CompCare may not be able to accurately predict utilization of its full-risk contracts resulting in contracts priced at levels insufficient to ensure profitability
that may not be possible, may cause disagreements with providers and divert management resources, which would have an adverse impact on CompCare’s financial results. Claims expense exceeded revenues for this contract for the six months ended June 30, 2008. CompCare received a rate increase effective January 1, 2008, provided it complies with monthly performance measures it believes it will meet. Although CompCare believes it will meet these standards, any failure to comply with one or more of the measurement criteria will reduce CompCare's anticipated cash flow and profitability from this contract.
CompCare’s existing and potential managed care clients operate in a highly competitive environment and may be subject to a higher rate of merger, acquisition and regulation than in other industries
CompCare typically contracts with small to medium sized HMOs which may be adversely affected by the continuing efforts of governmental and third party payers to contain or reduce the costs of healthcare through various means. Its clients may also determine to manage the behavioral healthcare benefits “in house” and, as a result, discontinue contracting with CompCare. Additionally, its clients may be acquired by larger HMOs, in which case there can be no assurance that the acquiring company would renew its contract.
Many of CompCare’s managed care company clients provide services to groups covered by Medicare, Medicaid or Children’s Health Insurance Program (CHIP) plans susceptible to annual changes in reimbursement rates and eligibility requirements that could ultimately affect CompCare
At
As of June 30, 2007,2008, CompCare managed over 938,000975,000 lives in connection with behavioral and substance abuse services covered through Medicare, Medicaid and CHIP programs in Medicare and Medicaid in programs in Texas, Medicare and Medicaid in Florida and Michigan, Medicaid in California and Indiana and Michigan, and Medicare in Maryland, Pennsylvania and Pennsylvania.Connecticut. Any non-renewal of these contractsdelays in payment or changes in Medicare, Medicaid and/or CHIP reimbursement could adversely affect CompCare through contract bidding and cost structures with the health plans impacted by such changes. Temporary reductions have previously had a negative impact on CompCare, and if implemented in the future could have a material, adverse impact on its operations. OtherIn addition, states in which CompCare operates may pass legislation that would reduce its revenue through changes in the reimbursement rates or in the number of eligible participants. CompCare may be unable to reduce its costs to a level that would allow it to maintain current gross margins specific to its Medicare, Medicaid and CHIP programs.
CompCare is dependent on its provider network to provide services to its members
CompCare contracts with providers as a means to assure access to behavioral health services for its members. Some providers could refuse to contract with CompCare, demand higher payments, or take other actions which could result in higher healthcare operating expenses. In addition, certain providers may have significant market position, which could cause disruption to provider access in a particular geographic area for CompCare’s members and affect its contractual requirements with its customers of maintaining an adequate network.
Because providers are responsible for claims submission, the timing of which is uncertain, CompCare must estimate the amount of claims incurred but not reported, and actual results may differ materially
CompCare’s costs of care include estimated amounts for claims incurred but not reported (IBNR). The IBNR is estimated using an actuarial paid completion factor methodology and other statistical analyses that it continually reviews and adjusts, if necessary, to reflect any change in the estimated liability. These estimates are subject to the effects of trends in utilization and other factors. CompCare’s estimates of IBNR may be inadequate, which would negatively affect results of operations. Considerable variability is inherent in such estimates, its unpaid claims liability may be inadequate, and actual results may differ materially from the estimates reported.
As a result of CompCare’s dependence
CompCare is dependent on a limited number of customers, theand loss or reduction in business of any one of these customers, or a reduction in business from any one of them, could have a material adverse effect on its working capital and future results of operations
For the six month periodmonths ended June 30, 2007,2008, CompCare provided behavioral healthcare services to the members of four health plans under contracts that on a combined basis represented approximately 86%89% of CompCare’s operating revenue was concentrated in contracts with six health plans to provide behavioral healthcare services under commercial, Medicare, Medicaid, and CHIP plans.revenue. The terms of each contract isare generally for one year periods and isare automatically renewable for additional one-year periods unless terminated by either party by giving the requisite written notice. The loss of one
or more of these clients, unless replaced by new business, would negatively affect the financial condition of CompCare. In the past, CompCare has experienced the loss of major customers.
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CompCare may be unsuccessful in obtaining performance bonds or other security that is required by its existing or future clients, and consequently may lose clients
The
CompCare’s new Indiana client requires CompCare to maintain a performance bond in the amount of $1,000,000. In addition, certain of CompCare’s other customers may require restricted cash accounts or other security with respect to its obligations to pay IBNR claims and claims not yet processed and paid. Due to CompCare’s small size and financial condition, it may be unable to provide the security required by its client, which could result in the loss of a client or clients which would negatively affect CompCare’s financial condition.
CompCare’s industry is subject to extensive state and federal regulations, as well as diverse licensure requirements varying by state. Changes in regulationsstate, and regulation changes could adversely affect thecontract profitability of CompCare’s contracts or itsand ability to gain and retain clients or to gain new customers
CompCare holdsis required to hold licenses or certificates to perform utilization review and third party administrator (TPA) services in some states.certain states in which it does business. Additional utilization review or TPA licenses may be required in the future and CompCare may not qualify to obtain them. In many states, entities that assume risk under contract with licensed insurance companies or health plans have not been considered by state regulators to be conducting an insurance or HMO business. As a result, CompCare has not sought licensure as either an insurer or HMO in any state. If the regulatory positions of these states were to change, its business could be materially affected until such time as it is able to meet the regulatory requirements, if at all. Additionally, some states may determine to contract directly with companies such as CompCare for managed behavioral healthcare services in which case they may also require it to maintain financial reserves or net worth requirements that it may not be able to meet. Currently, CompCare cannot quantify the potential effects of additional regulation of the managed care industry, but such costs will have an adverse effect on CompCare’s future operations to the extent that they are not able to be recouped in future managed care contracts.
CompCare has an annual seasonality inis subject to existing clients issuing RFPs for the usagemanagement of behavioral services currently being managed
CompCare’s clients are aware of the highly competitive nature of the industry, and its contracts with them frequently contain provisions allowing termination of the contract by either party without cause with 90 days written notice. Consequently, CompCare’s clients may request from CompCare and any of its provider network,competitors a request for proposal (RFP) for behavioral services currently managed by CompCare, putting CompCare at risk of losing a client or clients. For example, in January 2008 a major Pennsylvania and its financial results may sufferMaryland Medicare Advantage client issued an RFP prior to the extent it cannot adequately manage periodsend of increased utilizationCompCare’s contract. CompCare submitted a proposal but was not chosen to continue services, resulting in a significant reduction in revenue. In addition, certain administrative and overhead costs continued to be incurred past the termination date.
Historically CompCare has generally experienced increased utilization during the months of March, April and May, and lower utilization throughout the remainder of the year. Seasonal variation also impacts its costs of care during these months, generally having a negative impact on its gross margins and operating profits during these months.
CompCare is subject to intense competition that may prevent it from gaining new customers or pricing its contracts at levels to achieve sufficient gross margins to ensure profitability.profitability
CompCare is continually pursuing new business. However, many of CompCare's competitors are significantly larger and better capitalized than CompCare and the smaller size and financial condition of Compcare hasCompCare have proved a deterrent to some prospective customers. Additionally, CompCare will likely have difficulty in matching the financial resources expended on marketing characteristic ofby its competitors. As a result, CompcareCompCare may not be able to realizesuccessfully compete in its forecasted shortindustry. CompCare's major competitors include Magellan Health Services, United Behavioral Health, ValueOptions, and long-term growth plans.APS Healthcare.
CompCare's sales cycle is long, which complicates its ability to predict its growth.
The sales and implementation process of CompCare's services is lengthy and requires CompCare's potential clients to commit time and other resources. CompCare's sales cycle is unpredictable and has generally ranged from 12 to 18 months from initial contact to an executed contract. Accordingly, it may be difficult to replace any lost business quickly.
A failure of CompCare's information systems would significantly impair its ability to serve its customers and manage its business.
An effective and secure information system, available at all times, is vital to CompCare's health plan customers and their members. CompCare depends on its computer systems for significant service and management functions, such as providing membership verification, monitoring utilization, processing provider claims, and providing regulatory data and other client and managerial reports. Although CompCare's computer and communications hardware is protected by physical and software safeguards, it is still vulnerable to computer viruses, fire, storm, flood, power loss, telecommunications failures, physical or software break-ins and similar events. CompCare does not have 100% redundancy for all of its computer and telecommunications facilities. A catastrophic event could have a significant negative effect on CompCare's business, results of operations, and financial condition.
CompCare also depends on a third party provider of application services for its core business application. Any sustained disruption in their services to us would have a material effect on our business.
CompCare is subject to fines and penalties being assessed by its clients
Many of CompCare’s contracts contain provisions stating that if its clients are assessed penalties or fines by a regulatory agency due to CompCare’s noncompliance with a contractual requirement, CompCare will be responsible for paying the assessed fine or penalty. Though to date, no material fines have been assessed under such provisions, any future fines would have a negative impact on results of operations.
A failure
CompCare may be unsuccessful in renewing its NCQA accreditation and may lose customers who require such accreditation
NCQA accreditation is required by several of CompCare’s information systems would significantly impairclient contracts and is an important consideration to its abilityprospective clients. CompCare is periodically evaluated by NCQA to serve itsvalidate the Company’s adherence to NCQA industry-accepted standards covering operational areas such as preventative care, utilization management, credentialing, member rights and responsibilities, and quality improvement. Maintaining these quality standards and the NCQA accreditation are important considerations of our customers and manageprospective clients who are evaluated against similar standards. If CompCare is not successful in renewing its business.
An effective and secure information system, available at all times, is vital to CompCare’s health plans and their members. CompCare depends on its computer systems for significant service and management functions, such as providing membership verification, monitoring utilization, processing provider claims, and providing regulatory data and other client and managerial reports. AnyNCQA accreditation, this could result in the loss of availability of
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and local officials could result in administrative or judicial orders limiting or eliminating the claims we can make about our treatment programs, and other sanctions including substantial fines.financial penalties.
Our business practices may be found to constitute illegal fee-splitting or corporate practice of medicine, which may lead to penalties and adversely affect our business
Many states, including California in which our principal executive offices and twoone of our managed PROMETA Centerstreatment centers are located, have laws that prohibit business corporations, such as us, from practicing medicine, exercising control over medical judgments or decisions of physicians, or engaging in arrangements with physicians such as employment, payment for referrals or fee-splitting, with physicians.fee-splitting. Courts, regulatory authorities or other parties, including physicians, may assert that we are engaged in the unlawful corporate practice of medicine by providing administrative and ancillaryother services in connection with our treatment programs or by consolidating the revenues of the physician practices we manage, or that licensing our technology for a license fee that could be characterized as a portion of the patient fees, or subleasing space and providing turn-key business management to affiliated medical groups in exchange for management and licensing fees, constitute improper fee-splitting or payment for referrals, in which case we could be subject to civil and criminal penalties, our contracts could be found invalid and unenforceable, in whole or in part, or we could be required to restructure our contractual arrangements. If so, we may be unable to restructure our contractual arrangements on favorable terms, which would adversely affect our business and operations.
Our business practices may be found to violate anti-kickback, physician self-referral or false claims laws, which may lead to penalties and adversely affect our business
The healthcare industry is subject to extensive federal and state regulation with respect to financial relationships and “kickbacks”kickbacks involving healthcare providers, physician self-referral arrangements, filing of false claims and other fraud and abuse issues. Federal anti-kickback laws and regulations prohibit offers, payments, solicitations, or receipts of remuneration in return for (i) referring patients for items or services covered by Medicare, Medicaid or other federal healthcare programs, or (ii) purchasing, leasing, ordering or arranging for or recommending any service, good, item or facility for which payment may be made by a federal health care program. In addition, subject to numerous exceptions, federal physician self-referral legislation, commonly known as the Stark law, generally prohibits a physician from orderingreferring patients for certain designated health services reimbursable by Medicare Medicaid or other federal healthcare programsMedicaid from any entity with which the physician has a financial relationship, and many states have similaranalogous laws. Other federal and state laws govern the submission of claims for reimbursement, or false claims laws. One of the most prominent of these laws is the federal Civil False Claims Act, and violations of other laws, such as the federal anti-kickback lawslaw or the FDA prohibitions against promotion of off-label uses of drugs, may also be prosecuted as violations of the Civil False Claims Act. CompCare provides services to health plans that could become involved with false claims, which could include allegations against CompCare as well.
Federal or state authorities may claim that our fee arrangements, agreements and relationships with contractors, hospitals and physicians violate these laws and regulations. Violations of these laws aremay be punishable by monetary fines, civil and criminal penalties, exclusion from participation in government-sponsored healthcare programs and forfeiture of amounts collected in violation of such laws. If our business practices are found to violate any of these provisions, we may be unable to continue with our relationships or implement our business plans, which would have an adverse effect on our business and results of operations.
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We may be subject to healthcare anti-fraud initiatives, which may lead to penalties and adversely affect our business
State and federal governments are devoting increased attention and resources to anti-fraud initiatives against healthcare providers, takingand may take an expansive definition of fraud that includes receiving fees in connection with a healthcare business that is found to violate any of the complex regulations described above. While to our knowledge we have not been the subject of any anti-fraud investigations, if such a claim were made defending our business practices could be time consuming and expensive, and an adverse finding could result in substantial penalties or require us to restructure our operations, which we may not be able to do successfully.
Our use and disclosure of patient information is subject to privacy and security regulations, which may result in increased costs
In conducting research or providing administrative services to healthcare providers in connection with the use of our treatment programs, we may collect, use, disclose, maintain and transmit patient information in ways that will be subject to many of the numerous state, federal and international laws and regulations governing the collection, dissemination, use, anddisclosure, storage, transmission and/or confidentiality of patient-identifiable health information, including the administrative simplification requirements of the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations (HIPAA). The HIPAA Privacy Rule restricts the use and disclosure of patient information, and requires safeguarding that information. The HIPAA Security Rule establishes elaborate requirements for safeguarding patient information transmitted or stored electronically. HIPAA applies to covered entities, which may include most healthcare facilities and does include health plans that will contract for the use of our programs and our services. The HIPAA rules require covered entities to bind contractors like us to compliance with certain burdensome HIPAA rule requirements known as business associate requirements. If we are providing management services that include electronic billing on behalf of a physician practice or facility that is a covered entity, we may be required to conduct those electronic transactions in accordance with the HIPAA regulations governing the form and format of those transactions (HIPAA Transactions Rule). Other federal and state laws restricting the use and protecting the privacy and security of patient information also apply to our licensees directly and in some cases to us, either directly or indirectly. We may be required to make costly system purchases and modifications to comply with the HIPAA rule requirements that are imposed on us and our failure to comply may result in liability and adversely affect our business.
CompCare is subject to the administrative simplification requirements of HIPAA for most healthcare facilities and health plans that contract for the use of CompCare’s services. The HIPAA Transactions Rule requires CompCare to comply with format and data content standards for common healthcare transactions on behalf of our licensees. The HIPAA Privacy Rule restricts the use and disclosure of patient information, and requires safeguarding that information. The HIPAA Security Rule establishes elaborate requirements for safeguarding patient information transmitted or stored electronically. Failure to comply may result in civil and criminal liability and penalties, and have a material adverse effect on CompCare’s ability to retain its customers or to gain new business.
Federal and state consumer protection laws are being applied increasingly by the FTC and state attorneys general to regulate the collection, use, storage, and disclosure of personal or patient information, through web sites or otherwise, and to regulate the presentation of web site content. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Numerous other federal and state laws protect the confidentiality and security of personal and patient information. Other countries also have, or are developing laws governing the collection, use, disclosure and transmission of personal or patient information and these laws could create liability for us or increase our cost of doing business.
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RISKS RELATED TO OUR COMMON STOCK
Our business arrangements with health care providers may be deemed to be franchises, which could negatively impact our business operations
Franchise arrangements in the United States are subject to rules and regulations of the FTC and various state laws relating to the offer and sale of franchises. A number of the states in which we operate regulate the sale of franchises and require registration of the franchise offering circular with state authorities and the delivery of a franchise offering circular to prospective franchisees. State franchise laws often limit, among other things, the duration and scope of non-competitive provisions, the ability of a franchisor to terminate or refuse to renew a franchise and the ability of a franchisor to designate sources of supply. Franchise laws and regulations are complex, apply broadly and are subject to interpretation by courts and government agencies. Federal or state authorities or healthcare providers with whom we contract may claim that the agreements under which we license rights to our technology and trademarks and provide services violate these laws and regulations. Violations of these laws are punishable by monetary fines, civil and criminal penalties, and forfeiture of amounts collected in violation of such laws. If our business practices are found to constitute franchises, we could be subject to civil and criminal penalties, our contracts could be found invalid and unenforceable, in whole or in part, or we could be required to restructure our contractual arrangements. We may be unable to continue with our relationships or restructure them on favorable terms, which would have an adverse effect on our business and results of operations. We may also be required to furnish prospective franchisees with a franchise offering circular containing prescribed information, and restrict how we market to or deal with healthcare providers, potentially limiting and substantially increasing our cost of doing business.
Risks related to our common stock
Over 25% of our stock is controlled by our chairman and chief executive officer, who has the ability to substantially influence the election of directors and other matters submitted to stockholders
Reserva Capital, LLC and Bonmore, LLC, whose sole managing member is our chairman and chief executive officer, beneficially own 13,700,000 shares of our common stock, which represent approximately 25% of our 54,536,339 shares outstanding. As a result, he has and is expected to continue to have the ability to significantly influence the election of our board of directors and the outcome of all other issues submitted to our stockholders. The interests of these principal stockholders may not always coincide with our interests or the interests of other stockholders, and they may act in a manner that advances his best interests and not necessarily those of other stockholders. One consequence to this substantial influence or control is that it may be difficult for investors to remove management of the company. It could also deter unsolicited takeovers, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.
Our stock price may be subject to substantial volatility, and the value of your investment may decline
Our common stock is traded on The NasdaqNASDAQ Global Market, and trading volume may be limited or sporadic. The market price of our common stock has experienced, and may continue to experience, substantial volatility. Over 2006,2007, our common stock traded between $4.77$2.68 and $9.35$10.21 per share, on volume ranging from approximately 18,00050,000 to 3.73 million shares per day. As a result, the current price for our common stock on NasdaqNASDAQ is not necessarily a
reliable indicator of our fair market value. The price at which our common stock will trade may be highly volatile and may fluctuate as a result of a number of factors, including the number of shares available for sale in the market, quarterly variations in our operating results and actual or anticipated announcements of pilots and scientific studies of the effectiveness of our PROMETA programs,Treatment Programs, new products or services by us or competitors, regulatory investigations or determinations, acquisitions or strategic alliances by us or our competitors, recruitment or departures of key personnel, the gain or loss of significant customers, changes in the estimates of our operating performance, actual or threatened litigation, market conditions in our industry and the economy as a whole.
Over 30%
Volatility in the price of our common stock on the NASDAQ Global Market may depress the trading price of the common stock our common stock. The risk of volatility and depressed prices of our common stock also applies to warrant holders who receive shares of common stock upon conversion.
Numerous factors, including many over which we have no control, may have a significant impact on the market price of our common stock, including:
| ● | announcements of new products or services by us or our competitors; current events affecting the political, economic and social situation in the United States and other countries where we operate; |
| ● | trends in our industry and the markets in which we operate; |
| ● | changes in financial estimates and recommendations by securities analysts; |
| ● | acquisitions and financings by us or our competitors; |
| ● | the gain or loss of a significant customer; |
| ● | quarterly variations in operating results; |
| ● | volatility in exchanges rate between the US dollar and the currencies of the foreign countries in which we operate; |
| ● | the operating and stock price performance of other companies that investors may consider to be comparable; and |
| ● | purchases or sales of blocks of our securities. |
Furthermore, stockholders may initiate securities class action lawsuits if the market price of our stock is controlleddrops significantly, which may cause us to incur substantial costs and could divert the time and attention of our management.
Future sales of common stock by existing stockholders, or the perception that such sales may occur, could depress our stock price
The market price of our common stock could decline as a single stockholder who hasresult of sales by, or the ability to substantially influence the electionperceived possibility of directorssales by, our existing stockholders. We have completed a number of private placements of our common stock and other matters submittedsecurities over the last several years, and we have effective resale registration statements pursuant to stockholders
As of August 31, 2007, Reserva Capital, LLC, whose sole managing member is Terren S. Peizer, our chairman and chief executive officer, beneficially owned 13,700,000which the purchasers can freely resell their shares which represent approximately 31%into the market. In addition, most of our 44,603,706outstanding shares are eligible for public resale pursuant to Rule 144 under the Securities Act of 1933, as amended. Approximately 15 million shares of our common stock are currently held by our affiliates and may be sold pursuant to an effective registration statement or in accordance with the volume and other limitations of Rule 144 or pursuant to other exempt transactions. Future sales of common stock by significant stockholders, including those who acquired their shares in private placements or who are affiliates, or the perception that such sales may occur, could depress the price of our common stock.
Future issuances of common stock and hedging activities may depress the trading price of our common stock
Any future issuance of equity securities, including the issuance of shares upon exercise of outstanding warrants, could dilute the interests of our existing stockholders, and could substantially decrease the trading price of our common stock. As of June 30, 2008, we had outstanding more than 10 million warrants and options to acquire our common stock at prices between $2.50 and $9.24 per share. We may issue equity securities in the future for a result, he hasnumber of reasons, including to finance our operations and is expectedbusiness strategy, in connection with acquisitions, to continueadjust our ratio of debt to equity, to satisfy our obligations upon the exercise of outstanding warrants or options or for other reasons.
Additionally, we have the abilityoutstanding warrants to determine or significantly influence the electionacquire up to 1,300,000 shares of our boardcommon stock at an exercise price of directors and$2.15 per share that contain anti-dilution adjustments that will be triggered if the outcomesale price of all other issues submitted to our stockholders. The interestsa future issuance of this principal stockholder may not always coincide with our interests or the interestscommon stock is at a per share price of other stockholders, and it may act in a manner that advances its best interests and not necessarily those of other stockholders. One consequence to this substantial stockholder’s control is that it may be difficult for investors to remove management of the company. It could also deter unsolicited takeovers, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.less than $2.15.
Provisions in our certificate of incorporation, bylaws, charter documents and Delaware law could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, thereby and adversely affect existing stockholders
Our certificate of incorporation and the Delaware General Corporation Law contain provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our company, even when these attempts may be in the best interests of stockholders. OurFor example, our certificate of incorporation also authorizes our board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. Delaware law also imposes conditions on certain business combination transactions with “interested stockholders.”
These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. These provisions
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may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
We have never paid cash dividends and do not intendexpect to do sopay dividends in the foreseeable future, and accordingly you must rely on stock appreciation for any return on your investment
We have never declared or paid no cash dividends on our common stock. Westock to date, and we currently planintend to retain our future earnings, if any, earnings to financefund the continued development and growth of our business rather thanbusiness. As a result, we do not expect to pay cash dividends. Payments of any cash dividends in the futureforeseeable future. Further, any payment of cash dividends will also depend on our financial condition, results of operations, and capital requirements as well asand other factors, deemed relevant byincluding contractual restrictions to which we may be subject, and will be at the discretion of our board of directors.
SpecialSpecial note regarding forward-looking statements
This prospectus, including the documents that we incorporate by reference, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “ongoing,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements include, but are not limited to, statements regarding the following:
Ø | ● | the anticipated results of clinical studies on the efficacy of our treatment programs,protocols, and the publication of those results in medical journals |
| | |
Ø | ● | plans to have our treatment programsprotocols approved for reimbursement by third-party payerspayors |
|
Ø | ● | plans to license our treatment programsprotocols to more hospitals and healthcare providers |
| | |
Ø | ● | marketing plans to raise awareness of our PROMETAtreatment programs protocols |
| | |
Ø | ● | anticipated trends and conditions in the industry in which we operate, including regulatory changes |
| | |
Ø | ● | our future operating results, capital needs, and ability to obtain financing. |
Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section titled “Risk factors” in this prospectus. Accordingly, you should not unduly rely on these forward-looking statements, which speak only as of the date of this prospectus. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this prospectus or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the SEC. See “Where you can find more information.”
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Unaudited pro forma financial informationUse of proceedsThe unaudited consolidated pro forma financial information in the tables below for the periods ended December 31, 2006 and June 30, 2007 was derived from our and CompCare’s consolidated financial statements. This information should be read in conjunction with the consolidated financial statements and related notes contained in our and CompCare’s annual, quarterly and other reports. We have presented the financial data on an as adjusted basis to give effect to the transactions listed below:
1. The acquisition of a 50.25% majority, controlling interest in CompCare, via the acquisition of Woodcliff on January 12, 2007 for $9 million in cash and 215,053 sharesAll of our common stock. Atstock being offered under this prospectus is being sold by or for the timeaccount of the transaction Woodcliff owned over 50% of the voting interests in CompCare and had no assets other than securities of CompCare and no liabilities.
2. The acquisition financing, which closed on January 18, 2007. The $10 million proceeds were allocated for accounting purposes between the note and warrants based on the relative fair values on the date of issuance. Direct costs incurred to issue the note and warrants were approximately $300,000.
The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The CompCare acquisition is treated as a purchase transaction and, as such, the purchase price allocations are based primarily on a valuation analysis of identified intangible assets completed by an independent valuation specialist, Actuarial Risk Management (ARM), and could change, depending on the resolution of contingencies related to assumed liabilities.
The unaudited pro forma financial information is for informational purposes only and doesSelling Stockholders. We will not purport to present what our results would actually have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position forreceive any future period.
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Hythiam, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2006
| | | | | | | | | | | | | | | | | | | | | |
| | | Hythiam | | | CompCare | | | | | | | |
| | | Historical | | | Historical | | | Pro Forma Adjustments | | | | |
| | | Year Ended | | | Year Ended | | | | | | | Issuance of | | | | |
| | | December | | | November | | | Woodcliff | | | Note & | | | Pro Forma, | |
| (in thousands, except per share data) | | 31, 2006 | | | 30, 2006 (a) | | | Acquisition | | | Warrants | | | As Adjusted | |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Behavioral health managed care services | | $ | — | | | $ | 19,581 | | | $ | — | | | $ | — | | | $ | 19,581 | |
| Healthcare services | | | 3,906 | | | | — | | | | | | | | | | | $ | 3,906 | |
| | | |
| Total revenues | | | 3,906 | | | | 19,581 | | | | — | | | | — | | | | 23,487 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | |
| Behavioral health managed care services | | | — | | | | 17,129 | | | | — | | | | — | | | | 17,129 | |
| Cost of healthcare services | | | 818 | | | | — | | | | | | | | | | | | 818 | |
| General administrative expenses | | | 38,680 | | | | 2,913 | | | | — | | | | — | | | | 41,593 | |
| Research and development | | | 3,053 | | | | — | | | | — | | | | — | | | | 3,053 | |
| Depreciation & amortization | | | 1,281 | | | | 95 | | | | 756 | (b) | | | — | | | | 2,132 | |
| | | |
| Total operating expenses | | | 43,832 | | | | 20,137 | | | | 756 | | | | — | | | | 64,725 | |
| | | |
Loss from operations | | | (39,926 | ) | | | (556 | ) | | | (756 | ) | | | — | | | | (41,238 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Other non-operating income, net | | | — | | | | 141 | | | | — | | | | — | | | | 141 | |
| Interest income | | | 1,630 | | | | 99 | | | | | | | | (17 | ) (f) | | | 1,712 | |
| Interest expense | | | — | | | | (189 | ) | | | — | | | | (2,222 | ) (e) | | | (2,411 | ) |
| | | |
| Loss before provision for income taxes from continuing operations | | | (38,296 | ) | | | (505 | ) | | | (756 | ) | | | (2,239 | ) | | | (41,796 | ) |
| Provision for income taxes | | | (2 | ) | | | (88 | ) | | | — | (c) | | | — | (c) | | | (90 | ) |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss from continuing operations | | | (38,298 | ) | | | (593 | ) | | | (756 | ) | | | (2,239 | ) | | | (41,886 | ) |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss from continuing operations per common share: | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (0.96 | ) | | $ | (0.10 | ) | | $ | — | | | $ | — | | | $ | (1.05 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | | 39,715 | | | | 6,125 | | | | (6,125 | ) (d) | | | — | (g) | | | 39,930 | |
| | | | | | | | | | | | 215 | (d) | | | | | | | | |
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Hythiam, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 2007
| | | | | | | | | | | | | | | | | | | | | |
| | | Hythiam | | CompCare | | | | |
| | | Historical | | Historical | | Pro Forma Adjustments | | |
| | | Six months | | January 1 | | | | | | Issuance of | | |
| | | Ended June | | to January | | Woodcliff | | Note & | | Pro Forma, |
| (in thousands, except per share data) | | 30, 2007 | | 12, 2007 (a) | | Acquisition | | Warrants | | As Adjusted |
| Revenues: | | | | | | | | | | | | | | | | | | | | |
| Behavioral health managed care services | | $ | 16,765 | | | $ | 1,095 | | | $ | — | | | $ | — | | | $ | 17,860 | |
| Healthcare services | | | 3,432 | | | | — | | | | | | | | | | | $ | 3,432 | |
| | | |
| Total revenues | | | 20,197 | | | | 1,095 | | | | — | | | | — | | | | 21,292 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | |
| Behavioral health managed care services | | | 16,501 | | | | 1,110 | | | | — | | | | — | | | | 17,611 | |
| Cost of healthcare services | | | 759 | | | | — | | | | | | | | | | | | 759 | |
| General administrative expenses | | | 22,832 | | | | 303 | | | | — | | | | — | | | | 23,135 | |
| Research and development | | | 1,740 | | | | — | | | | — | | | | — | | | | 1,740 | |
| Depreciation & amortization | | | 1,157 | | | | 5 | | | | 7 | (b) | | | — | | | | 1,169 | |
| | | |
| Total operating expenses | | | 42,989 | | | | 1,418 | | | | 7 | | | | — | | | | 44,414 | |
| | | |
Loss from operations | | | (22,792 | ) | | | (323 | ) | | | (7 | ) | | | — | | | | (23,122 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Other non-operating income, net | | | 29 | | | | — | | | | — | | | | — | | | | 29 | |
| Interest income | | | 908 | | | | 4 | | | | | | | | — | | | | 912 | |
| Interest expense | | | (1,114 | ) | | | (6 | ) | | | — | | | | (141 | ) (e) | | | (1,261 | ) |
| | | |
| Loss before provision for income taxes from continuing operations | | | (22,969 | ) | | | (325 | ) | | | (7 | ) | | | (141 | ) | | | (23,442 | ) |
| Provision for income taxes | | | (26 | ) | | | (1 | ) | | | — | (c) | | | — | (c) | | | (27 | ) |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss from continuing operations | | | (22,995 | ) | | | (326 | ) | | | (7 | ) | | | (141 | ) | | | (23,469 | ) |
| | | |
| | | | | | | | | | | | | | | | | | | | | |
Net loss from continuing operations per common share: | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (0.52 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | (0.53 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted | | | 43,984 | | | | | | | | 18 | (d) | | | — | (g) | | | 44,002 | |
| | |
(a) | | The CompCare statement of operations presented for the twelve months ended November 30, 2006 is compiled based on the unaudited consolidated statements of operations for the six months ended November 30, 2006, adjusted to include the unaudited results for the three months ended February 28, 2006 and the three months ended May 31, 2006. CompCare’s statement of operations presented for the period January 1 through January 12, 2007 is based on unaudited information obtained from internal records. Due to CompCare’s accumulated deficit on the assumed date of the acquisition (January 1, 2006), a deficit minority stockholders’ balance existed at the time of the acquisition which was valued at zero, resulting in an increase in the amount of goodwill recognized in the acquisition. The minority stockholders’ interest in any further net losses will not be recorded due to the accumulated deficit. |
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(b) | | Reflects amortization on the $2,136,000 in estimated fair value of identified intangible assets acquired as part of the Woodcliff acquisition, determined in accordance with our proportionate share of ownership interest, which represents the value of customer contracts, provider network and other deferred costs, as if the transaction had been completed on January 1, 2006. The fair value is based on a valuation analysis completed by ARM. The estimated useful life of these assets range from two to seven years and the amortization is being recognized in relation to the incidence of estimated gross profits to be realized over the useful lives of the contracts, which approximates using the straight line method. Pro forma amortization amounted to $756,000 for the year ended December 31, 2006 and $7,000 for the period January 1 through January 12, 2007. |
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| | |
(c) | | No income tax is applicable to the adjustments since Hythiam has accumulated net operating losses from its inception. |
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(d) | | Reflects the issuance of 215,053 shares of common stock in the Woodcliff acquisition, offset by the elimination of CompCare’s historical balances for the year ended December 31, 2006, as if the transactions had been completed on January 1, 2006. The weighted average number of shares was 18,000 for the period January 1 through January 12, 2007. |
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(e) | | Reflects the amount of interest expense incurred on the $10 million senior secured note and warrants, which were issued on January 18, 2007 to fund the Woodcliff acquisition, at the rate of 10.75% (stated rate of prime plus 2.5%, using the current prime rate of 8.25% as of January 17, 2007), as if the note and warrants were issued on January 1, 2006. The amount allocated to the warrants at the date of issue was estimated at $1,380,000 using the Black Scholes method, and is recorded in additional paid-in capital. The remaining $8,620,000 amount of proceeds was allocated to the note. Pro forma interest amounted to $1,075,000 for the year ended December 31, 2006 and $47,000 for the period January 1 through January 12, 2007. The impact on interest expense of a .0125% change in interest rates would be approximately $12,000 annually and $6,000 for six months. |
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| | This adjustment also includes $897,000 and $83,000 for amortization of the $1,380,000 discount, and $172,000 and $6,000 for amortization of $259,000 of deferred issuance costs associated with the note, for the year ended December 31, 2006 and the period January 1 through January 12, 2007, respectively. Both the discount and issuance costs are being deferred and amortized using the effective interest method over 18 months because investors have the option to redeem the note after 18 months. |
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| | Additionally, the adjustment reflects $78,000 and $5,000 for amortization of a $266,000 purchase accounting adjustment to decrease the carrying value of CompCare’s long term subordinated debt, reflecting the estimated market value at the time the acquisition was completed, for the year ended December 31, 2006 and the six months ended June 30, 2007. The adjustment is being amortized using the effective interest method over the remaining contractual maturity of the note. |
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(f) | | Reflects the decrease in interest income earned resulting from the $300,000 of costs paid to issue the senior secured notes and warrants, which closed on January 18, 2007, as if the transaction had been completed on January 1, 2006. The assumed rate is 5.7% for the year ended December 31, 2006 and is consistent with the yield earned on marketable securities by Hythiam during this period. |
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(g) | | The warrants issued with the senior secured notes are anti-dilutive, and would not impact basic earnings per share. |
Use of proceeds
Unless we state otherwise in the applicable prospectus supplement, we expect to use the proceeds from the sale of our securitiescommon stock by or for capital expenditures,the account of the Selling Stockholders. We may receive up to $2,795,000 from the cash exercise of warrants from which 1,300,000 of the shares are issuable. Any proceeds will be used for working capital needs and other general corporate purposes.
Pending any ultimate use
Selling Stockholders
The shares of any portioncommon stock being offered by Highbridge International LLC, one of the proceeds from this offering, we intendSelling Stockholders may be acquired through the exercise of an Amended and Restated Warrant to invest the proceeds in a variety of capital preservation investments, including short-term, interest-bearing instruments such as US government securities and municipal bonds.
The securities we may offer
The descriptions of the securities contained in this prospectus, together with the applicable prospectus supplements, summarize all the material terms and provisions of the various types of securities that we may offer. We will describe in the applicable prospectus supplement relating to any securities the
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particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable prospectus supplement, the terms of the securities may differ from the terms we have summarized below. We will also include in the prospectus supplement information, where applicable, about material United States federal income tax considerations relating to the securities, and the securities exchange, if any, on which the securities will be listed. We may sell from time to time, in one or more offerings:
Ø | | various series of debt securities; |
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Ø | | preferred stock; |
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Ø | | common stock; |
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Ø | | warrants to purchase common stock; and |
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Ø | | units consisting of all or some of the securities listed above, in any combination. |
In this prospectus, we refer to our common stock, preferred stock, debt securities, warrants and units collectively as “securities.” The total dollar amount of all securities that we may issue pursuant to this prospectus will not exceed $50,000,000.
If we issue debt securitiesPurchase Common Stock dated July 31, 2008, for 1,300,000 shares at a discount from their original stated principal amount, then, for purposes of calculating the total dollar amount of all securities issued under this prospectus, we will treat the initial offering price of $2.15 per share, based on the debt securities as the total original principal amount of the debt securities.
This prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement.
DEBT SECURITIES
The following description, together with the additional information we include in any applicable prospectus supplements, summarizes the material terms and provisions of the debt securities that we may offer under this prospectus. While the terms we have summarized below will apply generally to any future debt securities we may offer, we will describe the particular terms of any debt securities that we may offer in more detail in the applicable prospectus supplement.
We may enter into indenture agreements with respect to any debt securities we may offer. We would enter into separate indentures, with different trustees, for any senior debt securities and subordinated debt securities. We use the term “indentures” to refer to the senior indenture and the subordinated indenture, and we use the term “trustees” to refer to the several trustees under the indentures. The material terms of the indenture governing a series of debt securities will be described in the applicable prospectus supplement. The indentures will be qualified under the Trust Indenture Act of 1939.
We conduct some of our operations through subsidiaries. Our rights and the rights of our creditors, including holders of debt securities, to the assets of any subsidiary of ours upon that subsidiary’s liquidation or reorganization or otherwise would be subject to the prior claims of that subsidiary’s creditors, except to the extent that we may be a creditor with recognized claims against the subsidiary. Our subsidiaries’ creditors may include trade creditors, debt holders, secured creditors and taxing authorities.
We will describe in the applicable prospectus supplement the following terms relating to a series of debt securities:
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Ø | | the title; |
|
Ø | | any limit on the amount that may be issued; |
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Ø | | the maturity date; |
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Ø | | the annual interest rate, which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment dates or the method for determining such dates; |
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Ø | | whether or not the debt securities will be secured or unsecured, and the terms of any securities; |
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Ø | | the terms of the subordination of any series of debt securities; |
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Ø | | the terms on which any series of debt securities may be convertible into or exchangeable for common stock or other securities of ours, including (a) provisions as to whether conversion or exchange is mandatory, at the option of the holder or at our option and (b) provisions pursuant to which the number of shares of common stock or other securities of ours that the holders of the series of debt securities receive would be subject to adjustment; |
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Ø | | the place where payments will be payable; |
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Ø | | our right, if any, to defer payment of interest and the maximum length of any such deferral period; |
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Ø | | the date, if any, after which, and the$2.14 closing price at which, we may, at our option, redeem the series of debt securities pursuant to any optional redemption provisions; |
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Ø | | the date, if any, on which, and the price at which we are obligated, pursuant to any mandatory sinking fund provisions or otherwise, to redeem, or at the holder’s option to purchase, the series of debt securities; |
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Ø | | whether the indenture will restrict our ability to pay dividends, or will require us to maintain any asset ratios or reserves; |
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Ø | | whether we will be restricted from incurring any additional indebtedness; |
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Ø | | a discussion of any material United States federal income tax considerations applicable to the debt securities; |
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Ø | | the denominations in which we will issue the series of debt securities, if other than denominations of $1,000 and any integral multiple thereof; and |
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Ø | | any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities. |
COMMON AND PREFERRED STOCK
The terms of our common stock on July 22, 2008, issued in connection with an amendment to our $5 million senior secured note with Highbridge and preferredsubject to possible future adjustment. The amended warrant expires five years from the amendment date. We are currently assessing the accounting impact that the amendment will have on our consolidated statements.
The shares of common stock are set forthbeing offered by the law firm of Dreier Stein Kahan Browne Woods George LLP were issued in our certificate of incorporation and bylaws, and are summarizedexchange for legal services to us. A partner in the Descriptionfirm also holds options to purchase up 50,000 shares of Capital Stock, that we have previously filed with the SEC. See “Incorporation of information by reference” and “Where you can find more information” below. The prospectus supplement will describe the specific terms of the series of the preferred stock offered through that prospectus supplement.
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WARRANTSour common stock.
The following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms and provisions of the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates. While the terms summarized below will apply generally to any warrants that we may offer, we will describe the particular terms of any series of warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement, the terms of any warrants offered under that prospectus supplement may differ from the terms described below. Specific warrant agreements will contain additional important terms and provisions and will be incorporated by reference as an exhibit to the registration statement that includes this prospectus.
We may issue warrants forare registering the purchaseshares of common stock in oneorder to permit the Selling Stockholders to offer the shares for resale from time to time. Except as noted below, the Selling Stockholders have not had any position, office, or more series. We may issue warrants independentlymaterial relationship with us or together with common stock, andany of our affiliates within the warrants may be attached to or separate from these securities.past three years.
We will evidence each series of warrants by warrant certificates that we will issue under a separate agreement. We may enter into
The table below lists the warrant agreement with a warrant agent. We will indicate the name and addressSelling Stockholders and other information regarding the warrant agent in the applicable prospectus supplement relating to a particular series of warrants.
Before exercising their warrants, holders of warrants will not have anybeneficial ownership of the rightsshares of holderscommon stock by each of the securities purchasable upon such exercise, includingSelling Stockholders. The second column lists the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
We will describe innumber of shares of common stock beneficially owned by each Selling Stockholder. The third column lists the applicableshares of common stock being offered by this prospectus supplementby each Selling Stockholder. The fourth column assumes the termssale of all of the seriesshares offered by the Selling Stockholders pursuant to this prospectus, and the fifth column lists the percentage of warrants, including:common stock owned by the Selling Stockholders after completion of the offering. The Selling Stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
ØName of Selling Stockholder | Number of Shares Owned Prior to Offering | the offering price and aggregate numberMaximum Number of warrants offered;Shares to be Sold Pursuant to this Prospectus | Number of Shares Owned After Offering | Percentage of Shares owned After Offering (1) |
Highbridge International LLC(2) c/o Highbridge Capital Management, LLC 9 West 57th Street, 27th Floor New York, NY 10019 | 1,869,627(3) | 1,300,000(4) | 569,627(3) | 1.04% |
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Ø | | if applicable, | |
Dreier Stein Kahan Browne Woods George LLP 1620 26th Street, 6th Fl, North Tower Santa Monica, CA 90404 Attn: Marc S. Dreier, Managing Partner | 300,000(5) | 250,000 | 50,000(5) | * |
| * | Less than one percent. |
| |
| (1) | Percentages are calculated based on 54,536,339 shares of Common Stock outstanding as of August 6, 2008. |
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| (2) | Highbridge Capital Management, LLC is the designationtrading manager of Highbridge International LLC and termshas voting control and investment discretion over the securities held by Highbridge International LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management LLC and have voting control and investment discretion over the securities held by Highbridge International LLC. Each of Highbridge Capital Management LLC, Glenn Dubin and Henry Swieca disclaims beneficial ownership of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security;held by Highbridge International LLC. |
| | |
Ø(3) | | if applicable, the date onIncludes 29,439 shares of common stock and after which the540,188 warrants and the related securities will be separately transferable;with an exercise price of $5.75 per share. |
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Ø(4) | | Due to possible future adjustment in the number of shares of common stock purchasable upon the exercise of one warrant, and the price at which these shares mayto be purchased upon such exercise; |
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Ø | | the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants; |
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Ø | | the terms of any rights to redeem or call the warrants; |
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Ø | | any provisions for changes to or adjustments in the exercise price or number of securities issuablereceived upon exercise of the warrants;warrant; 1,430,000 shares are being registered for resale. |
| | |
Ø(5) | Includes 50,000 shares issuable on the exercise of options held by a partner in the firm. |
The Selling Stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the Selling Stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
| ● | the dateson any national securities exchange or quotation service on which the right to exercisesecurities may be listed or quoted at the warrants will commence and expire;time of sale; |
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Ø● | in the over-the-counter market; |
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| ● | in transactions otherwise than on these exchanges or systems or in the mannerover-the-counter market; |
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| ● | through the writing of options, whether such options are listed on an options exchange or otherwise; |
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| ● | ordinary brokerage transactions and transactions in which the warrant agreement and warrants may be modified;broker-dealer solicits purchasers; |
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Ø | | a discussion on any material or special United States federal income tax consequences of holding or exercising the warrants; |
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Ø | | the terms of the securities issuable upon exercise of the warrants; and |
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Ø● | | any other specific terms, preferences, rights or limitations of or restrictions on the warrants. |
Each warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable prospectus supplement. After the close of business on the expiration date set forth in the applicable prospectus supplement, unexercised warrants will become void.
Holders of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with specified information, and paying the required amount to the warrant agent in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the warrant certificate and in the applicable prospectus supplement the information that the holder of the warrant will be required to deliver to the warrant agent.
Upon receipt of the required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or part of the exercise price for warrants.
UNITS
We may issue units comprised of one or more of the other securities described in this prospectus in any combination. Each unit may be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately at any time or at any time before a specified date.
The applicable prospectus supplement may describe:
Ø | | the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately; |
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Ø | | any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units; and |
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Ø | | any additional terms of the governing unit agreement. |
The applicable prospectus supplement will describe the terms of any units. The preceding description and any description of units in the applicable prospectus supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to the unit agreement and, if applicable, collateral arrangements and depositary arrangements relating to such units.
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Plan of distribution
We may offer and sell the securities described in this prospectus:
Ø | | through agents; |
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Ø | | through one or more underwriters or dealers; |
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Ø | | through a block tradetrades in which the broker or dealer engaged to handle the block tradebroker-dealer will attempt to sell the securitiesshares as agent;agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
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Ø● | | directly to one or more purchasers (through a specific bidding or auction process or otherwise); oran exchange distribution in accordance with the rules of the applicable exchange; |
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Ø● | privately negotiated transactions; |
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through ● | short sales; |
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| ● | sales pursuant to Rule 144; |
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| ● | broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share; |
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| ● | a combination of any of thesesuch methods of sale. |
The distribution of the securities described in this prospectus may be effected from time to time in one or more transactions either:
Ø | | at a fixed price or prices, which may be changed;sale; and |
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Ø | | at market prices prevailing at the time of sale; |
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Ø● | | at prices relatingany other method permitted pursuant to the prevailing market prices; or |
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Ø | | at negotiated prices.applicable law. |
Offers to purchase the securities may be solicited by agents designated by us from time to time. Any agent involved in the offer or sale of the securities will be named, and any commissions payable by us to the agent will be described, in the applicable prospectus supplement. Unless otherwise indicated in the applicable prospectus supplement, any such agent will be acting on a best efforts basis for the period of its appointment. Any agent may be deemed to be an underwriter, as such term is defined in the Securities Act of 1933, of the securities so offered and sold.
If we offer and sell the securitiesSelling Stockholders effect such transactions by selling shares of common stock to or through an underwriterunderwriters, broker-dealers or agents, such underwriters, we will execute an underwriting agreement with the underwriterbroker-dealers or underwriters. The names of the specific managing underwriter or underwriters, as well as any other underwriters, and the terms of the transactions, including compensation of the underwriters and dealers, whichagents may bereceive commissions in the form of discounts, concessions or commissions if any, willfrom the Selling Stockholders or commissions from purchasers of the shares of ommon stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be describedin excess of those customary in the applicable prospectus supplement, which will be used by the underwriters to make resalestypes of transactions involved). In connection with sales of the securities. That prospectus supplementshares of common stock or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The Selling Stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus will be used by the underwriters to make resales of the securities. If underwriters are used in the sale of any of the securitiesclose out short positions and to return borrowed shares in connection with this prospectus, those securities will be acquiredsuch short sales. The Selling Stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.
The Selling Stockholders may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default in the underwriters forperformance of their own accountsecured obligations, the pledgees or secured parties may offer and may be resoldsell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of Selling Stockholders to include the pledgee, transferee or other successors in oneinterest as Selling Stockholders under this prospectus. The Selling Stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices determined byother successors in interest will be the underwritersselling beneficial owners for purposes of this prospectus.
The Selling Stockholders and us at the time of sale. The securities may be offered to the public either through underwriting syndicates represented by managing underwriters or directly by one or more underwriters. If any underwriter or underwriters are usedbroker-dealer participating in the saledistribution of the securities, unless otherwise indicated in a related prospectus supplement, the underwriting agreement will provide that the obligationsshares of the underwriters are subject to some conditions precedent and that with respect to a sale of these securities the underwriters will be obligated to purchase all such securities if any are purchased.
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We may grant to the underwriters options to purchase additional securities to cover over-allotments, if any, at the public offering price, with additional underwriting commissions or discounts, as may be set forth in a related prospectus supplement. The terms of any over-allotment option will be set forth in the prospectus supplement for those securities.
If any underwriters are involved in the offer and sale, they will be permitted to engage in transactions that maintain or otherwise affect the price of our securities. These transactions may include over-allotment transactions, purchases to cover short positions created by the underwriter in connection with the offering and the imposition of penalty bids. If an underwriter creates a short position in the securities in connection with the offering, i.e., if it sells more securities than set forth on the cover page of the applicable prospectus supplement, the underwriter may reduce that short position by purchasing the securities in the open market. In general, purchases of a security to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. As noted above, underwriters may also choose to impose penalty bids on other underwriters or selling group members.
Neither we nor any underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the securities. In addition, neither we nor any underwriter make any representation that such underwriter will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.
If we offer and sell the securities through a dealer, we or an underwriter will sell the securities to the dealer, as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of resale. Any such dealercommon stock may be deemed to be an underwriter, as such term is defined in the Securities Act, of the securities so offered and sold. The name of the dealer and the terms of the transactions will be set forth in the applicable prospectus supplement.
We may solicit offers to purchase the securities directly, and we may sell the securities directly to institutional or other investors, who may be deemed an underwriter"underwriters" within the meaning of the Securities Act, with respectand any commission paid, or any discounts or concessions allowed to, any resalessuch broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of those securities. The termsthe shares of these sales, includingcommon stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any biddingbroker-dealers or auction process, if utilized, will be described inagents, any discounts, commissions and other terms constituting compensation from the applicable prospectus supplement.Selling Stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
We may enter into agreements with agents, underwriters and dealers under which we may agree to indemnify the agents, underwriters and dealers against certain liabilities, including liabilities under the Securities Act, or to contribute to payments they may be required to make with respect to these liabilities. The terms and conditions of this indemnification or contribution will be described in the applicable prospectus supplement. Some of the agents, underwriters or dealers, or their affiliates may be customers of, engage in transactions with or perform services for us in the ordinary course of business.
In order to comply withUnder the securities laws of some states, if applicable, the securities offered hereby willshares of common stock may be sold in those jurisdictionssuch states only through registered or licensed brokers or dealers. In addition, in some states securitiesthe shares of common stock may not be sold unless theysuch shares have been registered or qualified for sale in the applicablesuch state or an exemption from the registration or qualification requirement is available and is complied with.
There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.
The Selling Stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the Selling Stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.
We have advised each Selling Stockholder that it may not use shares registered on this registration statement to cover short sales of common stock made prior to the date on which this registration statement shall have been declared effective by the Commission. If a Selling Stockholder uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective shares under this registration statement.
We are required to pay all fees and expenses incident to the registration of the shares, but we will not receive any proceeds from the sale of the Common Stock. We have agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
NASDAQ Global Market quotation
Our common stock is traded on The Nasdaq Global Market under the symbol “HYTM.”
26
Incorporationorporation of certain information by reference
The following documents filed by Hythiam, Inc. (the “Registrant”) with the Commission pursuant to the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are specifically incorporated herein by reference into this prospectus:reference:
| (a) | (1) | | OurThe Registrant’s annual report on Form 10-K for the year ended December 31, 2006;2007, filed with the Commission pursuant to Section 13(a) or Section 15(d) of the Exchange Act on March 17, 2008; |
| (b) |
| (2) | | CompCare’s transitionThe Registrant's current report on Form 10-KT for8-K dated May 12, 2008, filed with the transition period from June 1, 2006 through December 31, 2006;Commission pursuant to Section 13(a) or Section 15(d) of the Exchange Act on May 12, 2008. |
| (c) |
| (3) | | Our Proxy Statement on Form DEF14A for our annual meeting of stockholders held on June 15, 2007; |
|
| (4) | | OurThe Registrant's quarterly report on Form 10-Q for the quarterquarterly period ended March 31, 2007; |
|
| (5) | | Our quarterly report on Form 10-Q for the quarter ended June 30, 2007; |
|
| (6) | | CompCare’s quarterly report on Form 10-Q for the quarter ended February 28, 2007; |
|
| (7) | | CompCare’s quarterly report on Form 10-Q for the quarter ended June 30, 2007; |
|
| (8) | | Our current reports on Form 8-K2008, filed with the SEC on January 18, 2007; January 19, 2007; January 25, 2007; January 29, 2007; February 6, 2007; March 2, 2007; March 15, 2007; May 7, 2007; May 9, 2007; May 10, 2007; May 15, 2007; May 25, 2007; May 29, 2007; May 31, 2007; June 18, 2007; July 10, 2007; and September 6, 2007; |
|
| (9) | | All other reports filedCommission pursuant to Section 13(a) or 15(d) of the Exchange Act sinceon May 12, 2008. |
| (d) | The Registrant's current report on Form 8-K dated July 16, 2008, filed with the endCommission pursuant to Section 13(a) or Section 15(d) of the fiscal year covered byExchange Act on July 18, 2008. |
| (e) | The Registrant's current report on Form 8-K dated July 31, 2008, filed with the documents referredCommission pursuant to in (1) and (2) above;Section 13(a) or Section 15(d) of the Exchange Act on August 1, 2008. |
| (f) | The Registrant's current report on Form 8-K dated August 11, 2018, filed with the Commission pursuant to Section 13(a) or Section 15(d) of the Exchange Act on August 11, 2008. |
| (g) | (10)The Registrant's quarterly report on Form 10-Q for the quarterly period ended June 30, 2008, filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act on August 11, 2008. |
| (h) | The Description of Capital Stock contained in ourthe Registration Statement on Form S-1/A filed with the SECCommission on June 23, 2004; and |
|
| (11) | | All documents that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering.2004. |
We will provide each person, including any beneficial owner,
All documents subsequently filed by the Registrant pursuant to whomSections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, prior to the filing of a prospectus is delivered, a copy of anypost-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all of the information that has beensecurities then remaining unsold, shall be deemed to be incorporated by reference in this prospectus but not delivered withherein and to be part hereof from the prospectus. We will provide this information upon written or oral request at no charge todate of the requester. The request for this information must be made to the following:filing of such documents.
Investor Relations
Hythiam, Inc.
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
(310) 444-4300
27
WhereWhere you can find additionalmore information
We make ourfile annual, reports on Form 10-K, our proxy statement, our quarterly reports on Form 10-Q, ourand current reports, on Form 8-K,proxy statements and any amendments to these reportsother information with the SEC. Our SEC filings are available free of charge through links on our corporate website as soon as reasonably practicable after such reports are filed with, or furnished to the Securities and Exchange Commission (SEC). Our corporate website is located onpublic over the Internet at the SEC’s website at http://www.hythiam.com. Only thosewww.sec.gov. The SEC’s website contains reports, specifically described above are incorporated by reference herein. The publicproxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. You may also read and copy any materialsdocument we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,N.E., Washington, DCD.C. 20549. The publicYou may also obtain copies of these documents at prescribed rates by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of theits Public Reference RoomRoom. We maintain a website at http://www.hythiam.com. We have not incorporated by callingreference into this prospectus the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet siteinformation in, or that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.accessed through, our website, and you should not consider it to be a part of this prospectus.
Legal matters
Various legal matters with respect to the validity of the securities offered by this prospectus will be passed upon for us by Dreier Stein & Kahan Browne Woods George LLP, Santa Monica, California. Dreier Stein & Kahan Browne Woods George LLP and its attorneys hold noholds 250,000 shares of our common stock, but an attorneyand a partner with the firm holds a warrantoptions to purchase up to 50,000 shares of our common stock.
Experts
Our
The financial statements as of December 31, 2007 and management’s report on2006 and for each of the three years in the period ended December 31, 2007 and management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2007 incorporated by reference in this prospectusProspectus have been audited byso incorporated in reliance on the reports of BDO Seidman, LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their reports incorporated herein by reference, and are incorporated herein in reliance upon such reports given uponon the authority of said firm as experts in auditing and accounting.
CompCare’s financial statements incorporated by reference in this Prospectus have been audited by Kirkland, Russ, Murphy & Tapp P.A., an independent registered public accounting firm, to the extent and for the periods set forth in their reports incorporated herein by reference, and are incorporated herein in reliance upon such reports given upon the authority
The valuation analysis
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various costs and expenses payable by the Registrantregistrant in connection with the sale of the securities being registered. All such costs and expenses shall be borne by the undersigned Registrant. Except for the SEC registration fee, all the amounts shown are estimates.
| | | | | | |
| SEC registration fee | | $ | 1,535 | | | $ | 134 | |
| Legal fees and expenses | | 25,000 | | | | 25,000 | |
| Accounting fees and expenses | | 25,000 | | | | 7,500 | |
| Printing and related expenses | | 5,000 | | | | | |
| Miscellaneous | | 3,465 | | | | 366 | |
| | | | | |
| Total | | $ | 60,000 | | | $ | 33,000 | |
| | | | | |
Item 15. Indemnification of Officers and Directors
Under Section 145 of the General Corporation Law of the State of Delaware, the Registrant has broad powers to indemnify its directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act. The Certificate of Incorporation and the Bylaws of the Registrant provide that the Registrant will indemnify, to the fullest extent permitted by the Delaware General Corporation Law, each person who is or was a director, officer, employee or agent of the Registrant, or who serves or served any other enterprise or organization at the request of the Registrant. Pursuant to Delaware law, this includes elimination of liability for monetary damages for breach of the directors’ fiduciary duty of care to the Registrant and its stockholders. These provisions do not eliminate the directors’ duty of care and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director’s duty of loyalty to the Registrant, for acts or omissions not in good faith or involving intentional misconduct, for knowing violations of law, for any transaction from which the director derived an improper personal benefit, and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware law. The provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.
The Registrant has entered into agreements with its directors and executive officers that require the Registrant to indemnify these persons against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred (including expenses of a derivative action) in connection with any proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that the person is or was a director or officer of the Registrant or any of its affiliated enterprises, provided the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the Registrant’s best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The indemnification agreements will also establish procedures that will apply if a claim for indemnification arises under the agreements.
The Registrant maintains a policy of directors’ and officers’ liability insurance that insures its directors and officers against the cost of defense, settlement or payment of a judgment under some circumstances.
Item 16. Exhibits
| | | |
| Exhibit No. | | Description |
| 3.1 | | Certificate of Incorporation of the Company(1) |
| | Company (1) |
| 3.2 | | Bylaws of the Company(1) |
| | Company (1) |
| 4.1 | | Specimen of Common Stock Certificate(2) |
| | Certificate (2) |
| 5.1 | | Opinion of Dreier Stein & Kahan Browne Woods George LLP |
| | |
| 23.1 | | Consent of Dreier Stein & Kahan Browne Woods George LLP (included in Exhibit 5.1) |
| | |
| 23.2 | | Consent of BDO Seidman, LLP |
| | |
23.3 | | Consent of Kirkland, Russ, Murphy & Tapp, P.A. |
| | |
23.4 | | Consent of Actuarial Risk Management |
| | |
24 .124.1 | | Power of Attorney (included in signature page hereof) |
| (1) | | Previously filed exhibit of same number to the Current Report on Form 8-K filed with the SEC on September 30, 2003 and incorporated by reference herein. |
| | | |
| (2) | | Previously filed exhibit of same number to the Annual Report of Form 10-K filed with the SEC on March 16, 2006 and incorporated by reference herein. |
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that:
The undertakings set forth in subparagraphs (i), (ii) and (iii) above do not apply and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) (§230.424(b) of this chapter) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein,herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, of 1933, each filing of the registrant’s annual report pursuant to sectionSection 13(a) or sectionSection 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)Act) that is incorporated by reference in the registration statementRegistration Statement shall be deemed to be a new registration statement relating to the securities offered therein,herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) If the securities to be registered are to be offered to existing security holders pursuant to warrants or rights and any securities not taken by security holders are to be reoffered to the public, the undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
(7) If the securities to be registered are to be offered at competitive bidding, the undersigned registrant hereby undertakes (1) to use its best efforts to distribute prior to the opening of bids, to prospective bidders, underwriters, and dealers, a reasonable number of copies of a prospectus which at that time meets the requirements of section 10(a) of the Act, and relating to the securities offered at competitive bidding, as contained in the registration statement, together with any supplements thereto, and (2) to file an amendment to the registration statement reflecting the results of bidding, the terms of the reoffering and related matters to the extent required by the applicable form, not later than the first use, authorized by the issuer after the opening of bids, of a prospectus relating to the securities offered at competitive bidding, unless no further public offering of such securities by the issuer and no reoffering of such securities by the purchasers is proposed to be made.
(8)(5) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a–314a-3 or Rule 14c–314c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X areis not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.
(9) If the registration statement will become effective upon filing with the Commission pursuant to Rule 462 (e) or (f) under the Securities Act, and:
(1) Any provision or arrangement exists whereby the registrant may indemnify a director, officer or controlling person of the registrant against liabilities arising under the Securities Act, or
(2) The underwriting agreement contains a provision whereby the registrant indemnifies the underwriter or controlling persons of the underwriter against such liabilities and a director, officer or controlling person of the registrant is such an underwriter or controlling person thereof or a member of any firm which is such an underwriter, and
(3) The benefits of such indemnification are not waived by such persons:
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 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 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 itsour counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by itus is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(10) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.SIGNATURES
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus 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.
(11) If the registrant intends to rely on section 305(b)(2) of the Trust Indenture Act of 1939 for determining the eligibility of the trustee under indentures for securities to be issued, offered, or sold on a delayed basis by or on behalf of the registrant, the undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under section 305(b)(2) of such Act.
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 the City of Los Angeles, State of California, on the 6th15th day of September, 2007.August 2008.
| | | | | | |
| | | HYTHIAM, INC.
| | |
| By: | /s/ Terren S. Peizer | |
| | Terren S. Peizer | |
| | Chief Executive Officer | |
| | | | | | | |
| | By: | | /s/ Terren S. Peizer | | |
| | | | Terren S. Peizer | | |
| | | | Chief Executive Officer | | |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Terren S. Peizer and Chuck Timpe,Richard A. Anderson, or any one of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, 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 file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, 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 connection therewith, 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 substitutes or substitute, 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.
| | | | |
| Signature | | Title(s) | | Date |
| | | | | |
/s/ Terren S. Peizer Terren S. Peizer | | Chairman of the Board of Directors and Chief Executive Officer (Principal | | August 15, 2008 |
| Terren S. Peizer | | (Principal Executive Officer) | | September 6, 2007 |
| | | | | |
/s/ Chuck TimpeChuck Timpe | | Chief Financial Officer
| | August 15, 2008 |
| Chuck Timpe | | (Principal Financial Officer) | | September 6, 2007 |
| | | | |
| /s/ Maurice Hebert | | Vice President and Corporate Controller | | August 15, 2008 |
| Maurice Hebert | | (Principal Accounting Officer) | | |
| | | | | |
| | Director, President and Chief Operating Officer | | August 15, 2008 |
| Richard A. Anderson | | | | |
| | | | |
| /s/ Christopher S. Hassan | | Director and Senior Executive Vice PresidentChief Strategy Officer | | September 6, 2007August 15, 2008 |
| Christopher S. Hassan | | | | |
| | | | | |
/s/ Christopher S. HassanChristopher S. HassanAndrea Grubb Barthwell | | Director and Senior Executive Vice President | | September 6, 2007August 15, 2008 |
| Andrea Grubb Barthwell | | | | |
| | | | | |
/s/ Maurice HebertMaurice HebertMarc G. Cummins | | Vice President and Corporate Controller
(Principal Accounting Officer)Director | | September 6, 2007August 15, 2008 |
| Marc G. Cummins | | | | |
| | | | |
| /s/ Steven A. Kreigsman | | Director | | August 15, 2008 |
| Steven A. Kreigsman | | | | |
| | | | | |
/s/ Karen Freeman-Wilson Karen Freeman-WilsonJay A. Wolf | | Director | | September 6, 2007August 15, 2008 |
| Jay A. Wolf | | | | |
/s/ Andrea Grubb BarthwellAndrea Grubb Barthwell | | Director | | September 6, 2007 |
| | | | |
/s/ Leslie F. BellLeslie F. Bell | | Director | | September 6, 2007 |
| | | | |
/s/ Marc G. CumminsMarc G. Cummins | | Director | | September 6, 2007 |
| | | | |
/s/ Ivan M. LieberburgIvan M. Lieberburg | | Director | | September 6, 2007 |
