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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
( ) For the transition period from __________ to __________
Commission file number: 000-29822
THEHEALTHCHANNEL.COM, INC.
(Exact name of small business issuer as specified in its charter)
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<S> <C>
DELAWARE 33-0728140
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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260 Newport Center Drive, Suite 250
Newport Beach, California 92660
(949) 631-8317 -telephone
(949) 631-2544 - facsimile
(Address of principal executive offices)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
------- ---
The issuer had 82,770,359 shares of its $.001 par value Common Stock
issued and outstanding as of October 31, 2000.
Transitional Small Business Disclosure Format (check one)
Yes No X
---- ------
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THEHEALTHCHANNEL.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION
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<CAPTION>
PAGE NO.
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Item 1. Financial Statements
Comparative Unaudited Balance Sheet as of September 30, 2000 1
Comparative Unaudited Statements of Operations for the 2
Three Months Ended September 30, 2000 and 1999, and
the nine months ended September 30, 2000 and 1999
Comparative Unaudited Statements of Cash Flows for the 3
nine months ended September 30, 2000 and 1999
Notes to the Unaudited Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 9
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
(b) Reports on Form 8-K
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED BALANCE SHEET - SEPTEMBER 30, 2000
ASSETS
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<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash $ 280,049
Software development costs 34,500
Loan receivable 63,000
Loan interest 0
Prepaid expenses and other receivables 41,203
---------------
Total current assets $ 418,752
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 628,269
DEPOSITS 3,852
-----------------
$ 1,050,873
=================
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LIABILITIES AND STOCKHOLDERS' EQUITY
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<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable and accrued expenses $ 923,473
Loans payable, short term, 6% interest, due
February 21, 2001, net of unamortized discount of $447,916 52,084
---------------
Total current liabilities $ 975,557
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 110,000,000 shares
authorized, 27,000,993 shares issued and outstanding 27,001
Additional paid in capital 8,017,364
Deficit accumulated during development stage (7,969,049)
---------------
Total stockholders' equity 75,316
-----------------
$ 1,050,873
=================
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
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<CAPTION>
For the nine For the nine For the three For the three
months ended months ended months ended months ended From inception
September 30, September 30, September 30, September 30, to September 30,
2000 1999 1999 1999 2000
-------------- ------------- ------------- ------------- -----------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 10,870 $ - $ 10,862 $ - $ 10,870
COST OF SALES - - - - -
-------------- -------------- ------------- ------------- -----------------
GROSS PROFIT 10,870 - 10,862 - 10,870
OPERATING EXPENSES:
General and administrative 2,305,543 653,662 1,089,674 653,662 5,766,271
-------------- -------------- ------------- ------------- -----------------
LOSS FROM CONTINUING OPERATIONS (2,294,673) (653,662) (1,078,812) (653,662) (5,755,401)
-------------- -------------- ------------- ------------- ------------------
Loss on discontinued operations - (367,014) - - (2,114,398)
Loss on disposal of segment - (99,250) - - (99,250)
-------------- -------------- ------------- ------------- ------------------
TOTAL DISCONTINUED OPERATIONS - (466,264) - - (2,213,648)
-------------- -------------- ------------- ------------- ------------------
NET LOSS $ (2,294,673) $ (1,119,926) $ (1,078,812) $ (653,662) $ (7,969,049)
============== ============== ============= ============= =================
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.09) $ (0.05) $ (0.04) $ (0.03)
============== ============== ============= =============
WEIGHTED AVERAGE COMMON EQUIVALENT
SHARES OUTSTANDING 24,715,990 22,078,199 26,346,144 22,129,663
============== ============== ============= =============
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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<CAPTION>
For the For the
nine months ended nine months ended From inception to
September 30, 2000 September 30, 1999 September 30, 2000
------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C>
NET LOS $ (2,294,673) $ (1,119,926) $ (7,969,049)
ITEMS RECONCILING NET LOSS TO CASH
USED BY OPERATING ACTIVITIES:
Depreciation 339,003 52,658 474,232
Loss on disposal of segment - 99,250 99,250
Noncash expenses from stock issuances 874,656 4,680,217
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable - 3,336 3,148
Inventory - 76,982 83,077
Software development costs (34,500) - (34,500)
Loan interest (537,500) (537,500)
Prepaid expenses (1,388) 33,952 (41,203)
Deposits (3,852) 2,597 (6,449)
Accounts payable and accrued expenses 602,091 804,036 866,926
------------------ ------------------ ------------------
NET CASH USED BY OPERATING ACTIVITIES (1,056,163) (47,115) (2,381,852)
------------------ ------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES -
disposal of (payments to) acquire property
and equipment (39,265) - (65,083)
------------------ ------------------ ------------------
NET CASH USED FOR INVESTING ACTIVITIES (39,265) - (65,083)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for asset transfer - (26,329) (26,329)
Loans receivable, officer-stockholders - 41,952 -
Stock subscription receivable 25,000 - -
Loans receivable (42,000) - (63,000)
Proceeds from loans 400,000 400,000
Proceeds from private placement offering, net 900,240 140,000 2,416,313
------------------ ------------------ ------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 1,283,240 155,623 2,726,984
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH 187,812 108,508 280,049
CASH, beginning of period 92,237 22,551 -
------------------ ------------------ ------------------
CASH, end of period $ 280,049 $ 131,059 $ 280,049
================== ================== ==================
-
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Noncash compensation from stock issuances $ 874,656 $ - $ 4,680,217
================== ================== ==================
Proceeds from loan payable paid directly to Horwitz and Beam
from Laguna Pacific on behalf of the Company $ 100,000 $ - $ 100,000
------------------ ------------------ ------------------
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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.
INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the
results of operations for the periods presented. Interim results are
not necessarily indicative of the results to be expected for a full
year. The financial statements should be read in conjunction with the
financial statements included in the annual report of
thehealthchannel.com (the "Company") on Form 10-KSB for the year ended
December 31, 1999.
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.
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.
4
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BUSINESS ACTIVITY, CONTINUED:
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
thethealthchannel.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.
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.
5
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
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.
(2) STOCKHOLDERS' EQUITY:
PRIVATE PLACEMENT
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 is
still in process.
REVERSE STOCK SPLIT
During October 2000, the stockholders of the Company approved the
stock split of 1:3 shares as proposed by the Board of Directors, the
effect of which, is retroactively reflected in the accompanying
financial statements.
6
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PART I - FINANCIAL INFORMATION CONTINUED
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
thehealthchannel.com, Inc., formerly known as Innovative Tracking
Solutions Corporation (the "Company") was incorporated in Delaware on September
6, 1996. It operates a consumer-based health super site
(http://www.thehealthchannel.com).
On April 16, 1999, the Company transferred all of its assets and
liabilities based on majority stockholder approval to a newly formed private
company. The Company's plan of operations following the transfer of assets and
liabilities was to seek and complete a merger or acquisition transaction with a
small or medium-sized enterprise, which desired to become or remain a public
corporation.
On July 28, 1999, the Company was successful in finding an appropriate
acquisition candidate and, pursuant to its bylaws and general Delaware corporate
law, the Company acquired certain assets of Biologix International, Ltd.,
consisting primarily of thehealthchannel.com website and related technology in
exchange for the controlling interests of the Company. Restricted common shares,
representing the majority controlling interests held by the directors of the
Company, were transferred.
In connection with this change of control, the Company's name was
changed to thehealthchannel.com, Inc. on July 28, 1999. The Acquisition closed
on July 28, 1999 (the "Acquisition").
With headquarters at 5000 Birch Street, Suite 4000, Newport Beach,
California, thehealthchannel.com is 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 and services. 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000.
REVENUE
Consistent with its business plan, the company generated revenues of
$10,862 from advertising associated with its wireless strategy for the three
months ended September 30, 2000. The company generated no revenues for the
comparative period in 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company did not have any selling expenses during the three
months ended September 30, 2000. During this period, the Company had general
and administrative expenses of $2,305,543.
7
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LOSS FROM OPERATIONS
The Company incurred a loss from operations of $1,078,812 for the
three months ended September 30, 2000, compared to a loss of $653,662 for the
same period in 1999.
NET LOSS
The Company had a net loss of $1,089,674 or $(0.04) per share, for
the three months ended September 30, 2000, and a net loss of $2,294,673 for
the nine months ended September 30, 2000. This compares to net losses of
$653,662 and $1,119,926 for the same periods in 1999 The operations of IVTX
in 1999 are presented as discontinued operations as a result of the transfer
of its assets and liabilities to a private company. The operations of the old
IVTX are not related to the operation of thehealthchannel.com business going
forward.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily funded its capital
requirements through private equity infusions. The Company recently concluded a
private offering to accredited investors only. The Company raised approximately
$1,410,779 from this offering. It has secured short term bridge loan financing
of $500,000 from institutional and accredited investors. The terms of the loan
were 6% interest payable in six months, or 30 days post SEC approval of the SB-2
filing plus warrants equal to the value of the loan at market prices upon
retirement of the debt. The Company has also secured a private equity line
valued at $30 million from Swartz Private Equity LLC. The private equity line is
contingent upon the SEC's approval of our Form SB-2 registration statement, and
we cannot guarantee that this registration statement will be approved. The
equity line of credit has a three-year term. If the Form SB-2 registration
statement is approved, the Company will be able to draw on the line of credit by
placing put orders for a specified amount of requested capital, pursuant to the
terms of the Investment Agreement entered into between the Company and Swartz
Private Equity LLC. Fulfillment of all or part of a request is based on the
stock price and market volume during the 30-day period after the put order. The
Company plans to use the equity line of credit for long-term financing and
potential acquisitions.
The company filed SB2 documentation with the SEC to register its stock
on August 31, 2000.
On November 17, 2000, the one for three reverse stock split that was
approved at the Company's Annual Shareholders meeting went into effect.
At September 30. 2000, the Company had outstanding current liabilities
of $923,473 consisting mainly of accounts payable $85,000, accrued professional
fees of approximately $260,000, accrued interest of $250,000 and accrued
officers salaries $216,000. The Company anticipates satisfying its current
liabilities in the ordinary course of business from revenues and accounts
receivable.
The Company does not believe that inflation has had a significant
impact on its operations since inception of the Company.
FUTURE PLAN OF OPERATION
The company's overall plan of operations for the next 12 months include
significant website development in four primary areas: a) Further develop,
promote and increase product offerings in its industry leading "Anywhere,
Anytime -TM-" mobile and wireless strategy. thehealtchannel.com was a first time
mover in the health sector with this technology application b) Broaden overall
content offerings in the areas of general health content and delivery of health
goods and services, c) Deliver a number of "deep vertical" products in specific
health topics, d) Implement the business to business revenue generating products
covering a number of health areas including some unique products not currently
in the marketplace. The company's overall plan of operation also includes
completion of strategic acquisitions for the purposes of revenue/profit
enhancement, content development, and increased traffic to the website. The
Company's ability to implement the plan is dependent on the Company's Form SB-2
Registration Statement being approved by the SEC and the use of the Swartz
equity line of credit or other financing. There is no
8
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guarantee that the Company will be able to obtain the funds necessary to
implement its business plan. In the event that the Form SB-2 is not approved
by the SEC in the next 4-6 months, it is likely that the Company would need
to find sources of funding other than the Swartz equity line of credit to
continue its operations. The Company cannot give any assurance that such
alternative financing will be available.
(i) The company can satisfy its cash requirements for a period of
approximately 3-4 months. The company will then need to raise additional
funds.
(ii) The company is currently conducting product research and development in
the areas of general health content, broadening and strengthening its health
information delivery, as well as conducting research and development in the
areas of premier health product offerings (deep verticals) and mobile and
wireless communication. In addition the company will continue to develop its
business-to-business goods and services products.
(iii) The company recently purchased (through the inclusion of its new
operations center lease) the necessary infrastructure to grow the company and
reduce its operational costs by bringing a majority of its software
development in house. The necessary resources and equipment are now attained,
and are operational.
(iv) The company expects to add approximately 5-10 new employees in the next
fiscal year.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SETTLEMENT OF GRANDON LAWSUIT
The share numbers in "Legal Proceedings" have not been adjusted to
reflect the one for three reverse stock split of the Company's common stock that
went effective on November 17, 2000.
The Company's Form 10-KSB filed on March 21, 2000 discloses that the
Company had been 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. ("Biologix") against Michael Grandon on October 22,
1999 alleging 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 related to the actions and conduct of Mr. Grandon
while an officer and director of Biologix. thehealthchannel.com was 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 was the responsibility of thehealthchannel.com
based upon thehealthchannel.com's purchase of the internet related assets of
Biologix. thehealthchannel.com was served with the cross-complaint on December
14, 1999. Mr. Grandon sought $400,000 in damages and options to purchase one
million shares of Biologix stock.
This lawsuit was settled by the parties through the execution of a
Settlement Agreement and Release (the "Setttlement Agreement") on August
31,2000. As part of the settlement, thehealhchannel.com agreed to allow the
exchange of a portion of Mr. Grandon's Biologix shares for thehealthchannel.com
shares.
Michael Grandon had tendered 5,102,834 shares (the "Grandon Shares")
of Biologix common stock to be exchanged for thehealthchannel.com stock as
part of the share exchange arrangement entered into by thehealthchannel in
connection with its acquisition of thehealthchannel.com website in July of
1999. Grandon had been unable to exchange these shares prior to the
settlement due to a preliminary injunction imposed by the Superior Court. In
addition, five companies that thehealthchannel.com believes were controlled
or affiliated with Michael Grandon had tendered at least 6,000,000 shares of
Biologix stock (the "Grandon Affiliate Shares") to be exchanged for
thehealthchannel.com stock that were also blocked by the preliminary
injuction. However, prior to the preliminary injunction, one of these
companies the MedTel Corporation, was able to exchange 1,000,000 Biologix
shares (the "MedTel Shares") for thehealthchannel.com shares.
Under the terms of the Settlement Agreement, thehealthchannel.com
agreed to exchange up to 2,200,000 of the Grandon Shares, provided that the
2,200,000 thehealthchannel shares to be received by Mr. Grandon will be placed
in escrow with 1,000,000 shares becoming immediately available to Mr. Grandon on
his satisfying certain terms of the
9
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Settlement Agreement. The remaining 1,200,000 shares can only become
available to Mr. Grandon as follows: (i) 500,000 shares upon the Company's
20-day weighted average share price reaching $.75, (ii) 500,000 shares upon
the Company's 20-day weighted average share price reaching $1.25, and (iii)
200,000 shares upon the Company's 20-day weighted average share price
reaching $2.00. Under the terms of the Settlement Agreement the remaining
2,902,834 Grandon Shares and all the Grandon Affiliate Shares will not be
exchanged for thehealthchannel.com, Inc. stock. In addition, the exchange of
the 1,000,000 MedTel Shares will be rescinded.
In summary, prior to the settlement of this litigation, Mr. Grandon and
companies that the Company believes were controlled or affiliated with Mr.
Grandon had exchanged or were requesting the exchange of at least 12,102,834
Biologix shares. The terms of the Settlement Agreement provide that they will
receive not more than 2,200,000 shares of thehealthchannel.com stock .
OTHER SETTLEMENTS
The other two cases disclosed by the Company's Form 10-KSB this year
(the threatened litigation against the Company by Sandra Redding and Marshall
Redding, and the threatened litigation against the Company by Fields, Israel &
Benning) have also both been settled.
To the knowledge of management, there is no other material litigation
pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The share numbers in "Changes in Securities and Use of Proceeds" have
not been adjusted to reflect the one for three reverse stock split of the
Company's common stock that went effective on November 17, 2000.
During the three months ended September 30, 2000, the Company sold
1,484,881 shares and 1,484,881 warrants in a private offering to accredited
investors only, raising $366,281. No underwriters were utilized and no
commissions were paid. This private offering is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act") pursuant to
Section 4(2) of the Act and Rule 506 of Regulation D.
On June 19, 2000, the Company issued 3,450,000 warrants to purchase
common stock to Swartz Private Equity LLC in consideration of entering into an
Equity Line Letter of Agreement for a $30,000,000 equity line of credit. These
warrants are exercisable by Swartz Private Equity LLC as follows: 1,150,000
shares became exercisable after a 15 business day review period of the
documentation for the transaction, 1,150,000 shares became exercisable after the
execution of the Investment Agreement for the $30,000,000 equity line of credit.
The remaining 1,150,000 shares are exercisable upon the earlier of (i) the date
of effectiveness of Company's Form SB-2 registration statement filed to register
the transaction, or (ii) December 19, 2000.
On July 5, 2000, the Company approved the issuance of 1,619,958
restricted shares to 12 officers, directors and consultants in payment for
services rendered to the Company.
On August 1, 2000, the Company agreed to issue 2,500,000 shares of
common stock to Laguna Pacific Partners L.P. in consideration recently issued a
loan in the amount of $250,000 from Laguna Pacific Partners L.P., a Delaware
limited partnership. This loan is made pursuant to a secured note which bears
interest at the rate of 6% and is payable on the earlier of February 3, 2001 or
the effective date of this prospectus. The loan is secured by all of the
Company's assets.
On August 18, 2000, in consideration for a loan of $250,000, the
Company agreed to issue 536,333 shares to Les Dube and Irene Dube and a warrant
for common stock common stock for an amount equal to the quotient of
10
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$250,000 divided by the closing bid of our stock immediately preceding the
effective date of the Form SB-2 that the Company is currently being reviewed
by the SEC. The term of the warrant is five years and the exercise price is
$1 in the aggregate. The loan is made pursuant to a note which bears interest
at the rate of 6% and is payable on the earlier of February 18, 2001 or the
effective date of this prospectus. The shares and warrants issued to Mr. and
Ms. Dube are being registered in this prospectus and upon repayment of this
loan, these shares are to be retained by them.
In August and September of this year, the Company agreed to issue
34,482 shares of Company stock to Integrity Media, Inc. pursuant to an agreement
signed between the Company and Integrity Media, Inc. on August 18, 2000. The
agreement provides for Integrity Media, Inc. to furnish public relations
services to the Company in return for 17,241 shares of Company stock per month.
The term of the Agreement is one month but it is renewable on a month to month
basis with the mutual consent of both parties. This agreement was renewed by the
parties in September, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
10.1 Content Partner Agreement between thehealthchannel.com and AvantGo,
dated July 31, 2000
10.2 6% Secured Note between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000
10.3 Unit Warrant between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000
10.4 Security Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000
10.5 Investor Representations and Warrants Agreement between
thehealthchannel.com and Laguna Pacific Partners, L.P., dated
August 1, 2000
10.6 Subscription Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P. dated August 1, 2000
10.7 Warrant Agreement to Purchase Common Stock of thehealthchannel.com,
Inc. by Swartz Private Equity, LLC dated August 15, 2000
10.8 Warrant Side Agreement between thehealthchannel.com, Inc. and Swartz
Private Equity dated August 15, 2000
10.9 Investment Agreement between thehealthchannel.com, Inc. and Swartz
Private Equity dated August 15, 2000
10.10 Registration Rights Agreement between thehealthchannel.com and Swartz
Private Equity, LLC dated as of August 15, 2000
10.11 Acknowledgement and Agreement between thehealthchannel.com and Swartz
Private Equity, LLC, dated August 15, 2000
10.12 Consulting Agreement between thehealthchannel.com and Lawrence
W. Horwitz, dated August 18, 2000
10.13 Consulting Agreement between thehealthchannel.com and Integrity
Media, Inc., dated August 18, 2000
10.14 Subscription Agreement between thehealthchannel.com and Les Dube and
Irene Dube, dated August 21, 2000
10.15 Investor Representations and Warrants Agreement between
thehealthchannel.com and Les Dube and Irene Dube, dated August 21,
2000
10.16 Settlement Agreement and Release between thehealthchannel.com and
Michael Grandon, dated August 31,
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2000
10.17 Content Distribution Agreement between thehealthchannel.com and OmniSky
Corporation, dated September 6, 2000
(b) REPORTS ON FORM 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<S> <C>
THEHEALTHCHANNEL.COM, INC.
Date: November 17, 2000 /s/ Donald Shea
---------------------------
Donald Shea, President
Date: November 17, 2000 /s/ Thomas Lonergan
---------------------------
Thomas Lonergan, Chief Operating Officer, Vice
President, Secretary
</TABLE>
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