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PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
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THEHEALTHCHANNEL.COM, INC.
(Name of Registrant as Specified in Its Charter)
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THEHEALTHCHANNEL.COM, INC.
260 Newport Center Drive, Suite 250
Newport Beach, California 92660
(949) 631-8317
September 19, 2000
Dear Stockholder:
On approximately September 12, 2000, we sent you a proxy statement for our
Annual Meeting of Stockholders, to be held at the Marriott Hotel, 900 Newport
Center Drive, Newport Beach, 92660 on Thursday, October 12, 2000 at 6:30 p.m..
In that proxy statement, you were asked to consider and approve a proposed
reverse stock split of one for three. Since the mailing of that proxy statement,
many stockholders have called us with questions regarding the reverse stock
split proposal. We are sending you this supplemental information to our proxy
statement to explain: (1) how the reverse stock split will work; and (2) why the
Board of Directors recommends a vote "FOR" the reverse stock split.
Additionally, you were asked to consider and approve an increase in the
number of our authorized shares. While the reverse stock split and the
increase in the number of authorized shares are not related or contingent
upon each other, some stockholders believe they are related and are asking
questions about this increase in authorized shares. Therefore, we are sending
you this supplemental information to our proxy statement to also explain why
the Board recommends a vote "FOR" the increase in the number of authorized
shares.
Prior to providing a more detailed explanation, we believe that it is
important that each of our stockholders understand that ALL stockholders of the
Company shall be treated equally as a result of the above two actions, including
all members of management and the Board of Directors. This is required by our
Bylaws and applicable Delaware law. If the reverse stock split is approved, all
shares held by management and the Board of Directors will be reduced the same as
every other stockholder of the Company. If the increase in the number of
authorized shares is approved, all shares held by management and the Board of
Directors will be subject to the same potential dilution as every other
stockholder of the Company.
We would request that each of you carefully consider the following
recommendations prior to casting your vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH STOCKHOLDER SHOULD CAST HIS
OR HER VOTE IN FAVOR OF THE ONE FOR THREE REVERSE STOCK SPLIT FOR THE FOLLOWING
REASONS:
(1) Company management has met with in excess of five investment banking
firms. Some of these firms are major national underwriters. Without
exception, each of these firms indicated that the Company would need
to conduct a reverse stock split in order to be seriously considered
by the investment banking community. This indication was based upon
not just the large number of shares outstanding (over 75 million), but
by the fact that established stock exchanges such as NASDAQ have
certain minimum price requirements. The general belief was that the
Company
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would never secure approval from any major exchange with such a large
number of shares outstanding and a low stock price.
(2) As you are hopefully aware, we have filed a Form SB-2 registering
certain shares to be sold by Swartz Private Equity, Inc. This is the
first established investment banking concern which has provided a
substantial capital commitment to thehealthchannel.com. As indicated
in our Form SB-2, Swartz's funding may be as high as $30 million.
Swartz has strongly recommended that we conduct a reverse stock split.
(3) We believe that a lower number of shares, with an eventual higher
stock price will achieve the following goals:
(a) Provide increased liquidity for our stockholders by increasing
both the quantity and quality of broker-dealers participating in
the market for our stock. This can only occur if we are able to
provide an orderly market for our Company's stock, which
accurately reflects what we believe will be the successful
implementation of our business plan over the next year.
(b) Expand the Company's opportunities to utilize our stock to fund
(in part or in their entirety) strategic acquisitions to expand
our revenue opportunities and achieve sustained profitability.
Once again, acquisition candidates will view our stock more
favorably if the stock is supported by established investment
banking concerns and/or trading on a national exchange.
(c) Increase the number of investment banking concerns who may show
an interest in raising capital for thehealthchannel.com. As most
of you are aware, many of our competitors are substantially
better capitalized than thehealthchannel. We need look no further
than Rupert Murdoch's infusion of $1 billion into Healtheon and
the recent equity contributions of in excess of $25 million into
drkoop.com to validate this statement. As a result, while we
believe that Swartz will address our short-term capital needs, we
believe that, upon deployment of all or a part of Swartz's
investment, eventually we will need to solicit the support of an
established underwriter to complete our proposed business plan.
While some of you may be concerned about potential dilution arising
from acquisition and capital raising activities, we believe strongly that such
activities will eventually prove nondilutive as to our existing stockholders. In
summary, we believe that acquisitions and additional capital raising are
necessary in order for the Company to implement the ambitious business plan as
set forth in our Form SB-2. We have been advised by our securities counsel as
well as numerous investment banking concerns that such activities can only be
successfully achieved if the Company implements a reverse stock split. As a
result, we believe that the eventual result of the reverse stock split will be
improved value for all of our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH OF OUR STOCKHOLDERS CAST
HIS OR HER VOTE IN FAVOR OF INCREASING THE NUMBER OF AUTHORIZED SHARES.
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By increasing our authorized shares, the Company has merely increased
the number of shares that it MAY issue in the future. We do not believe that we
will require the entire number of shares set forth in the proxy statement to
achieve our business objectives, however, we want to assure that our authorized
capital is sufficient to implement our future acquisition and fund raising
activities.
In summary, as a result of the structure required by Swartz to provide
the capital described in our Form SB-2, we are contractually required to
increase the number of authorized shares in order to guarantee Swartz that there
will be sufficient shares to comply with the Company's contractual obligations
to Swartz. While we anticipate that eventually our stock price will increase, if
it does not, we are contractually obligated to at least provide a number of
authorized shares which would allow Swartz to contribute its entire $30 million
commitment at current market prices. This does not mean that we would utilize
the Swartz equity line for the entire $30 million, rather it merely means that
our contract requires that we set aside enough shares to assure Swartz that we
have sufficient authorized shares to perform under the entire $30 million
investment. Whether this occurs or not is entirely at the discretion of Company
management.
We believe that the concerns recently expressed by stockholders are
legitimate, however, it is also important that all stockholders understand the
competitive environment into which we intend to deploy our proposed business
plan. This environment will require that we have a stable market for our shares,
supported by numerous investment banking concerns, providing us with the ability
to raise the capital required to compete. If we are unable to achieve these
objectives, Company management believes that thehealthchannel.com could miss the
window of opportunity that is now open for a healthcare internet company to
learn from the mistakes of our competitors and succeed in the marketplace.
We look forward to addressing any additional concerns at our Annual
Stockholders Meeting. The Annual Meeting will be held as originally scheduled on
Thursday, October 12, 2000 at the Marriott Hotel, 900 Newport Center Drive,
Newport Beach, 92660 at 6:30 p.m. (P.D.T.).
If you are unable to attend in person, you may listen to our Annual
Meeting over the world wide web at WWW.THEHEALTHCHANNEL.COM. If you have any
additional questions prior to the annual meeting or need further assistance,
please contact: Shannon Squyres, Market Pathways, 800-755-1860 (phone) or
[email protected] (e-mail). If you desire to vote electronically
over the internet, then please provide us with your e-mail address so that we
may electronically provide you with a ballot which may be returned via e-mail
YOUR VOTE IS VERY IMPORTANT. PLEASE COMPLETE, SIGN, AND RETURN YOUR PROXY.
Sincerely Yours,
/s/ THOMAS P. LONERGAN
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Thomas P. Lonergan, Chief Operating Officer,
Vice President, Secretary, Chief Financial Officer,
and Director
