<PAGE>
As filed with the Securities and Exchange Commission on December 12, 2000
Registration No. 33-44982
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Amendment No. 1
--------------------
THEHEALTHCHANNEL.COM, INC.
(Name of small business issuer in its charter)
Delaware 4812 33-0728140
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
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 (Address of principal place
of principal executive office of business)
The Company Corporation
1013 Centre Road
Wilmington, DE 19805
(302) 636-5440
(Name, address and telephone number of agent for service)
----------------------------
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/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
---------------------------------------------- ----------------- -------------------- ------------------- ----------------
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
---------------------------------------------- ----------------- -------------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Shares of Common Stock, $.001 par value (2) 33,751,840 $0.115 $3,881,461.60 $1,024.71
---------------------------------------------- ----------------- -------------------- ------------------- ----------------
Shares of Common Stock, $.001 par value, 7,490,760 $0.115 $861,437.40 $227.42
underlying warrants (3)
---------------------------------------------- ----------------- -------------------- ------------------- ----------------
TOTAL 41,242,600 $4,742,899 $1,252.13
---------------------------------------------- ----------------- -------------------- ------------------- ----------------
</TABLE>
(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 December 7, 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) 31,250,000 shares to be sold from time to time by Swartz Private Equity,
LLC; 1,975,284 shares to be sold from time to time by other Selling
Shareholders; and 526,556 shares to be sold from time to time by Les Dube
and Irene Dube.
(3) 4,275,000 shares underlying warrants to be sold from time to time by
Swartz Private Equity, LLC; 2,382,427 shares underlying warrants to be
sold from time to time by other Selling Shareholders, and 833,333 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 DECEMBER 12, 2000
PROSPECTUS
-----------
THEHEALTHCHANNEL.COM, INC.
--------------
41,242,600 Shares of Common Stock
This prospectus covers 41,242,600 shares of the common stock, of
thehealthchannel.com, Inc. This figure includes 31,250,000 shares of common
stock that we may issue in the future under our Investment Agreement with Swartz
Private Equity, LLC. and 7,490,760 shares of common stock that we may issue in
the future if warrants are exercised. The common stock will be sold solely by
the selling stockholders.
The securities offered hereby involve a high degree
of risk. Please read the "Risk factors"
beginning on page 2.
Our common stock is currently trading on the pink sheets under "THCH".
--------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
Our principal executive offices are located at 260
Newport Center Drive, Suite 250, Newport Beach,
California 92660. Our telephone number is
(949) 631-8317
The date of this prospectus is ________, 2000.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
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................................................................13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................................................15
ORGANIZATION OF THEHEALTHCHANNEL.COM...................................................19
BUSINESS OF THE COMPANY................................................................20
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS...........................25
EXECUTIVE COMPENSATION.................................................................27
CERTAIN TRANSACTIONS...................................................................28
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL OWNERS..................................28
SELLING SHAREHOLDERS...................................................................29
PLAN OF DISTRIBUTION...................................................................33
DESCRIPTION OF SECURITIES..............................................................34
LEGAL MATTERS..........................................................................34
EXPERTS................................................................................34
FINANCIAL STATEMENTS...................................................................35
INFORMATION NOT REQUIRED IN PROSPECTUS.................................................36
EXHIBITS............................................................................41
UNDERTAKINGS........................................................................44
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS ONLY A SUMMARY AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS,
INCLUDING ITS NOTES, 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 web site. We focus
exclusively upon the development of business strategies
and the acquisition of existing operations which satisfy
the following three part test: --is the business
strategy/acquisition candidate in the healthcare
industry? --does implementation of the internet
materially improve the business? strategy/acquisition
candidate? --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.
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: --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; --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; --providing broad healthcare information
on our Internet site, coupled with advertising, on a
variety of topics, with an increasing focus upon breast
cancer; and --making our web site 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 14, 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 web site
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 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.
1
<PAGE>
SECURITIES TO BE This prospectus has been prepared to register the sale
ISSUED TO SWARTZ from time to time of 31,250,000 shares of common stock
EQUITY, LLC and 4,275,000 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 This prospectus has also been prepared to register
SHAREHOLDERS 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 This prospectus will also register 526,556 shares of
LES DUBE AND IRENE commons stock for sale from time to time by Les Dube
DUBE AND TO LAGUNA and Irene Dube, as well as 833,333 shares of common
PACIFIC PARTNERS 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.
Common Stock Outstanding as of
December 5, 2000 27,610,953
Common Stock and Common Stock
Underlying Warrants Being
Registered for Swartz Private
Equity, LLC 35,525,000
Common Stock and Shares Underlying
Warrants Offered by Selling
Shareholders 4,357,711
Common Stock underlying warrants 833,333
issued in connection 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 THCH
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 presented here only summarizes basic data and should be read
in conjunction with the financial statements and notes 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
Nine Months Ended Fiscal Year Ended (September 6, 1996) to
September 30, 2000 December 31, 1999 September 30, 2000
------------------ ----------------- ------------------
<S> <C> <C> <C>
Statement of
Operations Data:
Revenue $ 10,870 $ -0- $ 10,870
Net Loss $ 2,294,673 $ 3,926,992 $ 7,969,049
Net loss per share $ 0.09 $ 0.18
</TABLE>
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Balance Sheet Data:
Total assets $ 1,050,873 $ 1,081,060
Total liabilities $ 975,557 $ 510,967
Stockholder's equity $ 75,316 $ 570,093
</TABLE>
3
<PAGE>
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 TheHealthChannel.com commenced implementation of its
HAS ONLY A LIMITED current business plan during the fourth quarter of 1999.
OPERATING HISTORY HAS Prior to July 1999 the assets currently comprising the
INCURRED FINANCIAL internet site had been owned and operated by BioLogix,
LOSSES SINCE INCEPTION Inc. In April 1999, BioLogix launched a health oriented
AND THERE IS NO web site relying upon advertising on the website to
ASSURANCE WHEN, IF generate revenues. We were unable to attract
EVER, WE WILL BEGIN advertisers. As a result, in July 1999, we commenced
GENERATING PROFITS. development 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. It is uncertain whether consumers
will be willing to pay for products and services over
the internet at a level that will allow the company to
sustain long-term profitability. Further, many of our
business plans for medical professionals we are
currently implementing have never been deployed over the
internet, thus it would be highly speculative to predict
revenues or any level of profitability. We cannot assure
you that the company will ever operate profitably.
THERE IS INTENSE We compete with other companies which have health care
COMPETITION IN THE websites. These competitors include WebMD, DrKoop.com,
ON-LINE HEALTHCARE InteliHealth, OnHealth, and YourHealth.com. These
BUSINESS. MANY OF OUR competitors have longer operating histories, larger
COMPETITORS ARE MORE customer bases, greater brand name recognition and
EXPERIENCED AND MUCH significantly greater financial, marketing and other
BETTER FINANCED. WE resources than we do. In addition, other companies with
ANTICIPATE THAT superior financing to our company may elect to enter the
COMPETITION WILL internet health field. Competitors may devote greater
BECOME INCREASINGLY resources to marketing and promotional campaigns, and
SEVERE IN THE FUTURE devote substantially more resources to Web site and
AS OTHER COMPANIES systems development than we can. We cannot assure you
DEPLOY MEDICALLY that we will be able to compete successfully against
ORIENTED WEBSITES. current and future competitors, and 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.
WE ARE DEPENDENT Our business plans depend on the efficient and
UPON THE EFFICIENT uninterrupted operation of our computer and
DEPLOYMENT OF OUR communications hardware and software systems. Similarly,
INTERNET SITE AND the ability to track, measure, and report the delivery
RELATED BUSINESS of advertisements, data and other information on our
STRATEGIES. IN THE website depends on the efficient and uninterrupted
EVENT OUR INTERNET operation of our system. These systems and operations
TECHNOLOGY IS NOT are vulnerable to damage or interruption from human
ACCESSIBLE BY THE error, natural disasters, telecommunication failures,
PUBLIC FOR TECHNICAL break-ins, sabotage, computer viruses, intentional acts
REASONS WE WILL SUFFER of vandalism and similar events. While we have
SEVERE NEGATIVE implemented certain systems intended to back-up our
BUSINESS CONSEQUENCES. website and its data, 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.
4
<PAGE>
WE MAY ACQUIRE The Federal Drug Administration and the various
BUSINESSES THAT ARE state-level medical licensing boards may regulate
SUBJECT TO components of our business as our business plan is
GOVERNMENTAL deployed. It is uncertain how these governmental
REGULATIONS, SUCH AS agencies will react to the newly established Internet
LAWS ASSOCIATED WITH healthcare field. There can be no assurance that any
REGULATION OF THE such regulatory requirements will not have a material
DISTRIBUTION OF DRUGS, adverse effect on our business, financial condition or
THE PRACTICE OF results of operations.
MEDICINE AND THE
DISSEMINATION OF
INFORMATION TO THE
PUBLIC AND MEDICAL
PROFESSIONALS.
THE INTERNET HAS BEEN The Internet is at an early stage, especially associated
THE SUBJECT OF with the medical industry. Technological changes will
CONSTANT TECHNOLOGICAL occur which virtually immediately impact upon our
CHANGE. IF WE ARE business strategies. If we are unable to either predict
UNABLE TO SUCCESSFULLY such changes in advance or rapidly adjust our plans and
AND TIMELY INCORPORATE technologies to reflect these changes, our business
THESE CHANGES INTO OUR plans and internet site could be rendered obsolete
BUSINESS PLAN, OUR within a very short period of time. These changes
SERVICES MAYBE include both the development of hardware which will
RENDERED OBSOLETE allow more information to be sent using less of the band
width available to send information over the Internet,
the development of software which may improve the
presentation to users of the Internet or the deployment
of business strategies focusing upon these changes,
rendering the companies business plan noncompetitive.
OUR BUSINESS IS The Internet based information market is new and rapidly
DEPENDENT ON THE evolving. Our business would be materially adversely
CONTINUED GROWTH AND affected if Internet usage does not continue to grow or
USE OF THE INTERNET, grows slower than currently projected. Further our
AS WELL AS THE business will be adversely effected if consumers or
EFFICIENT OPERATION OF professionals fail to use the Internet in sufficient
THE INTERNET. numbers to allow our business plans to be successfully
implemented. 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.
While these problems also occur in deploying an Internet
business plan in the healthcare sector, other risk
factors include:
- Many consumers may have privacy concerns regarding
placing personal medical information over the
Internet, thus decreasing the potential traffic
that our Internet site may generate and the
information we may be able to secure from this
traffic.
- Certain business strategies deployed by us toward
medical professionals may require that such
professionals substantially change their methods
of operating, many of which may be ingrained in
their professional practice for many years. These
professionals may resist, or even refuse to
implement the changes that our new technologies
and business methods present. Such resistance
could prohibit the success of the Company in
marketing its products and services to medical
professionals, thus materially and adversely
effecting our financial operations.
5
<PAGE>
THERE ARE CURRENTLY Federal and state laws and regulations addressing issues
LEGAL UNCERTAINTIES such as:
RELATING TO THE
INTERNET. AS A RESULT,
IT IS DIFFICULT TO - user privacy,
PREDICT WHAT, IF ANY - pricing,
IMPACT THESE - online content regulation,
REGULATIONS WILL HAVE - taxation and the characteristics
UPON OUR OPERATIONS. - quality of online products and services
IT IS POSSIBLE THAT
SOME OF THESE are under consideration by federal, state, local, and
REGULATIONS MAY foreign governments and agencies. It may take years to
SUBSTANTIALLY INCREASE determine the extent to which existing laws relating to
OUR COSTS OF DOING issues such as intellectual property ownership and
BUSINESS AND PROHIBIT infringement, libel, and personal privacy are applicable
CERTAIN BUSINESS to the Internet. The Federal Trade Commission and
STRATEGIES WE WISH TO government agencies in certain states have been
DEPLOY. 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 our web site or otherwise materially
adversely affect our business.
OUR DATA BASE WILL While most Internet companies have concerns about
CONTAIN EXTREMELY protecting the privacy of their users, these concerns
SENSITIVE INFORMATION are one of the primary business problems facing our
REGARDING THE HEALTH company. These concerns include:
CONDITION AND
INTERESTS OF OUR - An individual's personal health and interests in
USERS. TO THE EXTENT healthcare information are viewed as extremely
WE ARE UNABLE TO private. Any indication that such information
ASSURE ABSOLUTE might be available to a third party might
PRIVACY TO THESE materially reduce traffic and interest in our
USERS, OUR BUSINESS internet site.
MAYBE SEVERELY AND - The increasingly aggressive and creative attacks
ADVERSELY EFFECTED. by third parties to enter Internet data bases may
increase the concerns of parties who might
otherwise access our Internet site.
- We will be forced to continuously monitor and
upgrade our security precautions imposing
increased operating costs upon our budget.
WE DEPEND ON KEY Our success depends, to a significant extent, upon a
PERSONNEL FOR CRITICAL number of key employees, including our President, Donald
MANAGEMENT DECISIONS. 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.
6
<PAGE>
MANY OF OUR As a result of the constantly changing environment of
COMPETITORS HAVE BEEN the Internet healthcare industry, it is difficult to
FINANCED WITH MILLIONS predict the eventual utilization of capitalization. As
OF DOLLARS IN DEBT AND of the date of this Prospectus we anticipate that our
EQUITY CAPITAL. AS A capital needs will include:
RESULT, WE BELIEVE
THAT IT MAY BE - Computer hardware upgrades to improve the
NECESSARY FOR OUR performance of our Internet site and related
COMPANY TO SECURE business strategies.
FINANCING IN ADDITION - Computer hardware upgrades to improve the internal
TO THE FINANCING computers used by our development and office
CONTEMPLATED BY THIS staff.
PROSPECTUS. - Computer software upgrades developed by third
parties which may either be immediately used or
customized for our purposes.
- Computer software development by our internal
staff to improve the performance of our Internet
site and associated business strategies.
- Salaries and bonuses needed to attract top level
computer programmers, administrators experienced
in operating Internet companies and office
personnel.
OUR COMMON STOCK IS Our common stock is quoted and traded on the
CURRENTLY CLASSIFIED Over-the-Counter Pink Sheets ("Pink Sheets"). As a
AS A "PENNY STOCK" result, an investor could find it more difficult to
WHICH COULD CAUSE dispose of, or to obtain accurate quotations as to the
INVESTORS TO market value of, the stock as compared to securities
EXPERIENCE DELAYS which are traded on the NASDAQ trading market or on an
AND OTHER exchange. In addition, trading in our common stock is
DIFFICULTIES IN covered by what is known as the Penny Stock Rules. The
TRADING SHARES IN Penny Stock Rules require brokers to provide additional
THE STOCK MARKET 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 In many cases, our officers, directors, and present
EXPERIENCE IMMEDIATE shareholders have acquired their securities at a cost
AND SUBSTANTIAL substantially less than that which investors will pay
DILUTION. 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 The securities being offered in this prospectus are
SHARES OFFERED HEREBY offered at the market price prevailing at the time of
IS DEPENDENT UPON THE the offer. The market price of these securities may vary
PRICE IN THE PUBLIC and may have a limited relationship, or no relationship,
MARKET WHICH WILL to our assets, book value, results of operations, or
FLUCTUATE. 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 December 1, 2000, thehealthchannel.com had
COMMON STOCK OF WILL outstanding approximately 14,791,189 shares that are
BECOME ELIGIBLE FOR classified as "restricted securities as that term is
PUBLIC SALE OVER THE defined under Rule 144 of the Securities Act of 1933, as
NEXT YEAR WHICH COULD amended. Most of these shares have been held by
HAVE A DEPRESSIVE shareholders for at least one year and may be entitled
EFFECT ON THE STOCK. to be sold under Rule 144. In addition, we are
registering
7
<PAGE>
-- 31,250,000 shares and 4,275,000 shares underlying
warrants for Swartz,
-- 1,975,284 shares and 2,382,427 shares underlying
warrants for other Selling Shareholders,
-- 526,556 shares for Les Dube and Irene Dube, and
-- 833,333 shares underlying warrants for Laguna Pacific
Partners, L.P.
If a significant number of shares are offered for sale
through the public securities 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 securities
LIABILITIES RESULTING from September 1999 up to the date of this prospectus.
FROM OUR RECENT During this period of time, we sold securities to
PRIVATE PLACEMENT. 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 We have been advised by the Securities Exchange
BY THE SECURITIES AND Commission (SEC) alleging that the exchange of BioLogix
EXCHANGE COMMISSION shares for shares of thehealthchannel.com may have
(THE "SEC") THAT constituted an unregistered public offering in violation
CERTAIN TRANSACTIONS of applicable state and federal securities laws. While
INVOLVING we have provided correspondence to the SEC denying these
thehealthchannel.com allegations, the SEC has indicated that it continues to
MAY HAVE BEEN IN disagree with our position. If we have engaged in an
VIOLATION OF THE unregistered public offering, this would constitute a
SECURITIES LAWS. 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 We have never paid dividends on our common stock and do
DIVIDENDS ON OUR not plan on paying cash dividends in the foreseeable
COMMON STOCK AND DON'T future.
PLAN TO PAY DIVIDENDS
IN THE FUTURE.
SPECIAL NOTE REGARDING Statements made in this prospectus regarding our funding
FORWARD LOOKING requirements and the timing of and potential for our
STATEMENTS. 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.
Such 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 6,667 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,
however, 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 6,667 or more shares of common stock, for the 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.
We are registering 31,250,000 shares to be sold to Swartz in puts and 4,275,000
warrants to be issued to Swartz in connection with the puts. Therefore, in order
for the Company to receive $30,000,000, the average sale price of these shares
would need to be $.96. Unless our share price increases drastically, we will
receive only a portion of the $30,000,000 maximum.
Our closing price on the pink sheets as of December 5, 2000 was $0.125. The
maximum allowable number of shares per put under the Investment Agreement is
500,000 shares. Assuming our trading price remained at its current level, even
if we put the maximum allowable shares per put to Swartz under the investment
agreement, each put would yield only $25,000 in proceeds to us. The restrictions
discussed about, such as the restriction limiting the put amount to a percentage
of our aggregate trading volume, may operate to prevent us from putting the
maximum allowable number of shares.
The 35,525,000 shares that Swartz may sell under this prospectus would represent
56.26% of the Company if they were all issued, assuming that we don't issue any
other shares to other shareholders.
WARRANTS. We have delivered to Swartz warrants to purchase 383,333 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;
10
<PAGE>
- 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 any transaction
which would constitute 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;
- 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 their affiliates, 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, up to $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 and are 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:
11
<PAGE>
<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.
Depending on our stock price and due to the terms and conditions of the
Investment Agreement with Swartz, the proceeds we receive may be much less than
the $30,000,000 maximum allowed by the agreement.
12
<PAGE>
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Our common stock was quoted on the over-the-counter bulletin board system
since April 1998, formerly under the symbol IVTX. Following our name-change to
thehealthchannel.com, our symbol was changed to THCL. On November 17, 2000, when
our one for three reverse stock split went effective, we received our current
symbol, THCH Our common stock is currently quoted on the over-the-counter pink
sheets published by the National Quotation Bureau under the symbol THCH.
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* 7.50 3.33
Quarter ended September 30, 1998* 6.33 2.625
Quarter ended December 31, 1998* 5.25 1.69
Quarter ended March 31, 1999* 9.00 1.69
Quarter ended June 30, 1999* 9.75 0.50
Quarter ended September 30, 1999 13.875 0.94
Quarter ended December 31, 1999 2.44 0.80
Quarter ended March 31, 2000 4.22 0.66
Quarter ended June 30, 2000 1.69 0.47
Quarter ended September 30, 2000 1.41 0.80
</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 December 7, 2000, our
common stock closed at $0.115.
As of December 6, 2000, there were approximately 813 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.
SELECTED FINANCIAL DATA
13
<PAGE>
The following selected financial data summarize 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 its inception on
September 6, 1996 through September 30, 2000 (audited), the fiscal year ended
December 31, 1999 (audited), and the six months ended September 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
Nine Months Ended Fiscal Year Ended (September 6, 1996) to
September 30, 2000 December 31, 1999 September 30, 2000
------------------ ----------------- ------------------
<S> <C> <C> <C>
Statement of
Operations Data:
Revenue $ 10,870 $ -0- $ 10,870
Net Loss $ 2,294,673 $ 3,926,992 $ 7,969,049
Net loss per share $ 0.09 $ 0.18
</TABLE>
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Balance Sheet Data:
Total assets $ 1,050,873 $ 1,081,060
Total liabilities $ 975,557 $ 510,967
Stockholder's equity $ 75,316 $ 570,093
</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>
Nine Months Nine Months Year Ended Period from Inception
Ended Ended December 31 1999 (September 4, 1996)
September 30, September 30, to September 30, 2000
2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 10,870 $ -0- $ -0- $ 10,870
---------------------------------------------------------------------------------------------------------------
Cost of revenue $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Gross profit $ 10,870 $ -0- $ -0- $ 10,870
---------------------------------------------------------------------------------------------------------------
General, administrative,
and selling expenses $ (2,305,543) $ (653,662) $ (3,460,728) $ (5,766,271)
---------------------------------------------------------------------------------------------------------------
Loss from continuing
operations $ (2,294,673) $ (653,662) $ (3,460,728) $ (5,755,401)
---------------------------------------------------------------------------------------------------------------
Loss on discontinued
operations $ -0- $ (466,264) $ (466,264) $ (2,213,648)
---------------------------------------------------------------------------------------------------------------
Loss before taxes $ (2,294,673) $ (1,119,926) $ (3,926,992) $ (7,969,049)
---------------------------------------------------------------------------------------------------------------
Taxes on income $ -0- $ -0- $ -0- $ -0-
---------------------------------------------------------------------------------------------------------------
Net loss $ (2,294,673) $ (1,119,926) $ (3,926,992) $ (7,969,049)
---------------------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
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.
15
<PAGE>
NET LOSS
We had a net loss of $3,926,992, for the year ended December 31, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000.
REVENUE
We are a development stage company and had minimal revenues for the nine months
ended September 30, 2000, and consistent with its business plan, the company
generated revenues of $10,862 from advertising associated with its wireless
strategy for the three months ended September 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company did not have any selling expenses during the nine months ended
September 30, 2000. During this period, the Company had general and
administrative expenses of $2,305,543.
LOSS FROM OPERATIONS
We incurred a loss from operations of $2,294,673 for the nine months ended
September 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 $2,294,673 or $(0.09) per share, for the nine months ended
September 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. 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. As adjusted for our recent one for three reverse split, we
originally priced this offering at $2.25 per unit with a $2.25 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.
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 526,556
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
16
<PAGE>
the closing bid of our stock immediately preceding the effective date of this
prospectus.
As of September 30, 2000, we had outstanding current liabilities of $923,473
consisting mainly of accounts payable $85,000, accrued professional fees of
approximately $260,000, and accrued officers salaries $216,000. All officers of
the company have agreed to defer their compensation or receive their
compensation in the form of equity until such time as the Company has the
financial ability to pay them. Since September 30, 2000 $88,471 has been paid in
cash, with a further $706,162 to be reduced through the issuance of stock. We
have secured 6-month terms to pay the remaining $128,840.
In order to continue funding our operations and to meet obligations as they come
due, we hope to draw from the equity line to be provided by Swartz Private
Equity LLC, as allowed for in the section titled "Terms of the Offering"
detailed above". However there is no guarantee that we will be able to draw on
the equity line. In the event that we are able to draw on the equity line, it is
possible that the proceeds will not be adequate to meet our capital
requirements.
In the event we are unable to use the Swartz equity line or if the Swartz equity
line is inadequate to meet our capital requirements, we would need to find
additional funding. There is no guarantee that any such additional funding will
be available if we need it.
We do not believe that inflation has had a significant impact on our operations
since our inception.
FUTURE PLAN OF OPERATION
The company's overall plan of operations for the next 12 months include
significant website development in four primary areas:
a) Further develop, promote and increase product offerings in its
industry leading "Anywhere, Anytime-TM-" mobile and wireless
strategy. Thehealthchannel.com was a first time mover in the health
sector with this technology application.
b) Broaden overall content offerings in the areas of general health
content and delivery of health goods and services.
c) Deliver a number of "deep vertical" products in specific health
topics.
d) Implement the business to business revenue generating products
covering a number of health areas including some unique products not
currently in the marketplace.
The company's overall plan of operation also includes completion of strategic
acquisitions for the purposes of revenue/profit enhancement, content
development, and increased traffic to the website.
(i) With strict cost controls, the company can satisfy its cash requirements
for a period of approximately 3-4 months. Without the anticipated revenues
generated from its business strategies and acquisition goals, the company
will then need to draw down on the available equity line, as detailed above,
or raise additional funds.
(ii) The company is currently conducting product research and development in the
areas of general health content, broadening and strengthening its health
information delivery, as well as conducting research and development in the
areas of premier health product offerings (deep verticals) and mobile and
wireless communication. In addition the company will continue to develop its
business-to-business goods and services products.
(iii) The company recently purchased (through the inclusion of its new
operations center lease) the necessary infrastructure to grow the company and
reduce its operational costs by bringing a majority of its software development
in house.
(iv) The company expects to add approximately 5-10 new employees in the next
fiscal year.
AVAILABLE INFORMATION
We are presently subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended. We have filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 along with all amendments and
exhibits to it under the Securities Act of 1933, as amended, with respect to the
securities offered hereby. This prospectus, which constitutes a part of the
Registration Statement, omits certain information contained
17
<PAGE>
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, you should refer to the filed
document for the complete details. 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 "THCH."
FORWARD LOOKING STATEMENTS
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 "IVTX" 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. and IVTX's stock was cleared to trade on
the Over-the-Counter Bulletin Board under the 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 14, 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) The other 36 IVTX shareholders 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 were transferred by BioLogix, Inc. 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. 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.
19
<PAGE>
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. During this private 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.
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/WebMD, 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" and deliver
visitors to the website 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:
20
<PAGE>
1. Is the business strategy/acquisition candidate in the healthcare
industry which may be controlled by us?
2. Does implementation of the internet materially improve the business
strategy/acquisition candidate?
3 Can 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.
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:
- Our revenue sharing program with the Institute for Medical
Studies, Inc., a continuing medical education company; and
- 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
- Physician Pro Care obesity program.
thehealthchannel.com has entered into a revenue sharing agreement with the
Institute of Medical Studies to exchange Internet links and to jointly create
Internet continuing education programs. This agreement terminates on September
29, 2002. Under the terms of the agreement, thehealthchannel.com will give IMS
10% of the revenue received by thehealthchannel.com for the continuing medical
education programs. In addition IMS will receive a fee for accreditation
services which is 10% of any such program's budget. As consideration for
entering into the agreement, IMS received warrants to purchase 400,000 shares at
$.30.
According to their management, the Institute for Medical Studies 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. 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. To date,
thehealthchannel.com has not offered any such classes, nor has it received any
revenues from the agreement.
We are also developing a web based product entitled the Physicians
Automated Attendant. 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 first quarter of the year 2001. We
believe that there are a number of companies developing products which will
directly compete with the Physicians Automated Attendant. 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.
21
<PAGE>
Physician Pro Care is one of the leading professional obesity programs
designed for people who are clinically obese (50 lbs overweight). The
supplemental products that are offered as part of the program will be further
distributed thru website. It is anticipated that can be significant revenue
enhancement due to the increased exposure related to the distribution thru the
internet.
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.
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 fee of $80,000 in monthly
installments of $6,667 each. To date, we have made three installment payments
totaling $20,001.
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 and requires that
we pay EarthLink.com $36,000 in four installments of $9,000 each. To date, we
have made three installment payments to EarthLink.com totaling $27,000.
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. We currently have such relationships
with NewsEdge and Integrative Medicine as discussed 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 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
22
<PAGE>
("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:
<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 have begun accruing advertising revenue from the 24/7 agreement since
July, 2000. We have received additional revenue from website development
projects.
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 as well as http://www.omnisky.com 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 such as 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 this 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,
23
<PAGE>
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 merged. 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 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. We have developed some proprietary technology
related to our wireless applications and strategy. 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 five full-time employees and five part-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
To the best knowledge of management, there is currently no material
litigation pending or threatened against the Company.
24
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors and officers are as follows:
<TABLE>
<CAPTION>
Name Age Office
-----------------------------------------------------------------
<S> <C> <C>
Donald J. Shea 67 Chief Executive Officer, President, and
Chairman of the Board of Directors
Thomas Lonergan 50 Chief Operating Officer, Vice
President, Secretary, Chief
Financial Officer, and Director
Balazs Imre Bodai,
M.S., M.D. 45 Director
Jeffrey H. Berg,
MBA, Ph.D. 57 Director
Joseph Song, M.D.,
F.A.C.C. 40 Director
</TABLE>
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.
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.
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.
25
<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 a Vice President of the Chicago Corporation from 1991 to 1992. Mr. Berg
was a securities 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.
26
<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
------------------- ---------------------------------------
Name and Principal Other Restricted Securities LTIP All other
Position Year Salary Bonus annual Stock Awards Underlying Payouts Compensation
Compensation Options/SARs
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald J. Shea, Chief 1999 -0- -0- None 32,000 -0- None None
Executive Officer(1) 2000 $144,000 -0- -0- 486,957 -0- None None
---------------------------------------------------------------------------------------------------------------------
Thomas P. Lonergan,
Chief Operating 1999 -0- -0- None 52,000 -0- None None
Officer, Vice 2000 $144,000 -0- None 486,957 -0- None None
President, Chief
Financial Officer,
Secretary
---------------------------------------------------------------------------------------------------------------------
All officers as a group 1999 -0- -0- None 84,000 -0- None None
(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.
27
<PAGE>
CERTAIN TRANSACTIONS
We have a Consulting Agreement with Jeffrey Berg, a director of the
Company, whereby, for a one time payment of 2,444 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. 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 666,667 shares of common stock of the Company.
These 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 December 1, 2000 by:
-- each stockholder known by us to be the beneficial owner of
more than five percent of the outstanding Common Stock,
-- each of our directors, and
-- 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) 211,828 *
Thomas P. Lonergan(2) 742,003 2.7%
Balazs Imre Bodai, M.S., M.D.(2) 171,522 *
Jeffrey H. Berg, MBA, Ph.D.(2) 155,133 *
Joseph Song, M.D.(2) 845,208 3.1%
All Officers and Directors
as a Group (5 persons) 2,125,694 8.0%
</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. Shares of Common Stock approved for issuance
but not yet issued is deemed outstanding.
(2) c/o our address: 260 Newport Center Drive, Suite 250, Newport Beach,
California 92660.
28
<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>
---------------------------------------------------------------------------------------------------------------------------
NAME OF SELLING STOCKHOLDER SHARES OF SHARES OF COMMON PERCENTAGE
COMMON STOCKS UNDERLYING OWNED IF
THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Swartz Private Equity, LLC 31,250,000 4,275,000 56.27
---------------------------------------------------------------------------------------------------------------------------
2 Laguna Pacific Partners, L.P. 0 833,333 *
---------------------------------------------------------------------------------------------------------------------------
3 Les Dube and Irene Dube 526,556 0 *
---------------------------------------------------------------------------------------------------------------------------
4 Institute for Medical Studies, Inc. defined Benefit Pension 0 400,000 *
Plan
---------------------------------------------------------------------------------------------------------------------------
5 Institute for Medical Studies, Inc. defined Benefit Pension 44,444 444,444 *
Plan
---------------------------------------------------------------------------------------------------------------------------
6 R+R Enterprises, a Corporation Attn: John Peter McBride 15,555 15,555 *
---------------------------------------------------------------------------------------------------------------------------
7 Daniel Stryker 18,018 18,018 *
---------------------------------------------------------------------------------------------------------------------------
8 Eric Garcia 2,000 2,000 *
---------------------------------------------------------------------------------------------------------------------------
9 Sandrine Cassidy 2,000 2,000 *
---------------------------------------------------------------------------------------------------------------------------
10 J.L. Sommier 333 333 *
---------------------------------------------------------------------------------------------------------------------------
11 Dorothy Ernst 333 333 *
---------------------------------------------------------------------------------------------------------------------------
12 Jeffrey J. Heilman, an individual 4,273 4,273 *
---------------------------------------------------------------------------------------------------------------------------
13 William L. Heilman, TTEE or Marilyn B. Heilman, TTEE FBO The 8,547 8,547 *
Heilman Living Trust
---------------------------------------------------------------------------------------------------------------------------
14 Charles J. Najarian & Adlene L. Ichien Joint Account 23,148 23,148 *
---------------------------------------------------------------------------------------------------------------------------
15 David Stanley, an individual 2,273 2,273 *
---------------------------------------------------------------------------------------------------------------------------
16 Christopher Armstrong, an individual 7,576 7,576 *
---------------------------------------------------------------------------------------------------------------------------
17 Douglas J. Winters, an individual 7,576 7,576 *
---------------------------------------------------------------------------------------------------------------------------
18 Leslie Dube, an individual 42,735 42,735 *
---------------------------------------------------------------------------------------------------------------------------
19 James C. Bridgeman, an individual 8,547 8,547 *
---------------------------------------------------------------------------------------------------------------------------
20 Troy M. Pelfey, an individual 3,788 3,788 *
---------------------------------------------------------------------------------------------------------------------------
21 Jeffrey Scott Greene, an individual 7,576 7,576 *
---------------------------------------------------------------------------------------------------------------------------
22 Fred Brader, an individual 25,641 25,641 *
---------------------------------------------------------------------------------------------------------------------------
23 Wayne A. Frost, an individual 8,547 8,547 *
---------------------------------------------------------------------------------------------------------------------------
24 Dan W. Stephens, an individual 46,296 46,296 *
---------------------------------------------------------------------------------------------------------------------------
25 Bruce and Chieko Planck TTEES FBO The Planck Family Trust 1,616 1,616 *
---------------------------------------------------------------------------------------------------------------------------
26 Lucy Wells, an individual 25,252 25,252 *
---------------------------------------------------------------------------------------------------------------------------
27 Jim Achen Jr., an individual 4,629 4,629 *
---------------------------------------------------------------------------------------------------------------------------
28 Joe Engelbrecht, an individual 27,778 27,778 *
---------------------------------------------------------------------------------------------------------------------------
29 Daniel B. Guinn, an individual 18,518 18,518 *
---------------------------------------------------------------------------------------------------------------------------
29
<PAGE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
NAME OF SELLING STOCKHOLDER SHARES OF SHARES OF COMMON PERCENTAGE
COMMON STOCKS UNDERLYING OWNED IF
THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30 Les Couchman, an individual 3,788 3,788 *
---------------------------------------------------------------------------------------------------------------------------
31 A.G. Edwards & Sons Custodian for Paula S. Blum 11,111 11,111 *
---------------------------------------------------------------------------------------------------------------------------
32 Patty Brader, an individual 4,274 4,274 *
---------------------------------------------------------------------------------------------------------------------------
33 Lesley & Steven Olswang 14,881 14,881 *
---------------------------------------------------------------------------------------------------------------------------
34 Mark Adrian 14,881 44,642 *
---------------------------------------------------------------------------------------------------------------------------
35 Stephen & Laura Knight 1,190 1,190 *
---------------------------------------------------------------------------------------------------------------------------
36 Wayne Samarzich, an individual 33,333 33,333 *
---------------------------------------------------------------------------------------------------------------------------
37 Greg Boston, an individual 758 758 *
---------------------------------------------------------------------------------------------------------------------------
38 Craig Hoad, an individual 530 530 *
---------------------------------------------------------------------------------------------------------------------------
39 Charles J. Najarian & Adlene L. Ichien 41,019 41,019 *
---------------------------------------------------------------------------------------------------------------------------
40 Ronald and/or Jeanette Bear 1,190 1,190 *
---------------------------------------------------------------------------------------------------------------------------
41 Jesse DeCastro, an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
42 James William McInroy 12,578 12,578 *
---------------------------------------------------------------------------------------------------------------------------
43 Jayne Clark, an individual 12,346 12,346 *
---------------------------------------------------------------------------------------------------------------------------
44 Leslie and Irene Dube, Individual 83,333 83,333 *
---------------------------------------------------------------------------------------------------------------------------
45 Robert D. Sarno, an individual 15,873 15,873 *
---------------------------------------------------------------------------------------------------------------------------
46 David Poncoe 18,116 18,116 *
---------------------------------------------------------------------------------------------------------------------------
47 Marcela D. Uson 3,401 3,401 *
---------------------------------------------------------------------------------------------------------------------------
48 The Kellin Revocable Living Trust 66,667 66,667 *
---------------------------------------------------------------------------------------------------------------------------
49 James E. Scrimger, an individual 3,876 3,876 *
---------------------------------------------------------------------------------------------------------------------------
50 The Dowell Revocable Inter Vivos Trust 27,778 27,778 *
---------------------------------------------------------------------------------------------------------------------------
51 Daniel B. Guinn, an individual 17,544 17,544 *
---------------------------------------------------------------------------------------------------------------------------
52 Michael Osburn, an individual 7,333 7,333 *
---------------------------------------------------------------------------------------------------------------------------
53 Wayne Samarzich, an individual 16,667 16,667 *
---------------------------------------------------------------------------------------------------------------------------
54 Wayne & Cheryl Samarzich 11,000 11,000 *
---------------------------------------------------------------------------------------------------------------------------
55 LifeSpan International 66,667 66,667 *
---------------------------------------------------------------------------------------------------------------------------
56 LifeSpan International 28,736 28,736 *
---------------------------------------------------------------------------------------------------------------------------
57 Clell Gladson, an individual 15,152 15,152 *
---------------------------------------------------------------------------------------------------------------------------
58 Allen Thayer 5,555 5,555 *
---------------------------------------------------------------------------------------------------------------------------
59 Roger Thayer, an individual 3,704 3,704 *
---------------------------------------------------------------------------------------------------------------------------
60 Margarita S. Pham, an individual 18,519 18,519 *
---------------------------------------------------------------------------------------------------------------------------
61 Kimberly S. Thayler, an individual 27,778 27,778 *
---------------------------------------------------------------------------------------------------------------------------
62 David Sun, an individual 3,704 3,704 *
---------------------------------------------------------------------------------------------------------------------------
63 David and Edna Thayer 120,370 120,370 *
---------------------------------------------------------------------------------------------------------------------------
64 W. Craig & Gretchen A. Hoad 19,627 19,627 *
---------------------------------------------------------------------------------------------------------------------------
30
<PAGE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
NAME OF SELLING STOCKHOLDER SHARES OF SHARES OF COMMON PERCENTAGE
COMMON STOCKS UNDERLYING OWNED IF
THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
65 Christopher T. Lane and Sonia R. Lane 10,417 10,417 *
---------------------------------------------------------------------------------------------------------------------------
66 Ashok Chopra, M.D. 31,250 31,250 *
---------------------------------------------------------------------------------------------------------------------------
67 David Keschner, M.D. 14,583 14,583 *
---------------------------------------------------------------------------------------------------------------------------
68 Rich Scrimger 3,876 3,876 *
---------------------------------------------------------------------------------------------------------------------------
69 Mr. D.W. Barrick - Barrick Properties, LLC 13,889 13,889 *
---------------------------------------------------------------------------------------------------------------------------
70 Michael Y. Meganck, an individual 47,619 47,619 *
---------------------------------------------------------------------------------------------------------------------------
71 Elaine D. Thayer, an individual 333 333 *
---------------------------------------------------------------------------------------------------------------------------
72 Phillip N. Miller, IV, an individual 1,071 1,071 *
---------------------------------------------------------------------------------------------------------------------------
73 Luis and Angela Saavedra 28,571 28,571 *
---------------------------------------------------------------------------------------------------------------------------
74 Joseph Ynfante, an individual 15,152 15,152 *
---------------------------------------------------------------------------------------------------------------------------
75 Robert Herthel, an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
76 Ross Thayer, an individual 11,905 11,905 *
---------------------------------------------------------------------------------------------------------------------------
77 Charles Najarian 16,667 16,667 *
---------------------------------------------------------------------------------------------------------------------------
78 Kimberly S. Thayler, an individual 9,091 9,091 *
---------------------------------------------------------------------------------------------------------------------------
79 Less and Irene Dube, JTWROS 66,667 66,667 *
---------------------------------------------------------------------------------------------------------------------------
80 Shaker Radman, Jr., an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
81 Richard M. Fematt, an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
82 Salah Yacomb, an individual 12,821 12,821 *
---------------------------------------------------------------------------------------------------------------------------
83 Ali Awad, an individual 6,410 6,410 *
---------------------------------------------------------------------------------------------------------------------------
84 Terrie Mitchell, an individual 15,185 15,185 *
---------------------------------------------------------------------------------------------------------------------------
85 Wail S. Radwan, an individual 7,692 7,692 *
---------------------------------------------------------------------------------------------------------------------------
86 Vang Lai, an individual 14,103 14,103 *
---------------------------------------------------------------------------------------------------------------------------
87 Terri Mitchell, an individual 8,333 8,333 *
---------------------------------------------------------------------------------------------------------------------------
88 Eric G. Lee, an individual 6,061 6,061 *
---------------------------------------------------------------------------------------------------------------------------
89 Regina Marie Hovey & Leland Dele Ronningen, individual 18,182 18,182 *
---------------------------------------------------------------------------------------------------------------------------
90 Charlotte Anderson, an individual 3,333 3,333 *
---------------------------------------------------------------------------------------------------------------------------
91 Clell Gladson, an individual 10,000 10,000 *
---------------------------------------------------------------------------------------------------------------------------
92 Randall and Pamela Bertz 33,333 33,333 *
---------------------------------------------------------------------------------------------------------------------------
93 Leslie and Irene Dube, JTWROS 0 7,143 *
---------------------------------------------------------------------------------------------------------------------------
94 Greg Martinez 4,167 4,167 *
---------------------------------------------------------------------------------------------------------------------------
95 Jeff Delmonte 4,167 4,167 *
---------------------------------------------------------------------------------------------------------------------------
96 Richard Peters & Madeline I. Peters 7,843 7,843 *
---------------------------------------------------------------------------------------------------------------------------
97 Ivan Barrett & Marsha Barrett 3,922 3,922 *
---------------------------------------------------------------------------------------------------------------------------
98 Bob Ludovise 33,333 33,333 *
---------------------------------------------------------------------------------------------------------------------------
99 Lars Krogius 3,788 3,788 *
---------------------------------------------------------------------------------------------------------------------------
31
<PAGE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
NAME OF SELLING STOCKHOLDER SHARES OF SHARES OF COMMON PERCENTAGE
COMMON STOCKS UNDERLYING OWNED IF
THE WARRANTS MORE THAN 1%
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
100 Tris Krogius 3,788 3,788 *
---------------------------------------------------------------------------------------------------------------------------
101 Wendy Baldyga 8,333 8,333 *
---------------------------------------------------------------------------------------------------------------------------
102 Dan E. Reiders, MD 66,667 66,667 *
---------------------------------------------------------------------------------------------------------------------------
103 Ivan Barrett 4,386 4,386 *
---------------------------------------------------------------------------------------------------------------------------
104 Richard Peters 4,386 4,386 *
---------------------------------------------------------------------------------------------------------------------------
105 Kenneth M. Greenberg 5,208 5,208 *
---------------------------------------------------------------------------------------------------------------------------
106 Mario Pastorello 9,259 9,259 *
---------------------------------------------------------------------------------------------------------------------------
107 Joseph E. Weisz 13,889 13,889 *
---------------------------------------------------------------------------------------------------------------------------
108 Joseph E. Weisz 2,778 2,778 *
---------------------------------------------------------------------------------------------------------------------------
109 Mario Pastorello 15,490 15,490 *
---------------------------------------------------------------------------------------------------------------------------
110 Paul Dunn 3,333 3,333 *
---------------------------------------------------------------------------------------------------------------------------
111 Gregory J. Martinez 4,167 4,167 *
---------------------------------------------------------------------------------------------------------------------------
112 Steven J. Weisel 3,333 3,333 *
---------------------------------------------------------------------------------------------------------------------------
113 Tim D. Branner 1,667 1,667 *
---------------------------------------------------------------------------------------------------------------------------
114 Trevor J. Greenberg & Henry S. Greenberg 1,667 1,667 *
---------------------------------------------------------------------------------------------------------------------------
115 Henry S. Greenberg 3,333 3,333 *
---------------------------------------------------------------------------------------------------------------------------
116 Henry S. Greenberg 12,500 12,500 *
---------------------------------------------------------------------------------------------------------------------------
117 Henry S. Greenberg 6,250 6,250 *
---------------------------------------------------------------------------------------------------------------------------
118 Kenneth M. Greenberg 5,208 5,208 *
---------------------------------------------------------------------------------------------------------------------------
119 Mario Pastorello 9,259 9,259 *
---------------------------------------------------------------------------------------------------------------------------
120 Kevin C. Gilbert 8,333 8,333 *
---------------------------------------------------------------------------------------------------------------------------
121 Andrew M. Ames & Lisa D. Ames 9,259 9,259 *
---------------------------------------------------------------------------------------------------------------------------
122 Amer Ali 10,417 10,417 *
---------------------------------------------------------------------------------------------------------------------------
123 Carlos Tarin Garcia 3,968 3,968 *
---------------------------------------------------------------------------------------------------------------------------
124 Ruben T. Garcia 3,968 3,968 *
---------------------------------------------------------------------------------------------------------------------------
125 David L. Thayer & Edna L. Thayer 18,519 18,519 *
---------------------------------------------------------------------------------------------------------------------------
126 Ryan Matthew Adams, an individual 333 333 *
---------------------------------------------------------------------------------------------------------------------------
127 Laura Vega, an individual 15,789 15,789 *
---------------------------------------------------------------------------------------------------------------------------
128 Carolyn Kildes Trustee, Joseph G. Urquhart 34,,722 34,772 *
---------------------------------------------------------------------------------------------------------------------------
129 Joseph G. Urquhart 69,445 69,445 *
---------------------------------------------------------------------------------------------------------------------------
130 Jay and Tana Boersma 20,833 20,833 *
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES 33,751,617 7,490,761
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Percent owned is less than 1%
32
<PAGE>
PLAN OF DISTRIBUTION
This prospectus involves: This Offering relates to:
-- 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,
-- the possible sale from time to time of 526,556 shares of stock
issued in connection with a loan to the Company made by Les Dube and Irene Dube,
and
-- 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, and
-- the possible sale, from time to time, by other selling shareholders
of thehealthchannel.com, Inc. of up to 1,975,284 shares of common stock and
2,382,427 shares underlying warrants of thehealthchannel.com, Inc.
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. Such compensation for a particular broker-dealer may
be in excess of customary commissions.
Swartz is an "underwriter" within the meaning of Section 2(11) of the Act.
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. Any commissions received by underwriters and any profit realized by
underwriters 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.
33
<PAGE>
LES DUBE AND IRENE DUBE
In return for making a loan to us, we are issuing 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 175,000,000 shares of
Common Stock, no par value. 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 you should consult our articles of incorporation and
bylaws which have been filed with the SEC for the complete details.
COMMON STOCK
As of December 5, 2000, there were 27,610,953 shares of common stock
outstanding. On November 17, 2000, our common stock underwent a one for three
reverse split.
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; therefore 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.
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.
34
<PAGE>
FINANCIAL STATEMENTS
The following financial statements are included herein:
Balance Sheet of the Company as of September 30, 2000 (unaudited) and
December 31, 1999 (audited)
Statements of Operations of the Company for the nine months ended
September 30, 2000 (unaudited), the nine months ended September 30, 1999
(unaudited), the fiscal year ended December 31, 1999 (audited), the fiscal year
ended December 31, 1998 (audited), the Period from Inception (September 6, 1999)
to December 31, 1999 (audited), and for the period from September 6, 1996
(inception) to September 30, 2000 (unaudited)
Statement of Shareholders' Equity
Statements of Cash Flows of the Company for the nine months ended
September 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 September
30, 2000 (unaudited)
35
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4-5
Statement of Cash Flows 6-7
Notes to Financial Statements 8-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
thehealthchannel.com, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of thehealthchannel.com, Inc. (a
development stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements as of December
31, 1998 and for the year then ended and for the period from inception of
operations on September 4, 1996 to December 31, 1998 was audited by other
auditors whose report dated April 1, 1999, included an explanatory paragraph
which expressed substantial doubt about the Company's ability to continue as a
going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of thehealthchannel.com, Inc. as
of December 31, 1999, and the results of its operations and its cash flows for
the period then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses from operations, has negative cash flows
from operations, and its current liabilities exceeds its current assets. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
February 21, 2000
1
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
---- ----
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 280,049 $ 92,237
Software development costs 34,500 --
Loan receivable 63,000 21,000
Prepaid expenses and other receivables 41,203 129,399
------------ ------------
Total current assets 418,752 242,636
PROPERTY AND EQUIPMENT, net of
accumulated depreciation and amortization 628,269 838,424
DEPOSITS 3,852 --
------------ ------------
$ 1,050,873 $ 1,081,060
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 923,473 $ 510,967
Loans payable, short-term, 6% interest, due
February 21, 2001, net of unamortized discount
of $447,916 52,084 --
------------ ------------
Total current liabilities 975,557 510,967
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 175,000,000 shares
authorized, 27,000,993 and 22,960,597 shares issued
and outstanding (see Note 8), respectively 27,001 22,961
Additional paid-in capital 8,017,364 6,246,508
Subscriptions receivable -- (25,000)
Deficit accumulated during the development stage (7,969,049) (5,674,376)
------------ ------------
Total stockholders' equity 75,316 570,093
------------ ------------
$ 1,050,873 $ 1,081,060
============ ============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From inception on
Nine months ended Nine months ended Year ended Year ended September 4, 1996 to
September 30, 2000 September 30, 1999 December 31, 1999 December 31, 1998 September 30, 2000
---------------- ---------------- ---------------- ---------------- ----------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 10,870 $ -- $ -- -- $ 10,870
COST OF SALES -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
GROSS PROFIT 10,870 -- -- -- 10,870
GENERAL AND ADMINISTRATIVE EXPENSES 2,305,543 653,662 3,460,728 -- 5,766,271
---------------- ---------------- ---------------- ---------------- ----------------
LOSS FROM CONTINUING OPERATIONS (2,294,673) (653,662) (3,460,728) -- (5,755,401)
---------------- ---------------- ---------------- ---------------- ----------------
DISCONTINUED OPERATIONS:
Loss on discontinued operations -- (367,014) (367,014) (1,472,601) (2,114,398)
Loss on disposal of segment -- (99,250) (99,250) -- (99,250)
---------------- ---------------- ---------------- ---------------- ----------------
Total discontinued operations -- (466,264) (466,264) (1,472,601) (2,213,648)
---------------- ---------------- ---------------- ---------------- ----------------
NET LOSS $ (2,294,673) $ (1,119,926) $ (3,926,992) $ (1,472,601) $ (7,969,049)
================ ================ ================ ================ ================
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.09) $ (0.05) $ (0.18) $ (0.04)
================ ================ ================ ================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED 24,715,990 22,078,199 22,125,497 33,786,016
================ ================ ================ ================
</TABLE>
See accompanying 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>
DESCRIPTION
Balance at December 31, 1997, restated for
1:3 stock split on October 12, 2000 11,388,007 $ 11,388 $ 379,859 $ -- $ (274,783) $ 116,464
Shares sold for cash 3,334,252 3,334 473,130 476,464
Shares issued in exchange for services 6,998,481 6,998 1,054,541 1,061,539
Common stock subscription 184,413 184 59,816 (60,000)
Net loss for the year ended
December 31, 1998 (1,472,601) (1,472,601)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 21,905,153 21,905 1,967,345 (60,000) (1,747,384) 181,866
IVTX
Issuance of common stock from IVTX
private placement offering (Note 4) 113,043 113 112,086 60,000 172,199
Issuance of shares for services rendered on
behalf of the Company (Note 4) 34,800 35 52,165 52,200
THEHEALTHCHANNEL.COM (FORMERLY IVTX)
Contribution of asset from Biologix
International, Ltd. (Note 3) 947,835 947,835
Issuance of common stock from private
placement offering (Note 4) 405,934 406 510,134 (25,000) 485,540
Issuance of common stock related to
settlement agreements (Note 4) 501,667 502 1,796,843 1,797,345
(Continued)
</TABLE>
See accompanying 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 given directly by shareholders for
services rendered on the Company's
behalf (Note 4) 860,100 860,100
Net loss for the year ended
December 31, 1999 (3,926,992) (3,926,992)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 22,960,597 22,961 6,246,508 (25,000) (5,674,376) 570,093
Shares exchanged from pools (See Note 4) 1,199,920 1,200 (1,200)
Private placement offering, net 1,521,349 1,521 898,719 900,240
Proceeds received from stock subscriptions 25,000 25,000
Shares issued in settlement of debt (Alphabet
Media) 53,333 53 46,987 47,040
Shares issued for services (National
Securities) 5,170 5 7,333 7,338
Shares issued for services (Quinn Emanuel) 27,633 27 30,546 30,673
Shares issued in settlement of legal matter
(Beuning and Redding) 15,260 15 16,650 16,665
Shares issued in settlement (Marshall
Redding) 274,508 275 172,665 172,940
Shares issued for bridge loan (Les Dube) 526,556 527 286,973 287,500
Shares issued to Larry Horwitz for
consulting services 416,667 417 312,083 312,500
Net loss for the nine months ended
September 30, 2000 (unaudited) (2,294,673) (2,294,673)
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 2000 (unaudited) 27,000,993 $ 27,001 $ 8,017,364 $ -- $(7,969,049) $ 75,316
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying 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>
Nine months ended Nine months ended Year ended
September 30, 2000 September 30, 1999 December 31, 1999
------------------ ------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (2,294,673) $ (1,119,926) $ (3,926,992)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Depreciation and amortization 339,003 52,658 135,230
Loss on disposal of division -- 99,250 99,250
Non cash expenses from stock issuances 874,656 -- 2,611,423
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable -- 3,336 189
Inventory -- 76,982 (10,312)
Software development costs (34,500) -- --
Loan interest (537,500) -- --
Prepaid expenses (1,388) 33,952 (108,447)
Deposits (3,852) 2,597 2,597
(INCREASE) DECREASE IN LIABILITIES
accounts payable and accrued expenses 602,091 804,036 661,157
------------------ ------------------ ------------------
Net cash used for operating activities (1,056,163) (47,115) (535,905)
------------------ ------------------ ------------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
payments to acquire property, equipment and
other assets (39,265) -- (25,818)
------------------ ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
From inception on
Year ended September 4, 1996 to
December 31, 1998 September 30, 2000
------------------ ------------------
(unaudited)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss $ (1,472,601) $ (7,969,049)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Depreciation and amortization -- 474,232
Loss on disposal of division -- 99,250
Non cash expenses from stock issuances 1,041,138 4,680,217
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable (3,336) 3,147
Inventory (783) 83,077
Software development costs -- (34,500)
Loan interest -- (537,500)
Prepaid expenses (950) (130,787)
Deposits -- (6,449)
(INCREASE) DECREASE IN LIABILITIES
accounts payable and accrued expenses 34,311 956,510
------------------ ------------------
Net cash used for operating activities (402,221) (2,381,852)
------------------ ------------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
payments to acquire property, equipment and
other assets (46,959) (65,083)
------------------ ------------------
</TABLE>
(Continued)
See accompanying notes to financial statements.
6
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Nine months ended Nine months ended Year ended
September 30, 2000 September 30, 1999 December 31, 1999
------------------ ------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Assets and liabilities transferred out (See Note 1) -- (26,329) (26,329)
Loan receivable, officer-stockholders -- 41,952 --
Stock subscription receivable 25,000 -- (25,000)
Loans receivable (42,000) -- --
Proceeds from loans 400,000 -- --
Proceeds from issuance of capital stock 900,240 140,000 682,738
------------------ ------------------ ------------------
Net cash provided by financing activities 1,283,240 155,623 631,409
------------------ ------------------ ------------------
NET INCREASE (DECREASE) IN CASH 187,812 108,508 69,686
CASH, beginning of year 92,237 22,551 22,551
------------------ ------------------ ------------------
CASH, end of year $ 280,049 $ 131,059 $ 92,237
================== ================== ==================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES -
Non-cash compensation from stock issuances $ 874,656 $ -- $ 2,611,423
================== ================== ==================
Acquisition of website technology and related assets $ -- $ -- $ 947,835
================== ================== ==================
Proceeds from loan payable paid directly to Horwitz
and Beam from Laguna Pacific on behalf of the
Company $ 100,000 $ -- $ --
================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
From inception on
Year ended September 4, 1996 to
December 31, 1998 September 30, 2000
------------------ ------------------
(unaudited)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Assets and liabilities transferred out (See Note 1) -- (26,329)
Loan receivable, officer-stockholders (41,952) --
Stock subscription receivable -- --
Loans receivable (15,000) (63,000)
Proceeds from loans -- 400,000
Proceeds from issuance of capital stock 476,464 2,416,313
------------------ ------------------
Net cash provided by financing activities 419,512 2,726,984
------------------ ------------------
NET INCREASE (DECREASE) IN CASH (29,668) 280,049
CASH, beginning of year 52,219 --
------------------ ------------------
CASH, end of year $ 22,551 $ 280,049
================== ==================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES -
Non-cash compensation from stock issuances $ 1,041,138 $ 4,680,217
================== ==================
Acquisition of website technology and related assets $ -- $ 947,835
================== ==================
Proceeds from loan payable paid directly to Horwitz
and Beam from Laguna Pacific on behalf of the
Company $ -- $ 100,000
================== ==================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GOING CONCERN:
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has no
current source of revenue. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. This factor raises substantial doubt about the Company's
ability to continue as a going concern.
Management recognizes that the Company must generate additional
resources to enable it to continue operations. Management's plans
also include the sale of additional equity securities. However, no
assurance can be given that the Company will be successful in
raising additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional equity, that the
Company will achieve profitability or positive cash flow. If
management is unable to raise additional capital and expected
significant revenues do not result in positive cash flow, the
Company will not be able to meet its obligations and will have to
cease operations.
GENERAL:
With headquarters in Newport Beach, California, thehealthchannel.com
(formerly Innovative Tracking Solutions Corporation or "IVTX") is a
comprehensive health information Internet portal that offers a
one-step access point for consumers and professionals who want to
explore a broad array of health topics. The portal currently indexes
other Internet health and health-related sites, has direct links
with online health-care information service centers and provides
detailed coverage of medical conditions. Consumers may access a
global library of health-care information while searching for
products and services. The site offers a complete Internet portal
for state-of-the-art continuing medical education for professionals.
The Company was incorporated under the laws of the state of Delaware
on September 4, 1996.
BUSINESS ACTIVITY:
In early 1999, IVTX management determined that the "public" status
of IVTX was detrimental to IVTX' operations due to the time and
expense burdens of being a public company. IVTX management then
decided to take the operations of IVTX "private" by transferring all
IVTX assets and liabilities to a newly formed private company and
selling the public shell to a suitable company, preferably in the
healthcare industry. On April 13, 1999, IVTX obtained written
approval of 64.4% of the total voting stock of IVTX, voting "for"
taking the operations of IVTX private and selling the public shell
to a suitable company.
8
<PAGE>
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.
9
<PAGE>
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.
10
<PAGE>
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 September 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 nine
months ended September 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 850,000 restricted shares of the
Company's common stock. Website technology cost includes the design
(including software configuration and interfaces), coding, installation
costs to hardware and testing. The website asset (a non-monetary asset)
acquired was recorded at the transferors' (Biologix International, Ltd.)
historical cost basis determined under generally accepted accounting
principles.
Property and equipment is comprised of the following:
<TABLE>
<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.
11
<PAGE>
(4) STOCKHOLDERS' EQUITY:
Biologix paid $250,000 for 850,000 shares of common stock of IVTX,
representing the majority controlling interest held by the officers and
directors of IVTX (see Note 3 for the recording of this issuance). This
purchase was made pursuant to the exemption from registration set forth in
Section 4(1) of the Securities Act of 1933, as amended (the "Act"), as a
non-issuer transaction. The facts that make this exemption available are
that the officers and directors of IVTX sold their stock to Biologix; IVTX
itself did not issue any new stock. Additionally, Biologix agreed to
contribute thehealthchannel.com assets and technology to IVTX in exchange
for the IVTX shareholders agreeing to split their stock and exchange
shares with the shareholders of Biologix. This exchange was made pursuant
to the exemption set forth in Section 4(1) of the Act as a non-issuer
transaction. The facts that make this exemption available are that the
IVTX shareholders merely transferred their shares of IVTX (newly named
thehealthchannel.com, Inc.) to the shareholders of Biologix who elected to
exchange their shares. The shares of stock of IVTX were forward split
28.22-for-one and the IVTX shareholders opted to exchange each share they
held of IVTX stock for two shares of common stock of IVTX under its new
name of thehealthchannel.com, Inc. and contributed the remaining 26.22
shares each into a share exchange pool as presented in the statement of
stockholders' equity. Then approximately 800 Biologix shareholders were
provided with the alternative of retaining their Biologix shares or
retiring their Biologix shares in exchange for IVTX shares
(thehealthchannel.com shares) contained in the exchange pool on a one for
one share basis. Approximately 630 Biologix shareholders elected to
exchange their Biologix shares for thehealthchannel.com shares from the
pool (the "Exchange").
During October 2000, the shareholders approved a stock split of 1:3
shares, the effect of which has been retroactively applied in the
accompanying financial statements. The number of authorized
shares of common stock was increased to 175,000,000.
The Exchange was announced to shareholders of both IVTX and Biologix
through press releases and a letter to IVTX shareholders. After the
forward stock split, the Company (thehealthchannel.com, Inc. formerly
Innovative Tracking Solutions Corporation) had 35,606,519 post split
shares of common stock issued and outstanding. The Exchange began on
August 6, 1999 and ended on October 31, 1999 to ensure that all
shareholders had enough time and notice to exchange their shares.
Following the conclusion of the Exchange period, the Company had
approximately 12,667,000 post split shares reserved for exchange with
Biologix shareholders that were not exchanged.
During the year ended December 31, 1998, the Company sold 3,334,252
restricted (post split) shares of the Company's common stock for total
proceeds of $476,464 under Regulation D of the Securities Act of 1933.
During the year ended December 31, 1998, the Company recorded an expense
from the issuance of approximately 7,000,000 post split shares in exchange
for services and license agreements. Expense amounts totaling $1,061,539
were determined based on share value of consideration given and/or
consideration received, which ever was more clearly determinable.
Prior to the April 14, 1999 transfer of the IVTX assets and liabilities
(Note 1), the Company had concluded a private placement offering under
Rule 504 of Regulation D, whereby 113,043 (post split) shares of common
stock were sold at an offering price of $1.52 (post split) per share. This
offering resulted in net proceeds of $172,199. Also, the Company issued
34,800 (post split) shares of common stock for services rendered. The
services have been recorded at a fair value of $1.50 (post split) per
share for a total of $52,200.
12
<PAGE>
In September 1999, the Company initiated a Rule 506, Regulation D private
placement of 405,934 restricted shares of the Company's common stock from
shares available from the forward stock split and 1,217,802 warrants to
purchase restricted shares of the Company's' common stock with an exercise
price of $0.75, for proceeds of $510,540, of which $25,000 was received in
January 2000. The shares issued and the shares issuable upon exercise of
the warrants have piggyback registration rights in the event the Company
files a Registration Statement with the Securities and Exchange
Commission. The warrants vest immediately and expire two years from the
date of issuance.
The Company issued 501,667 shares of common stock for satisfaction of
legal settlement agreements the Company entered into for a total of
$1,797,345.
On December 15, 1999, shareholders conveyed 519,738 post split shares of
common stock to certain individuals and 84,000 shares of common stock to
officers of the Company for satisfaction of expenses and payment of
salaries these individuals and officers had rendered on the Company's
behalf. This resulted in recording a charge to expense and additional paid
in capital of $860,100 for the year.
During July 1999, the Company entered into a Consulting Agreement with
Ocean View Management, LLC. Under the Consulting Agreement, Ocean View
Management received a one time payment of 25,000 post split shares of
common stock of the Company. This issuance was exempt from the
registration provisions of the Act by virtue of Section 4(2) of the Act,
as transactions by an issuer not involving any public offering. The
securities issued pursuant to the Consulting Agreement are restricted
securities as defined in Rule 144.
During August 1999, the Company entered into an Agreement for Financial
Public Relation Services with Market Pathways Financial Relations
Incorporated. Under the Agreement for Financial Public Relations Services,
Market Pathways Financial Relations Incorporated received a one time
payment of 28,333 post split shares of common stock of the Company. This
issuance was exempt from the Registration provisions of the Act by virtue
of Section 4(2) of the Act, as transactions by an issuer not involving any
public offering. The securities issued pursuant to the Agreement are
restricted securities as defined in Rule 144.
On January 5, 2000, the Company entered into a Consulting Agreement with
Lawrence W. Horwitz pursuant to which Mr. Horwitz agreed to provide
business development and advisory services. For services rendered under
this Consulting Agreement, the Company issued 416,667 post split shares of
common stock of the Company (the "Shares"). The Shares were registered on
Form S-8, for which, an expense of $312,500 has been recorded. (Unaudited)
On August 5, 2000, the Company approved the issuance of 539,986 post split
restricted shares to 12 officers, directors and consultants in payment for
services rendered to the Company. The related expense amounts have been
recorded in accounts payable and accrued expenses as shares had not yet
been issued. (Unaudited)
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. (Unaudited)
13
<PAGE>
(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.
14
<PAGE>
LITIGATION
The Company has been named as a cross-defendant in a cross-complaint filed
by its Former President in an action pending in the Superior Court State
of California for the County of San Francisco, Case No. 307364. This
action was initiated by Biologix International, Ltd. ("Biologix") against
the former President on October 22, 1999 alleging causes of action against
the former President for: (1) temporary restraining order and preliminary
and permanent injunction; (2) breach of fiduciary duty; (3) fraud by
intentional misrepresentation; (4) conversion; (5) possession of personal
property; (6) declaratory relief; and (7) accounting. The claims alleged
by Biologix relate to the actions and conduct of the former President as
an officer and director of Biologix. Thehealthchannel.com is named as a
cross-defendant in the cross-complaint of the former President in a cause
of action for breach of contract based upon an alleged employment
agreement between the former President and Biologix. The former President
claims that this alleged employment agreement is the responsibility of
Thehealthchannel.com based upon thehealthchannel.com's purchase of the
internet related assets from Biologix. Thehealthchannel.com was served
with the cross-complaint on December 14, 1999. The former President seeks
$400,000 in damages and options to purchase one million shares of Biologix
stock. Thehealthchannel.com has answered the cross-complaint denying the
allegations and will aggressively defend the claims asserted by the former
President. In the event any judgments were brought against the Company, it
may have a severe and adverse effect on the Company's ability to continue
as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty, as the
amounts are not estimable.
To the best knowledge of management, there is no other material litigation
pending or threatened against the Company.
(8) SUBSEQUENT EVENTS (UNAUDITED):
REVERSE STOCK SPLIT
The Board of Directors and shareholders of the Company have approved a
reverse stock split of 1:3 common shares, the effect of which has been
retroactively applied in the accompanying financial statements.
(9) COMMITMENTS (UNAUDITED):
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.
15
<PAGE>
BRIDGE FINANCING
During August 2000, the Company entered into an agreement to borrow
$250,000 from Laguna Pacific Partners L.P., ("Laguna Partners") a Delaware
limited partnership. This loan is secured by all assets of the Company,
bears interest at 6% per annum and is payable on the earlier of 180 days
or within 30 days from the effective date of the Form SB-2 above. In
consideration for this loan, Laguna Partners will receive warrants for
common stock equal to the quotient of $250,000 divided by the closing bid
of the Company's stock price immediately preceding the effective date of
the Form SB-2 above. The term of this warrant is five years and the
exercise price is $1.
During August 2000, the Company entered into an agreement to borrow
$250,000 from Les and Irene Dube, ("Dube") individuals. This loan bears
interest at 6% per annum and is payable on the earlier of 180 days or
within 30 days from the effective date of the Form SB-2 above. In
consideration for this loan, Dube will receive warrants for common stock
equal to the quotient of $250,000 divided by the closing bid of the
Company's stock price immediately preceding the effective date of the Form
SB-2 above.
The Company will record interest expense using the fair value of $0.165
per warrant granted, measured at the date of grant using the Black Scholes
model with a 70% volatility. This expense will be recorded at the date the
warrants become issuable based upon the quotient calculation mentioned
above, as the future stock prices are not presently determinable.
(10) NOTE TO INTERIM FINANCIAL STATEMENTS (UNAUDITED):
In September 1999, the Company initiated a Rule 506, Regulation D private
placement of 1,927,274 (post split) restricted shares of the Company's
common stock from shares available from the forward stock split and
1,927,274 (post split) warrants to purchase restricted shares of the
Company's' common stock with an exercise price determined at 70% of the
trading value at the date of grant, for net proceeds of $1,410,779. The
shares issued and the shares issuable upon exercise of the warrants have
piggyback registration rights in the event the Company files a
Registration Statement with the Securities and Exchange Commission. The
warrants vest immediately and expire two years from the date of issuance.
The private placement offering was closed on August 29, 2000.
16
<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:
- a breach of the duty of loyalty to us or our stockholders;
- an act or omission that involves intentional misconduct or a knowing
violation of the law and an act or omission not in good faith;
- liability arising under Section 174 of the Delaware General
Corporation Law, relating to unlawful stock purchases, redemption,
or payment of dividends; or
- 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>
II 1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
All share numbers, warrant numbers, unit numbers, and prices have been
adjusted to retroactively reflect the one for three reverse stock split
implemented on November 17, 2000.
A. SALES OF UNREGISTERED SECURITIES TO OFFICERS & DIRECTORS
1. In September 1996 upon the inception of IVTX, IVTX issued 266,667
shares of restricted Common Stock to a founder of IVTX and 215,167 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 54,167 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 8,333 shares of
restricted Common Stock at a total offering price of $20,000 to a director
of IVTX. IVTX sold and issued the 8,333 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 83,333 and 66,667
shares respectively of Common Stock in IVTX at an exercise price of $1.50
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
156,000 shares of restricted Common Stock and 6,667 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 83,333 shares of restricted Common Stock
each to two licensors, who are also officers of IVTX, in partial
fulfillment of the terms of licensing agreements with these officers.
Before issuance, one officer, as licensor, assigned the total of all
83,333 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.
7. On September 1, 1999, the Company entered into a Consulting
Agreement with Jeffrey H. Berg, one of its Directors. Jeffrey H. Berg
agreed to introduce potential investors and financial institutions to the
Company. In consideration of entering into this agreement, Mr. Berg
received 7,333 shares of common stock. Mr. Berg is an accredited investor.
8. On July 5, 2000, the Company approved the issuance of 295,653
restricted shares to the Company's officers and directors.
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 212,333 shares of restricted Common Stock to six accredited
investors for a total offering price of $637,000. In the offering, IVTX
sold 45,667 shares to five
II 2
<PAGE>
accredited investors for the total proceeds of $137,000 and the remaining
166,667 shares offered were subscribed for investment intent by an
additional accredited investor for purchase at $3.00 per share. There was
no underwriter involved in the issuances of the 45,667 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 61,400 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
performed or to be performed was $184,200 and was based on a price of
$3.00 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 166,667 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 41,667 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 30,904
units at $2.00 per unit which included 93,179 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 $4.50
per share to $1.50 per share. Specifically, IVTX sold 2,000 shares at
$4.50 per share; 4,822 shares at $3.36 per share; 17,167 shares at $3.00
per share; 6,666.67 shares at $2.70 per share; 20,000 shares at $2.25 per
share; and 10,000 shares at $1.50 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 42,667 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
$6.00 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 134,226 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.
II 3
<PAGE>
4. In December 1997, the sale of the 166,667 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 $3.00
subscription rights back to IVTX for all 166,667 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 166,667
shares of restricted Common Stock at $3.00 per share via a private
offering pursuant to Section 4(2) of the Act for a total offering price of
$500,000. IVTX sold 146,779 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.
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.
5. In the Acquisition which closed on July 28, 1999, BioLogix paid
$250,000 for 850,000 shares of common stock of IVTX , representing the
majority controlling interests held by the officers and directors of IVTX.
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 three-for-one basis (the "Exchange").
6. 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 25,000 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. Richard
Wolpow is the beneficial owner of Ocean View Management and had full
access to Company information as a consultant to the Company. The
securities issued pursuant to the Consulting Agreement are restricted
securities as defined in Rule 144.
7. 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 28,333 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 beneficial owner of Market Pathways Financial
Relations Incorporated is Shannon Squyres. Shannon Squyres is an
accredited investor. The securities issued pursuant to the Agreement are
restricted securities as defined in Rule 144.
8. 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 $2.25
per Unit with a $2.25 exercise price on the Warrants. However, the price
of the Company's publicly traded stock dropped precipitously since the
beginning of this private offering and the Company has lowered the
purchase price of the Units and the corresponding exercise price on the
Warrants. To date, the Company has sold a total
II 4
<PAGE>
of 1,927,283 Units to 120 accredited investors for total gross proceeds of
$1,410,779. 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.
9. 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. This consulting
agreement is attached as Exhibit 47. For services rendered under the
consulting agreement, we issued Mr. Horwitz 666,667 shares of common stock
of the Company. These shares were registered on Form S-8. Under the terms
of the consulting agreement, in October 2000, Mr. Horwitz was issued an
additional 250,000 shares. This transaction is exempt from registration
under Section 4(2) of the Act.
10. On July 5, 2000, the Company approved the issuance of 200,000
restricted shares to 7 employees and consultants in payment for services
rendered to the Company.
11. On June 19, 2000, the Company issued 1,150,000 warrants to purchase
common stock to Swartz Private Equity LLC in consideration of entering
into an Equity Line Letter of Agreement for a $30,000,000 equity line of
credit. These warrants are exercisable by Swartz Private Equity LLC as
follows: 383,333 shares became exercisable after a 15 business day review
period of the documentation for the transaction, 383,333 shares became
exercisable after the execution of the Investment Agreement for the
$30,000,000 equity line of credit. The remaining 383,333 shares are
exercisable upon the earlier of (i) the date of effectiveness of Company's
Form SB-2 registration statement filed to register the transaction, or
(ii) December 19, 2000.
12. On August 1, 2000, the Company agreed to issue 833,333 shares of
common stock to Laguna Pacific Partners L.P. in consideration recently
issued a loan in the amount of $250,000 from Laguna Pacific Partners L.P.,
a Delaware limited partnership. This loan is made pursuant to a secured
note which bears interest at the rate of 6% and is payable on the earlier
of February 3, 2000 or the effective date of this prospectus. The loan is
secured by all of the Company's assets.
13. On August 15,2000, the Company entered into an Investment Agreement
with Swartz Private Equity LLC to put as much as $30,000,000 of Company
stock to Swartz, subject to the terms of the Investment Agreement which is
attached as Exhibit 28. The Company is registering 31,250,000 shares of
common stock and 4,275,000 shares of common stock underlying warrants to
have available for this transaction. This transaction is exempt under
Section 4(2) of the Act.
13. On August 18, 2000, in consideration for a loan of $250,000, the
Company agreed to issue 526,556 shares to Les Dube and Irene Dube and a
warrant for common stock common stock for an amount equal to the quotient
of $250,000 divided by the closing bid of our stock immediately preceding
the effective date of the Form SB-2 that the Company is currently being
reviewed by the SEC. The term of the warrant is five years and the
exercise price is $1 in the aggregate. The loan is made pursuant to a note
which bears interest at the rate of 6% and is payable on the earlier of
February 18, 2001, or the effective date of this prospectus. The shares
and warrants issued to Mr. and Ms. Dube are being registered in this
prospectus and upon repayment of this loan, these shares are to be
retained by them.
14. In August and September of this year, the Company agreed to issue
34,482 shares of Company stock to Integrity Media, Inc. pursuant to an
agreement signed between the Company and Integrity Media, Inc. on August
18, 2000. The agreement provides for Integrity Media, Inc. to furnish
public relations services to the Company in return for 17,241 shares of
Company stock per month. The term of the Agreement is one month but it is
renewable on a month to month basis with the mutual consent of both
parties. This agreement was renewed by the parties in September, 2000.
II 5
<PAGE>
The following documents that we filed with the SEC are incorporated by reference
in this prospectus:
SEC Filing Period or Date
---------- --------------
Current Report on Form 10QSB (File No. 0-29822) November 20, 2000
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*
* Previously filed
II 6
<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(Incorporated by reference from Exhibit 10.8 filed November 20,
2000, Registration Number 0-29822)
10.22 thehealthchannel.com, Inc. Investment Agreement dated August 15, 2000*
10.23 Agreement between thehealthchannel.com, Inc. and Swartz Private Equity,
LLC, dated August 15, 2000 (Incorporated by reference from Exhibit 10.7
filed November 20, 2000, Registration Number 0-29822)
10.24 Acknowledgement & Agreement thehealthchannel.com, Inc. and Swartz
Private Equity, LLC dated August 15, 2000 (Incorporated by reference
from Exhibit 10.11 filed November 20, 2000, Registration Number
0-29822)
10.25 Registration Rights Agreement between thehealthchannel.com and Swartz
Private Equity, LLC dated as of August 15, 2000 (Incorporated by
reference from Exhibit 10.10 filed November 20, 2000, Registration
Number 0-29822)
10.28 Investment Agreement between thehealthchannel.com and Swartz Private
Equity, LLC, dated August 15, 2000 (Incorporated by reference from
Exhibit 10.9 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)1
10.29 Warrant Side Agreement between thehealthchannel.com and Swartz Private
Equity, LLC, dated August 15, 2000 (Incorporated by reference from
Exhibit 10.8 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.30 Warrant to Purchase Common Stock of thehealthchannel.com by Swartz
Private Equity, LLC, dated June 28, 2000 (Incorporated by reference
from Exhibit 10.7 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)
10.31 Registration Rights Agreement between thehealthchannel.com and Swartz
Private Equity, LLC, dated August 25, 20002(Incorporated by reference
from Exhibit 10.10 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)
10.32 Acknowledgement and Agreement between thehealthchannel.com and Swartz
Private Equity, LLC, dated August 15, 2000 (Incorporated by reference
from Exhibit 10.11 to the Registration Statement Form 10QSB filed
November 20, 2000, Registration Number 0-29822)
10.33 6% Secured Note between thehealthchannel.com and Laguna Pacific
Partners, L.P.,dated August 1, 2000 (Incorporated by reference from
Exhibit 10.2 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.34 Unit Warrant Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000 (Incorporated by reference from
Exhibit 10.3 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.35 Security Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000 (Incorporated by reference from
Exhibit 10.4 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.36 Investor Representation and Warranties Agreement between
thehealthchannel.com and Laguna Pacific Partners, L.P., dated August 1,
2000 (Incorporated by reference from Exhibit 10.5 to the Registration
Statement Form 10QSB filed November 20, 2000, Registration Number
0-29822)
10.37 Subscription Agreement between thehealthchannel.com and Laguna Pacific
Partners, L.P., dated August 1, 2000 (Incorporated by reference from
Exhibit 10.6 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.38 Subscription Agreement between thehealthchannel.com and Les Dube and
Irene Dube, dated August 21, 2000 (Incorporated by reference from
Exhibit 10.6 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.39 Investor Representation and Warranties Agreement between
thehealthchannel.com and Les Dube and Irene Dube dated August 21, 2000
(Incorporated by reference from Exhibit 10.15 to the Registration
Statement Form 10QSB filed November 20, 2000, Registration Number
0-29822)
10.40 Employment Agreement with Minh-Chau Pham, dated May 15, 2000
10.41 Settlement Agreement and Release between thehealthchannel.com and
Michael Grandon dated August 31, 2000 (Incorporated by reference from
Exhibit 10.16 to the Registration Statement Form 10QSB filed
----------
1 Supercedes previously filed Exhibits 10.22 & 10.24
* Previously filed
II 7
<PAGE>
November 20, 2000, Registration Number 0-29822)
10.42 Consulting Agreement between thehealthchannel.com and Lawrence W.
Horwitz dated August 18, 2000 (Incorporated by reference from Exhibit
10.12 to the Registration Statement Form 10QSB filed November 20, 2000,
Registration Number 0-29822)
10.43 Content Partner Agreement between thehealthchannel.com and AvantGo,
dated July 31, 2000 (Incorporated by reference from Exhibit 10.1 to the
Registration Statement Form 10QSB filed November 20, 2000, Registration
Number 0-29822)
10.44 Content Distribution Agreement between thehealthchannel.com and OmniSky
Corporation, dated September 6, 2000 (Incorporated by reference from
Exhibit 10.17 to the Registration Statement Form 10QSB filed November
20, 2000, Registration Number 0-29822)
10.45 Contractual Agreement between thehealthchannel.com and The Blaine
Group, Inc., dated October 16, 2000
10.46 Letter of Agreement between thehealthchannel.com and ServerLogic
Corporation, dated October 12, 2000
10.47 Consulting Agreeement between thehealthchannel.com and Lawrence W.
Horwitz, dated January 5, 2000
10.48 Regulation M Representation of Swartz Private Equity, LLC
24.1 Consent of Horwitz & Beam (included in their opinion set forth in
Exhibit 5 hereto)*
24.3 Consent of Stonefield Josephson, Inc.
24.4 Consent of Roger G. Castro
25 Power of Attorney (Incorporated by reference from Exhibit 25 to the
Registration Statement Form SB-2 filed August 31, 2000 Registration
Number 333-44982)
27 Financial Data Schedule
* Previously filed
II 8
<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.
II 9
<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 December 12, 2000.
THEHEALTHCHANNEL.COM, INC.
By: /s/ Donald J. Shea
-----------------------------------
By: Donald J. Shea
Its: President, Chief Executive
Officer, Director
