<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 2000
REGISTRATION NO. 33-______
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
THEHEALTHCHANNEL.COM, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
DELAWARE 4812 33-0728140
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
260 Newport Center Drive, Suite 250 260 Newport Center Drive, Suite 250
Newport Beach, California 92660 Newport Beach, California 92660
(949) 631-8317 (949) 631-8317
(Address and telephone number of (Address of principal place of business)
principal executive office
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The Company Corporation
1013 Centre Road
Wilmington, DE 19805
(302) 636-5440
(Name, address and telephone number of agent for service)
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COPIES TO:
Lawrence W. Horwitz, Esq.
Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, CA 92618
(949) 453-0300
Approximate Date of Proposed Sale to the Public.
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE NUMBER OF SHARES PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF
REGISTERED TO BE REGISTERED PRICE PER SHARE (1) OFFERING PRICE REGISTRATION FEE
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Shares of Common Stock, $.001 par value (2) 100,840,063 $0.31 $31,260,419.53 $8,252.75
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Shares of Common Stock, $.001 par value,
underlying warrants (3) 22,057,492 $0.31 $6,837,822.52 $1,805.19
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TOTAL 122,897,555 $38,098,242.05 $10,057.94
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 and based upon the average of the
high and low prices for the Common Stock on August 25, 2000, as reported
by the over-the-counter Pink Sheets. We expect that in the event the
registered shares are sold, such shares will be sold at the then-current
market price.
(2) (4)93,750,000 shares to be sold from time to time by Swartz Private
Equity, LLC; 5,511,063 shares to be sold from time to time by other
Selling Shareholders; and 1,579,000 shares to be sold from time to time by
Les Dube and Irene Dube.
(3) 12,825,000 shares underlying warrants to be sold from time to time by
Swartz Private Equity, LLC; 6,732,492 shares underlying warrants to be
sold from time to time by other Selling Shareholders, and 2,500,000 shares
underlying warrants to be sold from time to time by Laguna Pacific
Partners, L.P.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED ______________, 2000
PROSPECTUS
THEHEALTHCHANNEL.COM, INC.
THE OFFERING This Offering relates to: (1) the possible
sale from time to time of 100,904,063 shares
and 22,036,063 shares underlying warrants by
Swartz Private Equity, LLC pursuant to an
investment agreement, (2) the possible sale,
from time to time, by certain shareholders,
the "Selling Shareholders" of up to 5,511,063
shares of common stock and 6,732,492 shares
underlying warrants of thehealthchannel.com,
Inc.; and (3) the possible sale from time to
time of 1,579,000 shares of stock issued in
connection with a loan to the Company made by
Les Dube and Irene Dube, and (4) the possible
sale from time to time of 2,500,000 shares
underlying warrants issued in connection with
a loan to the Company made by Laguna Pacific
Partners.
ABOUT OUR INVESTMENT We have entered into an investment agreement
AGREEMENT with Swartz Private Equity, LLC for Swartz to
invest up to $30 million, at our option,
through a series of sales of our common
stock. The dollar amount of each sale is
limited by our common stock's trading volume
and a minimum period of time since the last
sale. Each sale will be to Swartz. In turn,
Swartz will either sell our stock in the open
market, place our stock through negotiated
transactions with other investors, or hold
our stock in their own portfolio. This
prospectus covers the resale of our stock by
Swartz either in the open market or to other
investors.
MARKET FOR THE SHARES Our Common Stock is traded in the
over-the-counter electronic market, also
called the Pink Sheets, under the symbol
"THCL." To date, the volume of trading in the
Common Stock has been limited and, therefore,
the market prices for our Common Stock may
not accurately reflect the value of
thehealthchannel.com. We anticipate that we
will request at our next Annual Meeting of
Shareholders scheduled for October 12, 2000
that our shareholders approve a one for three
reverse stock split. This reverse stock split
has already been approved by the Board of
Directors.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY
IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IF TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS [__________________], 2000
<PAGE>
TABLE OF CONTENTS
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PROSPECTUS SUMMARY............................................................1
THE OFFERING..................................................................3
SUMMARY FINANCIAL INFORMATION.................................................3
RISK FACTORS..................................................................4
TERMS OF THE OFFERING.........................................................9
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS......................13
DIVIDEND POLICY..............................................................13
SELECTED FINANCIAL DATA......................................................14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................................15
ORGANIZATION OF THEHEALTHCHANNEL.COM.........................................19
BUSINESS OF THE COMPANY......................................................21
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.................26
EXECUTIVE COMPENSATION.......................................................28
CERTAIN TRANSACTIONS.........................................................29
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL OWNERS........................29
SELLING SHAREHOLDERS.........................................................30
PLAN OF DISTRIBUTION.........................................................34
DESCRIPTION OF SECURITIES....................................................35
LEGAL MATTERS................................................................35
EXPERTS......................................................................36
FINANCIAL STATEMENTS.........................................................37
INFORMATION NOT REQUIRED IN PROSPECTUS......................................II-1
EXHIBITS.................................................................II-5
UNDERTAKINGS.............................................................II-7
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE SPECIFICALLY REFERENCED, ALL REFERENCES TO DOLLAR
AMOUNTS REFER TO UNITED STATES DOLLARS.
OUR OFFICES Our offices are located 260 Newport Center
Drive, Suite 250, Newport Beach, CA 92660
and our phone number is (949) 631-8317.
OUR BUSINESS We operate thehealthchannel.com. We focus
exclusively upon the development of business
strategies and the acquisition of existing
operations which satisfy the following three
part test: (a) is the business
strategy/acquisition candidate in the
healthcare industry; (b) does implementation
of the internet materially improve the
business strategy/acquisition candidate;
(iii) will the proposed plan generate
projected revenues within six months and a
return on our investment within twelve
months of the deployment of our capital.
Healthcare is frequently characterized as
one of the largest sectors of the American
economy. Yet, leading internet based
healthcare companies, such as
Healtheon/RxMD, Inc. (NASDAQ: HLTH) and
Drkoop.com (NASDAQ: KOOP) as of the date of
this Prospectus have generated multi-hundred
million dollar losses since their inception.
These losses have been generated primarily
through the expenditure of enormous
marketing budgets intended to create "brand
awareness" among healthcare professionals
and consumers. While we are continuously
researching potential business strategies
consistent with our own criteria set forth
above, this Prospectus describes four such
strategies we are currently implementing:
(a) deployment of the Physicians Automated
Attendant, a wireless based software system
intended to automate multiple facets of a
physician's practice and interface with
large internet based information sites; (b)
strategic joint venture with the Institute
for Medical Studies and Academy for
Continuing Medical Education by transmitting
over the internet virtual classrooms
allowing healthcare industry professionals
to comply with their continuing education
requirements; (c) providing broad healthcare
information on our Internet site, coupled
with advertising, on a variety of topics,
with an increasing focus upon breast cancer;
and (d) making our website easily accessible
to wireless devices.
CORPORATE HISTORY Innovative Tracking Solutions Corporation,
our predecessor company, was incorporated in
Delaware on September 6, 1996. Innovative
Tracking Solutions became a public company
on March 1998 with their stock being quoted
on the Over-the-Counter Bulletin Board. In
early 1999, management of Innovative
Tracking Solutions determined that the
"public" status of their company was
detrimental to their operations due to the
time and expense burdens of being a public
company. Innovative Tracking Solutions'
management then decided to take the
operations of their company "private" by
transferring all of the assets and
liabilities to a newly formed private
company On April 16, 1999, Innovative
Tracking Solutions transferred all of its
assets and liabilities based on majority
stockholder approval to a newly formed
private company. On July 28, 1999,
Innovative Tracking Solutions acquired
certain assets of BioLogix International,
Ltd., consisting primarily of
thehealthchannel.com website and related
Internet technology. BioLogix retained its
subsidiaries and substantial assets. In
connection with this asset acquisition, the
name of Innovative Tracking Solutions was
changed to thehealthchannel.com, Inc. This
prospectus relates to business and financial
1
<PAGE>
matters of thehealthchannel.com, Inc. as it
is currently constituted. The Business Plan
described herein commenced its
implementation in the fourth quarter of 1999
and it is at a very early stage.
SECURITIES TO BE ISSUED TO SWARTZ This prospectus has been prepared to
EQUITY, LCC register the sale from time to time of
93,750,000 shares of common stock and
12,825,000 shares underlying warrants held
by Swartz Equity, LLC. These shares may be
issued to Swartz in the future pursuant to
our investment agreement with Swartz that
provides us with put options valued at up to
$30,000,000.
THE SELLING SHAREHOLDERS This prospectus has also been prepared to
register shares of common stock that were
previously issued to various individuals and
entities. These securities are being
registered because the holders of these
securities have piggyback registration
rights. A list of the securities being
registered in this prospectus and the people
and entities who own them appears in the
"Selling Shareholders" section of this
prospectus.
SECURITIES ISSUED TO LES DUBE AND This prospectus will also register 1,579,000
IRENE DUBE AND TO LAGUNA shares of commons stock for sale from time
PACIFIC PARTNERS to time by Les Dube and Irene Dube, as well
as 2,500,000 shares of common stock
underlying warrants for sale from time to
time by Laguna Pacific Partners. Les Dube
and Irene Dube and Laguna Pacific Partners
are receiving these securities in connection
with loans being made to
thehealthchannel.com.
2
<PAGE>
THE OFFERING
The share amounts set forth below assume that the average price of the shares
received by Swartz is $0.40.
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Common Stock Outstanding as of the date hereof 79,724,043
Common Stock and Common Stock Underlying Warrants Being
Registered for Swartz Private Equity, LLC 106,575,000
Common Stock and Shares Underlying Warrants Offered by
Selling Shareholders 12,243,555
Common Stock underlying warrants issued in connection 2,500,000
with loans made by Laguna Pacific Partners
Risk Factors The securities offered hereby involve a high
degree of risk and immediate substantial
dilution. See "Risk Factors."
OTC Pink Sheets Trading Symbol THCL
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SUMMARY FINANCIAL INFORMATION
The following table presents selected historical financial data for the
Company derived from the Company's Financial Statements. The historical
financial data are qualified in their entirety by reference to, and should be
read in conjunction with, the Financial Statements and notes thereto of the
Company, which are incorporated by reference into this prospectus. The following
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements of
the Company and the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from Inception
Six Months Ended Fiscal Year Ended (September 6, 1996) to
June 30, 2000 December 31, 1999 June 30, 2000
------------- ----------------- -------------
<S> <C> <C> <C>
Statement of
Operations Data:
Revenue $ -8- $ -0- $ -8-
Net Loss $ 1,215,861 $ 3,926,992 $ 6,890,237
Net loss per share $ 0.02 $ 0.06
</TABLE>
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<CAPTION>
June 30, 2000 December 31, 1999
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Balance Sheet Data:
Total assets $ 963,720 $ 1,081,060
Total liabilities $ 647,352 $ 510,967
Stockholder's equity $ 316,368 $ 570,093
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3
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RISK FACTORS
THE SECURITIES OFFERED IN THIS PROSPECTUS ARE VERY SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK. THESE SECURITIES SHOULD BE PURCHASED ONLY BY PEOPLE WHO
CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. BEFORE PURCHASING THESE
SECURITIES, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE
OTHER INFORMATION CONCERNING THEHEALTHCHANNEL.COM AND ITS BUSINESS CONTAINED IN
THIS PROSPECTUS.
THEHEALTHCHANNEL.COM HAS ONLY A Thehealthchannel.com commenced
LIMITED OPERATING HISTORY AND IS implementation of its current business plan
INCURRING LOSSES FROM ITS during the fourth quarter of 1999. Prior to
OPERATIONS. July 1999 the assets currently comprising
the internet site had been owned and
operated by BioLogix, Inc. In April 1999,
BioLogix launched the website deploying a
business plan relying upon the
advertising-based revenue model as many
other healthcare websites such as Healtheon
and DrKoop.com were doing. During the third
quarter of 1999, our management began to
conclude that an advertising-based revenue
model could not sustain profitable
operations as the marketing budgets
necessary to attract advertisers exceeded
the revenues produced by these advertisers.
thehealthchannel.com management believes
this failure was because the marketing
budgets needed to attract advertisers
exceeded the revenues produced by these
advertisers. As a result, in July 1999,
thehealthchannel.com commenced deployment of
the new business plan described in this
prospectus. This new business plan has
virtually no operating history and its
financial success will be subject to all the
risks inherent in the establishment of a new
business enterprise. Additionally,
thehealthchannel.com has operated at a loss
for all of the periods for which financial
statements are presented in this prospectus.
The likelihood of success of
thehealthchannel.com must be considered in
the light of the problems, expenses,
difficulties, complications, and delays
frequently encountered in connection with
the startup and growth of a new business,
and the competitive environment in which
thehealthchannel.com operates. Unanticipated
problems, expenses, and delays are
frequently encountered in establishing a new
business and marketing and developing
internet based products and services. These
include competition, the need to develop
customer support capabilities and market
expertise, setbacks in technology
development, market acceptance, sales, and
marketing. An additional risk factor
associated with this new business plan is
that some of the proposed strategies have
never been implemented and thus it would be
speculative to predict whether such
strategies will ever be successful. The
failure of thehealthchannel.com to meet any
of these conditions will have a materially
adverse effect upon our business and may
force us to reduce or curtail operations. We
cannot assure you that the company will ever
operate profitably. See "Management's
Discussion and Analysis of Financial
Condition and Results of Operations," and
"Our Business--Competition."
THERE IS INTENSE COMPETITION The online commerce industry is new, rapidly
IN THE ON-LINE HEALTHCARE evolving and intensely competitive, which we
BUSINESS. expect 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. We compete with other
companies which have health care websites.
These competitors include WebMD, DrKoop.com,
InteliHealth, OnHealth, and YourHealth.com.
These competitors have longer operating
histories, larger customer bases, greater
brand name recognition and significantly
greater financial, marketing and other
resources than we do. In addition, other
companies 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. Our 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 we can. We
cannot assure you that we will be able to
compete successfully against current and
future competitors, and
4
<PAGE>
competitive pressures may have a material
adverse effect on our business, prospects,
financial condition and results of
operations. Further as a strategic response
to changes in the competitive environment,
our management 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
thehealthchannel.com. In addition, companies
that control access to transactions through
network access or Web browsers could promote
our competitors or charge us a substantial
fee for inclusion. See "Business of the
Company--Competition."
THERE IS A RISK OF SYSTEM The ability to provide timely information
FAILURE FOR OUR WEBSITE. and continuous updates depends on the
efficient and uninterrupted operation of our
computer and communications hardware and
software systems. Similarly, the ability to
track, measure, and report the delivery of
advertisements, data and other information
on our website depends on the efficient and
uninterrupted operation of our system. These
systems and operations are vulnerable to
damage or interruption from human error,
natural disasters, telecommunication
failures, break-ins, sabotage, computer
viruses, intentional acts of vandalism and
similar events. We have a disaster recovery
plan that generates a two week tape rotation
and full backup for all tape devices.
Historical data requiring long term storage
will be backed up by CD-Rom. Two copies will
be made for each archive created. Data on
the local area network is backed up to a
tape drive on a nightly basis. Additionally,
we have a state of the art network that is
designed to run 24 hours a day, seven days a
week. Drives in the servers can be switched
without shutting down the system. Backup
generators are in place that will enable the
network to shut down properly in the event
of total power loss. The network can run
independently for up to ten minutes of a
brown out. Despite these precautions, there
is always the danger that human error or
sabotage could substantially disrupt our web
site which could cause a loss of visitors to
our site, damage to our systems, and bad
publicity.
WE MAY ACQUIRE BUSINESSES We may acquire companies with operations
THAT ARE SUBJECT TO that are subject to regulation by federal
GOVERNMENTAL REGULATIONS agencies and various state, local and
private consumer protection and other
regulatory authorities. There can be no
assurance that any such regulatory
requirements will not have a material
adverse effect on our business, financial
condition or results of operations.
TECHNOLOGICAL CHANGE MAY Although we are aware of no pending or
RENDER OUR SERVICES prospective technological change that would
NONCOMPETITION OR OBSOLETE adversely affect its business, new
developments in technology could have a
material adverse affect on the sale of some
or all of our services or products or render
our services noncompetitive or obsolete, and
there can be no assurance that we will be
able to develop or acquire new or improved
services or systems which may be required to
remain competitive. The occurrence of such
technological change could have a material
adverse affect us.
OUR BUSINESS IS DEPENDENT ON The Internet based information market is new
THE CONTINUED GROWTH AND and rapidly evolving. Our business would be
USE OF THE INTERNET, AS WELL AS materially adversely affected if Internet
THE EFFICIENT OPERATION OF THE usage does not continue to grow or grows
INTERNET. slower than currently projected. Internet
usage may be inhibited for a number of
reasons, such as:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service;
and
- unavailability of cost-effective,
high-speed access to the Internet.
5
<PAGE>
Our website viewers depend on Internet
service providers, online service providers
and other web site operators for access to
our website. Many of these services have
experienced significant service outages in
the past and could experience service
outages, delays, and other difficulties due
to system failures unrelated to our systems.
These occurrences could cause our viewers to
perceive the Internet in general or our web
site in particular as an unreliable medium
and, therefore, cause them to use other
media or other websites to obtain
information. We also depend on certain
information providers to deliver information
and data feeds on a timely basis. Our web
site could experience disruptions or
interruptions in service due to the failure
or delay in the transmission or receipt of
this information, which could have a
material adverse effect on our business,
results of operations, and financial
condition.
THERE ARE CURRENTLY LEGAL Certain existing laws or regulations
UNCERTAINTIES RELATING TO THE specifically regulate communications or
INTERNET commerce on the Internet. Further, laws and
regulations that address issues such as user
privacy, pricing, online content regulation,
taxation and the characteristics and quality
of online products and services are under
consideration by federal, state, local, and
foreign governments and agencies. Several
telecommunications companies have petitioned
the Federal Communications Commissioner to
regulate Internet service providers and
online services providers in a manner
similar to the regulation of long distance
telephone carriers and to impose access fees
on such companies. Such regulation, if
imposed, could increase the cost of
transmitting data over the Internet.
Moreover, it may take years to determine the
extent to which existing laws relating to
issues such as intellectual property
ownership and infringement, libel, and
personal privacy are applicable to the
Internet. The Federal Trade Commission and
government agencies in certain states have
been investigating certain Internet
companies regarding their use of personal
information. We could incur additional
expenses if any new regulations regarding
the use of personal information are
introduced or these agencies chose to
investigate our privacy practices. Any new
laws or regulations relating to the
Internet, or certain application or
interpretation of existing laws, could
decrease the growth in the use of the
Internet, decrease the demand for the our
web site or otherwise materially adversely
affect our business.
INTERNET SECURITY CONCERNS Concern about the transmission of
COULD HINDER INTERNET USE. confidential information over the Internet
has been a significant barrier to electronic
commerce and communications over the
Internet. Any well-publicized compromise of
security could deter more people from using
the Internet or from using it to conduct
transactions that involve the transmission
of confidential information, such as
personal health related information, signing
up for a paid subscription, or purchasing
goods or services. Because many of our
advertisers will seek to advertise on our
web site to encourage people to use the
Internet to purchase goods or services, our
business, results of operations, and
financial condition could be materially
adversely affected if Internet users
significantly reduce their use of the
Internet because of security concerns. We
may also incur significant costs to protect
our website against the threat of security
breaches or to alleviate problems caused by
such breaches.
WE DEPEND ON KEY PERSONNEL Our success depends, to a significant
FOR CRITICAL MANAGEMENT extent, upon a number of key employees,
DECISIONS. including our President, Donald Shea, and
our Vice President, Chief Operations
Officer, Secretary, and Chief Financial
Officer, Thomas Lonergan. The loss of
services of one or more of these employees
could have a material adverse effect on our
business. We believe that our future success
will also depend in part upon our ability to
attract, retain, and motivate qualified
personnel. Competition for such personnel is
intense. There can be no assurance that we
can attract and retain such personnel. We do
not have "key person" life insurance on any
of our employees. See "Management."
6
<PAGE>
WE MAY REQUIRE ADDITIONAL Our business is capital intensive. Our
FINANCING FOR ITS BUSINESS. future capital requirements will depend on
many factors, including cash flow from
operations, competing market developments,
and our ability to market our website
successfully. Although we currently expect
to meet our capital needs by selling stock
to Swartz Private Equity, LLC, it may be
necessary to raise additional funds through
equity or debt financings. Any equity
financings could result in dilution to our
shareholders. Debt financing may result in
higher interest expense. Any financing, if
available, may be on unfavorable terms. If
we cannot raise adequate funds, we may have
to reduce or curtail our operations.
OUR COMMON STOCK IS Our common stock is quoted and traded on the
CURRENTLY CLASSIFIED AS A Over-the-Counter Pink Sheets ("Pink
"PENNY STOCK" WHICH COULD Sheets"). As a result, an investor could
CAUSE INVESTORS TO EXPERIENCE find it more difficult to dispose of, or to
DELAYS AND OTHER DIFFICULTIES obtain accurate quotations as to the market
IN TRADING SHARES IN THE STOCK value of, the stock as compared to
MARKET securities which are traded on the NASDAQ
trading market or on an exchange. In
addition, trading in our common stock is
covered by what is known as the "Penny Stock
Rules." The Penny Stock Rules require
brokers to provide additional disclosure in
connection with any trades involving a stock
defined as a "penny stock," including the
delivery, prior to any penny stock
transaction, of a disclosure schedule
explaining the penny stock market and the
risks associated therewith. The regulations
governing penny stocks could limit the
ability of brokers to sell the shares
offered in this prospectus and thus the
ability of the purchasers of this Offering
to sell these shares in the secondary
market. Our stock will be covered by the
Penny Stock Rules until it has a market
price of $5.00 per share or more, subject to
certain exceptions The trading price of our
stock could be subject to wide fluctuations
in response to quarterly variations in
operating results, announcement of
technological innovations or new products by
us or our competitors, and other events or
factors. In addition, in recent years the
stock market has experienced extreme price
and volume fluctuations that have had a
substantial effect on the market prices for
many internet companies, which may be
unrelated to the operating performance of
the specific companies.
INVESTORS WILL EXPERIENCE In many cases, our officers, directors, and
IMMEDIATE AND SUBSTANTIAL present shareholders have acquired their
DILUTION. securities at a cost substantially less than
that which investors will pay for the common
stock offered by this prospectus. As a
result, investors acquiring shares
registered in this prospectus will likely
incur immediate, substantial dilution in the
net tangible book value per share of the
common stock. The net tangible book value of
a share represents the amount of our
tangible assets less the amount of its
liabilities, divided by the number of shares
outstanding.
THE PRICE OF THE SHARES The securities being offered in this
OFFERED HEREBY IS DEPENDENT prospectus are offered at the market price
UPON THE PRICE IN THE PUBLIC prevailing at the time of the offer. The
MARKET WHICH WILL FLUCTUATE. market price of these securities may
vary and may have a limited relationship, or
no relationship, to our assets, book value,
results of operations, or other established
criteria of value. The offering price also
may not be indicative of the prices that
will prevail in the subsequent trading
market for our securities.
MOST OF OUR SHARES OF As of July 28, 2000,
COMMON STOCK OF WILL BECOME thehealthchannel.com had outstanding
ELIGIBLE FOR PUBLIC SALE OVER 42,911,844 shares that are classified as
THE NEXT YEAR WHICH COULD "restricted securities" as that term is
HAVE A DEPRESSIVE EFFECT ON defined under Rule 144 of the Securities Act
THE STOCK. of 1933, as amended. Most of these shares
have been held by shareholders for at least
one year and may be entitled to be sold
under Rule 144. In addition, we are
registering (i) 100,840,063 shares and
12,825,000 shares underlying warrants for
Swartz, (ii) 5,511,063 shares and 6,732,492
shares underlying warrants for other Selling
Shareholders, (ii) 1,579,000 shares for Les
Dube and Irene Dube, and (iv) 2,500,000
shares underlying warrants for Laguna
Pacific Partners, L.P.. If a significant
number of shares are offered for sale
through the public securities
7
<PAGE>
markets simultaneously, it would have a
depressive effect on the trading price of
common stock. See "Description of
Securities."
WE MAY HAVE CONTINGENT We have engaged in a private placement of
LIABILITIES RESULTING FROM OUR securities from September 1999 up to the
RECENT PRIVATE PLACEMENT. date of this prospectus. During this period
of time, we sold securities to investors
based on our 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 our closing prices. We
cannot preclude the possibility that an
investor or investors who purchased
securities in the private placement will
claim that the Company failed to fully
disclose the fact that fluctuation in the
market for our stock would cause adjustment
in the price of the private placement. We
believe we fully disclosed this risk. In the
event any shareholder were to successfully
prosecute an action against us on this
issue, it may have severe and adverse
effects on the Company, including but not
limited to impacting our ability to continue
as a going concern.
WE HAVE BEEN ADVISED BY THE We have been advised by the Securities
SECURITIES AND EXCHANGE Exchange Commission ("SEC") alleging that
COMMISSION (THE "SEC") THAT the exchange of BioLogix shares for shares
CERTAIN TRANSACTIONS INVOLVING of thehealthchannel.com may have constituted
THEHEALTHCHANNEL.COM MAY HAVE an unregistered public offering in violation
BEEN IN VIOLATION OF THE of applicable state and federal securities
SECURITIES LAWS. laws. While we have provided correspondence
to the SEC denying these allegations, the
SEC has indicated that it continues to
disagree with our position. If we have
engaged in an unregistered public offering,
this would constitute a violation of the
Securities Act of 1933 and applicable state
laws and would make us potentially liable to
legal action by both the SEC and state
security regulators and our shareholders. In
the event any of these parties were to
successfully prosecute an action based on
these allegations, it would have a severe
and adverse effect on the Company. The
Company may be required to pay monetary
damages and penalties and may be subject to
a court-imposed injunction, or may be forced
to enter into a consent decree with the SEC.
In the event, any of these events were to
occur it would likely immediately and
severely impact the Company, possibly
impairing our ability to continue as a going
concern.
WE HAVE NEVER PAID DIVIDENDS ON We have never paid dividends on our common
OUR COMMON STOCK AND DON'T PLAN stock and do not plan on paying cash
TO PAY DIVIDENDS IN THE FUTURE. dividends in the foreseeable future.
SPECIAL NOTE REGARDING FORWARD Statements made in this prospectus regarding
LOOKING STATEMENTS. our funding requirements and the timing of
and potential for our business constitute
forward looking statements under federal
securities laws. Such statements are subject
to certain risks and uncertainties that
could cause the rate at which we incur
expenses and conducts our business to differ
materially from those projected. Our ability
to proceed with the marketing and
development of our business in accordance
with the dates anticipated is subject to all
of the risks discussed in this prospectus
and our ability to estimate the time period
for which revenues will fund our operations
is subject to substantial uncertainty. Undue
reliance should not be placed on the dates
and time periods discussed in this
prospects. These estimates are based on
the current expectations of our management
which may change in the future due to a
large number of unanticipated future
developments.
8
<PAGE>
TERMS OF THE OFFERING
Each selling shareholder is free to offer and sell his or her common
shares at such times, in such manner and at such prices as he or she may
determine. The types of transactions in which the common shares are sold may
include transactions on the pink sheets, or the OTC Bulletin Board in the event
the Company is relisted on the OTC Bulletin Board. The sales will be at market
prices prevailing at the time of sale or at negotiated prices. Such transactions
may or may not involve NASD licensed broker-dealers.
The Selling Shareholders may effect such transactions by selling common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the Selling Shareholders. They
may also receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Swartz Private Equity, LLC is, and each selling shareholder and any
broker-dealer that acts in connection with the sale of common shares may be
deemed to be, an "underwriter" within the meaning of Section 2(11) of the
Securities Act. Any commissions received by such broker-dealers and any profit
on the resale of the common shares sold by them while acting as principals might
be deemed to be underwriting discounts or commissions.
We have notified the Selling Shareholders of the prospectus delivery
requirements for sales made pursuant to this Prospectus and that, if there are
material changes to the stated plan of distribution, a post-effective amendment
with current information would need to be filed before offers are made and no
sales could occur until such amendment is declared effective
We have informed the Selling Shareholders that the anti- manipulation
rules of the SEC, including Regulation M promulgated under the Securities
Exchange Act, may apply to their sales in the market and have provided the
Selling Shareholders with a copy of such rules and regulations.
Selling Shareholders also may resell all or a portion of the common
shares in open market transactions in reliance upon Rule 144 under the
Securities and Exchange Act, provided they meet the criteria and conform to the
requirements of such Rule.
INVESTMENT AGREEMENT
OVERVIEW. On August 15, 2000, we entered into an investment agreement with
Swartz Private Equity, LLC. The investment agreement entitles us to issue and
sell, at our option, our common stock for up to an aggregate of $30 million from
time to time during a three-year period beginning on the date that this
registration statement is declared effective. This is also referred to as a put
right.
PUT RIGHTS. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the common
shares which may be issued as a consequence of the invocation of that put right
and we must be trading on at least the Over-The-Counter Bulletin Board.
Additionally, we must give at least ten but not more than twenty business days'
advance notice to Swartz of the date on which we intend to exercise a particular
put right and we must indicate the number of shares of common stock we intend to
sell to Swartz. At our option, we may also designate a maximum dollar amount of
common stock (not to exceed $2 million) which we will sell to Swartz during the
put and/or a minimum purchase price per common share, if applicable, at which
Swartz may purchase shares during the put. The designated minimum purchase price
per common share, if we chose to specify one, shall be no greater than the
lessor of (i) 80% of the closing bid price of our common stock on the business
day prior to the date of the advance put notice or (ii) the closing bid price of
our common stock on the business day prior to the date of the advance put
notice. The number of common shares sold to Swartz in a given put may not exceed
the lesser of:
- 15.0% of the aggregate daily reported trading volume (excluding any
block trades of 20,000 or more shares of common stock) during a period
which begins on the business day immediately following the day we
9
<PAGE>
invoked the put right and ends on and includes the day which is twenty
business days after the date we invoked the put right (excluding
certain days where the common shares trade below a minimum price
specified by us.
- 15.0% of the sum aggregate daily reported trading volumes (excluding
any block of 20,000 or more shares of common stock) for the twenty (20)
business days immediately preceding the put date.
- the intended put amount, specified in our put notice,
- the number of our shares, which when multiplied by the put share price,
equals $2 million,
- an amount of put shares, which when added to the number of put shares
acquired by the investor during the 31 days preceding the put date
would exceed 9.99% of the number of common shares outstanding (on a
fully diluted basis).
For each common share, Swartz will pay us the lesser of:
- the market price for the applicable pricing period, minus $0.075 or
- 91% of the market price for the applicable pricing period.
Market price is defined as the lowest closing bid price for the common stock
during the pricing period. The pricing period is the period beginning on the
business day immediately following the put date and ending on and including the
date which is 20 business days after such put date.
WARRANTS. We have delivered to Swartz warrants to purchase 1,150,000 shares of
our common stock at anytime for five years. Within five business days after the
end of the pricing period for each put, we are required to issue and deliver to
Swartz a warrant to purchase a number of shares of common stock equal to 10% of
the common shares issued to Swartz in the applicable put. Each warrant will be
exercisable at a price which will initially equal 110% of the market price for
the applicable put. The warrants will have semi-annual reset provisions. Each
warrant will be immediately exercisable and have a term beginning on the date of
issuance and ending five years thereafter. All shares underlying these warrants
are being registered in this prospectus.
LIMITATIONS AND CONDITIONS PRECEDENT TO OUR PUT RIGHTS. Swartz is not required
to acquire and pay for any common shares with respect to any particular put for
which during the period beginning on the date of the advance put notice and
ending on the last day of the pricing period:
- we have announced or implemented a stock split or combination of our
common stock;
- we have paid a common stock dividend;
- we have made a distribution of our common stock or of all or any
portion of our assets between the put notice date and the date the
particular put closes; or
- we have consummated a major transaction (including a transaction, which
constitutes a change of control) between the advance put notice date
and the date the particular put closes.
SHORT SALES. Swartz and its affiliates are prohibited from engaging in short
sales of our common stock, except that after they have received a put notice,
they may sell a number of shares in long sales or short sales, up to the number
of shares specified in the put notice.
CANCELLATION OF PUTS. We must cancel a particular put if between the date of the
advance put notice and the last day of the pricing period:
- we discover an undisclosed material fact relevant to Swartz's
investment decision;
10
<PAGE>
- the registration statement registering resales of the common shares
becomes ineffective; or
- shares are delisted from the then primary exchange.
NON-USAGE FEE. On the last business day of each six-month period following the
effectiveness of the registration period, if we have not put $1,000,000 of our
stock to Swartz, we will be required to pay Swartz a non-usage fee equal to the
difference between $100,000 and 10% of the aggregate put amounts to Swartz
during such six month period.
TERMINATION OF INVESTMENT AGREEMENT. We may also terminate our right to initiate
further puts or terminate the investment agreement by providing Swartz with
notice of such intention to terminate; however, any such termination will not
affect any other rights or obligations we have concerning the investment
agreement or any related agreement.
RIGHT OF FIRST REFUSAL. During the term of the investment agreement and for 90
days after its termination, we are prohibited from issuing or selling any
capital stock or securities convertible into our capital stock for cash in
private capital raising transactions, without obtaining the prior written
approval of Swartz. In addition, Swartz has the option for 10 days after
receiving notice to purchase such securities on the same terms and conditions.
This right of first refusal shall not apply to acquisitions or option plans.
SWARTZ'S RIGHT OF INDEMNIFICATION. We are obligated to indemnify Swartz
(including affiliates, their stockholders, officers, directors, employees and
agents) from all liability and losses resulting from any misrepresentations or
breaches we made in connection with the investment agreement, our registration
rights agreement, other related agreements, or the registration statement.
SOURCE AND USE OF PROCEEDS
We expect to sell to Swartz Private Equity, LLC, subject to effective
registration and applicable volume limitations, $30,000,000 of common stock
under the investment agreement. Additional amounts may be received if the
warrants to purchase common stock are exercised. Net proceeds are determined
after deducting all expenses of the offering (estimated to be $175,000). We
intend, in the following order of priority, to use the net proceeds from this
offering (excluding proceeds from warrant exercises) as follows:
<TABLE>
<S> <C>
Repayments of Loans made by Laguna $500,000
Pacific Partners, L.P. and Les Dube and
Irene Dube
Research and Development $9,500,000
Marketing $10,000,000
Other Working Capital $9,825,000
TOTAL PROCEEDS $29,825,000.00
</TABLE>
The amount and timing of working capital expenditures may vary significantly
depending upon numerous factors such as:
- The progress of our final development of our business,
- Revenues generated from existing and anticipated services, products and
licenses,
- The development of marketing and sales resources,
- Administrative and legal expenses, and other requirements not now known
or estimable.
11
<PAGE>
We believe that our available cash and existing sources of funding, together
with the proceeds of this offering and interest earned thereon, will be adequate
to maintain our current and planned operations for at least the next year.
12
<PAGE>
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Our common stock was 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. Our common stock is now quoted
on the over-the-counter pink sheets published by the National Quotation Bureau
under the symbol THCL.
The following table sets forth the high ask and low bid prices for our
common stock as reported on the OTC Bulletin Board until January 12, 2000 and as
reported on the over-the-counter pink sheets as of January 13, 2000 and through
the present.
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* 2 1/2 1 7/64
Quarter ended September 30, 1998* 2 7/64 0 7/8
Quarter ended December 31, 1998* 1 3/4 0 9/16
Quarter ended March 31, 1999* 3.00 0 9/16
Quarter ended June 30, 1999* 3 1/4 0 1/2
Quarter ended September 30, 1999 4 5/8 0 5/16
Quarter ended December 31, 1999 1/2 0 3/8
Quarter ended March 31, 2000 N/A 0 35/64
Quarter ended June 30, 2000 N/A 0 19/64
</TABLE>
* We believe the price prior to July 1999 may not be relevant in evaluating
our current operations as this was prior to our acquisition of
thehealthchannel.com website.
Since January, 2000 there has been little market making activity on the
pink sheet market for our stock. The price of the stock has fluctuated between
$0.20 and $1.00 per day during this time period. As of August 23, 2000 shares of
THCL closed at $0.40.
As of August 21, 2000, there were approximately 768 holders of our
Common Stock, as reported by the our transfer agent.
DIVIDEND POLICY
We never paid any cash dividends on its Common Stock and do not anticipate
paying any cash dividends in the future. We currently intend to retain future
earnings, if any, to fund the development and growth of our business.
13
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to, and
should be read in conjunction with, the Financial Statements, related Notes to
Financial Statements and Report of Independent Public Accountants, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. The following tables summarize certain
selected financial data of thehealthchannel.com for the Period from Inception
(September 6, 1996) through June 30, 2000 (audited), the fiscal year ended
December 31, 1999 (audited), and the six months ended June 30, 2000 (unaudited).
The data has been derived from Financial Statements included elsewhere in this
prospectus. No dividends have been paid for any of the periods presented.
<TABLE>
<CAPTION>
Period from Inception
Six Months Ended Fiscal Year Ended (September 6, 1996) to
June 30, 2000 December 31, 1999 June 30, 2000
------------- ----------------- -------------
<S> <C> <C> <C>
Statement of
Operations Data:
Revenue $ -8- $ -0- $ -8-
Net Loss $ 1,215,861 $ 3,926,992 $ 6,890,237
Net loss per share $ 0.02 $ 0.06
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion regarding our financial statements should be
read in conjunction with our financial statements included herewith.
OVERVIEW
We are engaged in the business of providing healthcare information over
the Internet.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Six Months Period from Inception
Ended June 30, Six Months Ended Year Ended (September 4, 1996)
2000 June 30, 1999 December 31 1999 to June 30, 2000
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ -8- $ -0- $ -0- $ 8
---------------------------------------------------------------------------------------------------------------
Cost of revenue $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Gross profit $ -8- $ -0- $ -0- $ 8
---------------------------------------------------------------------------------------------------------------
General, administrative,
and selling expenses $ (1,215,869) $ -0- $ (3,460,728) $ (4,676,597)
---------------------------------------------------------------------------------------------------------------
Loss from continuing
operations $ (1,215,861) $ -0- $ (3,460,728) $ (4,676,589)
---------------------------------------------------------------------------------------------------------------
Loss on discontinued
operations $ -0- $ (466,264) $ (466,264) $ (2,213,648)
---------------------------------------------------------------------------------------------------------------
Interest Income $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Interest expense $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Total other expense $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Loss before taxes $ (1,215,861) $ (466,264) $ (3,926,992) $ (6,890,237)
---------------------------------------------------------------------------------------------------------------
Taxes on income $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Net loss $ (1,215,861) $ (466,264) $ (3,926,992) $ (6,890,237)
---------------------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1999.
REVENUE
We are a development stage company and had no revenues for the fiscal
year ended December 31, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
We expended approximately $3,460,728 in selling, general and
administrative expenses. This included expenses for web site development, rent
for our office space, and compensation to consultants and employees.
15
<PAGE>
LOSS FROM OPERATIONS
We incurred a loss from operations of $3,460,728 for the year ended
December 31, 1999. The operations of our predecessor company, Innovative
Tracking Solutions Corporation ("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.
NET LOSS
We had a net loss of $3,926,992, for the year ended December 31, 1999.
SIX MONTHS ENDED JUNE 30, 2000.
REVENUE
We are a development stage company and had minimal revenues for the six
months ended June 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
We expended approximately $350,000 in professional services.
LOSS FROM OPERATIONS
We incurred a loss from operations of $518,230 for the three months
ended June 30, 2000. 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.
NET LOSS
We had a net loss of $1,215,861 or $(0.02) per share, for the six
months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have primarily funded its capital requirements
through private equity infusions. Commencing in September of 1999 and closing on
August 18, 2000, we conducted a private offering to accredited investors only of
units, each unit consisting of one share of our Common Stock and one Warrant
exercisable for a term of two years (the "Units"). All shares purchased in this
offering, as well as all shares underlying warrants purchased in this offering,
have piggyback registration rights and are entitled to be included in this
prospectus. We originally priced this offering at $0.75 per Unit with a $0.75
exercise price on the Warrants. However, the price of our publicly traded stock
dropped precipitously since the beginning of this private offering and we
subsequently offered the Units at lower prices. Company management has raised
$1,533,173 under this private offering. No NASD-registered broker-dealers were
involved in this offering. 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.
We have recently obtained a $30 million equity line from Swartz Private
Equity LLC, subject to registration with the SEC and governed by a percentage of
our trading volume. This equity line is governed by our investment agreement
with Swartz that provides that we may place puts to Swartz over a three year
period. See "Terms of the Offering" for a complete discussion of the equity line
and the investment agreement.
We recently received 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, 2000 or the effective date of this prospectus. The
loan is secured by all of our assets. In consideration for making this loan to
us, Laguna Pacific Partners received a warrant for common stock equal to the
quotient of $250,000 divided by the closing bid of our stock immediately
preceding the effective date of this prospectus. The term of this warrant is
five years and the exercise price is $1 in the aggregate.
16
<PAGE>
On August 18, 2000, we received a loan in the amount of $250,000 from
Les Dube and Irene Dube. This loan is made pursuant to a note which bears
interest at the rate of 6% and is payable on the earlier of February 18, 2000 or
the effective date of this prospectus. This loan was issued in consideration for
526,333 shares of common stock. These shares are being registered in this
prospectus and upon repayment of this loan, these shares are to be retained by
Les Dube. On the effective date of this prospectus, these shares may be sold by
Les Dube. In consideration for making this loan to us, Les Dube received a
warrant for common stock equal to the quotient of $250,000 divided by the
closing bid of our stock immediately preceding the effective date of this
prospectus.
As of June 30, 2000, we had outstanding current liabilities of $647,352
consisting mainly of accounts payable $88,000, accrued professional fees of
approximately $257,000, and accrued officers salaries $168,000. We anticipate
satisfying our current liabilities in the ordinary course of business from
revenues and accounts receivable.
We do not believe that inflation has had a significant impact on our
operations since our inception.
FUTURE PLAN OF OPERATIONS
Our overall plan of operations for the next 12 months we plan to
implement the following: (a) deployment of the Physicians Automated Attendant, a
wireless based software system intended to automate multiple facets of a
physician's practice and interface with large internet based information sites;
(b) strategic joint venture with the Institute for Medical Studies and Academy
for Continuing Medical Education by transmitting over the internet virtual
classrooms allowing healthcare industry professionals to comply with their
continuing education requirements; (c) providing broad healthcare information on
our Internet site, coupled with advertising, on a variety of topics, with an
increasing focus upon breast cancer; and (d) making our website easily
accessible to wireless devices.
We believe we can satisfy our cash requirements through the end of the
year. At that point we will need to raise additional funds.
Over the next 12 months, we plan to upgrade our management information
system, telecommunications system and office equipment to accommodate
anticipated growth plans. However, we will not perform any upgrades until its
management believes it has sufficient revenues to accommodate such upgrades.
We expect to add approximately 5 to 10 new employees by the end of the
year.
AVAILABLE INFORMATION
We are presently subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act"). We have filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form SB-2 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act") with respect to the securities offered hereby. This prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement on file with the Commission pursuant to
the Act and the rules and regulations of the Commission thereunder. The
Registration Statement, including the exhibits thereto, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of such material
may be obtained by mail at prescribed rates from the Public Reference Branch of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Statements
contained in this prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov.
thehealthchannel.com's securities are currently quoted on the over-the-counter
bulletin board system under the symbol "THCL."
FORWARD LOOKING STATEMENTS
17
<PAGE>
This registration statement contains forward-looking statements. The
company's expectation of results and other forward-looking statements contained
in this registration statement, involve a number of risks and uncertainties.
Among the factors that could cause actual results to differ materially from
those expected are the following: business conditions and general economic
conditions; and competitive factors, such as pricing and marketing efforts.
These and other factors may cause expectations to differ.
18
<PAGE>
ORGANIZATION OF THEHEALTHCHANNEL.COM
HISTORY
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.
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.
On April 16, 1999, IVTX transferred all of its assets and liabilities
based on majority stockholder approval to a newly formed private company,
Innovative Tracking Solutions, Inc., a Nevada corporation.
In June 1999, IVTX met the management of BioLogix, Inc. BioLogix was a
diversified public company which owned a number of assets, including a
consumer-based health care Web site located at http://www.thehealthchannel.com.
IVTX and BioLogix each reorganized as follows:
(1) In July, 1999 IVTX completed a 28.2 for 1 forward stock
split. The officers of IVTX were paid $250,000 cash in
exchange for their shares for the purpose of financing the
operation of the IVTX assets which had been transferred to a
private corporation in April, 1999.
(2) All other IVTX shareholders (36 in the aggregate) were
provided with the alternative of either retaining two of
their post-split IVTX shares and contributing the balance to
an exchange pool (as discussed more fully below) or
exchanging their shares for shares in Innovative Tracking
Solutions, Inc., a Nevada corporation, the privately held
corporation into which the IVTX operating assets had been
transferred. Thirty-five of these 36 IVTX shareholders
elected to retain two shares and contribute the balance to
the exchange pool.
(3) In July, 1999 the internet website and associated technology
located at www.thehealthchanel.com (the "THCL Website") were
transferred by BioLogix, Inc. ("BioLogix") to IVTX. The name
of IVTX was changed to thehealthchannel.com
(4) The BioLogix shareholders were provided with the alternative
of retaining their BioLogix shares or retiring their BioLogix
shares, on a one for one basis, in exchange for IVTX shares
contained in the exchange pool (which as noted above had
changed its name to The Health Channel.com). There were
approximately 800 BioLogix shareholders and approximately 650
of these shareholders elected to exchange their BioLogix
shares for THCL shares.
The SEC has expressed certain concerns regarding whether the above
reorganization was conducted in accordance with applicable state and federal
securities laws. The SEC has alleged that the exchange of BioLogix shares for
shares of thehealthchannel.com may have constituted an unregistered public
offering. (See "Risk Factors") While we have provided correspondence to the SEC
denying these allegations, the SEC has indicated that it continues to disagree
with our position. If we have engaged in an unregistered public offering, this
would constitute a violation of the Securities Act and would make us liable to
legal action by both the SEC and our shareholders. In the event the SEC or any
shareholder were to take successfully prosecute an action based on these
allegations, it would have a severe and adverse effect on the Company. The
Company may be required to pay monetary damages and penalties and may be subject
to a court-imposed injunction, or may be forced to enter into a consent decree
with the SEC. In the event, any of these events were to occur it would likely
immediately and severely impact the Company, possibly impairing our ability to
continue as a going concern.
In addition, we may be subject to contingent liabilities arising form
the our private placement of securities which commenced in September 1999 and
continued to August 2000 (See "Risk Factors"). During this private
19
<PAGE>
placement, shares were sold based on our stock's most recent closing cost on
the OTC Bulletin Board or on the Pink Sheets after we were no longer quoted
on the OTC Bulletin Board. Therefore, the price of the securities sold in
this private placement fluctuated widely, following fluctuations in our
closing prices. It is possible that an investor or investors who participated
in the private placement may claim that we did not fully disclose that the
price to be paid under the private offering fluctuated with the market price
for our stock. In the event such investor or investors successfully
prosecuted such an action against us, we may be forced to refund investor's
money and pay damages.
20
<PAGE>
BUSINESS OF THE COMPANY
THE HEALTHCARE INDUSTRY
The healthcare industry is comprised of a myriad of physicians
practicing through a variety of organizational entities and payment plans,
hospitals, operated both for profit and not for profit, owned by a variety of
small and large operators and ancillary service providers, such as laboratories
and out-patient surgical clinics, again owned and operated by many different
types and sizes of companies. The revenue and costs of this giant conglomeration
of companies and professional personnel are substantially controlled by large
insurance companies offering a variety of payment plans to the consumer.
This industry generates an enormous amount of information, paperwork,
data and transactions, none of which is standardized nor controlled by any
single entity or organizational protocol. Different insurance companies require
different forms; different providers require different intake information for
patients, different hospitals require different approvals be obtained by
consumers from their insurance companies.
At first glance, it would seem that such an enormous, information
intensive industry would be an obvious candidate for the launch of a successful
internet company. The exact opposite has actually been the case.
THE HEALTHCARE INTERNET INDUSTRY
While many Internet healthcare companies have deployed extensive health
information libraries useful to both consumers and medical professionals, it is
our belief that none of these companies have taken the promise of the Internet
and profitably applied it in the healthcare field.
In fact, a number of publicly held Internet healthcare companies, such
as DrKoop, Healtheon/RxMD, and Onhealth.com have sustained large losses
recently. We believe these losses have been generated primarily through the
expenditure of enormous marketing budgets intended to create "brand awareness"
among healthcare professionals and consumers.
We believe that the large losses suffered by these healthcare Internet
companies demonstrate that their business models, to date, may be failing. In
July, 1999, simultaneous with the acquisition of thehealthchannel.com Web site
by thehealthchannel.com, Inc., our management began to consider the financial
and business consequences of the healthcare industry business plans deployed
throughout the internet. We focused exclusively upon deploying a diversified
business plan throughout various sectors of the healthcare industry utilizing
the internet and associated technologies. This plan would focus upon immediate
requirements to generate potential profits, while avoiding the massive marketing
budgets currently plaguing the leading companies in the healthcare internet
sector. While there is no assurance that such profits will ever eventually be
generated, the plan set forth below is intended to attempt to accomplish
profitability within six months of each project's full deployment and a return
on our investment within one year.
THEHEALTHCHANNEL.COM SOLUTION
INTRODUCTION
As of July, 1999 we have focused exclusively upon the development of
business strategies and acquisition of existing operations which satisfy the
following three part test: (a) is the business strategy/acquisition candidate in
the healthcare industry which may be controlled by us; (b) does implementation
of the internet materially improve the business strategy/acquisition candidate;
and (c) will the proposed plan generate projected revenues within six months and
a return on our investment within twelve months of the deployment of our
capital. We believe that the following discussion of our business plan provides
the infrastructure which is now prepared to efficiently deploy a substantial
capital raise into the healthcare internet sector. Our plans diversify among
both healthcare industry consumers and healthcare industry professionals.
21
<PAGE>
PRODUCTS MARKETED TO HEALTHCARE PROFESSIONALS
We have focused our product development efforts in identifying internet
based products and services which will increase the productivity of healthcare
professionals, by either automating traditional paper-based or manual processes
or by providing additional revenue sources for the healthcare professional
community.
We are currently developing two products specifically directed toward
physicians:
(1) Our revenue sharing program with the Institute for Medical
Studies, Inc., a continuing medical education company; and
(2) The Physicians Automated Attendant, a software system which
will be integrated into our internet site, accessible through
wireless portable devices, automating the process of drug
prescription and insurance billing.
According to their management, the Institute for Medical Studies
("IMS") has for more than ten years provided physicians throughout the world
with continuing medical education programs involving virtually every area of the
medical practice, from new surgical techniques to certifications for prescribing
new drugs. These programs have typically been provided in a traditional
classroom setting requiring physicians to travel to the classes location. The
preparation of these classes involves the development of extensive materials and
the hiring of a number of prominent physicians in each field.
We have entered into a revenue sharing arrangement with IMS providing
thehealthchannel.com with the exclusive right to video-tape and then "stream"
each class over our Internet site. IMS also has an extensive library of
previously recorded video-tape and printed materials that will be repurposed for
Internet use. Classes will be both "real time" allowing internet participants to
interact with the presenter, as well as archived, allowing physicians to view
classes previously provided. Providing such classes over the internet involves
extremely new technologies and business models. There is no assurance that we
will successfully provide such classes over the Internet or if we are successful
in providing such classes that physicians will regularly access these classes
through our Internet site, rather than continue to attend traditional classroom
presentations.
We are also developing a web based product entitled the Physicians
Automated Attendant ("PAA"). This product is at an early stage of development.
However, it is our intention that this software system would be installed on
wireless devices which shall access our website providing patient prescriptions
and adjudication of insurance claims. We anticipate that the initial prototypes
of this product will be completed during the fourth quarter of the year 2000. We
believe that there are a number of companies developing products which will
directly compete with the PAA. Further, since this product involves newly
deployed technology, there is no assurance that the technology will be
successfully developed or that if it is successfully developed, that physicians
will utilize such technology at a level that will be financially practicable for
our business plan.
Medical professionals are embracing handheld devices to write
prescriptions, access drug databases, remotely access and manage front office
operations and communicate more effectively with patients, staff and other
health care providers. No company is currently providing medical professionals
with up to the minute news and information about the profession and/or their
medical specialty.
22
<PAGE>
HEALTHCARE INDUSTRY CONSUMER PRODUCTS
The centerpiece of our consumer products strategy is our website
located at www.thehealthchannel.com. We have engineered our web site completely
in-house, through the efforts of our web design team and in close collaboration
with new content and database integration partners. The site provides increased
ease of navigation, enhanced personalization, interaction through on-line chat
communities, increased ad and sponsorship banner space and healthcare management
via the "Conditions & Symptoms" research tool. The site focuses on alternative
care as well as traditional medicine and provides offerings for consumer and
professional users. The site was built utilizing the latest hardware and back
end systems that have been tested and configured for optimal performance,
reliability, stability and efficiency. We have entered into an agreement with
NewsEdge, to provide eHealth content consisting of approximately 90 articles
daily which are added to thehealthchannel.com's growing content database. Our
agreement requires that we pay NewsEdge one installment of $15,000. We have
entered into an agreement with Integrative Medicine, to provide various eHealth
content databases and weekly medical-alert newsletters. Our agreement requires
that we pay Integrative Medicine an annual fees of $80,000 in monthly
installments of $6,667 each. To date, we have made three installment payments
totaling $20,001. The annual fees will go up to $120,000 per year in September.
We have entered into an agreement with EarthLink.com, a general
internet portal, to provide ready access to our site for EarthLink subscribers
clicking the healthcare heading on the EarthLink portal. Our agreement with
EarthLink provides for a one year commitment requires that we pay EarthLink.com
$36,000 in four (4) installments of $9,000 each. To date, we have made one
installment payment to EarthLink.com of $9,000. Lastly, thehealthchannel.com has
an arrangement with the National Institute of Health to incorporate, publish and
"private label" content and content links from the National Library of
Medicine's MEDLINEplus web site. Our agreement with the National Institute of
Health requires no payment of money.
We also develop health-related content and programming for our world
wide web targeted at consumer access vis-a-vis the Internet, web-TV and/or other
means of network access.
We intend to enter into 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 us
to provide information to our web site ("Information Relationships") Concerning
Information relationships, we presently have two information relationships with
NewsEdge and Integrative Medicine as further detailed above.
We also expect to have numerous relationships with third party
e-commerce companies offering their products and services to
thehealthchannel.com users. This will either be through direct advertising of
the third party e-commerce site on thehealthchannel.com site or through a
commission agreement whereby we would receive a commission for any product
purchased from the third party e-commerce site by thehealthchannel.com user. In
this regard, we have entered into eight affiliate agreements with other health
oriented web sites such as vitamins.com and mothernature.com. These agreements
provide us with revenues (ranging from 10% to 20% of the sale) in the event
users are introduced to our affiliate sites through our website and products or
services are ordered. We have only recently commenced these affiliate
relationships and have received only a nominal amount of revenue as of the date
of this Prospectus. As a result of the recent commencement of these
relationships, it would be speculative to forecast any future sales or sales
growth.
On September 9, 1999, we 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. We 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, we
will pay 24/7 a percentage based upon the number of impressions on our web site
according to the following chart:
23
<PAGE>
<TABLE>
<CAPTION>
Number of Impressions Percentage Retained by 24/7
Delivered in Preceding Month for Current Month
---------------------------- -----------------
<S> <C>
0 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>
To date, we have generated only minimal revenue from this agreement
with 24/7. We did not begin accruing any advertising revenue from the 24/7
agreement.
We have implemented an "anywhere, anytime" strategy whereby we intend
to attract a segment of the market that may not be reachable through traditional
browser limited web sites. Our website is already available to Palm and Pocket
PC device users through http://www.avantgo.com and to wireless Palm devices
through http://www.palm.net. We intend to extend its reach in this market by
launching WAP (wireless application protocol) or web-enabled phone applications
in the coming weeks. We are the only healthcare web site to receive a four star
rating on the palm.net web site. A four star rating is only awarded to web sites
that are considered to be "good" in meeting 3Com's criteria (see
http://beta.palm.net/apps/users/main/1,10190,00.html/?ACTION=Rating) (see
http://beta.palm.net/apps/users/download/1,1051,1477,00.html).
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.
COMPETITION
The online commerce industry, particularly on the Internet, is new,
rapidly evolving and intensely competitive, which we expect 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. We currently or potentially
compete with other companies which have health care websites. These competitors
include InteliHealth, OnHealth, Web MD, Koop.com, and YourHealth.com.
We believe 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
our current and potential competitors have longer operating histories, larger
customer bases, greater brand name recognition and significantly greater
financial, marketing and other resources than we do. In addition, other websites
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 our 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
we do. Increased competition may result in reduced operating margins, loss of
market share and a diminished franchise value. There can be no assurance that we
will be able to compete successfully against current and future competitors, and
competitive pressures that we face may have a material adverse effect on our
business, prospects, financial condition and results of operations. Further as a
strategic response to changes in the competitive environment, we 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 us. In addition,
companies that control access to transactions through network access or Web
browsers could promote our competitors or charge us a substantial fee for
inclusion.
We face well-financed competition from other companies competing in the
health sector on the Internet, such as Healtheon, WebMD, and Drkoop. Recently,
Healtheon and WebMD announced that they were merging.
24
<PAGE>
There is no guarantee that we will be able to compete against these companies
or any other companies that might enter the Internet health sector.
INTELLECTUAL PROPERTY
We currently have an application pending with the United States Patent
and Trademark Office ("PTO") for registration of the name "thehealthchannel.com"
as a trademark. We have also registered the website domain name of
www.thehealthchannel.com.
We do not rely on proprietary technology in providing its healthcare
information over the Internet. While we use technology which has been customized
for its own purposes, we have deliberately avoided becoming overly dependent on
any one technology. By avoiding reliance on any one technology, we will be able
to take advantage of technological advances to provide improved accessibility to
its content.
We have no collective labor agreements.
EMPLOYEES
As of the date hereof, we have four full-time employees. We hire
independent contractors on an "as needed" basis only. We have no collective
bargaining agreements with its employees. We believe that our employee
relationships are satisfactory. Long term, we will attempt to hire additional
employees as needed based on its growth rate.
PROPERTIES AND FACILITIES
Our main administrative offices are located at 260 Newport Center
Drive, Suite 250, Newport Beach, California 92660, consisting of 1,284 square
feet, with a monthly lease payment of $3,852 per month, pursuant to a sublease
agreement.
LITIGATION
We have 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. against Michael Grandon on October 22, 1999. The
complaint of BioLogix International, Ltd. alleges 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. We are 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 claims that this
alleged employment agreement is our responsibility based upon our purchase of
the internet related assets of BioLogix International Ltd. We were served with
the cross-complaint on December 14, 1999. Mr. Grandon seeks $400,000 in damages
and options to purchase one million shares of BioLogix stock. We have answered
the cross-complaint denying the allegations of Mr. Grandon. We are aggressively
against defending against the claims asserted by Mr. Grandon.
To the best knowledge of management, there is no other material
litigation pending or threatened against the Company.
25
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
<TABLE>
<CAPTION>
Our directors and officers are as follows:
Name Age Office
-------------------------------------------------------------------------
<S> <C> <C>
Donald J. Shea 66 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. 59 Director
Joseph Song, M.D.,
F.A.C.C. 40 Director
</TABLE>
DONALD J. SHEA, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN. 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 F. LONERGAN, MA, CHIEF OPERATING OFFICER, VICE PRESIDENT, SECRETARY,
CHIEF FINANCIAL OFFICER, AND DIRECTOR. Mr. Lonergan was the co-founder and Vice
Chairman of The 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 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.
26
<PAGE>
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 Chicago
Corporation's senior medical advisor 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 Diseases. 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.
27
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table and attached notes sets forth the
compensation of our executive officers and directors during the last fiscal
year.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------------------------------- ---------------------------------------------------
Other Restricted Securities
Name and Principal annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compenstaion Awards Options/SARs Payouts Compensation
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald J. Shea,
Chief Executive 1999 0- -0- None 32,000 -0- None None
Officer(l) 2000 $144,000 -0- -0- 486,957 -0- None None
----------------------------------------------------------------------------------------------------------------------------
Thomas P.
Lonergan, Chief 1999 0- -0- None 52,000 -0- None None
Operating Officer, 2000 $144,000 -0- None 486,957 -0- None None
Vice President,
Chief Financial
Officer, Secretary
----------------------------------------------------------------------------------------------------------------------------
All officers as a 1999 0- -0- None 84,000 -0- None None
group (2 persons) 2000 $288,000 -0- None 973,914 -0- None None
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO EXECUTIVE COMPENSATION
The remuneration described in the table does not include our cost for
benefits furnished to the named executive officers, including premiums for
health insurance, reimbursement of expenses, and other benefits provided to such
individual that are extended in connection with the ordinary conduct of the
Company's business. The value of such benefits cannot be precisely determined,
but the executive officers named below did not receive other compensation in
excess of the lesser of $25,000 or 10% of such officer's cash compensation.
During the 1999 fiscal year, beginning July 28, 1999 (inception)
through December 31, 1999, no Officer or Director received any cash
consideration for salary, nor any aggregate remuneration for health insurance
and expenses, in excess of $40,000.
During the 1999 fiscal year, beginning July 28, 1999 through December
31, 1999, even though their employment agreements provide for salary on an
annual basis, all officers agreed to forego their cash compensation until we
were better financed. Two officers received shares of common stock in lieu of
salary.
EMPLOYMENT AGREEMENTS
We have 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.
We have 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.
28
<PAGE>
CERTAIN TRANSACTIONS
We have 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 us in locating, negotiating, and managing its
financing.
INTEREST OF NAMED EXPERTS AND COUNSEL
We have received a loan from Laguna Pacific Partners, L.P., a Delaware
Limited Partnership for $250,000. (See Liquidity and Capital Resources) In
connection with this loan, we issued a warrant to Laguna Pacific Partners. One
of the beneficial owners of Laguna Pacific Partners is also of counsel to
Horwitz & Beam, Inc., which is legal counsel to the Company.
On January 5, 2000, we entered into a Consulting Agreement with
Lawrence W. Horwitz pursuant to which Mr. Horwitz agreed to provide business
development and advisory services to us. For services rendered under the
Consulting Agreement, we issued Mr. Horwitz 1,250,000 shares of common stock of
the Company (the "Shares"). The Shares were registered on Form S-8. Mr. Horwitz
is of counsel to Horwitz & Beam, Inc., which is legal counsel to the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL OWNERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of August 18, 2000 by: (i) each stockholder
known by us to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each of our directors, and (iii) all directors
and officers as a group.
<TABLE>
<CAPTION>
Shares of Percent of
Name and Address Common Stock(1) Class(2)
---------------- --------------- --------------
<S> <C> <C>
Donald J. Shea(2) 635,484 *
Thomas P. Lonergan(2) 1,349,025 1.7%
Balazs Imre Bodai, M.S., M.D.(2) 514,566 *
Jeffrey H. Berg, MBA, Ph.D.(2) 520,575 *
Joseph Song, M.D.(2) 914,106 3.3%
All Officers and Directors
as a Group (5 persons) 3,933,756 5.0%
</TABLE>
---------------
* Less than one percent
(1) Except as otherwise indicated, we believe 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 our address: 260 Newport Center Drive, Suite 250, Newport Beach,
California 92660.
29
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
which may be offered for sale from time to time by the Selling Shareholders.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON PERCENTAGE
SHARES OF STOCKS UNDERLYING OWNED IF
NAME OF SELLING STOCKHOLDER COMMON THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Swartz Private Equity, LLC 93,750,000 12,825,000 57.21
---------------------------------------------------------------------------------------------------------------------------
2 Laguna Pacific Partners, L.P. 0 2,500,000 *
---------------------------------------------------------------------------------------------------------------------------
3 Les Dube and Irene Dube 1,578,999 0 *
---------------------------------------------------------------------------------------------------------------------------
4 Institute for Medical Studies, Inc. defined Benefit Pension
Plan 133,333 1,333,333 *
---------------------------------------------------------------------------------------------------------------------------
5 R+R Enterprises, a Corporation Attn: John Peter McBride 46,666 46,666 *
---------------------------------------------------------------------------------------------------------------------------
6 Daniel Stryker 54,054 54,054 *
---------------------------------------------------------------------------------------------------------------------------
7 Eric Garcia 6,000 6,000 *
---------------------------------------------------------------------------------------------------------------------------
8 Sandrine Cassidy 6,000 6,000 *
---------------------------------------------------------------------------------------------------------------------------
9 J.L. Sommier 1,000 1,000 *
---------------------------------------------------------------------------------------------------------------------------
10 Dorothy Ernst 1,000 1,000 *
---------------------------------------------------------------------------------------------------------------------------
11 Jeffrey J. Heilman, an individual 12,820 12,820 *
---------------------------------------------------------------------------------------------------------------------------
12 William L. Heilman, TTEE or Marilyn B. Heilman, TTEE FBO The
Heilman Living Trust 25,641 25,641 *
---------------------------------------------------------------------------------------------------------------------------
13 Charles J. Najarian & Adlene L. Ichien Joint Account 69,444 69,444 *
---------------------------------------------------------------------------------------------------------------------------
14 David Stanley, an individual 6,818 6,818 *
---------------------------------------------------------------------------------------------------------------------------
15 Christopher Armstrong, an individual 22,727 22,727 *
---------------------------------------------------------------------------------------------------------------------------
16 Douglas J. Winters, an individual 22,727 22,727 *
---------------------------------------------------------------------------------------------------------------------------
17 Leslie Dube, an individual 128,205 128,205 *
---------------------------------------------------------------------------------------------------------------------------
18 James C. Bridgeman, an individual 25,641 25,641 *
---------------------------------------------------------------------------------------------------------------------------
19 Troy M. Pelfey, an individual 11,364 11,364 *
---------------------------------------------------------------------------------------------------------------------------
----------------------------
(1) This number includes 3,450,000 common shares issuable upon exercise of
outstanding commitment warrants. This number also includes (solely for purposes
of this prospectus) up to an aggregate of 93,750,000 shares of our common stock
that we may sell to Swartz pursuant to the investment agreement, 8,522,727
shares underlying put warrants issued pursuant to the investment agreement, and
852,273 shares issuable upon exercise of purchase warrants issuable in
connection with the investment agreement, which shares would not be deemed
beneficially owned within the meaning of Sections 13(d) and 13(g) of the
Exchange Act before their acquisition by Swartz. It is expected that Swartz will
not beneficially own more than 9.9% of our standing common stock at any time.
30
<PAGE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON PERCENTAGE
SHARES OF STOCKS UNDERLYING OWNED IF
NAME OF SELLING STOCKHOLDER COMMON THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
20 Jeffrey Scott Greene, an individual 22,727 22,727 *
---------------------------------------------------------------------------------------------------------------------------
21 Fred Brader, an individual 76,923 76,923 *
---------------------------------------------------------------------------------------------------------------------------
22 Wayne A. Frost, an individual 25,641 25,641 *
---------------------------------------------------------------------------------------------------------------------------
23 Dan W. Stephens, an individual (20) 138,888 138,888 *
---------------------------------------------------------------------------------------------------------------------------
24 Bruce and Chieko Planck TTEES FBO The Planck Family Trust 4,848 4,848 *
---------------------------------------------------------------------------------------------------------------------------
25 Lucy Wells, an individual 75,757 75,757 *
---------------------------------------------------------------------------------------------------------------------------
26 Jim Achen Jr., an individual 13,888 13,888 *
---------------------------------------------------------------------------------------------------------------------------
27 Joe Engelbrecht, an individual 83,333 83,333 *
---------------------------------------------------------------------------------------------------------------------------
28 Daniel B. Guinn, an individual 55,555 55,555 *
---------------------------------------------------------------------------------------------------------------------------
29 Les Couchman, an individual 11,364 11,364 *
---------------------------------------------------------------------------------------------------------------------------
30 A.G. Edwards & Sons Custodian for Paula S. Blum 33,333 33,333 *
---------------------------------------------------------------------------------------------------------------------------
31 Patty Brader, an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
32 Lesley & Steven Olswang 44,642 44,642 *
---------------------------------------------------------------------------------------------------------------------------
33 Mark D. Dubin 44,642 44,642 *
---------------------------------------------------------------------------------------------------------------------------
34 Stephen & Laura Knight 3,571 3,571 *
---------------------------------------------------------------------------------------------------------------------------
35 Wayne Samarzich, an individual 100,000 100,000 *
---------------------------------------------------------------------------------------------------------------------------
36 Greg Boston, an individual 2,273 2,273 *
---------------------------------------------------------------------------------------------------------------------------
37 Craig Hoad, an individual 1,590 1,590 *
---------------------------------------------------------------------------------------------------------------------------
38 Charles J. Najarian & Adlene L. Ichien 123,056 123,056 *
---------------------------------------------------------------------------------------------------------------------------
39 Ronald and/or Jeanette Bear 3,571 3,571 *
---------------------------------------------------------------------------------------------------------------------------
40 Jesse DeCastro, an individual 38,462 38,462 *
---------------------------------------------------------------------------------------------------------------------------
41 James William McInroy 37,735 37,735 *
---------------------------------------------------------------------------------------------------------------------------
42 Jayne Clark, an individual 37,037 37,037 *
---------------------------------------------------------------------------------------------------------------------------
43 Leslie and Irene Dube, Individual 250,000 250,000 *
---------------------------------------------------------------------------------------------------------------------------
44 Robert D. Sarno, an individual 47,619 47,619 *
---------------------------------------------------------------------------------------------------------------------------
45 David Poncoe 54,348 54,348 *
---------------------------------------------------------------------------------------------------------------------------
46 Marcela D. Uson 10,204 10,204 *
---------------------------------------------------------------------------------------------------------------------------
47 The Kellin Revocable Living Trust 200,000 200,000 *
---------------------------------------------------------------------------------------------------------------------------
48 James E. Scrimger, an individual 11,628 11,628 *
---------------------------------------------------------------------------------------------------------------------------
49 The Dowell Revocable Inter Vivos Trust 83,333 83,333 *
---------------------------------------------------------------------------------------------------------------------------
50 Daniel B. Guinn, an individual 52,632 52,632 *
---------------------------------------------------------------------------------------------------------------------------
51 Michael Osburn, an individual 22,000 22,000 *
--------------------------------------------------------------------------------------------------------------------------
52 Wayne Samarzich, an individual 50,000 50,000 *
---------------------------------------------------------------------------------------------------------------------------
53 Wayne & Cheryl Samarzich 33,000 33,000 *
---------------------------------------------------------------------------------------------------------------------------
54 LifeSpan International 200,000 200,000 *
---------------------------------------------------------------------------------------------------------------------------
31
<PAGE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON PERCENTAGE
SHARES OF STOCKS UNDERLYING OWNED IF
NAME OF SELLING STOCKHOLDER COMMON THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
55 LifeSpan International 86,207 86,207 *
---------------------------------------------------------------------------------------------------------------------------
56 Clell Gladson, an individual 45,455 45,455 *
---------------------------------------------------------------------------------------------------------------------------
57 Allen Thayer 16,666 16,666 *
---------------------------------------------------------------------------------------------------------------------------
58 Roger Thayer, an individual 11,111 11,111 *
---------------------------------------------------------------------------------------------------------------------------
59 Margarita S. Pham, an individual 55,556 55,556 *
---------------------------------------------------------------------------------------------------------------------------
60 Kimberly S. Thayler, an individual 83,333 83,333 *
---------------------------------------------------------------------------------------------------------------------------
61 David Sun, an individual 11,111 11,111 *
---------------------------------------------------------------------------------------------------------------------------
62 David and Edna Thayer 361,111 361,111 *
---------------------------------------------------------------------------------------------------------------------------
63 W. Craig & Gretchen A. Hoad 5,882 5,882 *
---------------------------------------------------------------------------------------------------------------------------
64 Christopher T. Lane and Sonia R. Lane 31,250 31,250 *
---------------------------------------------------------------------------------------------------------------------------
65 Ashok Chopra, M.D. 93,750 93,750 *
---------------------------------------------------------------------------------------------------------------------------
66 David Keschner, M.D. 43,750 43,750 *
---------------------------------------------------------------------------------------------------------------------------
67 Rich Scrimger 11,628 11,628 *
---------------------------------------------------------------------------------------------------------------------------
68 Mr. D.W. Barrick - Barrick Properties, LLC 41,667 41,667 *
---------------------------------------------------------------------------------------------------------------------------
69 Michael Y. Meganck, an individual 142,857 142,857 *
---------------------------------------------------------------------------------------------------------------------------
70 Elaine D. Thayer, an individual 1,000 1,000 *
---------------------------------------------------------------------------------------------------------------------------
71 Phillip N. Miller, IV, an individual 3,212 3,212 *
---------------------------------------------------------------------------------------------------------------------------
72 Luis and Angela Saavedra 85,714 85,714 *
---------------------------------------------------------------------------------------------------------------------------
73 Joseph Ynfante, an individual 45,455 45,455 *
---------------------------------------------------------------------------------------------------------------------------
74 Robert Herthel, an individual 38,462 38,462 *
---------------------------------------------------------------------------------------------------------------------------
75 Ross Thayer, an individual 35,714 35,714 *
---------------------------------------------------------------------------------------------------------------------------
76 Charles Najarian 50,000 50,000 *
---------------------------------------------------------------------------------------------------------------------------
77 Kimberly S. Thayler, an individual 27,273 27,273 *
---------------------------------------------------------------------------------------------------------------------------
78 Less and Irene Dube, JTWROS 200,000 200,000 *
---------------------------------------------------------------------------------------------------------------------------
79 Shaker Radman, Jr., an individual 38,462 38,462 *
---------------------------------------------------------------------------------------------------------------------------
80 Richard M. Fematt, an individual 38,462 38,462 *
---------------------------------------------------------------------------------------------------------------------------
81 Salah Yacomb, an individual 38,462 38,462 *
---------------------------------------------------------------------------------------------------------------------------
82 Ali Awad, an individual 19,230 19,230 *
---------------------------------------------------------------------------------------------------------------------------
83 Terrie Mitchell, an individual 45,555 45,555 *
---------------------------------------------------------------------------------------------------------------------------
84 Wail S. Radwan, an individual 23,077 23,077 *
---------------------------------------------------------------------------------------------------------------------------
85 Vang Lai, an individual 42,308 42,308 *
---------------------------------------------------------------------------------------------------------------------------
86 Terri Mitchell, an individual 25,000 25,000 *
---------------------------------------------------------------------------------------------------------------------------
87 Eric G. Lee, an individual 18,182 18,182 *
---------------------------------------------------------------------------------------------------------------------------
88 Regina Marie Hovey & Leland Dele Ronningen, individual 54,545 54,545 *
---------------------------------------------------------------------------------------------------------------------------
89 Charlotte Anderson, an individual 10,000 10,000 *
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON PERCENTAGE
SHARES OF STOCKS UNDERLYING OWNED IF
NAME OF SELLING STOCKHOLDER COMMON THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
90 Clell Gladson, an individual 30,000 30,000 *
---------------------------------------------------------------------------------------------------------------------------
91 Randall and Pamela Bertz 100,000 100,000 *
---------------------------------------------------------------------------------------------------------------------------
92 Leslie and Irene Dube, JTWROS 0 21,429 *
---------------------------------------------------------------------------------------------------------------------------
93 Greg Martinez 12,500 12,500 *
---------------------------------------------------------------------------------------------------------------------------
94 Jeff Delmonte 12,500 12,500 *
---------------------------------------------------------------------------------------------------------------------------
95 Richard Peters & Madeline I. Peters 23,529 23,529 *
---------------------------------------------------------------------------------------------------------------------------
96 Ivan Barrett & Marsha Barrett 11,765 11,765 *
---------------------------------------------------------------------------------------------------------------------------
97 Bob Ludovise 100,000 100,000 *
---------------------------------------------------------------------------------------------------------------------------
98 Lars Krogius 11,364 11,364 *
---------------------------------------------------------------------------------------------------------------------------
99 Tris Krogius 11,364 11,364 *
---------------------------------------------------------------------------------------------------------------------------
100 Wendy Baldyga 25,000 25,000 *
---------------------------------------------------------------------------------------------------------------------------
101 Dan E. Reiders, MD 200,000 200,000 *
---------------------------------------------------------------------------------------------------------------------------
102 Ivan Barrett 13,158 13,158 *
---------------------------------------------------------------------------------------------------------------------------
103 Richard Peters 13,158 13,158 *
---------------------------------------------------------------------------------------------------------------------------
104 Kenneth M. Greenberg 15,624 15,624 *
---------------------------------------------------------------------------------------------------------------------------
105 Mario Pastorello 27,777 27,777 *
---------------------------------------------------------------------------------------------------------------------------
106 Joseph E. Weisz 41,667 41,667 *
---------------------------------------------------------------------------------------------------------------------------
107 Joseph E. Weisz 8,333 8,333 *
---------------------------------------------------------------------------------------------------------------------------
108 Mario Pastorello 76,471 76,471 *
---------------------------------------------------------------------------------------------------------------------------
109 Paul Dunn 10,000 10,000 *
---------------------------------------------------------------------------------------------------------------------------
110 Gregory J. Martinez 12,500 12,500 *
---------------------------------------------------------------------------------------------------------------------------
111 Steven J. Weisel 10,000 10,000 *
---------------------------------------------------------------------------------------------------------------------------
112 Tim D. Branner 5,000 5,000 *
---------------------------------------------------------------------------------------------------------------------------
113 Trevor J. Greenberg & Henry S. Greenberg 5,000 5,000 *
---------------------------------------------------------------------------------------------------------------------------
114 Henry S. Greenberg 10,000 10,000 *
---------------------------------------------------------------------------------------------------------------------------
115 Henry S. Greenberg 37,500 37,500 *
--------------------------------------------------------------------------------------------------------------------------
116 Henry S. Greenberg 18,750 18,750 *
---------------------------------------------------------------------------------------------------------------------------
117 Kenneth M. Greenberg 15,625 15,625 *
---------------------------------------------------------------------------------------------------------------------------
118 Mario Pastorello 27,778 27,778 *
---------------------------------------------------------------------------------------------------------------------------
119 Kevin C. Gilbert 25,000 25,000 *
---------------------------------------------------------------------------------------------------------------------------
120 Andrew M. Ames & Lisa D. Ames 27,778 27,778 *
---------------------------------------------------------------------------------------------------------------------------
121 Amer Ali 31,250 31,250 *
---------------------------------------------------------------------------------------------------------------------------
122 Carlos Tarin Garcia 11,904 11,904 *
---------------------------------------------------------------------------------------------------------------------------
123 Ruben T. Garcia 11,904 11,904 *
---------------------------------------------------------------------------------------------------------------------------
124 David L. Thayer & Edna L. Thayer 55,556 55,556 *
---------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES 100,849,599 22,057,492
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
* PERCENT OWNED IS LESS THAN 1%
PLAN OF DISTRIBUTION
This Prospectus involves: This Offering relates to: (1) the possible sale
from time to time of 31,250,000 shares and 4,275,000 shares underlying warrants
by Swartz Private Equity, LLC pursuant to an investment agreement, (2) the
possible sale, from time to time, by certain shareholders, the "Selling
Shareholders," of thehealthchannel.com, Inc. of up to 1,690,680 shares of common
stock and 2,097,823 shares underlying warrants of thehealthchannel.com, Inc.;
and (3) the possible sale from time to time of 526,333 shares of stock issued in
connection with a loan to the Company made by Les Dube and Irene Dube, and (4)
the possible sale form time to time of 833,333 shares underlying warrants issued
in connection with a bridge to the Company made by Laguna Pacific Partners.
SWARTZ PRIVATE EQUITY, LLC
This prospectus is registering the possible sale from time to time of
31,250,000 shares and 4,275,000 shares underlying warrants by Swartz. Pursuant
to our investment agreement with Swartz Private Equity, LLC, we can place puts
to them of our Common stock of up to $30,000,000. The dollar amount of each sale
is limited by our common stock's trading volume and a minimum period of time
since the last sale. Each sale will be to Swartz. In turn, Swartz may either
sell our stock in the open market, place our stock through negotiated
transactions with other investors, or hold our stock in their own portfolio.
SELLING SHAREHOLDERS
The Shares will be offered and sold by the Selling Shareholders for
their own accounts. We will receive payments for sales of the shares made to
Swartz under the Investment Agreement but we will not receive any of the
proceeds from the sale of the Shares pursuant to this prospectus. We will pay
all of the expenses of the registration of the Shares, but shall not pay any
commissions, discounts, and fees of underwriters, dealers, or agents. See "Terms
of the Offering."
The Selling Shareholders may offer and sell the Shares from time to
time in transactions in the over-the-counter market or in negotiated
transactions, at market prices prevailing at the time of sale or at negotiated
prices. The Selling Shareholders have advised us that they have not entered into
any agreements, understandings, or arrangements with any underwriters or
broker-dealers regarding the sale of their Shares, nor is there an underwriter
or coordinating broker acting in connection with the proposed sale of Shares by
the Selling Shareholders. Sales may be made directly or to or through
broker-dealers who may received compensation in the for of discounts,
concessions, or commissions from the Selling Shareholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both (which compensation as to a particular broker-dealer
may be in excess of customary commissions).
Swartz is, and the Selling Shareholders, Les Dube and Irene Dube,
Laguna Pacific Partners and any broker-dealers acting in connection with the
sale of the Shares hereunder may be deemed to be "underwriters' within the
meaning of Section 2(11) of the Act, and any commissions received by them and
any profit realized by them on the resale of Shares as principals may be
deemed underwriting compensation under the Act.
Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the Shares offered by this prospectus may not
simultaneously engage in market making activities with respect to the Common
Stock of the Company during the applicable "cooling off" periods prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Shareholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including, without
limitation, Rules 10b-6 and 10b-7, which provisions may limit the timing of
purchases and sales of Common Stock by the Selling Shareholders.
Selling Shareholders may also use Rule 144 under the Act to sell the
Shares if they meet the criteria and conform to the requirements of such Rule.
34
<PAGE>
LES DUBE AND IRENE DUBE
In return for making a loan to us, we are issuing 1,579,669 shares to
Les Dube and Irene Dube. These shares are being registered in this prospectus
and Les Dube and Irene Dube may continue to hold these shares or sell them on
the market if this prospectus is effective.
LAGUNA PACIFIC PARTNERS, L.P.
In return for making a loan to us, we are issuing 833,333 warrants to
Laguna Pacific Partners, L.P. The share underlying these warrants are being
registered in this prospectus and once it exercises these warrants, Laguna
Pacific Partners may sell the underlying shares on the market if this prospectus
is effective.
DESCRIPTION OF SECURITIES
Our authorized capital stock currently consists of 110,000,000 shares
of Common Stock, no par value. We anticipate that our shareholders will
authorize an increase in the number of our authorized stock to 175,000,000 at
our next shareholder meeting in October. We have no shares of Preferred Stock.
Our 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 our Articles of Incorporation and Bylaws.
COMMON STOCK
As of the date of this prospectus, there are 79,724,043 shares of
Common Stock outstanding. Our Board of Directors is asking our shareholders to
approve this reverse stock split at our next Shareholder meeting.
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 our
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
we are profitable.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if we issue new shares. 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.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Horwitz & Beam, Irvine, California.
35
<PAGE>
EXPERTS
The Financial Statements that we include in this registration
statement, have been included in reliance on the report of Stonefield Josephson,
Inc., and upon the authority of said firm as experts in accounting and auditing.
36
<PAGE>
FINANCIAL STATEMENTS
The following financial statements are included herein:
Balance Sheet of the Company as of June 30, 2000 (unaudited) and
December 31, 1999 (audited)
Statements of Operations of the Company for the six months ended June
30, 2000 (unaudited), the fiscal year ended December 31, 1999 (audited), the
Period from Inception (September 6, 1999) to December 31, 1999 (audited), and
for the period from September 6, 1996 (inception) to June 30, 2000 (unaudited)
Statements of Cash Flows of the Company for the three months ended June
30, 2000 (unaudited), the fiscal year ended December 31, 1999 (audited), the
Period from Inception (September 6, 1999) to December 31, 1999 (audited), and
for the period from September 6, 1996 (inception) to June 30, 2000 (unaudited)
37
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4-5
Statement of Cash Flows 6
Notes to Financial Statements 7-14
</TABLE>
<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.
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
1
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
June, December 31,
ASSETS 2000 1999
---- ----
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 146,225 $ 92,237
Software development costs 34,500 -
Prepaid expenses 7,549 129,399
Loan receivable 63,000 21,000
--------------- ---------------
Total current assets 251,274 242,636
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 708,594 838,424
DEPOSITS 3,852 -
--------------- ---------------
$ 963,720 $ 1,081,060
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
accounts payable and accrued expenses $ 647,352 $ 510,967
--------------- ---------------
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 110,000,000 shares
authorized, 74,179,327 and 68,881,791 shares issued
and outstanding (see Note 8), respectively 72,845 68,882
Additional paid-in capital 7,133,760 6,200,587
Subscriptions receivable - (25,000)
Deficit accumulated during the development stage (6,890,237) (5,674,376)
--------------- ---------------
Total stockholders' equity 316,368 570,093
--------------- ---------------
$ 963,720 $ 1,081,060
=============== ===============
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
2
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From inception on
Six months ended Six months ended Year ended September 4, 1996 to
June 30, 2000 June 30, 1999 December 31, 1999 June 30, 2000*
------------- ------------- ----------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 8 $ - $ - $ 8
COST OF SALES - - - -
------------- ------------- ----------------- -------------
GROSS PROFIT 8 - - 8
GENERAL AND ADMINISTRATIVE EXPENSES 1,215,869 - 3,460,728 4,676,597
------------- ------------- ----------------- -------------
LOSS FROM CONTINUING OPERATIONS (1,215,861) - (3,460,728) (4,676,589)
------------- ------------- ----------------- -------------
DISCONTINUED OPERATIONS:
Loss on discontinued operations - (367,014) (367,014) (2,114,398)
Loss on disposal of segment - (99,250) (99,250) (99,250)
------------- ------------- ----------------- -------------
Total discontinued operations - (466,264) (466,264) (2,213,648)
------------- ------------- ----------------- -------------
NET LOSS $ (1,215,861) $ (466,264) $ (3,926,992) $ (6,890,237)
============= ============= ================= =============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.02) $ (0.01) $ (0.06)
============= ============= =================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED 71,525,888 65,800,000 66,376,490
============= ============= =================
</TABLE>
* The period from inception on September 4, 1996 to December 31, 1999
(audited) and for the six months ended June 30, 2000 (unaudited).
See accompanying independent auditors' report and notes to financial statements.
3
<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>
SUMMARY
Balance at December 31, 1998, common
stock restated for 28.22:1 stock split on
July 28, 1999 65,715,459 $65,715 $1,923,535 $ (60,000) $(1,747,384) $ 181,866
IVTX
Issuance of common stock from IVTX
private placement officering (Note 4) 339,130 339 111,860 60,000 172,199
Issuance of shares for services rendered on
behalf of the Company (Note 4) 104,400 105 52,095 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) 1,217,802 1,218 509,322 (25,000) 485,540
Issuance of common stock related to
settlement agreements (Note 4) 1,505,000 1,505 1,795,840 1,797,345
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 68,881,791 68,882 6,200,587 (25,000) (5,674,376) 570,093
</TABLE>
(Continued)
See accompanying independent auditors' report and notes to financial statements.
4
<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 exchanged from pools 1,334,615
Private placement offering 2,835,208 2,835 659,646 662,481
Proceeds received from stock subscriptions 25,000 25,000
Shares issued in settlement of debt (Alphabet
Media) 160,000 160 46,880 47,040
Shares issued for services (National
Securities) 10,510 11 5,507 5,518
Shares issued for services (Quinn Emanuel) 82,899 83 30,590 30,673
Shares issued in settlement of legal matter
(Beuning and Redding) 869,304 869 188,735 189,604
Shares issued for services (National
Securities) 5,000 5 1,815 1,820
Net loss for the six months ended
June 30, 2000 (unaudited) (1,215,861) (1,215,861)
---------- ------- ---------- --------- ----------- ----------
Balance at June 30, 2000 (unaudited) 74,179,327 $72,845 $7,133,760 $ - $(6,890,237) $ 316,368
========== ======= ========== ========= ============ ==========
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
5
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Six months Six months Year ended
ended ended December 31,
June 30, 2000 June 30, 1999 1999
------------- ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (1,215,861) $ (466,264) $(3,926,992)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 165,226 - 135,230
Loss on disposal of division - 99,250 99,250
Loss on discontinued operations - 367,014 -
Non cash expenses from stock issuances 274,656 - 2,611,423
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable - - 189
Inventory - - (10,312)
Software development costs (34,500) - -
Prepaid expenses 121,850 - (108,447)
Deposits (3,852) - 2,597
(INCREASE) DECREASE IN LIABILITIES -
accounts payable and accrued expenses 136,386 - 661,157
------------- ------------- ------------
Net cash used for operating activities (556,096) - (535,905)
------------- ------------- ------------
CASH FLOWS USED FOR INVESTING ACTIVITIES -
payments to acquire property and equipment (35,396) - (25,818)
------------- ------------- ------------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Payment for asset transfer - - (26,329)
Cash transferred out - (22,551) -
Stock subscription receivable 25,000 - (25,000)
Loans receivable (42,000) - -
Proceeds from issuance of capital stock - - 682,738
Proceeds from private placement offering 662,480 - -
------------- ------------- ------------
Net cash provided by (used for) financing activities 645,480 (22,551) 631,409
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH 53,988 (22,551) 69,686
CASH, beginning of year 92,237 22,551 22,551
------------- ------------- ------------
CASH, end of year $ 146,225 $ - $ 92,237
============= ============= ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES -
non-cash compensation from stock issuances $ 274,656 $ - $ 2,611,423
============= ============= ============
</TABLE>
See accompanying independent auditors' report and notes to financial statements.
6
<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.
See accompanying independent auditors' report.
7
<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.
See accompanying independent auditors' report.
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:
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.
See accompanying independent auditors' report.
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:
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.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The accompanying unaudited condensed consolidated financial
statements for the interim periods ended June 30, 2000 and
1999 have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June
30, 2000 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000.
(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 2,550,000 restricted
shares of the Company's common stock. 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>
<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.
See accompanying independent auditors' report.
10
<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 2,550,000 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. 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").
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 106,819,557 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
38,000,000 shares reserved for exchange with Biologix shareholders that
were not exchanged. The number of authorized shares of common stock was
increased to 110,000,000.
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 339,130 (post split) shares of common
stock were sold at an offering price of $1 per share. This offering
resulted in net proceeds of $172,199. Also, the Company issued 104,400
(post split) shares of common stock for services rendered. The services
have been recorded at a fair value of $1 per share for a total of
$52,200.
In September 1999, the Company initiated a Rule 506, Regulation D
private placement of 1,217,802 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 1,505,000 shares of common stock for satisfaction of
legal settlement agreements the Company entered into for a total of
$1,797,345.
See accompanying independent auditors' report.
11
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(4) STOCKHOLDERS' EQUITY, CONTINUED:
On December 15, 1999, shareholders conveyed 1,559,214 shares of common
stock to certain individuals and 252,000 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.
(5) ADVERTISING COSTS:
Advertising costs are expensed when incurred and amounted to
approximately $400,000 for the 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.
See accompanying independent auditors' report.
12
<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 of the Company have approved and plan to propose
to the shareholders for approval, a reverse stock split of 1:3 in the
near future. The following chart presents the retroactive treatment of
the proposed reverse split as though it had been approved.
<TABLE>
<CAPTION>
Net loss per
Shares issued share - basic
and outstanding and diluted
--------------- -----------
<S> <C> <C>
December 31, 1999 (audited) 68,881,791 $ 0.06
1:3 reverse stock split 22,960,597 0.17
June 30, 2000 (unaudited) 74,179,327 0.02
1:3 reverse stock split 24,726,442 0.05
</TABLE>
See accompanying independent auditors' report.
13
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1999
(9) COMMITMENTS (UNAUDITED):
OFFERING
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 received
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 received 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.
(10) NOTE TO INTERIM FINANCIAL STATEMENTS (UNAUDITED):
In September 1999, the Company initiated a Rule 506, Regulation D
private placement of 4,052,973 restricted shares of the Company's
common stock from shares available from the forward stock split and
4,052,973 warrants to purchase restricted shares of the Company's'
common stock with an exercise price of $0.75, for total net proceeds of
$1,035,178, of which $524,638 relates to the first two quarters of the
year 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. This private placement offering is still in process.
See accompanying independent auditors' report.
14
<PAGE>
THEHEALTHCHANNEL.COM, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We are required by our Bylaws and Certificate of Incorporation to
indemnify, to the fullest extent permitted by law, each person that the Company
is permitted to indemnify. Our Charter requires it to indemnify such parties to
the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware
General Corporation Law.
Section 145 of the Delaware General Corporation Law permits us to
indemnify its directors, officers, employees, or agents against expenses,
including attorneys fees, judgments, fines and amounts paid in settlements
actually and reasonably incurred in relation to any action, suit, or proceeding
brought by third parties because they are or were directors, officers,
employees, or agents of the corporation. In order to be eligible for such
indemnification, however, our directors, officers, employees, or agents must
have acted in good faith and in a manner they reasonably believed to be in, or
not opposed to, our best interests. In addition, with respect to any criminal
action or proceeding, the officer, director, employee, or agent must have had no
reason to believe that the conduct in question was unlawful.
In derivative actions, we may only indemnify our officers, directors,
employees, and agents against expenses actually and reasonably incurred in
connection with the defense or settlement of a suit, and only if they acted in
good faith and in a manner they reasonably believed to be in, or not opposed to,
our best interests . Indemnification is not permitted in the event that the
director, officer, employee, or agent is actually adjudged liable to the
Corporation unless, and only to the extent that, the court in which the action
was brought so determines.
Our Certificate of Incorporation permits us to indemnify our directors
except in the event of: (1) a breach of the duty of loyalty to us or our
stockholders; (2) an act or omission that involves intentional misconduct or a
knowing violation of the law and an act or omission not in good faith; (3)
liability arising under Section 174 of the Delaware General Corporation Law,
relating to unlawful stock purchases, redemptions, or payment of dividends; or
(4) a transaction in which the potential indemnity received an improper personal
benefit.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to our controlling directors, officers,
or persons pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All the following numbers are approximations only.
<TABLE>
<S> <C>
SEC Registration Fee $ 12,887.56
Accounting Fees and Expenses $ 50,000
Legal Fees and Expenses $ 100,000
Printing Expenses $ 10,000
Miscellaneous $ 5,000
------------
Total $ 177,887.56
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
A. Sales of Unregistered Securities to Officers & Directors
-------------------------------------------------------------
II-1
<PAGE>
1. In September 1996 upon the inception of IVTX, IVTX issued
800,000 shares of restricted Common Stock to a founder of IVTX and
645,500 shares of restricted Common Stock to a co-founder of IVTX.
There was no underwriter involved in this issuance and no commissions
were paid to any person. The issuances were exempt from the
registration provisions of the Act by virtue of Section 4(2) under the
Act.
2. In September 1996 through March 1997, IVTX issued 162,500
shares of restricted Common Stock to a director of IVTX, in
consideration of consulting services rendered. There was no underwriter
involved in this issuance and no commissions were paid to any person.
This issuance was exempt from the registration provisions of the Act by
virtue of Section 4(2) under the Act.
3. In March 1997, IVTX conducted a private offering of 25,000
shares of restricted Common Stock at a total offering price of $20,000
to a director of IVTX. IVTX sold and issued the 25,000 shares to the
director in exchange for the total cash proceeds of $20,000. There was
no underwriter involved in this issuance and no commissions were paid
to any person. This issuance was exempt from the registration
provisions of the Act by virtue of Section 4(2) under the Act.
4. In July 1998, IVTX granted options to purchase 250,000 and
200,000 shares respectively of Common Stock in IVTX at an exercise
price of $.50 per share to two founding officers, subject to the terms
of their employment agreements. The options expire on December 31,
2002. There was no underwriter involved in this issuance and no
commissions were paid to any person. The issuances were exempt from the
registration provisions of the Act by virtue of Section 4(2) under the
Act.
5. In August 1998, IVTX issued to two of its officers an
aggregate of 468,000 shares of restricted Common Stock subject to the
terms of their Employment Agreements referenced herein in Exhibit 10.1
and 10.2 and 20,000 shares of restricted Common Stock to one of the
directors as a promotion bonus. There was no underwriter involved in
this issuance and no commissions were paid to any person. The issuances
were exempt from the registration provisions of the Act by virtue of
Section 4(2) under the Act.
6. In August 1998, IVTX issued 250,000 shares of restricted
Common Stock each to two licensors, who are also officers of IVTX, in
partial fulfillment of the terms of their Licensing Agreements
referenced herein in Exhibit 10.3 and 10.5. Before issuance, one
officer, as licensor, assigned the total of all 250,000 shares to the
other licensor. There was no underwriter involved in this issuance and
no commissions were paid to any person. The issuances were exempt from
the registration provisions of the Act by virtue of Section 4(2) under
the Act.
B. Sales of Unregistered Securities to Private Investors
---------------------------------------------------------
1. In September 1996 through May 1997, in order to raise IVTX's
initial seed capital for research and development, IVTX conducted a
private offering of 637,000 shares of restricted Common Stock to six
accredited investors for a total offering price of $637,000. In the
offering, IVTX sold 137,000 shares to five accredited investors for the
total proceeds of $137,000 and the remaining 500,000 shares offered
were subscribed for investment intent by an additional accredited
investor for purchase at $1.00 per share. There was no underwriter
involved in the issuances of the 137,000 purchased shares and no
commissions were paid to any person for any shares in the offering.
None of the transactions involved general solicitation or general
advertising. Each investor was provided with the Company's private
placement memorandum and business plan. The issuances were exempt from
the registration provisions of the Act by virtue of Section 4(2) under
the Act.
2. In February 1997 through March 1999, in order to purchase
services necessary to the development and marketing of IVTX's product
line and to minimize reductions in IVTX's limited capital raised, IVTX
conducted private offerings of restricted Common Stock pursuant to
Section 4(2) of the Act to consultants, contract vendors and legal
professionals in exchange for product engineering and development,
legal, consulting and marketing services. IVTX issued a total of
184,200 shares of restricted Common Stock to 12 accredited and 23
sophisticated purchasers in exchange for services rendered or to be
rendered on behalf of IVTX. The total value of the shares issued (total
offering price and proceeds) and the services
II-2
<PAGE>
performed or to be performed was $184,200 and was based on a price of
$1.00 per share. There was no underwriter involved in the issuances
and no commissions were paid to any person. None of the transactions
involved general solicitation or general advertising. Each investor
was provided with IVTX's private placement memorandum and business
plan. The issuances were exempt from the registration provisions of
the Act by virtue of Section 4(2) under the Act.
3. In July 1997 through February 1999, in order to raise capital
that would be needed to launch and maintain the marketing of IVTX' lead
product, IVTX conducted a private offering of Common Stock pursuant to
Regulation D, Rule 504. The pending sale of the 500,000 shares
mentioned in Item B1 above and the potential dilution of the sale once
consummated was fully disclosed in IVTX' offering circular which was
provided to each investor in the offering. IVTX initially offered
125,000 units of Common Stock at $2.00 per unit. Each Unit consisted of
one (1) share of Common Stock ($.001 par value) and three (3) Stock
Purchase Warrants. Each Warrant entitled the holder thereof to purchase
one (1) share of Common Stock of IVTX. The Warrants were exercisable at
$2.00 per share and were set to expire on July 21, 1998. The total
offering price of the offering was $250,000 and upon the exercise of
all warrants, the total offering price and proceeds of the offering
would be $1,000,000. IVTX sold 92,712 units at $2.00 per unit which
included 279,536 Warrants. After IVTX' stock became publicly traded,
the price of the stock dropped precipitously and IVTX cancelled all
remaining unsold warrants and offered individual shares at a reduced
purchase price ranging from $1.50 per share to $.50 per share.
Specifically, IVTX sold 6,000 shares at $1.50 per share; 14,465 shares
at $1.12 per share; 51,500 shares at $1.00 per share; 20,000 shares at
$.90 per share; 60,000 shares at $.75 per share; and 30,000 shares at
$.50 per share. IVTX sold a total of 274,677 shares of Common Stock to
72 investors in consideration of total cash proceeds of $339,938. IVTX
extended the Warrants purchased to expire on December 31, 1998.
However, none of the Warrants purchased were ever exercised and all
Warrants expired on December 31, 1998. Further and as part of the Rule
504 offering, in order to purchase designs and services necessary to
the development and marketing of IVTX' product line and to minimize
further reductions in IVTX' limited capital raised, IVTX offered a
portion of the Rule 504 shares to consultants, vendors and
professionals in exchange for product engineering and development, mold
design, equipment and production services and consulting and marketing
services. IVTX made such offers only when potential contractors of
service were not interested in restricted stock as payment for
services. IVTX issued a total of 128,000 shares of Common Stock to 10
purchasers in exchange for services rendered or to be rendered on
behalf of the Company and for total proceeds of $155. The total "value"
of the shares issued (total offering price and proceeds) and the
services performed or to be performed was $256,000 and was based on a
price of $2.00 per share consistent with IVTX offering price for Rule
504 shares. The total shares issued in the Rule 504 offering for both
cash and services (all listed above) was 402,677 to 82 purchasers and
the total proceeds of the offering for same was $315,380 net of $24,713
of offering costs. Each purchaser in the total offering was provided
with IVTX' offering circular. There was no underwriter involved in
these issuances and no commissions were paid to any person. None of the
transactions involved general solicitation or general advertising. The
issuances were exempt from the registration provisions of the Act by
virtue of Regulation D, Rule 504.
4. In December 1997, the sale of the 500,000 shares subscribed to
by an accredited investor indicated in Item B1 above had not yet been
consummated by the investor. However, IVTX was still in need of
additional research and development capital. Therefore, the accredited
investor who subscribed for the shares offered and agreed to assign his
$1.00 subscription rights back to IVTX for all 500,000 shares for
designation by IVTX to other investors so that IVTX could continue to
raise its ongoing Research & Development capital for its expanding
product line. From April 1998 to December, 1998, IVTX offered these
subscription rights to 500,000 shares of restricted Common Stock at
$1.00 per share via a private offering pursuant to Section 4(2) of the
Act for a total offering price of $500,000. IVTX sold 440,366 of these
shares to 23 accredited investors and 12 sophisticated investors in
consideration of cash proceeds totaling $375,916 net of $41,392 of
offering costs. There was no underwriter involved in this issuance and
no commissions were paid to any person. Each purchaser was provided
with IVTX's current offering circular which disclosed all potential
dilution. None of the transactions involved general solicitation or
general advertising. The issuances were exempt from the registration
provisions of the Act by virtue of Section 4(2) under the Act.
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All IVTX' sales of stock were made directly with purchasers whom IVTX'
officers had a pre-existing relationship with or that came from personal
referrals. None of the transactions involved general solicitation or general
advertising. Proceeds from the sale of the shares were applied towards the
continuing development and marketing of its products and working capital.
In the Acquisition which closed on July 28, 1999, BioLogix paid
$250,000 for 2,550,000 shares of common stock of IVTX , representing the
majority controlling interests held by the officers and directors of IVTX. This
issuance was exempt from the registration provisions of the Act by virtue of
Section 4(1) of the Act, as transactions by any person other than an issuer,
underwriter, or dealer. Additionally, BioLogix agreed to contribute its
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. 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 the remaining 26.22 shares each with the
shareholders of BioLogix on a one-for-one basis (the "Exchange").
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 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 $0.75 per Unit with a
$0.75 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. To date, the Company has sold a
total of 5,511,063 Units to 120 accredited investors for total gross proceeds of
$1,581,698. To date, no investor has exercised any warrants purchased in the
current offering. 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. This
Private Placement was closed on August 29, 2000. See the "Selling Shareholders"
section of the prospectus for a complete list of the investors in the Private
Placement.
On January 5, 2000, we entered into a Consulting Agreement with
Lawrence W. Horwitz pursuant to which Mr. Horwitz agreed to provide business
development and advisory services to us. For services rendered under the
Consulting Agreement, we issued Mr. Horwitz 1,250,000 shares of common stock of
the Company (the "Shares"). The Shares were registered on Form S-8.
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On August 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 July 27, 2000, the Company enacted the 2000 Incentive and
Nonstatutory Stock Option Plan (the "Plan") which has reserved for issuance
5,000,000 options to purchase shares of Common Stock of the Company for key
employees and consultants. To date, no options have been issued under the plan
and no options have been exercised.
ITEM 27. EXHIBITS
EXHIBIT
3.1 Certificate of Incorporation of Innovative Tracking Solutions
Corporation, a Delaware corporation, dated September 4, 1996
3.2 Amendment to Articles of Incorporation of Innovative Tracking Solutions
Corporation, a Delaware corporation, dated May 21, 1997
3.3 Certificate of Correction to Articles of Incorporation of Innovative
Tracking Solutions Corporation, a Delaware corporation dated June 16,
1999
3.4 Amendment to Articles of Incorporation of Innovative Tracking Solutions
Corporation, a Delaware corporation, dated July 28, 1999
3.5 Amendment to Articles of Incorporation of thehealthchannel.com, Inc., a
Delaware corporation, dated August 4, 1999
3.6 Amendment to Articles of Incorporation of thehealthchannel.com, Inc., a
Delaware corporation, dated August 5, 1999
3.7 Amended Bylaws of thehealthchannel.com, Inc., dated August 19, 1999
4.1 Stock Purchase Agreement and Warrant Agreement (form) for private
placement
5 Opinion of Horwitz & Beam
10.1 Acquisition, Stock Purchase, and Exchange Agreement, dated
July 28, 1999
10.2 24/7 Media Inc. Network Affiliation Agreement, dated September 9, 1999
10.3 Employment Agreement with Thomas P. Lonergan, dated September 1, 1999
10.4 Employment Agreement with Donald A. Shea, dated September 1, 1999
10.5 Consulting Agreement with Ocean View Management Group, LLC, dated July
13, 1999
10.6 Custom Content Service Agreement with ScreamingMedia.Net, Inc., dated
September 27, 1999
10.7 Agreement for Financial Public Relations Services with Market Pathways,
dated August 11, 1999
10.8 DVCi Technologies, Inc. thehealthchannel.com Technical Requirements and
Content Specification dated October 22, 1999
10.9 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
10.10 Exodus Communications, Inc. Master Services Agreement, dated November
19, 1999
10.11 Content Agreement with EarthLink Network, Inc., dated October 27, 1999
10.12 On-Line License Agreement with Infoseek, dated March 1, 1999 and
Addendum dated November 22, 1999 for thehealthchannel.com, Inc.
10.13 Consulting Agreement by and between Jeffrey Berg and
thehealthchannel.com, Inc. dated September 1, 1999
10.14 Website and Revenue Sharing Agreement between The Institute for Medical
Studies, Inc. and thehealthchannel.com, dated September 29, 1999
10.15 Warrant Agreement between Institute for Medical Studies, Inc. and
thehealthchannel.com dated September 29, 1999
10.16 Healthcompass Services Agreement between thehealthchannel.com, Inc. and
HealthMagic, Inc., dated February 16, 2000
10.17 Content License Agreement between Integrative Medicine Communications,
Inc. and thehealthchannel.com, dated March 24, 2000
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<PAGE>
10.18 LIVEware5, Inc. Agreement for Services between Liveware5, Inc. and
thehealthchannel.com, Inc., dated March 24, 2000
10.19 Office Lease
10.20 NewsEdge Contract, dated May 27, 2000
10.21 Swartz Private Equity Warrant to Purchase Common Stock dated June 19,
2000
10.22 thehealthchannel.com, Inc. Investment Agreement dated August 15, 2000
10.23 Registration Rights Agreement between thehealthchannel.com and Swartz
Private Equity, LLC dated as of August 15, 2000
10.24 Investment Agreement between thehealthchannel.com, Inc. and Swartz
Private Equity, LLC, dated August 15, 2000
10.25 Instruction to Transfer Agent
24.1 Consent of Horwitz & Beam (included in their opinion set forth in
Exhibit 5 hereto)
24.3 Consent of Stonefield Josephson, Inc.
25 Power of Attorney (see signature page)
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<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) Insofar as indemnification for liabilities arising under the
Act may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(2) File, during any period in which it offers or sells
securities, a post effective amendment to this registration statement
to:
(i) Include any prospectus required by section 10(a)(3)
of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
For determining liability under the Securities, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Newport
Beach, State of California on August 29, 2000.
THEHEALTHCHANNEL.COM, INC.
By: /s/ Donald J. Shea
-------------------------------------
By: Donald J. Shea
Its: President, Chief Executive
Officer, Director
POWER OF ATTORNEY
Each person whose signature appears appoints Donald J. Shea, and in his
absence, Thomas F. Lonergan, as his agent and attorney-in-fact, with full power
of substitution to execute for him and in his name, in any and all capacities,
all amendments (including post-effective amendments) to this Registration
Statement to which this power of attorney is attached. In accordance with the
requirements of the Securities Act of 1933, this Registration Statement was
signed by the following persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Donald J. Shea
--------------------------
Donald J. Shea Chief Executive Officer, Director August 29, 2000
/s/ Thomas F. Lonergan
--------------------------
Thomas F. Lonergan Chief Financial Officer, Director,
Chief Operating Officer, Executive
Vice President, Secretary August 29, 2000
/s/ Balazs Imre Bodai
--------------------------
Balazs Imre Bodai Director August 29, 2000
/s/ Joseph K. Song
--------------------------
Joseph K. Song Director August 29, 2000
/s/ Jeffrey Berg
--------------------------
Jeffrey Berg Director August 29, 2000
--------
</TABLE>
