-10-
The Issuance Of Significant Number Of Shares That Are Eligible For Future Sale
Could Lower Our Market Price
We have a significant amount of common stock that could enter the public
market in the future. The public resale of these shares could have a depressive
effect on the market price of our common stock.
The following are the shares that may be issued in the future:
. 2,000,000 common shares issuable upon exercise of our outstanding
public warrants will become available for resale in the public market
upon issuance;
. 1,461,779 common shares issuable upon exercise of our outstanding
options or options that we may grant in the future under our current
stock option plans, or pursuant to our employee stock purchase plan,
will become available for resale in the public market upon issuance;
and
. 11,471,788 common shares issuable upon exercise of outstanding
warrants that are not publicly traded will become available for resale
in the public market upon issuance
A Large Percentage Increase In Our Publicly Traded Common Stock May Lower The
Market Price of Our Common Stock
Since our initial public offering on June 16, 1999, we have issued common
stock and committed to issue common stock through warrants and options which we
have issued and through our Series A preferred stock which we may become
obligated to issue in the future. On a fully diluted basis, we have increased
our outstanding common stock since our initial public offering by 163%.
In this prospectus, we have registered the resale of 7,115,920 of our total
outstanding shares of common stock, which represents 42.1% of the number of our
publicly tradable shares after this registration. Also, we have outstanding
options and warrants that are exercisable into approximately 14,498,488 shares
of common stock, some of which are registered in this registration statement and
some of which have been previously registered. The issuance of these shares
would result in a 85.9% increase in our outstanding common stock. The large
percentage increases in our outstanding and registered common stock could have a
depressive effect on the market price of our common stock.
Holders Of Our Common Stock May Be Materially Diluted By The Exercise Of
Outstanding Warrants Issued in Connection With Our Series B and Series C
Preferred Stock
3,993,970 additional shares of our common stock may be issued upon the
exercise of the callable common warrant issued in 2000 to the purchaser of our
series B preferred stock. The exercise price of this warrant can be 95% of a two
day average market price of our common stock. The issuance of these warrant
shares at such price may have a depressive effect of the market price of our
common stock.
5,691,087 shares of our common stock may be issued upon the exercise of
warrants issued in 2001 in connection with the sale of our series C preferred
stock. The exercise price of these warrants is $2.55 for 5,173,716 of these
shares and $1.94 for the remaining 517,371 shares. Issuance of these shares at
an exercise price that is less than the market price of our common stock at that
time, may have a depressive effect of the market price of our common stock.
Control Of Careside By Our Management And Principal Stockholders Could Conflict
With Other Stockholders' Interests
The interests of our directors and executive officers, and our principal
stockholders could conflict with the interests of other Careside stockholders.
As of the date of this prospectus, our directors and executive officers,
together with the principal stockholders of Careside, beneficially own or
control approximately 49.4% of our common stock. This percentage takes into
account the effect of options and warrants. Accordingly, these stockholders may
be able to influence the outcome of stockholder votes, including votes
concerning the election of directors, certain amendments to our charter and
bylaws, and the approval of significant corporate transactions such
-11-
as a merger or a sale of our assets. This influence could have the effect of
delaying, deferring or preventing a change in control of Careside.
Future Issuances Of Preferred Stock May Dilute Rights Of Common Stockholders
Because of our liquidity needs, we have issued in the past three different
series of preferred stock. Each such series of preferred stock has had superior
rights to our common stock. The conversion of each series of preferred stock
into our common stock may have caused or may in the future cause dilution to our
stockholders. Currently, no shares of preferred stock are outstanding. We are
obligated to issue shares of series A preferred stock if the remaining $2
million of our bridge financing with S.R. One, Ltd. originally entered into in
December 1998 is converted. Given our liquidity position, we may have to seek
additional capital in the future as we have done in the past. Our Board of
Directors has the authority to issue up to 4,836,117 additional shares of
preferred stock in the future and to determine the price, privileges and other
terms of such shares. The Board may exercise this authority without the approval
of the stockholders. The rights of the holders of common stock may be adversely
affected by the rights of the holders of any preferred stock that may be issued
in the future. Specifically, our series A preferred stock is preferred over
common stock in dividends and has a liquidation preference over common stock. In
addition, the issuance of preferred stock may make it more difficult for a third
party to acquire control of Careside.
Delaware Law, Charter And Our By-laws May Delay Or Prevent Someone From
Acquiring Us
We will be subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. Section 203 could delay or prevent a third
party or a significant stockholder from acquiring control of us. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a
business combination with an interested stockholder for a period of three years
following the date the person became an interested stockholder, unless the
business combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a business
combination includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. An interested
stockholder is a person who, together with affiliates and associates, owns 15%
or more of a corporation's voting stock. Section 203 may prohibit or delay
mergers or other takeover or change in control attempts with respect to us. As a
result, Section 203 may discourage attempts to acquire us even though such
transaction may offer our stockholders the opportunity to sell their stock at a
price above the prevailing market price.
In addition, our charter and by-laws contain anti-takeover protections that
may have the effect of lowering the market price of our stock because they may
discourage, delay or prevent a merger, tender offer or proxy contest involving
us. Specifically, our charter and bylaws contain the following anti-takeover
protections:
. the fact that we have a board of directors that it is divided into
three classes of directors may have the effect of deterring or
delaying any attempt by any group to obtain control of us by a proxy
contest. A stockholder would be required to have its nominees elected
at two separate annual meetings in order to elect a majority of the
members of the board of directors;
. we may issue up to 4,836,117 shares of preferred stock that has
whatever rights, privileges and preferences our Board of Directors
determines. The issuance of preferred stock could be utilized as a
method of discouraging, delaying or preventing a change in control of
our stock;
. our charter requires that stockholder action be taken at meetings and
not by written consent and that special meetings of stockholders may
only be called by a majority of our board of directors, our chairman
or our chief executive officer;
. our charter provides that directors can be removes from the Board only
for cause and only with the affirmative vote of holders of 80% or more
of our outstanding voting shares
. our charter requires a holders of 75%, and in some cases 80%, of our
outstanding shares to approve any amendment to our charter;
-12-
. stockholders must follow the advance notice procedures set forth
in our bylaws to nominate a person for director or submit
proposals to our Board of Directors; and
. our Board of Directors has broad discretion under our bylaws to
determine the number of directors that will constitute our Board
and to fill vacancies on the Board, including those created by
increasing the number of directors.
The Market Prices Of Shares Of Common Stock And Warrants May Be Volatile
The market prices of shares of common stock and warrants may be highly
volatile. This means our stock prices may fluctuate significantly depending on
many factors, including:
. the success of our new products or new products introduced by our
competitors,
. developments with respect to our patents and other proprietary rights,
. our ability to meet sales and earnings expectations of securities
analysts,
. our need to raise financing through the sale of our equity, and
. changes in general market conditions.
Our Total Assets Include Significant Intangible Assets And The Write-Off Of A
Significant Portion Of Unamortized Intangible Assets Would Negatively Affect Our
Results Of Operations
Our total assets reflect significant intangible assets. As of June 30,
2001, we had approximately $1.9 million of net intangible assets representing
12.6% of our total assets and 21.2% of our stockholders' equity. Intangible
assets consist of goodwill associated with our acquisition of Texas Instrument
Laboratories, Inc., representing the excess of the purchase price and related
costs over the value assigned to the tangible assets we acquired in that
acquisition. Periodically, we assess whether there has been an impairment in the
value of our goodwill. Beginning January 1, 2002, we will account for our
intangible assets under Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets. Under this standard we will no longer
amortize our goodwill, but we will continue to periodically assess it for
impairment by comparing the carrying value to the estimated fair value. If the
estimated fair value is less than the carrying value, the goodwill will be
considered impaired and the impairment losses will be reported as an operating
expense in current results of operations. Any determination requiring the
write-off of a significant portion of unamortized intangible assets would
negatively affect our results of operations and total capitalization. As of June
30 2001, we have determined that no impairment existed.
The Terms Of Some Of Our Securities May Encourage Short-Selling Of Our Common
Stock Which Could Depress The Market Price Of Our Common Stock
Until the warrants issued in 2000 in connection with our series B
convertible preferred stock are exercised, there may be increased risk of
short-selling of our common stock, which could have a depressive effect on the
market price of our common stock. The holder of this warrant can exercise on its
own initiative at $14 per share. Or, we can call this warrant in which case the
exercise price is 95% of the two day average trading price prior to the call. If
we call the warrant, then, by short-selling our common stock, the warrant holder
could depress the market price of our common stock, enabling the holder to
acquire shares upon any subsequent call of these warrants at a lower price.
A short-sale is the sale of a security that the seller does not own or that
the seller owns but does not deliver. In order to deliver the security to the
purchaser, the short-seller will borrow the security, typically from a
broker-dealer or an institutional investor. The short-seller later closes out
the position by returning the security to the lender, typically by purchasing
equivalent securities on the open market. In general, short-selling is utilized
to profit from an expected downward price movement, or to hedge the risk of a
long position in the same security or in a related security. Although
short-selling serves useful market purposes, it also may be used as a tool for
manipulation. Further, short-selling can increase stock price volatility.
-13-
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future events
and developments, including our ability to generate revenue, income and cash
flows, or state other "forward-looking" information. We generally identify these
forward-looking statements by using the words "anticipate," "believe,"
"estimate," "expect," and similar expressions. These statements include, but are
not limited to, information about our cash available to fund our future
operations, future enhancements to our products, growth of the in vitro testing
and point-of-care testing markets, completion of the immunochemistry tests
cartridge, and the planned addition of further tests to our menu. Those
statements are subject to known and unknown risks, uncertainties and other
factors that could cause the actual results to differ materially from those
contemplated by the statements. Important factors that may cause actual results
to differ include those set forth under "Risk Factors" beginning on page 5.
We do not promise to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders pursuant to this prospectus. However, we may receive up to
approximately $14.4 million from the exercise of warrants with underlying common
stock registered hereunder. This figure assumes that those warrants are
exercised without using their cashless exercise feature. There is no guarantee
that any warrants will be exercised or that we will receive any proceeds. The
proceeds, if any, would be used for working capital purposes.
-14-
DILUTION
The selling security holders listed in this prospectus may offer and sell
shares of our common stock for their own account. We will not receive any
proceeds from any such sales.
Our net tangible book value as of June 30, 2001 was approximately
$7,217,889, or $0.63 per share of common stock. As the shares of common stock
being registered in this prospectus had already been issued in a private
transaction, there is no additional dilution to the net tangible book value per
share of common stock as a result of sales of shares registered in this
registration statement.
-15-
SELLING SECURITY HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of September 30, 2001 by each of the selling
security holders. Unless otherwise indicated below, to our knowledge, all
persons listed below have sole voting and investment power with respect to the
shares of common stock, except to the extent authority is shared by spouses
under applicable law.
The information included below is based upon information provided by the
selling security holders and by our transfer agent. Because the selling security
holders may offer all, some or none of their common stock, no definitive
estimate as to the number of shares thereof that will be held by the selling
security holders after such offering can be provided. In the following table,
column (A) shows all shares beneficially held by the holder at September 30,
2001, and column (B) has been prepared on the assumption that all shares of
common stock registered under this prospectus will be sold.
(A) (B)
Common Stock Common Stock To Be
Beneficially Owned Prior Beneficially Owned If All Shares
to September 30, 2001 Registered Hereunder Are Sold
-------------------------------------- --------------------------
Shares Shares That
Underlying May Be
Name Shares/(1)/ Warrants Percent/(2)/ Offered Hereunder Shares Percent/(2)/
---- --------- -------- ---------- ----------------- ------ -----------
Abood, Thomas J./(3)/ .................... 0 78,440 * 78,440 0 *
Abrahams, Louise H./(4)/ ................. 25,774 25,774 * 51,548 0 *
Abrahams, Richard L. /(5)/ ............... 46,393 46,393 * 92,786 0 *
Abrahams, Richard L. & Louise L.,
Trustees for the Richard and Louise
Abrahams Charitable Trust ................ 12,887 12,887 * 25,774 0 *
Allison, Robert G. ....................... 39,660 38,660 * 77,320 0 *
Anderson, Leonard ........................ 12,887 12,887 * 25,774 0 *
Anderson, Mary C. ........................ 31,000 31,000 * 62,000 0 *
Asphalt Green, Inc./(6)/ ................. 27,720 21,000 * 42,000 6,720 *
Bear Stearns as Custodian for Bruce
Hendry, IRA .............................. 257,732 257,732 3.0% 515,464 0 *
Bear Stearns as Custodian for
Demetre M. Nicoloff, IRA ................. 12,887 12,887 * 25,774 0 *
Bear Stearns as Custodian for Jerry
A. Kuny, IRA ............................. 12,887 12,877 * 25,774 0 *
Bear Stearns as Custodian for
Michael D. Lensing ....................... 12,887 12,887 * 25,774 0 *
Bear Stearns as Custodian for Steven
D. McWhirter, IRA/(7)/ ................... 12,887 12,887 * 25,774 0 *
Benenson, Paul A. ........................ 12,887 12,887 * 25,774 0 *
Bergren, Gary A. ......................... 15,464 15,464 * 30,928 0 *
Bigley, Robert ........................... 12,887 12,887 * 25,774 0 *
Brattain, Donald R. ...................... 51,546 51,546 * 103,092 0 *
Campbell, Craig L. ....................... 15,464 15,464 * 30,928 0 *
Castle Creek Health Care Partners ........
LLC/(8)/ ................................. 386,598 386,598 4.4% 773,196 0 *
CCL Fund, LLC/(9)/ ....................... 128,866 128,866 1.5% 257,732 0 *
Cheney, Steven ........................... 38,660 38,660 * 77,320 0 *
City of Stamford Firemen's Pension .......
Fund/(6)/ ................................ 84,080 46,000 * 92,000 38,080 *
-16-
(A) (B)
Common Stock Common Stock To Be
Beneficially Owned Prior Beneficially Owned If All Shares
to September 30, 2001 Registered Hereunder Are Sold
-------------------------------------- --------------------------
Shares Shares That
Underlying May Be
Name Shares/(1)/ Warrants Percent/(2)/ Offered Hereunder Shares Percent/(2)/
---- --------- -------- ---------- ----------------- ------ -----------
Crestview Capital Fund,
LP/(10)/ ............................... 257,750 257,750 3.0% 515,500 0 *
Dean Witter Foundation/(6)/ ............ 52,000 52,000 104,000
Digges, Sasha L. and Mary Catherine
Knott Digges ........................... 51,546 51,546 * 103,092 0 *
Dolan, Michael T./(3)/ ................. 0 1,804 * 1,804
Dolphin Offshore Partners L.P./(11)/.... 270,041 206,186 2.4% 412,372 63,855 *
Dougherty Funding LLC /(12)/ ........... 219,072 219,072 438,144 0
Dougherty, Michael E./(7)/ ............. 0 78,441 * 78,441 0 *
DRL Partners/(13)/ ..................... 12,887 12,887 * 25,774 0 *
Elsholtz, Robert W. .................... 12,887 12,887 * 25,774 0 *
Felling, Anthony/(3)/ .................. 0 19,407 * 19,407 0 *
Frantz, William T. ..................... 192,721 128,866 1.5% 257,732 63,855 *
Friedli, Peter/(14) (15)/ .............. 2,116,472/(16)/ 130,122/(17/ 9.8% 1,830,099 416,495 2.4%
Frommelt, Jeffrey J. ................... 19,330 19,330 * 38,660 0 *
Frommelt, Roger H. ..................... 6,443 6,443 * 12,886 0 *
Gonyea, Dennis A. ...................... 15,464 15,464 * 30,928 0 *
Hajas, Peter ........................... 360,825 360,825 4.2% 721,650 0 *
Harstad, Glen .......................... 12,887 12,887 * 25,774 0 *
Heidecker, Stephen C. .................. 12,887 12,887 * 25,774 0 *
Hoel, Dorothy J. ....................... 15,464 15,464 * 30,928 0 *
Horick, Jessica S./(18)/ ............... 0 7,895 7,895
Horick, Jonathan P./(3)/ ............... 4,750 93,000 * 93,000 4,750 *
Hunt, Helen ............................ 34,000 34,000 * 68,000 0 *
Johnson, Raymond R. .................... 15,464 15,464 * 30,928 0 *
Kelly, Eugene V. ....................... 73,975 51,546 * 103,092 22,429
Kessler Family Ltd. Partnership/(19)/... 128,866 128,866 1.5% 257,732 0 *
Kessler, Irvin R. ...................... 386,598 386,598 4.4% 773,196 0 *
King, Russell S./(3)/ .................. 0 7,000 * 7,000 0 *
Knopick, Alexander ..................... 0 5,291 * 5,291 0 *
Knott, William H. ...................... 29,381 29,381 * 58,762 0 *
Kohler, Gary ........................... 51,546 51,546 * 103,092 0 *
Kozberg, Mark/(3)/ ..................... 0 9,278 * 9,278 0 *
Kraut, Gerald/(7)/ ..................... 0 78,441 * 78,441 0 *
L & Co., LLC/(20)/ ..................... 51,546 51,546 * 103,092 0 *
Laube, James and Judith ................ 12,887 12,887 * 25,774 0 *
Lentz, Richard D. ...................... 12,887 12,887 * 25,774 0 *
Lindberg, Aaron A./(3)/ ................ 0 5,000 * 5,000
Lineberger, James E. ................... 192,366 103,093 1.7% 206,186 89,273 *
Lloyd, Maria C. ........................ 64,433 64,433 * 128,866 0 *
Marshman, Edward N., trustee u/a
dtd 9/15/88 FBO Edward N.
Marshman Trust ......................... 45,773 25,773 * 51,546 20,000 *
Marshman, Homer H., Jr. ................ 12,887 12,887 * 25,774 0 *
Mason, Stuart H./(3)/ .................. 12,887 37,887 * 50,774 0 *
-17-
(A) (B)
Common Stock To Be
Common Stock Beneficially Owned If
Beneficially Owned Prior All Shares Registered
to September 30, 2001 Hereunder Are Sold
------------------------------------------ --------------------------
Shares Shares That
Underlying May Be
Name Shares/(1)/ Warrants Percent/(2)/ Offered Hereunder Shares Percent/(2)/
---- ----------- -------- ------------ ----------------- ------ ------------
McWhirter, Steven D./(7)(21)/.......... 25,774 120,511 * 146,285 0 *
Meehan Foundation/(6)/ ................ 23,000 23,000 * 46,000 0 *
Milroy, Callista F., as TTEE under
the Trust Agreement dated 10/15/99
for Callista Milroy ................... 14,887 12,887 * 25,774 2,000 *
Mitchell, Timothy/(3)/ ................ 0 7,353 * 7,353 0 *
Nicoloff, Demetre M./(22)/ ............ 25,774 25,774 * 51,548 0 *
OTATO Limited Partnership/(23)/ ....... 103,093 103,093 1.2% 206,186 0 *
Paine Webber as Custodian FBO Demetre
M. Nicoloff, IRA ...................... 12,887 12,887 * 25,774 0 *
Paymar, Robert H./(3)/ ................ 0 887 * 887
Perkins, Daniel S. and Patrice M.,
JTWROS ................................ 40,000 40,000 * 50,000 0 *
Peterson, Mark/(3)/ ................... 2,500 902 * 902 2,500 *
Pint, Michael ......................... 25,773 25,773 * 51,546 *
Pint, Steve ........................... 25,773 25,773 * 51,546 0 *
Potter, James/(3)/ .................... 0 838 * 838 0 *
Potter, John T. ....................... 12,887 12,887 * 25,774 0 *
Potter, Susan Noel/(18)/ .............. 0 837 837 0
Public Employee Retirement System of
Idaho/(6)(14)/ ........................ 572,160 412,000 4.6% 824,000 160,160 *
Redleaf, Andrew J. .................... 51,546 51,546 * 103,092 0 *
RLA 1993 Trust/(13)/ .................. 33,506 33,506 * 67,012 0 *
Roycap, Inc./(14) (24)/ ............... 788,616 4,018,970 1.2% 199,253 4,608,333 2.1%
Sexton, William D. .................... 51,546 51,546 * 103,092 0 *
Shapiro, Lawrence B. .................. 25,773 25,773 * 51,546 0 *
Snyder, Hans/(3)/ ..................... 2,000 902 * 902 2,000 *
Spinner, G. James/(3)/ ................ 17,887 14,305 * 27,192 5,000 *
Stovern, Lori ......................... 25,773 25,773 * 51,546 0 *
Strickland, Scott E. and Mary T.,
JTWROS ................................ 12,887 12,887 * 25,774 0 *
The Peregrine Equity Fund, LLP/(25)/ 25,773 25,773 * 51,546 0 *
Theeuwes Family Trust, Felix Theeuwes
Trustee ............................... 26,000 26,000 * 52,000 0 *
Thomssen, Robert ...................... 50,000 50,000 * 100,000 0 *
UBS Piper Jaffray as Custodian FBO
Bradley A. Erickson, IRA .............. 15,464 15,464 * 30,928 0 *
UBS Piper Jaffray as Custodian FBO
Richard C. Perkins, IRA ............... 33,505 33,505 * 67,010 0 *
UBS - Piper Jaffray as Custodian FBO
James G. Peters, IRA .................. 20,000 20,000 * 40,000 0 *
UBS Piper Jaffray as Custodian FBO
David H. Potter, IRA .................. 25,000 25,000 * 50,000 0 *
Weinand, Shawn P. ..................... 15,464 15,464 * 30,928 0 *
Westrum, David M. ..................... 25,773 25,773 * 51,546 0 *
Williams, Bradley D./(3)/ ............. 0 500 * 500 0 *
-18-
(A) (B)
Common Stock To Be
Common Stock Beneficially Owned If
Beneficially Owned Prior All Shares Registered
to September 30, 2001 Hereunder Are Sold
------------------------------------- --------------------------
Shares Shares That
Underlying May Be
Name Shares/(1)/ Warrants Percent/(2)/ Offered Hereunder Shares Percent/(2)/
---- ---------- -------- ------------ ----------------- ------- ------------
Wilmington Trust Company, Trustee u/a
dtd 1/21/27 with Philip F. duPont for
Jane duPont Lunger/(14)/................. 412,371 412,371 4.7% 824,742 0 *
Wolfson Investment Partners LP/(6)/ ..... 52,000 52,000 * 104,000 1,320 *
Zesiger, Barrie Ramsay .................. 52,000 52,000 * 104,000 0 *
* Represents less than 1% of our outstanding shares of common stock.
(1) All shares owned by the selling security holder reflect shares
issued to convert shares of our series C convertible preferred stock
into common stock through an exchange of common stock for our series
C convertible preferred stock at a price of $1.94 per common share,
except where indicated separately by footnote.
(2) The percentage of ownership of outstanding common stock in
Columns (A) and (B) above before and after the sale of shares
registered hereunder is based on the fully diluted number of
shares of common stock outstanding assuming the exercise of all
warrants and options held by the selling security holder and
registered hereunder.
(3) The selling security holder is an employee or former employee of
Dougherty & Company, LLC, the placement agent in our private
placement of series C preferred stock, that has represented to us
that he, she or it received the securities registered in this
registration statement in the ordinary course of business and, at
the time of receipt of those securities, had no agreements or
understandings, directly or indirectly, with any person to
distribute the securities.
(4) Includes 12,887 shares of common stock and warrants to purchase
12,887 shares of common stock held by the Richard and Louise
Abrahams Charitable Trust.
(5) Includes 12,887 shares of common stock and warrants to purchase
12,887 shares of common stock held by the Richard and Louise
Abrahams Charitable Trust and 33,506 shares of common stock and
warrants to purchase 33,506 shares of common stock held by the
RLA 1993 Trust.
(6) Voting control and investment power over the shares is held by
Zesiger Capital Group LLC, an investment advisory firm. Voting
control and investment power of Zesiger Capital Group LLC is
exercised by or at the direction of any of its managing members.
The managing members of Zesiger Capital Group LLC are Albert L.
Zesiger, Barrie R. Zesiger, Lisa W. Hess, James F. Cleary and
John J. Kayola.**
(7) The selling security holder is a principal of Dougherty &
Company, LLC, the placement agent in the private placement of
series C preferred stock. The selling security holder purchased
the securities registered in this registration statement in the
ordinary course of business and at the time of purchase of those
securities had no agreements or understandings, directly or
indirectly, with any person to distribute the securities.
(8) Voting control and investment power over the shares is held by
Daniel Asher.**
(9) Voting control and investment power over the shares is held by
Daniel Asher and Nathan Fischel.**
(10) Voting control and investment power over the shares is held by
Stewart Flink and Gary Elkins.**
(11) Voting control and investment power over the shares is held by
Peter E. Salas.**
-19-
(12) The selling security holder is an affiliate of the placement agent for
our Series C preferred stock private placement and has represented to
us that it received the securities registered in this registration
statement in the ordinary course of business and, at the time of
receipt of those securities, had no agreements or understandings,
directly or indirectly, with any person to distribute the securities.
Voting control and investment power over the shares is held by Gerald
Kraut.
(13) Voting control and investment power over the shares is held by Richard
L. Abrahams.**
(14) The selling security holder beneficially owns greater than 5% of our
common stock.
(15) The selling security holder holds the shares registered on this
registration statement in two entities under his common control --
Pine, Inc. and Venturetec, Inc. BVI. Voting control and investment
power over these shares is held by Mr. Friedli.
(16) Includes:
. 196,472 shares of common stock held in the name of Pine, Inc. and
registered on this registration statement;
. 1,546,479 shares of common stock held in the name of Venturetec,
Inc. BVI and registered on this registration statement; and
. 373,521 shares of common stock held in the name of Venturetec and
not registered on this registration statement.
(17) Includes:
. warrants to purchase 87,148 shares of common stock held in the
name of Pine, Inc. and registered on this registration statement;
. warrants to purchase 9,320 shares of common stock held under the
name Pine, Inc. and not registered on this registration
statement; and
. warrants to purchase 33,654 shares of common stock held in the
name of Venturetec, Inc. BVI and not registered on this
registration statement.
(18) The selling security holder is a member of the immediate family of an
employee of Dougherty & Company, LLC.
(19) Voting control and investment power over the shares is held by Irvin
R. Kessler.**
(20) Voting control and investment power over the shares is held by James
E. Lineberger and James E. Lineberger, Jr.**
(21) Includes 12,887 shares of common stock and warrants to purchase 12,887
shares of common stock held by Bear Stearns as Custodian for Steven D.
McWhirter, IRA.
(22) Includes 12,887 shares of common stock and warrants to purchase 12,887
shares of common stock held by Bear Stearns as Custodian for Demetre
M. Nicoloff, IRA and 12,887 shares of common stock and warrants to
purchase 12,887 shares of common stock held by Paine Weber as
Custodian FBO Demetre M. Nicoloff, IRA.
(23) Voting control and investment power over the shares is held by Ira
Leventhal and Kevin Heneghan.**
(24) Voting control and investment power over the shares is held by Mark
Shoom.**
(25) The Peregine Fund, L.P. is controlled by Pepper Hamilton LLP, counsel
to the Company. Voting control and investment power over the shares is
held by a management committee comprised of James L. Murray, Barry M.
Abelson, Robert L. Hickok, Gilberto M. Villacorta and Michael B.
Staebler.
** Based solely on information provided to us by the selling security holder.
-20-
CARESIDE'S CAPITAL STRUCTURE
As of the effective date of this registration statement, we had 16,885,952
shares of common stock outstanding. The following table shows the eligibility of
these shares for public sale:
--------------------------------------------------------------------------------
# of Shares Eligibility for Public Resale
----------- -----------------------------
Outstanding
-----------
--------------------------------------------------------------------------------
11,801,612 registered and freely tradable without restrictions or
further registration under the Securities Act
--------------------------------------------------------------------------------
5,084,340 may be sold into the public market under Rule 144
currently, without registration under the Securities Act
--------------------------------------------------------------------------------
The following table shows the shares of common stock that we may issue in the
future and when we may issue them:
--------------------------------------------------------------------------------
# of Shares Issuable in the When Issuable
--------------------------- -------------
Future
------
--------------------------------------------------------------------------------
1,026,701 issuable upon exercise of outstanding options
--------------------------------------------------------------------------------
2,000,000 issuable upon exercise of our publicly traded
warrants
--------------------------------------------------------------------------------
11,471,787 issuable upon exercise of outstanding warrants
that are not publicly traded
--------------------------------------------------------------------------------
422,341 issuable upon exercise of options that we may
grant under our current stock option plans or
pursuant to our employee stock purchase plan
--------------------------------------------------------------------------------
-21-
PLAN OF DISTRIBUTION
We are registering the common stock covered by this prospectus for selling
stockholders. As used in this prospectus, "selling stockholders" includes the
donees, pledgees, transferees or others who may later hold the selling
stockholders' shares of common stock registered herein. We will pay the costs,
expenses and fees in connection with registering the common stock, but the
selling stockholders will pay any brokerage commissions, discounts or other
expenses attributable to the sale of common stock.
The selling stockholders may sell the common stock from time to time in one
or more types of transactions (which may include block transactions), on the
American Stock Exchange, in negotiated transactions, through put or call option
transactions relating to the shares, or a combination of such methods of sale,
at market prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers.
The selling stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
Selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such Rule.
If a selling stockholder notifies us that they have entered into or will
enter into any material arrangement with a broker or dealer for the sale of
shares of common stock through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant to Rule
424(b) under the Securities Act, as soon as practicable, but in no event later
than two business days after the arrangement has been entered into. This
supplement will disclose:
. the name of each such selling stockholder and of the participating
brokers or dealers;
. the number of shares of common stock involved;
. the price at which such shares were or will be sold;
. the commissions paid or to be paid or discounts or concessions allowed
or to be allowed to such brokers or dealers, where applicable;
. if applicable, that such brokers or dealers did not and will not
conduct any investigation to verify the information set out or
incorporated by reference in this prospectus; and
. other facts material to the transaction.
In addition, if a selling stockholder notifies us that a donee, pledgee or
other transferee intends to sell more than 500 shares of common stock, we will
file a supplement to this prospectus.
-22-
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Pepper Hamilton LLP.
EXPERTS
The December 31, 2000 financial statements incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report. Reference is made to
said report, which includes an explanatory paragraph with respect to the
uncertainty regarding the Company's ability to continue as a going concern as
discussed in Note 1 to the financial statements.
-23-
WHERE YOU CAN GET MORE INFORMATION
Our fiscal year ends on December 31. We file annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission" or "SEC"). You may read and copy any reports,
statements or other information on file at the SEC's public reference room in
Washington, D.C. You can request copies of those documents, upon payment of a
duplicating fee, by writing to the SEC. Our SEC filings are also available to
the public at the SEC Internet site at http://www.sec.gov.
We have filed a registration statement on Form S-3 with the SEC. This
prospectus, which forms a part of the registration statement, does not contain
all of the information included in the registration statement. Certain
information is omitted. You should refer to the registration statement and its
exhibits. With respect to references made in this prospectus to any contract or
other document relating to us, such references are not necessarily complete. You
should refer to the exhibits attached to the registration statement for copies
of the actual contract or document. You may review a copy of the registration
statement at the SEC's public reference room in Washington, D.C., and at the
SEC's regional offices in Chicago, Illinois and New York, New York. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings, including the registration statement, can also
be reviewed by accessing the SEC's Internet site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Careside with the Commission are
incorporated in this prospectus by reference:
. Careside's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 filed on March 29, 2001 and Amendment No. 1 thereto
on Form 10-K/A filed on July 27, 2001 and Amendment No. 2 on Form
10-K/A filed on September 12, 2001.
. Careside's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001 filed on May 15, 2001 and Amendment No. 1 thereto on Form
10-Q/A filed on July 27, 2001.
. Careside's Quarterly Report on Form 10-Q for the quarter ended June
30, 2001 filed on August 15, 2001.
. Careside's Registration Statement on Form 8-A filed on May 28, 1999
describing the terms, rights and provisions applicable to the common
stock, including any amendments or reports filed for the purpose of
updating such description.
. In addition, all documents subsequently filed by Careside pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering shall be deemed to be incorporated by
reference herein from their respective dates of filing.
All financial statements included in the above-referenced filings should be
read in conjunction with the Risk Factors section of this prospectus.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
You may also request a copy of these filings, at no cost, by writing or
telephoning James R. Koch at Careside at the following address:
Careside, Inc.
6100 Bristol Parkway
Culver City, California 90230
Telephone: (310) 338-6767
-24-
================================================================================
LOGO
12,894,155 Shares of common stock
----------
PROSPECTUS
----------
October 30, 2001
================================================================================
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any securities in any jurisdiction where it is unlawful. The information in
this prospectus is current as of its date.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an itemization of all estimated expenses, in
connection with sale of the securities being registered payable by Careside:
Nature of Expense Amount
----------------- ------
SEC Registration Fee ......................................... $ 8,744.08
Printing and engraving fees .................................. $ 0
Registrant's counsel fees and expenses ....................... $ 10,000
Accounting fees and expenses ................................. $ 5,000
Miscellaneous ................................................ $ 5,000
----------
TOTAL ..................................................... $28,744.08
Item 15. Indemnification of Directors and Officers.
Our Amended and Restated Certificate of Incorporation (the "Charter")
provides that we shall indemnify and advance expenses to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law ("DGCL"), as
amended from time to time, to each person who is or was one of our directors or
officers and the heirs, executors and administrators of such a person. Any
expenses, including attorneys' fees, incurred by a person who is or was one of
our directors or officers, and the heirs, executors and administrators of such a
person in connection with defending any such proceeding in advance of its final
disposition shall be paid by us; provided, however, that if the DGCL requires,
an advancement of expenses incurred by an indemnitee in his capacity as a
director or officer, and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan, such be made only upon delivery to us of an undertaking
by or on behalf of such indemnitee, to repay all amounts so advanced, if it
shall ultimately be determined that such indemnitee is not entitled to be
indemnified for such expenses. Notwithstanding the aforementioned
indemnification provisions, we may, at the discretion of our Chief Executive
Officer, enter into indemnification agreements with directors or officers.
Section 145 of the DGCL provides that a corporation has the power to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of the fact that such director or officer or former director or officer
is or was a director, officer, employee or agent of the corporation, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with such
action, suit or proceeding, if such person shall have acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such person had no reasonable cause to believe his or her conduct
was unlawful, except that, if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any claim, issue or
matter as to which such person shall have been judged to have been liable to the
corporation unless and to the extent that the Court of Chancery of the State of
Delaware, or any court in which such suit or action was brought, shall determine
-3-
upon application that, in view of all of the circumstances of the case, such
person is fairly and reasonably entitled to indemnify for such expenses as such
court shall deem proper.
The Charter contains a provision to limit the personal liability of our
directors to the fullest extent permitted by Section 102(b)(7) of the DGCL, as
amended. In addition, the Amended and Restated By-Laws provide that we shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, other than an action by us or
in our right, by reason of the fact that he is or was one of our directors,
officers, employees or agents, or is or was serving at our request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to our best
interests, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
As permitted by the DGCL, the Charter provides that, subject to certain
limited exceptions, none of our directors shall be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to us
or our stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) for the
unlawful payment of dividends on or redemption or repurchase of our capital
stock or (4) for any transaction from which the director derived an improper
personal benefit. The effect of this provision is to limit our ability and our
stockholders' ability through stockholder derivative suits on our behalf, to
recover monetary damages against a director for the breach of certain fiduciary
duties as a director, including breaches resulting from grossly negligent
conduct. In addition, the Charter and Amended and Restated By-Laws provide that
we shall, to the fullest extent permitted by the DGCL, indemnify all of our
directors and officers and that we may, to the extent permitted by the DGCL,
indemnify our employees and agents.
Item 16. Exhibits
Exhibit No. Description
----------- -----------
4.1 Certificate of Designations of Series C Convertible Preferred
Stock.*
4.2 Form of Securities Purchase and Subscription Agreement dated as of
March 29, 2001 by and between Careside, Inc. and Purchasers.*
4.3 Form of Warrant Agreement dated as of March 29, 2001 executed by
Careside, Inc. and addressed to Purchasers (including Warrant
Certificates).*
5.1 Opinion of Pepper Hamilton LLP
23.1 Consent of Arthur Andersen LLP
* Incorporated herein by reference to Careside's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2001 filed on May 15, 2001 (SEC File
Number 001-15051).
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
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 Securities 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
-4-
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 Securities Act and will be governed by
the final adjudication of such issue.
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:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(2) 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 dollar value of the securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering 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 a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement, and
(3) To include additional or changed material information on the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for purposes of determining liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered, and the offering of the
securities at that time 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.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or 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.
In addition, the undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
-5-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Culver City, California, on this 29th day of October, 2001.
CARESIDE, INC.
By: /s/ W. Vickery Stoughton
------------------------
W. Vickery Stoughton
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints W. Vickery Stoughton, Thomas H. Grove, and James
R. Koch and each of them, his true and lawful attorney-in-fact and agents, with
full power of substitution, for him and in his name, place and stead, in any and
all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents 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, on his or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signatures Title Date
---------- ----- ----
/s/ W. Vickery Stoughton Chairman of the Board of Directors, Chief Executive Officer October 29, 2001
------------------------
W. Vickery Stoughton and Director (principal executive officer)
/s/ Anthony P. Brenner Director October 29, 2001
----------------------
Anthony P. Brenner
Director October 29, 2001
William F. Flatley
/s/ S. Kenneth N. Kermes Director October 29, 2001
------------------------
Kenneth N. Kermes
/s/ C. Alan MacDonald Director October 29, 2001
---------------------
C. Alan MacDonald
-6-
/s/ Diana Mackie Director October 29, 2001
--------------------
Diana Mackie
/s/ James R. Koch Executive Vice President, Chief Financial Officer, Treasurer October 29, 2001
--------------------
James R. Koch and principal accounting officer
/s/ Bruce C. Vladeck Director October 29, 2001
--------------------
Bruce C. Vladeck
-7-