U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
INNOVATIVE TRACKING SOLUTIONS CORPORATION
(Name of Small Business Issuer in its charter)
Delaware 33-0728140
---------------------------------- ----------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification
23232 Peralta Drive, Suite 115
Laguna Hills, California 92653-1438
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 949-454-1278
---------------
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
The number of shares of common stock, $.001 par value outstanding
as of June 30, 1999 was 3,785,243.
<PAGE>
Innovative Tracking Solutions Corporation
-----------------------------------------
Form 10-QSB
------------
Quarter Ended June 30, 1999
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Condensed Balance Sheets as of June 30, 1999
(unaudited), and December 31, 1998 (audited)
Condensed Statements of Operations (unaudited)
for three months and six months ended June 30, 1999 and 1998
Condensed Statements of Cash Flows (unaudited)
for six months ended June 30, 1999, and 1998.
Notes to Condensed Financial Statements (unaudited)
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations or Plan of
Operations
PART II - OTHER INFORMATION
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
June 30,1999 Dec. 31, 1998
(unaudited) (audited)
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash in Banks 0 $ 22,551
Accounts Receivable 0 3,336
Loan receivable - officers 0 41,952
Inventory 0 76,982
Prepaid Expenses 0 2,475
-------
Total Current Assets 0 147,296
Fixed Assets:
Furniture & Equipment 0 38,512
Less: Accumulate Depreciation 0 (4,769)
-------
Total Fixed Assets 0 33,743
Other Assets:
Patents, trademarks and rights 0 28,786
Less accumulated amortization 0 (1,215)
------
Total Other Assets 0 27,571
------
TOTAL ASSETS $ 208,610
Liabilities & Stockholders' Equity
Current Liabilities:
Accounts payable 0 $ 19,450
Accrued expenses 0 7,294
Note payable -
-------
Total Current Liabilities 0 $ 26,744
Stockholders' Equity:
Common stocks , $.001 par value
Authorized shares - 10,000,000
Issued and outstanding shares:
3,785,243 and 3,563,490 shares
shares, respectively 3,785 3,533
Common Stock Subscribed
Paid in capital - 1,985,687
Subscriptions receivable - (60,000)
Deficit accumulated during the
development stage (3,785) (1,747,384)
--------
Total Stockholders' Equity 0 181,866
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 0 $ 208,610
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three Months ended Six Months ended
June 30, June 30,
1999 1998 1999 1998
----------------------- -----------------
<S> <C> <C> <C> <C>
Sales $ 628 $ 583 8,161 1,213
Cost of goods sold 275 - 496 -
Gross Profit 353 583 7,665 1,213
Selling, general and administrative expenses 14,221 133,770 333,711 246,863
Total Operating Expenses 14,221 133,770 333,711 246,863
Net loss from operation (13,868) (133,187) (326,046) (245,650)
Other Income (Expenses)
Interest income - - 279 687
Interest expense - - - -
Total Other Income (Expenses) - - 279 687
Net loss $ (13,964) $ (133,187) $(325,767) $(244,963)
Earnings (loss) per share $ (0.01) $ (0.06) $ (.09) $ (.11)
</TABLE>
<PAGE>
Innovative Tracking Solutions Corporation
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(Unaudited)
Six Months ended
June 30,
1999 1998
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(327,767) $(244,963)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Decrease in accounts receivable 3,336 -
Decrease in loans receivable - officers 41,952 -
Increase in inventory 76,982 (36,758)
Decrease in prepaid expenses 2,475 1,050
Increase (decrease) in accounts payable (28,786) (3,966)
Increase (decrease) in accrued salaries - 67,500
Increase (decrease) in accrued expenses (7,294) -
-------- --------
NET CASH (USED) BY OPERATING ACTIVITIES (239,102) (217,137)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets 33,743 (13,790)
Acquisition of other assets 27,571 (16,361)
------- -------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 61,314 (30,421)
CASH FLOWS FROM FINANCING ACTIVITIES
Note payable - (15,000)
Proceeds from issuance of common stock 333,540 245,439
Paid in Capital (1,985,687) -
Subscription receivable 60,000 -
Deficit accumulated during development stage 1,747,384 -
---------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 155,237 230,439
INCREASE (DECREASE) IN CASH (22,551) (17,119)
BEGINNING CASH 22,551 42,191
------ ------
ENDING CASH $ 0 $ 25,072
SCHEDULE OF NON CASH TRANSACTIONS:
Issuance of stock in exchange for services $ - $ -
Stock subscription receivable 60,000 18,700
------ ------
$ 60,000 18,700
See notes to financial statements
Disclosure of accounting policy: For the purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
</TABLE>
<PAGE>
Notes to Condensed Financial Statements
- ----------------------------------------
Innovative Tracking Solutions Corporation
(Unaudited)
The accompanying notes are an integral part of these financial statements.
Summary of Significant Accounting Policies
- --------------------------------------------------------------
This summary of significant accounting policies of Innovative Tracking
Solutions Corporation (a development stage company, the "Company") is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's
management who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements.
Business Activity
- --------------------------------------------------------------
The Company was incorporated in Delaware on September 4, 1996. The Company
is licensed to manufacture and market patented products. The Company has
devoted substantially all of its efforts in establishing its business and
marketing its product line and has not generated significant revenues.
Significant Events
- --------------------------------------------------------------
On April 16, 1999, the Board of Directors transferred all the assets and
liabilities of the Company, as directed and approved by a unanimous vote of
64.4% of voting shares of the Company represented at a stockholder meeting
held on April 13,1999, to a newly formed private company held by some or all of
the Company's shareholders. The newly formed private company, under the same
name of Innovative Tracking Solutions Corporation, a Nevada corporation,
(ITSC), d.b.a. Innovative Outcome Solutions, purchased all the assets of the
Company in exchange for assuming all the liabilities of the Company, and
Intends to continue the ongoing previous core business of the Company.
The action was taken in order to prepare the Company for a reverse-merger or
acquisition opportunity that would benefit the Company's public shareholders.
(See Item 4. "Submission of Matters to a Vote of Security Holders").
Basis of Presentation
- --------------------------------------------------------------
In the opinion of management, the financial information set forth in the
accompanying condensed financial statements reflect all adjustments necessary
for a fair statement of the periods reported, and all such adjustments were
of a normal and recurring nature. Interim results are not necessarily
indicative of results for a full year.
Revenue & Expense Recognition
- --------------------------------------------------------------
Revenue is recognized when the earning process is complete. Expenses are
recognized as incurred.
Inventory:
- --------------------------------------------------------------
Inventory is stated at cost. Cost is determined by specific identification
of each unit.
<PAGE>
Furniture & Equipment:
- --------------------------------------------------------------
Furniture and equipment are stated at cost. Depreciation is computed using
the straight-line method for both financial statement purposes and income tax
purposes.
Year
Furniture and equipment 7
Primary Net Income (Loss) Per Common Share
- --------------------------------------------------------------
Primary net income per share is based on the average number of shares of
Common stock outstanding during the year.
Noncash Consideration
- --------------------------------------------------------------
The Company issued stock for consulting, engineering, design and professional
services to non-affiliates of the Company. The amounts related to these
transactions are reflected on the income statement as expenses and were
valued at a fair value of 2.00 per share for any Rule 504 issuances and $1.00
per share for any Section 4 (2) restricted issuances which is consistent with
the Company's then current offering price for those securities.
Related Party Transactions
- -----------------------------------------------------
Loan receivable is cash advances made to the Company by certain officers and
stockholders of the Company.
Paid In Capital Adjustments
- -------------------------------------------------------
Certain shareholders, who are also officers of the Company, elected to draw
funds against the original basis of their stocks.
Income Taxes
- --------------------------------------------------------------
As of April 16, 1999, the Company's net operating loss carry forward was
transferred to ITSC, d.b.a. Innovative Outcome Solutions, therefore, as of
June 30, 1999, the Company's net operating loss carry forward was $0.
Leasing Arrangements
- --------------------------------------------------------------
All the Company's Leasing arrangements and liabilities were transferred to
the private company.
Rental expense amounted to $3,905 in 1998 for the three months
ended June 30, 1999 and $1,000 from 4/1/99 through 4/15/99.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations or Plan of Operations
- --------------------------------------------------------------------------
The following discussion addresses the Company's condensed financial
condition and results of operations as of and for the three months ended June
30, 1999. The financial information presented herein will not necessarily be
indicative of future results.
On April 16, 1999, the Company transferred all its assets and
liabilities as noted above based on majority Shareholder approval. The
Company's plan of operations following the transfer of assets and liabilities
was to seek and complete a merger or acquisition transaction with a small or
medium-sized enterprise which desires to become or remain a public
Corporation. In selecting a potential merger or acquisition candidate, the
Company considered many factors, including, but not limited to, potential for
growth and profitability, quality and experience of management, capital
requirements, and the ability of the Company to qualify its shares for trading
on NASDAQ or on an exchange.
The types of business enterprises which the Company believed might
find a business combination with the Company to be attractive included
acquisition candidates desiring to create a public market for their shares
in order to enhance liquidity for current shareholders, acquisition
candidates which have long-term plans for raising capital through the
public sale of securities and believe that the possible prior existence of
a public market for their securities would be beneficial, foreign
companies desiring to obtain access to U.S. customers and U.S. capital
markets, and acquisition candidates which plan to acquire additional
assets through issuance of securities rather than for cash, and believe that
the possibility of development of a public market for their securities will
be of assistance in that process. Other acquisition candidates included
those desiring to remain publicly traded as a "reporting" company. Acquisition
candidates which have a need for an immediate cash infusion are not likely to
find a potential business combination with the Company to be an attractive
alternative.
The Company's balance sheet for the quarter ended June 30, 1999,
reflects no current assets and current liabilities. The Company has no
current plans to raise additional funds and it has no formal agreement or
understanding in place with its shareholders or other persons pursuant to
which they have agreed to contribute additional capital.
On July 28, 1999, the Company was successful in finding an appropriate
acquisition candidate and, pursuant to its Bylaws and general Delaware
corporate law, the Company acquired approximately 90% of the assets of
BioLogix International, Ltd. ("BGIX"), consisting primarily of
thehealthchannel.com web site and related technology in exchange for the
controlling interests of the Company (the "Acquisition"). Restricted Common
Shares representing the majority controlling interests held by the directors of
the Company, were transferred.
In connection with this Change in Control, Registrant's name was
changed to thehealthchannel.com, Inc. on July 28, and its headquarters were
moved to 5000 Birch Street, Suite 4000, Irvine, California, 92660. Please
refer to the Company's Report on Form 8-K filed on August 13, 1999.
The acquisition closed on July 28, 1999. It is currently impracticable
for the Registrant to file the required audited financial statements for this
acquisition. However, the Registrant shall file such financial statements
under cover of Form 8-K as soon as practicable, but no later than sixty days
from the date of filing this report.
BioLogix, headquartered in San Francisco, is a leader within the e-
health portal industry. It operates the largest consumer-based health
supersite (http://www.thehealthchannel.com) and world of virtual reality health
and medical (http://www.virtucare.com). Thehealthchannel.com, currently indexes
over 2.8 million other Internet health and health-related sites, has direct
links with in excess of 1700 on-line healthcare information service centers,
provides detailed coverage of nearly 700 medical conditions, offers channels
for professional and personalized information, national and local TV
listings, and a "virtucare" environment for health chat and interactivity.
Current site expansions will also provide users with the ability to search
nearly 1,000,000 additional web pages of on-line health-care information at
thehealthchannel.com itself or to search the entire Internet.
Year 2000 Compliance
- ------------------------
All products manufactured during the second quarter of 1999 by the Company
were Year 2000 compliant.
Forward Looking Statements
- ----------------------- ------
This statement contains forward-looking statements. The Company's expectation
of results and other forward-looking statements contained in this registration
statement, involve a number of risks and uncertainties. Among the factors that
could cause actual results to differ materially from those expected are the
following: business conditions and general economic conditions; competitive
factors, such as pricing and marketing efforts, timing of product
introductions;
and the pace and success of product research and development. These and other
factors may cause expectations to differ.
<PAGE>
PART II -OTHER INFORMATION
Item 1. Legal Proceedings.
------------------------
There are no legal proceedings pending against the Company.
Item 2. Changes in Securities
------------------------
There were no changes in securities during the second quarter of 1999.
However, following the execution of the "acquisition", the Company's
authorized capital stock was increased to one hundred ten million (110,000,000)
and its outstanding shares of stock were restructured increase to 70,000,000 to
facilitate an even exchange of shares with BGIX shareholders while allowing a
2 to 1 forward exchange for the Company's shareholders. Please see the
Company's reports on Section 14(c) and on Form 8-k filed on August 13, 1999.
Item 3. Defaults Upon Senior Securities
----------------------------------
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the third annual meeting of shareholders, held on April 13, 1999, and
by a unanimous vote of 64.4% of voting shares of the Company represented at the
meeting, the Board of Directors was instructed to transfer all assets and
liabilities of the Company and transfer said assets to a newly formed private
corporation held by some or all of the Company's present Shareholders. The
purpose of this action was to improve the Company's ability to raise
additional growth capital for the Company as a "private" company, due to nature
of the Company's thinly traded public stock and the Company's focus on building
its fundamentals versus supporting public awareness of its publicly traded
stock. The Board of Directors was also authorized and ordered to take all
actions necessary to effect an acquisition or merger agreement for its public
entity, and to restructure the Company as needed in order to provide improved
liquidity to its public shareholders. The Board of Directors presented a
reverse-merger candidate, Desert Sun Investments, and said candidate was
approved. Furthermore, in the event the Desert Sun Investment transaction did
not fully consummate, the Board of Directors was authorized to seek other
appropriate acquisition or reverse-merger candidates and to effectuate an
agreement.
Item 5. Other Information
------------------------
Bill of Sale for "Acquisition". The Bill of Sale for the acquisition of
the majority of assets of BioLogix International, Ltd., mainly the
proprietary website, thehealthchannel.com and related technology, is herein
referenced as Exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) Exhibits
---------------
Exhibit 27.
(b) Additional Exhibits
---------------------
Exhibit 99 - Bill of Sale
(c) Reports on Form 8-K
----------------------
Report on Form 8-K relative to the "acquisition" was filed
on August 13, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INNOVATIVE TRACKING SOLUTIONS CORPORATION
(Registrant)
S/s Dianna Cleveland
- ------------------------------
Dianna Cleveland, President and C.E.O., Director
Date: August 15, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
S/s Lee A. Namisniak
- ------------------------------------
Lee A. Namisniak, Chief Financial/Operating Officer, Director
Date: August 15, 1999
S/s Lou Weiss
- -------------------------------------
Lou Weiss, Director
Date: August 15, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE>5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Apr-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
0
<ALLOWANCES> 0
<INVENTORY> 0
<Current-Asset> 0
<PP&E> 0
<DEPRECIATION> 0
[OTHER-ASSETS] 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,785
<OTHER-SE> (0)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 628
<TOTAL-REVENUES> 628
<CGS> 257
<TOTAL-COSTS> 257
<OTHER-EXPENSES> 14,221
[OTHER-INCOME] 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,964)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,964)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
BILL OF SALE
AND GENERAL ASSIGNMENT
This BILL OF SALE AND GENERAL ASSIGNMENT ("Bill of Sale") is made on
August 16, 1999, by BIOLOGIX INTERNATIONAL, LTD., a Delaware corporation
("Transferor"), in favor of THEHEALTHCHANNEL.COM, INC., a Delaware
corporation ("Transferee"). This Bill of Sale is executed pursuant to that
certain Acquisition, Stock Purchase, and Exchange Agreement between Transferor
and Transferee dated as of July 28, 1999 (the "Acquisition Agreement").
For value received, receipt and sufficiency of which are hereby
acknowledged, Transferor hereby sells, assigns, transfers, conveys and
delivers to Transferee, absolutely and not as security, all of its present and
future right, title and interest in and to the following personal property
(collectively, the "Personal Property"):
(i) Any and all tangible personal property of any type or nature
used in connection with the operation of the business known as
"thehealthchannel.com" (the "Business"), including, but not limited to, all
equipment, electrical devices, cables, furniture, fixtures, office materials
and supplies, hardware, tools, spare parts, and other tangible personal
property of every kind and description;
(ii) To the extent that they are assignable or transferable, any
and all licenses, permits, approvals, dedications and entitlements issued,
approved or granted by governmental authorities or otherwise in connection with
the Business;
(iii) To the extent that they are assignable or transferable, any
and all contracts, leases, and other agreements; any and all intellectual
property rights, including, without limitation, patents, formulas, know-how,
trade secrets, proprietary and technical information, licenses of technology,
and product registrations; franchises; trademarks, trade names, copyrights,
and
service marks; websites, URLs, domain names, and logos; and any other
intangible personal property, together with all rights to and applications,
licenses and franchises for, any of the foregoing, relating to the Business;
(iv) To the extent that they are assignable or transferable, any
and all marketing and distribution records, customer lists, customer credit
histories, mailing lists, warranty records, export and licensing records,
sales literature and other sales aids, employee records, accounting records,
graphic materials, pricing and information manuals, drawings, patterns, designs
and all other documents and records relating to the Business;
(v) All of the inventory which is used in and located at the
Business; and
(vi) To the extent that they are assignable, all security and
other deposits made by or for the benefit of the Business and relating to any
of the foregoing Personal Property, all prepaid expenses of any kind or nature
whatsoever which relate to any of the foregoing Personal Property, all other
current assets, and all other tangible and intangible personal property.
EXCEPT AS SET FORTH IN THE ACQUISITION AGREEMENT, THE PERSONAL
PROPERTY IS BEING CONVEYED HEREUNDER "AS IS" AND "WITH ALL FAULTS"
AS OF THE DATE OF THIS BILL OF SALE, WITHOUT ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED WHATSOEVER. TRANSFEREE HAS
INSPECTED OR CAUSED TO BE INSPECTED ALL SUCH PERSONAL PROPERTY
AND IS SATISFIED AS TO ITS CONDITION
Transferor will, upon request from Transferee, without further
consideration, execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered all such further documents necessary or proper to
effect the sale, assignment, transfer, conveyance and delivery of the
Personal Property to Transferee.
"TRANSFEROR"
BIOLOGIX INTERNATIONAL, LTD.,
a Delaware corporation
S/s Donald Shea
---------------------------
By: Donald Shea
Its: President
