AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 1999
REGISTRATION STATEMENT NO. 333-76579
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYBEAR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7375 13-3936988
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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EDWARD E. GOLDMAN, M.D.,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CYBEAR, INC.
5000 BLUE LAKE DRIVE
SUITE 200
BOCA RATON, FLORIDA 33431
(561) 999-3500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
DALE S. BERGMAN, P.A.
MICHAEL D. KARSCH, ESQ. BRUCE E. MACDONOUGH, ESQ.
BROAD AND CASSEL MICHAEL G. TAYLOR, ESQ.
201 SOUTH BISCAYNE BOULEVARD GREENBERG TRAURIG, P.A.
MIAMI CENTER, SUITE 3000 1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131 MIAMI, FLORIDA 33131
TELEPHONE: (305) 373-9400 TELEPHONE: (305) 579-0500
TELECOPIER: (305) 373-9443 TELECOPIER: (305) 579-0717
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT 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. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [x]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE>
The information contained in this prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS MAY 25, 1999
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3,000,000 SHARES
[GRAPHIC OMITTED]
COMMON STOCK
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Cybear, Inc. is offering 3,000,000 shares of common stock with this prospectus.
The common stock has been listed for trading on the OTC Bulletin Board under
the symbol "CYBR" since January 28, 1999. In connection with this offering, the
common stock will be listed on the Nasdaq National Market under the symbol
"CYBA." On May 24, 1999, the last reported sales price of the common stock on
the OTC Bulletin Board was $35.00 per share.
Cybear expects that the price to the public in the offering will be between
$14.00 and $16.00 per share. The market price of the shares after the offering
may be higher or lower than the offering price.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Price to the Public $ $
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Underwriting discount
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Proceeds to Cybear
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</TABLE>
Cybear has granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of 450,000 additional
shares from Cybear within 30 days following the date of this prospectus to
cover over-allotments.
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.
WARBURG DILLON READ LLC CIBC WORLD MARKETS
GRUNTAL & CO., L.L.C.
<PAGE>
Cybear uses the power of the Internet to create a virtual,
online healthcare community.
[DESCRIPTION OF ARTWORK]
Hub and spoke diagram of boxes with a circle superimposed on each,
representing the inter-connectivity of Cybear's Solutions products, with the
words "Solutions MD" and "physicians" within the center box and superimposed
circle, respectively, and the word combinations "Solutions Hosp" and
"Hospitals," "Solutions Net" and "Managed Care Organizations," "Solutions Rx"
and "Pharmacy," "Solutions Net" and "Physician Organizations" and "Solutions
You" and "Consumers" in the outer "spoke" boxes and superimposed circles, in
counterclockwise order beginning at the top.
CYBEAR/registered trademark/, SOLUTIONS MD/trademark/, SOLUTIONS
NET/trademark/, SOLUTIONS RX/trademark/, SOLUTIONS HOSP/trademark/ AND
SOLUTIONS YOU(SM) ARE OUR TRADEMARKS. THIS PROSPECTUS ALSO CONTAINS TRADEMARKS
OF OTHER COMPANIES.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Prospectus Summary ........................... 1
Risk Factors ................................. 4
Forward-Looking Statements ................... 14
Price Range of Our Common Stock .............. 14
Use of Proceeds .............................. 14
Dividend Policy .............................. 15
Capitalization ............................... 15
Dilution ..................................... 16
Selected Consolidated Financial Data ......... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................... 18
</TABLE>
<TABLE>
<S> <C>
Business .................................... 27
Directors and Executive Officers ............ 41
Certain Transactions ........................ 46
Principal Stockholders ...................... 47
Description of Capital Stock ................ 47
Shares Eligible for Future Sale ............. 49
Underwriting ................................ 50
Legal Matters ............................... 52
Experts ..................................... 52
Where You Can Find More Information ......... 52
Index to Consolidated Financial
Statements .................................. F-1
</TABLE>
As used in this prospectus, the terms "we," "us," "our," the "Company" and
"Cybear" mean Cybear, Inc. unless the context indicates a different meaning and
the term "common stock" means Cybear's common stock, $0.001 par value per
share.
Unless otherwise stated, all information contained in this prospectus
assumes no exercise of the over-allotment option granted to the underwriters.
The underwriters are offering the shares subject to various conditions and
may reject all or part of any order. The shares should be ready for delivery on
or about , 1999.
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, AND YOU SHOULD
CONSIDER THE INFORMATION SET FORTH UNDER "RISK FACTORS" AND OUR FINANCIAL
STATEMENTS AND ACCOMPANYING NOTES THAT APPEAR ELSEWHERE IN THIS PROSPECTUS.
WHO WE ARE
Cybear offers products and services using the Internet and Internet-based
applications to improve the efficiency of day-to-day administrative and
communications tasks of healthcare providers that interact to manage patient
care. Cybear is developing its Solutions product line, an Internet service
provider system that provides Internet access and Internet-based applications
to physicians, physician organizations, pharmacies and hospitals and allows
them to obtain information from Cybear's web site and other Internet locations.
In March 1999, Cybear introduced its first Solutions product, Solutions MD, a
physician-oriented healthcare Internet gateway site or portal that provides a
combination of Internet access, healthcare content, software applications to
increase user productivity, entry into a comprehensive private communications
network for Solutions subscribers and ongoing access to future Solutions
products and services. We have begun to market Solutions MD to physicians and
numerous physician organizations throughout the United States. We are marketing
Solutions MD on a monthly subscription basis at an affordable and competitive
price. We have established strategic relationships with several leading
physician organizations that collectively represent over 200,000 physicians.
Our competitive advantages include extensive healthcare experience, an in-house
sales force, an Internet-based technology platform and extensive in-house
software development capabilities.
Access to the Internet and the World Wide Web is typically obtained
through a third party Internet service provider or ISP. Most Internet service
providers serve the general public and fail to address the healthcare
industry's heightened need for secure and reliable transmission of information.
We provide access to the Internet and our Solutions products through our own
Internet service provider system, which enables us to provide secure and
reliable connectivity as well as various value-added services like web hosting
and private electronic communication networks. We have designed our Solutions
products using the Java programming language, which will allow us to
efficiently deliver, maintain and enhance our Solutions products on most types
of hardware platforms from our own network operations center.
The continued penetration of managed care and the acceptance of capitated,
risk-based contracts by physicians, physician networks and other healthcare
providers has increased the demand for and importance of clinical and financial
information, as well as the need to communicate this information efficiently
among providers. Most sectors of the healthcare industry have failed to invest
the resources necessary to upgrade their information systems to support these
increased information requirements, resulting in wasted efforts, redundant
tests and procedures and administrative inefficiencies that often adversely
impact the quality of care.
We believe the Internet provides a universal, cost-effective
communications medium to deliver value-added business solutions for the
healthcare industry. Our suite of Internet-based Solutions brand products is
designed to take advantage of the Internet's potential to solve existing
communication and information system shortcomings: Solutions MD for physicians,
Solutions Net for physician organizations, Solutions Rx for pharmacies and
Solutions Hosp for hospitals and multi-entity hospital organizations. Our
Solutions products include an Internet service provider connection that is used
only for our system, which provides useful content and software applications
tailored to the needs of the particular user group. Our Solutions MD product
includes a set of office, clinical practice and administrative tools which
enable physicians to enhance their practices in various ways. The benefits
include accessing pharmaceutical formulary lists from managed care
organizations, obtaining physician referral authorizations, confirming patient
eligibility online, analyzing profitability of managed care
1
<PAGE>
contracts, developing a practice web site and newsletter and ordering medical
and office supplies online. Subscribers may also access Solutions MD through
other ISPs.
To complement and promote our core Solutions products, we have established
strategic relationships with selected distribution, content and technology
partners. Our current strategic relationships include:
<TABLE>
<S> <C> <C>
DISTRIBUTION PARTNERS CONTENT PARTNERS TECHNOLOGY PARTNERS
/bullet/ The IPA Association of /bullet/ Envoy Corporation /bullet/ Sun Microsystems
America /bullet/ Data Advantage Corp. /bullet/ GTE
/bullet/ International Oncology /bullet/ Vistar Technologies /bullet/ Microsoft Healthcare Users
Network /bullet/ MediMedia USA Group
/bullet/ OMNA Practice /bullet/ Medimetrix Group /bullet/ Andover Group
Management /bullet/ MedPaper
/bullet/ PhyMatrix Corporation /bullet/ InfoSpace
/bullet/ AON Risk Services of /bullet/ Reuters Health Information
Florida /bullet/ Moore Medical Supply
/bullet/ Genesis Health
Ventures, Inc.
</TABLE>
We expect to realize revenues from several sources, including subscriber
fees from physicians, advertising on our web site and on our Internet service
provider and e-commerce commissions. We expect to begin recording material
revenues from Solutions MD in the second half of 1999 and for our other
products in 2000.
OUR BUSINESS STRATEGY
Our strategy to become the leading Internet-based platform for
connectivity among healthcare providers includes rapidly building our Solutions
MD physician subscriber base, utilizing our physician subscriber base to market
our other Solutions products to other industry participants, using our Internet
service provider-related ability to provide connectivity to retain subscribers,
building our Solutions brand recognition and capitalizing on multiple revenue
opportunities. To this end, we intend to use our strategic relationships to
enhance our distribution, content and technology capabilities.
OUR RECENT MERGER
We were incorporated in Delaware on February 5, 1997 and are in the
developmental stage. On November 20, 1998, Cybear, Inc., a then 98% owned
subsidiary of Andrx Corporation, merged with a wholly-owned subsidiary of 1997
Corp. Andrx Corporation is a publicly-held company that formulates and
commercializes oral pharmaceuticals using proprietary drug delivery
technologies and markets and delivers generic drugs manufactured by third
parties. 1997 Corp. was a "blank check" company seeking a business combination
with an operating entity. In the merger, 1997 Corp. changed its name to Cybear,
Inc. We are currently 94% owned by Andrx Corporation.
Our executive offices are located at 5000 Blue Lake Drive, Suite 200, Boca
Raton, Florida 33431. Our telephone number is (561) 999-3500 and our web site
address is www.cybear.com. Information contained on our web site is not part of
this prospectus.
2
<PAGE>
THE OFFERING
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<S> <C>
Common stock offered by Cybear ......... 3,000,000 shares
Common stock to be outstanding
after the offering ................... 16,269,400 shares (1)
Use of Proceeds ........................ To fund product development, marketing and sales,
additional infrastructure, operating losses, and for other
general corporate purposes. See "Use of Proceeds."
Trading Symbol ......................... "CYBA"
</TABLE>
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(1) Excludes (a) 1,003,083 shares of common stock issuable upon the exercise of
outstanding stock options as of May 20, 1999, (b) 796,917 additional
shares of common stock reserved for future issuance under our existing
stock option plan and (c) the estimated 500,000 shares of common stock to
be issued to Andrx Corporation on completion of this offering in exchange
for the contribution to Cybear's capital of the approximately $7.5
million estimated to be due to Andrx by Cybear on completion of this
offering. See "Certain Transactions."
SUMMARY CONSOLIDATED FINANCIAL DATA
YOU SHOULD READ THE FOLLOWING SUMMARY HISTORICAL FINANCIAL DATA TOGETHER
WITH THE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" SECTION LATER IN THIS PROSPECTUS AS WELL AS CYBEAR'S
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES ALSO CONTAINED LATER IN
THIS PROSPECTUS.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM FOR THE THREE MONTHS ENDED
FEBRUARY 5, 1997 MARCH 31,
(INCEPTION) TO FOR THE YEAR ENDED -------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
STATEMENT OF OPERATIONS DATA: ------------------- ------------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues ..................................... $ 95,927 $ -- $ -- $ --
Loss from operations ......................... (1,530,349) (4,170,571) (530,474) (2,824,915)
Net loss ..................................... (1,558,569) (2,481,012) (562,576) (1,514,913)
Basic and diluted net loss per share ......... (0.12) (0.19) (0.04) (0.11)
Basic and diluted weighted average
shares of common stock
outstanding ................................ 12,768,303 13,030,999 13,000,000 13,269,400
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
------------------- ---------------------------------------
ACTUAL ACTUAL AS ADJUSTED(1)
BALANCE SHEET DATA: ------------------- ---------------- --------------------
(UNAUDITED)
<S> <C> <C> <C>
Working capital (deficit) .............. $ (3,235,200) $ (5,688,867) $ 40,981,757(2)
Total assets ........................... 3,331,951 4,470,269 45,720,269
Total liabilities ...................... 3,799,568 6,362,437 941,813(2)
Stockholders' equity (deficit) ......... $ (467,617) $ (1,892,168) $ 44,778,456(2)
</TABLE>
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(1) Adjusted to give effect to the sale of 3,000,000 shares of common stock
offered by Cybear in this offering at an assumed public offering price of
$15.00 per share, and the application of the net proceeds from the sale
of the shares, after deducting the underwriting discount and estimated
offering expenses payable by Cybear. See "Use of Proceeds."
(2) Includes an adjustment relating to the conversion of the $5,420,624 due to
Andrx Corporation as of March 31, 1999 into 361,375 shares of Cybear's
common stock on completion of this offering based on the public offering
price of the shares offered in this offering and after the reimbursement
from Andrx Corporation for net operating loss carryforwards used by Andrx
Corporation. See "Certain Transactions."
3
<PAGE>
RISK FACTORS
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YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
BEFORE MAKING AN INVESTMENT DECISION. OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS COULD BE ADVERSELY AFFECTED BY ANY OF THE FOLLOWING FACTORS,
WHICH COULD CAUSE THE TRADING PRICE OF OUR COMMON STOCK TO DECLINE, AND YOU
COULD LOSE PART OR ALL OF YOUR INVESTMENT. ADDITIONAL RISKS AND UNCERTAINTIES
NOT PRESENTLY KNOWN TO US, OR THAT WE CURRENTLY THINK ARE IMMATERIAL, MAY ALSO
IMPAIR OUR BUSINESS OPERATIONS.
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO BASE AN INVESTMENT DECISION
We were organized in February 1997 and are still in the development stage.
Since our inception, we have been engaged primarily in product development
activities. We have not yet generated any significant revenues from product
sales or any other sources. As a result, we have no relevant operating history
for you to evaluate our performance and prospects.
WE ARE STILL IN THE DEVELOPMENT STAGE AND MAY EXPERIENCE DIFFICULTIES IN
DEVELOPING AND COMMERCIALIZING OUR PRODUCTS
We face all of the risks, uncertainties, expenses, delays, problems and
difficulties typically encountered in establishing a new business and
developing and commercializing new products. We have limited experience in
developing and commercializing software and Internet-based products. We do not
know the potential performance or market acceptance of Solutions MD or other
products that we may introduce. It is possible that we will have unanticipated
expenses, problems or technical difficulties that could cause material delays
in product commercialization.
WE EXPECT TO CONTINUE TO INCUR SIGNIFICANT EXPENSES AND HAVE OPERATING LOSSES
FOR THE FORESEEABLE FUTURE
We have incurred net losses and negative cash flow from operations since
inception, and as of March 31, 1999 had an accumulated deficit of approximately
$5.6 million. Our operating losses have increased in recent quarters as we have
built our infrastructure. We intend to continue to invest heavily in the areas
of product development, network operations, sales and marketing, customer
support and administration. As a result, we expect to continue to incur
substantial operating losses for the foreseeable future, and we may not achieve
or sustain profitability.
For the foreseeable future, we expect to incur significant expenses for:
/bullet/ licensing and content development;
/bullet/ marketing to potential subscribers and advertisers;
/bullet/ developing additional infrastructure;
/bullet/ subscription subsidies and other promotional arrangements;
/bullet/ subsidizing the installation of equipment for new subscribers; and
/bullet/ funding operating expenses.
OUR PLANNED EXPENSES WILL REQUIRE US TO GENERATE REVENUES TO BECOME PROFITABLE
We cannot be certain that we can achieve sufficient revenues in relation
to our expenses to ever become profitable. We will not generate any meaningful
revenues until Solutions MD gains market acceptance by physicians and other
participants in the healthcare industry. We expect our revenues to be generated
primarily from subscriber fees from users of our products and services and
advertising
4
<PAGE>
fees from third parties seeking to advertise their products and services to our
subscribers. However, our business model is still evolving and we are unable to
predict the amount and timing of revenues. If we do achieve profitability, we
cannot be certain that we can sustain or increase profitability on a quarterly
or annual basis in the future.
WE MAY NEED ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS IF WE DO NOT GENERATE
SUFFICIENT REVENUES OVER THE NEXT TWELVE MONTHS
We believe that the proceeds of this offering will be sufficient to meet
our requirements for at least the next 12 months. However, if our revenues fall
short of our projections or our expenses exceed our expectations, we may need
to raise additional capital through public or private debt or equity financings
to fund the deployment of our products or continue our business plan. We may
not be able to raise additional capital when needed on terms favorable to us or
at all.
WE HAVE NOT SOLD ANY PRODUCTS AND WE DO NOT KNOW IF POTENTIAL CUSTOMERS WILL
ACCEPT OUR PRODUCTS
Our Solutions products provide web-based communications, information and
administrative services for the healthcare industry. Many of our potential
customers do not currently use the Internet for these purposes. We cannot
guarantee that physicians and other participants in the healthcare industry
will accept our products, or even the Internet, as a replacement for
traditional sources of these services. Market acceptance of our products will
depend upon continued growth in the use of the Internet generally and, in
particular, as a source of communications, information and administrative
services for the healthcare industry.
The acceptance of Solutions MD and other products by healthcare
professionals will require acceptance of new methods of conducting business and
exchanging information. Our future financial success will depend upon our
ability to attract and retain subscribers and consumers and sell communications
services, advertising and sponsorships on our ISP. If Solutions MD fails to
achieve market acceptance, our business, financial condition and operating
results would be materially adversely affected and it would reduce our ability
to successfully introduce our other Solutions products.
OUR BUSINESS COULD BE HARMED IF WE FAIL TO ESTABLISH AND MAINTAIN THE SOLUTIONS
MD BRAND
In order to increase our subscriber and consumer bases, we must establish,
maintain and strengthen the Solutions MD brand. For us to be successful in
establishing our brand, healthcare professionals must perceive us as offering
quality, cost-effective communications, information and administrative
services, and medical suppliers, pharmaceutical companies and other vendors to
the healthcare industry must perceive Solutions MD as being an effective
marketing and sales channel for their products and services. Our business could
be materially adversely affected if our marketing efforts are not productive or
if we cannot increase our brand awareness.
WE NEED TO CONTINUE PRODUCT DEVELOPMENT OF SOLUTIONS MD AND OTHER PRODUCTS
OUR FIRST PRODUCT NEEDS FURTHER DEVELOPMENT. Solutions MD was introduced
in March 1999 but still needs further development. We have not yet completed
the development or testing of certain system enhancements including the coding
hotline and credentialing database. Other Solutions products have not yet been
introduced and are still under development. We will have to commit considerable
time, effort and resources to finalize the development and adapt our software
to satisfy specific requirements of potential customers. Our product
development efforts may not be successfully completed on a timely basis or at
all. We may not be able to successfully adapt our software to satisfy specific
requirements of potential customers, and we cannot guarantee that unanticipated
events will not occur which would result in increased costs or material delays
in product development or commercialization.
5
<PAGE>
WE HAVE ONLY CONDUCTED LIMITED TESTS OF SOLUTIONS MD AND MAY HAVE DELAYS
IF IT DOES NOT PERFORM AS DESIGNED. Solutions MD has been used by a limited
number of users for a short period of time. Consequently, we cannot guarantee
it will perform all of the functions for which it has been or will be designed
or prove to be sufficiently reliable in widespread commercial use. Technologies
as complex as those incorporated into our products may contain errors that
become apparent during commercial use. Remedying product errors could delay our
plans and cause us to incur substantial additional costs.
OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY AND COULD AFFECT
OUR STOCK PRICE
As a result of our limited operating history, our historical financial
data are of limited value in planning future operating expenses. Our revenue
expectations may be wrong because we have only recently commenced product
sales. Accordingly, our planned expenses, particularly for product development
and marketing, are based in part on our expectations concerning future revenues
and are fixed to a large extent. We may be unable to adjust spending in a
timely manner to compensate for any unexpected shortfall in revenues.
Further, our quarterly operating results may fluctuate significantly in
the future as a result of a variety of factors, some of which are outside our
control. These factors are described on page 20 of this prospectus in
Management's Discussion and Analysis of Financial Condition and Results of
Operations. In some future quarter our operating results may fall below market
expectations. If this happens, the trading price of our common stock would
likely decline, perhaps significantly.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY
Competition could result in fewer subscribers, lower subscriber revenues
and less advertising revenue, any of which could adversely affect our business.
Both the ISP market and the management applications market in which we intend
to operate are extremely competitive. Our competitors include online services
or web sites targeted to the healthcare community, general purpose ISPs,
publishers and distributors of offline media targeted to the healthcare
community, healthcare information companies and large data processing and
information companies. Any pricing pressures, reduced margins or loss of market
share resulting from our failure to compete effectively would materially
adversely affect our business, financial condition and operating results. We
may not have the financial resources, technical expertise or marketing and
support capabilities to compete successfully.
We expect competition in our market to increase significantly as new
companies enter the market and current competitors expand their product lines
and services. Many of these potential competitors are likely to enjoy
substantial competitive advantages, including:
/bullet/ greater financial, technical and marketing resources that can be
devoted to the development, promotion and sale of their services;
/bullet/ stronger strategic relationships;
/bullet/ longer operating histories;
/bullet/ greater name recognition; and
/bullet/ larger subscriber bases.
WE WILL NOT BE SUCCESSFUL IF INTERNET USAGE DOES NOT INCREASE
Our success depends on the continued growth of the Internet, which is
uncertain. Internet usage in our business area is at a very early stage of
development and is rapidly evolving. The adoption of the Internet for commerce,
particularly by those individuals and companies in the healthcare industry that
historically have relied upon traditional means of commerce, will require a
broad acceptance of new methods of conducting business and exchanging
information. A market for our products and services may not develop and demand
for our services may not emerge or be sustainable. If the market fails to
develop, develops more slowly than expected or becomes saturated with
competitors, or if our services do not achieve or sustain market acceptance,
our business, results of operations and financial condition would be materially
adversely affected.
6
<PAGE>
Internet usage may be inhibited by a number of reasons, such as:
/bullet/ lack of appropriate infrastructure;
/bullet/ security concerns;
/bullet/ inconsistent quality of service; and
/bullet/ lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth and performance, and
reliability may decline. In addition, web sites may from time to time
experience interruptions in their service as a result of outages and other
delays occurring throughout the Internet network infrastructure. If these
outages or delays frequently occur in the future, Internet usage could be
adversely affected and subscribers may not use our products and services.
WE NEED INTERNET ADVERTISING REVENUES FOR PROFITABLE OPERATIONS
WE HAVE NOT YET GENERATED ANY ADVERTISING REVENUES. We expect to generate
a significant percentage of our revenues from the sale of advertising on our
web site. However, we have not earned any advertising revenue to date, and we
may not be able to generate significant advertising revenues in the future. Our
ability to generate advertising revenues will depend on, among other factors:
/bullet/ the development of the Internet as an advertising medium;
/bullet/ the amount of traffic, and the number of subscribers, on our web
site; and
/bullet/ our ability to achieve and demonstrate user and subscriber
demographic characteristics that are attractive to advertisers.
WE NEED TO PERSUADE ADVERTISERS TO ADVERTISE ON OUR ISP. Most potential
advertisers and their advertising agencies have only limited experience with
the Internet as an advertising medium and have not devoted a significant
portion of their advertising expenditures to Internet-based advertising. We may
not be able to persuade advertisers to allocate or continue to allocate
portions of their budgets to Internet-based advertising. If persuaded, we
cannot guarantee that they will find such advertising to be effective for
promoting their products and services relative to traditional print and
broadcast media. No standards have yet been widely accepted for the measurement
of the effectiveness of Internet-based advertising, and we cannot guarantee
that such standards will develop sufficiently to support Internet-based
advertising as a significant advertising medium.
ADVERTISERS WILL WANT ACCURATE MEASURES OF DEMOGRAPHICS OF OUR SUBSCRIBER
BASE. We will need to demonstrate to advertisers the demographics of our users
so that we can set advertising rates. We are unable to predict our revenues
from advertising until we have data on our subscribers and their use of
Solutions MD.
ADVERTISERS MIGHT NOT USE OUR ISP IF INTERNET USERS COULD SELECTIVELY
BLOCK ADVERTISEMENTS ON OUR ISP. The widespread adoption of technologies that
permit Internet users to selectively block out unwanted graphics, including
advertisements, attached to web pages could adversely affect the growth of
Internet advertising and advertising revenues.
If the Internet does not develop as an effective and measurable medium for
advertising, our business, results of operations and financial condition would
be materially adversely affected.
WE WILL RELY ON SHORT-TERM NON-EXCLUSIVE ADVERTISING CONTRACTS THAT COULD CAUSE
OUR ADVERTISING REVENUES TO FLUCTUATE
Our advertising revenues will be derived from short-term, non-exclusive
contracts, which will not enable us to predict long-term advertising revenues.
Our advertising customers could move their
7
<PAGE>
advertising to competing web sites or to other media quickly and without
penalty, thereby increasing our exposure to competitive pressures and causing
our advertising revenues to fluctuate. Our failure to achieve predictable and
sufficient advertising revenues would have a material adverse effect on our
business, results of operations and financial condition.
BREACHES OF INTERNET SECURITY COULD HARM OUR BUSINESS AND RESULT IN LIABILITY
To the extent that our activities involve the storage and transmission of
proprietary information such as patient information and credit card numbers,
security breaches could expose us to a risk of loss, litigation and possible
liability to subscribers. Our security measures may not prevent security
breaches and the failure to prevent security breaches may have a material
adverse effect on our business, results of operations and financial condition.
A party who is able to circumvent our security measures could
misappropriate proprietary and confidential information or cause interruptions
in our operations. We may be required to expend significant capital and other
resources to protect against the threat of security breaches or to alleviate
problems caused by breaches. Concerns over the security of Internet
transactions and the privacy of users may also inhibit the growth of the
Internet generally, and the World Wide Web in particular, especially as a means
of conducting commercial transactions.
WE COULD BE LIABLE FOR INFORMATION RETRIEVED FROM THE INTERNET
Due to the fact that materials may be downloaded from Solutions MD and may
be subsequently distributed to others, there is the potential that claims will
be made against us for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of such
materials. Similar claims have been brought, sometimes successfully, against
Internet service providers in the past. In addition, we could be subject to
liability with respect to content that may be accessible through Solutions MD
or third party web sites linked from Solutions MD.
Although we carry general liability insurance, our insurance may not cover
potential claims of this type or may not be adequate to cover all costs
incurred in defense of potential claims or to indemnify us for all liability
that may be imposed. Any costs or imposition of liability that is not covered
by insurance or in excess of insurance coverage could have a material adverse
effect on our business, results of operations and financial condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OBTAIN DESIRABLE HEALTHCARE CONTENT FROM
INDEPENDENT CONTENT PROVIDERS
We rely on independent content providers for the majority of the clinical,
educational and other general healthcare information that is provided through
Solutions MD. We have entered into strategic relationships with several
companies to obtain content for Solutions MD, and we intend to enter into
additional relationships in the future. Our success depends significantly on
our ability to maintain our existing relationships with these content providers
and to build new relationships with other content providers. Our agreements
with content providers are short-term and non-exclusive. Termination of one or
more significant content provider agreements would decrease the availability of
healthcare-related news and information which we can offer our subscribers and
consumers and make our products and services less desirable to them. The
providers could also increase the license fees for their content. Due to the
non-exclusivity of our agreements with content providers, competitors offer, or
could offer, certain content that is similar or the same as ours. To the extent
that content providers, including but not limited to our current providers,
offer information to users or our competitors at a lower cost, our business,
financial condition and operating results could be materially adversely
affected.
In addition, we depend on the abilities of our content providers to
deliver high quality content from reliable sources and to continually upgrade
their content in response to subscriber and consumer
8
<PAGE>
demand and evolving healthcare industry trends. Failure by these parties to
develop and maintain high quality, attractive content could result in
subscriber and consumer dissatisfaction, could inhibit our ability to add
subscribers and consumers and could dilute the Solutions MD brand name, each of
which could have a material adverse effect on our business, financial condition
and operating results.
WE AND OUR SERVICE AND CONTENT PROVIDERS MAY EXPERIENCE SYSTEM FAILURES THAT
COULD INTERRUPT OUR SERVICES
The success of our business will depend on the capacity, reliability and
security of our network infrastructure. We rely on third parties to provide
portions of our network infrastructure. Any significant interruptions in our
services or an increase in response time could result in a loss of potential or
existing subscribers, strategic partners, advertisers and sponsors and, if
sustained or repeated, could reduce the attractiveness of Solutions MD to them.
Although we maintain insurance for our business, we cannot guarantee that our
insurance will be adequate to compensate us for all losses that may occur or to
provide for costs associated with business interruptions.
To succeed, we must be able to operate Solutions MD 24 hours a day, seven
days a week, without interruption. Almost all of our communications and
information services are provided through our service and content providers. To
operate without interruption, our service and content providers must guard
against:
/bullet/ damage from fire, power loss and other natural disasters;
/bullet/ communications failures;
/bullet/ software and hardware errors, failures or crashes;
/bullet/ security breaches, computer viruses and similar disruptive
problems; and
/bullet/ other potential interruptions.
Solutions MD may be required to accommodate a high volume of traffic and
deliver frequently updated information. Our subscribers may experience slower
response times or system failures due to increased traffic on our site or for a
variety of other reasons. We also depend on content providers to provide
information and data feeds on a timely basis. Solutions MD could experience
disruptions or interruptions in service due to the failure or delay in the
transmission or receipt of this information. Any significant interruption in
our operations could have a material adverse effect on our business, financial
condition and operating results.
IF WE ARE UNABLE TO MANAGE GROWTH, OUR BUSINESS MAY SUFFER
Our inability to manage continued growth effectively would have a material
adverse effect on our business, financial condition and operating results. We
have grown rapidly over the last year and intend to rapidly expand our
management, product development, testing, network operations, marketing, sales
and customer service personnel over the next year. This growth has and will
continue to place a significant strain on our managerial, operational,
financial and information systems resources. To accommodate our increasing size
and manage growth, we must continue to implement and improve our operational,
financial and information systems, and expand, train and manage our employee
base. We may not be able to effectively manage expansion of our operations, and
our facilities, systems, procedures or controls may not be adequate to support
our operations.
WE DEPEND ON OUR EXECUTIVES AND KEY EMPLOYEES
Our performance is substantially dependent on the continued services and
on the performance of our executive officers and key employees, many of whom
have worked together for only a short
9
<PAGE>
period of time. Particularly in light of our relatively early stage of
development, we are dependent on retaining and motivating highly qualified
personnel, especially our senior management. The loss of the services of Edward
E. Goldman, M.D., our president and chief executive officer, or other executive
officers and key employees could have a material adverse effect on our
business, results of operations or financial condition. We do not have "key
person" life insurance policies on any of our executive officers or key
employees.
WE NEED TO ATTRACT AND RETAIN KEY PERSONNEL TO IMPLEMENT OUR BUSINESS PLAN
Our future success also depends on our ability to attract and retain
highly qualified technical, sales, customer service and managerial personnel.
We particularly need these personnel to continue product development and
marketing. Competition for personnel in these areas is intense, and we cannot
guarantee that we will be able to attract or retain a sufficient number of
highly qualified employees in the future. If we are unable to hire and retain
personnel in key positions, our business, financial condition and operating
results could be materially adversely affected.
WE MIGHT NOT BE SUCCESSFUL IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL
PROPERTY
We regard our copyrights, trademarks, trade secrets including
methodologies, practices and tools and other intellectual property rights as
critical to our success. To protect our rights in these various forms of
intellectual property, we rely on a combination of patent, trademark and
copyright law, trade secret protection and confidentiality agreements and other
contractual arrangements with our employees, affiliates, clients, strategic
partners, acquisition targets and others.
We cannot guarantee that our actions to protect our proprietary rights
will be adequate, that third parties will not infringe or misappropriate
intellectual property, or that we will be able to detect unauthorized use of
our intellectual property and take appropriate steps to enforce our rights. It
is possible that our competitors or others will adopt product or service names
similar to ours, thereby impeding our ability to build brand identity and
possibly leading to customer confusion. Moreover, because domain names derive
value from the individual's ability to remember these names, we cannot
guarantee that our domain name will not lose its value if, for example, users
begin to rely on mechanisms other than domain names to access online resources.
Our inability to protect our marks adequately could have a material adverse
effect on the acceptance of the Solutions MD brand and on our business,
financial condition and operating results.
In addition, we cannot guarantee that other parties will not assert
infringement claims against us.
Litigation, whether to enforce or defend our intellectual property rights,
would divert management resources, be expensive and may not effectively enable
us to protect our intellectual property.
OUR GROWTH MIGHT BE LIMITED IF WE BECOME SUBJECT TO SALES OR OTHER TAXES
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign governments that could impose taxes on the sale of goods and
services and certain other Internet activities. A recently enacted law places a
temporary moratorium on certain types of taxation on Internet commerce. We
cannot predict the effect of current attempts at taxing or regulating commerce
over the Internet. Any legislation that substantially impairs the growth of
e-commerce could have a material adverse effect on our business, financial
condition and operating results.
GOVERNMENT REGULATION OF INTERNET COMMUNICATIONS MAY IMPACT OUR BUSINESS
We could become subject to regulation by the Federal Communications
Commission or another regulatory agency as a provider of basic
telecommunications services. Changes in the regulatory
10
<PAGE>
environment relating to the application of access charges and other support
payments to Internet and Internet telephony providers, regulation of Internet
services, including Internet telephony, and other regulatory changes that
directly or indirectly affect costs imposed on Internet or Internet telephony
providers, telecommunications costs or increase in the likelihood or scope of
competition, could make our communications infrastructure more expensive to
operate and have a material adverse impact on our business and financial
condition.
GOVERNMENT REGULATION OF HEALTHCARE MAY ADVERSELY IMPACT OUR BUSINESS
The impact of regulatory developments in the healthcare industry is
complex and difficult to predict, and we cannot guarantee that we will not be
materially adversely affected by existing or new regulatory requirements or
interpretations. Participants in the healthcare industry are subject to
extensive and frequently changing regulation under numerous laws administered
by governmental entities at the federal, state and local levels. Many current
laws and regulations, when enacted, did not anticipate the methods of
healthcare communication that we are developing. We believe, however, that
these laws and regulations may nonetheless be applied to our healthcare
communications business. Accordingly, our healthcare communications business
may be affected by current regulations as well as future regulations
specifically targeted to this new segment of the healthcare industry.
Current laws and regulations that may affect the healthcare communications
business include:
/bullet/ the regulation of confidential patient medical record information;
/bullet/ laws relating to the electronic transmission of prescriptions from
physicians' offices to pharmacies;
/bullet/ regulations governing the use of software applications in the
diagnosis, cure, treatment, mitigation or prevention of disease; and
/bullet/ laws or regulations relating to the relationships between or among
healthcare providers.
There may also be future legislation and regulation in these areas, both
at the state and federal level.
NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur an immediate,
substantial dilution of $12.33 in the net tangible book value per share of the
common stock from the assumed public offering price of $15.00 per share.
ANDRX CORPORATION WILL MAINTAIN CONTROL AFTER THIS OFFERING
Upon completion of this offering, Andrx Corporation will beneficially own
approximately 77% of our outstanding common stock. As a result, Andrx will be
able to control all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. Three
of our directors are executive officers of Andrx and another director is also a
director and employee of Andrx. This control may have the effect of delaying or
preventing a change in control of Cybear. For more information, see
"Management," "Certain Transactions," "Principal Stockholders" and "Description
of Capital Stock."
THERE HAS BEEN A LIMITED TRADING MARKET FOR OUR COMMON STOCK AND WE CANNOT
GUARANTEE THAT AN ACTIVE TRADING MARKET WILL DEVELOP
Since January 1999, our common stock has been quoted on the OTC Bulletin
Board and there has been a limited public market for our common stock since
only 269,400 shares are freely tradable.
11
<PAGE>
We cannot predict the extent to which investor interest in Cybear will lead to
the development of a more extensive trading market or how liquid that trading
market might become. The offering price for the shares will be determined by
negotiation between us and the underwriters based upon several factors and may
not be indicative of past or future market prices. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
OUR STOCK PRICE IS AND MAY CONTINUE TO BE VOLATILE
Our common stock has traded at prices ranging from $3.25 to $53.00 since
January 1999 and we believe it has fluctuated based on factors other than
developments in our business.
The stock market has experienced volatility that has affected the market
prices of equity securities of technology companies generally and
Internet-related companies in particular. This volatility has included rapid
and significant increases in the trading prices of certain Internet companies
following public offerings to levels that do not bear any reasonable
relationship to the operating performance of such companies. These fluctuations
may materially affect the trading price of our common stock. The trading price
of our common stock also could be subject to future fluctuations in response
to:
/bullet/ quarterly variations in our operating results;
/bullet/ announcements of technological innovations or new services or
products by us or our competitors;
/bullet/ changes in financial estimates by securities analysts;
/bullet/ the operating and stock price performance of other companies; and
/bullet/ general economic conditions and other events or factors.
Investors may not be able to sell their shares at or above the offering
price. In the past, following periods of volatility in the market price for a
company's securities, shareholders have often instituted securities class
action litigation. Litigation could result in substantial costs and the
diversion of management's attention and resources, which could have a material
adverse effect on our business, financial condition and operating results.
WE DO NOT PLAN TO DECLARE DIVIDENDS
We have not paid any dividends on our common stock and we do not plan to
pay any dividends in the foreseeable future. We plan to retain any earnings for
the operation and expansion of our business. For more information, see
"Dividend Policy."
WE MAY NOT BE ABLE TO COMPLETE ACQUISITIONS, AND THOSE THAT WE COMPLETE MAY
DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR BUSINESS
We may not be able to grow as planned if we are not able to complete
future acquisitions. If we need to acquire assets or technology, we may not be
able to identify suitable acquisition candidates available for sale at
reasonable prices or on reasonable terms. Additionally, regardless of whether
suitable candidates are available, we may not be able to complete future
acquisitions for reasons such as the availability of capital or our stock
price. Future acquisitions are subject to the following risks:
/bullet/ acquisitions may cause a disruption in our ongoing business,
distract our management and other resources and make it difficult to
maintain our standards, controls and procedures;
/bullet/ we may acquire companies in markets in which we have little
experience and may not be able to operate them successfully;
12
<PAGE>
/bullet/ we may not be able to successfully integrate the services,
products and personnel of any acquisition into our operations;
/bullet/ we may be required to incur debt or issue equity securities, which
may be dilutive to existing stockholders, to pay for acquisitions; and
/bullet/ our acquisitions may not result in any return on our investment
and we may lose our entire investment.
If we are unable to complete future acquisitions or successfully integrate
acquisitions into our operations, our business, financial condition and
operating results could be adversely affected.
WE MAY HAVE SUBSTANTIAL SALES OF OUR COMMON STOCK AFTER THE OFFERING
Sales of substantial amounts of common stock in the public market
following this offering, or the perception that such sales will occur, could
have a material adverse effect on the market price of our common stock. Please
see "Shares Eligible For Future Sale" for a discussion of the number of shares
outstanding and when those shares may be sold.
CERTAIN PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY HAVE
ANTI-TAKEOVER EFFECTS
Certain provisions of our certificate of incorporation, our bylaws and
Delaware law could make it more difficult for a third party to acquire us, even
if a change in control would be beneficial to our stockholders. For more
information, see "Description of Capital Stock-Anti-takeover Effects of Our
Certificate of Incorporation and Bylaws" and "- Anti-takeover Effects of
Delaware Law."
WE MAY FACE YEAR 2000 PROBLEMS
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Our computer
equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the Year 1900 rather than the
Year 2000. This could result in a system failure or a miscalculation, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. If all Year 2000 issues are not properly identified, or assessment,
remediation and testing of those Year 2000 problems that are identified is not
completed in a timely manner, there can be no assurance that the Year 2000
issue will not materially adversely impact Cybear's results of operations or
adversely affect Cybear's relationships with customers, vendors, or others.
We have been gathering information from and have initiated communications
with our providers to identify and, to the extent possible, resolve issues
involving the Year 2000 problem. However, we have limited or no control over
the actions of our providers. While we expect that we will be able to resolve
any significant Year 2000 problems with our systems, we cannot guarantee that
our service and content providers will resolve any or all Year 2000 problems
with their systems before the occurrence of a material disruption to our
business. Any failure of these third-parties to resolve Year 2000 problems with
their systems in a timely manner could have a material adverse effect on our
business, financial condition or operating results.
For more information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
13
<PAGE>
FORWARD-LOOKING STATEMENTS
- --------------------------------------------------------------------------------
Some of the information in this prospectus contains forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, product development plans, strategies, expectations
regarding competition and market acceptance of our products and the Internet as
a secure and reliable communications and commerce medium, and possible effects
of pending and future government regulation. Forward-looking statements
typically are identified by use of terms like "may," "will," "expect,"
"anticipate," "estimate" and similar words, although some forward-looking
statements are expressed differently. You should be aware that Cybear's actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, including those described under "Risk
Factors."
PRICE RANGE OF OUR COMMON STOCK
- --------------------------------------------------------------------------------
Our common stock has been traded on the OTC Bulletin Board under the
symbol "CYBR" since January 28, 1999. The opening trade price for the common
stock was $3.25 on January 28, 1999. High and low closing sale prices for the
common stock during the period from January 28, 1999 through May 24, 1999
ranged from $7.75 to $35.00 according to information obtained from the OTC
Bulletin Board. On May 24, 1999, the last reported sales price was $35.00 per
share. The quotations are over-the-counter quotations and, accordingly, reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not represent actual transactions. Because only 269,400 shares are freely
tradable, there has been a limited public market for our common stock and the
prices may not reflect the true value of our common stock.
USE OF PROCEEDS
- --------------------------------------------------------------------------------
Cybear estimates that the net proceeds from the sale of the shares of
common stock it is offering will be approximately $41.3 million. If the
underwriters fully exercise the over-allotment option, the net proceeds of the
shares sold by Cybear will be approximately $47.5 million. "Net proceeds" is
what Cybear expects to receive after paying the underwriting discount and other
expenses of the offering. For the purpose of estimating net proceeds, Cybear is
assuming that the public offering price will be $15.00 per share.
Cybear intends to use the net proceeds of the offering:
/bullet/ for further development of Solutions MD and other Solutions
products;
/bullet/ for marketing, sales and advertising for Solutions MD and other
Solutions products;
/bullet/ to build additional infrastructure; and
/bullet/ to fund operating losses.
Cybear will use the balance of the net proceeds for general corporate
purposes, including working capital.
Cybear reserves the right to vary the use of proceeds among the categories
listed above because Cybear's ability to use the proceeds is dependent on a
number of factors, including the degree of market acceptance of our products,
unexpected expenditures in further product development, marketing of our
products, acquiring additional content and maintaining or upgrading our
systems, the effects of competition and the impact of future government
regulation.
Until Cybear uses the net proceeds of the offering, Cybear will invest the
funds in investment grade, interest-bearing securities.
14
<PAGE>
From time to time, Cybear also expects to evaluate possible acquisitions
of or investments in businesses and technologies that are complementary to its
business and technologies, and may use net proceeds from the offering for such
purposes. While Cybear from time to time considers potential investments or
acquisitions, Cybear has no firm plans, commitments or agreements with respect
to any such investments or acquisitions.
DIVIDEND POLICY
- --------------------------------------------------------------------------------
Cybear has never paid cash dividends on its capital stock. Cybear
anticipates that it will retain earnings to support operations and to finance
the growth and development of its business. Therefore, Cybear does not intend
to pay cash dividends in the foreseeable future.
CAPITALIZATION
- --------------------------------------------------------------------------------
The following table shows:
/bullet/ The capitalization of Cybear on March 31, 1999; and
/bullet/ The capitalization of Cybear on March 31, 1999, assuming the
completion of the offering at an assumed public offering price of $15.00
per share and the conversion of the amounts due to Andrx Corporation into
shares of common stock at the assumed public offering price of $15.00 per
share. See "Certain Transactions."
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------------
ACTUAL AS ADJUSTED
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Due to Andrx Corporation(1) ...................................... $ 5,420,624 $ --
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, no
shares issued and outstanding ................................. -- --
Common stock, $0.001 par value, 25,000,000 shares authorized;
13,269,400 shares issued and outstanding, and 16,630,775 shares
issued and outstanding, as adjusted(1) ........................ 13,269 16,631
Additional paid-in capital(1) ................................... 3,649,057 50,316,319
Deficit accumulated during development stage .................... (5,554,494) (5,554,494)
------------ ------------
Total stockholders' equity (deficit) ............................. (1,892,168) 44,778,456
------------ ------------
Total capitalization ............................................. $ 3,528,456 $ 44,778,456
============ ============
</TABLE>
- ----------------
(1) At the closing of this offering, the then outstanding amounts due to Andrx
Corporation will be converted into an estimated 500,000 (361,375 shares as
of March 31, 1999) shares of common stock at the public offering price
after reimbursement from Andrx Corporation for net operating loss
carryforwards to be used by Andrx Corporation in 1999. We estimate the due
to Andrx to be approximately $7.5 million at the closing. See "Certain
Transactions."
15
<PAGE>
DILUTION
- --------------------------------------------------------------------------------
Cybear's net tangible book value on March 31, 1999 was a deficit of
approximately $(2,294,612), or $(0.17) per share. Net tangible book value is
total assets minus the sum of liabilities and intangible assets. Net tangible
book value per share is net tangible book value divided by the total number of
shares outstanding before the offering.
After giving effect to certain adjustments relating to the offering,
Cybear's pro forma net tangible book value on March 31, 1999 would have been
approximately $44.4 million, or $2.67 per share. The adjustments made to
determine pro forma net tangible book value per share are the following:
/bullet/ an increase in total assets to reflect the net proceeds of the
offering as described under "Use of Proceeds" (assuming that the public
offering price will be $15.00 per share);
/bullet/ the addition of the number of shares offered by this prospectus to
the number of shares outstanding; and
/bullet/ the conversion of the amounts due to Andrx Corporation into shares
of common stock at the public offering price at the closing of this
offering. See "Certain Transactions."
The following table illustrates the pro forma increase in net tangible
book value of $2.84 per share and the dilution (the difference between the
offering price per share and the net tangible book value per share) to new
investors:
<TABLE>
<S> <C> <C>
Assumed public offering price per share .......................................... $ 15.00
Negative net tangible book value per share as of March 31, 1999 .................. $ (0.17)
Increase in net tangible book value per share attributable to the offering ....... 2.48
Increase in net tangible book value per share attributable to the conversion of
the amounts due to Andrx Corporation ........................................... 0.36
-------
Pro forma net tangible book value per share as of March 31, 1999, giving effect
to the offering and the conversion of the amounts due to Andrx
Corporation, after reimbursement from Andrx for net operating loss
carryforwards .................................................................. 2.67
--------
Dilution per share to new investors in the offering .............................. $ 12.33
========
</TABLE>
The following table shows the difference between existing stockholders and
new investors with respect to the number of shares purchased from Cybear, the
total consideration paid and the average price paid per share. The table
assumes that the public offering price will be $15.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 13,269,400(1) 81.6% $ 530,000 1.2% $ 0.04
New investors ................. 3,000,000 18.4% $45,000,000 98.8% $ 15.00
------------ ----- ----------- -----
Total ....................... 16,269,400 100.0% $45,530,000 100.0% $ 2.80
============ ===== =========== =====
</TABLE>
- ----------------
(1) Does not include an estimated 500,000 shares of common stock to be issued
to Andrx Corporation in exchange for the conversion to capital of the
amounts due to Andrx, after reimbursement from Andrx for net operating
loss carryforwards.
As of May 20, 1999, there are 1,003,083 outstanding options to purchase
common stock, with exercise prices ranging from $1.00 to $3.00, that, if
exercised, would result in additional dilution.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
- --------------------------------------------------------------------------------
This section presents selected historical financial data of Cybear. You
should read this selected data with the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section later in this
prospectus as well as Cybear's consolidated financial statements and related
notes contained later in this prospectus. The selected data in this section is
not intended to replace the financial statements.
Cybear derived the statement of operations data for the period from
February 5, 1997 (inception) to December 31, 1997 and the year ended December
31, 1998 and the balance sheet data as of December 31, 1997 and 1998 from the
audited consolidated financial statements in this prospectus. Those
consolidated financial statements were audited by Arthur Andersen LLP,
independent certified public accountants. The statement of operations data for
the three months ended March 31, 1998 and 1999 and for the cumulative period
from February 5, 1997 (inception) to March 31, 1999 and the balance sheet data
as of March 31, 1999 have been derived from Cybear's unaudited interim
financial statements included in this prospectus, which in the opinion of
management, reflect all material adjustments necessary to present fairly
Cybear's financial position and results of operations for the periods
presented.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
STATEMENT OF OPERATIONS DATA: --------------------- --------------------
<S> <C> <C>
Revenues ..................................... $ 95,927 $ --
Operating expenses: ..........................
Software development expenses ............... 945,497 1,621,422
Selling, general and administrative
expenses .................................. 680,779 2,264,252
Write-off of software license ............... -- 159,897
Litigation settlement charge ................ -- 125,000
------------ ------------
Total operating expenses ..................... 1,626,276 4,170,571
------------ ------------
Loss from operations ......................... (1,530,349) (4,170,571)
Interest expense on due to
Andrx Corporation ........................... (28,220) (210,441)
Interest income .............................. -- --
------------ ------------
Loss before income taxes ..................... (1,558,569) (4,381,012)
Income tax benefit ........................... -- 1,900,000
------------ ------------
Net loss ..................................... $ (1,558,569) $ (2,481,012)
============ ============
Basic and diluted net loss per share ......... $ (0.12) $ (0.19)
============ ============
Basic and diluted weighted average shares
of common stock outstanding ................. 12,768,303 13,030,999
<CAPTION>
CUMULATIVE FROM
FOR THE THREE MONTHS ENDED FEBRUARY 5, 1997
MARCH 31, (INCEPTION) TO
----------------------------- MARCH 31,
1998 1999 1999
STATEMENT OF OPERATIONS DATA: ------------- --------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues ..................................... $ -- $ -- $ 95,927
Operating expenses: ..........................
Software development expenses ............... 305,793 494,311 3,061,230
Selling, general and administrative
expenses .................................. 224,681 2,330,604 5,275,635
Write-off of software license ............... -- -- 159,897
Litigation settlement charge ................ -- -- 125,000
----------- ------------ ------------
Total operating expenses ..................... 530,474 2,824,915 8,621,762
----------- ------------ ------------
Loss from operations ......................... (530,474) (2,824,915) (8,525,835)
Interest expense on due to
Andrx Corporation ........................... (32,102) (90,513) (329,174)
Interest income .............................. -- 515 515
----------- ------------ ------------
Loss before income taxes ..................... (562,576) (2,914,913) (8,854,494)
Income tax benefit ........................... -- 1,400,000 3,300,000
----------- ------------ ------------
Net loss ..................................... $ (562,576) $ (1,514,913) $ (5,554,494)
=========== ============ ============
Basic and diluted net loss per share ......... $ (0.04) $ (0.11) $ (0.43)
=========== ============ ============
Basic and diluted weighted average shares
of common stock outstanding ................. 13,000,000 13,269,400 12,947,899
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1998 1999
BALANCE SHEET DATA: ---------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Working capital deficit ......... $ (1,378,412) $ (3,235,200) $ (5,688,867)
Total assets .................... 395,456 3,331,951 4,470,269
Total liabilities ............... 1,410,119 3,799,568 6,362,437
Shareholders' deficit ........... $ (1,014,663) $ (467,617) $ (1,892,168)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION ALSO SHOULD BE READ TOGETHER WITH CYBEAR'S
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED LATER IN THIS
PROSPECTUS.
INTRODUCTION
Cybear, a Delaware corporation in the development stage, was incorporated
on February 5, 1997. Cybear offers products and services using the Internet and
Internet-based applications designed to improve the efficiency of day-to-day
administrative and communications tasks of healthcare providers that interact
to manage patient care. Cybear is developing its Solutions product line, an
Internet service provider system or ISP that provides Internet access and
Internet-based applications to physicians, physician organizations, pharmacies
and hospitals and allows them to obtain information from Cybear's web site and
other Internet locations. As of March 31, 1999, Cybear had not yet generated
any revenue from its Solutions MD product. From February 5, 1997 (inception)
through March 31, 1999, Cybear's principal activities have consisted of
developing its products, establishing its administrative, selling and
marketing, network operations and customer support infrastructure and providing
software development services to Andrx. Consequently, Cybear is considered to
be in the development stage for financial reporting purposes. Cybear expects to
generate revenues from operations in the second half of 1999 and, if our
expected revenues materialize, at that time will no longer be considered a
development stage company.
RECENT MERGER. On November 20, 1998, Cybear, Inc., a Florida corporation,
merged with 1997 Corp. pursuant to a merger agreement dated July 15, 1998. 1997
Corp. was a "blank check" company that had a registration statement on file
with the SEC to seek a business combination with an operating entity. Upon
consummation of the merger, Cybear, Inc. became a wholly-owned subsidiary of
1997 Corp. 1997 Corp. changed its name to Cybear, Inc. and remains the
continuing registrant for SEC reporting purposes. The merger was intended to be
a tax-free reorganization for federal income tax purposes and was treated as a
recapitalization of Cybear, Inc. for accounting and financial reporting
purposes.
The result of the merger was that the holders of Cybear, Inc.'s (the
Florida corporation) common stock prior to the merger own 13,000,000 shares or
approximately 98% of Cybear's common stock and the 1997 Corp.'s original
shareholders own 269,400 shares or approximately 2% of Cybear's common stock.
See Note 1 of the Notes to the Consolidated Financial Statements. In March
1999, Cybear Inc., the Florida corporation, was merged into Cybear.
RELATIONSHIP WITH ANDRX CORPORATION. As of March 31, 1999, Cybear was 94%
owned by Andrx and has been funded primarily through Andrx. In September 1998,
Andrx and Cybear entered into a credit agreement with respect to Andrx's
funding obligations to Cybear. The credit agreement provides that Andrx will
continue to fund Cybear's operations until either Cybear is in a position to
raise at least $4.0 million of debt or equity on its own or November 1999,
whichever occurs first, and that Andrx will make at least $3.0 million
available to Cybear on Cybear's demand. Interest accrues on the unpaid
principal amount from the date of borrowing until the principal amount is
repaid in full, at an annual interest rate equal to the prime rate plus 1/2%.
Cybear recorded $28,220 in interest expense on the balance due to Andrx for the
period from February 5, 1997 to December 31, 1997, $210,441 for the year ended
December 31, 1998, $32,102 for the three months ended March 31, 1998 and
$90,513 for the three months ended March 31, 1999.
Cybear and Andrx have a corporate services agreement whereby Andrx
provides Cybear with various services such as executive management, accounting
and finance, legal, payroll and human resources. For the period from February
5, 1997 to December 31, 1997, for the year ended December 31, 1998 and for the
three months ended March 31, 1998 and 1999, Cybear incurred amounts for these
services based upon mutually agreed upon allocation methods. Management
18
<PAGE>
believes that the amounts incurred for these services approximate fair market
value. Costs for such services were $110,000 for the period from February 5,
1997 to December 31, 1997, $120,000 for the year ended December 31, 1998 and
$30,000 for the three months ended March 31, 1998 and 1999.
Cybear and Andrx have a tax allocation agreement that provides, among
other things, for the allocation of federal income tax liabilities to Cybear at
the approximate amounts that would have been computed as if Cybear and Andrx
had filed separate income tax returns. Cybear recorded a tax benefit of $1.9
million for the year ended December 31, 1998 and $1.4 million for the three
months ended March 31, 1999, reflecting the reimbursement from Andrx for the
utilization of Cybear's tax attributes pursuant to the tax allocation
agreement.
PRODUCTS AND SOURCES OF REVENUE. Cybear introduced Solutions MD to the
healthcare community in March 1999. With respect to Solutions MD, Cybear
anticipates that its revenues will initially consist of recurring revenues from
product subscriptions. Cybear intends to sell Solutions MD to subscribers on an
individual monthly subscription basis with the monthly subscription fee for the
basic product package initially set at $24.95 per user. A premium package with
more applications is expected to be released in the second half of 1999 at a
monthly subscription fee of $34.99. Cybear may consider giving subscription
discounts for paid-in-advance contracts. Subscribers will also be able to
purchase additional services for additional fees. Advance billings and
collections relating to future product usage will be recorded as deferred
revenue and recognized when revenue is earned. If Cybear is successful in
building its subscriber base, brand recognition and increasing traffic on its
web site, Cybear expects to generate additional revenues through advertising
and sponsorships on its Solutions products.
Advertising revenues will be derived principally from short-term contracts
in which Cybear will guarantee a minimum number of page impressions to be
delivered to subscribers over a specified period of time for a fixed fee.
Sponsorship revenues will be derived principally from contracts that have
typically longer terms than standard advertising contracts and will involve
more integration with Cybear's services such as the placement of logos on the
home page or other sections of Cybear's applications. Revenues on advertising
and sponsorship contracts will be recognized ratably in the period in which the
advertisement is displayed, provided that no significant Cybear obligations
remain, at the lesser of the ratio of impressions delivered over the total
guaranteed impressions or the straight line basis over the term of the
contract. To the extent that minimum guaranteed impressions are not met, Cybear
will defer recognition of the corresponding revenues until the guaranteed
impressions are achieved.
With respect to its management applications products, Cybear plans to
build a customer base consisting of physician organizations, pharmacies and
hospitals and anticipates that its primary source of revenues derived from such
management applications products will be in the form of transaction fees.
Cybear will recognize revenue when services are provided.
Cybear's strategy is to rapidly develop a broad customer base and a source
of revenue by marketing Solutions MD and its other Solutions products once
introduced, which are intended to provide a one-stop location on the Internet
for the healthcare community to locate relevant news, healthcare-related
information and customizable features unique to each user. Cybear's launched
product, Solutions MD, will provide a base for the marketing of Cybear's other
Solutions products to the healthcare industry.
Over the next year, Cybear intends to build on its Solutions MD by
introducing further products such as Solutions Net, Solutions Rx and Solutions
Hosp that are targeted to other areas of the healthcare community such as
pharmacists, independent practice associations and hospitals. These products
will have many of the same features as Solutions MD with certain different
applications and services tailored to the target market.
Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of March 31, 1999, Cybear had an
accumulated deficit of approximately $5.6 million.
19
<PAGE>
In addition, Cybear intends to continue to invest heavily in its product
development, network operations, customer support, sales and marketing and
administrative areas. As a result, Cybear expects to continue to incur
substantial operating losses for the foreseeable future, and may not achieve or
sustain profitability.
In addition, Cybear may offer promotional packages to subscribers at
subsidized prices. These arrangements may require Cybear to incur significant
expenses, and Cybear cannot guarantee that it will generate sufficient revenues
to offset these expenses. Cybear cannot be certain that it can achieve
sufficient revenues in relation to its expenses to ever become profitable. If
Cybear does achieve profitability, it cannot be certain that it can sustain or
increase profitability on a quarterly or annual basis in the future.
If Cybear's revenues fall short of its projections, its business,
financial condition and operating results would be materially adversely
affected. Cybear may also need to raise additional capital through public or
private debt or equity financings to fund the deployment of its Solutions
products. However, Cybear may not be able to raise additional capital on
favorable terms or at all.
Cybear's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, some of which are outside its
control. These factors include: the number of subscribers to Solutions MD and
their use of the site, our ability to timely release our products and their
market acceptance, fees Cybear may pay for distribution, service or content
agreements and promotional arrangements or other costs Cybear may incur as it
expands its operations, the timing and amount of advertising and sponsorship
revenues, Cybear's ability to attract and retain personnel with the necessary
strategic, technical and creative skills required to develop and service its
customers, the amount and timing of capital expenditures and other costs
relating to the expansion of Cybear's operations, the introduction of new
products or services by Cybear or its competitors, pricing changes in the
industry, technical difficulties in the use of the Internet or Cybear's web
site, the level of traffic on Cybear's web site and the level of usage of the
Internet generally, future government regulations that may affect healthcare or
the Internet and general economic conditions.
Due to all of these factors, in some future quarter Cybear's operating
results may fall below market expectations. If this happens, the trading price
of Cybear's common stock would likely decline, perhaps significantly.
As a result of Cybear's limited operating history and the emerging nature
of the products and markets in which it competes, Cybear's historical financial
data are of limited value in planning future operating expenses. Accordingly,
Cybear's planned expenses are based in part on its expectations concerning
future revenues and are fixed to a large extent. Cybear expects its expenses to
increase significantly in the future as it continues to incur significant
network operations, operations support, sales and marketing, product
development and administrative expenses. Cybear's success depends on its
ability to increase its revenues to offset its expenses. Cybear cannot
guarantee that it will be able to generate sufficient revenues to offset its
expenses or that it will be able to achieve profitability. If its revenues fall
short of its projections, Cybear's business, financial condition and operating
results could be materially and adversely affected.
RESULTS OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO DECEMBER 31, 1997 COMPARED
TO THE
YEAR ENDED DECEMBER 31, 1998
Revenues were $95,927 for the period from February 5, 1997 to December 31,
1997 and consisted of software development services rendered to Andrx. Cybear
had no revenues for the year ended December 31, 1998 as it is in the
development stage.
Software development costs were $945,497 for the period from February 5,
1997 to December 31, 1997 compared to approximately $1.6 million for the year
ended December 31, 1998. Software
20
<PAGE>
development costs include outside consultant fees, payroll, benefits and
housing expenses of employees involved in the creation, design and development
of Cybear's products. Also included in the period from February 5, 1997 to
December 31, 1997 are the costs of providing software development services to
Andrx. The increase in the software development costs for the year ended
December 31, 1998 reflects the progress and expansion of Cybear's development
activities.
Selling, general and administrative expenses were $680,779 for the period
from February 5, 1997 to December 31, 1997 compared to approximately $2.3
million for the year ended December 31, 1998. Selling, general and
administrative expenses include costs incurred in the areas of sales and
marketing, network operations and maintenance, administration, and customer
support. The increase in selling, general and administrative expenses for the
year ended December 31, 1998 relates to the establishment of the
administrative, selling and marketing and customer support infrastructure and
the establishment of a network operations center.
In the year ended December 31, 1998, Cybear recorded $159,897 to write off
the unamortized portion of a software license obtained from a third party in
1997. The software was to be used as a means to handle certain types of
electronic data interchange, or EDI, messages in Cybear's Internet-based
management applications. In the fourth quarter of 1998, new EDI standards were
approved for use in the medical systems community in the U.S. and are now
released as open standards to the development community. Cybear has now adopted
these new standards to be compatible with the industry standards and has
integrated them into its software development process. The new standards
rendered obsolete the software licensed by Cybear.
In the year ended December 31, 1998, Cybear recorded a settlement charge
of $125,000 in connection with a legal settlement reached with Medix and
Cymedix to settle all previously outstanding legal disputes between the
companies.
Interest expense was $28,220 in the period from February 5, 1997 to
December 31, 1997. Interest expense was $210,441 for the year ended December
31, 1998. Interest expense represents interest on advances from Andrx under the
Credit Agreement between the two companies to fund Cybear's operations. At
December 31, 1998, the net advances including interest amounted to
approximately $5.4 million.
Cybear's taxable results are included in the consolidated income tax
return of Andrx. Cybear's taxable results will be included in the consolidated
income tax return of Andrx as long as Andrx owns at least 80% of the common
stock of Cybear. Cybear and Andrx have a tax allocation agreement that
provides, among other things, for the allocation of federal income tax
liabilities to Cybear at the approximate amounts that would have been computed
as if Cybear had filed separate income tax returns. Cybear recorded a tax
benefit of $1.9 million for the year ended December 31, 1998 reflecting the
reimbursement from Andrx for the utilization of Cybear's tax attributes
pursuant to the tax allocation agreement. As of December 31, 1998, Cybear has a
net operating loss carryforward in the amount of approximately $800,000 which
is available to offset future earnings. Under the provisions of SFAS No. 109,
Cybear has provided a valuation allowance to reserve against 100% of its
deferred tax asset given Cybear's history of net losses.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Cybear had no revenues in either the three months ended March 31, 1998 or
1999.
Software development costs were $305,793 for the 1998 quarter compared to
$494,311 for the 1999 quarter. Software development costs include outside
consultant fees, payroll, benefits and housing expenses of employees involved
in the creation, design and development of Cybear's products. The increase in
the software development costs for the 1999 quarter reflects the expansion of
Cybear's development activities.
Selling, general and administrative expenses were $224,681 for the 1998
quarter compared to approximately $2.3 million for the 1999 quarter. Selling,
general and administrative expenses include
21
<PAGE>
costs incurred in the areas of sales and marketing, network operations and
maintenance, administration, and customer support. The increase in selling,
general and administrative expenses for the 1999 quarter relates to the
establishment of the administrative, selling and marketing and customer support
infrastructure and the establishment of a network operations center.
Interest expense was $32,102 for the 1998 quarter compared to $90,513 for
the 1999 quarter. Interest expense represents interest on advances from Andrx
under the credit agreement between the two companies to fund Cybear's
operations. These net advances, including interest, amounted to approximately
$2.3 million at December 31, 1998 and approximately $5.4 million at March 31,
1999.
Cybear recorded a tax benefit of $1.4 million for the 1999 quarter
reflecting the reimbursement from Andrx for the utilization of Cybear's tax
attributes pursuant to the tax allocation agreement with Andrx. As of March 31,
1999, Cybear did not have any tax net operating loss carryforwards as all of
Cybear's tax attributes to date have been used by Andrx.
The following table sets forth the unaudited selected quarterly data for
the year ended December 31, 1998 and for the three months ended March 31, 1999:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue ............................ $ -- $ -- $ -- $ -- $ --
Operating expenses:
Software development .............. 305,793 449,812 413,721 452,096 494,311
Selling, general and
administrative .................. 224,681 350,771 577,623 1,111,177 2,330,604
Write-off of software license ..... -- -- -- 159,897 --
Litigation settlement charge ...... -- -- -- 125,000 --
----------- ----------- ------------ ------------ ------------
Total operating expenses ........... 530,474 800,583 991,344 1,848,170 2,824,915
----------- ----------- ------------ ------------ ------------
Loss from operations ............... (530,474) (800,583) (991,344) (1,848,170) (2,824,915)
Interest expense on due to Andrx
Corporation ....................... (32,102) (47,547) (65,610) (65,182) (90,513)
Interest income .................... -- -- -- -- 515
----------- ----------- ------------ ------------ ------------
Loss before income taxes ........... (562,576) (848,130) (1,056,954) (1,913,352) (2,914,913)
Income tax benefit ................. -- -- -- 1,900,000 1,400,000
----------- ----------- ------------ ------------ ------------
Net loss ........................... $ (562,576) $ (848,130) $ (1,056,954) $ (13,352) $ (1,514,913)
=========== =========== ============ ============ ============
Basic and diluted net loss
per share ......................... $ (0.04) $ (0.07) $ (0.08) $ 0.00 $ (0.11)
=========== =========== ============ ============ ============
Basic and diluted weighted
average shares of common
stock outstanding ................. 13,000,000 13,000,000 13,000,000 13,122,987 13,269,400
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
From February 5, 1997 through March 31, 1999, Cybear incurred a net loss
of approximately $5.6 million and was and continues to be dependent upon
funding from Andrx. As of March 31, 1999, Cybear owed Andrx approximately $5.4
million. As of March 31, 1999, Cybear had $325,479 in cash and a working
capital deficit of approximately $5.7 million comprised mainly of the Due to
Andrx of approximately $5.4 million.
Net cash used in operating activities was approximately $1.4 million for
both the period from February 5, 1997 through December 31, 1997 and the year
ended December 31, 1998. Net cash used in operating activities was primarily
attributable to Cybear's loss from operations offset by accounts payable and
accrued liabilities.
22
<PAGE>
Net cash used in operating activities for the 1998 quarter was $597,260
compared to approximately $1.6 million for the 1999 quarter. In the 1998
quarter, net cash used in operating activities was primarily attributable to
Cybear's loss from operations and decreases in accounts payable and accrued
liabilities. In the 1999 quarter, net cash used in operating activities was
primarily attributable to Cybear's loss from operations and decrease in
accounts payable, offset by the collection of the receivable from Blue Lake
Ltd., Cybear's landlord, reflecting the landlord's payment for a portion of the
leasehold improvements incurred by Cybear to its corporate headquarters and
network operations center.
Net cash used in investing activities for the period from February 5, 1997
through December 31, 1997 was $400,535 compared to approximately $2.7 million
for the year ended December 31, 1998. For the period from February 5, 1997
through December 31, 1997, Cybear invested $240,535 in capital expenditures
consisting mainly of computer hardware and software used in the development of
its products. In addition, Cybear entered into an agreement with a third party
to license the use of the third party's software for an unlimited period of
time. Cybear purchased this license for $160,000. In 1998, Cybear wrote-off the
unamortized portion of this software license as noted above. In 1998, Cybear
invested approximately $2.3 million in capital expenditures consisting mainly
of computer hardware and software used in the establishment of its network
operations center and the development of its products, and leasehold
improvements to the rented space housing its corporate headquarters and network
operations center. Cybear also capitalized $358,000 in software development
costs associated with the development of Solutions MD.
Net cash used in investing activities for the 1998 quarter was $69,596
compared to approximately $1.1 million for the 1999 quarter. In the 1998
quarter, Cybear invested $69,596 in capital expenditures consisting mainly of
computer hardware and software and furniture used in its software development
activities. In the 1999 quarter, Cybear invested approximately $1.1 million in
capital expenditures consisting mainly of computer hardware and software used
in the establishment of its network operations center and the development of
its products, leasehold improvements to the rented space housing its corporate
headquarters and network operations center and furniture for its corporate
headquarters. Cybear also capitalized $55,000 in software development costs
associated with the development of Solutions MD.
Net cash provided by financing activities for the period from February 5,
1997 through December 31, 1997 was approximately $1.8 million compared to
approximately $4.1 million for the year ended December 31, 1998. For the period
from February 5, 1997 to December 31, 1997, net cash provided by financing
activities consisted of proceeds from issuance of shares of Cybear's stock and
funding from Andrx. In February 1997, Cybear issued 12,870,000 shares of common
stock to Andrx for an aggregate amount of $500,000 and 130,000 shares of
convertible preferred stock to a third party for a promissory note of $30,000.
The promissory note was paid in full and the preferred stock was converted into
130,000 shares of common stock. In addition, Cybear received advances of
approximately $1.3 million from Andrx to fund its operations. In 1998, net cash
provided by financing activities consisted of advances from Andrx to fund
Cybear's operations and the reimbursement from Andrx for the utilization of
Cybear's tax attributes pursuant to the tax allocation agreement. The advances
bear interest at prime plus 1/2%. In November 1998, simultaneously with the
merger with 1997 Corp., the then outstanding Due to Andrx of approximately $3.0
million was converted into additional paid-in capital to Cybear.
Net cash provided by financing activities for the 1998 quarter was
$666,856 compared to approximately $3.1 million for the 1999 quarter. In the
1998 quarter, net cash provided by financing activities consisted of advances
from Andrx to fund Cybear's operations. In the 1999 quarter, net cash provided
by financing activities consisted of advances from Andrx to fund Cybear's
operations and the reimbursement from Andrx for the utilization of Cybear's tax
attributes pursuant to the tax allocation agreement.
In September 1998, Andrx and Cybear entered into a credit agreement with
respect to Andrx's funding obligations to Cybear. The credit agreement provides
that Andrx will continue to fund
23
<PAGE>
Cybear's operations until either Cybear is in a position to raise at least $4.0
million of debt or equity on its own or November 1999, whichever occurs first,
and that Andrx will make at least $3.0 million available to Cybear on Cybear's
demand. Interest accrues on the unpaid principal amount from the date of
borrowing until the principal amount is repaid in full, at an annual interest
rate equal to the prime rate plus 1/2%.
In the year ended December 31, 1998, Cybear recorded a settlement charge
of $125,000 in connection with a legal settlement reached with Medix and
Cymedix to resolve all previously outstanding legal disputes between the
companies. The disputes involved allegations of misappropriation by Cybear,
Andrx and certain of their respective officers, directors and employees of
medical software and Internet communications technology allegedly owned by
Cymedix, and Cybear's claims for defamation against Cymedix and Medix relating
to such allegations.
From time to time, Cybear may be involved in litigation relating to claims
arising out of its operations in the normal course of business. Cybear is not
currently a party to any other legal proceeding or aware of any other claim,
the adverse outcome of which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on Cybear's business,
operating results and financial condition.
Cybear anticipates that its cash requirements will continue to increase as
it continues to expend substantial resources to build its infrastructure,
develop its products and establish its sales and marketing, network operations,
customer support and administrative organizations. Cybear currently anticipates
that its available cash resources and available funding from Andrx will be
sufficient to meet its presently anticipated working capital and capital
expenditure requirements through 1999. Based on Andrx's most recent financial
statements, Cybear believes that Andrx currently has the resources to fund
Cybear's cash requirements through 1999.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Cybear's computer
equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the Year 1900 rather than the
Year 2000. This could result in a system failure or a miscalculation, causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based upon its identification and assessment efforts to date, Cybear
believes that certain of the computer equipment and software it currently uses
will require replacement or modification. In the ordinary course of replacing
computer equipment and software, Cybear will attempt to obtain replacements
that are Year 2000 compliant. Utilizing both internal and external resources to
identify and assess needed Year 2000 remediation, Cybear began its Year 2000
identification, assessment, remediation and testing efforts in the fourth
quarter 1998 and expects to complete such activities by third quarter 1999 and
that such efforts will be completed prior to any currently anticipated impact
on its computer equipment and software. Cybear estimates that as of April 30,
1999, it had completed approximately 45% of the initiatives that it believes
will be necessary to fully address potential Year 2000 issues relating to its
computer equipment and software. The projects comprising the remaining 55% of
the initiatives are in process and expected to be completed on or about the
third quarter 1999.
Cybear has also mailed letters to its significant vendors and service
providers to determine the extent to which its interfaces with them are
vulnerable to Year 2000 issues and whether products or services purchased from
them are Year 2000 compliant. For those significant vendors and service
providers that have not provided written assurance that they are Year 2000
compliant, Cybear is developing contingency plans to address issues that might
arise from interfaces with such entities.
Cybear believes that the cost of its Year 2000 identification, assessment,
remediation and testing efforts, as well as currently anticipated costs to be
incurred by Cybear with respect to Year 2000 issues
24
<PAGE>
of third parties, will not exceed $500,000 and will be funded from current
existing financial resources. As of May 10, 1999, Cybear had incurred costs of
approximately $55,000 related to its Year 2000 identification, assessment,
remediation and testing efforts. These costs were for planning, analysis,
repair or replacement of existing software, upgrades of existing software, or
evaluation of information received from significant vendors, service providers,
or customers. Other non-Year 2000 efforts have not been and are not expected to
be materially delayed.
Cybear has initiated a comprehensive analysis of the operational problems
and costs, including loss of revenues, that would be reasonably likely to
result from the failure by Cybear and certain third parties to complete efforts
necessary to achieve Year 2000 compliance on a timely basis. A contingency plan
for dealing with the most reasonably likely worst case scenario is under
development and should be completed by December 31, 1999.
The costs of Cybear's Year 2000 identification, assessment, remediation
and testing efforts and the dates on which Cybear believes it will complete
such efforts are based upon management's best estimates, which were derived
using numerous assumptions regarding future events, including the continued
availability of certain resources, third-party remediation plans, and other
factors. Cybear cannot assure you that these estimates will prove to be
accurate, and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to identify, assess, remediate and test all
relevant computer codes and embedded technology and other similar
uncertainties. In addition, variability of definitions of "compliance with Year
2000" and the variety of different products and services and combinations
thereof sold by Cybear may lead to claims relating to Year 2000 compliance
whose impact on Cybear is not currently estimable. Cybear cannot provide
assurance that the aggregate cost of defending and resolving such claims, if
any, will not materially adversely affect Cybear's results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards, or SFAS, No. 130, "Reporting
Comprehensive Income," requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Cybear has adopted the provisions of SFAS No. 130
beginning January 1, 1998, as required. Cybear's comprehensive losses and net
losses are the same for all periods presented.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Cybear has adopted
the provisions of SFAS No. 131 for the year ending December 31, 1998 as
required. Currently, Cybear does not believe it has any separately reportable
business segments or other disclosure information required by the Statement.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards requiring that
every derivative instrument including certain derivative instruments embedded
in other contracts be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the provision of SFAS No. 133 as of the beginning
of any fiscal quarter June 16, 1998 and
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thereafter. SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be
applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 and, at Cybear's election, before January 1,
1998.
Cybear has not yet quantified the impact of adopting SFAS No. 133 on its
financial statements and has not determined the timing or method of its
adoption of SFAS No. 133.
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BUSINESS
- --------------------------------------------------------------------------------
OVERVIEW
Cybear offers products and services using the Internet and Internet-based
applications to improve the efficiency of day-to-day administrative and
communications tasks of healthcare providers that interact to manage patient
care. Cybear is developing its Solutions product line, an Internet service
provider or ISP system that provides Internet access and Internet-based
applications to physicians, physician organizations, pharmacies and hospitals
and allows them to obtain information from Cybear's web site and other Internet
locations. In March 1999, Cybear introduced its first Solutions product,
Solutions MD, which is designed to address the communications and operational
needs of the estimated 650,000 physicians in the United States.
We believe the Internet provides a universal, cost-effective
communications medium to deliver value-added business solutions for the
healthcare industry. Our suite of Internet-based Solutions products is designed
to take advantage of the Internet's full potential to solve existing
communications and information system shortcomings: Solutions MD for
physicians, Solutions Net for physician organizations, Solutions Rx for
pharmacies and Solutions Hosp for hospitals and multi-entity hospital
organizations. We believe that our Solutions products will provide the
structured communications and information necessary to improve the
administrative efficiency and patient care and better meet the information
demands of managed care and other reimbursement systems.
Cybear was formed by Andrx in 1997 to develop a suite of Internet-based
productivity and communication products and services for the healthcare
industry. The initial products under development were software connectivity
products and applications to allow online communications among physicians,
pharmacies, labs, hospitals, managed care organizations and other healthcare
providers including an electronic prescription management product. In 1998,
Cybear shifted its primary focus to the development of Solutions MD. Many of
the features developed for the initial products have been incorporated in
Solutions MD and will be incorporated in future Solutions products. Cybear is
continuing development of the electronic prescription management product for
future release. Cybear has spent the last year building its infrastructure,
continuing product development and commencing sales and marketing activities.
HEALTHCARE COMMUNICATIONS AND INFORMATION TECHNOLOGY ISSUES
Participants in the healthcare industry are highly dependent upon
information. Information is generated by multiple sources, must be acted on at
various times by a variety of participants and forms the basis of quality care
and adequate reimbursement for services. With both the continued penetration of
managed care and reductions in government reimbursement, the need for accurate,
rapid and interactive information continues to increase. At the same time, the
acceptance of capitated, risk-based contracts by healthcare providers has
created increased demands for real-time clinical and administrative information
among healthcare provider networks.
Management believes that, notwithstanding the recognized need for improved
business-to-business communication, the healthcare industry has, to date,
underinvested in information technology. Instead, the exchange of complex
information currently depends on the inefficiencies inherent in mail, telephone
and fax communications. It is not unusual for patients to experience delays in
obtaining authorizations, in gaining access to specialists or in having
diagnostic or therapeutic procedures performed because of inefficient manual
methods of sharing information. Physicians find it increasingly difficult to
monitor the thousands of different medications covered by insurers, so
pharmacists interrupt patient care with requests to change or substitute
medications. It is common practice for physicians and their office staff to
telephonically verify a patient's eligibility and other items necessary to
render care. Manual methods of coding for healthcare reimbursement claims are
prone to human error. These inefficiencies are a daily part of healthcare and
reduce the profitability of healthcare providers and provider organizations.
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The desired linkage of existing computer systems used by participants in
the healthcare industry has been hindered by a variety of factors, including
the sheer number of industry participants, the complexity of healthcare
transactions, the high cost of technology, limitations of existing information
systems, the incompatibility of the many existing operating platforms and the
continuing prevalence of computer systems that are not Y2K compliant.
We believe that the Internet is a transformational communications
technology that will be best suited to handle complex communications between
healthcare providers and payors. The Internet's open architecture, universal
accessibility and acceptance makes it a powerful communications medium
overcoming many of the limitations of legacy healthcare information access and
technology systems. Additionally, the Internet has gained wide acceptance in
the healthcare community as an information access and gathering tool, with
approximately 75% of U.S. physicians accessing the Internet regularly.
Consequently, the deployment of various applications, content and tools will
more readily be accepted by physicians and their office staffs.
THE CYBEAR SOLUTION
We developed Solutions MD to meet healthcare providers' need to improve
the accuracy and efficiency of communications with other providers, third party
payors and provider networks. In order to meet the demands of managed care, we
believe a system needs to quickly collect and deliver patient information at
the point of care, track physician activities and patterns, identify trends and
issues that affect the critical components of managed care such as quality,
cost, outcomes, variability and patient satisfaction and facilitate prospective
utilization review. We also believe that there will be a strong demand for
real-time clinical and practice management solutions that are easy to use,
secure and cost effective.
Our Solutions integrated suite of Internet-based products and services is
designed to improve the efficiency of day-to-day administrative and
communication tasks of the various participants in the healthcare industry,
including physicians, hospitals, networks and payors that must interact to
successfully manage patient care. These products will include applications,
information and data transfer capabilities designed by us to meet their
particular needs, and, through our ISP, allow for the creation of secure
intranets or custom private networks for members of these networks to
communicate and share private information. Our Internet-based technology
platform allows for efficient installation, maintenance and customization using
the subscriber's existing computer system. Like other Internet service
providers, we use existing phone lines and the telecommunications
infrastructure. Subscribers may also access Solutions MD through other ISPs.
CYBEAR'S COMPETITIVE ADVANTAGES
We believe our extensive healthcare experience, our sales force, our
Internet-based technology platform and our in-house software development
capabilities provide us with significant competitive advantages that should
permit Cybear to become the leading Internet communications and applications
provider for the healthcare community. Our main strengths are:
/bullet/ WE HAVE EXTENSIVE HEALTHCARE EXPERIENCE - Our chief executive
officer is a physician with experience practicing medicine, managing
provider networks and providing practice management services. Other
members of our senior management and board of directors have extensive
experience in healthcare practice management and pharmaceutical
industries. Our development, marketing and support staff have in-depth
knowledge of the operations and specific needs of physicians and other
key participants in the healthcare industry. As a result, we believe we
are able to develop and deliver products that are useful and acceptable
to our subscribers allowing us to build meaningful and lasting subscriber
and advertiser relationships.
/bullet/ WE HAVE OUR OWN SALES FORCE - We have an in-house sales and
marketing staff that has long-standing ties to key segments of the
healthcare industry, including physician practices,
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physician organizations and pharmaceutical companies. We believe that
these relationships will allow us to rapidly expand our base of
subscribers, strategic partners and advertisers.
/bullet/ WE HAVE AN INTERNET-BASED TECHNOLOGY PLATFORM - We provide direct
Internet access to our subscribers through our own ISP, unlike our
competitors which depend on others for Internet access. Being an ISP
allows us to provide a secure medium for transmission of sensitive
patient and transactional information in an easy to use, low cost, fast
and reliable manner. Our ISP platform also allows us to provide more
value to our subscribers through web-hosting and the ability to develop
private intranets, which we believe will result in subscribers being less
likely to switch to a competitor's product or service.
/bullet/ WE HAVE EXTENSIVE IN-HOUSE SOFTWARE DEVELOPMENT CAPABILITIES - We
have an in-house software development team made up of 20 programmers,
allowing us to provide easy to use, low cost tools for day-to-day
operational and management needs of medical practices and networks. This
allows us to create flexible Java language-based applications to address
the particular needs of different segments of the healthcare industry.
Our in-house development capability, together with our server-based
applications technology that allows us to send updates to subscribers
online, will allow us to make continuous improvements to our products.
CYBEAR'S STRATEGY
Our strategy to become the leading Internet-based platform linking
physicians with other healthcare providers, third party payors and other
participants in the healthcare industry is based upon several elements,
including:
/bullet/ RAPIDLY BUILDING A PHYSICIAN SUBSCRIBER BASE - We are marketing
Solutions MD to physicians, their staff and physician organizations that
have ever-increasing and complex communications needs. In addition to
individual physician subscribers, large physician organizations will
either subscribe to or encourage their members to subscribe to Solutions
MD. We expect that administrative staff, particularly office managers,
schedulers and billers, will be regular users of many of the
administrative tools of Solutions MD.
/bullet/ USING A PHYSICIAN SUBSCRIBER BASE TO OBTAIN ADDITIONAL INDUSTRY
USERS - By developing a physician-centered subscriber base, we believe
that we will attract non-physician subscribers such as pharmacies,
hospitals and independent practice associations who will use our future
products to communicate and transact business with our Solutions MD
physician subscribers. To this end, we are actively pursuing strategic
relationships with key healthcare, technology and content partners to
enable us to offer higher quality products and solutions to other
segments of the healthcare industry.
/bullet/ USING CONNECTIVITY TO RETAIN SUBSCRIBERS - We believe that our
ISP-related ability to link physician organizations through custom,
secure private networks will improve communications and administrative
efficiency. We believe that once individual subscribers are connected to
and use a private network, particularly members of large provider
networks, they will continue subscribing to our products and services
instead switching to one of our competitor's services because if they
switched, they would not be able to communicate with members who use
Solutions MD.
/bullet/ BUILDING BRAND RECOGNITION - We believe that establishing the
Solutions MD and our other Solutions brands and building brand
recognition is critical to our ability to attract and retain new
subscribers, advertisers and e-commerce co-marketers. We have allocated
significant resources and commenced a marketing campaign to develop
awareness of Cybear and Solutions MD through advertising, product
promotion and strategic relationships.
/bullet/ CAPITALIZING ON MULTIPLE REVENUE SOURCES - We intend to generate
revenues from multiple sources, including subscription fees, advertising
revenues, e-commerce sales commissions and transaction fees. We believe
that this revenue model will reduce dependence on any single revenue
source and maximize our revenue generating potential.
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<PAGE>
PRODUCTS
OUR TECHNOLOGY PLATFORM
Our Internet-based technology platform for our Solutions product line
includes an ISP that serves only our subscribers, which ensures secure and
reliable Internet access to our subscribers, the use of Java language-based
programming to design our user applications, and a network operations center
with full system backups to provide reliability to our subscriber base, all
with the capacity to meet our subscribers' growing needs.
COMMON FEATURES OF SOLUTIONS PRODUCTS
Each of our Solutions products will share the following common features
tailored to meet the needs of the targeted user:
<TABLE>
<CAPTION>
COMPONENT FEATURES
- ---------------------------------------------------------------------------------------------
<S> <C>
Internet Service Provider /bullet/ Automatic configuration of the user's computer
/bullet/ Dial-in from any location in the U.S. through a
network of local numbers
/bullet/ Customizable front-end image that may include the
name and service mark of the user or the user's
network
/bullet/ On-demand customer support
- ---------------------------------------------------------------------------------------------
Communications Services /bullet/ E-mail, private network capabilities and web hosting
services
/bullet/ Tiered multiple user groups for password secure
restricted access network communications with others
in the relevant healthcare delivery system, with the
ability to control access to information as desired
/bullet/ User group menus comprising larger groups or
organizations defined by a common interest or
situation
- ---------------------------------------------------------------------------------------------
Content and Applications /bullet/ An entry point notifying users of new information
and product updates relevant to the particular user
group
/bullet/ A template for users to design their own web site,
search engine/directory to find information on the
Internet, and online newsletter publisher, each
customizable to the needs of the user, and web site
access and the ability to track the number of visitors
to a website
/bullet/ Software applications tools to streamline day-to-day
healthcare administrative and operational tasks
/bullet/ Lifestyle information geared for the e-commerce
needs of healthcare professionals
- ---------------------------------------------------------------------------------------------
</TABLE>
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SOLUTIONS MD
Solutions MD includes a broad range of practice management tools to assist
physicians and their office staff, increase physician productivity and enhance
potential reimbursement. Solutions MD is designed to manage communications
between physicians and the various other segments of the healthcare industry
that interact with them. Cybear launched Solutions MD in March 1999. The
following highlights the Solutions MD practice, office and physician tools:
PRACTICE TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- ---------------------- ---------------------------------------- ---------------------------------
<S> <C> <C>
Managed Care /bullet/ Contract Manager Helps manage differing
Applications /bullet/ Eligibility and Authorization insurance contracts, checks a
/bullet/ Capitation Evaluation patient's insurance status,
obtains referral authorization
and evaluates managed care
payments.
- ---------------------------------------------------------------------------------------------
Care Management /bullet/ Patient Satisfaction Survey Patient services including
/bullet/ Patient Education satisfaction evaluation,
/bullet/ Patient Support educational handouts, online
/bullet/ Practice Benchmarks patient support links and
evaluation of practice by
comparing to standard norms.
- ---------------------------------------------------------------------------------------------
Coding Management /bullet/ Coding Newsletter Updates and trains staff on
/bullet/ Medicare Training coding changes, simplifies
/bullet/ ICD-9 Online billing with online procedure
/bullet/ CPT-4 Online and disease listings, and
compares practice coding to
Health Care Financing
Administration audit criteria.
- ---------------------------------------------------------------------------------------------
Practice Compliance /bullet/ Compliance Newsletter Keeps practice abreast of
/bullet/ Legislative Update compliance issues and
/bullet/ Legal Resources legislative initiatives, alerts
/bullet/ Fraud and Abuse Alerts regarding fraud and abuse
issues and assists in evaluating
health care attorney
qualifications.
- ---------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
OFFICE TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- ------------------------- ---------------------------------- -------------------------------
<S> <C> <C>
Supply Replacement /bullet/ Medical Supplies Online ordering of medical,
/bullet/ Injectables Vaccines pharmaceutical and office
/bullet/ Office Supplies supplies frees staff time and
ensures availability.
- ---------------------------------------------------------------------------------------------
Staff Services /bullet/ Human Resources Helps track required human
/bullet/ Policy and Procedures resource documentation,
/bullet/ Office Training contains staff policies and
/bullet/ Occupational Safety and procedures, online training
Health Administration courses, and Occupational
Regulatory Compliance Safety and Health
/bullet/ Disaster Protocols Administration compliance
evaluation and protocols.
- ---------------------------------------------------------------------------------------------
Infrastructure Support /bullet/ Office Forms Database Extensive repository of office
forms for all needs, both
business and clinical.
- ---------------------------------------------------------------------------------------------
</TABLE>
PHYSICIAN TOOLS
<TABLE>
<CAPTION>
APPLICATION CONTENT BENEFIT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Continuing Education /bullet/ Continuing Medical Keeps the physician updated
Education on his education, and allows
/bullet/ Medical Library patient, disease and clinical
/bullet/ Conference Calendar research.
/bullet/ Clinical Studies
- --------------------------------------------------------------------------------------------------------
Prescription Management /bullet/ Managed Care Tracks the medications covered
/bullet/ Food and Drug by different insurance carriers,
Administration Approvals and minimizes changes and
/bullet/ Drug Formulary Prescription substitutions of patient
Profiling medications.
- --------------------------------------------------------------------------------------------------------
Certification Assistance /bullet/ Credentialing Database Updates physician's profile
/bullet/ Utilization Benchmarking regarding education, hospital
privileges, licensure, etc.
Allows comparison of patient
management and treatment to
standard clinical protocols and
treatment regimes.
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
FUTURE SOLUTIONS PRODUCTS
Cybear is developing additional Internet-based products and services
targeted to the needs of other healthcare providers such as physician
organizations, pharmacies and hospitals. Like physicians, all of these
providers interact and must communicate with patients and others in their field
as well as with other segments of the healthcare community. These products are
based on our Internet-based technology platform, and will add tools specially
designed to meet the needs of the expected users. Cybear anticipates that these
future products will attract new subscribers that will benefit from the
connectivity features to communicate among themselves and with physicians.
Among the Solutions products currently in development are:
SOLUTIONS NET is designed for physician networks and healthcare business
organizations at the management and operational level. The target market for
this product includes physician organizations with the need to improve
communications with and among their members and improve their ability to manage
risk. Solutions Net will contain all of the features and services of Solutions
MD and will serve as the Solutions MD management interface to allow an
organization to manage their Solutions MD Intranet. In addition, Solutions Net
will contain numerous additional web-based applications designed specifically
for the healthcare business organization including:
/bullet/ Ability to immediately obtain online patient eligibility and
transaction authorization.
/bullet/ Quality assurance tracking of patient satisfaction and customer
service through all levels of the organization.
/bullet/ Benchmarking statistical information to compare the Solutions Net
user's performance to goals and standards.
/bullet/ Prescription management tools that give the organization the
ability to effectively manage and analyze prescription utilization.
/bullet/ Online consulting services for support and guidance through a
network of partners.
SOLUTIONS RX is targeted to the nation's approximately 21,000 independent
pharmacies, a segment of the healthcare community that is experiencing
increasing market pressure due to consolidation and the growth of national
pharmacy chains. Solutions Rx will have applications that can be used by
independent pharmacies to better compete with chains. Cybear also believes that
these applications will be useful to the pharmacy chain market. In addition to
standard portal products, Solutions Rx will offer unique programs developed by
Cybear, including:
/bullet/ Drug dosing and compounding calculations and drug imaging
identification to ensure proper delivery of the accurate amount of
medication based on a patient's demographics.
/bullet/ Online prescription refilling and renewal.
/bullet/ E-commerce through the pharmacist's web page.
/bullet/ Access to numerous journals, regulatory information, formulary
listings and clinical study summaries.
SOLUTIONS HOSP is targeted to hospital systems and hospital-physician
networks. Solutions Hosp will complement and enhance the functionality of
existing hospital-based information systems, and will permit these users to
connect online with Solutions MD subscribers. Solutions Hosp will contain all
of the tools and resources as Solutions MD as well as several specific
applications designed for this market including:
/bullet/ Delivery of discharge orders and updates to admitting physicians.
Physicians will be able to complete admission paperwork via the secure
Intranet.
/bullet/ Access to transcription services to easily complete and access
chart notes.
/bullet/ A sophisticated indexing and search system to quickly locate
chart content and create summaries and reports for hospital staff and
management.
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/bullet/ Two-way secure connectivity among hospital lab and imaging
departments and the medical staff.
These products will be packaged in a similar product configuration to
Solutions MD and utilize a similar marketing strategy. Cybear expects to
release the initial versions of these three products over the next year.
OTHER PRODUCTS UNDER DEVELOPMENT
Cybear is developing a consumer-oriented healthcare web site that will be
marketed to other web sites and ISPs to become the healthcare channel for these
providers. This site, to be named SOLUTIONS YOU, will be content-neutral and
will use some of the content developed for Solutions MD.
Additionally, in parallel with Solutions MD, Cybear will continue to
develop and test additional management applications, including its electronic
prescription management product designed for use in office-based physician
practices.
STRATEGIC RELATIONSHIPS
An essential element of Cybear's growth strategy is the development and
use of various strategic partnering relationships that will serve to more
rapidly increase the subscriber base, provide high-quality content and ensure
that Cybear's Internet-based technology platform will remain state-of-the art.
In focusing Cybear's strategic relationships on distribution, content and
technology, Cybear ensures its subscriber base a continuous flow of useful
Internet-based products.
Solutions MD has been selected as the preferred ISP for several healthcare
organizations, which means that Cybear will be the only healthcare-related ISP
that these organizations will recommend to their members or require that their
members become subscribers.
The following is a brief description of our current key strategic
relationships:
DISTRIBUTION PARTNERS
THE IPA ASSOCIATION OF AMERICA OR T.I.P.A.A.A. The preeminent association
of independent practice associations in the United States that represents
over 200,000 physicians across the country. In 1998, Cybear entered into a
three-year strategic alliance with T.I.P.A.A.A. as the ISP and Internet
business applications provider recommended by T.I.P.A.A.A. to its members.
T.I.P.A.A.A. has actively endorsed Cybear's Solutions product line and will
help to market Cybear's products to T.I.P.A.A.A.'s membership.
INTERNATIONAL ONCOLOGY NETWORK OR ION. A physician practice management
organization serving 1,000 oncologists. Cybear is the ISP and Internet
business applications provider that ION recommends to its members.
OMNA PRACTICE MANAGEMENT OR OMNA. A multi-specialty physician practice
management organization. Cybear is the ISP and Internet business
applications provider that OMNA recommends to its members.
PHYMATRIX CORPORATION. A publicly-traded physician practice management
company serving over 12,000 physicians. Cybear is the ISP and Internet
business applications provider that PhyMatrix recommends to its members.
AON RISK SERVICES INC. OF FLORIDA OR AON. A professional insurance carrier.
Cybear is the ISP that AON recommends to its customers. AON will market its
professional insurance products through Cybear's Solutions products.
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<PAGE>
GENESIS HEALTH VENTURES, INC. OR GENESIS. A provider of long-term care,
home health, pharmaceutical and other healthcare services, with
approximately 500 affiliated physicians. Genesis has agreed to endorse and
recommend Solutions MD to its physicians and other affiliated providers.
Genesis is also our preferred provider of elder care content.
CONTENT PARTNERS
DATA ADVANTAGE CORP. A provider of hospital statistic databases and rating
mechanisms useful for benchmarking comparisons.
ENVOY CORPORATION. A provider of online transaction processing
applications. Envoy's transaction network provides online eligibility
verification for numerous managed care organizations.
INFOSPACE, INC. A nonmedical Internet content provider specializing in
general information such as telephone and address directories, government,
weather and lifestyle information content.
MEDIMEDIA USA, INC. Creator of the Infoscan database of drug formularies
categorized by managed care organizations.
MEDIMETRIX GROUP, INC. A provider of healthcare content including
healthcare news articles, papers and other literature directed to a
healthcare organization audience.
MEDPAPER, INC. A provider of organizational communications software that
provides a template for creation of broadcast "newsletter" information via
the Internet.
MOORE MEDICAL SUPPLY. A medical supply provider with online supply ordering
facilities.
REUTERS HEALTH INFORMATION, INC. A leading provider of custom news feeds
focusing on healthcare, business and entertainment as well as Moneynet
portfolio content.
VISTAR TECHNOLOGIES, INC. A provider of online physician credentialing,
forms generation and printing services.
TECHNOLOGY PARTNERS
SUN MICROSYSTEMS, INC. The leading supplier of enterprise network computing
products and developer of the Java computer programming language. Cybear is
a member of the Sun Development Group and has collaborated with Sun
Microsystems in the development of Java software tools.
GTE INTERNETWORKING, INC. A leading telecommunications infrastructure
provider. Cybear is a partner in GTE's beta program of asymmetric digital
subscriber line networks in the Tampa market as well as a GTE dial-up
partner.
MICROSOFT HEALTHCARE USERS GROUP. The technology standards organization
that jointly developed the current standards by which medical data is
transmitted. Cybear is a committee member of this organization, which
allows Cybear to provide input on the development of future medical data
transmission standards.
ANDOVER GROUP. A technology standards organization sponsored by Hewlett
Packard that works with Microsoft Healthcare Users Group in developing
medical transmission standards.
We are actively pursuing strategic relationships with other key
distribution, content and technology leaders that we believe will further our
growth strategies and competitive advantages. Certain of our existing
relationships, as well as others that may be established in the future, involve
or
35
<PAGE>
may involve the sale or issuance of our common stock to our partners. For
example, our three-year strategic alliance with T.I.P.A.A.A. entered into in
1998 provides that, in exchange for Cybear's preferred vendor status, Cybear
will make three $100,000 annual payments to T.I.P.A.A.A. and grant T.I.P.A.A.A.
an option to purchase 100,000 shares of its common stock. The first 30,000 of
these options have an exercise price of $3.00 per share, have a seven-year term
and vest at the rate of one share for every two T.I.P.A.A.A. physicians that
become and remain a Cybear user for a minimum of three months. In the event
that all of these 30,000 options are not vested by the expiration date of the
agreement, the options will vest in 2003. After the first 30,000 options have
vested, the remaining 70,000 options will vest at the rate of one share for
every two T.I.P.A.A.A. physicians that become and remain a Cybear subscriber
for a minimum of three months during the term of this agreement. These 70,000
options will have an exercise price equal to the market price of Cybear's
common stock on the date these options vest and will have a five-year term from
the date of grant.
MARKETING AND SALES
We sell our products and services primarily through two mechanisms: our
in-house sales force and our strategic distribution partnerships. We have hired
an in-house sales force of seven individuals with healthcare backgrounds and
relationships oriented to building the physician subscriber base. The sales
force activity will be complemented by senior management in approaching other
segments of the healthcare community, including the pharmaceutical, medical
device and supplies and ancillary service providers. We believe both through
direct sales and through distribution partnerships, we will have more rapid
product penetration and revenue generation. We plan to continue recruiting
additional sales and marketing staff.
To complement our sales strategy, we have a multifaceted marketing
approach that includes advertising, direct mailing, telemarketing, trade show
visibility and direct selling activity. Our marketing efforts take a business
partnership approach, with a focus on developing three main revenue bases:
subscribers, advertisers and e-commerce co-marketing/revenue-sharing
relationships.
In addition to our two-pronged sales efforts and our multifaceted
marketing approach, we believe that the generation of revenue in the following
three major areas underscores the importance of diversified revenue streams in
our financial model:
SUBSCRIBER MARKETING
Our subscriber marketing strategy is to identify and attract selected
targets with large physician affiliations within the managed care arena to
permit the maximum product penetration with a minimum investment of resources.
Primary targets include physician organizations with a high probability of
conversion and a high probability of successful distribution to and utilization
by the physician. Our senior management is actively involved in marketing
discussions with these larger entities, and our established relationships
represent successful implementations of this strategy.
Cybear also has deployed its marketing staff to build its individual and
small group physician subscriber base, offering promotional trial
subscriptions, with the intention that trial subscribers will become continuing
subscribers after they have had the opportunity to use Solutions MD and
experience its practice enhancing capabilities. We plan to employ this
technique in marketing our other Solutions products.
SITE ADVERTISING
The 650,000 physicians in the United States who are Solutions MD's
targeted customers make more than 80% of the decisions regarding the $1.0
trillion domestic annual healthcare expenditures. With almost $1.5 million in
decision making power per physician, this is a highly sought after audience.
As has been demonstrated in other market areas, the Internet has a unique
ability to deliver effective, targeted, and interactive messaging and
communication. That focus, combined with the
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<PAGE>
tremendous purchasing power of a physician user base, makes Solutions MD a
valuable advertising and product promotion medium to potential advertisers such
as pharmaceutical companies. Cybear will provide very targeted advertising
alternatives for various areas of business seeking to increase their healthcare
market share, from large pharmaceutical companies seeking to present specific
products to the particular healthcare specialists that would likely prescribe
and administer such products, to consumer goods distributors seeking marketing
channels to local healthcare practitioners.
Cybear's strategy to attract advertisers is to build its base of
subscribers from the healthcare industry to include not only individual
practitioners but also large organizations of practitioners of particular
specialties, so that businesses seeking to advertise on Solutions MD will be
able to access their desired targeted audience. Our Solutions Net and Solutions
Hosp products will include an optional home page that will allow a healthcare
organization to provide Solutions products as a private label value-added
benefit to their members. Advertisers will also participate in special
partnership and/or sponsorship opportunities and will have a presence on
Solutions MD beyond a typical targeted banner advertisement. Special services
and promotional programs will be available to partners and sponsors that will
greatly increase their visibility to Solutions MD users. Advertisers also have
the flexibility to purchase general or targeted advertisements.
E-COMMERCE CO-MARKETING
Cybear's marketing efforts are also directed to establishing co-marketing
relationships with other e-commerce businesses, whereby the Solutions product
line serves as a medium for these other e-commerce ventures to sell their goods
or services to Cybear's subscribers with Cybear sharing in the revenues of such
sales. Two examples of our existing co-marketing and revenue-sharing
relationships are our alliances with Office Max and Moore Medical Supply.
CUSTOMER SERVICE AND SUPPORT
Cybear believes that effective customer service is essential to attracting
and retaining subscribers and is acutely sensitive to the demands for
person-to-person responsiveness of the healthcare community. Cybear provides
ongoing telephone support in both technical computer hardware and healthcare
applications matters. This support will be provided through its customer
service and sales support centers which are accessible by a toll-free call and
are available from 8:00 a.m. to 8:00 p.m. eastern standard time Monday through
Friday with after hours support available via pager. Cybear's customer service
center screens all requests for telephone support and directs the call to the
appropriate customer service personnel. Personnel are trained to both resolve
technical problems and to answer inquiries on product usage. Cybear also has
trained customer satisfaction associates to ensure proper use and customer
satisfaction.
NETWORK OPERATIONS CENTER
Cybear's network operations center, or NOC, was designed to fully
integrate redundancy and scalability. We have installed redundant power
supplies, each with its own power cable, into every major switch or router in
our system so as to ensure that a disruption in the power supply or
disconnected power cable does not incapacitate the network. We can increase our
capacity, speed and fault tolerance without affecting or stopping existing
services simply by connecting additional equipment into our network. Upgrades
are done to our equipment and software as computer virus and other security
advisories become available. We use the latest in firewalls running dual design
in the event one should fail. Cybear's external connectivity is designed to be
as redundant and self- repairing as its internal network. We have connectivity,
split across several routes and high speed segments known as T3 lines, to
several major telecommunication infrastructure providers, including Bell South,
Uunet, Sprint and Cable & Wireless, to provide connections with the Internet.
If any one or more of the providers or routers becomes unavailable, the
infrastructure itself will re-route traffic as necessary to continue
functioning without interruption.
Every network segment is split among redundant switches, and each switch
also is attached to the backbone through redundant connections, resulting in an
efficient self-healing network that can sense
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and repair itself as the need arises. Our host routers and network segments,
both internal and external, are monitored 365 days a year through several
systems, on and offsite, in order to maintain site integrity. The NOC is
located in Boca Raton, Florida, and a redundant backup site for the NOC is
located in Miami, Florida.
COMPETITION
Cybear's competitors include online services or web sites targeted to
healthcare, general purpose ISPs, publishers and distributors of offline media,
healthcare information companies and large data processing and information
companies. Many of these competitors have substantial installed customer bases
in the healthcare industry and the ability to fund significant product
development and acquisition efforts. Cybear believes that the principal
competitive factors in its market include knowledge of user needs and client
service, system quality and product features, price and the effectiveness of
marketing and sales efforts. There can be no assurance that Cybear will be
competitive with respect to any individual factor or combination thereof.
To be competitive, Cybear must incorporate leading technologies, enhance
its existing services and content, develop new technologies that address the
increasingly sophisticated and varied needs of healthcare professionals and
healthcare consumers and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. There
can be no assurance that Cybear will be successful in using new technologies
effectively or adapting Solutions MD and other products to user requirements or
emerging industry standards. Any pricing pressures, reduced margins or loss of
market share resulting from Cybear's failure to compete effectively would
materially adversely affect Cybear's business, financial condition and
operating results.
Many of Cybear's current and potential competitors have greater financial,
technical and marketing resources to devote to the development, promotion and
sale of their services, longer operating histories, greater name recognition
and larger subscriber bases than Cybear and, therefore, may have a greater
ability to attract subscribers and advertisers. Many of these competitors may
be able to respond more quickly than Cybear to new or emerging technologies in
the Internet and the personal communications market and changes in Internet
user requirements and to devote greater resources than Cybear to the
development, promotion and sale of their services. In addition, Cybear does not
have contractual rights to prevent its strategic partners from entering into
competing businesses or directly competing with it.
GOVERNMENT REGULATION AND HEALTHCARE REFORM
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operation
of healthcare organizations. Cybear's products are designed to function within
the structure of the healthcare financing and reimbursement system currently
being used in the United States. During the past several years, the healthcare
industry has been subject to an increase in governmental regulation of, among
other things, reimbursement rates.
Proposals to reform the U.S. healthcare system have been and will continue
to be considered by the U.S. Congress. These programs may contain proposals to
increase governmental involvement in healthcare and otherwise change the
operating environment for Cybear's potential customers. Healthcare
organizations may react to these proposals and the uncertainty surrounding such
proposals by curtailing or deferring investments, including those for Cybear's
products. On the other hand, changes in the regulatory environment have in the
past increased and may continue to increase the needs of healthcare
organizations for cost-effective information management and thereby enhance the
marketability of Cybear's products and services. Cybear cannot predict with any
certainty what impact, if any, such proposals or healthcare reforms might have
on Cybear's results of operations, financial condition and business.
Cybear's products and services are not directly subject to governmental
regulations, although the proposed user base is subject to extensive and
frequently changing federal and state laws and
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regulations. However, with regard to healthcare issues on the Internet, the
recently enacted Health Insurance Portability and Accountability Act of 1996,
mandates the use of standard transactions, standard identifiers, security and
other provisions by the year 2000. It will be necessary for Cybear's platform
and for the applications that it provides to be in compliance with the proposed
regulations. Congress is also likely to consider legislation that would
establish uniform, comprehensive federal rules about an individual's right to
access his own or someone else's medical information. This legislation would
likely define what is to be considered "protected health information" and
outline steps to ensure the confidentiality of this information. The proposed
Health Information Modernization and Security Act would provide for
establishing standards and requirements for the electronic transmission of
health information.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may
be adopted in the future that address issues such as online content, user
privacy, pricing and characteristics and quality of products and services. For
example, although it was held unconstitutional, the Communications Decency Act
of 1996 prohibited the transmission over the Internet of certain types of
information and content. In addition, several telecommunications carriers are
seeking to have telecommunications over the Internet regulated by the FCC in
the same manner as other telecommunications services. Because the growing
popularity and use of the Internet has burdened the existing telecommunications
infrastructure in many areas, local exchange carriers have petitioned the FCC
to regulate ISPs in a manner similar to long distance telephone carriers and to
impose access fees on the ISPs.
Internet user privacy has become an issue in the United States. Current
United States privacy law consists of a few disparate statutes directed at
specific industries that collect personal data, none of which specifically
covers the collection of personal information online. Cybear cannot guarantee
that the United States or any state will not adopt legislation purporting to
protect such privacy. Any such legislation could affect the way in which Cybear
is allowed to conduct its business, especially those aspects that involve the
collection or use of personal information, and could have a material adverse
effect on Cybear's business, financial condition and operating results.
Moreover, it may take years to determine the extent to which existing laws
governing issues such as property ownership, libel, negligence and personal
privacy are applicable to the Internet.
With regard to copyright infringement liability, Congress recently enacted
the Online Copyright Infringement Liability Limitation Act as part of the
Digital Millennium Copyright Act which limits the copyright liability of ISPs
for certain transmissions through their systems. Through this law, an ISP can
avoid liability for copyright infringement with respect to the ISP's
transmitting, routing, linking, and storing materials through its service if
the materials are transmitted or stored by or at the direction of a person
other than the ISP through an automatic process without selection of the
materials by the ISP, the ISP does not select the recipients of the materials
except as an automatic response to the request of another person, the materials
are not accessible by unanticipated recipients, and the materials are
transmitted without modification of content.
The ISP must not have actual knowledge or information making it apparent
that materials on its system infringe, and must have procedures in place to
deal with allegations of infringement, including a designated person to receive
notifications of claimed infringement, a commitment to remove allegedly
infringing material from the service upon receipt of credible notifications and
notification of the subscriber whose material is removed from the service.
While this law provides some protection, it will not apply in all aspects
where Cybear could face liability for copyright infringement as a result of
materials available on its ISP because Cybear may create or modify certain of
these materials, and therefore be outside of the safe harbor provided by this
law.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign governments that could
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impose taxes on the sale of goods and services and certain other Internet
activities. A recently-passed law places a temporary moratorium on certain
types of taxation on Internet commerce. Cybear cannot predict the effect of
current attempts at taxing or regulating commerce over the Internet. Any
legislation that substantially impairs the growth of e-commerce could have a
material adverse effect on Cybear's business, financial condition and operating
results.
INTELLECTUAL PROPERTY
Cybear considers its methodologies, computer software and knowledge bases
to be proprietary. Cybear owns all of its applications. Cybear seeks to protect
its proprietary information through nondisclosure agreements with its
employees. Cybear's policy is to have employees enter into nondisclosure
agreements containing provisions prohibiting the disclosure of confidential
information to anyone outside Cybear, requiring disclosure to Cybear of any new
ideas, developments, discoveries or inventions conceived during employment, and
requiring assignment to Cybear of proprietary rights to such matters that are
related to Cybear's business.
Cybear also relies on a combination of trade secrets, copyright and
trademark laws, contractual provisions and technical measures to protect its
rights in various methodologies, systems and products and knowledge bases.
Cybear believes that because of the rapid pace of technological change in the
EDI industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability, experience and integrity of Cybear's
employees, frequent product enhancements and the timeliness and quality of
support services.
We have a federal service mark registration for "Cybear." We have also
registered the domain names "SolutionsMD.com" and "Cybear.com." We have also
filed one patent application, although no patents have been issued, and may
file additional applications if any of our inventions are patentable. There can
be no assurance that these or other applications will result in issued patents
or copyrights. Any infringement or misappropriation of Cybear's intellectual
property rights would disadvantage Cybear in its efforts to retain and attract
new customers in a highly competitive market and could cause Cybear to lose
revenues or incur substantial litigation expense.
Although Cybear believes that its products do not infringe on the
intellectual property rights of others, there can be no assurance that such a
claim will not be asserted against Cybear in the future. If asserted, such a
claim could cause Cybear to lose revenues or incur substantial litigation
expense.
LEGAL PROCEEDINGS
From time to time, Cybear may be involved in litigation relating to claims
arising out of its operations in the normal course of business. Cybear is not
currently a party to any legal proceeding, the adverse outcome of which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Cybear's business, operating results and financial
condition.
PROPERTIES
Cybear currently leases 21,648 square feet of space in Boca Raton, Florida
housing its corporate headquarters and network systems. This facility is
located in a high-technology office park and includes a state-of-the-art power
and communications infrastructure that will be adequate for Cybear's needs for
the foreseeable future. The lease provides for annual rent of $270,600,
excluding taxes, insurance, utilities and common area maintenance charges, and
has a five-year term beginning on January 1, 1999, with one five-year renewal
option at market rates. Cybear currently leases approximately 5,725 square feet
of space in Tampa, Florida, for its software development staff, pursuant to two
leases expiring in November 1999, each with a one-year renewal option, at a
current total annual rent of approximately $100,000. Cybear also subleases
approximately 4,000 square feet of office space in Ridgefield Park, New Jersey
housing its business development and sales activities. This lease is for a term
of five years beginning November 1998, and the rent under this lease is $10,000
per month plus $417 per month for electrical service. Cybear has adequate
insurance for these premises.
EMPLOYEES
As of April 30, 1999, Cybear had 69 full-time employees. None of Cybear's
employees is a member of a labor union and Cybear considers its relationship
with its employees to be good.
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DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The directors and executive officers of Cybear are set forth below. All
directors hold office for one year or until their successors have been elected
and qualified. Vacancies in the existing board are filled by majority vote of
the remaining directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ----------------------------- ----- ------------------------------------------------
<S> <C> <C>
John H. Klein 53 Chairman and Director
Edward E. Goldman, M.D. 54 President, Chief Executive Officer and Director
Debra S. Richman 40 Executive Vice President-Business Development
Scott Lodin 43 Secretary and Director
Alan P. Cohen 44 Director
Angelo Malahias 37 Director
Melvin Sharoky, M.D. 48 Director
Joel L. Stocker 51 Vice President for Legal Affairs
Betsy S. Atkins 42 Director nominee
Philip P. Gerbino 52 Director nominee
Martin Reid Stoller, Ph.D. 44 Director nominee
</TABLE>
JOHN H. KLEIN became the chairman and a director of Cybear on September 1,
1998. Mr. Klein has been a director of Hackensack University Medical Center in
New Jersey since 1997, and became a director of Sunbeam Corporation in February
1999. Mr. Klein was the chief executive officer, chairman of the board and a
director of MIM Corporation, a publicly traded pharmacy management company,
from May 1996 to May 1998. From 1989 to 1994, Mr. Klein served as president,
chief executive officer, a director and a member of the executive committee of
the board of directors of Zenith Laboratories, Inc., a manufacturer of
multi-source generic pharmaceutical drugs, which was acquired by IVAX
Corporation, a major multi-source generic pharmaceutical manufacturer and
marketer. From January 1995 to January 1996, Mr. Klein was a member of the
executive committee of IVAX and was president of IVAX's North American
Multi-Source Pharmaceutical Group.
EDWARD E. GOLDMAN, M.D. became the president and chief executive officer
of Cybear on September 1, 1998. From 1985 until he joined Cybear, he had served
as a founding partner and executive officer of PhyMatrix Corporation, a
publicly traded physician practice management company, where he was executive
vice president of physician development and chief medical officer. From 1983 to
1994, he served as chairman of Pal-Med Health Services, a multi-divisional
healthcare company engaged in practice management, risk contracting and the
operation of imaging centers, ambulatory surgeries and ancillary service
facilities.
DEBRA S. RICHMAN joined Cybear as executive vice president-business
development in August 1998. From 1996 to 1998, Ms. Richman was the executive
vice president/marketing for PhyMatrix. From 1995 to 1996 she was the executive
vice president/chief operating officer of CompreMedx Medical Management, Inc.,
a start-up physician management company. From 1989 to 1994 she had various
positions with Caremark International previously Baxter International,
including as vice president, physician networks and vice president, business
development, orthopedic services. Ms. Richman is also a Vice President and
director of TIPAAA, which has an agreement with Cybear, as disclosed under
"Business--Marketing."
SCOTT LODIN has been secretary and a director of Cybear since February 5,
1997. He joined Andrx in 1994 and is its vice president, general counsel and
secretary. Prior to joining Andrx, Mr. Lodin was special counsel to Hughes,
Hubbard & Reed and a predecessor law firm in Miami, Florida, where he practiced
primarily in the areas of corporate and commercial law for over 13 years.
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ALAN P. COHEN was the chairman and a director of Cybear from February 5,
1997 to August 31, 1998, when he resigned as chairman upon John Klein's
assuming such position. He remains a director of Cybear. Mr. Cohen has been the
chairman of the board, chief executive officer and a director of Andrx since he
founded Andrx in August 1992. Alan P. Cohen and certain members of his family
controlled Corner Drugstore, Inc., a privately-held retail drugstore chain.
Corner Drugstore, Inc. filed for reorganization under Chapter 11 of the United
States Bankruptcy Code in December 1994.
ANGELO C. MALAHIAS has been a director of Cybear since April 1999. Mr.
Malahias has been vice president and chief financial officer of Andrx
Corporation since January 1996. From January 1995 to January 1996, Mr. Malahias
was vice president and chief financial officer of Circa Pharmaceuticals, Inc.,
where he also served as corporate controller from July 1994 to January 1995.
From 1983 to July 1994 he was employed by KPMG Peat Marwick LLP. Mr. Malahias
is a certified public accountant.
MELVIN SHAROKY, M.D. Dr. Sharoky has been a director of Cybear since April
1999. Dr. Sharoky has been a director of Andrx since November 1995 and joined
Andrx as executive director on March 1, 1999. Dr. Sharoky is also president of
Somerset Pharmaceuticals Inc., 50% owned by Watson Pharmaceuticals, Inc. Dr.
Sharoky was a director of Watson from July 1995 to May 1998. From July 1995
through January 1998, Dr. Sharoky was president of Watson. From February 1993
through January 1998, Dr. Sharoky served as the president and chief executive
officer of Circa Pharmaceuticals. From November 1995 to May 1998, Dr. Sharoky
served on Andrx' board of directors as the designee of Watson.
JOEL L. STOCKER became vice president for legal affairs in February of
1999. Mr. Stocker's career has focused on the representation of healthcare
providers and insurers. Mr. Stocker founded and was chairman of the health law
department of Greenberg Traurig, P.A. At Greenberg Traurig, P.A. Mr. Stocker
was also co-chairman of the firm's technology committee. Mr. Stocker was a
principal shareholder at Greenberg Traurig, P.A. and a member of the firm for
10 years.
BETSY S. ATKINS is a director nominee of Cybear. Ms. Atkins is a member of
the board of Directors of several public and private companies, including
Ascend Communications Corp. since 1989, Olympic Steel since 1998, Amplitude
Software Corp. since 1996, Caere Corp. since 1998, Secure Computing, Inc. since
1997 and Polycon, Inc. since 1998. Ms. Atkins has spent her career founding
successful companies and has served in key executive management roles at major
technology companies, including vice president of marketing, aales and customer
service at Ascend and vice president of marketing, professional service and
systems integration of Unisys Corporation.
PHILIP P. GERBINO is a director nominee of Cybear. Dr. Gerbino is the
Linwood F. Tice professor of pharmacy and has been president of the University
of the Sciences in Philadelphia and its predecessor, the Philadelphia College
of Pharmacy, since 1995. Prior to being named president of the College, he
served as dean of the school of pharmacy and vice president for academic
affairs for one year. He is a national leader in the pharmacy profession having
served as president of the American Pharmaceutical Association in 1990 and
president of the AphA Academy of Pharmacy Practice from 1986-87.
MARTIN REID STOLLER, PH.D., is a director nominee of Cybear. Since 1987,
Dr. Stoller has been a Clinical Full Professor of Organization Behavior at the
Kellogg School of Management of Northwestern University. Dr. Stoller also
served as president and chief executive officer of Plextel Telecommunications
from August 1994 through January 1997. Plextel Telecommunications was an
artificial intelligence and pattern recognition software development company.
Dr. Stoller led Plextel's growth from 3 to 100 employees in less than three
years. Plextel was sold to Cendant Corporation in a $53 million transaction and
is now known as Spark Technologies, Inc.
KEY EMPLOYEES
MORRIS G. CAZZELL joined Andrx Corporation in June 1996 and has served as
chief information officer, technical development of Cybear since Cybear's
inception. Prior to joining Andrx Corporation,
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Mr. Cazzell served as senior vice president of Promedica Systems, Inc. a
medical software development company, from January 1995 to May 1996. From
August of 1993 to January 1995, Mr. Cazzell served as senior vice president of
technical development for Medical Technologies, Inc. At Medical Technologies,
Mr. Cazzell oversaw the design and development of the MedServ automated
medication-dispensing system and supervised the Performance Pharmacy software
development and installation terms. From 1981 to 1993, Mr. Cazzell served as
president of Systems Professionals, Inc., an outsourcing development and
engineering firm that specialized in the development of custom software
applications and electronics for NCR, Home Shopping Network, Cigna Health Care,
Air Touch and other national companies.
LLOYD CHESNEY became chief technology officer at Cybear in September 1998.
From 1995 to August 1998 he was chief information officer for PhyMatrix
Corporation, a national physician management company. He was responsible for
nationwide planning and design of PhyMatrix's medical systems. From 1991 to
1995 Mr. Chesney was the chief information officer for the Palm Beach
Healthcare District, the first countywide managed healthcare and trauma systems
in the United States. This organization served nearly a million residences of
Palm Beach County. His role was in strategic planning and implementation of the
District's managed care systems. In 1986 he founded Digital Office Systems
International which provided advanced computer-assisted design and networking
services for clients such as Pratt & Whitney, Motorola, and Sikorsky.
Upon completion of this offering, Cybear will establish audit and
compensation committees of its board of directors, which will each have a
majority of non-employee directors.
Cybear is currently conducting a search for a chief financial officer.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for
1998 received by the chief executive officer. No executive officer of Cybear
received compensation in 1998 in excess of $100,000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
SECURITIES
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SAR'S
- -------------------------------------- -------- ---------- ------- ----------------
<S> <C> <C> <C> <C>
Edward E. Goldman, M.D. .............. 1998 $72,115 -- 650,000(1)
President and Chief Executive Officer
</TABLE>
- ----------------
(1) Dr. Goldman joined Cybear in September 1998. Pursuant to his employment
agreement, Andrx has issued to Edward Goldman, upon payment of $50,000, a
warrant to purchase 650,000 shares Cybear common stock at its then market
price of $3.00 per share and stock options for 20,000 shares of common
stock of Andrx having an exercise price per share of the fair market
value of Andrx common stock at the close of business on the date of
grant. See "Employment Agreements."
COMPENSATION OF DIRECTORS
Non-employee directors of Cybear do not receive cash compensation for
their services. Messrs. Cohen, Lodin, Malahias and Sharoky are employees of
Andrx and were compensated by Andrx. Messrs. Klein and Goldman are employees of
Cybear.
EMPLOYMENT AGREEMENTS
Cybear entered into a five-year employment agreement with Edward Goldman,
M.D. pursuant to which he serves as Cybear's president and chief executive
officer effective as of September 15, 1998. The agreement provides for an
annual salary of $250,000 during the first two years and $300,000 for the
remaining three years. The agreement may be renewed for additional two-year
periods upon the agreement of the parties.
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The agreement also provides that Dr. Goldman will continue to receive his
salary until the expiration of the term of the employment agreements if his
employment is terminated by Cybear for any reason other than death or "good
cause" or by Dr. Goldman by reason of a material breach of the agreement by
Cybear. In the event of such a termination, Dr. Goldman is entitled to received
full compensation to which he would otherwise be entitled under the agreement
as if he had not so terminated his employment and was continuing to serve as an
employee thereunder for the full term of the agreement, payable in a single
lump sum distribution in cash or in equivalent marketable securities of Andrx
on the date of such termination.
In the event Dr. Goldman's employment with Cybear is terminated within six
months following a change in control of Cybear, then Cybear is obligated to pay
him on the date of such termination a single lump sum distribution equal to his
salary for the remaining term of the agreement. Notwithstanding the foregoing,
Dr. Goldman's employment will not be deemed terminated if, in lieu of his
position with Cybear, Andrx or any other entity owned or controlled by Andrx
offers him a replacement position, where he will perform similar executive
duties and will receive a compensation package at least equal to the one set
forth in the agreement; provided, however, that he is not required be appointed
as president and chief executive officer of any entity, but rather that he
shall continue to perform employment duties generally performed by senior
management personnel of an entity in the healthcare industry.
In recognition of the potential value of Dr. Goldman to Cybear and to
induce him to forego other employment opportunities, Andrx agreed to issue to
Dr. Goldman upon payment of $50,000, a warrant to purchase 650,000 shares of
Cybear common stock at its then market price of $3.00 per share. In addition,
Andrx has issued to Dr. Goldman stock options for 20,000 shares of Andrx common
stock having an exercise price, per share, of $37.00, the fair market value of
Andrx stock at the close of business on the date of grant.
The stock to be issued pursuant to the exercise of Dr. Goldman's warrant
includes piggyback registration rights. The warrant is exercisable from April
30, 1999 to April 30, 2006, subject to contractual obligations with Andrx.
Cybear entered into an employment agreement with Debra Richman, Cybear's
executive vice president--business development. The agreement provides for a
two-year term ending August 2000, a base salary of $160,000 and $80,000 in
deferred compensation that is payable in eight $10,000 quarterly installments.
Ms. Richman was also granted options to purchase 100,000 shares of Cybear's
common stock at its then market price of $3.00 per share under Cybear's stock
option plan. The options will vest and become exercisable in two annual
increments, as follows: two increments of 37,500 shares each will vest on the
first and second anniversary of the agreement and the remaining 25,000 options
will vest and become exercisable only if the agreement is renewed and then at
the end of the first calendar year of a renewal period.
In the event that Ms. Richman's employment by Cybear is terminated by
Cybear prior to the expiration of the initial two-year term for any reason that
does not constitute cause (as defined in the agreement), she will be entitled
to receive the balance of any unpaid base compensation for the remaining
portion of the initial term and any remaining unpaid portion of the deferred
compensation, as well as any accrued entitlements, including any unused
vacation and unreimbursed business expenses. In addition, in the event of such
termination of employment by Cybear for other than cause during the first year
of her employment, options to purchase 50,000 shares shall accelerate and
become vested, and, in the event of such termination during the second year of
employment, options to purchase 37,500 shares shall accelerate and become
vested.
Messrs. Cohen, Lodin, Malahias and Sharoky are employees of Andrx and do
not have employment agreements with Cybear. Cybear does not have any
agreements, plans or understandings to pay any cash compensation to Messrs.
Cohen, Lodin, Malahias and Sharoky for serving as directors or officers of
Cybear. Mr. Lodin and Mr. Malahias spend approximately 20% of their time on
Cybear matters.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Cybear had no compensation committee during 1998. Messrs. Cohen and Lodin
participated in deliberations of Cybear's board of directors concerning
compensation of executive officers.
STOCK OPTION PLAN
Cybear's stock option plan currently authorizes the award of up to
1,800,000 shares of common stock in the form of stock options. As of the date
of this prospectus, stock options to purchase 1,003,083 shares of common stock
were outstanding under the plan. Accordingly, 796,917 shares of common stock
are available for future awards under the plan. The purpose of the plan is to
enable Cybear to attract and retain qualified and competent employees and to
enable such persons to participate in the long-term success and growth of
Cybear by giving them an equity interest in Cybear, and to enable Cybear to pay
all or part of the compensation of the directors of Cybear other than a
director who is an officer or employee of Cybear, and to provide consultants
and advisors with options to purchase shares of Cybear's common stock, thereby
increasing their proprietary interest in Cybear.
All employees of Cybear are eligible to be granted awards under the plan.
Consultants of and advisors to Cybear are eligible to be granted awards under
the plan if their services are of a continuing nature or otherwise contribute
to the long-term success and growth of Cybear.
The participants under the plan shall be selected from time to time by the
board of directors, or if constituted by the board of directors, by the
compensation committee, in its sole discretion, from among those eligible.
In granting options, the compensation committee considers current levels
of compensation, the need to provide incentives to particular employees, past
performance, comparison to employees at comparable companies holding similar
positions and Cybear's overall performance.
The plan is administered by the compensation committee or such other
committee of directors as the board shall designate. The committee makes all
decisions or determinations by either a majority vote of its members at a
meeting or by the unanimous written approval of its members. The committee may
adopt, alter or repeal any administrative rules, guidelines and practices for
carrying out the purposes of the plan. The committee has the right to
determine, among other things, the persons to whom awards are granted, the
terms and conditions of any awards granted, the number of shares of common
stock covered by the awards, the exercise price of options and the term
thereof.
The exercise price, term and exercise period of each stock option shall be
fixed by the committee at the time of grant. Notwithstanding the fixed option
price, no incentive stock option shall (i) have an option price which is less
than 100% of the fair market value of the common stock on the date of the award
of the stock option, (ii) be exercisable more than ten years after the date
such incentive stock option is awarded, or (iii) be awarded more than ten years
after the plan is adopted by the board.
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CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
Messrs. Cohen, Lodin and Malahias are executive officers of Andrx and are
not required to commit their full time to the affairs of Cybear and it is
likely they will not devote a substantial amount of time to the affairs of
Cybear. Such personnel may have conflicts of interest in allocating management
time among various business activities. Since its inception in February 1997,
Andrx has funded substantially all of Cybear's operations through loans or
purchases of shares of Cybear common stock. As of March 31, 1999, Andrx's net
funding including interest was approximately $8.9 million. Andrx and Cybear
have entered into a corporate services agreement pursuant to which Andrx
provides certain legal, financial and administrative services to Cybear in
exchange for $120,000 per annum. Andrx and Cybear have also entered into a tax
allocation agreement pursuant to which Cybear will be responsible for its tax
liabilities as if it had filed separate income tax returns. Cybear recorded a
tax benefit of $1.9 million for the year ended December 31, 1998 and $1.4
million for the three months ended March 31, 1999 reflecting the reimbursement
from Andrx for the utilization of Cybear's tax attributes pursuant to the tax
allocation agreement.
Immediately prior to consummation of this offering, Andrx will reimburse
Cybear for utilization of its tax attributes pursuant to the tax allocation
agreement. In its 1999 consolidation tax return, Andrx will utilize net
operating losses and research and development credits generated by Cybear
through the date of this offering. Cybear will record the tax reimbursement
from Andrx as a tax benefit and will reduce amounts due to Andrx.
Also immediately prior to this offering, Andrx will contribute its
advances due from Cybear, net of the reimbursement for tax attributes described
above, to Cybear's capital in exchange for an estimated 500,000 shares of
Cybear common stock. The number of shares will be determined by dividing the
amount of the advance by the public offering price. Cybear has also agreed with
Andrx that until the earlier to occur of March 31, 2002 or Andrx no longer
qualifying to use pooling of interest treatment for acquisitions, Cybear will
not, without Andrx's prior written consent, take any action through the
issuance of its securities to dilute Andrx's percentage interest of Cybear's
common stock below 55%. In the future, the independent directors of Cybear will
approve any transactions between Andrx and Cybear.
In September 1998, Andrx agreed to sell John Klein, the chairman of
Cybear, 333,333 shares of Cybear common stock for $1.0 million or its then
market price of $3.00 per share. This transaction was completed in January
1999. Andrx will use such proceeds to fund its loan commitment to Cybear. As
such transactions were effected at market prices, there is no impact on
Cybear's consolidated financial statements.
In September 1998, Andrx agreed to issue to Edward Goldman, M.D., Cybear's
president, upon payment of $50,000, a warrant to purchase 650,000 shares of
Cybear common stock held by Andrx at its then market price of $3.00 per share.
In addition, Andrx issued to Dr. Goldman stock options for 20,000 shares of
Andrx common stock having an exercise price, per share, of the fair market
value of Andrx stock at the close of business on the date of grant. The stock
to be issued pursuant to the exercise of the warrant includes piggyback
registration rights. The warrant is exercisable commencing on April 30, 1999.
The warrant is exercisable until April 30, 2006, subject to contractual
obligations with Andrx. As such transactions were effected at market prices,
there is no impact on Cybear's consolidated financial statements.
In November, 1998, Cybear entered into a five year sublease agreement with
Strategy Business and Technology Solutions, LLC, a company owned by John Klein,
whereby Cybear leases approximately 4,000 square feet of office space in
Ridgefield Park, New Jersey, to house its business development and sales
activities. Cybear agreed to pay $10,000 and $417 per month in base rent and
electricity, respectively. In addition, Cybear agreed to pay a security deposit
of $20,000. Cybear recorded an expense of $20,834 for this lease for the year
ended December 31, 1998 and $33,125 for the three months ended March 31, 1999.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a description of a credit agreement and other
funding obligations of Andrx to Cybear.
46
<PAGE>
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth certain information regarding the
beneficial ownership of the common stock of Cybear as of the date of this
prospectus, by each person owning more than 5% of such common stock, each of
the directors and executive officers and all directors and executive officers
as a group:
<TABLE>
<CAPTION>
PERCENT OF CLASS OUTSTANDING
NAME AND ADDRESS OF AMOUNT AND NATURE OF --------------------------------------
BENEFICIAL OWNER(1)(2) BENEFICIAL OWNERSHIP BEFORE OFFERING AFTER OFFERING(7)
- ------------------------------------- ------------------------- ----------------- ------------------
<S> <C> <C> <C>
Andrx Corporation ................... 12,536,667(6) 94.5% 77.1%
Alan P. Cohen ....................... 12,536,667(3)(6) 94.5% 77.1%
Edward E. Goldman, M.D. ............. 650,000(4) 4.9% 4.0%
John Klein .......................... 444,444(5) 3.3% 2.7%
Scott Lodin ......................... 12,536,667(3)(6) 94.5% 77.1%
Angelo Malahias ..................... 12,536,667(3)(6) 94.5% 77.1%
Melvin Sharoky, M.D. ................ 12,536,667(3)(6) 94.5% 77.1%
All officers and directors as a group
(8 persons) ....................... 12,981,111 97.0% 79.2%
</TABLE>
- ----------------
<TABLE>
<S> <C>
(1) Except as indicated, the address of each person named in the table is c/o Cybear, Inc., 5000 Blue
Lake Drive, Suite 200, Boca Raton, Florida 33431.
(2) Except as otherwise indicated, the persons named in this table have sole voting and investment
power with respect to all shares of common stock listed, which include shares of common stock
that such persons have the right to acquire a beneficial interest within 60 days from the date of
this prospectus.
(3) Represents shares of common stock owned indirectly by Andrx.
(4) Consists of shares of common stock issuable upon the exercise of a warrant issued to
Dr. Goldman by Andrx exercisable beginning on April 30, 1999 having an exercise price of $3.00
per share.
(5) Includes 111,111 shares of common stock issuable upon the exercise of stock options that vest
within 60 days from the date of this prospectus.
(6) Includes 650,000 shares of common stock deemed to be beneficially owned by Edward E.
Goldman, M.D.
(7) Does not give effect to the issuance of an estimated 500,000 shares of common stock to Andrx in
connection with the conversion of amounts due to Andrx. See "Certain Transactions."
</TABLE>
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
As of the date of this prospectus, Cybear's authorized capital stock
consists of 25,000,000 shares of common stock, par value $.001 per share,
13,269,400 shares of which are outstanding and 2,000,000 shares of preferred
stock, par value $.01 per share, none of which is outstanding.
COMMON STOCK
Subject to the rights of the holders of any preferred stock that may be
outstanding (none are be outstanding as of the date of this prospectus), each
holder of common stock on the applicable record date is entitled to receive any
dividends declared by the board of directors out of available funds and, in the
event of our liquidation, to share pro rata in any distribution of our assets
after we have paid or provided for our liabilities and the liquidation
preference of any outstanding preferred stock.
Each holder of common stock is entitled to one vote for each share held of
record on the applicable record date on all matters presented to a vote of
stockholders, including the election of
47
<PAGE>
directors. Holders of common stock have no cumulative voting rights or
preemptive rights to purchase or subscribe for any stock or other securities,
and there are no conversion rights or redemption or sinking fund provisions
with respect to such stock. All outstanding shares of common stock are, and the
shares of common stock being sold in this offering will be, when issued, fully
paid and nonassessable.
PREFERRED STOCK
Cybear's board of directors has the authority to issue 2,000,000 shares of
preferred stock in one or more series and to fix, by resolution, conditional,
full, limited or no voting powers, and the designations, preferences the number
of shares, dividend rates, conversion or exchange rights, redemption provisions
or other special rights of the shares constituting any class or series as the
board may deem advisable without any further vote or action by the
stockholders. Any shares of preferred stock issued by Cybear could have
priority over the common stock with respect to dividend or liquidation rights
or both and could have voting and other rights of stockholders. Cybear has no
present plans to issue shares of preferred stock.
ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
GENERAL. Certain provisions of our certificate of incorporation and bylaws
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt, including attempts that might result in a
premium being paid over the market price for the shares held by stockholders.
PROVISIONS FOR FILLING VACANT DIRECTORSHIPS AND INCREASING SIZE OF BOARD.
Our certificate of incorporation and bylaws authorize only the board of
directors to fill vacant directorships or increase the size of the board. This
provision may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by removal with its own nominees.
SPECIAL MEETING OF STOCKHOLDERS. Cybear's certificate of incorporation and
bylaws provide that special meetings of Cybear's stockholders may be called
only by a majority of the board of directors, the president of Cybear or
holders of not less than one half of Cybear's outstanding voting stock.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns or within three years prior
to the proposed business combination, did own 15% or more of the corporation's
voting stock.
TRANSFER AGENT
The transfer agent for Cybear's common stock is Continental Stock Transfer
& Trust Company, New York, New York.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
When the offering is completed, Cybear will have a total of 16,269,400
shares of common stock outstanding, excluding an estimated 500,000 shares of
common stock to be issued to Andrx Corporation. See "Certain Transactions." The
3,000,000 shares offered by this prospectus, and 269,400 currently outstanding
shares of common stock, will be freely tradable unless they are purchased by
"affiliates" of Cybear, as defined in Rule 144 under the Securities Act of
1933. The remaining 13,000,000 shares are restricted, which means they were
originally sold in certain types of offerings that were not subject to a
registration statement filed with the Securities and Exchange Commission. These
restricted shares may be resold only through registration under the Securities
Act of 1933 or under an available exemption from registration, such as provided
through Rule 144. Substantially all of these shares will be eligible for resale
beginning in November 1999, subject to the volume limitations and other
requirements of Rule 144.
Andrx and our officers and directors, which hold a total of 12,870,000
shares of common stock, have agreed to a 180-day lock-up with respect to these
shares. This generally means that they cannot sell these shares during the 180
days following the date of this prospectus. See "Underwriting" for additional
details. After the 180-day lock-up period, these shares may be sold in
accordance with Rule 144.
49
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
Cybear has entered into an underwriting agreement with the underwriters
named below. Warburg Dillon Read LLC, CIBC World Markets Corp. and Gruntal &
Co., L.L.C. are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares of common stock set forth opposite its
name below.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------------------------------- -----------------
<S> <C>
Warburg Dillon Read LLC ...........
CIBC World Markets Corp. ..........
Gruntal & Co., L.L.C. ............. ---------
Total ............................. 3,000,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other
than those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The representatives have advised Cybear that the underwriters propose to
offer the shares directly to the public at the public offering price that
appears on the cover page of this prospectus. In addition, the representatives
may offer some of the shares to certain securities dealers at such price less a
concession of $ per share. The underwriters may also allow, and such
dealers may allow, a concession not in excess of $ per share to certain
other dealers. After the shares are released for sale to the public, the
representatives may change the offering price and other selling terms at
various times.
Cybear has granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 450,000 additional shares
from Cybear to cover over-allotments. If the underwriters exercise all or part
of this option, they will purchase shares covered by the option at the public
offering price that appears on the cover page of this prospectus, less the
underwriting discount. If this option is exercised in full, the total price to
public will be $ , the total proceeds to Cybear will be $ . The
underwriters have severally agreed that, to the extent the over-allotment
option is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the above table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by Cybear:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE OF TOTAL WITH FULL EXERCISE
PER SHARE OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
- ----------- --------------------------- -------------------------
<S> <C> <C>
$ $ $
</TABLE>
Cybear estimates that the total expenses of the offering, excluding the
underwriting discount, will be approximately $600,000.
Cybear has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
50
<PAGE>
Cybear, its officers and directors and Andrx have agreed to a 180-day lock
up with respect to 12,870,000 shares of common stock and certain other Cybear
securities that they beneficially own, including securities that are
convertible into shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. This means that, subject to certain
exceptions, for a period of 180 days following the date of this prospectus,
Cybear and such persons may not offer, sell, pledge or otherwise dispose of
these Cybear securities without the prior written consent of Warburg Dillon
Read LLC.
The representatives have informed Cybear that they do not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this prospectus.
The underwriters have reserved for sale up to shares for employees,
directors and certain other persons associated with Cybear. These reserved
shares will be sold at the public offering price that appears on the cover of
this prospectus. The number of shares available for sale to the general public
in the offering will be reduced to the extent reserved shares are purchased by
such persons. The underwriters will offer to the general public, on the same
terms as other shares offered by this prospectus, any reserved shares that are
not purchased by such persons.
Prior to this offering, there has been only a very limited public market
for the common stock. Consequently, the offering price for the common stock has
been determined by negotiations between Cybear and the underwriters and is not
necessarily related to Cybear's asset value, net worth or other established
criteria of value. The factors considered in such negotiations, in addition to
prevailing market conditions, included the history of and prospects for the
industry in which Cybear competes, an assessment of Cybear's management,
Cybear's prospects, its capital structure and certain other factors as were
deemed relevant.
Rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
/bullet/ Stabilizing transactions - The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price of
the shares, so long as stabilizing bids do not exceed a specified maximum.
/bullet/ Over-allotments and syndicate covering transactions - The
underwriters may create a short position in the shares by selling more
shares than are set forth on the cover page of this prospectus. If a short
position is created in connection with the offering, the representatives
may engage in syndicate covering transactions by purchasing shares in the
open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option.
/bullet/ Penalty bids - If the representatives purchase shares in the open
market in a stabilizing transaction or syndicate covering transaction,
they may reclaim a selling concession from the underwriters and selling
group members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither Cybear nor the underwriters makes any representation or prediction
as to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.
Cybear and the underwriters expect that the shares will be ready for
delivery on the fourth business day following the date of this prospectus.
Under Securities and Exchange Commission
51
<PAGE>
regulations, secondary market trades are required to settle in three business
days following the trade date (commonly referred to as "T-3"), unless the
parties to the trade agree to a different settlement cycle. As noted above, the
shares will settle in T-3. Therefore, purchasers who wish to trade on the date
of this prospectus or during the next 3 succeeding business days must specify
an alternate settlement cycle at the time of the trade to prevent a failed
settlement. Purchasers of the shares who wish to trade shares on the date of
this prospectus or during the next 3 succeeding business days should consult
their own advisors.
LEGAL MATTERS
- --------------------------------------------------------------------------------
Broad and Cassel, a partnership including professional associations,
Miami, Florida will give an opinion for Cybear regarding the validity of the
common stock offered under this prospectus. Greenberg Traurig, P.A., Miami,
Florida will give an opinion for the underwriters regarding the validity of the
common stock offered under this prospectus.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements included in this prospectus have been audited by
Arthur Andersen LLP, independent certified public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
- --------------------------------------------------------------------------------
Cybear has filed a registration statement on Form S-1 with the Securities
and Exchange Commission in connection with this offering. In addition, Cybear
files annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
the registration statement and any other documents filed by Cybear at the
Securities and Exchange Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the Public Reference
Room. Cybear's Securities and Exchange Commission filings are also available to
the public at the Securities and Exchange Commission's Internet site at http://
www.sec.gov.
This prospectus is part of the registration statement and does not contain
all of the information included in the registration statement. Whenever
reference is made in this prospectus to any contract or other document of
Cybear, the reference may not be complete and you should refer to the exhibits
that are part of the registration statement for a copy of the contract or the
document.
52
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants .......... F-2
Consolidated Balance Sheets ................................. F-3
Consolidated Statements of Operations ....................... F-4
Consolidated Statements of Shareholders' Deficit ............ F-5
Consolidated Statements of Cash Flows ....................... F-6
Notes to Consolidated Financial Statements .................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Cybear, Inc.:
We have audited the accompanying consolidated balance sheets of Cybear,
Inc. (a Delaware corporation in the development stage) and subsidiary, a 95%
owned subsidiary of Andrx Corporation and subsidiaries, as of December 31, 1997
and 1998, and the related consolidated statements of operations, shareholders'
deficit and cash flows for the period from February 5, 1997 (inception) to
December 31, 1997 and for the year ended December 31, 1998. 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 audits.
We conducted our audits 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 audits provide 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 Cybear, Inc. and subsidiary
as of December 31, 1997 and 1998, and the results of their operations and their
cash flows for the period from February 5, 1997 (inception) to December 31,
1997 and for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 12, 1999.
F-2
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MARCH 31,
1997 1998 1999
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 1,000 $ 3,983 $ 325,479
Receivable from Blue Lake Ltd. ............................. -- 366,000 --
Prepaid expenses ........................................... 30,707 194,385 348,091
------------ ------------ ------------
Total current assets ...................................... 31,707 564,368 673,570
Property and equipment, net ................................. 189,065 2,406,629 3,310,013
Software development costs, net ............................. -- 358,000 402,444
Software license ............................................ 160,000 -- --
Other assets ................................................ 14,684 2,954 84,242
------------ ------------ ------------
Total assets .............................................. $ 395,456 $ 3,331,951 $ 4,470,269
============ ============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable ........................................... $ 64,813 $ 1,153,059 $ 613,215
Accrued liabilities ........................................ 76,533 301,782 328,598
Due to Andrx Corporation ................................... 1,268,773 2,344,727 5,420,624
------------ ------------ ------------
Total current liabilities ................................. 1,410,119 3,799,568 6,362,437
------------ ------------ ------------
Commitments and contingencies (Notes 7 and 11)
Shareholders' deficit:
Convertible preferred stock, $.01 par value; 2,000,000 shares
authorized, none issued and outstanding at December 31,
1997 and 1998 and March 31, 1999 (unaudited) .............. -- -- --
Common stock, $.001 par value; 25,000,000 shares
authorized, 13,000,000 shares issued and outstanding at
December 31, 1997 and 13,269,400 shares issued and
outstanding at December 31, 1998 and March 31, 1999
(unaudited) ............................................... 13,000 13,269 13,269
Additional paid-in capital .................................. 530,906 3,558,695 3,649,057
Deficit accumulated during development stage ................ (1,558,569) (4,039,581) (5,554,494)
------------ ------------ ------------
Total shareholders' deficit ............................... (1,014,663) (467,617) (1,892,168)
------------ ------------ ------------
Total liabilities and shareholders' deficit .............. $ 395,456 $ 3,331,951 $ 4,470,269
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------- --------------------
<S> <C> <C>
Revenues:
Software development services to
Andrx Corporation ..................... $ 95,927 $ --
------------ ------------
Operating expenses:
Software development .................... 945,497 1,621,422
Selling, general and administrative ..... 680,779 2,264,252
Write-off of software license ........... -- 159,897
Litigation settlement charge ............ -- 125,000
------------ ------------
Total operating expenses ................. 1,626,276 4,170,571
------------ ------------
Loss from operations ..................... (1,530,349) (4,170,571)
Interest expense on due to
Andrx Corporation ....................... (28,220) (210,441)
Interest income .......................... -- --
------------ ------------
Loss before income taxes ................. (1,558,569) (4,381,012)
Income tax benefit ....................... -- 1,900,000
------------ ------------
Net loss ................................. $ (1,558,569) $ (2,481,012)
============ ============
Basic and diluted net loss per share ..... $ (0.12) $ (0.19)
============ ============
Basic and diluted weighted
average shares of common
stock outstanding ....................... 12,768,303 13,030,999
============ ============
<CAPTION>
FOR THE THREE MONTHS CUMULATIVE FROM
ENDED MARCH 31, FEBRUARY 5, 1997
----------------------------- (INCEPTION) TO
1998 1999 MARCH 31, 1999
------------- --------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Software development services to
Andrx Corporation ..................... $ -- $ -- $ 95,927
----------- ------------ ------------
Operating expenses:
Software development .................... 305,793 494,311 3,061,230
Selling, general and administrative ..... 224,681 2,330,604 5,275,635
Write-off of software license ........... -- -- 159,897
Litigation settlement charge ............ -- -- 125,000
----------- ------------ ------------
Total operating expenses ................. 530,474 2,824,915 8,621,762
----------- ------------ ------------
Loss from operations ..................... (530,474) (2,824,915) (8,525,835)
Interest expense on due to
Andrx Corporation ....................... (32,102) (90,513) (329,174)
Interest income .......................... -- 515 515
----------- ------------ ------------
Loss before income taxes ................. (562,576) (2,914,913) (8,854,494)
Income tax benefit ....................... -- 1,400,000 3,300,000
----------- ------------ ------------
Net loss ................................. $ (562,576) $ (1,514,913) $ (5,554,494)
=========== ============ ============
Basic and diluted net loss per share ..... $ (0.04) $ (0.11) $ (0.43)
=========== ============ ============
Basic and diluted weighted
average shares of common
stock outstanding ....................... 13,000,000 13,269,400 12,947,899
=========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------- ------------- ----------
<S> <C> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) ................ -- $ -- -- $ --
Issuance of shares of common stock to
Andrx Corporation as promoter .............. -- -- 12,870,000 12,870
Issuance of shares of convertible
preferred stock ............................ 130,000 130 -- --
Shares of common stock issued in connection
with conversion of shares of convertible
preferred stock ............................ (130,000) (130) 130,000 130
Options granted to non-employees ............ -- -- -- --
Net loss .................................... -- -- -- --
-------- ---- ---------- -------
BALANCE, DECEMBER 31, 1997 .................. -- -- 13,000,000 13,000
Shares of common stock issued in connection
with merger with 1997 Corp. ................ -- -- 269,400 269
Conversion of due to Andrx Corporation
upon consummation of merger with
1997 Corp. ................................. -- -- -- --
Options granted to non-employees ............ -- -- -- --
Net loss .................................... -- -- -- --
-------- ---- ---------- -------
BALANCE, DECEMBER 31, 1998 .................. -- -- 13,269,400 13,269
Options granted to non-employees
(unaudited) ................................ -- -- -- --
Net loss (unaudited) ........................ -- -- -- --
-------- ---- ---------- -------
BALANCE, MARCH 31, 1999 (UNAUDITED) ......... -- $ -- 13,269,400 $13,269
======== ==== ========== =======
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING TOTAL
PAID-IN DEVELOPMENT SHAREHOLDERS'
CAPITAL STAGE DEFICIT
------------- --------------- ----------------
<S> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) ................ $ -- $ -- $ --
Issuance of shares of common stock to
Andrx Corporation as promoter .............. 487,130 -- 500,000
Issuance of shares of convertible
preferred stock ............................ 29,870 -- 30,000
Shares of common stock issued in connection
with conversion of shares of convertible
preferred stock ............................ -- -- --
Options granted to non-employees ............ 13,906 -- 13,906
Net loss .................................... -- (1,558,569) (1,558,569)
---------- ----------- -----------
BALANCE, DECEMBER 31, 1997 .................. 530,906 (1,558,569) (1,014,663)
Shares of common stock issued in connection
with merger with 1997 Corp. ................ (269) -- --
Conversion of due to Andrx Corporation
upon consummation of merger with
1997 Corp. ................................. 3,012,452 -- 3,012,452
Options granted to non-employees ............ 15,606 -- 15,606
Net loss .................................... -- (2,481,012) (2,481,012)
---------- ----------- -----------
BALANCE, DECEMBER 31, 1998 .................. 3,558,695 (4,039,581) (467,617)
Options granted to non-employees
(unaudited) ................................ 90,362 -- 90,362
Net loss (unaudited) ........................ -- (1,514,913) (1,514,913)
---------- ----------- -----------
BALANCE, MARCH 31, 1999 (UNAUDITED) ......... $3,649,057 $(5,554,494) $(1,892,168)
========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................... $ (1,558,569) $ (2,481,012)
Adjustments to reconcile net loss to net
cash used in operating activities--
Write-off of software license ............. -- 159,897
Provision for litigation settlement ....... -- 125,000
Depreciation and amortization ............. 65,376 139,268
Changes in operating assets
and liabilities:
Receivable from Blue Lake Ltd. ........... -- (366,000)
Prepaid expenses ......................... (30,707) (163,678)
Other assets ............................. (14,684) 11,730
Accounts payable ......................... 64,813 1,088,246
Accrued liabilities ...................... 76,533 100,249
------------ ------------
Net cash used in
operating activities .................. (1,397,238) (1,386,300)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ........ (240,535) (2,341,123)
Software development costs ................. -- (358,000)
Purchase of software license ............... (160,000) --
------------ ------------
Net cash used in investing activities..... (400,535) (2,699,123)
------------ ------------
Cash flows from financing activities:
Advances from Andrx Corporation
net of utilization of Cybear's tax
attributes ............................... 1,268,773 4,088,406
Proceeds from issuance of shares
of common stock .......................... 500,000 --
Proceeds from promissory note issued
for purchase of shares of convertible
preferred stock .......................... 30,000 --
------------ ------------
Net cash provided by
financing activities ................... 1,798,773 4,088,406
------------ ------------
Net increase in cash ........................ 1,000 2,983
Cash, beginning of period ................... -- 1,000
------------ ------------
Cash, end of period ......................... $ 1,000 $ 3,983
============ ============
Supplemental disclosure of
non-cash activities:
Conversion of due to Andrx Corporation
into additional paid-in capital ............ $ -- $ 3,012,452
============ ============
<CAPTION>
FOR THE THREE MONTHS ENDED CUMULATIVE FROM
MARCH 31, FEBRUARY 5, 1997
------------------------------ (INCEPTION) TO
1998 1999 MARCH 31, 1999
------------- ---------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................... $ (562,576) $ (1,514,913) $ (5,554,494)
Adjustments to reconcile net loss to net
cash used in operating activities--
Write-off of software license ............. -- -- 159,897
Provision for litigation settlement ....... -- -- 125,000
Depreciation and amortization ............. 20,383 190,982 395,626
Changes in operating assets
and liabilities:
Receivable from Blue Lake Ltd. ........... -- 366,000 --
Prepaid expenses ......................... 11,903 (153,706) (348,091)
Other assets ............................. -- (20,800) (23,754)
Accounts payable ......................... (27,585) (539,844) 613,215
Accrued liabilities ...................... (39,385) 26,816 203,598
---------- ------------ ------------
Net cash used in
operating activities .................. (597,260) (1,645,465) (4,429,003)
---------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ........ (69,596) (1,053,936) (3,635,594)
Software development costs ................. -- (55,000) (413,000)
Purchase of software license ............... -- -- (160,000)
---------- ------------ ------------
Net cash used in investing activities..... (69,596) (1,108,936) (4,208,594)
---------- ------------ ------------
Cash flows from financing activities:
Advances from Andrx Corporation
net of utilization of Cybear's tax
attributes ............................... 666,856 3,075,897 8,433,076
Proceeds from issuance of shares
of common stock .......................... -- -- 500,000
Proceeds from promissory note issued
for purchase of shares of convertible
preferred stock .......................... -- -- 30,000
---------- ------------ ------------
Net cash provided by
financing activities ................... 666,856 3,075,897 8,963,076
---------- ------------ ------------
Net increase in cash ........................ -- 321,496 325,479
Cash, beginning of period ................... -- 3,983 --
---------- ------------ ------------
Cash, end of period ......................... $ 1,000 $ 325,479 $ 325,479
========== ============ ============
Supplemental disclosure of
non-cash activities:
Conversion of due to Andrx Corporation
into additional paid-in capital ............ $ -- $ -- $ 3,012,452
========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-6
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(1) GENERAL
Cybear, Inc. ("Cybear" or the "Company"), a Delaware corporation in the
development stage, was incorporated on February 5, 1997. As of December 31,
1998, Cybear, Inc. was a 95% owned subsidiary of Andrx Corporation ("Andrx").
Cybear offers products and services using the Internet and Internet-based
applications designed to improve the efficiency of day-to-day administrative
and communications tasks of healthcare providers that interact to manage
patient care. The Company is developing its Solutions product line, an Internet
Service Provider ("ISP") system that provides Internet access and
Internet-based productivity applications to physicians, physician
organizations, pharmacies and hospitals and allows them to obtain information
from Cybear's web site and other Internet locations. From February 5, 1997
(inception) through December 31, 1998, the Company's principal activities have
consisted of developing its products, establishing its administrative, selling
and marketing, customer support and network operations infrastructure and
providing software development services to Andrx.
RECAPITALIZATION
On November 20, 1998, Cybear, Inc. ("Cybear, Inc. (FL)"), a Florida
corporation, merged with 1997 Corp. (the "Merger") pursuant to a Merger
Agreement and Plan of Reorganization, dated July 15, 1998 ("the Merger
Agreement"). 1997 Corp. was a "blank check" company that had a registration
statement on file with the Securities and Exchange Commission ("SEC") to seek a
business combination with an operating entity. Upon consummation of the Merger,
Cybear, Inc. (FL) became a wholly owned subsidiary of 1997 Corp. and 1997 Corp.
changed its name to Cybear, Inc. 1997 Corp. (now called Cybear, Inc.) remains
the continuing registrant for SEC reporting purposes. The Merger was intended
to be a tax-free reorganization for federal income tax purposes and was treated
as a recapitalization of Cybear, Inc. (FL) for accounting and financial
reporting purposes.
Under the terms of the Merger Agreement, all outstanding Cybear, Inc. (FL)
common shares were cancelled and were converted by virtue of the Merger into a
total of 13,000,000 1997 Corp. common shares. All outstanding employee stock
options of Cybear, Inc. (FL) were assumed by 1997 Corp. There was no change in
the ownership of the 270,000 registered shares of 1997 Corp. common stock
outstanding immediately prior to the Merger (after giving effect to a
five-for-one common stock dividend payable on each of the 45,000 outstanding
shares of 1997 Corp.). As required by Rule 419 promulgated pursuant to the
Securities Act of 1933, as amended, stockholders of 1997 Corp. were required to
reconfirm their purchase of 1997 Corp.'s common shares and each stockholder who
rejected or failed to approve the Merger Agreement was paid his or her pro rata
share of the funds deposited in the Rule 419 escrow account at Continental
Stock Transfer and Trust Company, or approximately $5.13 per share. Funds were
returned for a total of 100 shares.
The result of the Merger was that the holders of Cybear Inc. (FL)'s common
stock prior to the Merger own 13,000,000 shares of Cybear, Inc.'s common stock
or approximately 98% of Cybear, Inc.'s common stock and the 1997 Corp.'s
original shareholders own 269,400 shares of Cybear, Inc.'s common stock or
approximately 2% of Cybear, Inc.'s common stock.
MANAGEMENT'S PLANS
From February 5, 1997 (inception) through March 31, 1999, the Company has
incurred a net loss of $5,554,494 and has been dependent upon funding from
Andrx. Management anticipates incurring
F-7
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(1) GENERAL--(CONTINUED)
additional net losses in the near term, as the focus of the Company's business
is to develop and market its products. In September 1998, Andrx and Cybear
entered into a credit agreement with respect to Andrx's funding obligations to
Cybear. The credit agreement provides that Andrx will continue to fund Cybear's
operations until Cybear is in a position to raise at least $4,000,000 on its
own (whether through debt or equity) or 12 months from the consummation of the
Merger, whichever date is earlier and that Andrx will make at least $3,000,000
available to Cybear on Cybear's demand. Interest will accrue on the unpaid
principal amount from the date of borrowing until the principal amount is
repaid in full, at an annual interest rate equal to the prime rate plus 1/2%
(see Note 8).
Cybear is planning to introduce Solutions MD to the healthcare community
in the first quarter of 1999. The Company has not yet completed third-party
testing of its Internet-based management applications or the development or
testing of certain system enhancements. The Company will be required to commit
considerable time, effort and resources to finalize such development and adapt
its software to satisfy specific requirements of potential customers. There can
be no assurance that Cybear will successfully develop its products, achieve or
sustain profitability or positive cash flow from its operations.
The likelihood of the success of the Company must be considered in light
of the problems, expenses, complications and delays frequently encountered in
connection with the development of new business ventures. Cybear's business
risks include its limited operating history, its history of losses, the
emerging and competitive nature of its markets, the greater financial,
marketing and other resources of its competitors, the rapid technology change
in its industry, changes in government regulations, dependence on network
infrastructure, telecommunications carriers and content providers, dependence
on a limited number of key personnel, dependence on continued growth in the use
of the Internet and its adoption as an advertising medium, security risks
involved with Internet commerce and market acceptance and profitability of its
products.
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999 and for the three
months ended March 31, 1998 and 1999 and for the cumulative period from
February 5, 1997 (inception) to March 31, 1999 are unaudited. In the opinion of
management, such unaudited financial statements have been prepared by Cybear
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission. The unaudited financial statements reflect, in the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
results of operations and cash flows. The unaudited results of operations and
the unaudited cash flows for the three months ended March 31, 1999, are not
necessarily indicative of the results of operations or cash flows which may be
expected for the remainder of 1999.
F-8
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Cybear, Inc. and its subsidiary. All significant intercompany transactions and
balances have been eliminated in consolidation.
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.
PROPERTY AND EQUIPMENT, NET
Property and equipment is recorded at cost less accumulated depreciation
or amortization. Depreciation or amortization is provided using the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Computer hardware and software ......... 3 years
Furniture and fixtures ................. 5 years
Leasehold improvements ................. Lesser of useful life or term of lease
</TABLE>
Major renewals and betterments are capitalized, while maintenance and
repairs are expensed as incurred.
SOFTWARE LICENSE, NET
In 1997, Cybear entered into an agreement with a third party to license
the use of their software as a means to handle certain types of electronic data
interchanges ("EDI") messages in the Company's Internet-based management
applications. As of December 31, 1997, the Company had capitalized $160,000
under this agreement. In the fourth quarter of 1998, new EDI standards were
approved for use in the medical systems community in the U.S. and are now
released as open standards to the development community. The Company has now
adopted these new standards to be compatible with the industry standards and
has integrated them into its software development process. This has rendered
obsolete the software licensed by the Company. Accordingly, the Company has
written off its software license in its consolidated statement of operations
for the year ended December 31, 1998.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company utilizes the provisions of Financial Accounting Standards
Board ("FASB") Statement on Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of
F-9
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Long-Lived Assets and for Long-Lived Assets to be Disposed of" which requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstance indicate that the carrying amount of an asset may not be
recoverable. To determine a loss, if any, to be recognized, the book value of
the asset would be compared to the market value or expected future cash flow
value. Except for the write-off of its software license as noted above, such
provisions had no impact on the Company's financial position or results of
operations as of or for the period from February 5, 1997 (inception) to
December 31, 1997 and for the year ended December 31, 1998.
REVENUE RECOGNITION
Software development service revenues which to date have been rendered to
Andrx are recognized at the time the services are rendered.
SOFTWARE DEVELOPMENT COSTS
SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed", requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based on the Company's product development process, technological feasibility
is established upon completion of a working model. Once technological
feasibility has been established, such costs are capitalized until the software
has completed beta testing and is generally available. Software development
costs are amortized, on a product-by-product basis, using the straight-line
method over a maximum of five years or the expected life of the product,
whichever is less. As of December 31, 1998, the Company has achieved technical
feasibility for Solutions MD but not for its Internet-based management
applications. Accordingly, the capitalized software development costs represent
only costs associated with the development of the Company's Solutions MD
product. Software development costs for Solutions MD were incurred with
third-party vendors. The Company did not record any amortization of its
capitalized software development costs in the year ended December 31, 1998 as
it had not yet released Solutions MD.
START-UP COSTS
All costs to organize the Company and start up its operations are expensed
as incurred.
STOCK-BASED COMPENSATION
Under the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", companies can either measure the compensation cost of equity
instruments issued to employees under employee compensation plans using a fair
value based method, or can continue to recognize compensation cost using the
intrinsic value method under the provisions of Accounting Principles Board
Opinion ("APB") No. 25. However, if the provisions of APB No. 25 are applied,
pro forma disclosures of net income or loss and earnings or loss per share must
be presented in the financial statements as if the fair value method had been
applied. For the period from February 5, 1997 (inception) to
F-10
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
December 31, 1997 and for the year ended December 31, 1998, the Company
recognized compensation costs for options granted to non-employees under the
provisions of APB No. 25, and the Company has provided the expanded disclosure
required by SFAS No. 123 (see Note 10).
INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes". The provisions of SFAS No. 109 require, among
other things, recognition of future tax benefits measured at enacted rates
attributable to the deductible temporary differences between the financial
reporting and income tax bases of assets and liabilities and to tax net
operating loss carryforwards to the extent that the realization of said
benefits is "more likely than not". The Company's taxable results will be
included in the consolidated income tax return of Andrx as long as Andrx owns
at least 80% of the common stock of the Company (see Note 6).
NET LOSS PER SHARE
SFAS No. 128, "Earnings Per Share". SFAS No. 128 specifies the
computation, presentation and disclosure requirements for earnings or loss per
share. The provisions of SFAS No. 128 are effective for financial statements
for periods ended after December 15, 1997. The Company has adopted the
provisions of SFAS No. 128.
For the period from February 5, 1997 (inception) to December 31, 1997, and
for the year ended December 31, 1998, basic and diluted net loss per share is
based on the weighted average number of shares of common stock outstanding.
Since the effect of common stock equivalents was antidilutive, all such
equivalents were excluded in diluted loss per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1997 and 1998, the carrying amounts of the receivable
from Blue Lake Ltd., the accounts payable, accrued liabilities and the due to
Andrx approximate fair value. In accordance with SFAS No. 107, "Disclosures
about fair value of financial instruments", the fair value of the due to Andrx
was estimated based on future cash flows discounted at current interest rates
available to the Company for instruments with similar characteristics.
COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income", requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The Company has adopted
the provisions of SFAS No. 130 as of January 1, 1998. The adoption of the
provisions of this standard had no impact on the Company's existing reporting
disclosures. Cybear's comprehensive losses and net losses are the same for all
periods presented.
F-11
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
BUSINESS SEGMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", establishes standards for reporting information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company has
adopted the provisions of SFAS No. 131 in the year ended December 31, 1998, as
required. Currently, the Company does not believe it has any separately
reportable business segments or other disclosure information required by the
Statement.
DERIVATIVES
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the provision of SFAS No. 133 as of the beginning
of any fiscal quarter after issuance. SFAS No. 133 cannot be applied
retroactively. SFAS No. 133 must be applied to (a) derivative instruments and
(b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997 (and, at
the Company's election, before January 1, 1998). The Company has not yet
quantified the impacts of adopting SFAS No. 133 on its financial statements and
has not determined the timing of or method of adoption of SFAS No. 133.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current year presentation.
(3) RECEIVABLE FROM BLUE LAKE LTD.
In September 1998, the Company entered into a lease agreement with Blue
Lake Ltd. ("Blue Lake") to house its corporate headquarters and network systems
(see Note 7). As part of the lease agreement, Blue Lake has agreed to pay the
Company $406,667 ("Landlord Contribution") of the total costs incurred by the
Company to improve the rented space prior to its occupancy. Payment of the
Landlord Contribution is due 30 days from the date of receipt by Blue Lake of
copy of an invoice and other support documents from the contractor. As of
December 31, 1998, 90% of the leasehold
F-12
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
improvements were completed and invoiced, and as such the Company recorded a
receivable of $366,000 from Blue Lake. Such receivable was collected during the
three months ended March 31, 1999.
(4) PROPERTY AND EQUIPMENT, NET
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1997 1998
------------ --------------
<S> <C> <C>
Computer hardware and software .......................... $ 164,410 $ 1,806,831
Furniture and fixtures .................................. 73,408 241,911
Leasehold improvements .................................. 2,717 532,916
--------- -----------
240,535 2,581,658
Less: accumulated depreciation and amortization ......... (51,470) (175,029)
--------- -----------
Property and equipment, net ............................. $ 189,065 $ 2,406,629
========= ===========
</TABLE>
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1998
----------- ------------
<S> <C> <C>
Payroll and employee benefits ......... $ 76,533 $ 116,782
Litigation settlement charge .......... -- 125,000
Other ................................. -- 60,000
-------- ---------
$ 76,533 $ 301,782
======== =========
</TABLE>
(6) INCOME TAXES
The components of the income tax benefit are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
------ -------------
<S> <C> <C>
Current .......... $ -- $1,900,000
Deferred ......... -- --
---- ----------
Total ............ $ -- $1,900,000
==== ==========
</TABLE>
The Company and Andrx have a tax allocation agreement that provides, among
other things, for the allocation of federal income tax liabilities to the
Company at the approximate amounts which would have been computed as if the
Company had filed separate income tax returns. The tax benefit reflects the
reimbursement from Andrx for the utilization of Cybear's tax attributes
pursuant to the tax allocation agreement.
F-13
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(6) INCOME TAXES--(CONTINUED)
Deferred income taxes represent the tax effect of the difference between
the financial reporting and tax bases of assets and liabilities. The major
components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1998
------------ ------------
<S> <C> <C>
Net operating loss carryforward ......... $ 576,500 $ 324,989
Tax over book depreciation .............. (2,597) (7,525)
Operating reserves ...................... -- 24,704
Software license ........................ (50,180) --
---------- ----------
523,723 342,168
Valuation allowance ..................... (523,723) (342,168)
---------- ----------
Net ................................... $ -- $ --
========== ==========
</TABLE>
As of December 31, 1998, the Company has a net operating loss carryforward
in the amount of approximately $800,000 which is available to offset future
earnings. Under the provisions of SFAS No. 109, the Company has provided a
valuation allowance to reserve against 100% of its net deferred tax assets
given the Company's history of net losses. Net operating loss carryforwards are
subject to review and possible adjustments by the Internal Revenue Service and
may be limited in the event of certain cumulative changes in the ownership
interest of significant shareholders over a three-year period in excess of 50%.
(7) COMMITMENTS
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with certain officers,
the terms of which expire at various dates through September 2003. Such
agreements provide for annual base salary, stock options, severance packages
and in some instances, signing and/or incentive bonuses or deferred
compensation.
Future commitments under employment agreements at December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999 ........... $ 608,000
2000 ........... 545,000
2001 ........... 450,000
2002 ........... 450,000
2003 ........... 313,000
----------
$2,366,000
==========
</TABLE>
F-14
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(7) COMMITMENTS--(CONTINUED)
In addition, as part of the Company's President's employment agreement,
Andrx has issued to the Company's President 20,000 options to purchase common
stock of Andrx, at its then current market price, vesting in four annual
increments of 5,000 shares on the anniversary of the date of grant and for
payment of $50,000, a warrant to purchase 650,000 shares of common stock of the
Company exercisable at its then market price of $3.00 per share, beginning on
April 30, 1999 ("Warrant Exercise Date"). The warrant expires seven years after
the Warrant Exercise Date, subject to contractual obligations with Andrx. As
such transactions were effected at market prices, there is no impact on the
Company's accompanying consolidated financial statements.
PRODUCT LIABILITY
Software products such as those to be offered by the Company frequently
contain undetected errors or failures when first introduced or as new versions
are released. Testing of the Company's products is particularly challenging
because it is difficult to simulate the wide variety of computing environments
in which the Company's potential customers may deploy these products. There can
be no assurance that defects, errors or difficulties will not cause delays in
product introductions, result in increased costs and diversion of development
resources, require design modifications or decrease market acceptance or
customer satisfaction with the Company's products. In addition, there can be no
assurance that, despite testing by the Company and by potential customers,
errors will not be found after commencement of commercial introduction,
resulting in loss of or delay in market acceptance, which could have a material
adverse effect upon the Company's business, operating results and financial
condition.
OPERATING LEASES
In September 1998, Cybear entered into a lease with Blue Lake Ltd. (see
Note 3) for 18,400 square feet of space in Boca Raton, Florida to house its
corporate headquarters and network systems. In January 1999, the leased
premises were enlarged to 21,648 square feet. The lease provides for an annual
base rent of $271,000 excluding taxes, insurance, utilities and common area
maintenance charges and has a five-year term commencing on January 1, 1999 with
one five-year renewal option at market rates.
In November, 1998, the Company entered into a sublease with Strategy
Business and Technology Solutions, LLC, a company owned by the chairman of the
Company (see Note 8), for 4,000 square feet of office space in Ridgefield Park,
New Jersey to house its business development and sales activities. The lease
provides for $120,000 and $5,000 in annual base rent and electricity,
respectively, and has a five-year term commencing on November 1, 1998. In
addition, the Company agreed to pay a security deposit of $20,000. For the year
ended December 31, 1998, the Company has recorded an expense of $20,834
relative to this lease which had not been paid as of December 31, 1998.
In October 1998, the Company entered into a three year lease with Bell
South Telecommunications, Inc. to provide business Internet service to the
Company. This lease is effective January 1999 and provides for $159,000 in
annual recurring charges.
F-15
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(7) COMMITMENTS--(CONTINUED)
In addition, the Company leases various office equipment and telephone
lines under operating leases. The following schedule summarizes future minimum
lease payments required under non-cancelable operating leases with terms
greater than one year, as of December 31, 1998:
<TABLE>
<S> <C>
1999 ........... $ 994,000
2000 ........... 1,004,000
2001 ........... 979,000
2002 ........... 566,000
2003 ........... 537,000
-----------
$ 4,080,000
===========
</TABLE>
Rent expense amounted to $130,000 for the period from February 5, 1997
(inception) to December 31, 1997 and $145,000 for the year ended December 31,
1998.
PREFERRED VENDOR AGREEMENTS
In 1998, the Company entered into a three-year strategic alliance with The
IPA Association of America ("TIPAAA"), the nation's leading trade association
focused on physician independent practice associations whereby Cybear will
become the preferred ISP and Internet business applications provider for
TIPAAA. In consideration of its preferred vendor status, Cybear agreed to make
to TIPAAA three $100,000 annual payments and to grant TIPAAA an option to
purchase 100,000 shares of its common stock . The first 30,000 of such options
have an exercise price of $3.00 per share and have a seven (7) year term and
shall vest at the rate of one share for every two TIPAAA physicians that become
and remain a Cybear user for a minimum of three months. In the event, that all
such options are not vested by the expiration date of the agreement, such
options shall vest in 2003. After such 30,000 have vested, the remaining 70,000
options will vest at the rate of one share for every two TIPAAA physicians that
become and remain a Cybear user for a minimum of three months during the term
of this agreement. These 70,000 options will have an exercise price equal to
the market price of Cybear common stock on the date such options vest and shall
have a five (5) year term from the date of grant. The Company will record
charges to earnings for the options that vest. In the year ended December 31,
1998, the Company has paid and recorded the annual fee of $100,000 to prepaid
expenses. The Company will start amortizing the annual fees over the term of
its contract with TIPAAA when its Solutions MD product is launched.
In February 1999, the Company entered into a three-year agreement with
PhyMatrix Corporation ("PhyMatrix") whereby Cybear will receive preferential
access to all PhyMatrix physicians to use Cybear's ISP and applications.
PhyMatrix will use Cybear's applications as the means of communicating with its
physician group practices and independent practice associations ("PhyMatrix
Business Partners") and PhyMatrix will market Cybear's ISP and its applications
for business development purposes. In consideration of its preferred vendor
status, Cybear agreed to, among other things, to consult with and provide
advice to PhyMatrix concerning hardware and software that may be required by
PhyMatrix to electronically communicate with the PhyMatrix Business Partners,
to create, when commercially practicable, applications and efficiencies that
are of interest to PhyMatrix,
F-16
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(7) COMMITMENTS--(CONTINUED)
to advance to PhyMatrix the funds for hook-ups or dial-up modems that Cybear
believes to be reasonably necessary to run Cybear's applications and establish
electronic communications between the PhyMatrix Business Partners, and after
recouping any advance noted above, pay to PhyMatrix, on a quarterly basis, 50%
of the net revenues (defined as the total amount collected by Cybear before
interest and taxes attributable thereto) that Cybear derives from PhyMatrix
directly or from the PhyMatrix Business Partners or from any business developed
through PhyMatrix.
LICENSE AGREEMENT
In October 1998, the Company entered into a three-year license agreement
effective January 1999, with Medimedia USA, Inc. ("MMUSA") whereby MMUSA
granted a non exclusive license to use the InfoScan formulary database
("Licensed Product") and related documentation for the lookup of drug formulary
statuses by the Company and its customers. The Company is permitted to use the
Licensed Product internally and to integrate it into its software products. In
return, the Company has agreed to pay MMUSA an annual database access fee of
$20,000 and a fee per prescription equal to 10% of the Company's receipts per
script from licensees, users, subscribers or retail pharmacies connecting to
Cybear client installations. Total fees paid by Cybear shall not exceed
$150,000 in any one year. In the year ended December 31, 1998, the Company has
paid and recorded the annual database access fee of $20,000 to prepaid
expenses. The annual fee will be amortized in 1999.
(8) RELATED PARTY TRANSACTIONS
The Company and Andrx have a corporate services agreement whereby Andrx
provides the Company with various services of its management such as executive
management, accounting and finance, legal, payroll and human resources. For the
period from February 5, 1997 (inception) to December 31, 1997 and for the year
ended December 31, 1998, the Company incurred amounts for these services based
upon mutually agreed upon allocation methods. Management believes that the
amounts incurred for these services approximate fair market value. Costs for
such services were $110,000 for the period from February 5, 1997 (inception) to
December 31, 1997 and $120,000 for the year ended December 31, 1998.
The Company and Andrx have a tax allocation agreement that provides, among
other things, for the allocation of federal income tax liabilities to the
Company at the approximate amounts which would have been computed as if the
Company had filed separate income tax returns. The Company recorded a tax
benefit of $1,900,000 for the year ended December 31, 1998 reflecting the
reimbursement from Andrx for the utilization of Cybear's tax attributes
pursuant to the tax allocation agreement (see Note 6).
Due to Andrx in the accompanying balance sheets represents advances from
Andrx to fund the Company's operations and the related accrued interest. Such
advances bear interest at prime (7.75% at December 31, 1998) plus 1/2%. On
November 20, 1998, upon consummation of the merger with 1997
F-17
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(8) RELATED PARTY TRANSACTIONS--(CONTINUED)
Corp., the then outstanding Due to Andrx of $3,012,452 was converted into
additional paid-in capital to the Company. In September 1998, Andrx and Cybear
entered into a credit agreement with respect to Andrx's funding obligations to
Cybear. The credit agreement provides that Andrx will continue to fund Cybear's
operations until Cybear is in a position to raise at least $4,000,000 on its
own (whether through debt or equity) or 12 months from the consummation of the
merger with 1997 Corp., whichever date is earlier and that Andrx will make at
least $3,000,000 available to Cybear on Cybear's demand. The Company recorded
$28,220 in interest expense on the Due to Andrx for the period from February 5,
1997 (inception) to December 31, 1997 and $210,441 for the year ended December
31, 1998. As of December 31, 1998, the Company has not paid any interest
expense on the Due to Andrx.
From February 5, 1997 (inception) to December 31, 1997, the Company
provided Andrx with software development services. The Company charged Andrx
based on mutually agreed upon allocation methods. Software development services
charged to Andrx were $95,927 for the period from February 5, 1997 (inception)
to December 31, 1997. The Company did not provide Andrx with software
development services for the year ended December 31, 1998.
In February 1997, Cybear entered into an agreement with Group One
Enterprises, Inc. ("Group One"), a minority shareholder of the Company, whereby
Group One agreed to provide certain consulting services to the Company. The
agreement with Group One was terminated in 1997. Costs incurred for services
provided by Group One were $68,000 for the period from February 5, 1997
(inception) to December 31, 1997.
In September 1998, Andrx agreed to sell to the Company's chairman 333,333
shares of Cybear common stock for $1 million or at its then current market
price of $3.00 per share. Andrx will use such proceeds to fund its loan
commitment to Cybear. As of December 31, 1998, Andrx had sold 233,333 shares to
the Company's chairman for $700,000. In January 1999, Andrx sold the remaining
100,000 under this agreement to the Company's chairman for $300,000. As such
transactions were effected at market prices, there is no impact on the
Company's accompanying consolidated financial statements.
(9) CONVERTIBLE PREFERRED STOCK
In February 1997, the Company issued 130,000 shares of convertible
preferred stock to Group One for a promissory note of $30,000. The fair value
of the convertible preferred stock was $0.23 per share as determined by the
Company's Board of Directors. As of December 31, 1997, the promissory note was
paid in full. The preferred stock issued had the same voting and dividend
rights as the common stock but had a liquidation preference and was convertible
into common stock of the Company on a one-for-one basis if the consulting
agreement with Group One was terminated before an initial public offering. The
agreement with Group One was terminated in 1997 and the 130,000 shares of
preferred stock were converted into 130,000 shares of common stock.
F-18
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(10) STOCK INCENTIVE PLAN
The Company has reserved 1,000,000 shares of its common stock for issuance
under its 1997 Stock Option Plan (the "Plan"). Under the Plan, incentive and
nonqualified stock options are available to directors, officers, employees or
consultants to the Company. The terms of each option agreement are determined
by the Company's Board of Directors or its compensation committee (the
"Committee"). The terms for, and exercise price at which any stock option may
be awarded is to be determined by the Committee. Options granted under the Plan
must be exercised within ten years of the date of grant, unless a shorter
period is designated at the time of grant. In January 1999, the Company's Board
of Directors approved an amendment to the Company's Plan increasing the number
of shares issuable under the Plan by 500,000 to 1,500,000.
The Company accounts for options granted to employees under the Plan in
accordance with the provisions of APB No. 25. Each stock option has an exercise
price equal to the market price on the date of grant and, accordingly, no
compensation expense has been recorded for any stock option grants to
employees. Had compensation cost for the Company's stock options been based on
fair value at the grant dates consistent with the methodologies of SFAS No.
123, the Company's pro forma basic and diluted net loss and basic and diluted
net loss per share would have been $1,590,717 and $0.12 for the period from
February 5, 1997 (inception) to December 31, 1997 and $2,581,962 and $0.20 for
the year ended December 31, 1998, respectively.
A summary of the Plan's activity is as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------------------ -------------------------
EXERCISE PRICE PER SHARE
-------------------------------------
NUMBER OF WEIGHTED AVG.
SHARES EXERCISE
UNDER OPTION LOW HIGH WID. AVG. SHARES PRICE
-------------- ---------- ---------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
February 5, 1997 (inception) ......... --
Granted .............................. 350,000 $ 1.00 $ 1.00 $ 1.00
-------
December 31, 1997 .................... 350,000 1.00 1.00 1.00 -- $ --
Granted .............................. 705,083 2.00 3.00 2.81
Forfeited ............................ (70,000) 1.00 1.00 1.00
-------
December 31, 1998 .................... 985,083 $ 1.00 $ 3.00 $ 2.30 70,000 $ 1.00
=======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT EXERCISABLE OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
- -------------------------------------------------------------------------- -------------------------
WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG.
REMAINING LIFE EXERCISE EXERCISE
RANGE OF EXERCISE PRICE SHARES (YEARS) PRICE SHARES PRICE
- ------------------------- --------- ---------------- --------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.00 - $1.00 280,000 8.2 1.0 70,000 $ 1.00
$ 2.00 - $2.00 130,500 9.4 2.0 -- --
$ 3.00 - $3.00 574,583 9.8 3.0 -- --
------- ------
985,083 9.3 2.3 70,000 $ 1.00
======= ======
</TABLE>
F-19
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(10) STOCK INCENTIVE PLAN--(CONTINUED)
The range of weighted average fair market value per share as of the grant
date was $0.70 for the stock options granted during the period from February 5,
1997 (inception) to December 31, 1997 and $1.50 to $2.23 for the stock options
granted during the year ended December 31, 1998. The fair market value of each
option grant was estimated using the Black-Scholes option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------- -------------------
<S> <C> <C>
Risk-free interest rate ................. 5.3% 4.8%
Average life of options (years) ......... 6.0 4.5
Average volatility ...................... 75% 85%
Dividend yield .......................... -- --
</TABLE>
(11) LITIGATION
On March 18, 1998, Andrx received a letter from counsel for Medix
Resources, Inc. ("Medix") and its subsidiary, Cymedix Lynx Corporation
("Cymedix") alleging the theft and unlawful appropriation by Andrx, the
Company, and certain directors, officers and employees of the Company and Andrx
of certain computer medical software and internet medical communications
technology allegedly owned by Cymedix. The letter demanded trebled damages
totaling $396.6 million pursuant to the civil theft provisions of Florida law,
including Florida's Racketeer Influenced and Corrupt Organization Act and
certain other provisions of federal and state law. On March 23, 1998, the
Company and Andrx filed a complaint against Medix and Cymedix in Broward
County, Florida for libel and slander arising from the improper public
dissemination of the contents of the aforesaid demand letter. On June 2, 1998,
Medix, on behalf of Cymedix, filed a complaint against the Company, Andrx and
certain of their directors, officers and employees in Hillsborough County,
Florida making the same allegations as were reflected in the aforesaid demand
letter. On December 22, 1998, the Medix complaint was provisionally dismissed
and transferred to Broward County, Florida by the Hillsborough County Court. In
February 1999, this matter was settled, with all of the parties respectively
releasing the others from any liability, through the payment to Medix of
$125,000 which was accrued in the accompanying consolidated financial
statements for the year ended December 31, 1998.
From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is not currently a party to any other legal proceeding or aware of any
other claim, the adverse outcome of which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect on the Company's
business, operating results and financial condition.
(12) SUBSEQUENT EVENTS
On April 20, 1999, the Company filed a registration statement for a public
offering of primary shares of its common stock. No assurance can be given that
this offering will be consummated.
F-20
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999 AND
THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO MARCH 31, 1999
(12) SUBSEQUENT EVENTS--(CONTINUED)
In May 1999, the Company entered into a one-year agreement with Genesis
Health Ventures, Inc. ("Genesis"). Pursuant to the agreement, Genesis will
provide consulting services concerning providers' and facilities' information
needs, workflows and reimbursement structures of the long term care industry.
In addition, Genesis will promote the installation and use of Solutions MD to
500 of its provider physicians. In consideration thereof, Cybear will pay
Genesis $150,000 for the consulting services with $50,000 payable on the date
of the agreement and $25,000 at the end of each quarter thereafter provided
that Solutions MD is installed and used by an additional 125 Genesis providers
each quarter. In addition, Cybear will provide Solutions MD to the Genesis
providers with no monthly subscription fee during the term of the agreement.
F-21
<PAGE>
[ARTWORK]
Cybear logo and the phrase, "Internet Solutions. for healthcare. for people."
Reproductions of Cybear's Internet web site "products and services" screen and
two sample Solutions MD Internet portal screens.
<PAGE>
- --------------------------------------------------------------------------------
- ----------------
PROSPECTUS
- ----------------
3,000,000 SHARES
[GRAPHIC OMITTED]
COMMON STOCK
WARBURG DILLON READ LLC CIBC WORLD MARKETS
GRUNTAL & CO., L.L.C.
, 1999
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO
DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS
NOT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR
IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE
DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ......... $ 15,346.00
NASD filing fee ............................................. 6,020.00
Nasdaq National Market listing fee .......................... 96,000.00
Printing and engraving expenses ............................. 150,000.00
Accounting fees and expenses ................................ 100,000.00
Legal fees and expenses ..................................... 175,000.00
Blue Sky fees and expenses .................................. 20,000.00
Transfer Agent's fees and expenses .......................... 5,000.00
Miscellaneous ............................................... 32,634.00
-------------
TOTAL .................................................... $ 600,000.00
=============
</TABLE>
All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Delaware General Corporation Law to
indemnify its directors and officers to the extent provided for in such
statute. The Registrant's Certificate of Incorporation and Bylaws provide that
the Registrant may insure, shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent not prohibited by law. The
Registrant is also a party to indemnification agreements with each of its
directors and executive officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Cybear issued an aggregate of 12,870,000 shares of its common stock to
Andrx Corporation in February 1997. Cybear issued 5,000 shares of its common
stock to Judith Hazelton and 10,000 shares of its common stock to Richard
Campbell in March 1997, and an aggregate of 30,000 shares of its common stock
to various shareholders in June 1997. Additionally, in December 1997, Cybear
issued 130,000 shares of its common stock to Group One Enterprises as a result
of its conversion of outstanding shares of Cybear's preferred stock.
The foregoing securities were all issued without registration under the
Securities Act of 1933, as amended, by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as
transactions by an issuer not involving public offering, each recipient of such
securities having consented to the imposition of restrictive legends upon the
certificates evidencing such securities.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Registrant's Certificate of Incorporation, as amended(1)
3.2 Registrant's Bylaws(2)
3.3 Certificate of Ownership and Merger of Cybear, Inc. (FL) with and into the Registrant(4)
4.1 Specimen common stock certificate
5.1 Opinion of Broad and Cassel
10.1 Stock Option Plan*(1)
10.2 Employment Agreement between the Registrant and Edward Goldman(1)
10.3 Letter Employment Agreement between the Registrant and Debra Richman(1)
10.4 Form of Indemnification Agreement between the Registrant and each of its directors and
executive officers*(1)
10.5 Corporate Services Agreement between the Registrant and Andrx Corporation(2)
10.6 Credit Agreement between Andrx Corporation and the Registrant(2)
10.7 Tax Allocation Agreement between Andrx Corporation and the Registrant(1)
10.8 Letter Agreement between the Registrant and Andrx Corporation
10.9 Lease Agreement relating to premises located at 5000 Blue Lake Dr., Suite 200, Boca Raton,
Florida(1)
10.10 Lease Agreement relating to premises located at 105 Challenger Rd., Ridgefield Park, New
Jersey(1)
23.1 Consent of Broad and Cassel (included in its opinion filed as Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Director Nominee Betsy S. Atkins(4)
23.4 Consent of Director Nominee Philip Gerbino(4)
23.5 Consent of Director Nominee Martin Reid Stoller, Ph.D.(4)
27.1 Financial Data Schedule
</TABLE>
- ----------------
* Management Compensation Plan or Arrangement
(1) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and incorporated herein
by reference.
(2) Previously filed as an exhibit to the Registrant's Registration Statement
on Form SB-2, including post-effective amendments thereto (File No.
333-24671) and incorporated herein by reference.
(3) To be filed by amendment.
(4) Previously filed as an exhibit to this Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
The Registrant undertakes:
(1) To 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 Securities
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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation
II-2
<PAGE>
from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with this Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volumes
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, 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.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery
to each purchaser.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense or any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(6) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 1 to this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boca Raton, State of Florida, on May 24, 1999.
CYBEAR, INC.
By: /s/ EDWARD E. GOLDMAN, M.D.
-------------------------------------------
Name: Edward E. Goldman, M.D.
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to this Registration Statement has been signed by the following persons
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------- ------------------------------------ -------------
<S> <C> <C>
/s/ JOHN H. KLEIN Chairman and Director May 24, 1999
- -----------------------------------
John H. Klein
/s/ EDWARD E. GOLDMAN, M.D. President, Chief Executive Officer May 24, 1999
- ----------------------------------- and Director (Principal Executive
Edward E. Goldman, M.D. and Financial Officer)
/s/ CLAUDE BERTRAND Vice President and Controller May 24, 1999
- ----------------------------------- (Principal Accounting Officer)
Claude Bertrand
/s/ SCOTT LODIN Secretary and Director May 24, 1999
- -----------------------------------
Scott Lodin
/s/ ALAN P. COHEN Director May 24, 1999
- -----------------------------------
Alan P. Cohen
/s/ ANGELO MALAHIAS Director May 24, 1999
- -----------------------------------
Angelo Malahias
/s/ MELVIN SHAROKY, M.D. Director May 24, 1999
- -----------------------------------
Melvin Sharoky, M.D.
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- --------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
4.1 Specimen common stock certificate
5.1 Opinion of Broad and Cassel
10.8 Letter Agreement between the Registrant and Andrx Corporation
23.2 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
</TABLE>
EXHIBIT 1.1
CYBEAR, INC.
_____________ SHARES
COMMON STOCK
$0.001 PAR VALUE
UNDERWRITING AGREEMENT
______________, 1999
<PAGE>
UNDERWRITING AGREEMENT
__________, 1999
WARBURG DILLON READ LLC
CIBC World Markets Corp.
Gruntal & Co., L.L.C.
as Managing Underwriters
299 Park Avenue
New York, New York 10171-0026
Ladies and Gentlemen:
Cybear, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell to the underwriters named in Schedule A annexed hereto (the
"Underwriters") an aggregate of _________ shares (the "Firm Shares") of Common
Stock, $0.001 par value (the "Common Stock"), of the Company. In addition,
solely for the purpose of covering over-allotments, the Company proposes to
grant to the Underwriters the option to purchase from the Company up to an
additional _________ shares of Common Stock (the "Additional Shares"). The Firm
Shares and the Additional Shares are hereinafter collectively sometimes referred
to as the "Shares." The Shares are described in the Prospectus which is referred
to below.
The Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively called the "Act"), with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (File No. 333-76579),
including a prospectus, relating to the Shares, which incorporates by reference
documents that the Company has filed in accordance with the provisions of the
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively called the "Exchange Act"). The Company has
furnished to you, for use by the Underwriters and by dealers, copies of one or
more preliminary prospectuses (each thereof being herein called a "Preliminary
Prospectus") relating to the Shares. Except where the context otherwise
requires, the registration statement, as amended when it becomes effective,
including all documents filed as a part thereof or incorporated by reference
therein, and including any information contained in a prospectus subsequently
filed with the Commission pursuant to Rule 424(b) under the Act and deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430(A) under the Act and also including any registration statement filed
pursuant to Rule 462(b) under the Act, is herein called the Registration
Statement, and the prospectus, in the form filed by the Company with the
Commission pursuant to Rule 424(b) under the Act on or before the second
business day after the date hereof (or such earlier time as may be required
under the Act) or, if no such filing is required, the form of final prospectus
included in the Registration Statement at the time it became effective, is
herein called the Prospectus.
The Company and the Underwriters agree as follows:
<PAGE>
1. SALE AND PURCHASE. Upon the basis of the warranties and
representations and subject to the terms and conditions herein set forth, the
Company agrees to sell to the respective Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company the
respective number of Firm Shares set forth opposite the name of such Underwriter
in Schedule A annexed hereto, in each case at a purchase price of $_____________
per Share. The Company is advised by you that the Underwriters intend (i) to
make a public offering of their respective portions of the Firm Shares as soon
after the effective date of the Registration Statement as in your judgment is
advisable and (ii) initially to offer the Firm Shares upon the terms set forth
in the Prospectus. You may from time to time increase or decrease the public
offering price after the initial public offering to such extent as you may
determine.
In addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and representations and
subject to the terms and conditions herein set forth, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company ratably
in accordance with the number of Firm Shares to be purchased by each of them
(subject to such adjustment as you shall determine to avoid fractional shares),
all or a portion of the Additional Shares as may be necessary to cover
over-allotments made in connection with the offering of the Firm Shares, at the
same purchase price per share to be paid by the Underwriters to the Company for
the Firm Shares. This option may be exercised by you on behalf of the several
Underwriters at any time (but not more than once) on or before the thirtieth day
following the date hereof, by written notice to the Company. Such notice shall
set forth the aggregate number of Additional Shares as to which the option is
being exercised, and the date and time when the Additional Shares are to be
delivered (such date and time being herein referred to as the additional time of
purchase); PROVIDED, HOWEVER, that the additional time of purchase shall not be
earlier than the time of purchase (as defined below) nor earlier than the second
business day1 after the date on which the option shall have been exercised nor
later than the tenth business day after the date on which the option shall have
been exercised. The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same proportion to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter on Schedule A hereto bears to the total
number of Firm Shares (subject, in each case, to such adjustment as you may
determine to eliminate fractional shares).
2. PAYMENT AND DELIVERY. Payment of the purchase price for the Firm
Shares shall be made to the Company by Federal Funds wire transfer, against
delivery of the certificates for the Firm Shares to you through the facilities
of the Depository Trust Company ("DTC") for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 10:00
- ----------
(1) As used herein "business day" shall mean a day on which the New York
Stock Exchange is open for trading.
2
<PAGE>
A.M., New York City time, on _____________, 1999 (unless another time shall be
agreed to by you and the Company or unless postponed in accordance with the
provisions of Section 8 hereof). The time at which such payment and delivery are
actually made is hereinafter sometimes called the time of purchase, and the date
of such event is referred to as the "Closing Date." Certificates for the Firm
Shares shall be delivered to you in definitive form in such names and in such
denominations as you shall specify no later than the second business day
preceding the time of purchase. For the purpose of expediting the checking of
the certificates for the Firm Shares by you, the Company agrees to make such
certificates available to you for such purpose at least one full business day
preceding the time of purchase.
Payment of the purchase price for the Additional Shares shall be made
at the additional time of purchase in the same manner and at the same office as
the payment for the Firm Shares. Certificates for the Additional Shares shall be
delivered to you in definitive form in such names and in such denominations as
you shall specify no later than the second business day preceding the additional
time of purchase. For the purpose of expediting the checking of the certificates
for the Additional Shares by you, the Company agrees to make such certificates
available to you for such purpose at least one full business day preceding the
additional time of purchase. The date on which payment for and delivery of the
Additional Shares is made is referred to herein as the "Option Closing Date."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters that:
(a) the Company has not received, and has no notice of, any order of
the Commission preventing or suspending the use of any Preliminary Prospectus,
or instituting proceedings for that purpose, and each Preliminary Prospectus, at
the time of filing thereof, conformed in all material respects to the
requirements of the Act, and when the Registration Statement becomes effective,
the Registration Statement and the Prospectus will fully comply in all material
respects with the provisions of the Act, and the Registration Statement will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company makes
no warranty or representation with respect to any statement contained in the
Registration Statement or the Prospectus in reliance upon and in conformity with
information concerning the Underwriters and furnished in writing by or on behalf
of any Underwriter through you to the Company expressly for use in the
Registration Statement or the Prospectus; the documents incorporated by
reference in the Registration Statement, at the time they were filed with the
Commission, complied in all material respects with the requirements of the Act
and the Exchange Act, and do not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Company has not distributed any offering material
in connection
3
<PAGE>
with the offering or sale of the Shares other than the Registration Statement,
the Preliminary Prospectus, the Prospectus or any other materials, if any,
permitted by the Act;
(b) as of the date of this Agreement, the Company has an authorized
capitalization as set forth under the heading entitled "Actual" in the section
of the Registration Statement and the Prospectus entitled "Capitalization" and,
as of the time of purchase the Company shall have an authorized capitalization
as set forth under the heading entitled "As Adjusted" in the section of the
Registration Statement and the Prospectus entitled "Capitalization"; all of the
issued and outstanding shares of capital stock including Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right;
(c) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
power and authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement;
(d) the Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where the ownership or leasing
of its properties or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, properties, financial condition or results of operation of the
Company (a "Material Adverse Effect"); and the Company is in compliance in all
material respects with the laws, orders, rules, regulations and directives
issued or administered by such jurisdictions. The Company has no subsidiaries
(as defined in the Rules and Regulations); except as set forth in the
Registration Statement, the Company does not own, directly or indirectly, any
shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint venture,
association or other entity; complete and correct copies of the certificates of
incorporation and of the bylaws of the Company and all amendments thereto have
been delivered to you, and except as set forth in the exhibits to the
Registration Statement no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date;
(e) [reserved];
(f) the Company is not in breach of, or in default under (nor has any
event occurred which with notice, lapse of time, or both would result in any
breach of, or constitute a default under), its charter or by-laws or in the
performance or observance of any obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any lease, contract or other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, and the execution, delivery and performance of this
Agreement, the issuance and sale of the Shares and the consummation of the
transactions contemplated hereby will not conflict with, or result in any breach
of or constitute a default under (nor constitute any event which with notice,
lapse of time,
4
<PAGE>
or both would result in any breach of, or constitute a default under), any
provisions of the charter or by-laws of the Company or under any provision of
any license, indenture, mortgage, deed of trust, bank loan or credit agreement
or other evidence of indebtedness, or any lease, contract or other agreement or
instrument to which the Company is a party or by which it or its properties may
be bound or affected, or under any federal, state, local or foreign law,
regulation or rule or any decree, judgment or order applicable to the Company;
(g) this Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other similar rights affecting the enforcement of creditors'
rights in general;
(h) the capital stock of the Company, including the Shares, conforms in
all material respects to the description thereof contained in the Registration
Statement and Prospectus and the certificates for the Shares are in due and
proper form and the holders of the Shares will not be subject to personal
liability solely by reason of being such holders;
(i) the Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable;
(j) no approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Shares or the consummation by the Company of the transaction as contemplated
hereby other than registration of the Shares under the Act and any necessary
qualification under the securities or blue sky laws of the various jurisdictions
in which the Shares are being offered by the Underwriters or under the rules and
regulations of the National Association of Securities Dealers, Inc. (the
"NASD");
(k) no person has the right, contractual or otherwise, to cause the
Company to issue to it, or register pursuant to the Act, any shares of capital
stock of the Company upon the issue and sale of the Shares to the Underwriters
hereunder, nor does any person have preemptive rights, co-sale rights, rights of
first refusal or other rights to purchase any of the Shares other than those
that have been expressly waived prior to the dates hereof;
(l) Arthur Andersen LLP, whose report on the consolidated financial
statements of the Company and its subsidiary is filed with the Commission as
part of the Registration Statement and Prospectus, are independent public
accountants as required by the Act;
(m) the Company has all necessary licenses, authorizations, consents
and approvals and has made all necessary filings required under any federal,
state, local or foreign law, regulation or rule, and has obtained all necessary
authorizations, consents and approvals from other persons, in order to conduct
its respective business; the Company is not in violation of, or in default
under, any such license, authorization, consent or approval or any federal,
state, local
5
<PAGE>
or foreign law, regulation or rule or any decree, order or judgment applicable
to the Company, the effect of which could be a Material Adverse Effect;
(n) all statutes, regulations, legal or governmental proceedings,
contracts, leases or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required;
(o) there are no actions, suits, claims, investigations or proceedings
pending or threatened to which the Company or any of its officers is a party or
of which any of its properties is subject at law or in equity, or before or by
any federal, state, local or foreign governmental or regulatory commission,
board, body, authority or agency which could result in a judgment, decree or
order having a Material Adverse Effect or jeopardize consummation of the
transaction contemplated hereby;
(p) the audited financial statements included in the Registration
Statement and the Prospectus present fairly the consolidated financial position
of the Company and its subsidiary as of the dates indicated and the consolidated
results of operations and cash flows of the Company and its subsidiary for the
periods specified; such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
during the periods involved;
(q) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been (i) any
material adverse change or any development which, in the Company's reasonable
judgment, is likely to cause a Material Adverse Effect, (ii) any transaction
which is material to the Company, except transactions in the ordinary course of
business, (iii) any obligation, direct or contingent, which is material to the
Company incurred by the Company, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock or outstanding
indebtedness of the Company or (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company. The Company does not
have any material contingent obligation which is not disclosed in the
Registration Statement;
(r) the Company has obtained the agreement of each of its directors and
officers and certain of its other stockholders not to sell, offer to sell,
contract to sell, hypothecate, grant any option to sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock or securities convertible
into or exchangeable for Common Stock or warrants or other rights to purchase
Common Stock for a period of 180 days after the date of the Prospectus;
(s) the Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
6
<PAGE>
(t) the Company (i) is in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business, and (iii) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, license or approvals would not, singly
or in the aggregate, have a Material Adverse Effect;
(u) there are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect;
(v) the Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which it is engaged; the Company has not been
refused any insurance coverage sought or applied for; and the Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect;
(w) the Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba;
(x) except as disclosed in the Prospectus, (i) the Company owns or
possesses the requisite licenses, registrations or other evidences of adequate
rights to make, use or sell, as the case may be, any inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks, trade names, technology and know-how currently employed by it to
conduct its business in the manner described in the Prospectus, (ii) the Company
has not received any notice of infringement of or conflict with (and the Company
does not know of any infringement or conflicts with) asserted rights of others
with respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect, and (iii) the Company has not knowingly infringed upon any
intellectual property right or patent of any third party, or any discovery,
invention, product or process, the result of which could be a Material Adverse
Effect;
(y) the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit
7
<PAGE>
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences;
(z) no material labor dispute with the employees of the Company exists
or, to the knowledge of the Company, is imminent, and the Company is not aware
of any existing, threatened or imminent labor disturbance by the employees of
any of its principal suppliers, manufacturers or contractors that could have a
Material Adverse Effect;
(aa) as of the date the Registration Statement became effective, the
Common Stock was authorized for listing on the Nasdaq National Market upon
official notice of issuance;
(bb) the Company has not at any time since the Company's inception (i)
made any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof; and
(cc) the Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
4. CERTAIN COVENANTS OF THE COMPANY. The Company hereby agrees:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the securities or
blue sky laws of such states as you may designate and to maintain such
qualifications in effect so long as required for the distribution of the Shares;
PROVIDED that the Company shall not be required to qualify as a foreign
corporation or to consent to the service of process under the laws of any such
state (except service of process with respect to the offering and sale of the
Shares); and to promptly advise you of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose;
(b) to make available to the Underwriters in New York City, as soon as
practicable after the Registration Statement becomes effective, and thereafter
from time to time to furnish to the Underwriters, as many copies of the
Prospectus (or of the Prospectus as amended or supplemented if the Company shall
have made any amendments or supplements thereto after the effective date of the
Registration Statement) as the Underwriters may reasonably request for the
purposes contemplated by the Act; in case any Underwriter is required to deliver
a prospectus within the nine-month period referred to in Section 10(a)(3) of the
Act in connection with the sale of the Shares, the Company will prepare promptly
upon request, but at the expense of such
8
<PAGE>
Underwriter, such amendment or amendments to the Registration Statement and such
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act;
(c) to advise you promptly and (if requested by you) to confirm such
advice in writing, (i) when the Registration Statement has become effective and
when any post-effective amendment thereto becomes effective and (ii) if Rule
430A under the Act is used, when the Prospectus is filed with the Commission
pursuant to Rule 424(b) under the Act (which the Company agrees to file in a
timely manner under such Rules);
(d) to advise you promptly, confirming such advice in writing, of any
request by the Commission for amendments or supplements to the Registration
Statement or Prospectus or for additional information with respect thereto, or
of notice of institution of proceedings for, or the entry of a stop order
suspending the effectiveness of the Registration Statement and, if the
Commission should enter a stop order suspending the effectiveness of the
Registration Statement, to make every reasonable effort to obtain the lifting or
removal of such order as soon as possible; to advise you promptly of any
proposal to amend or supplement the Registration Statement or Prospectus
(including by filing any documents that would be incorporated therein by
reference) and to file no such amendment or supplement to which you shall
reasonably object in writing;
(e) to file promptly all reports and any definitive proxy or
information statement required to be filed by the Company with the Commission in
order to comply with the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in connection with
the offering or sale of the Shares, and to promptly notify you of such filing;
(f) if necessary or appropriate, to file a registration statement
pursuant to Rule 462(b) under the Act;
(g) to furnish to you and, upon request, to each of the other
Underwriters for a period of five years from the date of this Agreement (i)
copies of any reports or other communications which the Company shall send to
its stockholders or shall from time to time publish or publicly disseminate,
(ii) copies of all annual, quarterly and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be
designated by the Commission, (iii) copies of documents or reports filed with
any national securities exchange on which any class of securities of the Company
is listed, and (iv) such other information as you may reasonably request
regarding the Company, in each case as soon as such reports, communications,
documents or information become available;
(h) to advise the Underwriters promptly of the happening of any event
known to the Company within the time during which a Prospectus relating to the
Shares is required to be delivered under the Act which, in the judgment of the
Company, would require the making of any change in the Prospectus then being
used so that the Prospectus would not include an untrue
9
<PAGE>
statement of material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they are
made, not misleading, and, during such time, to prepare and furnish, at the
Company's expense, to the Underwriters promptly such amendments or supplements
to such Prospectus as may be necessary to reflect any such change and to furnish
you a copy of such proposed amendment or supplement before filing any such
amendment or supplement with the Commission;
(i) to make generally available to its security holders, and to deliver
to you, an earnings statement of the Company (which will satisfy the provisions
of Section 11(a) of the Act) covering a period of twelve months beginning after
the effective date of the Registration Statement (as defined in Rule 158(c) of
the Act) as soon as is reasonably practicable after the termination of such
twelve-month period but not later than _________, 2000;
(j) to furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flow of the Company for such fiscal
year, accompanied by a copy of the certificate or report thereon of nationally
recognized independent certified public accountants;
(k) to furnish to you four signed copies of the Registration Statement,
as initially filed with the Commission, and of all amendments thereto (including
all exhibits thereto and documents incorporated by reference therein) and
sufficient conformed copies of the foregoing (other than exhibits) for
distribution of a copy to each of the other Underwriters;
(l) [reserved];
(m) to apply the net proceeds from the sale of the Shares in the manner
set forth under the caption "Use of Proceeds" in the Prospectus;
(n) [reserved];
(o) subject to certain exceptions, not to sell, offer or agree to sell,
contract to sell, grant any option to sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock or warrants or other rights to
purchase Common Stock or any other securities of the Company that are
substantially similar to Common Stock or permit the registration under the Act
of any shares of Common Stock, except for the registration of the Shares and the
sales to the Underwriters pursuant to this Agreement and except for issuances of
Common Stock upon the exercise of outstanding options and warrants, for a period
of 180 days after the date hereof, without the prior written consent of Warburg
Dillon Read LLC;
(p) to use its best efforts to cause the Common Stock to be listed for
quotation on the National Association of Securities Dealers Automated Quotation
National Market System ("NASDAQ"); and
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(q) to pay all expenses, fees and taxes (other than any transfer taxes
and fees and disbursements of counsel for the Underwriters except as set forth
under Section 5 hereof or (iii) or (iv) below) in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriters and to
dealers (including costs of mailing and shipment), (ii) the issuance, sale and
delivery of the Shares by the Company, (iii) the word processing and/or printing
of this Agreement, any Agreement Among Underwriters, any dealer agreements, any
Statements of Information and the reproduction and/or printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including costs of
mailing and shipment), (iv) the qualification of the Shares for offering and
sale under state laws and the determination of their eligibility for investment
under state law as aforesaid (including the reasonable legal fees and filing
fees and other disbursements of counsel to the Underwriters) and the printing
and furnishing of copies of any blue sky surveys or legal investment surveys to
the Underwriters and to dealers, (v) any listing of the Shares on any securities
exchange or qualification of the Shares for quotation on NASDAQ and any
registration thereof under the Exchange Act, (vi) the filing for review of the
public offering of the Shares by the National Association of Securities Dealers,
Inc. (the "NASD"), and (vii) the performance of the Company's other obligations
hereunder.
5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Shares are not
delivered for any reason other than the termination of this Agreement pursuant
to the second paragraph of Section 7 hereof or the default by one or more of the
Underwriters in its or their respective obligations hereunder, the Company
shall, in addition to paying the amounts described in Section 4(q) hereof,
reimburse the Underwriters for all of their out-of-pocket expenses, including
the fees and disbursements of their counsel.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time of
purchase (and the several obligations of the Underwriters at the additional time
of purchase are subject to the accuracy of the representations and warranties on
the part of the Company on the date hereof and at the time of purchase (unless
previously waived) and at the additional time of purchase, as the case may be),
the performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase and at the
additional time of purchase, as the case may be, an opinion of Broad and Cassel,
counsel for the Company, addressed to the Underwriters, and dated the time of
purchase or the additional time of purchase, as the case may be, with reproduced
copies for each of the other Underwriters and in form satisfactory to Greenberg
Traurig, P.A., counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
corporate power and authority
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to own, lease and operate its properties and conduct its business as described
in the Registration Statement and the Prospectus, to execute and deliver this
Agreement and to issue, sell and deliver the Shares as herein contemplated;
(ii) [reserved];
(iii) the Company is duly qualified or licensed by each jurisdiction in
which it conducts its business and in which the failure, individually or in the
aggregate, to be so licensed or qualified could have a Material Adverse Effect,
and the Company is duly qualified, and is in good standing, in each jurisdiction
in which it owns or leases real property or maintains an office and in which
such qualification is necessary;
(iv) this Agreement has been duly authorized, executed and delivered by
the Company;
(v) the Shares have been duly authorized and, when issued and delivered
to and paid for by the Underwriters, will be duly and validly issued and will be
fully paid and non-assessable;
(vi) the Company has an authorized capitalization as set forth in the
Registration Statement and the Prospectus; the outstanding shares of capital
stock of the Company have been duly and validly authorized and issued, and are
fully paid, nonassessable and free of statutory and contractual preemptive
rights; the Shares when issued will be free of statutory and contractual
preemptive rights, resale rights, rights of first refusal and similar rights;
the certificates for the Shares are in due and proper form and the holders of
the Shares will not be subject to personal liability by reason of being such
holders;
(vii) other than as set forth in the Registration Statement, the
Company does not own or control, directly or indirectly, any corporation,
association or other entity;
(viii) the capital stock of the Company, including the Shares, conforms
to the description thereof contained in the Registration Statement and
Prospectus;
(ix) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained or incorporated by reference therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act;
(x) the Registration Statement has become effective under the Act and,
to the best of such counsel's knowledge, no stop order proceedings with respect
thereto are pending or threatened under the Act and any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424 under the Act has
been made in the manner and within the time period required by such Rule 424;
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(xi) no approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Shares and consummation by the Company of the transaction as contemplated hereby
other than registration of the Shares under the Act (except such counsel need
express no opinion as to any necessary qualification under the state securities
or blue sky laws of the various jurisdictions in which the Shares are being
offered by the Underwriters);
(xii) the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby do not and will not conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which with notice, lapse of
time, or both, would result in any breach of or constitute a default under), any
provisions of the certificate of incorporation or by-laws of the Company or
under any provision of any material license, indenture, mortgage, deed of trust,
bank loan, credit agreement or other evidence of indebtedness, or any lease,
contract or other agreement or instrument known to us to which the Company is a
party or by which it or its properties may be bound or affected, or under any
federal, state, local or foreign law, regulation or rule or any decree, judgment
or order applicable to the Company, the violation of which could have been a
Material Adverse Effect;
(xiii) to the best of such counsel's knowledge, the Company is not in
violation of its charter or by-laws or is in breach of, or in default under (nor
has any event occurred which with notice, lapse of time, or both would result in
any breach of, or constitute a default under), any material license, indenture,
mortgage, deed of trust, bank loan or any other agreement or instrument known to
us to which the Company is a party or by which it or its properties may be bound
or affected or under any federal, state, local or foreign law, regulation or
rule or any decree, judgment or order applicable to the Company, except where
such breach, default or violation could not have a Material Adverse Effect;
(xiv) to the best of such counsel's knowledge, there are no contracts,
licenses, agreements, leases or documents of a character which are required to
be filed as exhibits to the Registration Statement or to be summarized or
described in the Prospectus which have not been so filed, summarized or
described;
(xv) to the best of such counsel's knowledge, there are no actions,
suits, claims, investigations or proceedings pending, threatened or contemplated
to which the Company is subject or of which any of its properties is subject at
law or in equity or before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency which
are required to be described in the Prospectus but are not so described;
(xvi) [reserved];
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(xvii) the Company will not, upon consummation of the transactions
contemplated by this Agreement, be an "investment company," or a "promoter" or
"principal underwriter" for, a "registered investment company," as such terms
are defined in the Investment Company Act;
(xviii) such counsel have read the description of the Company's
business in the Prospectus and the statements (a) in the Prospectus under the
captions "Risk Factors -- We Could Be Subject to Sales or Other Taxes," "Risk
Factors -- Government Regulation of Internet Communications May Impact our
Business," "Risk Factors --Government Regulation of Healthcare," "Business --
Government Regulation and Healthcare Reform," "Certain Transactions,"
"Description of Capital Stock," "Shares Eligible for Future Sale" and, insofar
as such statements relate to the terms of the Underwriting Agreement,
"Underwriters" and (b) in the Registration Statement in Items 14 and 15, in each
case insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(xix) such counsel have participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants of the Company and representatives of the Underwriters at which the
contents of the Registration Statement and Prospectus were discussed and,
although such counsel is not passing upon and does not assume responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus (except as and to the extent stated in
subparagraphs (vi), (viii) and (xviii) above), on the basis of the foregoing
(relying as to materiality upon the opinions of officers and other
representatives of the Company) nothing has come to the attention of such
counsel that causes them to believe that the Registration Statement or any
amendment thereto at the time such Registration Statement or amendment became
effective contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus or any supplement thereto at the
date of such Prospectus or such supplement, and at all times up to and including
the time of purchase or additional time of purchase, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(b) You shall have received from Arthur Andersen LLP, letters dated,
respectively, the date of this Agreement and the time of purchase and additional
time of purchase, as the case may be, and addressed to the Underwriters (with
reproduced copies for each of the Underwriters) in the forms heretofore approved
by Warburg Dillon Read LLC.
(c) You shall have received at the time of purchase and at the
additional time of purchase, as the case may be, the favorable opinion of
Greenberg Traurig, P.A., counsel for the
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Underwriters, dated the time of purchase or the additional time of purchase, as
the case may be, as to the matters referred to in subparagraphs (iv), (v),
(viii) (with respect to the Shares only), (ix) and (x) of paragraph (a) of this
Section 6.
In addition, such counsel shall state that such counsel have
participated in conferences with officers and other representatives of the
Company, counsel for the Company, representatives of the independent public
accountants of the Company and representatives of the Underwriters at which the
contents of the Registration Statement and Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as to matters
referred to with respect to the Shares under subparagraph (viii) of paragraph
(a) of this Section 6), on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of officers and other representatives of the
Company), no facts have come to the attention of such counsel which lead them to
believe that the Registration Statement or any amendment thereto at the time
such Registration Statement or amendment became effective contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus as of its date or any supplement thereto as of its date
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no comment with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
(d) No amendment or supplement to the Registration Statement or
Prospectus, including documents deemed to be incorporated by reference therein,
shall be filed prior to the time the Registration Statement becomes effective to
which you object in writing.
(e) The Registration Statement shall become effective, or if Rule 430A
under the Act is used, the Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) under the Act, at or before 5:00 P.M., New York City
time, on the date of this Agreement, unless a later time (but not later than
5:00 P.M., New York City time, on the second full business day after the date of
this Agreement) shall be agreed to by the Company and you in writing or by
telephone, confirmed in writing; PROVIDED, HOWEVER, that the Company and you and
any group of Underwriters, including you, who have agreed hereunder to purchase
in the aggregate at least 50% of the Firm Shares may from time to time agree on
a later date.
(f) Prior to the time of purchase or the additional time of purchase,
as the case may be, (i) no stop order with respect to the effectiveness of the
Registration Statement shall have been issued under the Act or proceedings
initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement
and all amendments thereto, or modifications thereof, if any, shall not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and (iii) the Prospectus and
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all amendments or supplements thereto, or modifications thereof, if any, shall
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they are made, not misleading.
(g) Between the time of execution of this Agreement and the time of
purchase or the additional time of purchase, as the case may be, (i) no change,
financial or otherwise (other than as referred to in the Registration Statement
and Prospectus), in the business, condition or prospects of the Company shall
occur or become known and (ii) no transaction shall have been entered into by
the Company which, in either case, could have a Material Adverse Effect.
(h) The Company will, at the time of purchase or additional time of
purchase, as the case may be, deliver to you a certificate of two of its
executive officers to the effect that the representations and warranties of the
Company as set forth in this Agreement are true and correct as of each such
date, that the Company shall perform such of its obligations under this
Agreement as are to be performed at or before the time of purchase and at or
before the additional time of purchase, as the case may be and the conditions
set forth in paragraphs (f) and (g) of this Section 6 have been met.
(i) You shall have received signed letters, dated the date of this
Agreement, from each of the directors and officers of the Company and certain of
its other stockholders to the effect that such persons shall not sell, offer or
agree to sell, contract to sell, grant any option to sell or otherwise dispose
of, directly or indirectly, any shares of Common Stock of the Company or
securities convertible into or exchangeable or exercisable for Common Stock or
warrants or other rights to purchase Common Stock or any other securities of the
Company that are substantially similar to the Common Stock for a period of 180
days after the date of the Prospectus without Warburg Dillon Read LLC's prior
written consent.
(j) The Company shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Registration Statement and the Prospectus as of the time of purchase and the
additional time of purchase, as the case may be, as you may reasonably request.
(k) The Shares shall have been approved for quotation on the Nasdaq
National Market, subject only to notice of issuance at or prior to the time of
purchase or the additional time of purchase, as the case may be.
(l) [reserved].
7. EFFECTIVE DATE OF AGREEMENT; TERMINATION. This Agreement shall
become effective (i) if Rule 430A under the Act is not used, when you shall have
received notification of the effectiveness of the Registration Statement, or
(ii) if Rule 430A under the Act is used, when the parties hereto have executed
and delivered this Agreement.
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The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of you or any group of Underwriters
(which may include you) which has agreed to purchase in the aggregate at least
50% of the Firm Shares, if, since the time of execution of this Agreement or the
respective dates as of which information is given in the Registration Statement
and Prospectus, there has been any material adverse and unfavorable change,
financial or otherwise (other than as referred to in the Registration Statement
and Prospectus), in the operations, business, condition or prospects of the
Company, which would, in your judgment or in the judgment of such group of
Underwriters, make it impracticable to market the Shares, or, if, at any time
prior to the time of purchase or, with respect to the purchase of any Additional
Shares, the additional time of purchase, as the case may be, trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market shall have been suspended or limitations or minimum
prices shall have been established on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market or if a banking moratorium shall
have been declared either by the United States or New York State authorities, or
if the United States shall have declared war in accordance with its
constitutional processes or there shall have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on the financial markets of the United States
as, in your judgment or in the judgment of such group of Underwriters, to make
it impracticable to market the Shares.
If you or any group of Underwriters elects to terminate this Agreement
as provided in this Section 7, the Company and each other Underwriter shall be
notified promptly by letter or telegram.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the Company shall not
be under any obligation or liability under this Agreement (except to the extent
provided in Sections 4(q), 5 and 9 hereof), and the Underwriters shall be under
no obligation or liability to the Company under this Agreement (except to the
extent provided in Section 9 hereof).
8. INCREASE IN UNDERWRITERS' COMMITMENTS. Subject to Sections 6 and 7,
if any Underwriter shall default in its obligation to take up and pay for the
Firm Shares to be purchased by it hereunder (otherwise than for reasons
sufficient to justify the termination of this Agreement under the provisions of
Section 7 hereof) and if the number of Firm Shares which all Underwriters so
defaulting shall have agreed but failed to take up and pay for does not exceed
10% of the total number of Firm Shares, the non-defaulting Underwriters shall
take up and pay for (in addition to the number of Firm Shares they are obligated
to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided. Such
Shares shall be taken up and paid for by such non-defaulting Underwriter or
Underwriters in such amount or amounts as you may designate with the consent of
each Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken
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up and paid for by all non-defaulting Underwriters pro rata in proportion to the
aggregate number of Firm Shares set opposite the names of such non-defaulting
Underwriters in Schedule A.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that they
will not sell any Firm Shares hereunder unless all of the Firm Shares are
purchased by the Underwriters (or by substituted Underwriters selected by you
with the approval of the Company or selected by the Company with your approval).
If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term Underwriter as used in this agreement shall refer to and
include any Underwriter substituted under this Section 8 with like effect as if
such substituted Underwriter had originally been named in Schedule A.
If the aggregate number of Shares which the defaulting Underwriter or
Underwriters agreed to purchase exceeds 10% of the total number of Shares which
all Underwriters agreed to purchase hereunder, and if neither the non-defaulting
Underwriters nor the Company shall make arrangements within the five business
day period stated above for the purchase of all the Shares which the defaulting
Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall
be terminated without further act or deed and without any liability on the part
of the Company to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company. Nothing in this
paragraph, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
9. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter, its partners, directors and officers, and any person who controls
any Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and the successors and assigns of all of the foregoing persons
from and against any loss, damage, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally, any such
Underwriter or any such person may incur under the Act, the Exchange Act, the
common law or otherwise, insofar as such loss, damage, expense, liability or
claim arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company) or in a Prospectus (the term Prospectus for the purpose of this Section
9 being deemed to include any Preliminary Prospectus, the Prospectus and the
Prospectus as amended or supplemented by the Company), or arises out of or is
based upon any omission or alleged
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omission to state a material fact required to be stated in either such
Registration Statement or Prospectus or necessary to make the statements made
therein not misleading, except insofar as any such loss, damage, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in and in conformity with
information furnished in writing by or on behalf of any Underwriter through you
to the Company expressly for use with reference to such Underwriter in such
Registration Statement or such Prospectus or arises out of or is based upon any
omission or alleged omission to state a material fact in connection with such
information required to be stated in either such Registration Statement or
Prospectus or necessary to make such information not misleading; and provided,
further, that the Company will not be liable to any Underwriter or any person
controlling such Underwriter with respect to any such untrue statement or
omission made in any Preliminary Prospectus that is corrected in the Prospectus
(or any amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Shares from such Underwriter but was not
sent or given a copy of the Prospectus (as amended or supplemented) at or prior
to the written confirmation of the sale of such Shares to such person in any
case where such delivery of the Prospectus (as amended or supplemented) is
required by the Act, unless the failure is the result of non-compliance by the
Company with paragraph (h) of Section 4 hereof.
If any action, suit or proceeding (together, a "Proceeding") is brought
against an Underwriter or any such person in respect of which indemnity may be
sought against the Company pursuant to the foregoing paragraph, such Underwriter
or such person shall promptly notify the Company in writing of the institution
of such Proceeding and the Company shall assume the defense of such Proceeding,
including the employment of counsel reasonably satisfactory to such indemnified
party and payment of all fees and expenses; PROVIDED, HOWEVER, that the omission
to so notify the Company shall not relieve the Company from any liability which
the Company may have to any Underwriter or any such person or otherwise, except
to the extent that the Company is prejudiced as a proximate result of such
failure. Such Underwriter or such controlling person shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such Underwriter or of such person
unless the employment of such counsel shall have been authorized in writing by
the Company in connection with the defense of such Proceeding or the Company
shall not have, within a reasonable period of time in light of the circumstances
employed counsel to have charge of the defense of such Proceeding or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from, additional to or in
conflict with those available to the Company (in which case the Company shall
not have the right to direct the defense of such Proceeding on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the Company and paid as incurred (it being understood,
however, that the Company shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one Proceeding or
series of related Proceedings in the same jurisdiction representing the
indemnified parties who are parties to such Proceeding). The Company shall not
be liable for any settlement of any such Proceeding effected without its written
consent but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Underwriter and any such
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person from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested in writing an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
sentence of this paragraph, then the indemnifying party agrees that it shall be
liable for any settlement of any Proceeding effected without its written consent
if (i) such settlement is entered into more than 60 business days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement and (iii) such indemnified party
shall have given the indemnifying party at least 30 days' prior written notice
of its intention to settle. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened Proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such Proceeding and does not include an admission of fault, culpability or a
failure to act, by or on behalf of such indemnified party.
(b) Each Underwriter severally agrees to indemnify, defend and hold
harmless the Company, its directors and officers, and any person who controls
the Company within the meaning of Section 15 of the Act, or Section 20 of the
Exchange Act from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
the Company or any such person may incur under the Act, the Exchange Act, or
common law or otherwise, insofar as such loss, damage, expense, liability or
claim arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact contained in and in conformity with information
furnished in writing by or on behalf of such Underwriter through you to the
Company expressly for use with reference to such Underwriter in the Registration
Statement (or in the Registration Statement as amended by or on behalf of any
post-effective amendment thereof by the Company) or in a Prospectus, or arises
out of or is based upon any omission or alleged omission to state a material
fact in connection with such information required to be stated in such
Registration Statement or Prospectus or necessary to make such information not
misleading.
If any Proceeding is brought against the Company or any such person in
respect of which indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Company or such person shall promptly notify such
Underwriter in writing of the institution of such Proceeding and such
Underwriter shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses, PROVIDED, HOWEVER, that the omission to so
notify such Underwriter shall not relieve such Underwriter from any liability
which such Underwriter may have to the Company or any such person or otherwise.
The Company or such person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company or such person unless the employment of such counsel shall have been
authorized in writing by such Underwriter in connection with the defense of such
Proceeding or
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such Underwriter shall not have employed counsel to have charge of the defense
of such Proceeding or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to or in conflict with those available to such Underwriter
(in which case such Underwriter shall not have the right to direct the defense
of such Proceeding on behalf of the indemnified party or parties, but such
Underwriter may employ counsel and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such Underwriter),
in any of which events such fees and expenses shall be borne by such Underwriter
and paid as incurred (it being understood, however, that such Underwriter shall
not be liable for the expenses of more than one separate counsel (in addition to
any local counsel) in any one Proceeding or series of related Proceedings in the
same jurisdiction representing the indemnified parties who are parties to such
Proceeding). No Underwriter shall be liable for any settlement of any such
Proceeding effected without the written consent of such Underwriter but if
settled with the written consent of such Underwriter, such Underwriter agrees to
indemnify and hold harmless the Company and any such person from and against any
loss or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such settlement is
entered into more than 60 business days after receipt by such indemnifying party
of the aforesaid request, (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding.
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 9 in respect of any losses, damage, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, damages, expenses,
liabilities or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportion as the total
proceeds from the offering (net of underwriting
21
<PAGE>
discounts and commissions but before deducting expenses) received by the Company
and the total underwriting discounts and commissions received by the
Underwriters, bear to the aggregate public offering price is the shares. The
relative fault of the Company on the one hand and of the Underwriters on the
other shall be determined by reference to, among other things, whether the
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, damages, expenses,
liabilities and claims referred to in this subsection shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating, preparing to defend or defending any claim or
Proceeding.
(d) The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in subsection (c) above. Notwithstanding
the provisions of this Section 9, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by such Underwriter and distributed to the public were offered to
the public exceeds the amount of any damage which such Underwriter has otherwise
been required to pay by reason of such untrue statement or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 9(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to their respective underwriting commitments
and not joint.
(e) The indemnity and contribution agreements contained in this Section
9 and the covenants, warranties and representations of the Company contained in
this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, its directors and
officers or any person (including each partner, officer or director of such
person) who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, or by or on behalf of the Company, its
directors or officers or any person who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, and shall survive
any termination of this Agreement or the issuance and delivery of the Shares.
The Company and each Underwriter agree promptly to notify each other
commencement of any Proceeding against it and, in the case of the Company,
against any of the Company's officers or directors in connection with the
issuance and sale of the Shares, or in connection with the Registration
Statement or Prospectus.
10. NOTICES. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or sent to
Warburg Dillon Read LLC, 299 Park Avenue, New York, NY 10171-0026, Attention:
Syndicate Department, if to the Company, shall be sufficient in all
22
<PAGE>
respects if delivered or sent to the Company at the offices of the Company at
5000 Blue Lake Drive, Suite 200, Boca Raton, Florida 33431, Attention:
President.
11. GOVERNING LAW; CONSTRUCTION. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
12. SUBMISSION TO JURISDICTION. Except as set forth below, no Claim may
be commenced, prosecuted or continued in any court other than the courts of the
State of New York located in the City and County of New York or in the United
States District Court for the Southern District of New York, which courts shall
have jurisdiction over the adjudication of such matters, and the Company
consents to the jurisdiction of such courts and personal service with respect
thereto. The Company hereby consents to personal jurisdiction, service and venue
in any court in which any Claim arising out of or in any way relating to this
Agreement is brought by any third party against Warburg Dillon Read LLC or any
indemnified party. Each of Warburg Dillon Read LLC and the Company (on its
behalf and, to the extent permitted by applicable law, on behalf of its
stockholders and affiliates) waives all right to trial by jury in any action,
proceeding or counterclaim (whether based upon contract, tort or otherwise) in
any way arising out of or relating to this Agreement. The Company agrees that a
final judgment in any such action, proceeding or counterclaim brought in any
such court shall be conclusive and binding upon the Company and may be enforced
in any other courts in the jurisdiction of which the Company is or may be
subject, by suit upon such judgment.
13. PARTIES AT INTEREST. The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters, the Company and to the extent
provided in Section 9 hereof the controlling persons, directors and officers
referred to in such Section, and their respective successors, assigns, heirs,
pursuant representatives and executors and administrators. No other person,
partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
14. COUNTERPARTS. This Agreement may be signed by the parties in one or
more counterparts which together shall constitute one and the same agreement
among the parties.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Underwriters and the Company and their successors and assigns and any successor
or assign of any substantial portion of the Company's and any of the
Underwriters' respective businesses and/or assets.
23
<PAGE>
If the foregoing correctly sets forth the understanding among the
Company and the Underwriters, please so indicate in the space provided below for
the purpose, whereupon this letter and your acceptance shall constitute a
binding agreement among the Company and the Underwriters, severally.
Very truly yours,
CYBEAR, INC.
By: ____________________________
Title:
Accepted and agreed to as of the date first
above written, on behalf of themselves and
the other several Underwriters named in
Schedule A
WARBURG DILLON READ LLC
CIBC WORLD MARKETS CORP.
GRUNTAL & CO., L.L.C.
By: WARBURG DILLON READ LLC
By: ___________________________
Title:
By: ___________________________
Title:
24
<PAGE>
SCHEDULE A
NUMBER OF
UNDERWRITER FIRM SHARES
WARBURG DILLON READ LLC
CIBC WORLD MARKETS CORP.
GRUNTAL & CO., L.L.C.
-----------
Total............................................................
===========
EXHIBIT 4.1
NUMBER CYBEAR SHARES
C CYBEAR, INC.
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 23243p 10 3
THIS IS TO CERTIFY THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.001 PER SHARE, OF
CYBEAR, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the corporation and the facsimile
signature of its duly authorized officers.
Dated: CYBEAR INC.
CORPORATE
/s/ EDWARD E. GOLDMAN M.D. SEAL /s/ SCOTT LODIN
- ------------------------- 1997 ------------------
PRESIDENT DELAWARE SECRETARY
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, N.J.) TRANSFER AGENT
BY AND REGISTRAR
AUTHORIZED OFFICER
<PAGE>
CYBEAR, INC.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entities
JT TEN - as joint tenants with right
of survivorship and not as tenants
in common
UNIF GIFT MIN ACT-..........Custodian...............
(Cust) (Minor)
under Uniform Gifts to Minors
Act..........................
(State)
Additional abbreviations may also be used though not in the above list.
For value received,___________hereby sell, assign and transfer unto:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE, NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:________________________
_____________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKERS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE MEDALLION PROGRAM), PURSUANT TO S.E.C.
RULE 17Ad-15.
EXHIBIT 5.1
BROAD AND CASSEL
ATTORNEYS AT LAW
BOCA RATON * FT. LAUDERDALE * MIAMI * ORLANDO * TALLAHASSEE
* TAMPA * WEST PALM BEACH
SUITE 3000
MIAMI CENTER
201 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131
(305) 373-9400
FAX (305) 373-9443
May 25, 1999
Cybear, Inc.
5000 Blue Lake Drive, Suite 200
Boca Raton, Florida 33431
Re: Cybear, Inc. (the "Company")
REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
You have requested our opinion with respect to the shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), included
in the Registration Statement on Form S-1 (the "Form S-1") filed with the U.S.
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act").
As counsel to the Company, we have examined the original or certified
copies of such records of the Company, and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinions expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinions, we have
relied upon statements or certificates of officials and representatives of the
Company and others.
Based on, and subject to the foregoing, we are of the opinion that the
shares of Common Stock being registered in the Form S-1 shall, upon such
issuance as described in the Form S-1, be duly and validly issued and fully paid
and nonassessable.
In rendering this opinion, we advise you that members of this Firm are
members of the Bar of the State of Florida, and we express no opinion herein
concerning the applicability or effect of any laws of any other jurisdiction,
except the securities laws of the United States of America referred to herein.
<PAGE>
Cybear, Inc.
Page 2
This opinion has been prepared and is to be construed in accordance
with the Report on Standards for Florida Opinions, dated April 8, 1991, as
amended and supplemented, issued by the Business Law Section of The Florida Bar
(the "Report"). The Report is incorporated by reference into this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Form S-1. We also consent to the use of our name under the caption "Legal
Matters" in the Prospectus constituting part of the Form S-1. In giving such
consent, we do not thereby admit that we are included within the category of
persons whose consent is required under Section 7 of the Securities Act, or the
rules and regulations promulgated thereunder.
Very truly yours,
/s/ BROAD AND CASSEL
--------------------
BROAD AND CASSEL
EXHIBIT 10.8
[ANDRX CORPORATION LOGO]
Alan P. Cohen
Chairman & Chief Executive Officer
May 12, 1999
Edward Goldman, M.D.
President and Chief Executive Officer
Cybear, Inc.
5000 Blue Lake Drive
Suite #200
Boca Raton, FL 33431
Dear Dr. Goldman:
As you are aware, Andrx Corporation has been funding the operations of Cybear,
Inc. pursuant to a credit agreement dated September 15, 1998. This shall confirm
our conversation wherein we agreed that, as of the date Cybear, Inc. concludes
the offering of its stock, thereby raising sufficient funds to continue its
operations, Andrx Corporation is willing to convert the then outstanding net
amount due under the credit agreement into stock of Cybear, Inc. That conversion
shall take place at the stock price at which Cybear, Inc. executes its offering.
If this letter correctly sets forth our understanding, kindly so indicate by
signing the enclosed copy of this agreement where indicated and return it to me.
Sincerely,
/s/ ALAN P. COHEN /s/ Edward Goldman, M.D.
- ------------------------------------- ---------------------------------
Alan P. Cohen
Co-Chairman & Chief Executive Officer
APC:kms
cc: Scott Lodin
[ANDRX LOGO]
4001 S.W. 47th Avenue, Fort Lauderdale, Florida 33314
* 954-584-0300 * FAX: 954-792-1034
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our report and to all references to our Firm included in or made a part of
this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 24, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 11-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> FEB-05-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 MAR-31-1999
<CASH> 1,000 3,983 325,479
<SECURITIES> 0 0 0
<RECEIVABLES> 0 366,000 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 31,707 564,368 673,570
<PP&E> 240,535 2,581,658 3,635,594
<DEPRECIATION> (51,470) (175,029) (325,581)
<TOTAL-ASSETS> 395,456 3,331,951 4,470,269
<CURRENT-LIABILITIES> 1,410,119 3,799,568 6,362,437
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 13,000 13,269 13,269
<OTHER-SE> (1,027,663) (480,886) (1,905,437)
<TOTAL-LIABILITY-AND-EQUITY> 395,456 3,331,951 4,470,269
<SALES> 95,927 0 0
<TOTAL-REVENUES> 95,927 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 1,626,276 4,170,571 2,824,915
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 28,220 210,441 90,513
<INCOME-PRETAX> (1,558,569) (4,381,012) (2,914,913)
<INCOME-TAX> 0 1,900,000 1,400,000
<INCOME-CONTINUING> (1,558,569) (2,481,012) (1,514,913)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (1,558,569) (2,481,012) (1,514,913)
<EPS-BASIC> (0.12) (0.19) (0.11)
<EPS-DILUTED> (0.12) (0.19) (0.11)
</TABLE>
