<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
( ) For the transition period from __________ to __________
Commission file number: 000-29822
THEHEALTHCHANNEL.COM, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0728140
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
260 Newport Center Drive, Suite 250
Newport Beach, California 92660
(949) 631-8317 -telephone
(949) 631-2544 - facsimile
(Address of principal executive offices)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
------ ------
The issuer had 73,377,617 shares of its $.001 par value Common Stock
issued and outstanding as of June 30, 2000.
Transitional Small Business Disclosure Format (check one)
Yes No X
------ ------
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THEHEALTHCHANNEL.COM, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED BALANCE SHEET - JUNE 30, 2000
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 146,225
Software development costs 34,500
Loan receivable 63,000
Prepaid expenses 7,549
---------
TOTAL CURRENT ASSETS $ 251,274
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 708,594
DEPOSITS 3,852
---------
$ 963,720
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -
accounts payable and accrued expenses $ 647,352
STOCKHOLDERS' EQUITY:
Common stock; $.001 par value, 110,000,000 shares
authorized, 74,179,327 shares issued and outstanding 72,845
Additional paid in capital 7,133,760
Deficit accumulated during development stage (6,890,237)
---------
Total stockholders' equity 316,368
---------
$ 963,720
=========
</TABLE>
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THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended Six months ended Three months ended Three months ended From inception
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 to June 30, 2000 *
------------- ------------- ------------- ------------- ------------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 8 $ -- $ 8 $ -- $ 8
COST OF SALES -- -- -- -- --
------------ ---------- ------------ ---------- ------------
GROSS PROFIT 8 -- 8 -- 8
OPERATING EXPENSES:
General and administrative 1,215,869 -- 518,238 -- 4,676,597
------------ ---------- ------------ ---------- ------------
LOSS FROM CONTINUING OPERATIONS (1,215,861) -- (518,230) -- (4,676,589)
Loss on discontinued operations -- (367,014) -- -- (2,114,398)
Loss on disposal of segment -- (99,250) -- -- (99,250)
------------ ---------- ------------ ---------- ------------
TOTAL DISCONTINUED OPERATIONS -- (466,264) -- -- (2,213,648)
------------ ---------- ------------ ---------- ------------
NET LOSS (1,215,861) (466,264) (518,230) -- (6,890,237)
============ ========== ============ ========== ============
NET LOSS PER SHARE, BASIC AND DILUTED (0.02) (0.01) (0.01) --
============ ========== ============ ==========
WEIGHTED AVERAGE COMMON EQUIVALENT
SHARES OUTSTANDING 71,525,888 65,800,000 70,999,139
============ ========== ============
</TABLE>
* The period from inception on September 4, 1996 to December 31,
1999 (audited) and for the six months ended June 30, 2000 (unaudited).
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
For the six For the six For the three For the three
months ended months ended months ended months ended From inception to
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000 *
------------- ------------- ------------- ------------- ---------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET LOSS $(1,215,861) $(466,264) $(518,230) $-- $(6,890,237)
ITEMS RECONCILING NET LOSS TO CASH
USED BY OPERATING ACTIVITIES:
Depreciation 165,225 -- 84,088 300,455
Loss on disposal of segment -- 99,250 -- -- 99,250
Loss on discontinued operations -- 367,014 -- -- 2,114,398
Noncash expenses from stock issuances 274,656 -- 191,425 -- 2,886,079
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable -- -- -- -- 189
Inventory -- -- -- -- (10,312)
Software development costs (34,500) -- (9,500) -- (34,500)
Prepaid expenses 121,850 -- 71,120 -- 13,403
Deposits (3,852) -- (3,852) -- (1,255)
Accounts payable and accrued expenses 136.386 -- (86,364) -- 668,829
----------- --------- --------- --- -----------
NET CASH USED BY OPERATING ACTIVITIES (556,096) -- (271,313) -- (853,701)
----------- --------- --------- --- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -
payments to acqure property and equipment (35,396) -- (7,133) -- (61,214)
----------- --------- --------- --- -----------
NET CASH USED FOR INVESTING ACTIVITIES (35,396) -- (7,133) -- (61,214)
----------- --------- --------- --- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment for asset transfer -- -- -- -- (26,329)
Cash transferred out -- (22,551) -- -- (22,551)
Stock subscription receivable 25,000 -- -- -- --
Loans receivable (42,000) -- (14,000) -- (63,000)
Proceeds from private placement offering, net 662,480 -- 284,252 -- 1,173,020
-- -- -- -- --
----------- --------- --------- --- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 645,480 (22,551) 270,252 -- 1,061,140
----------- --------- --------- --- -----------
NET INCREASE (DECREASE) IN CASH 53,988 (22,551) (8,194) -- 146,225
CASH, beginning of period 92,237 22,551 154,419 -- --
----------- --------- --------- --- -----------
CASH, end of period $ 146,225 $ -- $ 146,225 $-- $ 146,225
=========== ========= ========= === ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Noncash compensation from stock issuances $ 274,656 $ -- $ 191,425 $-- $ 2,886,079
=========== ========= ========= === ===========
</TABLE>
* The period from inception on September 4, 1996 to December 31, 1999 (audited)
and for the six months ended June 30, 2000 (unaudited).
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL:
With headquarters in Newport Beach, California,
thehealthchannel.com (formerly Innovative Tracking Solutions
Corporation or "IVTX") is a comprehensive health information
Internet portal that offers a one-step access point for
consumers and professionals who want to explore a broad array
of health topics. The portal currently indexes other Internet
health and health-related sites, has direct links with online
health-care information service centers and provides detailed
coverage of medical conditions. Consumers may access a global
library of health-care information while searching for
products and services. The site offers a complete Internet
portal for state-of-the-art continuing medical education for
professionals.
The Company was incorporated under the laws of the state of
Delaware on September 4, 1996.
INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals) which are, in
the opinion of management, necessary for a fair presentation
of the results of operations for the periods presented.
Interim results are not necessarily indicative of the results
to be expected for a full year. The financial statements
should be read in conjunction with the financial statements
included in the annual report of thehealthchannel.com (the
"Company") on Form 10-KSB for the year ended December 31,
1999.
BUSINESS ACTIVITY:
In early 1999, IVTX management determined that the "public"
status of IVTX was detrimental to IVTX' operations due to the
time and expense burdens of being a public company. IVTX
management then decided to take the operations of IVTX
"private" by transferring all IVTX assets and liabilities to a
newly formed private company and selling the public shell to a
suitable company, preferably in the healthcare industry. On
April 13, 1999, IVTX obtained written approval of 64.4% of the
total voting stock of IVTX, voting "for" taking the operations
of IVTX private and selling the public shell to a suitable
company.
On April 14, 1999, IVTX transferred all of its assets and
liabilities based on majority stockholder approval to a newly
formed private company, Innovative Tracking Solutions
Corporation, a private Nevada corporation, incorporated on
March 29, 1999. Innovative Tracking Solutions Corporation was
formed by IVTX management specifically for the purpose of
taking the operations of IVTX private. The former IVTX
officers and directors, Dianna Cleveland, Lee Namisniak and
Lou Weiss are the officers and directors of Innovative
Tracking Solutions Corporation, the private company. The
consideration for the transfer of assets was the assumption of
all IVTX's liabilities by the newly formed private company. As
a result of this transfer of assets and liabilities and the
disposal of the segment of business on April 14, 1999 (which
is unrelated to the present business of thehealthchannel.com),
the Company has recorded a loss on discontinued operations of
$367,014 and a loss on disposal of a segment of $99,250 for
the year ended December 31, 1999.
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BUSINESS ACTIVITY, CONTINUED:
In June 1999, IVTX was introduced to thehealthchannel.com, a
consumer-based health Internet web site
(HTTP://WWW.THEHEALTHCHANNEL.COM). On July 28, 1999, IVTX,
pursuant to its bylaws and general Delaware corporate law,
acquired a certain asset of Biologix International, Ltd., a
Delaware corporation ("Biologix") consisting of
thehealthchannel.com web site and its related technology in
exchange for the controlling interest in IVTX. In connection
with this change of control, IVTX's name was changed to
thethealthchannel.com, Inc. on July 28, 1999. The acquisition
closed on July 28, 1999.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
FAIR VALUE:
Unless otherwise indicated, the fair values of all reported
assets and liabilities which represent financial instruments,
none of which are held for trading purposes, approximate the
carrying values of such amounts.
CASH:
The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to earnings as incurred,
whereas, additions, renewals, and betterments are capitalized.
When property and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included
in operations. Depreciation is computed using the
straight-line method over the estimated useful lives of the
related assets.
<PAGE>
THEHEALTHCHANNEL.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEVELOPMENT STAGE ENTERPRISE:
The Company is a development stage company as defined in
Statement of Financial Accounting Standards No. 7, "Accounting
and Reporting by Development Stage Enterprises." The Company
is devoting substantially all of its present efforts to
establish a new business, which is unrelated to the business
of Innovative Tracking Solutions Corporation ("IVTX"), and its
planned principal operations have not yet commenced. All
losses accumulated since inception of thehealthchannel.com
(Note 1) have been considered as part of the Company's
development stage activities. The operations of IVTX are
presented as discontinued operations as a result of the
transfer of its assets and liabilities to a private company
(Note 1).
NET LOSS PER SHARE:
The Company has adopted Statement of Financial Accounting
Standard No. 128, Earnings per Share ("SFAS No. 128"), which
is effective for annual and interim financial statements
issued for periods ending after December 15, 1997. Net loss
per share has been computed using the weighted average number
of shares outstanding. Common stock equivalents have been
excluded since their inclusion would reduce loss per share.
(2) STOCKHOLDERS' EQUITY:
In September 1999, the Company initiated a Rule 506, Regulation D
private placement of 4,052,973 restricted shares of the Company's
common stock from shares available from the forward stock split and
4,052,973 warrants to purchase restricted shares of the Company's'
common stock with an exercise price of $0.75, for total proceeds of
$1,173,020. The shares issued and the shares issuable upon exercise of
the warrants have piggyback registration rights in the event the
Company files a Registration Statement with the Securities and Exchange
Commission. The warrants vest immediately and expire two years from the
date of issuance. The private placement offering is still in process.
<PAGE>
PART I - FINANCIAL INFORMATION CONTINUED
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE COMPANY
thehealthchannel.com, Inc., formerly known as Innovative Tracking
Solutions Corporation (the "Company") was incorporated in Delaware on September
6, 1996. It operates a consumer-based health super site
(http://www.thehealthchannel.com).
On April 16, 1999, the Company transferred all of its assets and
liabilities based on majority stockholder approval to a newly formed private
Company. The Company's plan of operations following the transfer of assets and
liabilities was to seek and complete a merger or acquisition transaction with a
small or medium-sized enterprise which desired to become or remain a public
corporation.
On July 28, 1999, the Company was successful in finding an appropriate
acquisition candidate and, pursuant to its bylaws and general Delaware corporate
law, the Company acquired certain assets of Biologix International, Ltd.,
consisting primarily of thehealthchannel.com website and related technology in
exchange for the controlling interests of the Company. Restricted common shares,
representing the majority controlling interests held by the directors of the
Company, were transferred.
In connection with this change of control, the Company's name was
changed to thehealthchannel.com, Inc. on July 28, 1999. The Acquisition closed
on July 28, 1999 (the "Acquisition").
With headquarters at 260 Newport Center Drive, Suite 250, Newport
Beach, California, 92660, thehealthchannel.com is a comprehensive health
information Internet portal that offers a one-step access point for consumers
and professions who want to explore a broad array of health topics. Consumers
may access a global library of health-care information while searching for
products and services. The site offers a complete Internet portal for
state-of-the-art continuing medical education for professionals.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000.
REVENUE
The Company is a development stage Company and had no revenues for the
six months ended June 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company expended approximately $350,000 in professional services
related to web site maintenance & development.
LOSS FROM OPERATIONS
The Company incurred a loss from operations of $518,230 for the three
months ended June 30, 2000. The operations of IVTX in 1999 are presented as
discontinued operations as a result of the transfer of its assets and
liabilities to a private Company. The operations of the old IVTX are not related
to the operation of
<PAGE>
thehealthchannel.com business going forward.
NET LOSS
The Company had a net loss of $518,230 or $(0.01) per share, for the
three months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily funded its capital
requirements through private equity infusions. The Company is currently
conducting a private offering to accredited investors only, of units, each unit
consisting of one share of the Company's Common Stock and one Warrant
exercisable for a term of two years (the "Units"). The Company is offering the
Units at 30% discount on its stock at the closing price on the day of purchase
with the same exercise price on the Warrants. The Company is attempting to raise
a maximum of $5,000,000 under this private offering. During the Company's second
quarter, the Company raised $284,253 through this private placement. 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.
At June 30. 2000, the Company had outstanding current liabilities of
$647,352 consisting mainly of accounts payable $88,000, accrued professional
fees of approximately $257,000, and accrued officers salaries $168,000. The
Company anticipates satisfying its current liabilities in the ordinary course of
business from revenues and accounts receivable.
The Company does not believe that inflation has had a significant
impact on its operations since inception of the Company.
Future Plan of Operation
The Company's overall plan of operations for the next 12 months include
significant website development in four primary areas: a) Further develop,
promote and increase product offerings in its industry leading "Anywhere,
Anytime (TM)" mobile and wireless strategy. thehealtchannel.com was a first time
mover in the health sector with this technology application b) Broaden overall
content offerings in the areas of general health content and delivery of health
goods and services, c) Deliver a number of "deep vertical" products in specific
health topics, d) Implement the business to business revenue generating products
covering a number of health areas including some unique products not currently
in the marketplace.
The Company's overall plan of operation also includes completion of
strategic acquisitions for the purposes of revenue/profit enhancement, content
development, and increased traffic to the website.
(i) The Company can satisfy its cash requirements for a period of
approximately 4 - 6 months. The Company will then need to raise additional
funds.
(ii) The Company is currently conducting product research and
development in the areas of general health content, broadening and strengthening
its health information delivery, as well as conducting research and development
in the areas of premier health product offerings (deep verticals) and mobile and
wireless communication. In addition the Company will continue to develop its
business-to-business goods and services products.
(iii) The Company recently purchased (through the inclusion of its new
operations center lease) the necessary infrastructure to grow the Company and
reduce its operational costs by bringing a majority of its software development
in house.
(iv) The Company expects to add approximately 5-10 new employees in the
next fiscal year.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's Form 10-KSB filed on March 21, 2000 discloses that the
Company has been named as a cross-defendant in a cross-complaint filed by
Michael Grandon in an action pending in the Superior Court State of California
for the County of San Francisco, Case No. 307364. This action was initiated by
Biologix International, Ltd. against Michael Grandon on October 22, 1999
alleging causes of action against Michael Grandon for: (1) temporary restraining
order and preliminary and permanent injunction; (2) breach of fiduciary duty;
(3) fraud by intentional misrepresentation; (4) conversion; (5) possession of
personal property; (6) declaratory relief; and (7) accounting. The claims
alleged by Biologix International, Ltd. relate to the actions and conduct of Mr.
Grandon while an officer and director of Biologix International, Ltd.
thehealthchannel.com is named as a cross-defendant in the cross-complaint of
Michael Grandon in a cause of action for breach of contract based upon an
alleged employment agreement between Michael Grandon and Biologix International
Ltd. Mr. Grandon claims that this alleged employment agreement is the
responsibility of thehealthchannel.com based upon thehealthchannel.com's
purchase of the internet related assets of Biologix International Ltd.
thehealthchannel.com was served with the cross-complaint on December 14, 1999.
Mr. Grandon seeks $400,000 in damages and options to purchase one million shares
of Biologix stock. The management is not aware of any material developments in
this proceeding during the second quarter of 2000.
The other two cases disclosed by the Company's Form 10-KSB this year
(the threatened litigation against the Company by Sandra Redding and Marshall
Redding, and the threatened litigation against the Company by Fields, Israel &
Benning) have both been settled.
To the knowledge of management, there is no other material litigation
pending or threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2000, the Company sold
1,861,472 shares and 1,861,472 warrants in a private offering (see "LIQUIDITY
AND CAPITAL RESOURCES"), raising $284,253. No underwriters were utilized and
no commissions were paid. This private offering is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Act") pursuant to Section 4(2) of the Act and Rule 506 of Regulation D.
On April 4, 2000, the Company issued 45,781 shares of Common Stock to
Fields, Israel & Benning in settlement of a legal dispute.
On May 31, 2000, the Company issued 823,523 shares of Common Stock to
Sandra Redding and Marshall Redding in settlement of a legal dispute.
On April 4, 2000, the Company issued 5,000 shares to National
Securities FBO Randall D. Lewis in compensation for services rendered by Randall
D. Lewis in connection with the preparation of the Company's business plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
10.1 NewsEdge Agreement, dated May 27, 2000
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THEHEALTHCHANNEL.COM, INC.
Date: August 11, 2000 /s/ DONALD SHEA
--------------------------------------
Donald Shea, President
Date: August 11, 2000 /s/ THOMAS LONERGAN
--------------------------------------
Thomas Lonergan, Chief Operating
Officer, Vice President, Secretary
