As filed with the Securities and Exchange Commission on August 31, 2001
Registration No. 333-44982
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Amendment No. 2
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THEHEALTHCHANNEL.COM, INC.
(Name of small business issuer in its charter)
Delaware 4812 33-0728140
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
260 Newport Center Drive, Suite 250 260 Newport Center Drive, Suite 250
Newport Beach, California 92660 Newport Beach, California 92660
(949) 631-8317 (949) 631-8317
(Address and telephone number of (Address of principal place of business)
principal executive office)
The Company Corporation
1013 Centre Road
Wilmington, DE 19805
(302) 636-5440
(Name, address and telephone number of agent for service)
----------------------------
COPIES TO:
Lawrence W. Horwitz, Esq.
Senn Palumbo Meulemans
18301 Von Karmen Avenue, Suite 850
Irvine, CA 92612-1009
(949) 442-0300
Approximate Date of Proposed Sale to the Public.
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.|X|
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Number of Shares to Proposed Offering Proposed Aggregate Amount of
Securities to be Registered be Registered(1) Price Per Share (2) Offering Price Registration Fee
-------------------------------------------------------------------------------------------------------------
Shares of Common Stock,
$.001 par value (3) 2,741,617 $0.14 $383,826 $95.96
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Shares of Common Stock,
$.001 par value,
underlying warrants (4) 4,046,177 $0.14 $566,464 $141.62
-------------------------------------------------------------------------------------------------------------
TOTAL 6,787,794 $950,290 $237.58
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(1) thehealthchannel.com, Inc. conducted a one for three reverse stock split
on November 20, 2000. The share numbers set forth herein are based on
post-split calculations.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 and based upon the average of the
high and low prices for the Common Stock on February 21, 2001, as reported
by the over-the-counter Pink Sheets. We expect that in the event the
registered shares are sold, such shares will be sold at the then-current
market price.
(3) 2,215,284 shares to be sold from time to time by other Selling
Shareholders and, 526,556 shares to be sold from time to time by Les Dube
and Irene Dube.
(4) 2,382,427 shares underlying warrants to be sold from time to time by other
Selling Shareholders, and 1,663,750 shares underlying warrants to be sold
from time to time by Laguna Pacific Partners, L.P. The warrants held by
Laguna Pacific Partners, L.P. are subject to monthly increases under the
terms of the warrant agreement by and between Laguna Pacific Partners,
L.P. and thehealthchannel.com, Inc. The number of shares underlying the
warrant set forth herein is based on adjustments made for February, March
and April 2001.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED ______________, 2001
SUBJECT TO COMPLETION, DATED MARCH 19, 2001
PROSPECTUS
-----------------
THEHEALTHCHANNEL.COM, INC.
----------------------
6,787,794 Shares of Common Stock
This prospectus covers 6,787,794 shares of the common stock, of
thehealthchannel.com, Inc. The common stock will be sold solely
by the selling stockholders.
The securities offered hereby involve a high degree of risk.
Please read the "Risk factors" beginning on page 2.
Our common stock is currently trading on the pink sheets under "THCH".
--------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Our principal executive offices are located at 260 Newport Center Drive,
Suite 250, Newport Beach, California 92660. Our telephone number is
(949) 631-8317
The date of this prospectus is ________, 2001.
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................1
THE OFFERING...................................................................2
SUMMARY FINANCIAL INFORMATION..................................................2
RISK FACTORS...................................................................3
TERMS OF THE OFFERING..........................................................9
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS.......................10
DIVIDEND POLICY...............................................................10
SELECTED FINANCIAL DATA.......................................................10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.........................................................12
ORGANIZATION OF THEHEALTHCHANNEL.COM..........................................15
BUSINESS OF THE COMPANY.......................................................17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS..................22
EXECUTIVE COMPENSATION........................................................23
CERTAIN TRANSACTIONS..........................................................24
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL OWNERS.........................25
SELLING SHAREHOLDERS..........................................................26
PLAN OF DISTRIBUTION..........................................................30
DESCRIPTION OF SECURITIES.....................................................32
LEGAL MATTERS.................................................................32
EXPERTS.......................................................................33
FINANCIAL STATEMENTS..........................................................33
INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1
EXHIBITS................................................................II-6
UNDERTAKINGS............................................................II-9
PROSPECTUS SUMMARY
The following summary is only a summary and should be read in
conjunction with, the more detailed information and the financial statements,
including its notes, appearing elsewhere in this prospectus. Unless otherwise
specifically referenced, all references to dollar amounts refer to United States
dollars.
Our Business We operate thehealthchannel.com web site. We
focus exclusively upon the development of
business strategies and the acquisition of
existing operations which satisfy the
following three part test:
--is the business strategy/acquisition
candidate in the healthcare industry?
--does implementation of the Internet
materially improve the business?
strategy/acquisition candidate?
--will the proposed plan generate projected
revenues within six months and a return on
our investment within twelve months of the
deployment of our capital.
While we are continuously researching
potential business strategies consistent
with our own criteria set forth above, this
prospectus describes four such strategies we
are currently implementing:
--deployment of the Physicians Automated
Attendant, a wireless based software system
intended to automate multiple facets of a
physician's practice and interface with
large internet based information sites;
--strategic joint venture with the Institute
for Medical Studies and Academy for
Continuing Medical Education by transmitting
over the Internet virtual classrooms
allowing healthcare industry professionals
to comply with their continuing education
requirements;
--providing broad healthcare information on
our Internet site, coupled with advertising,
on a variety of topics, with an increasing
focus upon breast cancer; and
--making our web site easily accessible to
wireless devices.
The Selling Shareholders This prospectus has been prepared to
register shares of common stock that were
previously issued to various individuals and
entities. These securities are being
registered because the holders of these
securities have piggyback registration
rights. A list of the securities being
registered in this prospectus and the people
and entities that own them appears in the
"Selling Shareholders" section of this
prospectus.
Securities issued to Les Dube and This prospectus will also register 526,556
Irene Dube and to Laguna shares of commons stock for sale from time
Pacific Partners to time by Les Dube and Irene Dube, as well
as 1,663,750 shares of common stock
underlying warrants for sale from time to
time by Laguna Pacific Partners. Les Dube
and Irene Dube and Laguna Pacific Partners
are receiving these securities in connection
with loans made to thehealthchannel.com.
Securities issued to Senn This prospectus will also register 240,000
Palumbo Meulemans, LLP shares of common stock for the sale from
time to time by Senn Palumbo Meulemans, LLP.
Senn Palumbo Meulemans were issued these
shares as a retainer for legal services to
be performed by them for
thehealthchannel.com.
1
THE OFFERING
Common Stock Outstanding as of December 31, 2000 27,610,954
Common Stock and Shares Underlying Warrants Offered
by Selling Shareholders 6,787,794
Common Stock underlying warrants issued in connection 1,663,750
with loans made by Laguna Pacific Partners
Risk Factors The securities offered
hereby involve a high
degree of risk and
immediate substantial
dilution. See "Risk
Factors."
OTC pink sheets trading symbol. THCH
SUMMARY FINANCIAL INFORMATION
The following table presents our selected historical financial data
derived from our financial statements. The historical financial data presented
herein only summarizes basic data and should be read in conjunction with our
financial statements and notes. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes included elsewhere in this
prospectus.
Fiscal Year Ended Fiscal Year Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Statement of Operations
Data:
Revenue $ 10,765 $ -0-
Net Loss $ 3,874,017 $ 3,926,992
Net loss per share $ 0.15 $ 0.18
December 31, 2000 December 31, 1999
----------------- -----------------
Balance Sheet Data:
Total assets $ 570,995 $ 1,081,060
Total liabilities $ 1,639,857 $ 510,967
Stockholder's equity $ (1,068,862) $ 570,093
2
RISK FACTORS
The securities offered in this prospectus are very speculative and involve
a high degree of risk. These securities should be purchased only by people who
can afford the loss of their entire investment. Before purchasing these
securities, you should carefully consider the following risk factors and the
other information concerning thehealthchannel.com and its business contained in
this prospectus.
We have only a limited TheHealthChannel.com commenced implementation of
operating history have its current business plan during the fourth
incurred financial losses quarter of 1999. Prior to July 1999 the assets
since inception and there currently comprising the internet site had been
is no assurance when, if owned and operated by BioLogix, Inc. In April
ever, we will begin 1999, BioLogix launched a health oriented web site
generating profits. relying upon advertising on the website to
generate revenues. We were unable to attract
advertisers. As a result, in July 1999, we
commenced development of the new business plan
described in this prospectus. This new business
plan has virtually no operating history and its
financial success will be subject to all the risks
inherent in the establishment of a new business
enterprise. Additionally, thehealthchannel.com has
operated at a loss for all of the periods for
which financial statements are presented in this
prospectus. It is uncertain whether consumers will
be willing to pay for products and services over
the internet at a level that will allow us to
sustain long-term profitability. Further, many of
our business plans for medical professionals we
are currently implementing have never been
deployed over the internet, thus it would be
highly speculative to predict revenues or any
level of profitability. We cannot assure you that
we will ever operate profitably.
There is intense We compete with other companies which have health
competition in the care websites. These competitors include WebMD,
on-line healthcare DrKoop.com, InteliHealth, OnHealth, and
business. Many of our YourHealth.com. These competitors have longer
competitors are more operating histories, larger customer bases,
experienced and much greater brand name recognition and significantly
better financed. We greater financial, marketing and other resources
anticipate that than we do. In addition, other companies with
competition will become superior financing to our company may elect to
increasingly severe in enter the Internet health field. Competitors may
the future as other devote greater resources to marketing and
companies deploy promotional campaigns, and devote substantially
medically oriented more resources to website and systems development
websites. than we can. We cannot assure you that we will be
able to compete successfully against current and
future competitors, and competitive pressures may
have a material adverse effect on our business,
prospects, financial condition and results of
operations. Further as a strategic response to
changes in the competitive environment, our
management may, from time to time, make certain
service or marketing decisions or acquisitions
that could have a material adverse effect on our
business, prospects, financial condition and
results of operations. New technologies and the
expansion of existing technologies may increase
the competitive pressures on us.
We are dependent upon the Our business plans depend on the efficient and
efficient deployment of uninterrupted operation of our computer and and
our Internet site and communications hardware and software systems.
related business Similarly, the ability to track, measure, report
strategies. In the event the delivery of advertisements, data and other
our Internet technology information on our website depends on the
is not accessible by the efficient and uninterrupted operation of our
public, for technical system. These systems and operations are
reasons, we will suffer vulnerable to damage or interruption from human
severe negative business error, natural disasters, telecommunication
consequences. failures, break-ins, sabotage, computer viruses,
intentional acts of vandalism and similar events.
While we have implemented certain systems intended
to back-up our website and its data, despite these
precautions, there is always the danger that human
error or sabotage could substantially disrupt our
website which could cause a loss of visitors to
our site, damage to our systems, and bad
publicity.
3
We may acquire businesses The Federal Drug Administration and the various
that are subject to state-level medical licensing boards may regulate
governmental regulations, components of our business as our business plan is
such as laws associated deployed. It is uncertain how these governmental
with the regulation of agencies will react to the newly established
the distribution of Internet healthcare field. There can be no
drugs, the practice of assurance that any such regulatory requirements
medicine and the will not have a adversely effect our business,
dissemination of financial condition or results of operations.
information to the public
and medical
professionals.
The Internet has been the The Internet is at an early stage, especially
subject of constant associated with the medical industry.
technological change. If Technological changes will occur which virtually
we are unable to immediately impact upon our business strategies.
successfully and timely If we are unable to either predict such changes in
incorporate these changes advance or rapidly adjust our plans and
into our business plan, technologies to reflect these changes, our
our services maybe business plans and internet site could be rendered
rendered obsolete. obsolete within a very short period of time. These
changes include both the development of hardware
which will allow more information to be sent using
less of the bandwidth available to send
information over the Internet, the development of
software which may improve the presentation to
users of the Internet or the deployment of
business strategies focusing upon these changes,
rendering the companies business plan
noncompetitive.
Our business is dependent The Internet based information market is new and
on the continued growth rapidly evolving. Our business is heavily
and use of the Internet, dependent upon an increasing Internet usage,
as well as the efficient particularly by consumers and physicians. Our
operation of the business would be materially adversely affected if
Internet. Internet usage does not continue to grow or grows
slower than currently projected. Further our
business will be adversely effected if consumers
or professionals fail to use the Internet in
sufficient numbers to allow our business plans to
be successfully implemented. Internet usage may be
inhibited for a number of reasons, such as:
o Inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and,
o unavailability of cost-effective, high-speed
access to the Internet.
While these problems may occur in deploying any
Internet business plan, risks unique to our
specific business plan focusing upon the Internet
healthcare sector include:
o Many consumers may have privacy concerns
regarding placing personal medical information
over the Internet, thus decreasing the
potential traffic that our Internet site may
generate and the information we may be able to
secure from this traffic.
o Certain business strategies deployed by us
toward medical professionals may require that
such professionals substantially change their
methods of operating, many of which may be
ingrained in their professional practice for
many years. These professionals may resist, or
even refuse to implement the changes that our
new technologies and business methods present.
Such resistance could prohibit the success of
the Company in marketing its products and
services to medical professionals, thus
materially and adversely effecting our
financial operations.
4
There are currently legal Federal and state laws and regulations addressing
uncertainties relating to issues such as:
the Internet. As a
result, it is difficult o user privacy;
to predict what, if any o pricing;
impact these regulations o online content regulation;
will have upon our o taxation and the characteristics; and,
operations. It is o quality of online products and services.
possible that some of
these regulations may Are under consideration by federal, state, local
substantially increase and foreign governments and agencies. It may take
our costs of doing years to determine the extent to which existing
business and prohibit laws relating to issues such as intellectual
certain business property ownership and infringement, libel, and
strategies we wish to personal privacy are applicable to the Internet.
deploy. The Federal Trade Commission and government
agencies in certain states have been investigating
certain Internet companies regarding their use of
personal information. Our business model
contemplates providing physicians with patient
information via our website. We could incur
additional expenses if any new regulations
regarding the use of personal information are
introduced or these agencies chose to investigate
our privacy practices. Any new laws of regulations
relating to the Internet, or certain application
or interpretation of existing laws, could decrease
the growth in the use of the Internet, decrease
the demand for a our website or otherwise
adversely affect our business.
Our database will contain While most Internet companies have concerns about
extremely sensitive protecting the privacy of their users, these
information regarding the concerns are one of the primary business problems
health condition and facing us. These concerns include:
interests of our users.
To the extent we are o An individual's personal health and interests
unable to assure absolute in healthcare information are viewed as
privacy to these users, extremely private. Any indication that such
our business maybe information might be available to a third party
severely and adversely might materially reduce traffic and interest in
effected. our internet site;
o The increasingly aggressive and creative
attacks by third parties to enter Internet data
bases may increase the concerns of parties who
might otherwise access our Internet site; and,
o We will be forced to continuously monitor and
upgrade our security precautions imposing
increased operating costs upon our budget.
We depend on key Our success depends, to a significant extent, upon
personnel for critical a number of key employees, including our
management decisions. President, Donald Shea, and our Vice President,
Chief Operations Officer, Secretary, and Chief
Financial Officer, Thomas Lonergan. Specifically,
Mr. Shea has been involved in the development of
the company's new business plan, including its
increasing focus on wireless medical industry
applications. Mr. Lonergan has been very active in
identifying strategic joint venture and
advertising opportunities, as well as, fundraising
and investor relations. The loss of services of
one or more of these employees could have a
material adverse effect on our business. We
believe that our future success will also depend
in part upon our ability to attract, retain, and
motivate qualified personnel. Competition for such
personnel is intense. There can be no assurance
that we can attract and retain such personnel. We
do not have "key person" life insurance on any of
our employees.
5
Many of our competitors As a result of the constantly changing environment
have been financed with of the Internet healthcare industry, it is
millions of dollars in difficult to predict the eventual utilization of
debt and equity capital. capitalization. As of the date of this Prospectus
As a result, we believe we anticipate that our capital needs will include:
that it may be necessary
for our company to secure o Computer hardware upgrades to improve the
financing in addition to performance of our Internet site and related
the financing business strategies.
contemplated by this
Prospectus. o Computer hardware upgrades to improve the
internal computers used by our development and
office staff.
o Computer software upgrades developed by third
parties who may either be immediately used or
customized for our purposes.
o Computer software development by our internal
staff to improve the performance of our
Internet site and associated business
strategies.
o Salaries and bonuses needed to attract
top-level computer programmers, administrators
experienced in operating Internet companies,
and office personnel.
Our common stock is Our common stock is quoted and traded on the
currently classified as a Over-the-Counter Pink Sheets ("Pink Sheets"). As a
"penny stock" which could result, an investor could find it more difficult
cause investors to to dispose of, or to obtain accurate quotations as
experience delays and to the market value of, the stock as compared to
other difficulties in securities which are traded on the NASDAQ trading
trading shares in the market or on an exchange. While it is our
stock market intention to apply for quotation on the
Over-the-Counter Bulletin Board upon approval of
this registration statement, there is no assurance
that we will successfully recommence trading on
the bulletin board.
In addition, trading in our common stock is
covered by what is known as the "Penny Stock
Rules." The penny stock rules require brokers to
provide additional disclosure in connection with
any trades involving a stock defined as a "penny
stock," including the delivery, prior to any penny
stock transaction, of a disclosure schedule
explaining the penny stock market and the risks
associated therewith. The regulations governing
penny stocks could limit the ability of brokers to
sell the shares offered in this prospectus and
thus the ability of the purchasers of this
offering to sell these shares in the secondary
market. Our stock will be covered by the penny
stock rules until it has a market price of $5.00
per share or more, subject to certain exceptions
The trading price of our stock could be subject to
wide fluctuations in response to quarterly
variations in operating results, announcement of
technological innovations or new products by us or
our competitors, and other events or factors. In
addition, in recent years the stock market has
experienced extreme price and volume fluctuations
that have had a substantial effect on the market
prices for many Internet companies, which may be
unrelated to the operating performance of the
specific companies.
Investors will experience In many cases, our officers, directors, and
immediate and substantial present shareholders have acquired their
dilution. securities at a cost substantially less than that
which investors will pay for the common stock
offered by this prospectus. As a result, investors
acquiring shares registered in this prospectus
will likely incur immediate, substantial dilution
in the net tangible book value per share of the
common stock. The net tangible book value of a
share represents the amount of our tangible assets
less the amount of its liabilities, divided by the
number of shares outstanding.
The price of the shares The securities being offered in this prospectus
offered hereby is are offered at the market price prevailing at the
dependent upon the price time of the offer. The market price of our
in the public market securities have varied and may has, at times, had
which will fluctuate. a limited relationship, or no relationship, to our
assets, book value, results of operations, or
other established criteria of value. The offering
6
price also may not be indicative of the prices
that will prevail in the subsequent trading market
for our securities.
Most of our shares of As of December 31, 2000, thehealthchannel.com had
common stock of will outstanding approximately 27,610,954 shares that
become eligible for are classified as "restricted securities" as that
public sale over the next term is defined under Rule 144 of the Securities
year, which could have a Act of 1933, as amended. Most of these shares have
depressive effect on the been held by shareholders for at least one year
stock. and may be entitled to be sold under Rule 144. In
addition, we are registering:
--2,741,617 shares and 4,046,177 shares underlying
warrants for other Selling Shareholders which
include:
-- 526,556 shares for Les Dube and Irene Dube, and
--1,663,750 shares underlying warrants for Laguna
Pacific Partners, L.P.
If a significant number of shares are offered for
sale through the public securities markets
simultaneously, it would have a depressive effect
on the trading price of common stock. See
"Description of Securities."
We may have contingent We have engaged in a private placement of
liabilities resulting securities from September 1999 up to the date of
from our recent private this prospectus. During this period of time, we
placement. sold securities to investors based on our most
recent closing price on the OTC Bulletin Board or
the Pink Sheets. The prices at which these
securities were sold fluctuated widely, based on
fluctuations in our closing prices. We cannot
preclude the possibility that an investor or
investors who purchased securities in the private
placement will claim that we failed to fully
disclose the fact that fluctuation in the market
for our stock would cause adjustment in the price
of the private placement. In the event any
shareholder were to successfully prosecute an
action against us on this issue, the shareholders
who were investors in this private placement may
be entitled to damages including a right to
rescind their investment entitling them to a
return of their gross investment. The net amount
raised in the private offering was $1,410,780.
According, assuming that the shareholders were
entitled to a return of their investment damages
to the company would, at the minimum, be equal to
$1,410,780 and could exceed that amount. Such a
damage award would have a severe and adverse
effect on our business, including but not limited
to impacting our ability to continue as a going
concern.
7
Our termination of the We obtained a $30 million equity line from Swartz
Swartz transactions may Private Equity LLC, subject to registration with
expose us to liability to the SEC and governed by a percentage of our
Swartz under the terms of trading volume. This equity line was governed by
the Swartz agreements. our investment agreement with Swartz that provided
that we may place puts to Swartz over a three-year
period. As a result of a conversation with the
SEC, we determined that it was highly unlikely
that the Swartz transaction would clear comments
based upon certain insurmountable aspects of the
Swartz deal. As such, we determined that it as not
in the best interest of the company to continue
with this transaction and have terminated the
agreement with Swartz. We remain willing to work
with Swartz on future dealings should they be able
to demonstrate that their transaction structure
could pass scrutiny. Nonetheless, the termination
of the Swartz agreement, according to its terms,
requires the payment of a "break-up" fee of
$200,000. While we believe that no fee is due
Swartz, based on the legal impossibility of this
agreement, Swartz may attempt to pursue remedies
against the company. While we firmly believe that
Swartz would not prevail in any action against us,
there is no guarantee that they will not recover
substantial damages against us. Given the current
lack of revenues and funding available to us, a
damage award could have an adverse effect on our
business operations.
We have been advised by We have been advised by the Securities Exchange
the Securities and Commission ("SEC") that the exchange of BioLogix
Exchange Commission (the shares for shares of thehealthchannel.com may have
"SEC") that certain constituted an unregistered public offering in
transactions involving violation of applicable state and federal
thehealthchannel.com may securities laws. While we have provided
have been in violation of correspondence to the SEC denying these
the securities laws. allegations, the SEC has indicated that it
continues to disagree with our position. If we
have engaged in an unregistered public offering,
this would constitute a violation of the
Securities Act of 1933 and applicable state laws
and would make us potentially liable to legal
action by the SEC and state security regulators
and our shareholders. In the event any of these
parties were to successfully prosecute an action
based on these allegations, it would have a severe
and adverse effect on our business. We may be
required to pay monetary damages and penalties,
and may be subject to a court-imposed injunction,
or may be forced to enter into a consent decree
with the SEC. At the very least, damages could
take the form of a rescission order permitting the
shareholders who exchanged their shares of
BioLogix for shares; of thehealthchannel.com,
Inc., to receive a return of their BioLogix shares
or, damages could be monetary; requiring the
company to pay to the investors the fair market
value of their shares at the time of the exchange.
This dollar amount would be so high a number that
there would be a substantial likelihood that we
would be forced to cease operations.
We have never paid We have never paid dividends on our common stock
dividends on our common and do not plan on paying cash dividends in the
stock and don't plan to foreseeable future.
pay dividends in the
future.
Special note regarding Statements made in this prospectus regarding our
forward-looking funding requirements and the timing of and
statements. potential for our business constitute
forward-looking statements under federal
securities laws. Such statements are subject to
certain risks and uncertainties that could cause
the rate at which we incur expenses and conduct
our business to differ materially from those
projected. Our ability to proceed with the
marketing and development of our business in
accordance with the dates anticipated is subject
to all of the risks discussed in this prospectus
and our ability to estimate the time period for
which revenues will fund our operations is subject
to substantial uncertainty. Undue reliance should
not be placed on the dates and time periods
discussed in this prospectus. These estimates are
based on the current expectations of our
management, which may change in the future due to
a large number of unanticipated future
developments.
8
TERMS OF THE OFFERING
Each selling shareholder is free to offer and sell his or her common
shares at such times, in such manner and at such prices as he or she may
determine. The types of transactions in which the common shares are sold may
include transactions on the pink sheets, or the OTC Bulletin Board in the event
the Company is relisted on the OTC Bulletin Board. The sales will be at market
prices prevailing at the time of sale or at negotiated prices. Such transactions
may or may not involve NASD licensed broker-dealers.
The selling shareholders may effect such transactions by selling common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the selling shareholders. They
may also receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both.
Such compensation as to a particular broker-dealer might be in excess of
customary commissions.
Each selling shareholder and any broker-dealer that acts in connection
with the sale of common shares may be deemed to be, an "underwriter" within the
meaning of Section 2(11) of the Securities Act. Any commissions received by such
broker-dealers and any profit on the resale of the common shares sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions.
We have notified the Selling Shareholders of the prospectus delivery
requirements for sales made pursuant to this prospectus and that, if there are
material changes to the stated plan of distribution, a post-effective amendment
with current information would need to be filed before offers are made and no
sales could occur until such amendment is declared effective.
We are informing the Selling Shareholders that the anti-manipulation rules
of the SEC, including Regulation M promulgated under the Securities Exchange
Act, may apply to their sales in the market and have provided the Selling
Shareholders with a copy of such rules and regulations.
Selling Shareholders also may resell all or a portion of the common shares
in open market transactions in reliance upon Rule 144 under the Securities and
Exchange Act, provided they meet the criteria and conform to the requirements of
such rule.
9
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Our common stock was quoted on the over-the-counter bulletin board system
since April 1998, formerly under the symbol IVTX. Following our name-change to
thehealthchannel.com, our symbol was changed to THCL. On November 17, 2000, when
our one for three reverse stock split went effective, we received our current
symbol, THCH. Our common stock is currently quoted on the over-the-counter pink
sheets published by the National Quotation Bureau under the symbol THCH.
The following table sets forth the high ask and low bid prices for our
common stock as reported on the OTC bulletin board until January 12, 2000 and as
reported on the over-the-counter pink sheets as of January 13, 2000 and through
the present.
The prices below also reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual transactions:
Period Reported High Ask Low Bid
--------------- -------- -------
Quarter ended June 30, 1998* 7.50 3.33
Quarter ended September 30, 1998* 6.33 2.625
Quarter ended December 31, 1998* 5.25 1.69
Quarter ended March 31, 1999* 9.00 1.69
Quarter ended June 30, 1999* 9.75 0.50
Quarter ended September 30, 1999 13.875 0.94
Quarter ended December 31, 1999 2.44 0.80
Quarter ended March 31, 2000 4.22 0.66
Quarter ended June 30, 2000 1.69 0.47
Quarter ended September 30, 2000 1.41 0.80
Quarter ended December 31, 2000 0.06 0.05
*We believe the price prior to July 1999 may not be relevant in evaluating
our current operations as this was prior to our acquisition of
thehealthchannel.com website.
Since January 2000 there has been little market making activity on the
pink sheet market for our stock. The price of the stock has fluctuated between
$0.20 and $1.00 per day during this time period. As of February 21, 2001, our
common stock closed at $.14.
As of December 31, 2000, there were approximately 481 holders of our
common stock, as reported by our transfer agent.
DIVIDEND POLICY
We have never paid any cash dividends on our Common Stock and do not
anticipate paying any cash dividends in the future. We currently intend to
retain future earnings, if any, to fund the development and growth of our
business.
10
SELECTED FINANCIAL DATA
The following selected financial data is a summary and should be read in
conjunction with, the financial statements, related notes to financial
statements and Report of Independent Public Accountants, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained elsewhere. The following tables summarize certain selected financial
data of thehealthchannel.com for the period from its inception on September 6,
1996 through September 30, 2000 (audited), the fiscal year ended December 31,
1999 (audited), and the fiscal year ended December 31, 2000 (audited). The data
has been derived from financial statements included elsewhere in this
prospectus. No dividends have been paid for any of the periods presented.
Period from Inception
Fiscal Year Fiscal Year Ended (September 6, 1996) to
December 31, 2000 December 31, 1999 September 30, 2000
----------------- ----------------- ------------------
Statement of
Operations
Data:
Revenue $ 10,765 $ -0- $ 10,870
Net Loss $ 3,874,017 $ 3,926,992 $ 7,969,049
Net loss per
share $ 0.14 $ 0.18
December 31, 2000 December 31, 1999
----------------- -----------------
Balance Sheet Data:
Total assets $ 570,995 $ 1,081,060
Total liabilities $ 1,639,857 $ 510,967
Stockholder's equity $ (1,068,862) $ 570,093
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion regarding our financial statements should
be read in conjunction with our financial statements included herewith.
Overview
We are engaged in the business of providing healthcare information
over the Internet.
Results of Operations
The following table sets forth, for the periods indicated, selected
financial information:
---------------------------------------------------------------------------------------
Year Ended Year Ended Period from Inception
December 31 1999 December 31, 2000 (September 4, 1996)
to September 30, 2000
---------------------------------------------------------------------------------------
Total revenue $ -0- $ 10,765 $ 10,765
---------------------------------------------------------------------------------------
Cost of revenue $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------
Gross profit $ -0- $ 10,765 $ 10,765
---------------------------------------------------------------------------------------
General, administrative,
and selling expenses $ (3,884,782) $ (3,884,782) $ (7,244,510)
---------------------------------------------------------------------------------------
Loss from continuing
operations $ (3,460,728) $ (3,874,017) $ (7,233,745)
---------------------------------------------------------------------------------------
Loss on discontinued
operations $ (466,264) $ ( - ) $ (2,213,648)
---------------------------------------------------------------------------------------
Loss before taxes $ (3,926,992) $ (3,874,017) $ (9,447,393)
---------------------------------------------------------------------------------------
Taxes on income $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------
Net loss $ (3,926,992) $ (3,874,017) $ (9,447,393)
---------------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations Fiscal Year Ended December 31, 1999 compared to December
31, 2000.
REVENUE
We are a development stage company and had no revenues for the
fiscal year ended December 31, 1999. Revenues for December 31, 2000 were $10,765
and were derived from advertising associated with our wireless strategy.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
We expended approximately $3,884,782 for the year ended December 31,
2000 compared to $3,460,728 in 1999, in selling, general and administrative
expenses. This included expenses for web site development, rent for our office
space, and compensation to consultants and employees.
12
LOSS FROM OPERATIONS
We incurred a loss from operations of $3,874,017 for the year ended
December 31, 2000 compared to a loss of $3,460,728 for 1999. The operations of
our predecessor company, Innovative Tracking Solutions Corporation ("IVTX") in
1999 are presented as discontinued operations as a result of the transfer of its
assets and liabilities to a private company. The operations of the old IVTX are
not related to the operation of thehealthchannel.com business going forward.
NET LOSS
We had a net loss of $3,874,017, for the year ended December 31,
2000, compared to a loss of $3,926,992 in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have primarily funded our capital
requirements through private equity infusions. Commencing in September of 1999
and closing in August, 2000, we conducted a private offering, to accredited
investors only, of units, each unit consisting of one share of our common stock
and one warrant exercisable for a term of two years. All shares purchased in
this offering, as well as all shares underlying warrants purchased in this
offering, have piggyback registration rights and are entitled to be included in
this prospectus. As adjusted for our one for three reverse split, we originally
priced this offering at $2.25 per unit with a $2.25 exercise price on the
warrants. However, the price of our publicly traded stock dropped precipitously
since the beginning of this private offering and we subsequently offered the
units at lower prices.
Company management has raised net proceeds of $1,410,780 under this
private offering. No NASD-registered broker-dealers were involved in this
offering. This private offering is exempt from the registration requirements
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
We obtained a $30 million equity line from Swartz Private Equity
LLC, subject to registration with the SEC and governed by a percentage of our
trading volume. This equity line was governed by several agreements with Swartz.
As a result of our conversations with the SEC, we determined that it is highly
unlikely that the Swartz transaction would clear comments. As such, we
determined that it as not in the best interest of the company to continue with
this transaction and have terminated the agreement with Swartz and canceled the
warrants provided to Swartz as part of the transaction. We remain willing to
work with Swartz on future transactions should they be able to demonstrate that
their transaction structure could pass scrutiny. Nonetheless, termination of the
Swartz agreement, according to its terms, requires the payment of a "break-up"
fee of $200,000. While we believe that no fee is due Swartz and, we have the
legal right to cancel the warrants and terminate the agreements, Swartz may
attempt to pursue remedies against the company. While we firmly believe that
Swartz would not prevail in any action against us, there is no guarantee that
they will not recover substantial damages against us. These damages at a minimum
would include the break up fee and an order to reissue the warrants. Given the
current lack of revenues and funding available to the company, a damage award
could have an adverse effect on our business operations.
We received a loan in the amount of $250,000 from Laguna Pacific
Partners L.P., a Delaware limited partnership. This loan is made pursuant to a
secured note that bears interest at the rate of 6% and is payable on the earlier
of February 3, 2001 or the effective date of this prospectus. The due date of
this loan has been extended to the earlier of May 1, 2001, or the effective date
of this prospectus. The loan is secured by all of our assets. In consideration
for making this loan to us, Laguna Pacific Partners received a warrant for
common stock equal to the quotient of $250,000 divided by the closing bid of our
stock immediately preceding the effective date of this prospectus. The term of
this warrant is five years and the exercise price is $1 in the aggregate. The
warrant agreement contains terms, which increase the number of shares underlying
the warrants commencing February 1, 2001 at the rate of 10% per month,
compounding on a monthly basis, until the effective date of our registration
statement. The number of shares being registered under this registration
statement includes the monthly increase for February, March and April, 2001.
13
On August 18, 2000, we received a loan in the amount of $250,000
from Les Dube and Irene Dube. This loan is made pursuant to a note, which bears
interest at the rate of 6% and is payable on the earlier of February 18, 2001 or
the effective date of this prospectus. The due date of this loan has been
extended to the earlier of May 23, 2001, or the effective date of this
prospectus. This loan was issued in consideration for 526,556 shares of common
stock. These shares are being registered in this prospectus, and, upon repayment
of this loan; these shares are to be retained by Les Dube. On the effective date
of this prospectus, Les Dube may sell these shares.
As of December 31, 2000, we had outstanding current liabilities of
$1,639,857, of which $1,033,349 has been approved by the Board of Directors to
be settled by issuance of stock, the balance of $783,349 consists mainly of
accounts payable of approximately $145,000, accrued professional fees of
approximately $143,000, of which $95,000 will be satisfied by the issuance of
common stock, and accrued officers salaries $190,000. All officers of the
company have agreed to defer their compensation or receive their compensation in
the form of equity until such time as the company has the financial ability to
pay them. It is anticipated that loans payable will be repaid from online and
wireless revenue. Our current ratio is .01. After adjusting for items that will
be satisfied by stock issuance, and loans payable, the new current liabilities
would be $218,000 resulting in a current ratio of .11.
While we believe that we will eventually generate the revenues
necessary to fund operations, we currently do not have sufficient revenues to
fund our operations over the next twelve months. We are discussing sources of
private funding, but there is no assurance that such funding will be forthcoming
in a timely manner, or that when forthcoming it will be sufficient to fund
operations.
We do not believe that inflation has had a significant impact on our
operations since our inception.
FUTURE PLAN OF OPERATION
The company's overall plan of operations for the next 12 months
include significant website development in four primary areas:
a) Further develop, promote and increase product offerings in its
industry leading "Anywhere, Anytime (TM)" mobile and wireless
strategy. Thehealthchannel.com was a first time mover in the health
sector with this technology application.
b) Broaden overall content offerings in the areas of general health
content and delivery of health goods and services.
c) Deliver a number of "deep vertical" products in specific health
topics.
d) Implement the business-to-business revenue generating products
covering a number of health areas including some unique products not
currently in the marketplace.
The company's overall plan of operation also includes completion of
strategic acquisitions for the purposes of revenue/profit enhancement, content
development, and increased traffic to the website.
We are is currently conducting product research and development in the
areas of general health content, broadening and strengthening our health
information delivery, as well as conducting research and development in the
areas of premier health product offerings (deep verticals) and mobile and
wireless communication. In addition we will continue to develop its
business-to-business goods and services products.
We recently purchased (through the inclusion of our new operations center
lease) the necessary infrastructure to grow and reduce our operational costs by
bringing a majority of our software development in-house.
We expect to add approximately 5-10 new employees in the next fiscal year.
Available Information
14
We are presently subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended. We have filed with the Securities
and Exchange Commission a Registration Statement on Form SB-2 along with all
amendments and exhibits to it under the Securities Act of 1933, as amended, with
respect to the securities offered by this prospectus. This prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement on file with the SEC pursuant to the Act
and the rules and regulations of the thereunder.
The Registration Statement, including the exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies
of such material may be obtained by mail at prescribed rates from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, you should refer to the filed
document for the complete details. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. thehealthchannel.com's securities are currently quoted on
the over-the-counter market under the symbol "THCH."
Forward Looking Statements
This registration statement contains forward-looking statements. The
company's expectation of results and other forward-looking statements contained
in this registration statement, involve a number of risks and uncertainties.
Among the factors that could cause actual results to differ materially from
those expected are the following: business conditions and general economic
conditions; and competitive factors, such as pricing and marketing efforts.
These and other factors may cause expectations to differ.
ORGANIZATION OF THEHEALTHCHANNEL.COM
History
Innovative Tracking Solutions Corporation, also known as "IVTX" was
incorporated under the laws of the state of Delaware on September 4, 1996.
In March 1998, a market maker filed a 15c2-11 statement with the
National Association of Securities Dealers, Inc. and IVTX's stock was cleared
for quotation on the Over-the-Counter Bulletin Board under the symbol "IVTX" on
April 21, 1998.
In early 1999, IVTX management determined that the "public" status
of IVTX was detrimental to IVTX's operations due to the time and expense burdens
of being a public company.
On April 14, 1999, IVTX transferred all of its assets and
liabilities based on majority stockholder approval to a newly formed private
company, Innovative Tracking Solutions, Inc., a Nevada corporation.
In June 1999, IVTX met the management of BioLogix, Inc. BioLogix was
a diversified public company which owned a number of assets, including a
consumer-based health care website located at http://www.thehealthchannel.com.
IVTX and BioLogix each reorganized as follows:
o In July 1999 IVTX completed a 28.2 for 1 forward stock split. The
officers of IVTX were paid $250,000 cash in exchange for their
shares for the purpose of financing the operation of the IVTX
assets, which had been transferred to a private corporation in April
1999.
o The other 36 IVTX shareholders were provided with the alternative of
either retaining two of their post-split IVTX shares and
contributing the balance to an exchange pool (as discussed more
fully below) or exchanging their shares for shares in Innovative
Tracking Solutions, Inc., a Nevada
15
corporation, the privately held corporation into which the IVTX
operating assets had been transferred. Thirty-five of these 36 IVTX
shareholders elected to retain two shares and contribute the balance
to the exchange pool.
o In July 1999 the Internet website and associated technology located
at www.thehealthchanel.com were transferred by BioLogix, Inc. to
IVTX. The name of IVTX was changed to thehealthchannel.com
o The BioLogix shareholders were provided with the alternative of
retaining their BioLogix shares or retiring their BioLogix shares,
on a one for one basis, in exchange for IVTX shares contained in the
exchange pool (which as noted above had changed its name to
TheHealthChannel.com). There were approximately 800 BioLogix
shareholders and approximately 650 of these shareholders elected to
exchange their BioLogix shares for THCL shares.
The SEC has expressed certain concerns regarding whether the above
reorganization was conducted in accordance with applicable state and federal
securities laws. The SEC has alleged that the exchange of BioLogix shares for
shares of thehealthchannel.com may have constituted an unregistered public
offering. While we have provided correspondence to the SEC denying these
allegations, the SEC has indicated that it continues to disagree with our
position. If we have engaged in an unregistered public offering, this would
constitute a violation of the Securities Act and would make us liable to legal
action by both the SEC and our shareholders.
In the event the SEC or any shareholder was to take and successfully
prosecute an action based on these allegations, it would have a severe and
adverse effect on the company. We may be required to pay monetary damages and
penalties and may be subject to a court-imposed injunction, or may be forced to
enter into a consent decree with the SEC. If any of these events were to occur
it would likely immediately and severely impact our operations and business,
possibly impairing our ability to continue as a going concern.
In addition, we may be subject to contingent liabilities arising form our
private placement of securities, which commenced in September 1999 and continued
to August 2000. During this private placement, shares were sold based on our
stock's most recent closing cost on the OTC Bulletin Board or on the pink sheets
after we were no longer quoted on the OTC Bulletin Board. Therefore, the price
of the securities sold in this private placement fluctuated widely, following
fluctuations in our closing prices. It is possible that an investor or investors
who participated in the private placement may claim that we did not fully
disclose that the price to be paid under the private offering fluctuated with
the market price for our stock. In the event such investor or investors
successfully prosecuted such an action against us, we may be forced to refund
investor's money and pay damages.
Finally, our conversations with the SEC has led us to conclude that
transactions involving Swartz Equity will not clear comments and that there are
serious problems with the legality of Swartz's form of transaction.
We obtained a $30 million equity line from Swartz Private Equity LLC,
subject to registration with the SEC and governed by a percentage of our trading
volume. This equity line was governed by several agreements with Swartz. We
determined that it is highly unlikely that the Swartz transaction would clear
comments. As such, we determined that it as not in the best interest of the
company to continue with this transaction and have terminated the agreement with
Swartz and canceled the warrants provided to Swartz as part of the transaction.
Termination of the Swartz agreement, according to its terms, requires the
payment of a "break-up" fee of $200,000. While we believe that no fee is due
Swartz and, we have the legal right to cancel the warrants and terminate the
agreements, Swartz may attempt to pursue remedies against the company. While we
firmly believe that Swartz would not prevail in any action against us, there is
no guarantee that they will not recover substantial damages against us. These
damages at a minimum would include the break up fee and an order to reissue the
warrants. Given the current lack of revenues and funding available to the
company, a damage award could have an adverse effect on our business operations.
16
BUSINESS OF THE COMPANY
The Healthcare Industry
The healthcare industry is comprised of a myriad of physicians practicing
through a variety of organizational entities and payment plans, hospitals,
operated both for profit and not for profit, owned by a variety of small and
large operators; and ancillary service providers, such as laboratories and
out-patient surgical clinics, again owned and operated by many different types
and sizes of companies. Large insurance companies who offer a variety of payment
plans to the consumer substantially control the revenue and costs of this giant
conglomeration of companies and professional personnel.
This industry generates an enormous amount of information, paperwork, data
and transactions, none of which is standardized nor controlled by any single
entity or organizational protocol. Different insurance companies require
different forms; different providers require different intake information for
patients, different hospitals require different approvals be obtained by
consumers from their insurance companies.
At first glance, it would seem that such an enormous, information
intensive industry would be an obvious candidate for the launch of a successful
Internet company. The exact opposite has actually been the case.
The Healthcare Internet Industry
While many Internet healthcare companies have deployed extensive health
information libraries useful to both consumers and medical professionals, it is
our belief that none of these companies have taken the promise of the Internet
and profitably applied it in the healthcare field.
In fact, a number of publicly held Internet healthcare companies, such as
Dr. Koop, Healtheon/WebMD, and Onhealth.com have sustained large losses
recently. We believe these losses have been generated primarily through the
expenditure of enormous marketing budgets intended to create "brand awareness"
and deliver visitors to the website among healthcare professionals and
consumers.
We believe that the large losses suffered by these healthcare Internet
companies demonstrate that their business models, to date, may be failing. In
July 1999, simultaneous with the acquisition of thehealthchannel.com Web site by
thehealthchannel.com, Inc., our management began to consider the financial and
business consequences of the healthcare industry business plans deployed
throughout the Internet. We focused exclusively upon deploying a diversified
business plan throughout various sectors of the healthcare industry utilizing
the Internet and associated technologies. This plan would focus upon immediate
requirements to generate potential profits, while avoiding the massive marketing
budgets currently plaguing the leading companies in the healthcare Internet
sector. While there is no assurance that such profits will ever eventually be
generated, the plan set forth below is intended to attempt to accomplish
profitability within six months of each project's full deployment and a return
on our investment within one year.
THEHEALTHCHANNEL.COM SOLUTION
Introduction
As of July 1999 we have focused exclusively upon the development of
business strategies and acquisition of existing operations, which satisfy the
following three-part test:
o Is the business strategy/acquisition candidate in the healthcare
industry which may be controlled by us?
o Does implementation of the Internet materially improve the business
strategy/acquisition candidate?
o Can the proposed plan generate projected revenues within six months
and a return on our investment within twelve months of the
deployment of our capital?
17
We believe that the following discussion of our business plan provides the
infrastructure that is now prepared to efficiently deploy a substantial capital
raise into the healthcare Internet sector. Our plans diversify among both
healthcare industry consumers and healthcare industry professionals.
Products Marketed to Healthcare Professionals
We have focused our product development efforts in identifying Internet
based products and services which will increase the productivity of healthcare
professionals by either automating traditional paper-based or manual processes,
or by providing additional revenue sources for the healthcare professional
community.
We are currently developing three products specifically directed toward
physicians:
o Our revenue sharing program with the Institute for Medical
Studies, Inc., a continuing medical education company;
o The Physicians Automated Attendant, a software system which
will be integrated into our internet site, accessible through
wireless portable devices, automating the process of drug
prescription and insurance billing; and,
o Physician Pro Care obesity program.
thehealthchannel.com has entered into a revenue sharing agreement with the
Institute of Medical Studies to exchange Internet links and to jointly create
Internet continuing education programs. This agreement terminates on September
29, 2002. Under the terms of the agreement, thehealthchannel.com will give IMS
10% of the revenue received by thehealthchannel.com for the continuing medical
education programs. In addition, IMS will receive a fee for accreditation
services which is 10% of any such program's budget. As consideration for
entering into the agreement, IMS received warrants to purchase 400,000 common
shares at $.30 per share.
According to their management, the Institute for Medical Studies has for
more than ten years provided physicians throughout the world with continuing
medical education programs involving virtually every area of the medical
practice, from new surgical techniques to certifications for prescribing new
drugs. These programs have typically been provided in a traditional classroom
setting requiring physicians to travel to the class's location. The preparation
of these classes involves the development of extensive materials and the hiring
of a number of prominent physicians in each field. Classes will be both "real
time" allowing Internet participants to interact with the presenter, as well as
archived, allowing physicians to view classes previously provided. Providing
such classes over the Internet involves extremely new technologies and business
models. There is no assurance that we will successfully provide such classes
over the Internet or if we are successful in providing such classes that
physicians will regularly access these classes through our Internet site, rather
than continue to attend traditional classroom presentations. To date,
thehealthchannel.com has not offered any such classes, nor has it received any
revenues from the agreement.
We are also developing a web-based product entitled the Physicians
Automated Attendant. This product is at an early stage of development. However,
it is our intention that this software system would be installed on wireless
devices which shall access our website providing patient prescriptions and
adjudication of insurance claims. We anticipate that the initial prototypes of
this product will be completed during the first quarter of the year 2001. We
believe that there are a number of companies developing products, which will
directly compete with the Physicians Automated Attendant. Further, since this
product involves newly deployed technology, there is no assurance that the
technology will be successfully developed or that if it is successfully
developed, that physicians will utilize such technology at a level that will be
financially practicable for our business plan.
Medical professionals are embracing handheld devices to write
prescriptions, access drug databases, remotely access and manage front office
operations and communicate more effectively with patients, staff and other
health care providers. No company is currently providing medical professionals
with up to the minute news and information about the profession and/or their
medical specialty.
18
Physician Pro Care is one of the leading professional obesity programs
designed for people who are clinically obese (50 lbs. overweight). The
supplemental products that are offered as part of the program will be further
distributed through our website. It is anticipated that this can be significant
revenue enhancement due to the increased exposure related to the distribution
through the Internet.
Healthcare Industry Consumer Products
The centerpiece of our consumer products strategy is our website located
at www.thehealthchannel.com. We have engineered our website completely in-house,
through the efforts of our web design team and in close collaboration with new
content and database integration partners. The site provides increased ease of
navigation, enhanced personalization, and interaction through on-line chat
communities, increased ad and sponsorship banner space and healthcare management
via the "Conditions & Symptoms" research tool. The site focuses on alternative
care as well as traditional medicine and provides offerings for consumer and
professional users. The site was built utilizing the latest hardware and back
end systems that have been tested and configured for optimal performance,
reliability, stability and efficiency. We have entered into an agreement with
NewsEdge, to provide eHealth content consisting of approximately 90 articles
daily, which are added to thehealthchannel.com's growing content database. Our
agreement requires that we pay NewsEdge one installment of $15,000. We have
entered into an agreement with Integrative Medicine, to provide various eHealth
content databases and weekly medical-alert newsletters. Our agreement requires
that we pay Integrative Medicine an annual fee of $80,000 in monthly
installments of $6,667 each. To date, we have made three installment payments
totaling $20,001. We have renegotiated this agreement to decrease the amount
owed on a monthly basis to $5,000 per month commencing February 1, 2001 and
continuing until June 30, 2002.
We have entered into an agreement with EarthLink.com, a general Internet
portal, to provide ready access to our site for EarthLink subscribers clicking
the healthcare heading on the EarthLink portal. Our agreement with EarthLink
provides for a one-year commitment and requires that we pay EarthLink.com
$36,000 in four installments of $9,000 each. To date, we have made three
installment payments to EarthLink.com totaling $27,000. Lastly,
thehealthchannel.com has an arrangement with the National Institute of Health to
incorporate, publish and "private label" content and content links from the
National Library of Medicine's MEDLINEplus web site. Our agreement with the
National Institute of Health requires no payment of money.
We also develop health-related content and programming for the World Wide
Web targeted at consumer access vis-a-vis the Internet, web-TV and/or other
means of network access.
We intend to enter into strategic alliances and business relationships.
These come in many different forms. For example, medical education, alternative
medicine, pharmacy, library, and journals may enter into relationships with us
to provide information to our web site. We currently have such relationships
with NewsEdge and Integrative Medicine as discussed above.
We also expect to have numerous relationships with third party e-commerce
companies offering their products and services to thehealthchannel.com users.
This will either be through direct advertising of the third party e-commerce
site on thehealthchannel.com site or through a commission agreement whereby we
would receive a commission for any product purchased from the third party
e-commerce site by thehealthchannel.com user. In this regard, we have entered
into eight affiliate agreements with other health oriented websites such as
vitamins.com and mothernature.com. These agreements provide us with revenues
(ranging from 10% to 20% of the sale) in the event users are introduced to our
affiliate sites through our website and products or services are ordered. We
have only recently commenced these affiliate relationships and have received
only a nominal amount of revenue as of the date of this prospectus. As a result
of the recent commencement of these relationships, it would be speculative to
forecast any future sales or sales growth.
On September 9, 1999, we entered into an agreement with 24/7 Media, Inc.
24/7 operates a network of Internet websites (the "24/7 Network") for which it
solicits advertisers, advertising agencies, buying services or others
("Advertisers") regarding the placement of advertising banners and similar
devices and sponsorships
19
("Advertising") for display on pages, screens, and other segments or spaces on
Internet websites. We granted 24/7 the worldwide exclusive right to sell all
Advertising on the Company's website for a term of one year. For all advertising
revenues generated by 24/7, we will pay 24/7 a percentage based upon the number
of impressions on our website according to the following chart:
Number of Impressions Percentage Retained by 24/7
Delivered in Preceding Month for Current Month
---------------------------- -----------------
0 to 2,000,000 50%
2,000,000 to 2,999,999 45%
3,000,000 to 4,999,999 40%
5,000,000 to 14,999,999 35%
15,000,000+ 30%
To date, we have generated only minimal revenue from this agreement with
24/7. We have begun accruing advertising revenue from the 24/7 agreement since
July 2000. We have received additional revenue from website development
projects.
We have implemented an "anywhere, anytime" strategy whereby we intend to
attract a segment of the market that may not be reachable through traditional
browser limited websites. Our website is already available to Palm and Pocket PC
device users through http://www.avantgo.com and to wireless Palm devices through
http://www.palm.net as well as http://www.omnisky.com. We intend to extend our
reach in this market by launching WAP (wireless application protocol) or
web-enabled phone applications in the coming weeks. We are the only healthcare
website to receive a four star rating on the palm.net web site. A four star
rating is only awarded to web sites that are considered to be "good" in meeting
3Com's criteria (see http://beta.palm.net/apps/users/main/
1,10190,00.html/?ACTION=Rating) (see http://beta.palm.net/apps/users/download/
1,1051,1477,00.html).
The emergence of the Internet as a significant communications medium is
driving the development and adoption of web content and commerce applications
that offer both convenience and value to consumers, as well as unique marketing
opportunities and reduced operating costs to business. A growing number of
consumer and trade customers have begun to conduct business on the Internet
including paying bills, booking airline tickets, trading securities and
purchasing consumer goods such as personal computers, consumer electronics,
compact disks, books, groceries and vehicles. Moreover, online transactions can
be faster, less expensive and more convenient than transactions conducted
through a human intermediary.
Competition
The online commerce industry, particularly on the Internet, is new,
rapidly evolving and intensely competitive, which we expect to intensify in the
future. Barriers to entry are minimal, allowing current and new competitors to
launch new websites at a relatively low cost. We currently or potentially
compete with other companies which have health care websites. These competitors
include InteliHealth, OnHealth, Web MD, Koop.com, and YourHealth.com.
We believe that the principal competitive factors in this market are brand
name recognition, wide selection, personalized service, ease of use, 24-hour
accessibility, customer service, convenience, reliability, quality of search
engine tools, and quality of editorial and other site content. Many of our
current and potential competitors have longer operating histories, larger
customer bases, greater brand name recognition and significantly greater
financial, marketing and other resources than we do. In addition, other websites
may be acquired by, receive investments from or enter into other commercial
relationships with larger, well-established and well-financed companies as use
of the Internet and other online services increases. Certain of our competitors
may be able to devote greater resources to marketing and promotional campaigns,
and devote substantially more resources to website and systems development than
we do.
Increased competition may result in reduced operating margins, loss of
market share and a diminished franchise value. There can be no assurance that we
will be able to compete successfully against current and future competitors, and
competitive pressures that we face may have a material adverse effect on our
business, prospects,
20
financial condition and results of operations. Further as a strategic response
to changes in the competitive environment, we may, from time to time, make
certain service or marketing decisions or acquisitions that could have a
material adverse effect on its business, prospects, financial condition and
results of operations. New technologies and the expansion of existing
technologies may increase the competitive pressures on us. In addition,
companies that control access to transactions through network access or Web
browsers could promote our competitors or charge us a substantial fee for
inclusion.
We face well-financed competition from other companies competing in the
health sector on the Internet, such as Healtheon, WebMD, and Dr. Koop. Recently,
Healtheon and WebMD merged. There is no guarantee that we will be able to
compete against these companies or any other companies that might enter the
Internet health sector.
Intellectual Property
We currently have an application pending with the United States Patent and
Trademark Office for registration of the name "thehealthchannel.com" as a
trademark. We have also registered the website domain name of
www.thehealthchannel.com.
We do not rely on proprietary technology in providing its healthcare
information over the Internet. We have developed some proprietary technology
related to our wireless applications and strategy. While we use technology which
has been customized for its own purposes, we have deliberately avoided becoming
overly dependent on any one technology. By avoiding reliance on any one
technology, we will be able to take advantage of technological advances to
provide improved accessibility to its content.
We have no collective labor agreements.
Employees
As of the date hereof, we have five full-time employees and five part-time
employees. We hire independent contractors on an "as needed" basis only. We have
no collective bargaining agreements with our employees. We believe that our
employee relationships are satisfactory. Long term, we will attempt to hire
additional employees as needed based on our growth rate.
Properties and Facilities
Our main administrative offices are located at 260 Newport Center Drive,
Suite 250, Newport Beach, California 92660, consisting of 1,284 square feet,
with a monthly lease payment of $3,852 per month, pursuant to a sublease
agreement.
Litigation
To the best knowledge of management, there is currently no material
litigation pending or threatened against the Company.
21
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors and officers are as follows:
Name Age Office
--------------------------------------------------------------------------
Donald J. Shea 67 Chief Executive Officer, President, and
Chairman of the Board of Directors
Thomas Lonergan 50 Chief Operating Officer, Vice
President, Secretary, Chief
Financial Officer, and Director
Balazs Imre Bodai,
M.S., M.D. 45 Director
Jeffrey H. Berg,
MBA, Ph.D. 59 Director
Joseph Song, M.D.,
F.A.C.C. 40 Director
DONALD J. SHEA, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN. From 1995
through 1997, Mr. Shea was Marketing Consultant to Marketing Insights, Inc., a
new product development Company in Princeton, New Jersey. Prior to that he was
President of Avonwood Capital Corporation, Philadelphia, Pennsylvania, a Venture
Capital/Management Consulting firm; and President of Brilliant Enterprises,
Inc., Philadelphia, Pennsylvania, a dental products manufacturer. Mr. Shea was
also the former President and CEO of Clairol, Inc., a Division of Bristol-Myers
Squibb and former Vice-President of Bristol-Myers Squibb.
THOMAS F. LONERGAN, MA, CHIEF OPERATING OFFICER, VICE PRESIDENT, SECRETARY,
CHIEF FINANCIAL OFFICER, AND DIRECTOR. Mr. Lonergan was the co-founder and Vice
Chairman of The IQ NOW Corporation, a deliverer of healthcare information on the
Internet from 1992 through 1999. Previously, he was a Regional Director of
Cardiology for Tenet Medical Group, former Director of Clinical Services at
Downey Community Hospital, and has been a hospital administrator for 20 years.
For 11 years he has been an instructor and director of medical technology at
Coast College. Mr. Lonergan is co-founder of the American College of
Cardiovascular Administrators. He has an Associate of Arts (Pre-Medicine) from
Cerritos Junior College (1971), a Bachelor of Science (Pre-Medicine) from the
University of California, Irvine (1973), and an Executive Masters Degree of
Business Administration from Pepperdine University (1990).
BALAZS IMRE BODAI, M.D., DIRECTOR. From 1985 and continuing through the present,
Dr. Bodai is the Chief of Surgery at Kaiser Permanente Medical Center,
Sacramento, California. He is also President of B and B Medical Research
Technology, Inc., Sacramento, California; an Associate Clinical Professor of
Surgery at the University of California at Davis; a Consultant to COAT, Johnson
& Johnson, Newark, New Jersey; and a Senior Consultant to Sontek Medical, Inc.,
Higham, and Massachusetts. "Ernie" holds a Bachelor of Science and Master of
Science Degrees from the School of Medicine at the University of California at
Los Angeles, and a Doctor of Medicine Degree from the University of California
at Davis. He is author and co-author of over 120 scientific and clinical
publications in several of the leading medical journals, and author of a surgery
textbook.
22
JEFFREY H. BERG, PH.D., DIRECTOR. Dr. Berg holds an MBA and Ph.D. in Chemistry
from New York University. From September 1995 through the present, he is a
senior research analyst for M.H. Meyerson & Co., Inc. From 1991 through the
present, he is the President of Health Care Insights. Mr. Berg was Chicago
Corporation's senior medical advisor from 1991 to 1992. Mr. Berg was security
analyst for William K. Woodruff & Co. from 1990 to 1991 and Vice-President of
Research for J.C. Bradford & Co. from 1987 to 1990. From 1981 to 1987, he was
Vice-President of the Health Care Division of PA Consulting Services, Inc. of
London, England, specializing in international technology and new product
surveillance, venture capital investment, acquisition studies, and
state-of-the-art for diverse areas of health care. During the 1970s, Mr. Berg
developed products and conducted research for General Foods, the Patient Care
Division of Johnson & Johnson Products, Inc., the Consumer Products Division of
Ortho Pharmaceutical Corporation; and staffed and supervised scientists and
engineers at the R&D laboratories for development of varied medical and health
care products within the Johnson & Johnson family of companies. Dr. Berg holds
several patents in the area of biosensor and disposable electrode technology. He
has published a number of articles on topics such as biosensors, cancer therapy,
biopharmaceuticals, drug infusion devices and industrial biotechnology. Dr. Berg
serves as a liaison with the investment banking and scientific communities.
JOSEPH SONG, M.D., F.A.C.C., DIRECTOR. From 1994 through the present, Dr. Song
has his own practice in Interventional Cardiology. From 1991 through 1994, he
was an Interventional Cardiologist with Internal Medicine Specialists Medical
Group, Inc. He is a Lecturer and Moderator at Downey Foundation Hospitals. Dr.
Song is Clinical Assistant Professor of Medicine/Cardiology at the College of
Osteopathic Medicine of the Pacific in California and a member of the Teaching
Staff of the Family Practice Internship/Residency Program at Rio Hondo/Downey
Community Hospital, California. He is certified by the American Board of
Internal Medicine and the American Board of Cardiovascular Diseases. Dr. Song
received an A.B. in Physics from Washington University in St. Louis Missouri in
1982 and his M.D. from University of Missouri-Columbia School of Medicine in
1986.
EXECUTIVE COMPENSATION
Executive Compensation
The following table and attached notes sets forth the compensation
of our executive officers and directors during the last fiscal year.
-------------------------------------------------------------------------------------------------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------------- ---------------------------------------------
Restricted Securities
Name and Principal Year Other annual Stock Underlying LTIP All other
Position Salary Bonus Compensation Awards Options/SARs Payouts Compensation
-------------------------------------------------------------------------------------------------------------------
Donald J. Shea,
Chief Executive 1999 -0- -0- None 32,000 -0- None None
Officer(1) 2000 $144,000 -0- -0- 486,957 -0- None None
-------------------------------------------------------------------------------------------------------------------
Thomas P. None
Lonergan, Chief 1999 -0- -0- None 52,000 -0- None None
Operating Officer, 2000 $144,000 -0- None 486,957 -0- None
Vice President,
Chief Financial
Officer, Secretary
-------------------------------------------------------------------------------------------------------------------
All officers as a 1999 -0- -0- None 84,000 -0- None None
group (2 persons) 2000 $288,000 -0- None 973,914 -0- None None
-------------------------------------------------------------------------------------------------------------------
Notes to Executive Compensation
23
The remuneration described in the table does not include our cost for
benefits furnished to the named executive officers, including premiums for
health insurance, reimbursement of expenses, and other benefits provided to such
individual that are extended in connection with the ordinary conduct of the
Company's business. The value of such benefits cannot be precisely determined,
but the executive officers named below did not receive other compensation in
excess of the lesser of $25,000 or 10% of such officer's cash compensation.
During the 1999 fiscal year, beginning July 28, 1999 (inception) through
December 31, 1999, no Officer or Director received any cash consideration for
salary, nor any aggregate remuneration for health insurance and expenses, in
excess of $40,000.
During the 1999 fiscal year, beginning July 28, 1999 through December 31,
1999, even though their employment agreements provide for salary on an annual
basis, all officers agreed to forego their cash compensation until we were
better financed. During the 2000 fiscal year, Thomas P. Lonergan received cash
compensation of $60,000 and took the remainder of his salary in common stock in
lieu of cash. Mr. Shea took his full 2000 salary in stock in lieu of cash.
Employment Agreements
We have an employment agreement with Donald J. Shea, its President, dated
September 1, 1999. This agreement has a term of three years and provides for
salary of $144,000 per year, four weeks of vacation per year, and eligibility to
participation in all our benefit programs. There is no severance provision.
We have an employment agreement with Thomas P. Lonergan, our Vice
President, Chief Operations Officer, Secretary, and Chief Financial Officer,
dated September 1, 1999. This agreement has a term of three years and provides
for salary of $144,000 per year, four weeks of vacation per year, and
eligibility to participation in all our benefit programs. There is no severance
provision.
CERTAIN TRANSACTIONS
We have a Consulting Agreement with Jeffrey Berg, a director of the
Company, whereby, for a one-time payment of 2,444 shares of common stock, Mr.
Berg assists us in locating, negotiating, and managing our financing.
INTEREST OF NAMED EXPERTS AND COUNSEL
We have received a loan from Laguna Pacific Partners, L.P., a Delaware
Limited Partnership for $250,000. In connection with this loan, we issued a
warrant to Laguna Pacific Partners. Lawrence W. Horwitz, a consultant to the
company and a member of the company's legal firm, Senn Palumbo Meulemans, is one
of the two persons who have voting and investment control over Laguna Pacific
Partners, L.P..
On January 5, 2000, we entered into a consulting agreement with Lawrence
W. Horwitz pursuant to which Mr. Horwitz agreed to provide business development
and advisory services to us. For services rendered under the consulting
agreement, we issued Mr. Horwitz 666,667 shares of common stock of the company.
In accordance with the terms of Mr. Horwitz's consulting agreement, he is
providing general business consulting services to thehealthchannel.com, Inc.,
including, but not limited to: identifying potential key employees (he
introduced thehealthchannel.com, Inc. to its current Chief Financial Officer);
identifying potential investment opportunities for the company; identifying
potential joint venture candidates; he has also provided specific legal services
associated with drafting key contracts for the company, including proposed joint
venture agreements; distribution agreements; consulting agreements and
employment agreements. These shares issued pursuant to this consulting agreement
were registered on Form S-8. Mr. Horwitz is a member of Senn Palumbo Meulemans,
LLP, which is legal counsel to the Company.
On February 20, 2001, we executed a retainer agreement with Senn Palumbo
Meulemans, LLP. We issued to the firm 240,000 shares of common stock as a
retainer fee for the services of the firm. These shares are registered
hereunder.
24
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of December 1, 2000 by each stockholder known
by us to be the beneficial owner of more than five percent of the outstanding
Common Stock, each of our directors, and all directors and officers as a group.
Shares of Percent of
Name and Address Common Stock(1) Class(2)
---------------- --------------- ----------
Donald J. Shea(2) 211,828 *
Thomas P. Lonergan(2) 742,003 2.7%
Balazs Imre Bodai, M.S., M.D.(2) 171,522 *
Jeffrey H. Berg, MBA, Ph.D.(2) 155,133 *
Joseph Song, M.D.(2) 845,208 3.1%
All Officers and Directors
as a Group (5 persons) 2,125,694 8.0%
----------
* Less than one percent
(1) Except as otherwise indicated, we believe that the beneficial owners of
common stock listed above, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person holding such
options or warrants, but are not deemed outstanding for purposes of computing
the percentage of any other person. Shares of Common Stock approved for issuance
but not yet issued is deemed outstanding.
(2) c/o our address: 260 Newport Center Drive, Suite 250, Newport Beach,
California 92660.
25
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock which
may be offered for sale from time to time by the Selling Shareholders.
-------------------------------------------------------------------------------------------
Name of Selling Stockholder Shares of Shares of Percentage
Common Common Stocks Owned if
Underlying the More
Warrants Than 1%
-------------------------------------------------------------------------------------------
1 Laguna Pacific Partners, L.P.(1) 0 1,663,750 *
-------------------------------------------------------------------------------------------
2 Les Dube and Irene Dube 526,556 0 *
-------------------------------------------------------------------------------------------
3 Institute for Medical Studies, Inc.
defined Benefit Pension Plan(2) 0 400,000 *
-------------------------------------------------------------------------------------------
4 Institute for Medical Studies, Inc.
defined Benefit Pension Plan 44,444 444,444 *
-------------------------------------------------------------------------------------------
5 R+R Enterprises, a Corporation Attn:
John Peter McBride 15,555 15,555 *
-------------------------------------------------------------------------------------------
6 Daniel Stryker 18,018 18,018 *
-------------------------------------------------------------------------------------------
7 Eric Garcia 2,000 2,000 *
-------------------------------------------------------------------------------------------
8 Sandrine Cassidy 2,000 2,000 *
-------------------------------------------------------------------------------------------
9 J.L. Sommier 333 333 *
-------------------------------------------------------------------------------------------
10 Dorothy Ernst 333 333 *
-------------------------------------------------------------------------------------------
11 Jeffrey J. Heilman, an individual 4,273 4,273 *
-------------------------------------------------------------------------------------------
12 William L. Heilman, TTEE or Marilyn B.
Heilman, TTEE FBO 8,547 8,547 *
The Heilman Living Trust
-------------------------------------------------------------------------------------------
13 Charles J. Najarian & Adlene L. Ichien
Joint Account 23,148 23,148 *
-------------------------------------------------------------------------------------------
14 David Stanley, an individual 2,273 2,273 *
-------------------------------------------------------------------------------------------
15 Christopher Armstrong, an individual 7,576 7,576 *
-------------------------------------------------------------------------------------------
16 Douglas J. Winters, an individual 7,576 7,576 *
-------------------------------------------------------------------------------------------
17 Leslie Dube, an individual 42,735 42,735 *
-------------------------------------------------------------------------------------------
18 James C. Bridgeman, an individual 8,547 8,547 *
-------------------------------------------------------------------------------------------
19 Troy M. Pelfey, an individual 3,788 3,788 *
-------------------------------------------------------------------------------------------
20 Jeffrey Scott Greene, an individual 7,576 7,576 *
-------------------------------------------------------------------------------------------
21 Fred Brader, an individual 25,641 25,641 *
-------------------------------------------------------------------------------------------
22 Wayne A. Frost, an individual 8,547 8,547 *
-------------------------------------------------------------------------------------------
23 Dan W. Stephens, an individual 46,296 46,296 *
-------------------------------------------------------------------------------------------
24 Bruce and Chieko Planck TTEES FBO The
Planck Family Trust 1,616 1,616 *
-------------------------------------------------------------------------------------------
25 Lucy Wells, an individual 25,252 25,252 *
-------------------------------------------------------------------------------------------
26 Jim Achen Jr., an individual 4,629 4,629 *
-------------------------------------------------------------------------------------------
27 Joe Engelbrecht, an individual 27,778 27,778 *
-------------------------------------------------------------------------------------------
28 Daniel B. Guinn, an individual 18,518 18,518 *
-------------------------------------------------------------------------------------------
29 Les Couchman, an individual 3,788 3,788 *
-------------------------------------------------------------------------------------------
26
-------------------------------------------------------------------------------------------
Name of Selling Stockholder Shares of Shares of Percentage
Common Common Stocks Owned if
Underlying the More
Warrants Than 1%
-------------------------------------------------------------------------------------------
30 A.G. Edwards & Sons Custodian for
Paula S. Blum 11,111 11,111 *
-------------------------------------------------------------------------------------------
31 Patty Brader, an individual 4,274 4,274 *
-------------------------------------------------------------------------------------------
32 Lesley & Steven Olswang 14,881 14,881 *
-------------------------------------------------------------------------------------------
33 Mark Adrian 14,881 44,642 *
-------------------------------------------------------------------------------------------
34 Stephen & Laura Knight 1,190 1,190 *
-------------------------------------------------------------------------------------------
35 Wayne Samarzich, an individual 33,333 33,333 *
-------------------------------------------------------------------------------------------
36 Greg Boston, an individual 758 758 *
-------------------------------------------------------------------------------------------
37 Craig Hoad, an individual 530 530 *
-------------------------------------------------------------------------------------------
38 Charles J. Najarian & Adlene L. Ichien 41,019 41,019 *
-------------------------------------------------------------------------------------------
39 Ronald and/or Jeanette Bear 1,190 1,190 *
-------------------------------------------------------------------------------------------
40 Jesse DeCastro, an individual 12,821 12,821 *
-------------------------------------------------------------------------------------------
41 James William McInroy 12,578 12,578 *
-------------------------------------------------------------------------------------------
42 Jayne Clark, an individual 12,346 12,346 *
-------------------------------------------------------------------------------------------
43 Leslie and Irene Dube, Individual 83,333 83,333 *
-------------------------------------------------------------------------------------------
44 Robert D. Sarno, an individual 15,873 15,873 *
-------------------------------------------------------------------------------------------
45 David Poncoe, an individual 18,116 18,116 *
-------------------------------------------------------------------------------------------
46 Marcela D. Uson, an individual 3,401 3,401 *
-------------------------------------------------------------------------------------------
47 The Kellin Revocable Living Trust (3) 66,667 66,667 *
-------------------------------------------------------------------------------------------
48 James E. Scrimger, an individual 3,876 3,876 *
-------------------------------------------------------------------------------------------
49 The Dowell Revocable Inter Vivos Trust (4) 27,778 27,778 *
-------------------------------------------------------------------------------------------
50 Daniel B. Guinn, an individual 17,544 17,544 *
-------------------------------------------------------------------------------------------
51 Michael Osburn, an individual 7,333 7,333 *
-------------------------------------------------------------------------------------------
52 Wayne Samarzich, an individual 16,667 16,667 *
-------------------------------------------------------------------------------------------
53 Wayne & Cheryl Samarzich 11,000 11,000 *
-------------------------------------------------------------------------------------------
54 LifeSpan International 66,667 66,667 *
-------------------------------------------------------------------------------------------
55 LifeSpan International 28,736 28,736 *
-------------------------------------------------------------------------------------------
56 Clell Gladson, an individual 15,152 15,152 *
-------------------------------------------------------------------------------------------
57 Allen Thayer, an individual 5,555 5,555 *
-------------------------------------------------------------------------------------------
58 Roger Thayer, an individual 3,704 3,704 *
-------------------------------------------------------------------------------------------
59 Margarita S. Pham, an individual 18,519 18,519 *
-------------------------------------------------------------------------------------------
60 Kimberly S. Thayler, an individual 27,778 27,778 *
-------------------------------------------------------------------------------------------
61 David Sun, an individual 3,704 3,704 *
-------------------------------------------------------------------------------------------
62 David and Edna Thayer 120,370 120,370 *
-------------------------------------------------------------------------------------------
63 W. Craig & Gretchen A. Hoad 19,627 19,627 *
-------------------------------------------------------------------------------------------
27
-------------------------------------------------------------------------------------------
Name of Selling Stockholder Shares of Shares of Percentage
Common Common Stocks Owned if
Underlying the More
Warrants Than 1%
-------------------------------------------------------------------------------------------
64 Christopher T. Lane and Sonia R. Lane 10,417 10,417 *
-------------------------------------------------------------------------------------------
65 Ashok Chopra, M.D. 31,250 31,250 *
-------------------------------------------------------------------------------------------
66 David Keschner, M.D. 14,583 14,583 *
-------------------------------------------------------------------------------------------
67 Rich Scrimger, an individual 3,876 3,876 *
-------------------------------------------------------------------------------------------
68 Mr. D.W. Barrick - Barrick Properties, LLC 13,889 13,889 *
-------------------------------------------------------------------------------------------
69 Michael Y. Meganck, an individual 47,619 47,619 *
-------------------------------------------------------------------------------------------
70 Elaine D. Thayer, an individual 333 333 *
-------------------------------------------------------------------------------------------
71 Phillip N. Miller, IV, an individual 1,071 1,071 *
-------------------------------------------------------------------------------------------
72 Luis and Angela Saavedra 28,571 28,571 *
-------------------------------------------------------------------------------------------
73 Joseph Ynfante, an individual 15,152 15,152 *
-------------------------------------------------------------------------------------------
74 Robert Herthel, an individual 12,821 12,821 *
-------------------------------------------------------------------------------------------
75 Ross Thayer, an individual 11,905 11,905 *
-------------------------------------------------------------------------------------------
76 Charles Najarian , an individual 16,667 16,667 *
-------------------------------------------------------------------------------------------
77 Kimberly S. Thayler, an individual 9,091 9,091 *
-------------------------------------------------------------------------------------------
78 Less and Irene Dube, JTWROS 66,667 66,667 *
-------------------------------------------------------------------------------------------
79 Shaker Radman, Jr., an individual 12,821 12,821 *
-------------------------------------------------------------------------------------------
80 Richard M. Fematt, an individual 12,821 12,821 *
-------------------------------------------------------------------------------------------
81 Salah Yacomb, an individual 12,821 12,821 *
-------------------------------------------------------------------------------------------
82 Ali Awad, an individual 6,410 6,410 *
-------------------------------------------------------------------------------------------
83 Terrie Mitchell, an individual 15,185 15,185 *
-------------------------------------------------------------------------------------------
84 Wail S. Radwan, an individual 7,692 7,692 *
-------------------------------------------------------------------------------------------
85 Vang Lai, an individual 14,103 14,103 *
-------------------------------------------------------------------------------------------
86 Terri Mitchell, an individual 8,333 8,333 *
-------------------------------------------------------------------------------------------
87 Eric G. Lee, an individual 6,061 6,061 *
-------------------------------------------------------------------------------------------
88 Regina Marie Hovey & Leland Dele Ronningen,
individual 18,182 18,182 *
-------------------------------------------------------------------------------------------
89 Charlotte Anderson, an individual 3,333 3,333 *
-------------------------------------------------------------------------------------------
90 Clell Gladson, an individual 10,000 10,000 *
-------------------------------------------------------------------------------------------
91 Randall and Pamela Bertz 33,333 33,333 *
-------------------------------------------------------------------------------------------
92 Leslie and Irene Dube, JTWROS 0 7,143 *
-------------------------------------------------------------------------------------------
93 Greg Martinez, an individual 4,167 4,167 *
-------------------------------------------------------------------------------------------
94 Jeff Delmonte, an individual 4,167 4,167 *
-------------------------------------------------------------------------------------------
95 Richard Peters & Madeline I. Peters 7,843 7,843 *
-------------------------------------------------------------------------------------------
96 Ivan Barrett & Marsha Barrett 3,922 3,922 *
-------------------------------------------------------------------------------------------
97 Bob Ludovise, an individual 33,333 33,333 *
-------------------------------------------------------------------------------------------
28
-------------------------------------------------------------------------------------------
Name of Selling Stockholder Shares of Shares of Percentage
Common Common Stocks Owned if
Underlying the More
Warrants Than 1%
-------------------------------------------------------------------------------------------
98 Lars Krogius, an individual 3,788 3,788 *
-------------------------------------------------------------------------------------------
99 Tris Krogius, an individual 3,788 3,788 *
-------------------------------------------------------------------------------------------
100 Wendy Baldyga, an individual 8,333 8,333 *
-------------------------------------------------------------------------------------------
101 Dan E. Reiders, MD, an individual 66,667 66,667 *
-------------------------------------------------------------------------------------------
102 Ivan Barrett, an individual 4,386 4,386 *
-------------------------------------------------------------------------------------------
103 Richard Peters, an individual 4,386 4,386 *
-------------------------------------------------------------------------------------------
104 Kenneth M. Greenberg, an individual 5,208 5,208 *
-------------------------------------------------------------------------------------------
105 Mario Pastorello, an individual 9,259 9,259 *
-------------------------------------------------------------------------------------------
106 Joseph E. Weisz, an individual 13,889 13,889 *
-------------------------------------------------------------------------------------------
107 Joseph E. Weisz, an individual 2,778 2,778 *
-------------------------------------------------------------------------------------------
108 Mario Pastorello, an individual 15,490 15,490 *
-------------------------------------------------------------------------------------------
109 Paul Dunn, an individual 3,333 3,333 *
-------------------------------------------------------------------------------------------
110 Gregory J. Martinez, an individual 4,167 4,167 *
-------------------------------------------------------------------------------------------
111 Steven J. Weisel, an individual 3,333 3,333 *
-------------------------------------------------------------------------------------------
112 Tim D. Branner, an individual 1,667 1,667 *
-------------------------------------------------------------------------------------------
113 Trevor J. Greenberg & Henry S. Greenberg 1,667 1,667 *
-------------------------------------------------------------------------------------------
114 Henry S. Greenberg, an individual 3,333 3,333 *
-------------------------------------------------------------------------------------------
115 Henry S. Greenberg, an individual 12,500 12,500 *
-------------------------------------------------------------------------------------------
116 Henry S. Greenberg, an individual 6,250 6,250 *
-------------------------------------------------------------------------------------------
117 Kenneth M. Greenberg, an individual 5,208 5,208 *
-------------------------------------------------------------------------------------------
118 Mario Pastorello, an individual 9,259 9,259 *
-------------------------------------------------------------------------------------------
119 Kevin C. Gilbert, an individual 8,333 8,333 *
-------------------------------------------------------------------------------------------
120 Andrew M. Ames & Lisa D. Ames 9,259 9,259 *
-------------------------------------------------------------------------------------------
121 Amer Ali, an individual 10,417 10,417 *
-------------------------------------------------------------------------------------------
122 Carlos Tarin Garcia, an individual 3,968 3,968 *
-------------------------------------------------------------------------------------------
123 Ruben T. Garcia, an individual 3,968 3,968 *
-------------------------------------------------------------------------------------------
124 David L. Thayer & Edna L. Thayer 18,519 18,519 *
-------------------------------------------------------------------------------------------
125 Ryan Matthew Adams, an individual 333 333 *
-------------------------------------------------------------------------------------------
126 Laura Vega, an individual 15,789 15,789 *
-------------------------------------------------------------------------------------------
127 Carolyn Kildes Trustee 34,722 34,772 *
-------------------------------------------------------------------------------------------
128 Joseph G. Urquhart, an individual 69,445 69,445 *
-------------------------------------------------------------------------------------------
129 Jay and Tana Boersma 20,833 20,833 *
-------------------------------------------------------------------------------------------
130 Senn Palumbo Meulemans, LLP (5) 240,000 240,000 *
-------------------------------------------------------------------------------------------
TOTAL SHARES 2,741,617 4,046,177
-------------------------------------------------------------------------------------------
* Percent owned is less than 1%
(1) Laguna Pacific Partners, L.P. is controlled by both Mr. Lawrence W.
Horwitz and Mr. Thomas Ehrlich.
(2) Mr. Robert Ludovise has voting and/or investment control of the Institute
for Medical Studies, Inc., defined Benefit Pension Plan.
(3) Ms. Sally Kellin is the trustee of the Kellin Revocable Living Trust.
29
(4) Mr. George A. Dowell and Evelyn H. Dowell are co-trustees of the Dowel
Revocable Inter Vivos Trust.
(5) Mr. George Redheffer has voting and/or investment control of LifeSpan
International.
(6) Mr. George Redheffer has voting and/or investment control of Barrick
Properties, LLC.
(7) Voting and investment control of Senn Palumbo Meulemans, LLP is held by
Kevin Senn, Diane Palumbo and Kathleen Meulemans.
PLAN OF DISTRIBUTION
This Offering relates to:
o the possible sale from time to time of 526,556 shares of stock issued in
connection with a loan to the Company made by Les Dube and Irene Dube, and
o the possible sale from time to time of 1,663,750 shares underlying
warrants issued in connection with a bridge to the Company made by Laguna
Pacific Partners, and
o the possible sale, from time to time, by other selling shareholders of
thehealthchannel.com, Inc. of up to 2,214,951 shares of common stock and
2,382,427 shares underlying warrants of thehealthchannel.com, Inc.
Selling Shareholders
The Shares will be offered and sold by the Selling Shareholders for their
own accounts. We will not receive any of the proceeds from the sale of the
Shares pursuant to this prospectus. We will pay all of the expenses of the
registration of the Shares, but shall not pay any commissions, discounts, and
fees of underwriters, dealers, or agents. See "Terms of the Offering."
The Selling Shareholders may offer and sell the Shares from time to time
in transactions in the over-the-counter market or in negotiated transactions, at
market prices prevailing at the time of sale or at negotiated prices. The
Selling Shareholders have advised us that they have not entered into any
agreements, understandings, or arrangements with any underwriters or
broker-dealers regarding the sale of their Shares, nor are there an underwriter
or coordinating broker acting in connection with the proposed sale of Shares by
the Selling Shareholders. Sales may be made directly or to or through
broker-dealers who may received compensation in the for of discounts,
concessions, or commissions from the Selling Shareholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both. Such compensation for a particular broker-dealer may
be in excess of customary commissions.
The Selling Shareholders, Les Dube and Irene Dube, Laguna Pacific Partners
and any broker-dealers acting in connection with the sale of the Shares
hereunder may be deemed to be "underwriters' within the meaning of Section 2(11)
of the Act. Any commissions received by underwriters and any profit realized by
underwriters on the resale of Shares as principals may be deemed underwriting
compensation under the Act.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Shares offered by this prospectus may not
simultaneously engage in market making activities with respect to the Common
Stock of the Company during the applicable "cooling off" periods prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of Common Stock by the Selling Shareholders.
Selling Shareholders may also use Rule 144 under the Act to sell the
Shares if they meet the criteria and conform to the requirements of such Rule.
Les Dube and Irene Dube
In return for making a loan to us, we are issuing shares to Les Dube and
Irene Dube. These shares are being registered in this prospectus and Les Dube
and Irene Dube may continue to hold these shares or sell them on the market if
this prospectus is effective.
30
Laguna Pacific Partners, L.P.
In return for making a loan to us, we issued warrants to Laguna Pacific
Partners, L.P. The warrant provides for the ability to purchase common stock of
the company equal to the quotient of $250,000 divided by the closing bid of our
stock immediately preceding the effective date of this prospectus. The warrant
agreement contains terms which increase the number of shares underlying the
warrants commencing February 1, 2001 at the rate of 10% per month, compounding
on a monthly basis, until the effective date of our registration statement. The
shares, adjusted for February, March and April 2001 are being registered in this
prospectus and once it exercises these warrants, Laguna Pacific Partners may
sell the underlying shares on the market if this prospectus is effective.
31
DESCRIPTION OF SECURITIES
Our authorized capital stock currently consists of 175,000,000 shares of
Common Stock, no par value. We have no shares of Preferred Stock.
Our Transfer Agent is Continental Stock Transfer & Trust Company, 2
Broadway, 19th Floor, New York, New York 10004.
The following summary of certain terms of the Common Stock does not
purport to be complete and you should consult our articles of incorporation and
bylaws which have been filed with the SEC for the complete details.
Common Stock
As of December 31, 2000 there were 27,610,954 shares of common stock
outstanding. On November 17, 2000, our common stock underwent a one for three
reverse split.
Holders of Common Stock are each entitled to cast one vote for each share
held of record on all matters presented to shareholders. Cumulative voting is
not allowed; therefore the holders of a majority of the outstanding Common Stock
can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the board of directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of our assets
after payment of liabilities. The board of directors is not obligated to declare
a dividend and it is not anticipated that dividends will be paid until we are
profitable.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if we issue new shares. There are no conversion, redemption,
sinking fund or similar provisions regarding the Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable and all of
the shares of Common Stock offered hereby will be, upon issuance, fully paid and
non-assessable.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us
by Senn Palumbo Meulemans, LLP, Irvine, California.
32
EXPERTS
The financial statements that we include in this registration statement,
have been included in reliance on the report of Stonefield Josephson, Inc., and
upon the authority of said firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The following financial statements are included herein:
Balance Sheet of the Company as of December 30, 2000 (audited) and
December 31, 1999 (audited)
Statements of Operations of the Company for the fiscal year ended December
31, 2000 (audited), the fiscal year ended December 31, 2000 (audited), the
fiscal year ended December 31, 1999 (audited), the fiscal year ended December
31, 1998 (audited), the Period from Inception (September 6, 1999) to December
31, 1999 (audited), and for the period from September 6, 1996 (inception) to
September 30, 2000 (unaudited)
Statement of Shareholders' Equity
Statements of Cash Flows of the Company for the fiscal year ended December
31, 2000 (audited), the fiscal year ended December 31, 1999 (audited), the
Period from Inception (September 6, 1999) to December 31, 1999 (audited), and
for the period from September 6, 1996 (inception) to September 30, 2000
(unaudited)
33
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1 - F-2
FINANCIAL STATEMENTS:
Balance Sheet F-3
Statements of Operations F-4
Statement of Stockholders' Deficit F-5 - F-6
Statements of Cash Flows F-7 - F-8
Notes to Financial Statements F-9 - F-17
INDEPENDENT AUDITORS' REPORT
Board of Directors
thehealthchannel.com, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of thehealthchannel.com, Inc. (a
development stage enterprise) as of December 31, 2000, and the related
statements of operations, stockholders' deficit and cash flows for the two years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements for the period from
inception of operations on September 4, 1996 to December 31, 1998 was audited by
other auditors whose report dated April 1, 1999, included an explanatory
paragraph which expressed substantial doubt about the Company's ability to
continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of thehealthchannel.com, Inc. as
of December 31, 2000, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses from operations, has negative cash flows
from operations, and its current liabilities exceeds its current assets. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
January 26, 2001
F-1
REPORT OF INDEPENDENT AUDITOR
To the Shareholders and Board of Directors
thehealthchannel.com, Inc. (formerly
Innovative Tracking Solutions Corporation)
I have audited the balance sheets of thehealthchannel.com, Inc. (formerly
Innovative Tracking Solutions Corporation and a Development Stage Company) as of
December 31, 1998, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for periods then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of thehealthchannel.com, Inc.
(formerly Innovative Tracking Solutions Corporation and a Development Stage
Company) at December 31, 1998, 1997 and 1996, and the results of operations and
cash flows for the periods then ended, in conformity with generally accepted
accounting principles.
The financial statements have been prepared assuming the Company will continue
as a going concern. As discussed in Note 1, the Company has an accumulated
deficit at December 31, 1998. These factors raise substantial doubt about the
Company's ability to continue as going concern. Management's plan in regard to
these matters is also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Roger G. Castro
Oxnard, California
April 1, 1999
F-2
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET - DECEMBER 31, 2000
ASSETS
CURRENT ASSETS:
Cash $ 2,429
Prepaid expenses and other receivables 20,855
---------------
Total current assets $ 23,284
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 543,859
DEPOSITS 3,852
---------------
$ 570,995
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 500,672
Loans payable, stockholders 25,000
Loans payable, net of unamortized discount
of $169,164 330,836
Accrued stock based compensation 783,349
---------------
Total current liabilities $ 1,639,857
STOCKHOLDERS' DEFICIT:
Common stock; $.001 par value, 175,000,000 shares
authorized, 27,610,954 shares issued and outstanding 27,611
Additional paid-in capital 8,451,920
Deficit accumulated during the development stage (9,548,393)
---------------
Total stockholders' deficit (1,068,862)
---------------
$ 570,995
See accompanying notes to financial statements.
F-3
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
From inception on
Year ended Year ended September 4, 1996 to
December 31, 2000 December 31, 1999 December 31, 2000
----------------- ----------------- -----------------
NET REVENUES $ 10,765 $ - $ 10,765
COST OF REVENUES - - -
--------------- --------------- --------------
GROSS PROFIT 10,765 - 10,765
--------------- --------------- --------------
OPERATING EXPENSES:
Depreciation 333,830 135,230 469,060
Consulting and professional fees 1,509,420 2,512,039 4,021,459
Website related 561,914 195,829 757,743
Interest expense 343,335 - 343,335
General and administrative 1,136,283 617,630 1,753,913
--------------- --------------- --------------
3,884,782 3,460,728 7,345,510
--------------- --------------- --------------
LOSS FROM CONTINUING OPERATIONS (3,874,017) (3,460,728) (7,334,745)
--------------- --------------- --------------
DISCONTINUED OPERATIONS:
Loss on discontinued operations - (367,014) (2,114,398)
Loss on disposal of segment - (99,250) (99,250)
--------------- --------------- --------------
Total discontinued operations - (466,264) (2,213,648)
--------------- --------------- --------------
NET LOSS $ (3,874,017) $ (3,926,992) $ (9,548,393)
=============== =============== ==============
NET LOSS PER SHARE, BASIC AND DILUTED:
Continuing operations $ (0.15) $ (0.16)
=============== ==============
Discontinued operations $ - $ (0.02)
=============== ==============
Net loss per share $ (0.15) $ (0.18)
=============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED 26,332,188 22,125,497
=============== ===============
See accompanying notes to financial statements.
F-4
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' DEFICIT
Deficit
Accumulated
Common Stock Additional Stock during the Total
------------ paid-in subscriptions development stockholders'
Shares Amount Capital Receivable Stage Equity/ (Deficit)
----------- ----------- ----------- ----------- ----------- -----------------
DESCRIPTION
Balance at December 31, 1997, restated for
1:3 stock split on October 12, 2000 11,388,007 $ 11,388 $ 379,859 $ -- $ (274,783) $ 116,464
Shares sold for cash 3,334,252 3,334 473,130 476,464
Shares issued in exchange for services 6,998,481 6,999 1,054,540 1,061,539
Common stock subscription 184,413 184 59,816 (60,000)
Net loss for the year ended
December 31, 1998 (1,472,601) (1,472,601)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 21,905,153 21,905 1,967,345 (60,000) (1,747,384) 181,866
IVTX
Issuance of common stock from IVTX
private placement offering (Note 4) 113,043 113 112,086 60,000 172,199
Issuance of shares for services rendered on
behalf of the Company (Note 4) 34,800 35 52,165 52,200
THEHEALTHCHANNEL.COM (FORMERLY IVTX)
Contribution of asset from Biologix
International, Ltd. (Note 3) 947,835 947,835
Issuance of common stock from private
placement offering (Note 4) 405,934 406 510,134 (25,000) 485,540
Issuance of common stock related to
settlement agreements (Note 4) 501,667 502 1,796,843 1,797,345
(Continued)
See accompanying notes to financial statements.
F-5
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' DEFICIT (CONTINUED)
Deficit
Accumulated
Common Stock Additional Stock during the Total
------------ paid-in subscriptions development stockholders'
Shares Amount Capital Receivable Stage Equity/ (Deficit)
----------- ----------- ----------- ----------- ----------- -----------------
Shares given directly by shareholders for
services rendered on the Company's
behalf (Note 4) 860,100 860,100
Net loss for the year ended
December 31, 1999 (3,926,992) (3,926,992)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 22,960,597 22,961 6,246,508 (25,000) (5,674,376) 570,093
Shares exchanged from pools (See Note 4) 1,528,369 1,528 (1,528) --
Private placement offering, net 1,524,651 1,525 898,715 900,240
Proceeds received from stock subscriptions 25,000 25,000
Shares issued in settlement of debt (Alphabet
Media) 53,333 53 46,987 47,040
Shares issued for services - consultants 22,105 22 25,978 26,000
Shares issued for services (National
Securities) 5,170 5 7,333 7,338
Shares issued for services (Quinn Emanuel) 27,633 27 30,645 30,672
Shares issued in settlement of legal matter
(Benning and Fields) 21,365 21 23,310 23,331
Shares issued in settlement (Marshall
Redding) 274,508 275 172,666 172,941
Shares issued for bridge loan (Les Dube) 526,556 527 251,973 252,500
Warrants issuable for bridge loan (Laguna
Pacific) 250,000 250,000
Shares issued to Larry Horwitz for
consulting services 666,667 667 499,333 500,000
Net loss for the year ended
December 31, 2000 (3,874,017) (3,874,017)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2000 27,610,954 $ 27,611 $ 8,451,920 $ -- $(9,548,393) $(1,068,862)
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements.
F-6
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From inception on
September 4,
Year ended Year ended 1996 to
December 31, December 31, December 31,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $(3,874,017) $(3,926,992) $(9,548,393)
----------- ----------- -----------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 333,830 135,230 469,060
Loss on disposal of division -- 99,250 99,250
Interest expense 330,835 -- 330,835
Non cash expenses from stock issuances 1,290,671 2,611,423 5,096,232
Settlement of litigation 300,000 -- 300,000
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable -- 189 3,147
Inventory -- (10,312) 83,077
Prepaid expenses (60,620) (108,447) (190,020)
Deposits (3,852) 2,597 (6,449)
(INCREASE) DECREASE IN LIABILITIES -
accounts payable and accrued expenses 261,371 661,157 615,789
----------- ----------- -----------
Total adjustments 2,452,235 3,391,087 6,800,921
----------- ----------- -----------
Net cash used for operating activities (1,421,782) (535,905) (2,747,472)
----------- ----------- -----------
(Continued)
See accompanying notes to financial statements.
F-7
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
From inception on
September 4,
Year ended Year ended 1996 to
December 31, December 31, December 31,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES -
payments to acquire property, equipment and other assets (39,266) (25,818) (65,083)
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Assets and liabilities transferred out (See Note 1) -- (26,329) (26,329)
Stock subscription receivable 25,000 (25,000) --
Loans receivable 21,000 -- --
Proceeds from loans, including related parties 425,000 -- 425,000
Proceeds from issuance of capital stock, net 900,240 682,738 2,416,313
----------- ----------- -----------
Net cash provided by financing activities 1,371,240 631,409 2,814,984
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (89,808) 69,686 2,429
CASH, beginning of year 92,237 22,551 --
----------- ----------- -----------
CASH, end of year $ 2,429 $ 92,237 $ 2,429
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES -
Non-cash consideration from debt and equity transactions $ 1,990,671 $ 2,611,423 $ 5,999,401
=========== =========== ===========
Proceeds from loan payable paid directly to Horwitz
and Beam by Laguna Pacific on behalf of the Company $ 100,000 $ -- $ 100,000
=========== =========== ===========
Acquisition of website technology and related assets $ -- $ 947,835 $ 947,835
=========== =========== ===========
See accompanying notes to financial statements.
F-8
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GOING CONCERN:
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. The Company has no current source of
material revenues. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. This
factor raises substantial doubt about the Company's ability to
continue as a going concern.
Management recognizes that the Company must generate additional
resources to enable it to continue operations. Management's plans also
include the sale of additional equity and debt securities. However, no
assurance can be given that the Company will be successful in raising
additional capital. Further, there can be no assurance, assuming the
Company successfully raises additional funding, that the Company will
achieve profitability or positive cash flow. If management is unable
to raise additional capital and expected significant revenues do not
result in positive cash flow, the Company will not be able to meet its
obligations and will have to cease operations.
GENERAL:
With headquarters in Newport Beach, California, thehealthchannel.com
(formerly Innovative Tracking Solutions Corporation or "IVTX") is a
comprehensive health information Internet portal that offers a
one-step access point for consumers and professionals who want to
explore a broad array of health topics. The portal currently indexes
other Internet health and health-related sites, has direct links with
online health-care information service centers and provides detailed
coverage of medical conditions. Consumers may access a global library
of health-care information while searching for products and services.
The site offers a complete Internet portal for state-of-the-art
continuing medical education for professionals.
The Company was incorporated under the laws of the state of Delaware
on September 4, 1996.
BUSINESS ACTIVITY:
In early 1999, IVTX management determined that the "public" status of
IVTX was detrimental to IVTX' operations due to the time and expense
burdens of being a public company. IVTX management then decided to
take the operations of IVTX "private" by transferring all IVTX assets
and liabilities to a newly formed private company and selling the
public shell to a suitable company, preferably in the healthcare
industry. On April 13, 1999, IVTX obtained written approval of 64.4%
of the total voting stock of IVTX, voting "for" taking the operations
of IVTX private and selling the public shell to a suitable company.
F-9
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BUSINESS ACTIVITY, CONTINUED:
On April 14, 1999, IVTX transferred all of its assets and liabilities
based on majority stockholder approval to a newly formed private
company, Innovative Tracking Solutions Corporation, a private Nevada
corporation, incorporated on March 29, 1999. Innovative Tracking
Solutions Corporation was formed by IVTX management specifically for
the purpose of taking the operations of IVTX private. The former IVTX
officers and directors, Dianna Cleveland, Lee Namisniak and Lou Weiss
are the officers and directors of Innovative Tracking Solutions
Corporation, the private company. The consideration for the transfer
of assets was the assumption of all IVTX's liabilities by the newly
formed private company. As a result of this transfer of assets and
liabilities and the disposal of the segment of business on April 14,
1999 (which is unrelated to the present business of
thehealthchannel.com), the Company recorded a loss on discontinued
operations of $367,014 and a loss on disposal of a segment of $99,250
for the year ended December 31, 1999.
In June 1999, IVTX was introduced to thehealthchannel.com, a consumer-
based health Internet web site (HTTP://WWW.THEHEALTHCHANNEL.COM). On
July 28, 1999, IVTX, pursuant to its bylaws and general Delaware
corporate law, acquired a certain asset of Biologix International,
Ltd., a Delaware corporation ("Biologix") consisting of
thehealthchannel.com web site and its related technology in exchange
for the controlling interest in IVTX. In connection with this change
of control, IVTX's name was changed to thehealthchannel.com, Inc. on
July 28, 1999. The acquisition closed on July 28, 1999.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments, none of which are
held for trading purposes, approximate the carrying values of such
amounts.
CASH:
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts.
F-10
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred, whereas,
additions, renewals, and betterments are capitalized. When property
and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts,
and any gain or loss is included in operations. Depreciation is
computed using the straight-line method over the estimated useful
lives of the related assets. Website and related technology is being
amortized straight-line over its estimated useful life of three years.
INCOME TAXES:
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which
adopts the asset and liability approach to measurement of temporary
differences between financial reporting and income tax return
reporting. The principal temporary difference is the net operating
loss carryforward of approximately $8,000,000 at December 31, 2000.
Due to business activity during 1999 (Note 1), there are significant
limitations on the Company's ability to utilize this operating loss
carryforward. A deferred asset has been provided and completely offset
by a valuation allowance, because its utilization does not appear to
be reasonably assured. The federal net operating loss carryforward
starts to expire on December 31, 2019 and the California state net
operating loss carryforward starts to expire on December 31, 2004.
DEVELOPMENT STAGE ENTERPRISE:
The Company is a development stage company as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially
all of its present efforts to establish a new business, which is
unrelated to the business of Innovative Tracking Solutions Corporation
("IVTX"), and its planned principal operations have not yet commenced.
All losses accumulated since inception of thehealthchannel.com (Note
1) have been considered as part of the Company's development stage
activities. The operations of IVTX are presented as discontinued
operations as a result of the transfer of its assets and liabilities
to a private company (Note 1).
NET LOSS PER SHARE:
Net loss per share has been computed using the weighted average number
of shares outstanding. Common stock equivalents have been excluded
since their inclusion would reduce loss per share.
F-11
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS:
In December 1999, the Securities and Exchange Commission (the
Commission) issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, which is to be applied beginning
with the fourth fiscal quarter of fiscal years beginning after
December 15, 1999, to provide guidance related to recognizing revenue
in circumstances in which no specific authoritative literature exists.
The adoption by the Company in the application of the Staff Accounting
Bulletin to the Company's financial statements did not have a material
change in the amount of revenues the Company ultimately realized.
In March 2000, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 44 (Interpretation 44), "Accounting for
Certain Transactions Involving Stock Compensation". Interpretation 44
provides criteria for the recognition of compensation expense in
certain stock-based compensation arrangements that are accounted for
under APB Opinion No. 25, Accounting for Stock-Based Compensation.
Interpretation 44 is effective July 1, 2000, with certain provisions
that are effective retroactively to December 15, 1998 and January 12,
2000. Interpretation 44 is not expected to have any material impact on
the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 requires the Company
to recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. It further provides criteria
for derivative instruments to be designated as fair value, cash flow
and foreign currency hedges and establishes respective accounting
standards for reporting changes in the fair value of the derivative
instruments. Upon adoption, the Company will be required to adjust
hedging instruments to fair value in the balance sheet and recognize
the offsetting gains or losses as adjustments to be reported in net
income or other comprehensive income, as appropriate. The Company is
evaluating its expected adoption date and currently expects to comply
with the requirements of SFAS 133 in fiscal year 2001. The Company
does not expect the adoption will be material to the Company's
financial position or results of operations since the Company does not
believe it participates in such activities.
(2) PROPERTY AND EQUIPMENT:
On July 28, 1999, the Company acquired an asset from Biologix
International, Ltd., consisting primarily of thehealthchannel.com website
and related technology in exchange for 850,000 restricted shares of the
Company's common stock. Website technology cost includes the design
(including software configuration and interfaces), coding, installation
costs to hardware and testing. The website asset (a non-monetary asset)
acquired was recorded at the transferors' (Biologix International, Ltd.)
historical cost basis determined under generally accepted accounting
principles.
F-12
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(2) PROPERTY AND EQUIPMENT, CONTINUED:
Property and equipment is comprised of the following:
Website and related technology $ 987,100
Software 25,819
-----------
1,012,919
Less accumulated depreciation and amortization 469,060
-----------
$ 543,859
===========
Depreciation and amortization expense for the years ended December 31, 2000
and 1999 amounted to $333,830 and $135,230, respectively.
(3) STOCKHOLDERS' DEFICIT:
Biologix paid $250,000 for 850,000 shares of common stock of IVTX,
representing the majority controlling interest held by the officers and
directors of IVTX (see Note 2 for the recording of this issuance). This
purchase was made pursuant to the exemption from registration set forth in
Section 4(1) of the Securities Act of 1933, as amended (the "Act"), as a
non-issuer transaction. This exemption was available since the officers and
directors of IVTX sold their stock to Biologix; IVTX itself did not issue
any new stock. Further, Biologix agreed to contribute thehealthchannel.com
assets and technology to IVTX in exchange for the IVTX shareholders
agreeing to split their stock and exchange shares with the shareholders of
Biologix. This exchange was made pursuant to the exemption set forth in
Section 4(1) of the Act as a non-issuer transaction. This exemption was
available since IVTX shareholders transferred their shares of IVTX (newly
named thehealthchannel.com, Inc.) to the shareholders of Biologix who
elected to exchange their shares. The shares of stock of IVTX were forward
split 28.22-for-one and the IVTX shareholders opted to exchange each share
they held of IVTX stock for two shares of common stock of IVTX under its
new name of thehealthchannel.com, Inc. and contributed the remaining 26.22
shares each into a share exchange pool as presented in the statement of
stockholders' equity. Then approximately 800 Biologix shareholders were
provided with the alternative of retaining their Biologix shares or
retiring their Biologix shares in exchange for IVTX shares
(thehealthchannel.com shares) contained in the exchange pool on a one for
one share basis. Approximately 630 Biologix shareholders elected to
exchange their Biologix shares for thehealthchannel.com shares from the
pool (the "Exchange").
During October 2000, the shareholders approved a stock split of 1:3 shares,
the effect of which has been retroactively applied in the accompanying
financial statements. The number of authorized shares of common stock was
increased to 175,000,000.
F-13
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(3) STOCKHOLDERS' DEFICIT, CONTINUED:
The Exchange was announced to shareholders of both IVTX and Biologix
through press releases and a letter to IVTX shareholders. After the forward
stock split, the Company (thehealthchannel.com, Inc. formerly Innovative
Tracking Solutions Corporation) had 35,606,519 post split shares of common
stock issued and outstanding. The Exchange began on August 6, 1999 and
ended on October 31, 1999 to ensure that all shareholders had enough time
and notice to exchange their shares. Following the conclusion of the
Exchange period, the Company had approximately 12,667,000 post split shares
reserved for exchange with Biologix shareholders that were not exchanged.
During 2000, 1,528,369 shares were exchanged with Biologix shareholders.
During the year ended December 31, 1998, the Company sold 3,334,252
restricted (post split) shares of the Company's common stock for total
proceeds of $476,464 under Regulation D of the Securities Act of 1933.
During the year ended December 31, 1998, the Company recorded an expense
from the issuance of approximately 7,000,000 post split shares in exchange
for services and license agreements. Expense amounts totaling $1,061,539
were determined based on share value of consideration given and/or
consideration received, which ever was more clearly determinable.
Prior to the April 14, 1999 transfer of the IVTX assets and liabilities
(Note 1), the Company had concluded a private placement offering under Rule
504 of Regulation D, whereby 113,043 (post split) shares of common stock
were sold at an offering price of $1.52 (post split) per share. This
offering resulted in net proceeds of $172,199. Also, the Company issued
34,800 (post split) shares of common stock for services rendered. The
services have been recorded at a fair value of $1.50 (post split) per share
for a total of $52,200.
In September 1999, the Company initiated a Rule 506, Regulation D private
placement of 1,930,585 (post split) restricted shares of the Company's
common stock from shares available from the forward stock split and
1,930,585 (post split) warrants to purchase restricted shares of the
Company's' common stock with an exercise price determined at 70% of the
trading value at the date of grant, for net proceeds of $1,410,780. The
private placement offering was closed on August 29, 2000. The shares issued
and the shares issuable upon exercise of the warrants have piggyback
registration rights in the event the Company files a Registration Statement
with the Securities and Exchange Commission. The warrants vest immediately
and expire two years from the date of issuance.
The Company issued 501,667 shares of common stock for satisfaction of legal
settlement agreements the Company entered into for a total of $1,797,345.
During July 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management received a one time payment of 25,000 post split shares of
common stock of the Company, which is recorded in accrued stock based
compensation on the balance sheet. This issuance was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act, as
transactions by an issuer not involving any public offering. The securities
issued pursuant to the Consulting Agreement are restricted securities as
defined in Rule 144.
F-14
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(3) STOCKHOLDERS' DEFICIT, CONTINUED:
During August 1999, the Company entered into an Agreement for Financial
Public Relation Services with Market Pathways Financial Relations
Incorporated. Under the Agreement for Financial Public Relations Services,
Market Pathways Financial Relations Incorporated received a one time
payment of 28,333 post split shares of common stock of the Company and is
included in accrued stock based compensation on the balance sheet. This
issuance was exempt from the Registration provisions of the Act by virtue
of Section 4(2) of the Act, as transactions by an issuer not involving any
public offering. The securities issued pursuant to the Agreement are
restricted securities as defined in Rule 144.
On December 15, 1999, shareholders conveyed 519,738 post split shares of
common stock to certain individuals and 84,000 shares of common stock to
officers of the Company for satisfaction of expenses and payment of
salaries these individuals and officers had rendered on the Company's
behalf. This resulted in recording a charge to expense and additional paid
in capital of $860,100 for the year.
During 2000, the Company entered into a Consulting Agreement with Lawrence
W. Horwitz pursuant to which Mr. Horwitz agreed to provide business
development and advisory services. For services rendered under this
Consulting Agreement, the Company issued 666,667 post split shares of
common stock of the Company (the "Shares"). The Shares were registered on
Forms S-8, for which, an expense of $500,000 has been recorded.
On August 5, 2000, the Company approved the issuance of 508,319 post split
restricted shares to 12 officers, directors and consultants in payment for
services rendered to the Company. The related expense amounts of $457,487
have been recorded in accrued stock based compensation as shares had not
yet been issued.
BRIDGE FINANCING
During August 2000, the Company entered into an agreement to borrow
$250,000 from Laguna Pacific Partners L.P., ("Laguna Partners") a Delaware
limited partnership. This loan is secured by all assets of the Company,
bears interest at 6% per annum and is payable on the earlier of 180 days or
within 30 days from the effective date of the Form SB-2 above. This loan
has been extended to May 1, 2001. In consideration for this loan, Laguna
Partners will receive warrants for common stock equal to the quotient of
$250,000 divided by the closing bid of the Company's stock price
immediately preceding the effective date of the Form SB-2 above. The term
of this warrant is five years and the exercise price is $1. The Company
will record interest expense using the fair value of $0.165 per warrant
granted, measured at the date of grant using the Black Scholes model with a
70% volatility. This discount of $250,000 is being amortized over the loan
term using the imputed interest method.
During August 2000, the Company entered into an agreement to borrow
$250,000 from Les and Irene Dube, ("Dube") individuals. This loan bears
interest at 6% per annum and is payable on the earlier of 180 days or
within 30 days from the effective date of the Form SB-2 above. This loan
has been extended to May 23, 2001. In consideration for this loan, Dube
received 526,556 (post-split) common stock shares for which an amount of
$250,000 is being amortized over the life of the loan using the imputed
interest method.
F-15
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(3) STOCKHOLDERS' DEFICIT, CONTINUED:
STOCK OPTIONS
On July 27, 2000, the Company enacted the 2000 Incentive and Nonstatutory
Stock Option Plan (the "Plan"), which has reserved for issuance, 5,000,000
options to purchase shares of Common Stock of the Company for key employees
and consultants. To date, no options have been granted under the plan.
(4) ADVERTISING COSTS:
Advertising costs are expensed when incurred and amounted to approximately
$615,000 and $400,000 for the years ended December 31, 2000 and 1999,
respectively.
(5) EMPLOYMENT AGREEMENTS:
The Company has employment agreements with its chief operating officer and
president. The employment agreements provide for a monthly salary of
$12,000 each. The agreements commenced on September 1, 1999 and are in
effect for three years from that date.
(6) CONTINGENCIES:
The Company is involved in other various routine legal proceedings
incidental to the conduct of its normal business operations. The Company's
management believes that none of these legal proceedings will have a
material adverse impact on the financial condition or results of operations
of the Company.
The Securities and Exchange Commission ("SEC") has alleged that the
exchange of shares involving the Biologix shareholders may have been in
violation of the Securities Act of 1933 and thereby constituted the making
of an unregistered public offering to which the Company continues to
disagree. If the SEC were to prevail in its position, it would have a
severe and adverse impact on the Company, and the Company's ability to
continue as a going concern would be adversely affected. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty, as the amounts are not estimable.
The Company initiated a private placement of securities during September
1999 which closed on August 29, 2000. During this period of time, the
Company sold securities to investors based on the most recent closing price
on the OTC Bulletin Board or the Pink Sheets. The prices at which these
securities were sold fluctuated widely, based on fluctuations in the
closing prices. The Company is contingently liable in the event that an
investor or investors who purchased securities in this private placement
asserts a claim that the Company failed to fully disclose the fact that
fluctuations in the market would cause adjustments in the price of the
private placement. The Company believes that they fully disclosed this
risk, however, in the event any shareholder(s) were to successfully
prosecute an action against the Company, it may have a severe and adverse
effect on the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty, as the amounts are not estimable.
F-16
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000 AND 1999
(6) CONTINGENCIES, CONTINUED:
TERMINATION OF SWARTZ EQUITY LINE
During 2000, the Company entered into an agreement with Swartz Private
Equity LLC ("Swartz") for a $30,000,000 equity offering, subject to
registration with the SEC and governed by a percentage of our trading
volume. This equity line was governed by the investment agreement with
Swartz that provided that the Company may place puts to Swartz over a
three-year period. The Company has determined that it was highly unlikely
that the Swartz transaction would clear comments based upon certain
insurmountable aspects of the Swartz deal. As such, the Company terminated
the agreement with Swartz. Termination of the Swartz agreement, according
to its terms, requires the payment of a "break-up" fee of $200,000. While
the Company believes that no fee is due Swartz, based on the legal
impossibility of this agreement, Swartz may attempt to pursue remedies
against the company. Based on discussions with legal counsel, management
does not believe that Swartz would prevail in any action against the
Company. Accordingly, no amounts have been recorded in the accompanying
financial statements as the probability of a negative outcome is remote.
LITIGATION
During 2000, the Company was named as a cross-defendant in a
cross-complaint filed by its Former President in an action pending in the
Superior Court State of California for the County of San Francisco, Case
No. 307364. This action was initiated by Biologix International, Ltd.
("Biologix") against the Former President on October 22, 1999 alleging
causes of action against the former President for: (1) temporary
restraining order and preliminary and permanent injunction; (2) breach of
fiduciary duty; (3) fraud by intentional misrepresentation; (4) conversion;
(5) possession of personal property; (6) declaratory relief; and (7)
accounting. The claims alleged by Biologix relate to the actions and
conduct of the former President as an officer and director of Biologix.
Thehealthchannel.com was named as a cross-defendant in the cross-complaint
of the former President in a cause of action for breach of contract based
upon an alleged employment agreement between the former President and
Biologix. The former President claimed that the alleged employment
agreement was the responsibility of thehealthchannel.com based upon
thehealthchannel.com's purchase of the internet related assets from
Biologix. Thehealthchannel.com was served with the cross-complaint on
December 14, 1999. The former President seeks $400,000 in damages and
options to purchase one million shares of Biologix stock. The Company
entered into a Settlement Agreement and Release with its Former President.
Pursuant to the settlement agreement, (a) the Former President was required
to transfer 266,667 thehealthchannel.com post split shares which had
erroneously been issued to a Company under his control and contribute the
proceeds from the sale of 66,667 thehealthchannel.com post split shares to
the Company, withdraw all pending claims or rights to any monetary
compensation, whether asserted or unasserted, stock options or stocks and
waive his right to future claims or lawsuits against the Company and (b)
the Company was to issue approximately 333,333 post split shares
immediately, 166,667 post split shares if the weighted average trading
price as determined in the agreement was at least $2.25, 166,666 post split
shares if the weighted average trading price as determined in the agreement
was at least $3.75 and 66,667 post split shares if the weighted average
trading price as determined in the agreement was at least $6.00. Pursuant
to this agreement, the Company recorded an obligation of $300,000 arising
from the initial 333,333 shares at $0.90 per share, which approximated the
post split trading price per share. This obligation of $300,000 is included
in accrued stock based compensation on the balance sheet. The Company is
contingently liable to issue 400,000 additional post split shares based
upon certain stock price goals as disclosed above, and no amounts have been
recorded in the accompanying financial statements
To the best knowledge of management, there is no other material litigation
pending or threatened against the Company.
F-17
THEHEALTHCHANNEL.COM, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
We are required by our Bylaws and Certificate of Incorporation to
indemnify, to the fullest extent permitted by law, each person that the Company
is permitted to indemnify. Our Charter requires it to indemnify such parties to
the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware
General Corporation Law.
Section 145 of the Delaware General Corporation Law permits us to
indemnify its directors, officers, employees, or agents against expenses,
including attorneys fees, judgments, fines and amounts paid in settlements
actually and reasonably incurred in relation to any action, suit, or proceeding
brought by third parties because they are or were directors, officers,
employees, or agents of the corporation. In order to be eligible for such
indemnification, however, our directors, officers, employees, or agents must
have acted in good faith and in a manner they reasonably believed to be in, or
not opposed to, our best interests. In addition, with respect to any criminal
action or proceeding, the officer, director, employee, or agent must have had no
reason to believe that the conduct in question was unlawful.
In derivative actions, we may only indemnify our officers, directors,
employees, and agents against expenses actually and reasonably incurred in
connection with the defense or settlement of a suit, and only if they acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
our best interests . Indemnification is not permitted in the event that the
director, officer, employee, or agent is actually adjudged liable to the
Corporation unless, and only to the extent that, the court in which the action
was brought so determines.
Our Certificate of Incorporation permits us to indemnify our directors
except in the event of:
o a breach of the duty of loyalty to us or our stockholders;
o an act or omission that involves intentional misconduct or a knowing
violation of the law and an act or omission not in good faith;
o liability arising under Section 174 of the Delaware General
Corporation Law, relating to unlawful stock purchases, redemption,
or payment of dividends; or
o a transaction in which the potential indemnity received an improper
personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to our controlling directors, officers,
or persons pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
All the following numbers are approximations only.
SEC Registration Fee $12,887.56
Accounting Fees and Expenses $ 50,000
Legal Fees and Expenses $100,000
Printing Expenses $ 10,000
Miscellaneous $ 5,000
-----------
Total $177,887.56
II-1
Item 26. Recent Sales of Unregistered Securities
All share numbers, warrant numbers, unit numbers, and prices have been
adjusted to retroactively reflect the one for three reverse stock split
implemented on November 17, 2000.
A. Sales of Unregistered Securities to Officers & Directors
1. In September 1996 upon the inception of IVTX, IVTX issued 266,667
shares of restricted Common Stock to a founder of IVTX and 215,167 shares
of restricted Common Stock to a co-founder of IVTX. There was no
underwriter involved in this issuance and no commissions were paid to any
person. The issuances were exempt from the registration provisions of the
Act by virtue of Section 4(2) under the Act.
2. In September 1996 through March 1997, IVTX issued 54,167 shares of
restricted Common Stock to a director of IVTX, in consideration of
consulting services rendered. There was no underwriter involved in this
issuance and no commissions were paid to any person. This issuance was
exempt from the registration provisions of the Act by virtue of Section
4(2) under the Act.
3. In March 1997, IVTX conducted a private offering of 8,333 shares of
restricted Common Stock at a total offering price of $20,000 to a director
of IVTX. IVTX sold and issued the 8,333 shares to the director in exchange
for the total cash proceeds of $20,000. There was no underwriter involved
in this issuance and no commissions were paid to any person. This issuance
was exempt from the registration provisions of the Act by virtue of
Section 4(2) under the Act.
4. In July 1998, IVTX granted options to purchase 83,333 and 66,667 shares
respectively of Common Stock in IVTX at an exercise price of $1.50 per
share to two founding officers, subject to the terms of their employment
agreements. The options expire on December 31, 2002. There was no
underwriter involved in this issuance and no commissions were paid to any
person. The issuances were exempt from the registration provisions of the
Act by virtue of Section 4(2) under the Act.
5. In August 1998, IVTX issued to two of its officers an aggregate of
156,000 shares of restricted Common Stock and 6,667 shares of restricted
Common Stock to one of the directors as a promotion bonus. There was no
underwriter involved in this issuance and no commissions were paid to any
person. The issuances were exempt from the registration provisions of the
Act by virtue of Section 4(2) under the Act.
6. In August 1998, IVTX issued 83,333 shares of restricted Common Stock
each to two licensors, who are also officers of IVTX, in partial
fulfillment of the terms of licensing agreements with these officers.
Before issuance, one officer, as licensor, assigned the total of all
83,333 shares to the other licensor. There was no underwriter involved in
this issuance and no commissions were paid to any person. The issuances
were exempt from the registration provisions of the Act by virtue of
Section 4(2) under the Act.
7. On September 1, 1999, the Company entered into a Consulting Agreement
with Jeffrey H. Berg, one of its Directors. Jeffrey H. Berg agreed to
introduce potential investors and financial institutions to the Company.
In consideration of entering into this agreement, Mr. Berg received 7,333
shares of common stock. Mr. Berg is an accredited investor.
8. On July 5, 2000, the Company approved the issuance of 295,653
restricted shares to the Company's officers and directors.
II-2
B. Sales of Unregistered Securities to Private Investors
1. In September 1996 through May 1997, in order to raise IVTX's initial
seed capital for research and development, IVTX conducted a private
offering of 212,333 shares of restricted Common Stock to six accredited
investors for a total offering price of $637,000. In the offering, IVTX
sold 45,667 shares to five accredited investors for the total proceeds of
$137,000 and the remaining 166,667 shares offered were subscribed for
investment intent by an additional accredited investor for purchase at
$3.00 per share. There was no underwriter involved in the issuances of the
45,667 purchased shares and no commissions were paid to any person for any
shares in the offering. None of the transactions involved general
solicitation or general advertising. Each investor was provided with the
Company's private placement memorandum and business plan. The issuances
were exempt from the registration provisions of the Act by virtue of
Section 4(2) under the Act.
2. In February 1997 through March 1999, in order to purchase services
necessary to the development and marketing of IVTX's product line and to
minimize reductions in IVTX's limited capital raised, IVTX conducted
private offerings of restricted Common Stock pursuant to Section 4(2) of
the Act to consultants, contract vendors and legal professionals in
exchange for product engineering and development, legal, consulting and
marketing services. IVTX issued a total of 61,400 shares of restricted
Common Stock to 12 accredited and 23 sophisticated purchasers in exchange
for services rendered or to be rendered on behalf of IVTX. The total value
of the shares issued (total offering price and proceeds) and the services
performed or to be performed was $184,200 and was based on a price of
$3.00 per share. There was no underwriter involved in the issuances and no
commissions were paid to any person. None of the transactions involved
general solicitation or general advertising. Each investor was provided
with IVTX's private placement memorandum and business plan. The issuances
were exempt from the registration provisions of the Act by virtue of
Section 4(2) under the Act.
3. In July 1997 through February 1999, in order to raise capital that
would be needed to launch and maintain the marketing of IVTX' lead
product, IVTX conducted a private offering of Common Stock pursuant to
Regulation D, Rule 504. The pending sale of the 166,667 shares mentioned
in Item B1 above and the potential dilution of the sale once consummated
was fully disclosed in IVTX' offering circular which was provided to each
investor in the offering. IVTX initially offered 41,667 units of Common
Stock at $2.00 per unit. Each Unit consisted of one (1) share of Common
Stock ($.001 par value) and three (3) Stock Purchase Warrants. Each
Warrant entitled the holder thereof to purchase one (1) share of Common
Stock of IVTX. The Warrants were exercisable at $2.00 per share and were
set to expire on July 21, 1998. The total offering price of the offering
was $250,000 and upon the exercise of all warrants, the total offering
price and proceeds of the offering would be $1,000,000. IVTX sold 30,904
units at $2.00 per unit which included 93,179 warrants.
After IVTX' stock became publicly traded, the price of the stock
dropped precipitously and IVTX cancelled all remaining unsold warrants and
offered individual shares at a reduced purchase price ranging from $4.50
per share to $1.50 per share. Specifically, IVTX sold 2,000 shares at
$4.50 per share; 4,822 shares at $3.36 per share; 17,167 shares at $3.00
per share; 6,666.67 shares at $2.70 per share; 20,000 shares at $2.25 per
share; and 10,000 shares at $1.50 per share. IVTX sold a total of 274,677
shares of Common Stock to 72 investors in consideration of total cash
proceeds of $339,938. IVTX extended the Warrants purchased to expire on
December 31, 1998. However, none of the Warrants purchased were ever
exercised and all Warrants expired on December 31, 1998.
Further and as part of the Rule 504 offering, in order to purchase
designs and services necessary to the development and marketing of IVTX'
product line and to minimize further reductions in IVTX' limited capital
raised, IVTX offered a portion of the Rule 504 shares to consultants,
vendors and professionals in exchange for product engineering and
development, mold design, equipment and production services and consulting
and marketing services. IVTX made such offers only when potential
contractors of service were not interested in restricted stock as payment
for services. IVTX issued a total of 42,667 shares of Common Stock to 10
purchasers in exchange for services rendered or to be rendered on behalf
of the Company and
II-3
for total proceeds of $155. The total "value" of the shares issued (total
offering price and proceeds) and the services performed or to be performed
was $256,000 and was based on a price of $6.00 per share consistent with
IVTX offering price for Rule 504 shares. The total shares issued in the
Rule 504 offering for both cash and services (all listed above) was
134,226 to 82 purchasers and the total proceeds of the offering for same
was $315,380 net of $24,713 of offering costs. Each purchaser in the total
offering was provided with IVTX' offering circular. There was no
underwriter involved in these issuances and no commissions were paid to
any person. None of the transactions involved general solicitation or
general advertising. The issuances were exempt from the registration
provisions of the Act by virtue of Regulation D, Rule 504.
4. In December 1997, the sale of the 166,667 shares subscribed to by an
accredited investor indicated in Item B1 above had not yet been
consummated by the investor. However, IVTX was still in need of additional
research and development capital. Therefore, the accredited investor who
subscribed for the shares offered and agreed to assign his $3.00
subscription rights back to IVTX for all 166,667 shares for designation by
IVTX to other investors so that IVTX could continue to raise its ongoing
Research & Development capital for its expanding product line. From April
1998 to December, 1998, IVTX offered these subscription rights to 166,667
shares of restricted Common Stock at $3.00 per share via a private
offering pursuant to Section 4(2) of the Act for a total offering price of
$500,000. IVTX sold 146,779 of these shares to 23 accredited investors and
12 sophisticated investors in consideration of cash proceeds totaling
$375,916 net of $41,392 of offering costs.
There was no underwriter involved in this issuance and no
commissions were paid to any person. Each purchaser was provided with
IVTX's current offering circular which disclosed all potential dilution.
None of the transactions involved general solicitation or general
advertising. The issuances were exempt from the registration provisions of
the Act by virtue of Section 4(2) under the Act.
All IVTX' sales of stock were made directly with purchasers whom
IVTX' officers had a pre-existing relationship with or that came from
personal referrals. None of the transactions involved general solicitation
or general advertising. Proceeds from the sale of the shares were applied
towards the continuing development and marketing of its products and
working capital.
5. In the Acquisition which closed on July 28, 1999, BioLogix paid
$250,000 for 850,000 shares of common stock of IVTX , representing the
majority controlling interests held by the officers and directors of IVTX.
This issuance was exempt from the registration provisions of the Act by
virtue of Section 4(1) of the Act, as transactions by any person other
than an issuer, underwriter, or dealer. Additionally, BioLogix agreed to
contribute its thehealthchannel.com assets and technology to IVTX in
exchange for the IVTX shareholders agreeing to split their stock and
exchange shares with the shareholders of BioLogix. This exchange was made
pursuant to the exemption set forth in Section 4(1) of the Act. The shares
of stock of IVTX were forward split 28.22-for-one and the IVTX
shareholders agreed to exchange each share they held of IVTX stock for two
shares of common stock of IVTX under its new name of thehealthchannel.com,
Inc. and exchange the remaining 26.22 shares each with the shareholders of
BioLogix on a three-for-one basis (the "Exchange").
6. On July 13, 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management received a one-time payment of 25,000 shares of common stock of
the Company. This issuance was exempt from the registration provisions of
the Act by virtue of Section 4(2) of the Act, as transactions by an issuer
not involving any public offering. Richard Wolpow is the beneficial owner
of Ocean View Management and had full access to Company information as a
consultant to the Company. The securities issued pursuant to the
Consulting Agreement are restricted securities as defined in Rule 144.
7. On August 11, 1999, the Company entered into an Agreement for Financial
Public Relation Services with Market Pathways Financial Relations
Incorporated. Under the Agreement for Financial Public Relations Services,
Market Pathways Financial Relations Incorporated received a one-time
payment of 28,333 shares of common stock of the Company. This issuance was
exempt from the registration provisions of the Act by virtue of Section
4(2) of the Act, as transactions by an issuer not involving any public
offering. The beneficial owner of Market Pathways Financial Relations
Incorporated is Shannon
II-4
Squyres. Shannon Squyres is an accredited investor. The securities issued
pursuant to the Agreement are restricted securities as defined in Rule
144.
8. On September 24, 1999, the Company commenced a private offering to
accredited investors only of units, each unit consisting of one share of
the Company's Common Stock and one Warrant exercisable for a term of two
years (the "Units"). The Company originally priced this offering at $2.25
per Unit with a $2.25 exercise price on the Warrants. However, the price
of the Company's publicly traded stock dropped precipitously since the
beginning of this private offering and the Company has lowered the
purchase price of the Units and the corresponding exercise price on the
Warrants. To date, the Company has sold a total of 1,927,283 Units to 120
accredited investors for total gross proceeds of $1,410,779. To date, no
investor has exercised any warrants purchased in the current offering. The
Private Placement is exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not
involving any public offering. The securities issued pursuant to the
Private Placement are restricted securities as defined in Rule 144. This
Private Placement was closed on August 29, 2000. See the "Selling
Shareholders" section of the prospectus for a complete list of the
investors in the Private Placement.
9. On January 5, 2000, we entered into a Consulting Agreement with
Lawrence W. Horwitz pursuant to which Mr. Horwitz agreed to provide
business development and advisory services to us. This consulting
agreement is attached as Exhibit 47. For services rendered under the
consulting agreement, we issued Mr. Horwitz 666,667 shares of common stock
of the Company. These shares were registered on Form S-8. Under the terms
of the consulting agreement, in October 2000, Mr. Horwitz was issued an
additional 250,000 shares. This transaction is exempt from registration
under Section 4(2) of the Act.
10. On July 5, 2000, the company approved the issuance of 200,000
restricted shares to 7 employees and consultants in payment for services
rendered to the company. The company relied on an exemption available
under 4(2) of the Act in issuing the shares to these employees and
consultants. All seven employees and consultants were accredited
investors, and because of their relationships with the company, had access
to information regarding the company. These employees and consultants were
provided with complete access to the books and records of the company when
accepting these shares in lieu of cash payment for services rendered.
11. On June 19, 2000, the Company issued 1,150,000 warrants to purchase
common stock to Swartz Private Equity LLC in consideration of entering
into an Equity Line Letter of Agreement for a $30,000,000 equity line of
credit. These warrants were exercisable by Swartz Private Equity LLC as
follows: 383,333 shares became exercisable after a 15 business day review
period of the documentation for the transaction, 383,333 shares became
exercisable after the execution of the Investment Agreement for the
$30,000,000 equity line of credit. The remaining 383,333 shares were
exercisable upon the earlier of (i) the date of effectiveness of Company's
Form SB-2 registration statement filed to register the transaction, or
(ii) December 19, 2000. As previously stated, the company has terminated
its agreement with Swartz and canceled the above referenced warrants.
12. On August 1, 2000, the company entered into an agreement with
Laguna Pacific Partners L.P. wherein as consideration for a loan in
the amount of $250,000 from Laguna Pacific Partners L.P., a Delaware
limited partnership, the company issued warrants to purchase common
stock equal to the quotient of 250,000 divided by the closing bid of
company stock immediately preceding the effective date of the Company's
prospectus. The term of the warrant is five years and the exercise
price is $1 in the aggregate. The warrant agreement contains terms
which increase the number of shares underlying the warrants commencing
February 1, 2001. This loan is made pursuant to a secured note which
bears interest at the rate of 6% and is payable on the earlier of
February 3, 2001 or the effective date of this prospectus. The payment
date has been extended until May 1, 2001. The loan is secured by all of
the company's assets. The company relied on an exemption available
under 4(2) of the Act in issuing the securities. Laguna Pacific
Partners, L.P. is an accredited investor and represented as such to the
company in the documents memorializing this transaction.
13. On August 15, 2000, the company entered into an Investment Agreement
with Swartz Private Equity LLC to put as much as $30,000,000 of Company
stock to Swartz, subject to the terms of the Investment Agreement which is
attached as Exhibit 28. The company has terminated its agreement with
Swartz. In entering into this agreement, the company relied upon an
exemption available under Section
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4(2) of the Act. Swartz represented to the company in the documents
memorializing this transaction that it is an accredited investor.
14. On August 18, 2000, in consideration for a loan of $250,000, the
Company agreed to issue 526,556 shares to Les Dube and Irene Dube and a
warrant for common stock common stock for an amount equal to the quotient
of $250,000 divided by the closing bid of our stock immediately preceding
the effective date of the Form SB-2 that the Company is currently being
reviewed by the SEC. The term of the warrant is five years and the
exercise price is $1 in the aggregate. The loan is made pursuant to a note
which bears interest at the rate of 6% and is payable on the earlier of
February 18, 2001, or the effective date of this prospectus. The payment
date has been extended until May 31, 2001. The shares and warrants issued
to Mr. and Ms. Dube are being registered in this prospectus and upon
repayment of this loan, these shares are to be retained by them. The loan
is secured by all of the company's assets. The company relied on an
exemption available under 4(2) of the Act in issuing the shares to these
securities. The Dubes are accredited investors and represented as such to
the company in the documents memorializing this transaction
15. In August and September of this year, the Company agreed to issue
34,482 shares of Company stock to Integrity Media, Inc. pursuant to an
agreement signed between the Company and Integrity Media, Inc. on August
18, 2000. The agreement provides for Integrity Media, Inc. to furnish
public relations services to the Company in return for 17,241 shares of
Company stock per month. The term of the Agreement is one month but it is
renewable on a month-to-month basis with the mutual consent of both
parties. This agreement was renewed by the parties in September, 2000. The
company relied on an exemption available under 4(2) of the Act in issuing
the shares to these warrants. Integrity Media, Inc. is an accredited
investors and represented as such to the company in the documents
memorializing this transaction.
The following documents that we filed with the SEC are incorporated by reference
in this prospectus:
SEC Filing Period or Date
---------- --------------
Current Report on Form 10QSB (File No. 0-29822) November 20, 2000
Item 27. Exhibits
Exhibit
3.1 Certificate of Incorporation of Innovative Tracking Solutions
Corporation, a Delaware corporation, dated September 4, 1996*
3.2 Amendment to Articles of Incorporation of Innovative Tracking
Solutions Corporation, a Delaware corporation, dated May 21, 1997*
3.3 Certificate of Correction to Articles of Incorporation of Innovative
Tracking Solutions Corporation, a Delaware corporation dated June
16, 1999*
3.4 Amendment to Articles of Incorporation of Innovative Tracking
Solutions Corporation, a Delaware corporation, dated July 28, 1999*
3.5 Amendment to Articles of Incorporation of thehealthchannel.com,
Inc., a Delaware corporation, dated August 4, 1999*
3.6 Amendment to Articles of Incorporation of thehealthchannel.com,
Inc., a Delaware corporation, dated August 5, 1999*
3.7 Amended Bylaws of thehealthchannel.com, Inc., dated August 19, 1999*
4.1 Stock Purchase Agreement and Warrant Agreement (form) for private
placement*
5 Opinion of Senn Palumbo Meulemans, LLP
10.1 Acquisition, Stock Purchase, and Exchange Agreement, dated July 28,
1999*
10.2 24/7 Media Inc. Network Affiliation Agreement, dated September 9,
1999*
10.3 Employment Agreement with Thomas P. Lonergan, dated September 1,
1999*
II-6
10.4 Employment Agreement with Donald A. Shea, dated September 1, 1999*
10.5 Consulting Agreement with Ocean View Management Group, LLC, dated
July 13, 1999*
10.6 Custom Content Service Agreement with ScreamingMedia.Net, Inc.,
dated September 27, 1999*
10.7 Agreement for Financial Public Relations Services with Market
Pathways, dated August 11, 1999*
10.8 DVCi Technologies, Inc. thehealthchannel.com Technical Requirements
and Content Specification dated October 22, 1999*
10.9 Asset & Liability Purchase and Sale Agreement between Innovative
Tracking Solutions Corporation, a Nevada corporation and Innovative
Tracking Solutions Corporation, a Delaware corporation, dated April
14, 1999*
10.10 Exodus Communications, Inc. Master Services Agreement, dated
November 19, 1999*
10.11 Content Agreement with EarthLink Network, Inc., dated October 27,
1999*
10.12 On-Line License Agreement with Infoseek, dated March 1, 1999 and
Addendum dated November 22, 1999 for thehealthchannel.com, Inc.*
10.13 Consulting Agreement by and between Jeffrey Berg and
thehealthchannel.com, Inc. dated September 1, 1999*
10.14 Website and Revenue Sharing Agreement between The Institute for
Medical Studies, Inc. and thehealthchannel.com, dated September 29,
1999*
10.15 Warrant Agreement between Institute for Medical Studies, Inc. and
thehealthchannel.com dated September 29, 1999*
10.16 Healthcompass Services Agreement between thehealthchannel.com, Inc.
and HealthMagic, Inc., dated February 16, 2000*
10.17 Content License Agreement between Integrative Medicine
Communications, Inc. and thehealthchannel.com, dated March 24, 2000*
10.18 LIVEware5, Inc. Agreement for Services between Liveware5, Inc. and
thehealthchannel.com, Inc., dated March 24, 2000*
10.19 Office Lease*
10.20 NewsEdge Contract, dated May 27, 2000*
10.21 Swartz Private Equity Warrant to Purchase Common Stock dated June
19, 2000(Incorporated by reference from Exhibit 10.8 filed November
20, 2000, Registration Number 0-29822)*
10.22 thehealthchannel.com, Inc. Investment Agreement dated August 15,
2000*
10.23 Agreement between thehealthchannel.com, Inc. and Swartz Private
Equity, LLC, dated August 15, 2000 (Incorporated by reference from
Exhibit 10.7 filed November 20, 2000, Registration Number 0-29822)*
10.24 Acknowledgement & Agreement thehealthchannel.com, Inc. and Swartz
Private Equity, LLC dated August 15, 2000 (Incorporated by reference
from Exhibit 10.11 filed November 20, 2000, Registration Number
0-29822)*
10.25 Registration Rights Agreement between thehealthchannel.com and
Swartz Private Equity, LLC dated as of August 15, 2000 (Incorporated
by reference from Exhibit 10.10 filed November 20, 2000,
Registration Number 0-29822)*
10.28 Investment Agreement between thehealthchannel.com and Swartz Private
Equity, LLC, dated August 15, 2000 (Incorporated by reference from
Exhibit 10.9 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)*
10.29 Warrant Side Agreement between thehealthchannel.com and Swartz
Private Equity, LLC, dated August 15, 2000 (Incorporated by
reference from Exhibit 10.8 to the Registration Statement Form 10QSB
filed November 20, 2000, Registration Number 0-29822)*
10.30 Warrant to Purchase Common Stock of thehealthchannel.com by Swartz
Private Equity, LLC, dated June 28, 2000 (Incorporated by reference
from Exhibit 10.7 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)*
10.31 Registration Rights Agreement between thehealthchannel.com and
Swartz Private Equity, LLC, dated August 25, 20001(Incorporated by
reference from Exhibit 10.10 to the Registration Statement Form
10QSB filed November 20, 2000, Registration Number 0-29822)*
10.32 Acknowledgement and Agreement between thehealthchannel.com and
Swartz Private Equity, LLC, dated August 15, 2000 (Incorporated by
reference from Exhibit 10.11 to the Registration Statement Form
10QSB filed November 20, 2000, Registration Number 0-29822)*
10.33 6% Secured Note between thehealthchannel.com and Laguna Pacific
Partners, L.P.,dated August 1, 2000 (Incorporated by reference from
Exhibit 10.2 to the Registration Statement Form 10QSB filed
II-7
November 20, 2000, Registration Number 0-29822)*
10.34 Unit Warrant Agreement between thehealthchannel.com and Laguna
Pacific Partners, L.P., dated August 1, 2000 (Incorporated by
reference from Exhibit 10.3 to the Registration Statement Form 10QSB
filed November 20, 2000, Registration Number 0-29822)*
10.35 Security Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000 (Incorporated by reference from
Exhibit 10.4 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)*
10.36 Investor Representation and Warranties Agreement between
thehealthchannel.com and Laguna Pacific Partners, L.P., dated August
1, 2000 (Incorporated by reference from Exhibit 10.5 to the
Registration Statement Form 10QSB filed November 20, 2000,
Registration Number 0-29822)*
10.37 Subscription Agreement between thehealthchannel.com and Laguna
Pacific Partners, L.P., dated August 1, 2000 (Incorporated by
reference from Exhibit 10.6 to the Registration Statement Form 10QSB
filed November 20, 2000, Registration Number 0-29822)*
10.38 Subscription Agreement between thehealthchannel.com and Les Dube and
Irene Dube, dated August 21, 2000 (Incorporated by reference from
Exhibit 10.6 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)*
10.39 Investor Representation and Warranties Agreement between
thehealthchannel.com and Les Dube and Irene Dube dated August 21,
2000 (Incorporated by reference from Exhibit 10.15 to the
Registration Statement Form 10QSB filed November 20, 2000,
Registration Number 0-29822)*
10.40 Employment Agreement with Minh-Chau Pham, dated May 15, 2000 *
10.41 Settlement Agreement and Release between thehealthchannel.com and
Michael Grandon dated August 31, 2000 (Incorporated by reference
from Exhibit 10.16 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)*
10.42 Consulting Agreement between thehealthchannel.com and Lawrence W.
Horwitz dated August 18, 2000 (Incorporated by reference from
Exhibit 10.12 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)*
10.43 Content Partner Agreement between thehealthchannel.com and AvantGo,
dated July 31, 2000 (Incorporated by reference from Exhibit 10.1 to
the Registration Statement Form 10QSB filed November 20, 2000,
Registration Number 0-29822)*
10.44 Content Distribution Agreement between thehealthchannel.com and
OmniSky Corporation, dated September 6, 2000 (Incorporated by
reference from Exhibit 10.17 to the Registration Statement Form
10QSB filed November 20, 2000, Registration Number 0-29822)*
10.45 Contractual Agreement between thehealthchannel.com and The Blaine
Group, Inc., dated October 16, 2000 *
10.46 Letter of Agreement between thehealthchannel.com and ServerLogic
Corporation, dated October 12, 2000 *
10.47 Consulting Agreement between thehealthchannel.com and Lawrence W.
Horwitz, dated January 5, 2000*
10.48 Regulation M Representation of Swartz Private Equity, LLC*
10.49 Letter from Mr. Don Shea to Swartz Private Equity, LLC dated
February 20, 2001
10.50 Memorandum regarding agreement with Horwitz & Beam dated August 31,
2001
10.51 Retainer Agreement by and between thehealthchannel.com, Inc. and
Senn Palumbo Meulemans, LLP.
10.52 Amendment to Agreement No 2 (two) to Content License Agreement by
and between with Integrative Medicine Communications, Inc. and
thehealthchannel.com, Inc. dated January 31, 2001
10.53 Form of Stock Purchase Agreement
10.54 Form of Warrant Agreement
10.55 Intentionally Omitted
10.56 Projected Statement of Operations
24.1 Consent of Senn Palumbo Meulemans, LLP (included in their opinion
set forth in Exhibit 5 hereto)*
24.3 Consent of Stonefield Josephson, Inc.*
24.4 Consent of Roger G. Castro *
25 Power of Attorney (Incorporated by reference from Exhibit 25 to the
Registration Statement Form SB-2 filed August 31, 2000 Registration
Number 333-44982)*
* Previously filed
II-8
Item 28. Undertakings
The undersigned registrant hereby undertakes to:
(1) Insofar as indemnification for liabilities arising under the Act may
be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its counsel
the matter has been settled by controlling precedent submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(2) File, during any period in which it offers or sells securities, a post
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
For determining liability under the Securities, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
II-9
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Newport
Beach, State of California on March 19, 2001.
THEHEALTHCHANNEL.COM, INC.
By: /s/ Donald J. Shea
--------------------------------------
By: Donald J. Shea
Its: President, Chief Executive
Officer, Director
II-10