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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT 1 TO
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 000-29822
THEHEALTHCHANNEL.COM, INC.
(Name of small business issuer as specified in its charter)
DELAWARE 33-0728140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3101 WEST COAST HIGHWAY, SUITE 175
NEWPORT BEACH, CALIFORNIA 92663
(Address of principal executive offices) (Zip code)
(949) 476-3602
(Issuer's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.001 per share
Check whether Registrant (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 / /
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
the Form 10-KSB. /X/
Registrant's revenues for its fiscal year ended December 31, 1999, were $-0-. As
of December 5, 2000, Registrant had 27,610,953 shares of its $.001 par value
Common Stock issued and outstanding with an aggregate market value of the common
stock held by non-affiliates of $2,820,269.38. This calculation is based upon
the closing sales price of $0.125 per share on the Pink Sheets on December 5,
2000.
Transitional Small Business Disclosure Format (check one). Yes / / No /X/
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TABLE OF CONTENTS
<TABLE>
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PART I PAGE
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Item 1 Description of Business 1
Item 2 Description of Property 7
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote of Security Holders 8
PART II
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Item 5 Market for Common Equity and Related Stockholder Matters 8
Item 6 Management's Discussion and Analysis 9
Item 7 Financial Statements 13
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 13
PART III
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Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act 13
Item 10 Executive Compensation 15
Item 11 Security Ownership of Certain Beneficial Owners and Management 16
Item 12 Certain Relationships and Related Transactions 17
PART IV
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Item 13 Exhibits and Reports on Form 8-K 17
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PART I
ITEM 1 - BUSINESS
A. BUSINESS DEVELOPMENT
1. FORM AND YEAR OF ORGANIZATION
Innovative Tracking Solutions Corporation, also known as InTracks
Corporation ("IVTX" or "the Predecessor Company") was incorporated under the
laws of the state of Delaware on September 4, 1996. IVTX was formed to develop,
manufacture, and market a broad range of simple and creative products to solve
typical problems associated with the fast-paced nature of modern individuals and
businesses. Information in this Form 10-KSB/A gives effect to a one-for-three
reverse split executed on November 17, 2000. All share amounts and per share
prices are adjusted to give effect to the reverse stock split.
IVTX's initial operations included the further development and
manufacture of the Smart Kitchen-TM- patented food storage tracking system
invented by IVTX' founders and licensed exclusively to IVTX. Based on the then
current financial condition of IVTX and the cost to launch this product into the
consumer marketplace, management of IVTX decided to postpone the launch in favor
of the development and launch of an additional product, the Private Practice-TM-
Vibration Reminder Disk, which management of IVTX felt held greater market
potential and lower manufacturing and marketing costs. IVTX secured exclusive
marketing rights to the product and launched it into test markets in November
1997.
In March 1998, a market maker filed a 15c2-11 statement with the
National Association of Securities Dealers, Inc. ("NASD") and IVTX's stock was
cleared to trade on the Over-the-Counter Bulletin Board (Symbol: IVTX) on April
21, 1998.
In early 1999, IVTX management determined that the "public" status of
IVTX was detrimental to IVTX' operations due to the time and expense burdens of
being a public company. IVTX management then decided to take the operations of
IVTX "private" by transferring all IVTX assets and liabilities to a newly formed
private company and selling the public shell to a suitable company, preferably
in the healthcare industry. On April 13, 1999, IVTX obtained written approval of
64.4% of the total voting stock of IVTX voting "for" taking the operations of
IVTX private and selling the public shell to a suitable company.
On April 14, 1999, IVTX transferred all of its assets and liabilities
based on majority stockholder approval to a newly formed private company,
Innovative Tracking Solutions Corporation, a Nevada corporation, incorporated on
March 29, 1999.
In June 1999, IVTX was introduced to thehealthchannel.com, a
consumer-based health Internet web site (http://www.thehealthchannel.com). On
July 28, 1999, IVTX, pursuant to its bylaws and general Delaware corporate law,
acquired a certain asset of Biologix International, Ltd., a Delaware corporation
("Biologix") consisting of thehealthchannel.com web site and its related
technology in exchange for the controlling interests of IVTX. In connection with
this change of control, IVTX' name was changed to thehealthchannel.com, Inc. on
July 28, 1999. The Acquisition closed on July 28, 1999 (the "Acquisition").
Biologix paid $250,000 for 850,000 shares of common stock of IVTX,
representing the majority controlling interests held by the officers and
directors of IVTX. Additionally, Biologix agreed to contribute its
thehealthchannel.com asset to IVTX in exchange for the IVTX shareholders
agreeing to split their stock and exchange shares with the shareholders of
Biologix. The shares of stock of IVTX were forward split 28.22-for-one and the
IVTX shareholders agreed to exchange each share they held of IVTX stock for two
shares of common stock of IVTX under its new name of thehealthchannel.com, Inc.
and exchange 26.22 shares each
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with the shareholders of Biologix on a three-for-one basis (the "Exchange"), as
adjusted for the Company's one-for-three reverse split. At the time of the
Exchange, IVTX had 139 shareholders.
The Exchange was announced to shareholders of both IVTX and Biologix
through press releases and a letter to IVTX shareholders. After the forward
stock split, the Company (thehealthchannel.com, Inc. formerly Innovative
Tracking Solutions Corporation) had 35,606,519 shares of common stock issued and
outstanding. The Exchange began on August 6, 1999 and ended on October 31, 1999
to ensure that all shareholders had enough time and notice to exchange their
shares. Following the conclusion of the Exchange period, the Company had
approximately 10,600,000 shares reserved for exchange with Biologix shareholders
that were not exchanged and therefore cancelled those extra shares and as of
December 31, 1999 had 25 million issued and outstanding shares of common stock,
of which approximately 10 million shares were in the public float.
2. ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDING
Not Applicable.
3. ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION,
OR PURCHASE OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY
COURSE OF BUSINESS
See discussion in Item 1 - Business, A. Business Development, 1. Form
and Year of Organization.
B. BUSINESS OF ISSUER
thehealthchannel.com is a comprehensive health information Internet
portal that offers a one-step access point for consumers and professionals who
want to explore a broad array of health topics. Consumers may access a global
library of health-care information while searching for products and services.
The site offers a complete Internet portal for state-of-the-art continuing
medical education for professionals.
1. PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKET
a. THE MARKET
THE INTERNET
IDC estimates that the number of users accessing the Worldwide Web will
grow from 28 million in 1996 to 175 million in 2001 and that the amount of
commerce conducted over the web will increase from approximately $2.6 billion in
1996 to $220 billion in 2001. Growth in Internet usage has been fueled by a
number of factors, including the large and growing base of personal computers
installed in the workplace and home, advances in the performance and speed of
personal computers and modems, improvements in network infrastructure, easier
and cheaper access to the Internet and increased awareness of the Internet among
consumer and trade customers.
The emergence of the Internet as a significant communications medium is
driving the development and adoption of web content and commerce applications
that offer both convenience and value to consumers, as well as unique marketing
opportunities and reduced operating costs to business. A growing number of
consumer and trade customers have begun to conduct business on the Internet
including paying bills, booking airline tickets, trading securities and
purchasing consumer goods (e.g., personal computers, consumer electronics,
compact disks, books, groceries and vehicles). Moreover, online transactions can
be faster, less expensive and more convenient than transactions conducted
through a human intermediary.
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TELEMEDICINE
Telemedicine is the practice of providing healthcare and healthcare
information and services on-line via the Internet. Due to the convergence of
advanced image transmission and computer technology, price declines in hardware,
and providers' quests to improve both the quality and access of care and their
competitive position in urban and rural markets, the interest in telemedicine is
now at an all-time high. Its use as a tool for clinical consultation, linking
the various elements of an integrated network, including homes and long-term
care facilities is expanding rapidly. However, many unresolved issues remain,
such as liability, reimbursement and other economic factors, clinical
expectations, ease of use and licensing of technology and expertise, among
others.
Although now a rapidly emerging and burgeoning industry, telemedicine
has existed in this country for almost 40 years. The first known project
involved the transmission of neurological records across the campus of the
University of Nebraska in 1959. Five years later, the university established a
link with a state mental hospital 112 miles away. Since that time, many state
and federal agencies as well as private insurers, managed care organizations
(MCO's), software companies, and medical device manufacturers have created their
own telemedicine initiatives. Although the total amount of money spent on
telemedicine research and development is unknown, a recent report by the U.S.
General Accounting Office places telemedicine investments by nine federal
departments and independent agencies at $646 Million for fiscal years 1994-96.
Based on the Company's experience, internet companies compete by
providing quality content and creating a body of users through advertising and
word-of-mouth. The Company believes that it will succeed by providing quality
content and by advertising its web site on third-party web sites and in more
traditional media.
b. PRINCIPAL PRODUCTS AND SERVICES
thehealthchannel.com
Thehealthchannel.com provides health-related content and programming
for the world wide web targeted at consumer access vis-a-vis the Internet,
web-TV and/or other means of network access. Web site: www.thehealthchannel.com.
The Company's revenue model comes with six variants of revenue sources:
1: Advertising Revenue Model. Banner and "time-out" advertising. Banner
advertising is an advertisement that appears on a web site concurrently with the
content, usually at the top and/or bottom of a web page. Time out advertising
refers to inserting a one to three second full page advertisement as a precursor
to the content information appearing on a web page.
On September 9, 1999, the Company entered into an agreement with 24/7
Media, Inc. ("24/7"). 24/7 operates a network of Internet Web sites (the "24/7
Network") for which it solicits advertisers, advertising agencies, buying
services or others ("Advertisers") regarding the placement of advertising
banners and similar devices and sponsorships ("Advertising") for display on
pages, screens, and other segments or spaces on Internet Web sites.
The Company granted 24/7 the worldwide exclusive right to sell all
Advertising on the Company's web site for a term of one year. For all
advertising revenues generated by 24/7, the Company shall pay 24/7 a percentage
based upon the number of impressions on the Company's web site according to the
following chart:
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<TABLE>
<CAPTION>
Number of Impressions Percentage Retained by 24/7
Delivered in Preceding Month for Current Month
<S> <C>
999,999 to 2,000,000 50%
2,000,000 to 2,999,999 45%
3,000,000 to 4,999,999 40%
5,000,000 to 14,999,999 35%
15,000,000+ 30%.
</TABLE>
As of December 31, 1999, the Company had not yet generated any
advertising revenue from this agreement with 24/7.
As of December 31, 1999, the Company had no other agreements for
advertising on its web site.
2. Retail Sales Model. Companies will sell their products and services
on their site with referrals from the Company and the Company will receive
commissions. The Company had no relationships of this type as of December 31,
1999.
3. Portal/Information Center. Companies pay to have products and
services listed in thehealthchannel.com broadband portal. The Company had no
relationships of this type as of December 31, 1999.
4. Subscription model. The Company could charge users to access
information and certain portions of the Company's web site. As of December
31, 1999, the Company was not charging users to access any portions of the
Company's web site.
5. Affiliate/Affinity model. The Company's web site would offer goods
and services from companies that it has a direct relationship with so that the
Company may share in the revenues. As of December 31, 1999, the Company had no
relationships of this type.
6. Auction model. thehealthchannel.com would offer the forum for
companies to "auction" their goods or services. As of December 31, 1999, the
Company had no relationships of this type.
2. DISTRIBUTION
thehealthchannel.com, Inc. (the "Company") distributes its web site
content via the Internet.
3. STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE.
On August 11, 1999, the Company entered into an agreement with Market
Pathways, a financial relations firm. Market Pathways handles the dissemination
of the Company's press releases, helps draft press releases, and answers
questions about the Company from Company shareholders and the marketplace in
general. Market Pathways receives a fee of $4,000 per month for these services
plus a one-time fee of 28,333 shares of common stock of the Company, restricted
under Rule 144 of the Act.
On July 13, 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management will establish and maintain an accounting system for the Company,
balance the Company's books, and provide cash management services. In exchange
for these services, Ocean View Management received a one time payment of 25,000
shares of the Company's common stock and receives a cash payment of $3,000 per
month. The Agreement is terminable upon notice by either party.
On December 1, 1999, the Company unveiled an updated version of its web
site hosted by DVCi Technologies. Pursuant to an agreement of October 22, 1999,
DVCi Technologies undertook to (a) create image and brand recognition for the
Company along with short and long term media strategies; and (b) provide
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web site hosting and software development for the Company's web site,
thehealthchannel.com. In addition, DVCi agreed to arrange for hardware leasing,
software applications, hosting services, and human resources for approximately
$136,000 in two equal payments, all of which have been made.
4. COMPETITION
The online commerce industry, particularly on the Internet, is new,
rapidly evolving and intensely competitive, which the Company expects to
intensify in the future. Barriers to entry are minimal, allowing current and new
competitors to launch new web sites at a relatively low cost. As of December 31,
1999, the Company competed or was in potential competition with other companies
which have health care web sites. These competitors include InteliHealth,
OnHealth, Web MD, Koop.com, and YourHealth.com.
The Company believes that the principal competitive factors in its
market are brand name recognition, wide selection, personalized service, ease of
use, 24-hour accessibility, customer service, convenience, reliability, quality
of search engine tools, and quality of editorial and other site content. Many of
the Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand name recognition and significantly greater
financial, marketing and other resources than the Company. In addition, other
web sites may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases. Certain of
the Company's competitors may be able to devote greater resources to marketing
and promotional campaigns, and devote substantially more resources to web site
and systems development than the Company. Increased competition may result in
reduced operating margins, loss of market share and a diminished franchise
value. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and competitive pressures
faced by the Company may have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. Further as a
strategic response to changes in the competitive environment, the Company may,
from time to time, make certain service or marketing decisions or acquisitions
that could have a material adverse effect on its business, prospects, financial
condition and results of operations. New technologies and the expansion of
existing technologies may increase the competitive pressures on the Company. In
addition, companies that control access to transactions through network access
or web browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion.
The Company will consider conducting acquisitions of its competitors
and/or complementary businesses in the future, but is not contemplating any
acquisitions as of the date of this document.
5. THE SOURCES AND AVAILABILITY OF RAW MATERIALS
The content for the Company's web site comes from three primary
sources:
1: HTML links. Programmed medical content links from the Infoseek
search engine (ultraseek).
2: Strategic Alliances and Business Relationships. These come in many
different forms. For example, medical education, alternative medicine, pharmacy,
library, and journals may enter into relationships with the Company to provide
information to the Company's web site ("Information Relationships"). Concerning
Information relationships, as of December 31, 1999, the Company had one
information relationship with ScreamingMedia.Net, Inc which provides the Company
with daily content feed for the Headline section of thehealthchannel.com web
site. This is a one year term relationship that allows the Company to set
filters for specific content and draw up to 500 stories per month at a cost of
$3,250.00 per month.
The Company also expects to have numerous relationship with third party
e-commerce companies offering their products and services to
thehealthchannel.com users. This will either be through direct
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advertising of the third party e-commerce site on thehealthchannel.com site or
through a commission agreement whereby the Company would receive a commission
for any product purchased from the third party e-commerce site by
thehealthchannel.com user. In this regard, there are presently no existing
relationships.
3: Original content: The Company has a diverse, experienced board of
directors (see "Management") and advisors who provide original content for the
Company's site in their areas of expertise.
6. DEPENDENCE ON A SINGLE OR FEW CUSTOMERS
Not Applicable.
7. INTELLECTUAL PROPERTY
The Company currently has an application pending with the United States
Patent and Trademark Office ("PTO") for registration of the name
"thehealthchannel.com" as a trademark. The Company has also registered the web
site domain name of www.thehealthchannel.com.
The Company does not rely on proprietary technology in providing its
healthcare information over the Internet. While the Company uses technology
which has been customized for its own purposes, the Company has deliberately
avoided becoming overly dependent on any one technology. By avoiding reliance on
any one technology, the Company will be able to take advantage of technological
advances to provide improved accessibility to its content.
The Company has no collective labor agreements.
8. GOVERNMENT APPROVAL.
The Company is not currently subject to direct regulation by any
domestic or foreign governmental agency, other than regulations applicable to
businesses generally, and laws or regulations directly applicable to access to
online commerce. However, due to the increasing popularity and use of the
Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, pricing, content, copyrights, distribution
and characteristics and quality of products and services. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for the Company's
products and services and increase the Company's cost of doing business, or
otherwise have a material adverse effect on the company's business, prospects,
financial condition and results of operations. Moreover, the applicability to
the Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Any such new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to the Company's business, or
the application of existing laws and regulations to the Internet and other
online services could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
Permits or licenses may be required from federal, state or local
government authorities to operate on the Internet. No assurances can be made
that such permits or licenses will be obtainable. The Company may be required to
comply with future national and/or international legislation and statutes
regarding conducting commerce on the Internet in all or specific countries
throughout the world.
9. EFFECT OF ANY EXISTING OR PROPOSED GOVERNMENT REGULATIONS
See discussion in Paragraph 8, Government Approval above.
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10 RESEARCH AND DEVELOPMENT COSTS.
Since the Company began operations through December 31, 1999 it has
spent approximately $50,000 on the research and development of its proprietary
technology. The revenues the Company achieve will be primarily from strategic
alliances and direct customer revenues. Fees generated, while paying directly
for research and technology costs accrued to date, will also fund the operations
of the Company, which includes funding on-going technological development.
11. COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND
REGULATIONS
The Company is not involved in a business which involves the use of
materials in a manufacturing stage where such materials are likely to result in
the violation of any existing environmental rules and/or regulations. Further,
the Company does not own any real property which would lead to liability as a
landowner. Therefore, the Company does not anticipate that there will be any
costs associated with the compliance of environmental laws and regulations.
12. EMPLOYEES
As of December 31, 1999, the Company employed four full-time employees.
The Company hires independent contractors on an "as needed" basis only. The
Company has no collective bargaining agreements with its employees. The Company
believes that its employee relationships are satisfactory. Long term, the
Company will attempt to hire additional employees as needed based on its growth
rate.
ITEM 2 - PROPERTIES
The main administrative offices of the Company are located at 3101 West
Coast Highway, Suite 175, Newport Beach, California 92663, consisting of 1,850
square feet, with a monthly lease payment of $3,000, pursuant to an oral
agreement.
ITEM 3 - LEGAL PROCEEDINGS
thehealthchannel.com was named as a cross-defendant in a
cross-complaint filed by Michael Grandon in an action pending in the Superior
Court State of California for the County of San Francisco, Case No. 307364.
This action was initiated by Biologix International, Ltd. against Michael
Grandon on October 22, 1999. The complaint of Biologix International, Ltd.
alleged causes of action against Michael Grandon for: (1) temporary
restraining order and preliminary and permanent injunction; (2) breach of
fiduciary duty; (3) fraud by intentional misrepresentation; (4) conversion;
(5) possession of personal property; (6) declaratory relief; and (7)
accounting. The claims alleged by Biologix International, Ltd. relate to the
actions and conduct of Mr. Grandon while an officer and director of Biologix
International, Ltd. thehealthchannel.com is named as a cross-defendant in the
cross-complaint of Michael Grandon in a cause of action for breach of
contract based upon an alleged employment agreement between Michael Grandon
and Biologix International Ltd. Mr. Grandon claimed that this alleged
employment agreement is the responsibility of thehealthchannel.com based upon
thehealthchannel.com's purchase of the internet related assets of Biologix
International Ltd. thehealthchannel.com was served with the cross-complaint
on December 14, 1999. Mr. Grandon sought $400,000 in damages and options to
purchase 333,333 shares of Biologix stock. thehealthchannel.com has answered
the cross-complaint denying the allegations of Mr. Grandon. The Company
subsequently settled this matter.
In the summer of 1999, Sandra Redding and Marshall Redding (the
"Reddings"), threatened the Company with litigation over the following dispute:
Sandra Redding is a former officer and director of I.Q. Now Corporation (IQ
Now"). Ms. Redding alleged to have made a series of loans to IQ Now in excess of
$250,000 for the purpose of funding the operations of IQ Now (the "Loans") and
that these Loans were never
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repaid. In September 1997, IQ Now sold substantially all of its assets to
Biologix in exchange for a warrant for common stock of Biologix. In July 1999,
BIOLOGIX sold its internet related assets to the Company in exchange for common
stock of IVTX. As of December 31, 1999, the Reddings were threatening litigation
against IQ Now, Biologix, and the Company for re-payment of the loans. The total
claim was for $260,000 plus interest. The Company subsequently settled this
matter.
In March, 1999, the law firm of Fields, Israel & Benning sought
collection for their past due account with IQ Now in the amount of $13,558.39.
This past due amount was never paid by IQ Now. In September 1997, IQ Now sold
substantially all of its assets to Biologix in exchange for a warrant for common
stock of Biologix. In July 1999, Biologix sold its internet related asset to the
Company in exchange for common stock of IVTX. As of December 31, 1999, Fields,
Israel & Benning were seeking collection of the past due account from IQ Now,
Biologix, and the Company. The Company settled this matter to avoid litigation.
The total claim was for $13,558.39 plus interest.
To the knowledge of management, there is no material litigation pending
or threatened against the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The Company's Common Stock has been quoted on the over-the-counter
bulletin board system ("OTC Bulletin Board") since April 1998, formerly under
the symbol IVTX, and since its name change, under the symbol THCL. However, on
January 13, 2000, as the Company's Form 10-SB had not yet cleared all SEC
comments, the Company's common stock was no longer eligible for quotation on the
OTC Bulletin Board, but started being quoted on the "Pink Sheets."
The following table sets forth the high ask and low bid prices for the
Company's common stock as reported on the OTC Bulletin Board.
The prices below also reflect inter-dealer quotations, without retail
mark-up, mark-down or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Period Reported High Ask Low Bid
<S> <C> <C>
Quarter ended June 30, 1998 7.5 3.33
Quarter ended September 30, 1998 6.33 2.625
Quarter ended December 31, 1998 5.25 1.69
Quarter ended March 31, 1999 9 1.69
Quarter ended June 30, 1999 9.75 1.50
Quarter ended September 30, 1999 12.625 0.94
Quarter ended December 31, 1999 2.44 0.80
</TABLE>
(b) STOCKHOLDERS
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As of December 6, 2000, the Company had approximately 813 holders of
Company Common Stock.
(c) DIVIDENDS
The Company has not paid cash dividends on its Common Stock in the past
and does not anticipate doing so in the foreseeable future. The Company
currently intends to retain future earnings, if any, to fund the development and
growth of its business.
CHANGES IN SECURITIES
On July 13, 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management received a one time payment of 75,000 shares of common stock of the
Company. This issuance was exempt from the registration provisions of the Act by
virtue of Section 4(2) of the Act, as transactions by an issuer not involving
any public offering. The securities issued pursuant to the Consulting Agreement
are restricted securities as defined in Rule 144.
On August 11, 1999, the Company entered into an Agreement for Financial
Public Relation Services with Market Pathways Financial Relations Incorporated.
Under the Agreement for Financial Public Relations Services, Market Pathways
Financial Relations Incorporated received a one time payment of 85,000 shares of
common stock of the Company. This issuance was exempt from the registration
provisions of the Act by virtue of Section 4(2) of the Act, as transactions by
an issuer not involving any public offering. The securities issued pursuant to
the Agreement are restricted securities as defined in Rule 144.
On September 24, 1999, the Company commenced and is currently
conducting a private offering to accredited investors only of units, each unit
consisting of one share of the Company's Common Stock and one Warrant
exercisable for a term of two years (the "Units"). The Company originally priced
this offering at $2.25 per Unit with a $2.25 exercise price on the Warrants.
However, the price of the Company's publicly traded stock dropped precipitously
since the beginning of this private offering and the Company has lowered the
purchase price of the Units and the corresponding exercise price on the
Warrants. The Company may raise of a maximum of $5,000,000 under this private
offering (2,222,222 Units). As of December 31, 2000, the Company sold a total of
441.215 Units (441.215 shares of common stock and 441.215 warrants) to 34
accredited investors for total gross proceeds of $526,815 at prices ranging from
$0.42 to $2.25. The Private Placement is exempt from the registration provisions
of the Act by virtue of Section 4(2) of the Act, as transactions by an issuer
not involving any public offering. The securities issued pursuant to the Private
Placement are restricted securities as defined in Rule 144.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements of the Company
included herewith.
OVERVIEW
The Company's new segment of business, as a result of
thehealthchannel.com contributed asset on July 28, 1999, is the business of
providing healthcare information over the Internet.
PLAN TO ADDRESS GOING CONCERN OPINION
The Company's independent certified public accountants' report on the
Company's financial statements for the year ended December 31, 1999 contains an
explanatory paragraph regarding the Company's ability to continue as a going
concern. Among the factors cited by the accountants as raising substantial doubt
as to the Company's ability to continue as a going concern are the Company's net
losses from operations,
9
<PAGE>
negative cash flows from operations, and the fact that current liabilities
exceed current assets. The accountants notes state that the Company's ability to
continue as a going concern is subject to the attainment of necessary funding
from outside sources. The Company has developed a plan to achieve profitability
and allay doubts as to its ability to continue as a going concern. This plan
includes: (1) obtaining long term-financing through securities offerings; and
(2) marketing and a variety or revenue sources to generate revenues.
LONG TERM FINANCING THROUGH SECURITIES OFFERINGS. Since September 1999,
the Company has received approximately $526,815 through a private offering of
its common stock and warrants. See "Liquidity and Capital Resources." Management
of the Company plans on continuing this private offering to raise up to $5
million. Management is also currently seeking additional financing from
institutions, but has not yet entered into any agreements for such financing.
Management plans to continue to seek financing through investment bankers,
venture capitalists, and institutions.
MARKETING AND REVENUE GENERATION. The Company will use a portion of
the proceeds from its financing efforts to establish a marketing and
promotion department and fund product marketing. Additionally, the Company
will pursue the following revenue models: (1) advertising revenues; (2)
retail sales; (3) portal/information center; (4) subscription fees; (5)
affiliates and/or affinity relationships; and (6) auctions. See "Business of
the Issuer."
RESULTS OF OPERATIONS
The following table set forth, for the years indicated, selected
financial information for the Company. The Company is a development stage
company as defined in Statement of Financial Accounting Standards No. 7,
"Accounting and Reporting by Development Stage Enterprises." The Company is
devoting substantially all of its present efforts to establish a new
business, which is unrelated to the business of Innovative Tracking Solutions
Corporation ("IVTX"), and its planned principal operations have not yet
commenced. All losses accumulated since inception of thehealthchannel.com
have been considered as part of the Company's development stage activities.
The operations of IVTX are presented as discontinued operations as a result
of the transfer of its assets and liabilities to a private company.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Year Ended Period from
December 31, 1999 Inception
(September 4, 1996)
to December 31, 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
Total revenue $ -0- $ -0-
Cost of revenue $ -0- $ -0-
Gross profit $ -0- $ -0-
General, administrative,
and selling expenses $ 3,460,728 $ 3,460,728
Loss from operations $(3,460,728) $(3,460,728)
Discontinued Operations $ (466,264) $(2,213,648)
Net income loss $(3,926,992) $(5,674,376)
--------------------------------------------------------------------------------------
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1999
10
<PAGE>
REVENUE
The Company is a development stage company and had no revenues for
the year ended December 31, 1999.
GENERAL AND ADMINISTRATIVE EXPENSES
The Company incurred costs of $3,460,728 for the year ended December
31, 1999 for launching its advertising campaign, satisfaction of professional
services provided on the Company's behalf and other operating expenses
incurred in support of its health-care web site.
In early 1999, IVTX management determined that the "public" status
of IVTX was detrimental to IVTX' operations due to the time and expense
burdens of being a public company. IVTX management then decided to take the
operations of IVTX "private" by transferring all IVTX assets and liabilities
to a newly formed private company and selling the public shell to a suitable
company, preferably in the healthcare industry. On April 13, 1999, IVTX
obtained written approval of 64.4% of the total voting stock of IVTX, voting
"for" taking the operations of IVTX private and selling the public shell to a
suitable company. On April 14, 1999, IVTX transferred all of its assets and
liabilities based on majority stockholder approval to a newly formed private
company, Innovative Tracking Solutions Corporation, a private Nevada
corporation, incorporated on March 29, 1999. Innovative Tracking Solutions
Corporation was formed by IVTX management specifically for the purpose of
taking the operations of IVTX private. The former IVTX officers and
directors, Dianna Cleveland, Lee Namisniak and Lou Weiss are the officers and
directors of Innovative Tracking Solutions Corporation, the private company.
The consideration for the transfer of assets was the assumption of all IVTX's
liabilities by the newly formed private company. As a result of this transfer
of assets and liabilities and the disposal of the segment of business on
April 14, 1999 (which is unrelated to the present business of
thehealthchannel.com), the Company has recorded a loss on discontinued
operations of $367,014 and a loss on disposal of a segment of $99,250 for the
year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily funded its capital
requirements through private equity infusions. The Company is currently
conducting a private offering to accredited investors only of units, each
unit consisting of one share of the Company's Common Stock and one Warrant
exercisable for a term of two years (the "Units"). The Company originally
priced this offering at $2.25 per Unit with a $2.25 exercise price on the
Warrants. These Unit numbers and prices have been adjusted for the Company's
one-for-three reverse split which takes effect November 17, 2000. However,
the price of the Company's publicly traded stock dropped precipitously since
the beginning of this private offering and the Company has lowered the
purchase price of the Units and the corresponding exercise price on the
Warrants. The Company planned to raise of a maximum of $5,000,000 under this
private offering. As of December 31, 1999, the Company has sold a total of
441,215 Units (441,215 shares of common stock and 441,215 warrants) for total
gross proceeds of $526,815 at prices ranging from $0.42 to $2.25 per Unit. As
of December 31, 1999, no investor had exercised any warrants purchased in the
current offering. This private offering is exempt from the registration
requirements of the Act pursuant to Section 4(2) of the Act.
In addition to the funds being raised in the private offering, the
Company will need to raise additional capital in the next twelve months to
support its media advertising budget. This capital may be raised privately or
publicly. As of December 31, 1999, the Company has no commitments for raising
additional financing.
11
<PAGE>
As of December 31, 1999, the Company had outstanding current
liabilities of $510,967 consisting of accounts payable and accrued expenses.
All officers of the Company have agreed to defer their compensation until
such time as the Company has the financial ability to pay compensation. The
Company anticipates satisfying its current liabilities in the ordinary course
of business from revenues and accounts receivable.
The Company plans to upgrade its management information system,
telecommunications system and office equipment to accommodate anticipated
growth plans. However, the Company will not perform any upgrades until its
management believes it has sufficient revenues to accommodate such upgrades.
The Company does not believe that inflation has had a significant
impact on its operations since inception of the Company.
YEAR 2000 COMPLIANCE
The Company's business operations depend on a network of computer
systems. Many of the systems previously used a two digit date field to
represent the date and could not have distinguished the year 1900 from the
year 2000 (commonly referred to as the Year 2000 problem). In addition, the
fact that the Year 2000 is a leap year could have created difficulties for
some systems. At this date, it appears that the operations of the Company
have not been materially adversely affected by any Year 2000 computer-related
problems. However, it is still possible that Year 2000 problems could emerge.
If the Company or one of its vendors develops problems related to Year 2000
which have not shown up at this date, the operations of the Company may be
adversely affected.
FORWARD LOOKING STATEMENTS
This registration statement contains forward-looking statements. The
Company's expectations 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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has a Consulting Agreement with Jeffrey Berg, a director
of the Company, whereby, for a one time payment of 7,333 shares of common
stock of the Company, Mr. Berg assists the Company in locating, negotiating,
and managing its financing.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company currently consists of
175,000,000 shares of Common Stock, $.001 par value. The Company has no
shares of Preferred Stock.
The Company's Transfer Agent is Continental Stock Transfer & Trust
Company, 2 Broadway, 19th Floor, New York, New York 10004.
The following summary of certain terms of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by,
the provisions of the Company's Articles of Incorporation and Bylaws.
12
<PAGE>
COMMON STOCK
As of the date of this report, there are 25,000,000 shares of Common
Stock outstanding.
Holders of Common Stock are each entitled to cast one vote for each
share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor and, in the event of liquidation, to share pro rata in any
distribution of the Company's assets after payment of liabilities. The Board
of Directors is not obligated to declare a dividend and it is not anticipated
that dividends will be paid until the Company is profitable.
Holders of Common Stock do not have preemptive rights to subscribe
to additional shares if issued by the Company. There are no conversion,
redemption, sinking fund or similar provisions regarding the Common Stock.
All of the outstanding shares of Common Stock are fully paid and
non-assessable and all of the shares of Common Stock offered hereby will be,
upon issuance, fully paid and non-assessable.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements that constitute Item 7 are included at the
end of this report beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(1) DISMISSAL OF PRINCIPAL ACCOUNTANTS.
The Registrant terminated Singer Lewak Greenbaum & Goldstein, LLP,
Certified Public Accountants & Management Consultants ("Singer Lewak"), as
its principal accountant as of November 29, 1999. The principal accountant's
report on the financial statements of the Registrant contained no adverse
opinion or a disclaimer of opinion, or was qualified nor modified as to
uncertainty, audit scope, or accounting principles. The termination of Singer
Lewak was approved by the Board of Directors. During the Registrant's two
most recent fiscal years and any subsequent interim period preceding such
registration, declination, or dismissal, there were no disagreements with the
former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
(2) ENGAGEMENT OF NEW PRINCIPAL ACCOUNTANTS.
The Company engaged Stonefield Josephson, Inc. on November 29, 1999
as its principal accountants. Stonefield, Josephson's business address is
1620 26th Street, Suite 400 South, Santa Monica, California, 90404.
Stonefield, Josephson replaces Singer Lewack. Stonefield Josephson conducted
the audits for which financial statements are attached. Neither the Company
nor anyone on its behalf has consulted Singer Lewack during the two most
recent past fiscal years regarding any matter for which reporting is required
under Regulation S-B, Item 304(a)(2)(i) or (ii) and the related instructions.
The decision to engage Stonefield, Josephson was approved by the Board of
Directors.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) DIRECTORS AND EXECUTIVE OFFICERS
13
<PAGE>
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal offices and
positions with the Company held by each person and the date such person
became a director or executive officer of the Company. The executive officers
of the Company are elected annually by the Board of Directors. Each year the
stockholders elect the board of directors. The executive officers serve terms
of one year or until their death, resignation or removal by the Board of
Directors. There was no arrangement or understanding between any executive
officer and any other person pursuant to which any person was elected as an
executive officer.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald A. Shea 67 Chief Executive Officer, President, and
Chairman of the Board of Directors
Thomas Lonergan 50 Chief Operating Officer, Vice President,
Secretary, Chief Financial Officer, and Director
Balazs Imre Bodai, M.S., M.D. 45 Director
Jeffrey H. Berg, MBA, Ph.D. 57 Director
Joseph Song, M.D., F.A.C.C. 40 Director
-------------------------------------------------------------------------------------------------
</TABLE>
All directors have been with the Company since July 28, 1999 and
serve for one year terms.
DONALD J. SHEA, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN.
From July 1999 through the present, Mr. Shea is the President and Chairman of
Biologix International, Ltd. From September 1997 through July 1999, he was a
board member of Biologix International, Ltd. From 1995 through 1997, Mr. Shea
was Marketing Consultant to Marketing Insights, Inc., a new product
development Company in Princeton, New Jersey. Prior to that he was President
of Avonwood Capital Corporation, Philadelphia, Pennsylvania, a Venture
Capital/Management Consulting firm; and President of Brilliant Enterprises,
Inc., Philadelphia, Pennsylvania, a dental products manufacturer. Mr. Shea
was also the former President and CEO of Clairol, Inc., a Division of
Bristol-Myers Squibb, former Vice-President of Bristol-Myers Squibb. Mr. Shea
brings over 35 years of consumer products marketing and general management
experience to the Company.
THOMAS P. LONERGAN, M.S., M.B.A., CHIEF OPERATING OFFICER, VICE
PRESIDENT, SECRETARY, CHIEF FINANCIAL OFFICER, AND DIRECTOR. From July 1999
through the present, Mr. Lonergan is a Director, Vice President, Chief
Operating Officer, Secretary, and Treasurer of Biologix International, Ltd.
Mr. Lonergan was the co-founder and Vice Chairman of IQ NOW Corporation, a
deliverer of healthcare information on the Internet from 1992 through 1999.
Previously, he was a Regional Director of Cardiology for Tenet Medical Group,
former Director of Clinical Services at Downey Community Hospital, and has
been a hospital administrator for 20 years. He was responsible for $70
million budget and manages over 200 employees. For 11 years he has been an
instructor and director of medical technology at Coast College. Mr. Lonergan
is co-founder of the American College of Cardiovascular Administrators. He
has an Associate of Arts (Pre-Medicine) from Cerritos Junior College (1971),
a Bachelor of Science (Pre-Medicine) from the University of California,
Irvine (1973), and an Executive Masters Degree of Business Administration
from Pepperdine University (1990).
BALAZS IMRE BODAI, M.D., DIRECTOR. From 1985 and continuing through
the present, Dr. Bodai is the Chief of Surgery at Kaiser Permanente Medical
Center, Sacramento, California. He is also President of B and B Medical
Research Technology, Inc., Sacramento, California; an Associate Clinical
Professor of Surgery at the University of California at Davis; a Consultant
to COAT, Johnson & Johnson, Newark, New Jersey; and a Senior Consultant to
Sontek Medical, Inc., Higham, Massachusetts. "Ernie" holds a Bachelor of
Science and Master of Science Degrees from the School of Medicine at the
University of
14
<PAGE>
California at Los Angeles, and a Doctor of Medicine Degree from the
University of California at Davis. He is author and co-author of over 120
scientific and clinical publications in various of the leading medical
journals, author of a surgery text book, and is well-recognized within the
field of emergency and critical care medicine.
JEFFREY H. BERG, PH.D., DIRECTOR. Dr. Berg holds an MBA and Ph.D. in
Chemistry from New York University. From September 1995 through the present,
he is a senior research analyst for M.H. Meyerson & Co., Inc. From 1991
through the present, he is the President of Health Care Insights. Mr. Berg
was a Vice President of the Chicago Corporation from 1991 to 1992. Mr. Berg
was security analyst for William K. Woodruff & Co. from 1990 to 1991 and
Vice-President of Research for J.C. Bradford & Co. from 1987 to 1990. From
1981 to 1987 he was Vice-President of the Health Care Division of PA
Consulting Services, Inc. of London, England, specializing in international
technology and new product surveillance, venture capital investment,
acquisition studies, and state-of-the-art for diverse areas of health care.
During the 1970s, Mr. Berg developed products and conducted research for
General Foods, the Patient Care Division of Johnson & Johnson Products, Inc.,
the Consumer Products Division of Ortho Pharmaceutical Corporation; and
staffed and supervised scientists and engineers at the R&D laboratories for
development of varied medical and health care products within the Johnson &
Johnson family of companies. Dr. Berg holds several patents in the area of
biosensor and disposable electrode technology. He has published a number of
articles on topics such as biosensors, cancer therapy, biopharmaceuticals,
drug infusion devices and industrial biotechnology. Dr. Berg serves as a
liaison with the investment banking and scientific communities.
JOSEPH SONG, M.D., F.A.C.C., DIRECTOR. From 1994 through the
present, Dr. Song has his own practice in Interventional Cardiology. From
1991 through 1994, he was an Interventional Cardiologist with Internal
Medicine Specialists Medical Group, Inc. He is a Lecturer and Moderator at
Downey Foundation Hospitals. Dr. Song is Clinical Assistant Professor of
Medicine/Cardiology at the College of Osteopathic Medicine of the Pacific in
California and a member of the Teaching Staff of the Family Practice
Internship/Residency Program at Rio Hondo/Downey Community Hospital,
California. He is certified by the American Board of Internal Medicine and
the American Board of Cardiovascular Dieases. Dr. Song received an A.B. in
Physics from Washington University in St. Louis Missouri in 1982 and his M.D.
from University of Missouri-Columbia School of Medicine in 1986.
(b) COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
of the Company's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons, the Company
believes that during its 1999 fiscal year, all such filing requirements
applicable to its officers, directors, and greater than 10% beneficial owners
were complied with.
ITEM 10-EXECUTIVE COMPENSATION
(a) SUMMARY COMPENSATION AND OPTIONS
The following shows the annual amounts which the Company anticipates
paying each executive officer for the fiscal year ending December 31, 1999.
The officers joined the Company on July 28, 1999. The following officers of
the Company received the following annual cash salaries and other
compensation:
15
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION YEAR ANNUAL SALARY(1)(2)(3)
<S> <C> <C>
Donald A. Shea,
Chief Executive Officer 1999 $144,000
Thomas P. Lonergan, Chief
Operating Officer, Vice President,
Chief Financial Officer 1999 $144,000
All Officers as a Group (2 persons) 1999 $288,000
</TABLE>
(1) No officers received or will receive any bonus or other annual
compensation other than salaries during fiscal 1999. The Company does not
provide any personal benefits to offices of the Company, such as the cost of
automobiles, life insurance, and supplemental medical insurance. Management
believes that the value of non-cash benefits and compensation distributed to
executive officers of the Company individually or as a group during fiscal
year 1999 will not exceed the lesser of $50,000 or ten percent of such
officers' individual cash compensation or, with respect to the group, $50,000
times the number of person sin the group or ten percent of the group's
aggregate cash compensation.
(2) No officers received or will receive any long term incentive plan (LTIP)
payouts or other payouts during fiscal 1999.
(3) No officers received or will receive any awards, including stock awards
or securities underlying options, during fiscal 1999.
(b) EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Donald J. Shea, its
President, dated September 1, 1999. This agreement has a term of three years
and provides for salary of $144,000 per year, four weeks of vacation per
year, and eligibility to participation in all Company benefit programs. There
is no severance provision.
The Company has an employment agreement with Thomas P. Lonergan, its
Vice President, Chief Operations Officer, Secretary, and Chief Financial
Officer, dated September 1, 1999. This agreement has a term of three years
and provides for salary of $144,000 per year, four weeks of vacation per
year, and eligibility to participation in all Company benefit programs. There
is no severance provision.
(c) COMPENSATION OF DIRECTORS
Directors of the Company do not receive any cash compensation, but
are entitled to reimbursement of their reasonable expenses incurred in
attending directors' meetings.
ITEM 11-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of the date of this
Prospectus by: (i) each stockholder known by the Company to be the beneficial
owner of more than five percent of the outstanding Common Stock, (ii) each
director of the Company and (iii) all directors and officers as a group.
<TABLE>
<CAPTION>
Shares of Percent
Name and Address Common Stock(1) of Class(2)
<S> <C> <C>
Donald A. Shea(2) 138,500 *
Thomas P. Lonergan(2) 862,003 3.4%
Balazs Imre Bodai, M.S., M.D.(2) 445,000 1.8%
Jeffrey H. Berg, MBA, Ph.D.(2) 147,800 *
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
Joseph Song, M.D.(2) 844,542 3.4%
All Officers and Directors
as a Group (5 persons) 2,437,845 9.8%
</TABLE>
---------------
* Less than one percent
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of Common Stock listed above, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable, or exercisable within
60 days, are deemed outstanding for purposes of computing the percentage of
the person holding such options or warrants, but are not deemed outstanding
for purposes of computing the percentage of any other person.
(2) c/o Company's address: 3101 West Coast Highway, Suite 175, Newport Beach,
California 92663.
ITEM 12-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<S> <C>
3.1 Articles of Incorporation*
3.2 Amendment to Articles of Incorporation*
3.3 Certificate of Correction to Articles of Incorporation*
3.4 By-laws*
3.5 Amended By-laws*
4.1 Specimen Certificate of Common Stock*
4.2 Specimen Warrant Certificate of Common Stock*
10.1 Acquisition, Stock Purchase, and Exchange Agreement, dated July 28, 1999*
10.8 Stock Purchase Agreement and Warrant Agreement (form) for pending private placement*
10.9 24/7 Media Inc. Network Affiliation Agreement, dated September 9, 1999*
10.10 Employment Agreement with Thomas P. Lonergan, dated September 1, 1999*
10.11 Employment Agreement with Donald A. Shea, dated September 1, 1999*
10.12 Consulting Agreement with Ocean View Management Group, LLC, dated July 13, 1999*
10.13 Custom Content Service Agreement with ScreamingMedia.Net, Inc., dated September 27, 1999*
10.14 Agreement for Financial Public Relations Services with Market Pathways, dated August 11, 1999*
10.15 DVCi Technologies, Inc. thehealthchannel.com Technical Requirements and Content Specification dated
October 22, 1999*
10.16 Asset & Liability Purchase and Sale Agreement between Innovative Tracking Solutions Corporation, a Nevada corporation and
Innovative Tracking Solutions Corporation, a Delaware corporation, dated April 14, 1999*
10.17 Exodus Communications, Inc. Master Services Agreement, dated November 19, 1999*
10.18 Content Agreement with EarthLink Network, Inc., dated October 27, 1999*
10.19 On-Line License Agreement with Infoseek, dated March 1, 1999 and Addendum dated November 22, 1999 for
thehealthchannel.com, Inc.*
10.20 Consulting Agreement by and between Jeffrey Berg and thehealthchannel.com, Inc. dated September 1, 1999*
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
27.1 Financial Data Schedule
</TABLE>
---------------------------
* Incorporated by reference from Registration Statement on Form 10-SB filed by
the Company on March 13, 2000.
(b) REPORTS ON FORM 8-K
On October 14, 1999, the Company filed a report on Form 8-K/A
amending its Report on Form 8-K, filed with the Commission on August 12,
1999, to submit the financial statements required for its acquisition
reported on August 12, 1999.
On December 13, 1999, the Company filed a report on Form 8-K
reporting the termination of Singer Lewak Greenbaum & Goldstein, LLP,
Certified Public Accountants & Management Consultants ("Singer Lewak") as the
Company's principal accountant as of November 29, 1999.
On December 17, 1999, the Company filed a report on Form 8-K/A
amending its Report on Form 8-K, filed with the Commission on December 13,
1999, to submit the letter from Singer Lewak as required by SEC rules.
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<S> <C>
Date: December 14, 2000 THE HEALTHCHANNEL.COM, INC.
/s/ Donald A. Shea
------------------------------------
By: Donald A. Shea
Its: President, Chief Executive
Officer, Director
</TABLE>
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ DONALD A. SHEA
----------------------------
Donald A. Shea Chief Executive Officer, Director December 15, 2000
/s/ Thomas P. Lonergan
----------------------------
Thomas P. Lonergan Chief Financial Officer, Director,
Chief Operating Officer, Executive
Vice President, Secretary December 15, 2000
/s/ Balazs Imre Bodai
----------------------------
Balazs Imre Bodai Director December 15, 2000
/s/ Joseph K. Song
----------------------------
Joseph K. Song Director December 15, 2000
/s/ Jeffrey Berg
----------------------------
Jeffrey Berg Director December 15, 2000
</TABLE>
19
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5-F-6
Statement of Cash Flows F-7
Notes to Financial Statements F-8-F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
thehealthchannel.com, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of thehealthchannel.com, Inc. (a
development stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements as of December
31, 1998 and for the year then ended and for the period from inception of
operations on September 4, 1996 to December 31, 1998 was audited by other
auditors whose report dated April 1, 1999, included an explanatory paragraph
which expressed substantial doubt about the Company's ability to continue as a
going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of thehealthchannel.com, Inc. as
of December 31, 1999, and the results of its operations and its cash flows for
the period then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses from operations, has negative cash flows
from operations, and its current liabilities exceeds its current assets. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
February 21, 2000
F-2
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS - DECEMBER 31, 1999
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 92,237
Loan receivable 21,000
Prepaid expenses and other receivables 129,399
---------------
Total current assets $ 242,636
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 838,424
---------------
$ 1,081,060
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
accounts payable and accrued expenses $ 510,967
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 175,000,000 shares
authorized, 22,960,597 shares issued and outstanding
(see Note 8) $ 22,961
Additional paid-in capital 6,246,508
Subscriptions receivable (25,000)
Deficit accumulated during the development stage (5,674,376)
---------------
Total stockholders' equity 570,093
---------------
$ 1,081,060
===============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From inception on
Year ended Year ended September 4, 1996 to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- -----------------
(unaudited)
<S> <C> <C> <C>
NET REVENUES $ - $ - $ -
COST OF SALES - - -
----------------- --------------- -------------------
GROSS PROFIT - - -
GENERAL AND ADMINISTRATIVE EXPENSES 3,460,728 - 3,460,728
----------------- ---------------- -------------------
LOSS FROM CONTINUING OPERATIONS (3,460,728) - (3,460,728)
----------------- ---------------- -------------------
DISCONTINUED OPERATIONS:
Loss on discontinued operations (367,014) (1,472,601) (2,114,398)
Loss on disposal of segment (99,250) - (99,250)
----------------- ---------------- -------------------
Total discontinued operations (466,264) (1,472,601) (2,213,648)
----------------- ---------------- -------------------
NET LOSS $ (3,926,992) $ (1,472,601) $ (5,674,376)
================= ================ ===================
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.18) $ (0.04)
================ ===============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED 22,125,497 33,786,016
================= ================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common stock Additional Stock during the Total
----------------------- paid-in subscriptions development stockholders'
Shares Amount capital receivable stage equity
--------- ----------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
DESCRIPTION
-----------
Balance at December 31, 1997, restated for
1:3 stock split on October 12, 2000 11,388,007 $ 11,388 $ 379,859 $ - $ (274,783) $ 116,464
Shares sold for cash 3,334,252 3,334 473,130 476,464
Shares issued in exchange for services 6,998,481 6,998 1,054,541 1,061,539
Common stock subscription 184,413 184 59,816 (60,000)
Net loss for the year ended
December 31, 1998 (1,472,601) (1,472,601)
---------- ----------- ---------- ---------- ----------- ----------
Balance at December 31, 1998 21,905,153 21,905 1,967,345 (60,000) (1,747,384) 181,866
IVTX
----
Issuance of common stock from IVTX
private placement offering (Note 4) 113,043 113 112,086 60,000 172,199
Issuance of shares for services rendered on
behalf of the Company (Note 4) 34,800 35 52,165 52,200
thehealthchannel.com (FORMERLY IVTX)
------------------------------------
Contribution of asset from Biologix
International, Ltd. (Note 3) 947,835 947,835
Issuance of common stock from private
placement offering (Note 4) 405,934 406 510,134 (25,000) 485,540
Issuance of common stock related to
settlement agreements (Note 4) 501,667 502 1,796,843 1,797,345
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common stock Additional Stock during the Total
----------------------- paid-in subscriptions development stockholders'
Shares Amount capital receivable stage equity
---------- ----------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares given directly by shareholders for
services rendered on the Company's
behalf (Note 4) 860,100 860,100
Net loss for the year ended
December 31, 1999 (3,926,992) (3,926,992)
---------- ----------- ---------- ---------- ----------- ----------
Balance at December 31, 1999 22,960,597 $ 22,961 $6,246,508 $ (25,000) $(5,674,376) $ 570,093
========== =========== ========== ========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
From inception on
Year ended Year ended September 4, 1996 to
December 31, 1999 December 31, 1998 December 31, 1999
----------------- ----------------- --------------------
(unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
ACTIVITIES:
Net loss $ (3,926,992) $ (1,472,601) $ (5,674,376)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING
ACTIVITIES:
Depreciation and amortization 135,230 - 135,230
Loss on disposal of division 99,250 - 99,250
Non cash expenses from stock issuances 2,611,423 1,041,138 3,805,561
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 189 (3,336) 3,146
Inventory (10,312) (783) 83,077
Prepaid expenses (108,447) (950) (129,399)
Deposits 2,597 - 2,597
(DECREASE) INCREASE IN LIABILITIES -
accounts payable and accrued expenses 661,157 34,311 354,419
---------------- ---------------- ----------------
Net cash used for operating activities (535,905) (402,221) (1,325,689)
---------------- ---------------- ----------------
CASH FLOWS USED FOR INVESTING ACTIVITIES -
payments to acquire property, equipment and
other assets (25,818) (46,959) (25,818)
---------------- ---------------- ----------------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING
ACTIVITIES:
Assets and liabilities transferred out (See Note 1) (26,329) - (26,329)
Loan receivable, officer-stockholders - (41,952) -
Stock subscription receivable (25,000) - (25,000)
Loans receivable - (15,000) (21,000
Proceeds from issuance of capital stock 682,738 476,464 1,516,073
---------------- ---------------- ----------------
Net cash provided by financing activities 631,409 419,512 1,443,744
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH 69,686 (29,668) 92,237
CASH, beginning of year 22,551 52,219 -
---------------- ---------------- ----------------
CASH, end of year $ 92,237 $ 22,551 $ 92,237
================ ================ ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES -
Non-cash compensation from stock issuances $ 2,611,423 $ 1,041,138 $ 3,805,561
================ ================ ================
Acquisition of website technology and related
assets $ 947,835 $ - $ 947,835
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GOING CONCERN:
The Company's financial statements are prepared using the
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
The Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for
the Company to continue as a going concern. This factor raises
substantial doubt about the Company's ability to continue as a
going concern.
Management recognizes that the Company must generate
additional resources to enable it to continue operations.
Management's plans also include the sale of additional equity
securities. However, no assurance can be given that the
Company will be successful in raising additional capital.
Further, there can be no assurance, assuming the Company
successfully raises additional equity, that the Company will
achieve profitability or positive cash flow. If management is
unable to raise additional capital and expected significant
revenues do not result in positive cash flow, the Company will
not be able to meet its obligations and will have to cease
operations.
GENERAL:
With headquarters in Newport Beach, California,
thehealthchannel.com (formerly Innovative Tracking Solutions
Corporation or "IVTX") is a comprehensive health information
Internet portal that offers a one-step access point for
consumers and professionals who want to explore a broad array
of health topics. The portal currently indexes other Internet
health and health-related sites, has direct links with online
health-care information service centers and provides detailed
coverage of medical conditions. Consumers may access a global
library of health-care information while searching for
products and services. The site offers a complete Internet
portal for state-of-the-art continuing medical education for
professionals.
The Company was incorporated under the laws of the state of
Delaware on September 4, 1996.
BUSINESS ACTIVITY:
In early 1999, IVTX management determined that the "public"
status of IVTX was detrimental to IVTX' operations due to the
time and expense burdens of being a public company. IVTX
management then decided to take the operations of IVTX
"private" by transferring all IVTX assets and liabilities to a
newly formed private company and selling the public shell to a
suitable company, preferably in the healthcare industry. On
April 13, 1999, IVTX obtained written approval of 64.4% of the
total voting stock of IVTX, voting "for" taking the operations
of IVTX private and selling the public shell to a suitable
company.
F-8
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BUSINESS ACTIVITY, CONTINUED:
On April 14, 1999, IVTX transferred all of its assets and
liabilities based on majority stockholder approval to a newly
formed private company, Innovative Tracking Solutions
Corporation, a private Nevada corporation, incorporated on
March 29, 1999. Innovative Tracking Solutions Corporation was
formed by IVTX management specifically for the purpose of
taking the operations of IVTX private. The former IVTX
officers and directors, Dianna Cleveland, Lee Namisniak and
Lou Weiss are the officers and directors of Innovative
Tracking Solutions Corporation, the private company. The
consideration for the transfer of assets was the assumption of
all IVTX's liabilities by the newly formed private company. As
a result of this transfer of assets and liabilities and the
disposal of the segment of business on April 14, 1999 (which
is unrelated to the present business of thehealthchannel.com),
the Company has recorded a loss on discontinued operations of
$367,014 and a loss on disposal of a segment of $99,250 for
the year ended December 31, 1999.
In June 1999, IVTX was introduced to thehealthchannel.com, a
consumer-based health Internet web site
(http://www.thehealthchannel.com). On July 28, 1999, IVTX,
pursuant to its bylaws and general Delaware corporate law,
acquired a certain asset of Biologix International, Ltd., a
Delaware corporation ("Biologix") consisting of
thehealthchannel.com web site and its related technology in
exchange for the controlling interest in IVTX. In connection
with this change of control, IVTX's name was changed to
thehealthchannel.com, Inc. on July 28, 1999. The acquisition
closed on July 28, 1999.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments,
none of which are held for trading purposes, approximate the
carrying values of such amounts.
CASH:
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts.
F-9
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred,
whereas, additions, renewals, and betterments are capitalized.
When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included
in operations. Depreciation is computed using the
straight-line method over the estimated useful lives of the
related assets.
INCOME TAXES:
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which adopts the asset and liability approach to
measurement of temporary differences between financial
reporting and income tax return reporting. The principal
temporary difference is the net operating loss carryforward of
approximately $4,500,000 at December 31, 1999. Due to business
activity during 1999 (Note 1), there are significant
limitations on the Company's ability to utilize this operating
loss carryforward. A deferred asset has been provided and
completely offset by a valuation allowance, because its
utilization does not appear to be reasonably assured. Federal
net operating loss carryforward expire on December 31, 2019
and California state net operating loss carryforward expire on
December 31, 2004.
DEVELOPMENT STAGE ENTERPRISE:
The Company is a development stage company as defined in
Statement of Financial Accounting Standards No. 7, "Accounting
and Reporting by Development Stage Enterprises." The Company
is devoting substantially all of its present efforts to
establish a new business, which is unrelated to the business
of Innovative Tracking Solutions Corporation ("IVTX"), and its
planned principal operations have not yet commenced. All
losses accumulated since inception of thehealthchannel.com
(Note 1) have been considered as part of the Company's
development stage activities. The operations of IVTX are
presented as discontinued operations as a result of the
transfer of its assets and liabilities to a private company
(Note 1).
NET LOSS PER SHARE:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which
is effective for annual and interim financial statements
issued for periods ending after December 15, 1997. Net loss
per share has been computed using the weighted average number
of shares outstanding. Common stock equivalents have been
excluded since their inclusion would reduce loss per share.
F-10
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS:
The Company has adopted Statements of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" and No. 133
"Accounting for Derivative Instruments and Hedging
Activities." The Company also adopted Statement of Position
No. 98-5 "Reporting on the Costs of Start-up Activities."
Adoption of these activities did not materially affect the
financial statements.
(2) LOAN RECEIVABLE:
The loan receivable is non-interest bearing, unsecured and due on
demand.
(3) PROPERTY AND EQUIPMENT:
On July 28, 1999, the Company acquired an asset from Biologix
International, Ltd., consisting primarily of thehealthchannel.com
website and related technology in exchange for 850,000 restricted
shares of the Company's common stock. Website technology cost includes
the design (including software configuration and interfaces), coding,
installation costs to hardware and testing. The website asset (a
non-monetary asset) acquired was recorded at the transferors' (Biologix
International, Ltd.) historical cost basis determined under generally
accepted accounting principles.
Property and equipment is comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Website and related technology $ 947,835
Software 25,819
---------------
973,654
Less accumulated depreciation and amortization 135,230
--------------
$ 838,424
===============
</TABLE>
Depreciation and amortization expense for the year ended December 31,
1999 amounted to $135,230.
F-11
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(4) STOCKHOLDERS' EQUITY:
Biologix paid $250,000 for 850,000 shares of common stock of IVTX,
representing the majority controlling interest held by the officers and
directors of IVTX (see Note 3 for the recording of this issuance). This
purchase was made pursuant to the exemption from registration set forth
in Section 4(1) of the Securities Act of 1933, as amended (the "Act"),
as a non-issuer transaction. The facts that make this exemption
available are that the officers and directors of IVTX sold their stock
to Biologix; IVTX itself did not issue any new stock. Additionally,
Biologix agreed to contribute thehealthchannel.com assets and
technology to IVTX in exchange for the IVTX shareholders agreeing to
split their stock and exchange shares with the shareholders of
Biologix. This exchange was made pursuant to the exemption set forth in
Section 4(1) of the Act as a non-issuer transaction. The facts that
make this exemption available are that the IVTX shareholders merely
transferred their shares of IVTX (newly named thehealthchannel.com,
Inc.) to the shareholders of Biologix who elected to exchange their
shares. The shares of stock of IVTX were forward split 28.22-for-one
and the IVTX shareholders opted to exchange each share they held of
IVTX stock for two shares of common stock of IVTX under its new name of
thehealthchannel.com, Inc. and contributed the remaining 26.22 shares
each into a share exchange pool as presented in the statement of
stockholders' equity. Then approximately 800 Biologix shareholders were
provided with the alternative of retaining their Biologix shares or
retiring their Biologix shares in exchange for IVTX shares
(thehealthchannel.com shares) contained in the exchange pool on a one
for one share basis. Approximately 630 Biologix shareholders elected to
exchange their Biologix shares for thehealthchannel.com shares from the
pool (the "Exchange").
During October 2000, the shareholders approved a stock split of 1:3
shares, the effect of which has been retroactively applied in the
accompanying financial statements. The number of authorized shares of
common stock was increased to 175,000,000.
The Exchange was announced to shareholders of both IVTX and Biologix
through press releases and a letter to IVTX shareholders. After the
forward stock split, the Company (thehealthchannel.com, Inc. formerly
Innovative Tracking Solutions Corporation) had 35,606,519 post split
shares of common stock issued and outstanding. The Exchange began on
August 6, 1999 and ended on October 31, 1999 to ensure that all
shareholders had enough time and notice to exchange their shares.
Following the conclusion of the Exchange period, the Company had
approximately 12,667,000 post split shares reserved for exchange with
Biologix shareholders that were not exchanged.
During the year ended December 31, 1998, the Company sold 3,334,252
restricted (post split) shares of the Company's common stock for total
proceeds of $476,464 under Regulation D of the Securities Act of 1933.
During the year ended December 31, 1998, the Company recorded an
expense from the issuance of approximately 7,000,000 post split shares
in exchange for services and license agreements. Expense amounts
totaling $1,061,539 were determined based on share value of
consideration given and/or consideration received, which ever was more
clearly determinable.
Prior to the April 14, 1999 transfer of the IVTX assets and liabilities
(Note 1), the Company had concluded a private placement offering under
Rule 504 of Regulation D, whereby 113,043 (post split) shares of common
stock were sold at an offering price of $1.52 (post split) per share.
This offering resulted in net proceeds of $172,199. Also, the Company
issued 34,800 (post split) shares of common stock for services
rendered. The services have been recorded at a fair value of $1.50
(post split) per share for a total of $52,200.
F-12
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(4) STOCKHOLDERS' EQUITY, CONTINUED:
In September 1999, the Company initiated a Rule 506, Regulation D
private placement of 405,934 restricted shares of the Company's common
stock from shares available from the forward stock split and 1,217,802
warrants to purchase restricted shares of the Company's' common stock
with an exercise price of $0.75, for proceeds of $510,540, of which
$25,000 was received in January 2000. The shares issued and the shares
issuable upon exercise of the warrants have piggyback registration
rights in the event the Company files a Registration Statement with the
Securities and Exchange Commission. The warrants vest immediately and
expire two years from the date of issuance.
The Company issued 501,667 shares of common stock for satisfaction of
legal settlement agreements the Company entered into for a total of
$1,797,345.
On December 15, 1999, shareholders conveyed 519,738 post split shares
of common stock to certain individuals and 84,000 shares of common
stock to officers of the Company for satisfaction of expenses and
payment of salaries these individuals and officers had rendered on the
Company's behalf. This resulted in recording a charge to expense and
additional paid in capital of $860,100 for the year.
During July 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management received a one time payment of 25,000 post split shares of
common stock of the Company. This issuance was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the
Act, as transactions by an issuer not involving any public offering.
The securities issued pursuant to the Consulting Agreement are
restricted securities as defined in Rule 144.
During August 1999, the Company entered into an Agreement for Financial
Public Relation Services with Market Pathways Financial Relations
Incorporated. Under the Agreement for Financial Public Relations
Services, Market Pathways Financial Relations Incorporated received a
one time payment of 28,333 post split shares of common stock of the
Company. This issuance was exempt from the Registration provisions of
the Act by virtue of Section 4(2) of the Act, as transactions by an
issuer not involving any public offering. The securities issued
pursuant to the Agreement are restricted securities as defined in Rule
144.
UNAUDITED
On January 5, 2000, the Company entered into a Consulting Agreement
with Lawrence W. Horwitz pursuant to which Mr. Horwitz agreed to
provide business development and advisory services. For services
rendered under this Consulting Agreement, the Company issued 416,667
post split shares of common stock of the Company (the "Shares"). The
Shares will be registered on Form S-8, for which, an expense of
$312,500 will be recorded.
(5) ADVERTISING COSTS:
Advertising costs are expensed when incurred and amounted to
approximately $400,000 for the year ended December 31, 1999.
F-13
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(6) EMPLOYMENT AGREEMENTS:
The Company has employment agreements with its chief operating officer
and president. The employment agreements provide for a monthly salary
of $12,000 each. The agreements commenced on September 1, 1999 and are
in effect for three years from that date.
(7) CONTINGENCIES:
The Company is involved in other various routine legal proceedings
incidental to the conduct of its normal business operations. The
Company's management believes that none of these legal proceedings will
have a material adverse impact on the financial condition or results of
operations of the Company.
The Securities and Exchange Commission ("SEC") has alleged that the
exchange of shares involving the Biologix shareholders may have been in
violation of the Securities Act of 1933 and thereby constituted the
making of an unregistered public offering to which the Company
continues to disagree. If the SEC were to prevail in its position, it
would have a severe and adverse impact on the Company, and the
Company's ability to continue as a going concern would be adversely
affected. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty, as the amounts are
not estimable.
The Company initiated a private placement of securities during
September 1999 which is currently on going. During this period of time,
the Company sold securities to investors based on the most recent
closing price on the OTC Bulletin Board or the Pink Sheets. The prices
at which these securities were sold fluctuated widely, based on
fluctuations in the closing prices. The Company is contingently liable
in the event that an investor or investors who purchased securities in
this private placement asserts a claim that the Company failed to fully
disclose the fact that fluctuations in the market would cause
adjustments in the price of the private placement. The Company believes
that they fully disclosed this risk, however, in the event any
shareholder(s) were to successfully prosecute an action against the
Company, it may have a severe and adverse effect on the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty, as the amounts are not estimable.
F-14
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(7) CONTINGENCIES, CONTINUED:
LITIGATION
The Company has been named as a cross-defendant in a cross-complaint
filed by its Former President in an action pending in the Superior
Court State of California for the County of San Francisco, Case No.
307364. This action was initiated by Biologix International, Ltd.
("Biologix") against the former President on October 22, 1999 alleging
causes of action against the former President for: (1) temporary
restraining order and preliminary and permanent injunction; (2) breach
of fiduciary duty; (3) fraud by intentional misrepresentation; (4)
conversion; (5) possession of personal property; (6) declaratory
relief; and (7) accounting. The claims alleged by Biologix relate to
the actions and conduct of the former President as an officer and
director of Biologix. Thehealthchannel.com is named as a
cross-defendant in the cross-complaint of the former President in a
cause of action for breach of contract based upon an alleged employment
agreement between the former President and Biologix. The former
President claims that this alleged employment agreement is the
responsibility of Thehealthchannel.com based upon
thehealthchannel.com's purchase of the internet related assets from
Biologix. Thehealthchannel.com was served with the cross-complaint on
December 14, 1999. The former President seeks $400,000 in damages and
options to purchase one million shares of Biologix stock.
Thehealthchannel.com has answered the cross-complaint denying the
allegations and will aggressively defend the claims asserted by the
former President. In the event any judgments were brought against the
Company, it may have a severe and adverse effect on the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty, as the amounts are not estimable.
To the best knowledge of management, there is no other material
litigation pending or threatened against the Company.
(8) SUBSEQUENT EVENTS (UNAUDITED):
REVERSE STOCK SPLIT
The Board of Directors and shareholders of the Company have approved a
reverse stock split of 1:3 common shares, the effect of which has been
retroactively applied in the accompanying financial statements.
(9) COMMITMENTS (UNAUDITED):
OFFERINGS
In September 1999, the Company initiated a Rule 506, Regulation D
private placement of 1,927,274 (post split) restricted shares of the
Company's common stock from shares available from the forward stock
split and 1,927,274 (post split) warrants to purchase restricted shares
of the Company's' common stock with an exercise price determined at 70%
of the trading value at the date of grant, for net proceeds of
$1,410,779. The shares issued and the shares issuable upon exercise of
the warrants have piggyback registration rights in the event the
Company files a Registration Statement with the Securities and Exchange
Commission. The warrants vest immediately and expire two years from the
date of issuance. The private placement offering was closed on August
29, 2000.
F-15
<PAGE>
thehealthchannel.com, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(9) COMMITMENTS (UNAUDITED), CONTINUED:
OFFERINGS, CONTINUED
During August 2000, the Company entered into an investment agreement
with Swartz Private Equity, LLC to issue and sell, at the Company's
option, shares of its common stock for up to an aggregate of $30
million from time to time during a three-year period beginning on the
date that the Form SB-2 registration statement is declared effective as
filed with the Securities and Exchange Commission during August 2000.
This is also referred to as a put right.
BRIDGE FINANCING
During August 2000, the Company entered into an agreement to borrow
$250,000 from Laguna Pacific Partners L.P., ("Laguna Partners") a
Delaware limited partnership. This loan is secured by all assets of the
Company, bears interest at 6% per annum and is payable on the earlier
of 180 days or within 30 days from the effective date of the Form SB-2
above. In consideration for this loan, Laguna Partners will receive
warrants for common stock equal to the quotient of $250,000 divided by
the closing bid of the Company's stock price immediately preceding the
effective date of the Form SB-2 above. The term of this warrant is five
years and the exercise price is $1.
During August 2000, the Company entered into an agreement to borrow
$250,000 from Les and Irene Dube, ("Dube") individuals. This loan bears
interest at 6% per annum and is payable on the earlier of 180 days or
within 30 days from the effective date of the Form SB-2 above. In
consideration for this loan, Dube will receive warrants for common
stock equal to the quotient of $250,000 divided by the closing bid of
the Company's stock price immediately preceding the effective date of
the Form SB-2 above.
The Company will record interest expense using the fair value of $0.165
per warrant granted, measured at the date of grant using the Black
Scholes model with a 70% volatility. This expense will be recorded at
the date the warrants become issuable based upon the quotient
calculation mentioned above, as the future stock prices are not
presently determinable.
F-16
