AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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]
---------------
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<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per share 3,450,000 shares $ 16.00 55,200,000(2) $ 15,346.00
===================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Includes up to 450,000 shares that may be purchased by the underwriters
pursuant to exercise of their over-allotment option.
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.
================================================================================
<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 April 20, 1999
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3,000,000 SHARES
[CYBEAR LOGO]
COMMON STOCK
- --------------------------------------------------------------------------------
Cybear, Inc. is offering 3,000,000 shares of common stock with this prospectus.
This is a firm commitment underwriting.
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
"CYBR." On April 19, 1999, the last reported sales price of the common stock on
the OTC Bulletin Board was $27.00 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
- ------------------------------------------------------
<S> <C> <C>
Price to the Public $ $
- ------------------------------------------------------
Underwriting discount
- ------------------------------------------------------
Proceeds to Cybear
- ------------------------------------------------------
</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.
The date of this Prospectus is , 1999.
<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 Hospital" and
"Hospitals," "Solutions Net" and "Managed Care Organizations," "Solutions Rx"
and "Pharmacy," "Solutions Net" and "Physician Organizations" and "The Family
MD" 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 THE
FAMILY MDSM ARE OUR TRADEMARKS. THIS PROSPECTUS ALSO CONTAINS TRADEMARKS OF
OTHER COMPANIES.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Forward-Looking Statements ................... i
Prospectus Summary ........................... 1
Risk Factors ................................. 4
Price Range of Our Common Stock .............. 16
Use of Proceeds .............................. 16
Dividend Policy .............................. 17
Capitalization ............................... 17
Dilution ..................................... 18
Selected Consolidated Financial Data ......... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................... 20
Business .................................... 28
Directors and Executive Officers ............ 42
Certain Transactions ........................ 46
Principal Stockholders ...................... 48
Description of Capital Stock ................ 48
Shares Eligible for Future Sale ............. 50
Underwriting ................................ 51
Legal Matters ............................... 53
Experts ..................................... 53
Where You Can Find More Information ......... 53
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 against payment in immediately available funds.
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 our limited operating history
and substantial operating losses, availability of capital resources, ability to
effectively compete, economic conditions, unanticipated difficulties in product
development, ability to gain market acceptance and market share, ability to
manage growth, reliance on short-term non-exclusive contracts, Internet
security risks and uncertainty relating to the evolution of the Internet as a
medium for commerce, dependence on third party content providers, dependence on
our key personnel, ability to protect our intellectual property, Year 2000
problems and the impact of future government regulation on our business. You
should also consider carefully the risks described in this prospectus or
detailed from time to time in our filings with the Securities and Exchange
Commission.
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
YOU SHOULD CONSIDER BEFORE INVESTING IN THE SHARES. 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 is an information technology company 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 information and Internet-based
productivity applications to physicians, physician organizations, pharmacies
and hospitals. In March 1999, Cybear introduced its first Solutions product,
Solutions MD, a healthcare Internet portal site that provides a combination of
healthcare content, productivity software applications tools, the entry point
to a comprehensive communications network and ongoing access to further
Solutions products and services. We have begun to market Solutions MD to
physicians and numerous physician organizations throughout the United States.
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, a state-of-the-art Internet-based technology platform and
extensive application development capabilities.
We provide access to the Internet and our Solutions products through our
own Internet Service Provider, which enables us to provide secure and reliable
connectivity as well as various value-added services like web hosting and
private intranets. We have designed our Solutions products using the
platform-independent Java programming language, which will allow us to
efficiently deliver, maintain and enhance our Solutions products 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 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 a dedicated Internet Service Provider connection, 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
contracts, developing a practice web site and newsletter and ordering medical
and office supplies online.
1
<PAGE>
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 Health Users Group
Network /bullet/ MediMedia USA /bullet/ Andover Group
/bullet/ OMNA Practice /bullet/ Medimetrix Group
Management /bullet/ MedPaper
/bullet/ PhyMatrix Corporation /bullet/ InfoSpace
/bullet/ AON Risk Services of /bullet/ Reuters Health Information
Florida /bullet/ Moore Medical Supply
</TABLE>
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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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 ......................... "CYBR"
</TABLE>
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(1) Excludes (a) 1,004,083 shares of common stock issuable upon the exercise of
outstanding stock options at April 15, 1999, (b) 795,917 additional
shares of common stock reserved for future issuance under our existing
stock option plan and (c) the estimated 450,000 shares of common stock to
be issued to Andrx Corporation upon completion of this offering in
exchange for the contribution to Cybear's capital of certain amounts due
to Andrx by Cybear. 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
FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
STATEMENT OF OPERATIONS DATA: ------------------- -------------------
<S> <C> <C>
Revenues ..................................... $ 95,927 $ --
Loss from operations ......................... (1,530,349) (4,170,571)
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
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------
ACTUAL AS ADJUSTED(1)
BALANCE SHEET DATA: ---------------- --------------------
<S> <C> <C>
Working capital (deficit) .............. $ (3,235,200) $ 40,359,527(2)
Total assets ........................... 3,331,951 44,581,951
Total liabilities ...................... 3,799,568 1,454,841(2)
Shareholders' equity (deficit) ......... $ (467,617) $ 43,127,110(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 amounts due to Andrx
Corporation as of December 31, 1998 into 156,315 shares of Cybear's common
stock upon consummation of this offering based on the public offering price
of the shares offered hereby and after the reimbursement from Andrx
Corporation for net operating loss carryforwards used by Andrx Corporation.
See "Certain Transactions."
3
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
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. THE RISKS AND UNCERTAINTIES
DESCRIBED BELOW ARE NOT THE ONLY ONES THAT WE FACE. 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 AND ARE STILL IN THE DEVELOPMENT STAGE
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 introduced Solutions MD, our first product, in March 1999. We
have not yet generated any significant revenues from this product or any other
products. As a result, we have no relevant operating history for you to
evaluate our performance and prospects. 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 and advertising, although our business model is
still evolving and we are unable to predict the amount and timing of revenues.
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 HAVE INCURRED SUBSTANTIAL LOSSES AND ANTICIPATE SIGNIFICANT LOSSES FOR THE
FORESEEABLE FUTURE
We have incurred net losses and negative cash flow from operations since
inception, and as of December 31, 1998 had an accumulated deficit of
approximately $4.0 million. Our 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.
We cannot be certain that we can achieve sufficient revenues in relation
to our expenses to ever become profitable. 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.
NEED FOR ADDITIONAL CAPITAL
We believe that the proceeds of this offering will be sufficient to meet
our requirements for at least the next twelve months. However, if our revenues
fall short of our projections or our expenses
4
<PAGE>
exceed our expectations, our business, financial condition and operating
results would be materially adversely affected. We may then 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.
NO GUARANTEE OF MARKET ACCEPTANCE OF SOLUTIONS PRODUCTS
Our Solutions products provide web-based communications, information and
administrative services for the healthcare industry. 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 damage our ability
to successfully introduce our other Solutions products.
WE MUST ESTABLISH AND MAINTAIN THE SOLUTIONS MD BRAND
In order to increase our subscriber and consumer bases and expand our
online traffic, 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.
We expect to substantially increase our marketing budget in order to
generate brand recognition and build brand loyalty. Our business could be
materially adversely affected if our marketing efforts are not productive or if
we cannot increase our brand awareness. Further, our web site will be more
attractive to healthcare advertisers if we have a large audience of subscribers
with demographic characteristics desirable to advertisers. Therefore, we intend
to introduce additional or enhanced services in the future in an effort to
attract and retain subscribers. Our reputation and brand name could be
adversely affected if we experience difficulties in introducing new services,
if these services are not accepted by subscribers, if we are required to
discontinue existing services or if our services do not function properly.
WE NEED TO CONTINUE PRODUCT DEVELOPMENT
Solutions MD was introduced in March 1999 but still needs further
development. Other Solutions products have not yet been introduced and are
still under development. We have not yet completed the development or testing
of certain system enhancements. 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. We also need to attract and retain personnel
with the necessary skills required to continue product development.
In addition, while we believe that our basic technology platform performs
the principal functions for which it has been designed, we have only conducted
limited tests of the initial components of our
5
<PAGE>
software in connection with preliminary market testing activities.
Consequently, we cannot guarantee that this software 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 software may contain errors which become apparent
subsequent to commercial use. Remedying such errors could delay our plans and
cause us to incur substantial additional costs.
OUR QUARTERLY FINANCIAL RESULTS MAY FLUCTUATE SIGNIFICANTLY
As a result of our limited operating history and the emerging nature of
the products and markets in which we expect to compete, our historical
financial data is of limited value in planning future operating expenses.
Accordingly, our planned expenses 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 include:
/bullet/ the number of ongoing paid subscribers to Solutions MD and their
use of the site;
/bullet/ our ability to timely release our connectivity products and their
market acceptance;
/bullet/ fees we may pay for distribution, service or content agreements
and promotional arrangements or other costs we incur as we expand
our operations;
/bullet/ the timing and amount of advertising and sponsorship revenues;
/bullet/ our ability to attract and retain personnel with the necessary
strategic, technical and creative skills required to develop and
service our customers;
/bullet/ the amount and timing of capital expenditures and other costs
relating to the expansion of our operations;
/bullet/ the introduction of new products or services by us or our
competitors;
/bullet/ pricing changes in the industry;
/bullet/ technical difficulties in the use of the Internet;
/bullet/ the level of traffic on our web site and the level of usage of the
Internet generally;
/bullet/ new government regulations that affect healthcare or the Internet;
and
/bullet/ general economic conditions.
Due to all of these factors, 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 FACE INTENSE COMPETITION
Both the ISP market and the management applications market in which we
intend to operate are extremely competitive. The market for Internet services
and products is relatively new, intensely competitive and rapidly changing.
Since the Internet's commercialization in the early 1990's, the number of web
sites on the Internet competing for users' attention has proliferated with no
substantial barriers to entry, and we expect that competition will continue to
intensify. We compete, directly and
6
<PAGE>
indirectly, for subscribers, consumers, content and service providers,
advertisers, sponsors and acquisition candidates with the following categories
of companies:
/bullet/ online services or web sites targeted to the healthcare industry
generally and general purpose ISPs;
/bullet/ publishers and distributors of traditional offline media,
including those targeted to healthcare professionals, many of
which have established or may establish web sites;
/bullet/ online medical information service companies;
/bullet/ public sector and non-profit web sites that provide healthcare
information without advertising or commercial sponsorships;
/bullet/ physician office management information systems companies;
/bullet/ vendors of healthcare information, products and services
distributed through other means, including direct sales, mail and
fax messaging; and
/bullet/ web search and retrieval services and other high-traffic web
sites.
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/ longer operating histories;
/bullet/ greater name recognition; and
/bullet/ larger subscriber bases.
To be competitive, we must use leading technologies, enhance our services
and content, develop new technologies that address the increasingly
sophisticated and varied needs of healthcare professionals and respond to
technological advances and emerging industry standards and practices on a
timely and cost-effective basis. We believe that there are many web sites that
provide much of the substantive information to be provided on Solutions MD,
although none of these companies is believed to be an ISP offering all of the
same content and management tools. We cannot guarantee that we will be
successful in using new technologies effectively or adapting our web site and
proprietary technology to user requirements or emerging industry standards. 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 OPERATE IN AN EVOLVING MARKET THAT IS DEPENDENT ON THE INTERNET
Our business depends on the 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
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<PAGE>
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.
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.
DEPENDENCE ON ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM
We expect to generate 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 revenue 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 member demographic
characteristics that are attractive to advertisers.
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.
In addition, 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 the Internet as an
advertising medium.
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.
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WE WILL RELY ON SHORT-TERM NON-EXCLUSIVE ADVERTISING CONTRACTS
Our advertising revenue 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 advertising to competing web sites
or to other media quickly and without penalty, thereby increasing our exposure
to competitive pressures. Our failure to achieve sufficient advertising revenue
would have a material adverse effect on our business, results of operations and
financial condition.
WE WILL HAVE TO PROTECT AGAINST INTERNET SECURITY RISKS
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. Our security measures may not prevent security breaches and the
failure to prevent such security breaches may have a material adverse effect on
our business, results of operations and financial condition.
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. We rely
on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information. Advances in computer capabilities, new discoveries
in the field of cryptography or other events or developments may result in a
compromise or breach of our security measures designed to protect customer
transaction data. If any compromise of our security were to occur, it could
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
online services 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. A recent federal law called the Digital Millennium Copyright Act
may provide some protection in this regard. However, this law has not been
tested or interpreted in courts to any significant degree and may not protect
us in all situations.
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.
WE DEPEND ON OUR 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
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<PAGE>
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 could have a
material adverse effect on our business, financial condition and operating
results. The providers could also increase the license fees for the services.
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 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 MAY EXPERIENCE SYSTEM FAILURES
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. We have agreements with several
providers and believe that additional network capacity is readily available
from the major telecommunications companies. We have entered into agreements
with multiple suppliers to best meet our needs. 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 our web site 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. Moreover, the Internet
infrastructure may not be able to support continued growth in its use. Any
significant interruption in our operations could have a material adverse effect
on our business, financial condition and operating results.
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<PAGE>
WE MAY NOT BE ABLE TO MANAGE GROWTH
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; WE NEED TO ATTRACT AND RETAIN
KEY PERSONNEL
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 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 John Klein, our Chairman of the Board, Edward 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.
Our future success also depends on our ability to attract and retain
highly qualified technical, sales, customer service and managerial personnel.
Competition for such personnel 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 MUST 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 intellectual
properties, 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 have a federal service mark registration for "Cybear." We have also
registered the domain names "Solutions MD.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.
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 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 such 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, although we believe that our proprietary rights do not
infringe on the intellectual property rights of others, we cannot guarantee
that other parties will not assert infringement claims against us.
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<PAGE>
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.
WE COULD BE 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 provide Internet services, in part, through data transmissions over
public telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for wireline communications. We currently are
not subject to direct regulation by the Federal Communications Commission or
any other governmental agency, other than regulations applicable to businesses
generally.
However, in the future 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 environment
relating to the application of access charges and Universal Service Fund
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 have a material adverse impact on our business and
financial condition.
GOVERNMENT REGULATION OF HEALTHCARE
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 which 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. We expect to conduct our healthcare
communications business in substantial compliance with all material federal,
state and local laws and regulations governing our operations.
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<PAGE>
NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur an immediate,
substantial dilution of $12.40 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 (assuming no exercise of the
Underwriters' over-allotment option and excluding the estimated 450,000 shares
to be issued to Andrx upon completion of the offering in connection with the
conversion of amounts due to Andrx by Cybear). See "Certain Transactions." As a
result, Andrx will be able to control all matters requiring shareholder
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. For more
information, see "Management," "Principal Stockholders" and "Description of
Capital Stock."
THERE HAS BEEN A LIMITED TRADING MARKET FOR OUR COMMON STOCK
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. 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 VOLATILE
The trading price of our common stock could be subject to fluctuations in
response to:
/bullet/ quarterly variations in 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.
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 and volatile prices
of these securities. These fluctuations may materially affect the trading price
of our common stock. 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."
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WE WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,000,000 shares of
common stock offered by us will be approximately $41.3 million, at an assumed
public offering price of $15.00 per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. We
intend to use the net proceeds (a) to fund the development and deployment of
Solutions MD, including promotion of the Solutions MD brand, funding of
promotional arrangements, content development and licensing and expansion of
our marketing and advertising sales efforts, (b) to fund operating losses, and
(c) for working capital and other general corporate purposes.
We also intend to seek acquisitions that could provide additional service
or content offerings or technologies. Consequently, our Board of Directors and
management will have significant flexibility in applying the net proceeds of
this offering. The failure of management to apply such funds effectively could
have a material adverse effect on our business, financial condition and
operating results. For more information, see "Use of Proceeds."
ACQUISITIONS MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR BUSINESS
We may make acquisitions of or investments in complementary companies,
technologies and assets. 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;
/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 shareholders, to pay for acquisitions;
and
/bullet/ our acquisitions may not result in any return on our investment
and we may lose our entire investment.
We may not be able to effect our growth strategy if we are not able to
consummate 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 consummate
future acquisitions for other reasons such as the availability of capital. If
we are unable to consummate future acquisitions, 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. After
the completion of this offering, 16,269,400 shares of common stock will be
outstanding, excluding an estimated 450,000 shares of common stock to be issued
to Andrx Corporation upon completion of this offering in exchange for the
contribution to Cybear's capital of certain amounts due to Andrx by Cybear. See
"Certain Transactions." Only the 3,000,000 shares sold pursuant to this
offering and 269,400 currently outstanding shares will be tradable in the
public market without restriction.
The remaining 13,000,000 shares of common stock to be outstanding after
the offering are "restricted securities" within the meaning of Rule 144 under
the Securities Act of 1933, and may not
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<PAGE>
be publicly resold, except in compliance with the registration requirements of
the Securities Act or pursuant to an exemption from registration, including
that provided by Rule 144.
These shares will be eligible for resale in the public market, subject to
compliance with certain volume, timing and other requirements of Rule 144 under
the Securities Act, commencing in November 1999.
Andrx and our officers and directors (holding an aggregate of 12,870,000
shares of common stock), have agreed not to offer, sell or contract to sell or
otherwise dispose of any common stock for a period of 180 days after the date
of this prospectus without the prior written consent of Warburg Dillon Read
LLC. In its sole discretion, and at any time without notice, Warburg Dillon
Read LLC may release all or any portion of the shares subject to such lock-ups.
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 shareholders. 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.
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.
We expect to identify and resolve all Year 2000 problems that could
materially adversely affect our business, financial condition or operating
results. However, we believe that it is not possible to determine with complete
certainty that all Year 2000 problems affecting us have been identified or
corrected. We could suffer the following consequences:
/bullet/ a significant number of operational inconveniences and
inefficiencies for us, our service and content providers and our
subscribers and consumers that may divert our time and attention
and financial and human resources from our ordinary business
activities; and
/bullet/ a lesser number of serious system failures that may require
significant efforts by us, our service and content providers or
our subscribers and consumers to prevent or alleviate material
business disruptions.
We are currently developing contingency plans to be implemented as part of
our efforts to identify and correct Year 2000 problems affecting our internal
systems. We expect to complete our contingency plans by the end of the third
quarter of 1999. If we are required to implement any of these contingency
plans, such plans could have a material adverse effect on our business,
financial
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condition or operating results. However, if all Year 2000 issues are not
properly identified, or assessment, remediation and testing of those Year 2000
problems that are identified is not effected 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. For more information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000."
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 April 19, 1999
ranged from $7.75 to $33.00 according to information obtained from the OTC
Bulletin Board. On April 19, 1999, the last reported sales price was $27.00 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.
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.
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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 December 31, 1998; and
/bullet/ The capitalization of Cybear on December 31, 1998, 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>
DECEMBER 31, 1998
---------------------------------
ACTUAL AS ADJUSTED
--------------- ---------------
<S> <C> <C>
Due to Andrx Corporation(1) ...................................... $ 2,344,727 $ --
------------ ------------
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 16,425,715 shares
issued and outstanding, as adjusted(1) ........................ 13,269 16,425
Additional paid-in capital(1) ................................... 3,558,695 47,150,266
Deficit accumulated during development stage .................... (4,039,581) (4,039,581)
------------ ------------
Total stockholders' equity (deficit) ............................. (467,617) 43,127,110
------------ ------------
Total capitalization ............................................. $ 1,877,110 $ 43,127,110
============ ============
</TABLE>
- ----------------
(1) At the closing of this offering, the then outstanding amounts due to Andrx
Corporation will be converted into an estimated 450,000 (156,315 shares as
of December 31, 1998) 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. See "Certain
Transactions."
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DILUTION
- --------------------------------------------------------------------------------
Cybear's net tangible book value on December 31, 1998 was approximately
$(825,617), or $(0.06) 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 December 31, 1998 would have been
approximately $42.8 million, or $2.60 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.
/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 $2.66 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
Net tangible book value per share as of December 31, 1998 ..................... $ (0.06)
Increase in net tangible book value per share attributable to the offering .... 2.51
Increase in net tangible book value per share attributable to the conversion of
the amounts due to Andrx Corporation ........................................ 0.15
-------
Pro forma net tangible book value per share as of December 31, 1998, giving
effect to the offering and the conversion of the amounts due to Andrx
Corporation, after reimbursement from Andrx for net operating loss
carryforwards ............................................................... 2.60
--------
Dilution per share to new investors in the offering ........................... $ 12.40
========
</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 450,000 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 April 15, 1999, there are 1,004,083 outstanding options to purchase
common stock, with exercise prices ranging from $1.00 to $3.00, that, if
exercised, would result in additional dilution.
18
<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 Operation" 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 and balance sheet data
from the audited consolidated financial statements in this prospectus. Those
consolidated financial statements were audited by Arthur Andersen LLP,
independent certified public accountants.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM CUMULATIVE FROM
FEBRUARY 5, 1997 FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1998
STATEMENT OF OPERATIONS DATA: --------------------- -------------------- -----------------
<S> <C> <C> <C>
Revenues ............................................. $ 95,927 $ -- $ 95,927
Operating expenses: ..................................
Software development expenses ....................... 945,497 1,621,422 2,566,919
General and administrative expenses ................. 680,779 2,264,252 2,945,031
Write-off of software license ....................... -- 159,897 159,897
Litigation settlement charge ........................ -- 125,000 125,000
------------ ------------ ------------
Total operating expenses ............................. 1,626,276 4,170,571 5,796,847
Loss from operations ................................. (1,530,349) (4,170,571) (5,700,920)
Interest expense on due to Andrx Corporation ......... (28,220) (210,441) (238,661)
Income tax benefit ................................... -- 1,900,000 1,900,000
------------ ------------ ------------
Net loss ............................................. $ (1,558,569) $ (2,481,012) $ (4,039,581)
============ ============ ============
Basic and diluted net loss per share ................. $ (0.12) $ (0.19) $ (0.31)
============ ============ ============
Basic and diluted weighted average shares of
common stock outstanding ............................ 12,768,303 13,030,999 12,906,266
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
BALANCE SHEET DATA: ---------------- ----------------
<S> <C> <C>
Working capital deficit ......... $ (1,378,412) $ (3,235,200)
Total assets .................... 395,456 3,331,951
Total liabilities ............... 1,410,119 3,799,568
Shareholders' deficit ........... $ (1,014,663) $ (467,617)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. CYBEAR'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY
FACTORS, INCLUDING THOSE STATED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. 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 is an information technology company 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 that provides information and
Internet-based productivity applications to physicians, physician
organizations, pharmacies and hospitals. In March 1999, Cybear introduced its
first Solutions product, Solutions MD, which addresses the communications and
operational needs of physicians. Cybear's other Solutions products, derived
from Solutions MD, will provide Internet-based productivity software
applications and communication networks for other constituents of the
healthcare community. From February 5, 1997 (inception) through December 31,
1998, 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.
RECENT MERGER. On November 20, 1998, Cybear, Inc., a Florida corporation,
merged with 1997 Corp. pursuant to a Merger Agreement and Plan of
Reorganization dated July 15, 1998. 1997 Corp. was a "blank check" company that
had a registration statement on file with the Securities and Exchange
Commission 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. (the Florida corporation that merged into 1997
Corp.) 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.
RELATIONSHIP WITH ANDRX CORPORATION. As of December 31, 1998, Cybear was
95% owned by Andrx Corporation ("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 Cybear is in a
position to raise at least $4.0 million on its own (whether through debt or
equity) or 12 months from the consummation of the above-described merger,
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 (inception) to December 31, 1997 and $210,441 for
the year ended December 31, 1998.
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
20
<PAGE>
resources. For the period from February 5, 1997 (inception) to December 31,
1997 and for the year ended December 31, 1998, Cybear 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.
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, 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 December 31, 1998, Cybear had
an accumulated deficit of $4.0 million. In addition,
21
<PAGE>
Cybear intends to continue to invest heavily in product development and
marketing. 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 (inception) 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 (inception) to December 31, 1997 compared to approximately $1.6 million
for the year ended December 31, 1998.
22
<PAGE>
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. Also included in the period from February 5,
1997 (inception) 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.
General and administrative expenses were $680,779 for the period from
February 5, 1997 (inception) to December 31, 1997 compared to approximately
$2.3 million for the year ended December 31, 1998. 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 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 ("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. This has 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
(inception) 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, such net advances including interest amounted
to approximately $5.4 million and bear interest at prime (7.75% at December 31,
1998) plus 1/2%.
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 approximately $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.
23
<PAGE>
The following table sets forth the unaudited selected quarterly data for
the year ended December 31, 1998:
<TABLE>
<CAPTION>
FISCAL 1998 QUARTER ENDED
------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenue ...................................... $ -- $ -- $ -- $ --
Operating expenses:
Software development ........................ 305,793 449,812 413,721 452,096
General and administrative .................. 224,681 350,771 577,623 1,111,177
Write-off of software license ............... -- -- -- 159,897
Litigation settlement charge ................ -- -- -- 125,000
---------- ---------- ------------ ------------
Total operating expenses ..................... 530,474 800,583 991,344 1,848,170
---------- ---------- ------------ ------------
Loss from operations ......................... (530,474) (800,583) (991,344) (1,848,170)
Interest expense on due to Andrx
Corporation ................................ (32,102) (47,547) (65,610) (65,182)
---------- ---------- ------------ ------------
Loss before income taxes ..................... (562,576) (848,130) (1,056,954) (1,913,352)
Income tax benefit ........................... -- -- -- 1,900,000
---------- ---------- ------------ ------------
Net loss ..................................... $ (562,576) $ (848,130) $ (1,056,954) $ (13,352)
========== ========== ============ ============
Basic and diluted net loss per share ......... $ (0.04) $ (0.07) $ (0.08) $ 0.00
========== ========== ============ ============
Basic and diluted weighted average shares of
common stock outstanding ................... 13,000,000 13,000,000 13,000,000 13,122,987
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
From February 5, 1997 (inception) through December 31, 1998, Cybear
incurred a net loss of approximately $4.0 million and has been dependent upon
funding from Andrx. As of December 31, 1998, Cybear owed Andrx approximately
$2.3 million. As of December 31, 1998, Cybear had $3,983 in cash and a working
capital deficit of approximately $3.2 million.
Net cash used in operating activities was approximately $1.4 million for
both the period from February 5, 1997 (inception) 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.
Net cash used in investing activities for the period from February 5, 1997
(inception) 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 (inception) 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 provided by financing activities for the period from February 5,
1997 (inception) 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 (inception) 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
24
<PAGE>
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 (7.75% at December 31, 1998) plus 1/2%. On November 20,
1998, upon consummation of 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.
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 $4.0 million on its own (whether through debt or
equity) or 12 months from the consummation of the above-described merger,
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. Andrx is committed to the
required funding of Cybear's operations until Cybear is able to raise capital
from third parties or the next twelve months. From February 5, 1997 (inception)
through December 31, 1998, Cybear has been dependent upon funding from Andrx.
As of December 31, 1998, Cybear owed Andrx approximately $2.3 million. 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 for at least the next 12 months. Based on
Andrx's most recent financial statements, Cybear believes that Andrx currently
has the resources to fund Cybear's cash requirements for at least the next 12
months.
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
25
<PAGE>
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 March 15,
1999, it had completed approximately 40% 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 60% 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 interfaces with such entities are
vulnerable to Year 2000 issues and whether the products and services purchased
from or by such entities are Year 2000 compliant. As of March 15, 1999, Cybear
had received responses on Internet documentation from approximately 92% of such
third parties, and 93% of the companies that have responded have provided
written assurance that they are Year 2000 compliant, with the remaining 7%
expecting to address all their significant Year 2000 issues on a timely basis.
A follow-up mailing to significant vendors and service providers that did not
initially respond, or whose responses were deemed unsatisfactory by Cybear, was
conducted in March 1999.
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 of third parties, will not
exceed $500,000 and will be funded from current existing financial resources.
As of March 15, 1999, Cybear had incurred costs of approximately $100,000
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 not yet completed 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 ("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.
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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 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 is an information technology company 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 ("ISP") system that provides information and
Internet-based productivity applications to physicians, physician
organizations, pharmacies and hospitals.
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. Cybear's other Solutions
products, derived from Solutions MD, will provide Internet-based productivity
software applications and communication networks for other constituents of the
healthcare industry. Solutions MD is a healthcare Internet portal site that
provides a combination of healthcare content, productivity software
applications tools, the entry point to a comprehensive communications network
and ongoing access to further Solutions products and services. We have begun to
market our first product, Solutions MD, to physicians and numerous physician
organizations throughout the United States. We have established strategic
relationships with several leading physician organizations that collectively
represent over 200,000 physicians.
We believe the Internet provides a universal, cost-effective
communications medium to deliver value-added business solutions for the
healthcare industry. Cybear intends to sell Solutions MD on a monthly
subscription basis at an affordable and competitive price. 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. These complementary products will contain
applications, content and connectivity features that the specialized users of
these products will find useful. Our ability to create private communications
networks is an important improvement over the paper and fax communications
typically used by physicians and their staffs and other healthcare providers.
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.
In addition to our subscribers, we believe advertisers will be attracted
to our site because of our ability to target physicians by specialty, interact
with them electronically and allow them to order pharmaceutical samples and
other products over a secure network.
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 network providers.
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
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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.
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 dedicated ISP, allow for the creation of
secure intranets 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.
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,
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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, 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, 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 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
private networks will improve communications and administrative
efficiency, and that this in turn will limit the desire and
ability of individual subscribers to discontinue subscribing to
our products and services in favor of competitors.
/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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PRODUCTS
OUR TECHNOLOGY PLATFORM
Our Internet-based technology platform for our Solutions product line
includes a dedicated ISP, which ensures secure and reliable Internet access to
our subscribers, the use of Java language-based programming to design our user
applications, and a fully-redundant Network Operations Center ("NOC") to
provide scalability and reliability to our subscriber base.
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>
ISP-Based Communications System /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
/bullet/ E-mail, private network capabilities and web hosting
services
/bullet/ Tiered multiple user groups for password secure
Intranet 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/ A portal entry point notifying users of new
information and product updates relevant to the
particular user group
/bullet/ A web site template, search engine/directory, and
online newsletter publisher, each customizable to the
needs of the user, and web site access and usage
tracking
/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
/bullet/ HCFA Norms compares practice coding to
HFCA 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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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/ OSHA Compliance procedures, online training
/bullet/ Disaster Protocols courses, and OSHA 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/ Formularies by different insurance carriers,
/bullet/ FDA Approvals and minimizes changes and
/bullet/ 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/ Online real-time eligibility and authorization transaction
capability for varying plan sizes.
/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 serve as the interface to
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 THE FAMILY MD, 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. The following is a brief description of our current
key strategic relationships:
DISTRIBUTION PARTNERS
THE IPA ASSOCIATION OF AMERICA ("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 its preferred ISP and
Internet business applications provider. 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. A physician practice management
organization serving 1,000 oncologists. Cybear is its preferred ISP and
Internet business applications provider.
OMNA PRACTICE MANAGEMENT. A multi-specialty physician practice management
organization. Cybear is its preferred ISP and Internet business
applications provider.
PHYMATRIX CORPORATION. A publicly-traded physician practice management
company serving over 12,000 physicians. Cybear is its preferred ISP and
Internet business applications provider.
AON RISK SERVICES INC. OF FLORIDA. A professional insurance carrier. Cybear
is its preferred ISP and AON will market its professional insurance
products through Cybear's Solutions products.
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.
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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. ("SUN"). 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 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 ADSL networks in the
Tampa market as well as a GTE dial-up partner.
MICROSOFT HEALTH USERS GROUP. The technology standards organization that
jointly developed the current standards by which medical data is
transmitted. Cybear is a committee member of MSHUG, 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 Health Users Group ("MSHUG") 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 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
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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 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 a portal page that is co-branded by Cybear and the
network sponsor. 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.
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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 ("NOC") was designed to fully integrate
redundancy and scalability. Among some of the technologies utilized are Virtual
Router Redundancy Protocol (VRRP) and Border Gateway Protocol Level 4 (BGP4),
between our master switches. These switches are the central core of Cybear's
network. In addition to load balancing, they operate at every TCP/IP layer up
to layer 4. We have installed redundant power supplies, each with its own power
cable, into every major switch or router so as to ensure that a disruption in
the power supply or disconnected power cable does not incapacitate the network.
We have also installed dual Ethernet ports in each of our major connection
points, enabling a redundant backup wire or card to become operative in the
event of card and/or wire failure. We can increase our capacity, speed and
fault tolerance without affecting or stopping existing services simply by
plugging additional systems into our load balanced network. Upgrades are done
to our routers, switches and hosts as viral 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 T3 segments, to several major backbone providers, including
Bell South, Uunet, Sprint and Cable & Wireless, all of which are peered using
the BGP4 Protocol. If any one or more of the providers or routers becomes
unavailable, the backbone itself will re-route traffic as necessary to continue
functioning without interruption.
Every network segment, including the load balanced systems and private
networks, are 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 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 center 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
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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 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
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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 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
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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.
Cybear has filed one patent application and copyright applications
relating to its software technology and has obtained trademark protection for
the name Cybear. 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 other 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 March 15, 1999, Cybear had 65 full-time employees. None of such
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 ("IVAX"), 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 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
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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.
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.,
("Circa") 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.
("Watson"). 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. 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, Sales 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 CEO 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.
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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, 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 CAD/CAM, and networking services for
clients such as Pratt & Whitney, Motorola, and Sikorsky.
Following 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 (the "CEO"). 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 CEO
</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.
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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.
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
(without any present value adjustment) 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 (without
any present value adjustment) 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 (the "Warrant") 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 the Warrant includes
piggyback registration rights. The Warrant is exercisable commencing on April
30, 1999 (the "Warrant Exercise Date"). The Warrant shall be exercisable for a
period of seven years after the Warrant Exercise Date, 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 1997
Stock Option Plan (the "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.
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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.
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
The Plan currently authorizes the award of up to 1,800,000 shares (subject
to adjustment as provided in the Plan in the event of stock dividends and
splits) of common stock in the form of stock options. As of the date of this
prospectus, stock options to purchase 1,004,083 shares of common stock were
outstanding under the Plan. Accordingly, 795,917 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 (each, an "Outside Director"),
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 (such services being the "Participation Status") 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 (the "Committee"), in its sole discretion, from among
those eligible.
In granting options, the 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 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, and its determination, interpretation and construction of
any provision of the Plan are final and conclusive. 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.
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
Messrs. Cohen, Lodin and Malahias are executive officers of Andrx and none
of such persons is required to commit his full time to the affairs of Cybear
and it is likely that such persons will not
46
<PAGE>
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 December 31, 1998, such net funding including
interest amounted to $5.4 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 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 450,000 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 (the "Warrant") 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 Exercise Date"). The Warrant is exercisable for a period
of 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 Cybear's consolidated financial statements.
In November, 1998, Cybear entered into a five year sublease agreement with
Strategy Business and Technology Solutions, LLC (the "Lessor"), 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 the Lessor $10,000 and $417 per month in
base rent and electricity, respectively. In addition, Cybear agreed to pay a
security deposit of $20,000. For the year ended December 31, 1998, Cybear has
recorded an expense of $20,834 relative to this lease which had not been paid
as of December 31, 1998.
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.
47
<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>
- ----------------
(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 450,000 shares of
common stock to Andrx in connection with the conversion of amounts due to
Andrx. See "Certain Transactions."
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
such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and, in the event of liquidation, to share pro rata
in any distribution of our assets after payment or provision for the payment of
liabilities and the liquidation preference of any outstanding preferred stock.
48
<PAGE>
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 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 offered hereby 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 such designations, preferences and
relative, participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, including the
number of shares in such series (which the Board may increase or decrease as
permitted by Delaware law), liquidation preferences, dividend rates, conversion
or exchange rights, redemption provisions of the shares constituting any series
and such other special rights and protective provisions with respect to any
class or series as the Board may deem advisable without any further vote or
action by the stockholders. Any shares of preferred stock so issued 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.
RESTRICTIONS ON REMOVAL OF DIRECTORS. The Certificate of Incorporation and
Bylaws of Cybear provide that directors may only be removed for cause and only
upon the affirmative vote of the holders of at least three-fourths of the
outstanding shares of capital stock entitled to vote. These provisions, when
coupled with the provision of Cybear's Certificate of Incorporation and Bylaws
authorizing only the Board of Directors to fill vacant directorships or
increase the size of the Board, may deter a stockholder from removing incumbent
directors and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with its own nominees.
SPECIAL MEETING OF STOCKHOLDERS. Cybear's Certificate of Incorporation and
Bylaws provide that special meetings of Cybear's stockholders 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.
AMENDMENT OF CERTIFICATE OF INCORPORATION. The provisions identified above
contained in Cybear's Certificate of Incorporation can only be amended by the
affirmative vote of three-fourths of the outstanding shares of Cybear's capital
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.
49
<PAGE>
TRANSFER AGENT
The transfer agent for Cybear's common stock is Continental Stock Transfer
& Trust Company, New York, New York.
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 450,000 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.
The holders 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.
50
<PAGE>
UNDERWRITING
- --------------------------------------------------------------------------------
Cybear has entered into an underwriting agreement with the underwriters
named below. Warburg Dillon Read LLC, CIBC Oppenheimer 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 Oppenheimer 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 foregoing
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.
51
<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
52
<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 regarding the validity of the common stock
offered under this prospectus. Certain legal matters relating to the offering
will be passed upon for the underwriters by Greenberg Traurig, P.A., Miami,
Florida.
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.
53
<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, for the year ended December 31, 1998 and for the cumulative
period from February 5, 1997 (inception) to 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, for the year ended December 31, 1998 and for the cumulative period from
February 5, 1997 (inception) to 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,
---------------------------------
1997 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................................... $ 1,000 $ 3,983
Receivable from Blue Lake Ltd. ......................................... -- 366,000
Prepaid expenses ....................................................... 30,707 194,385
------------ ------------
Total current assets .................................................. 31,707 564,368
Property and equipment, net ............................................. 189,065 2,406,629
Software development costs .............................................. -- 358,000
Software license ........................................................ 160,000 --
Other assets ............................................................ 14,684 2,954
------------ ------------
Total assets .......................................................... $ 395,456 $ 3,331,951
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable ....................................................... $ 64,813 $ 1,153,059
Accrued liabilities .................................................... 76,533 301,782
Due to Andrx Corporation ............................................... 1,268,773 2,344,727
------------ ------------
Total current liabilities ............................................. 1,410,119 3,799,568
------------ ------------
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 ............. -- --
Common stock, $.001 par value; 25,000,000 shares authorized,
13,000,000 and 13,269,400 shares issued and outstanding
at December 31, 1997 and 1998, respectively ........................... 13,000 13,269
Additional paid-in capital .............................................. 530,906 3,558,695
Deficit accumulated during development stage ............................ (1,558,569) (4,039,581)
------------ ------------
Total shareholders' deficit ........................................... (1,014,663) (467,617)
------------ ------------
Total liabilities and shareholders' deficit .......................... $ 395,456 $ 3,331,951
============ ============
</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 CUMULATIVE FROM
FEBRUARY 5, 1997 FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------- -------------------- ------------------
<S> <C> <C> <C>
Revenues:
Software development services to
Andrx Corporation ......................... $ 95,927 $ -- $ 95,927
------------ ------------ ------------
Operating expenses:
Software development ........................ 945,497 1,621,422 2,566,919
General and administrative .................. 680,779 2,264,252 2,945,031
Write-off of software license ............... -- 159,897 159,897
Litigation settlement charge ................ -- 125,000 125,000
------------ ------------ ------------
Total operating expenses ..................... 1,626,276 4,170,571 5,796,847
------------ ------------ ------------
Loss from operations ......................... (1,530,349) (4,170,571) (5,700,920)
Interest expense on due to Andrx
Corporation ................................ (28,220) (210,441) (238,661)
------------ ------------ ------------
Loss before income taxes ..................... (1,558,569) (4,381,012) (5,939,581)
Income tax benefit ........................... -- 1,900,000 1,900,000
------------ ------------ ------------
Net loss ..................................... $ (1,558,569) $ (2,481,012) $ (4,039,581)
============ ============ ============
Basic and diluted net loss per share ......... $ (0.12) $ (0.19) $ (0.31)
============ ============ ============
Basic and diluted weighted average shares of
common stock outstanding ................... 12,768,303 13,030,999 12,906,266
============ ============ ============
</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 consultants .................. -- -- -- --
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 consultants .................. -- -- -- --
Net loss ........................................ -- -- -- --
-------- ------- ---------- -------
BALANCE, DECEMBER 31, 1998 ...................... -- $ -- 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 consultants .................. 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 consultants .................. 15,606 -- 15,606
Net loss ........................................ -- (2,481,012) (2,481,012)
---------- ------------ -------------
BALANCE, DECEMBER 31, 1998 ...................... $3,558,695 $ (4,039,581) $ (467,617)
========== ============ =============
</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 CUMULATIVE FROM
FEBRUARY 5, 1997 FEBRUARY 5, 1997
(INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------- -------------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ..................................... $ (1,558,569) $ (2,481,012) $ (4,039,581)
Adjustments to reconcile net loss to net
cash used in operating activities--
Write-off of software license ............... -- 159,897 159,897
Provision for litigation settlement ......... -- 125,000 125,000
Depreciation and amortization ............... 51,470 123,662 175,132
Non cash charges for options
granted to consultants .................... 13,906 15,606 29,512
Changes in operating assets
and liabilities:
Receivable from Blue Lake Ltd. ............. -- (366,000) (366,000)
Prepaid expenses ........................... (30,707) (163,678) (194,385)
Other assets ............................... (14,684) 11,730 (2,954)
Accounts payable ........................... 64,813 1,088,246 1,153,059
Accrued liabilities ........................ 76,533 100,249 176,782
------------ ------------ ------------
Net cash used in operating activities...... (1,397,238) (1,386,300) (2,783,538)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment .......... (240,535) (2,341,123) (2,581,658)
Software development costs ................... -- (358,000) (358,000)
Purchase of software license ................. (160,000) -- (160,000)
------------ ------------ ------------
Net cash used in investing activities ...... (400,535) (2,699,123) (3,099,658)
------------ ------------ ------------
Cash flows from financing activities:
Advances from Andrx Corporation .............. 1,268,773 5,988,406 7,257,179
Payments on due to Andrx Corporation ......... -- (1,900,000) (1,900,000)
Proceeds from issuance of shares of
common stock ............................... 500,000 -- 500,000
Proceeds from promissory note issued for
purchase of shares of convertible
preferred stock ............................ 30,000 -- 30,000
------------ ------------ ------------
Net cash provided by
financing activities .................... 1,798,773 4,088,406 5,887,179
------------ ------------ ------------
Net increase in cash .......................... 1,000 2,983 3,983
Cash, beginning of period ..................... -- 1,000 --
------------ ------------ ------------
Cash, end of period ........................... $ 1,000 $ 3,983 $ 3,983
============ ============ ============
Supplemental disclosure of non-cash activities:
Conversion of due to Andrx Corporation into
additional paid-in capital .................. $ -- $ 3,012,452 $ 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
(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 is an information technology company 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 information and
Internet-based productivity applications to physicians, physician
organizations, pharmacies and hospitals. 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 December 31, 1998, the Company
has incurred a net loss of $4,039,581 and has been dependent upon funding from
Andrx. Management anticipates
F-7
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(1) GENERAL--(CONTINUED)
incurring 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.
(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:
F-8
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
<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 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,
F-9
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 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
F-10
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
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.
F-11
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 improvements were completed and
invoiced, and as such the Company recorded a receivable of $366,000 from Blue
Lake.
(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>
F-12
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(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.
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
F-13
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(6) INCOME TAXES--(CONTINUED)
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>
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.
F-14
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(7) COMMITMENTS--(CONTINUED)
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.
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
F-15
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(7) COMMITMENTS--(CONTINUED)
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, 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
F-16
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(8) RELATED PARTY TRANSACTIONS--(CONTINUED)
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 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.
F-17
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(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.
(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.
F-18
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(10) STOCK INCENTIVE PLAN--(CONTINUED)
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>
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
F-19
<PAGE>
CYBEAR, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1998
(11) LITIGATION--(CONTINUED)
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) EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)
On April 20, 1999, the Company filed a registration statement for a
secondary public offering of its common stock. No assurance can be given that
this offering will be consummated.
F-20
<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
[CYBEAR LOGO]
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)
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
4.1 Specimen common stock certificate(3)
5.1 Opinion of Broad and Cassel(3)
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(3)
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
23.4 Consent of Director Nominee Philip Gerbino
23.5 Consent of Director Nominee Martin Reid Stoller, Ph.D.
25.1 Power of Attorney (included on the signature page of this Registration Statement)
27.1 Financial Data Schedule (SEC use only)
</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.
(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 Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boca Raton,
State of Florida, on April 19, 1999.
CYBEAR, INC.
By: /s/ EDWARD E. GOLDMAN, M.D.
-------------------------------------------
Name: Edward E. Goldman, M.D.
Title: President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Edward
E. Goldman, M.D. and John Klein or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any
and all capacities to execute in the name of each such person who is then an
officer or director of the Registrant any and all amendments (including
post-effective amendments) to this Registration Statement, and any registration
statement relating to the offering hereunder pursuant to Rule 462 under the
Securities Act of 1933, as amended, and to file the same with all exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each
of them full power and authority to do and perform each and every act and thing
required or necessary to be done in and about the premises as fully as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, 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 April 19, 1999
- -----------------------------------
John H. Klein
/s/ EDWARD E. GOLDMAN, M.D. President, Chief Executive Officer April 19, 1999
- ----------------------------------- and Director (Principal Executive
Edward E. Goldman, M.D.
and Financial Officer)
/s/ CLAUDE BERTRAND Vice President and Controller April 19, 1999
- ----------------------------------- (Principal Accounting Officer)
Claude Bertrand
/s/ SCOTT LODIN Secretary and Director April 19, 1999
- -----------------------------------
Scott Lodin
/s/ ALAN P. COHEN Director April 19, 1999
- -----------------------------------
Alan P. Cohen
/s/ ANGELO MALAHIAS Director April 19, 1999
- -----------------------------------
Angelo Malahias
/s/ MELVIN SHAROKY, M.D. Director April 19, 1999
- -----------------------------------
Melvin Sharoky, M.D.
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------
<S> <C>
3.3 Certificate of Ownership and Merger of Cybear, Inc. (FL) with and into the Registrant
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
23.4 Consent of Director Nominee Philip Gerbino
23.5 Consent of Director Nominee Martin Reid Stoller, Ph.D.
25.1 Power of Attorney (included on the signature page of this Registration Statement)
27.1 Financial Data Schedule (SEC use only)
</TABLE>
EXHIBIT 3.3
CERTIFICATE OF OWNERSHIP AND MERGER
OF CYBEAR, INC. (FL),
A FLORIDA CORPORATION,
WITH AND INTO
CYBEAR, INC.,
A DELAWARE CORPORATION
Cybear, Inc., a Delaware corporation (the "Corporation"), pursuant to
section 253 of the Delaware General Corporation Law, hereby files this
Certificate of Ownership and Merger with regard to the merger of Cybear, Inc.
(FL), the Corporation's wholly-owned subsidiary incorporated under the laws of
the State of Florida, with and into the Corporation:
1. The resolution of the Corporation's board of directors authorizing
and directing the merger of Cybear, Inc. (FL) with and into the Corporation is
set forth below:
RESOLVED, that Cybear, Inc. (FL) be merged with and into Cybear, Inc.
and the officers of the Company are authorized and empowered to execute such
agreements and documents as they, in their judgment, deem necessary or desirable
to effectuate the original intent of this resolution.
2. The foregoing resolution was adopted by the Corporation's board of
directors on March 5, 1999.
IN WITNESS WHEREOF, the duly authorized officer of the Corporation has
executed this Certificate of Ownership and Merger as of the 25th day of March,
1999.
CYBEAR, INC., a Delaware corporation
/s/ EDWARD GOLDMAN
------------------------------------
By: Edward Goldman, M.D.
Its: President
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.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
April 15, 1999.
EXHIBIT 23.3
CONSENT OF DIRECTOR NOMINEE
THE UNDERSIGNED, a nominee for director of Cybear, Inc., a Delaware
corporation (the "Company"), hereby consents to: (i) being nominated for the
position of director of the Company and to serve as such if elected, effective
upon completion of the Company's 1999 public offering of its common stock (the
"Offering"), and (ii) being named as a director nominee in the Company's
Registration Statement on Form S-1 relating to the Offering, and in the
Prospectus contained therein proposed to be circulated in connection with the
Offering, and all amendments thereto.
EXECUTED as of this 19th day of April, 1999.
/s/ BETSY S. ATKINS
------------------------
Betsy S. Atkins
EXHIBIT 23.4
CONSENT OF DIRECTOR NOMINEE
THE UNDERSIGNED, a nominee for director of Cybear, Inc., a Delaware
corporation (the "Company"), hereby consents to: (i) being nominated for the
position of director of the Company and to serve as such if elected, effective
upon completion of the Company's 1999 public offering of its common stock (the
"Offering"), and (ii) being named as a director nominee in the Company's
Registration Statement on Form S-1 relating to the Offering, and in the
Prospectus contained therein proposed to be circulated in connection with the
Offering, and all amendments thereto.
EXECUTED as of this 19th day of April, 1999.
/s/ PHILIP P. GERBINO
------------------------
Philip P. Gerbino
EXHIBIT 23.5
CONSENT OF DIRECTOR NOMINEE
THE UNDERSIGNED, a nominee for director of Cybear, Inc., a Delaware
corporation (the "Company"), hereby consents to: (i) being nominated for the
position of director of the Company and to serve as such if elected, effective
upon completion of the Company's 1999 public offering of its common stock (the
"Offering"), and (ii) being named as a director nominee in the Company's
Registration Statement on Form S-1 relating to the Offering, and in the
Prospectus contained therein proposed to be circulated in connection with the
Offering, and all amendments thereto.
EXECUTED as of this 19th day of April, 1999.
/s/ MARTIN REID STOLLER, PHD.
------------------------
Martin Reid Stoller, Ph.D.
<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>
<PERIOD-TYPE> 11-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> FEB-05-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 1,000 3,983
<SECURITIES> 0 0
<RECEIVABLES> 0 366,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,707 564,368
<PP&E> 240,535 2,581,658
<DEPRECIATION> (51,470) (175,029)
<TOTAL-ASSETS> 395,456 3,331,951
<CURRENT-LIABILITIES> 1,410,119 3,799,568
<BONDS> 0 0
0 0
0 0
<COMMON> 13,000 13,269
<OTHER-SE> (1,027,663) (480,886)
<TOTAL-LIABILITY-AND-EQUITY> 395,456 3,331,951
<SALES> 95,927 0
<TOTAL-REVENUES> 95,927 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,626,276 4,170,571
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 28,220 210,441
<INCOME-PRETAX> (1,558,569) (4,381,012)
<INCOME-TAX> 0 1,900,000
<INCOME-CONTINUING> (1,558,569) (2,481,012)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,558,569) (2,481,012)
<EPS-PRIMARY> (0.12) (0.19)
<EPS-DILUTED> (0.12) (0.19)
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