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As filed with the Securities and Exchange Commission on June 2, 1999
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PIPELINE DATA INC.
(Name of small business issuer in its charter)
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<TABLE>
<S> <C> <C>
Delaware 7310 13-3953764
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
Address; 250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530;
(914) 725-7028
(Address and telephone number of principal executive offices,
principal place of business, and name, address and telephone number
of agent for service of process)
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Jack Rubinstein, Chief Executive Officer
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this registration statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. |_|
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If any of the securities being registered on this Form are being offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box. |X|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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With copies to:
Adam S. Gottbetter, Esq.
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue, 5th Floor
New York, NY 10017-6705
(212) 983-0532
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of each Class of Securities Being Registered Registered Per Security(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock................................................. 2,002,500 $0.50(1) $1,001,250(1) $ 278.35(1)
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Class A Redeemable Warrants.................................. 1,000,000 $0.10 $ 100,000 $ 27.80
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Class B Redeemable Warrant................................... 1,000,000 $0.10 $ 100,000 $ 27.80
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Common Stock Underlying Class A Warrants(2).................. 1,000,000 $3.00 $3,000,000 $ 834.00
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Common Stock Underlying Class B warrants(2).................. 1,000,000 $5.00 $5,000,000 $1,390.00
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TOTAL........................................................ 6,002,500 $9,201,250 $2,557.95
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee and
includes shares being sold by selling stockholders.
(2) Pursuant to Rule 416 there are also registered hereby such additional
number of shares as may become issuable by reason of the anti-dilution
provisions of the Class A Redeemable Warrants and Class B Redeemable
Warrants.
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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 become effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
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Page 1 of ____ pages
Exhibit Index at Page ____
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PIPELINE DATA INC.
Cross Reference Sheet
(Pursuant to Rule 404 and
Item 501 of Regulation S-B)
ITEM PAGE
---- ----
1. Front of Registration Statement and Outside
Front Cover of Prospectus..........................................
2. Inside Front and Outside Back Cover Pages of Prospectus............
3. Summary Information and Risk Factors...............................
4. Use of Proceeds....................................................
5. Determination of Offering Price....................................
6. Dilution...........................................................
7. Selling Security Holders...........................................
8. Plan of Distribution...............................................
9. Legal Proceedings..................................................
10. Directors, Executive Officers, Promoters and Control Persons.......
11. Security Ownership of Certain Beneficial Owners and Management.....
12. Description of Securities..........................................
13. Interest of Named Experts and Counsel..............................
14. Certain Provisions of Our Articles and By-Laws and
Disclosure of Commission Position on Indemnification
For Securities Act Liabilities.................................
15. Organization Within Last Five Years................................
16. Description of Business............................................
17. Management's Discussion and Analysis...............................
<PAGE>
Cross Reference Sheet
(Continued)
ITEM PAGE
---- ----
18. Description of Property............................................
19. Certain Relationships and Related Transactions.....................
20. Market For Common Equity and Related Stockholder Matters...........
21. Executive Compensation.............................................
22. Financial Statements...............................................
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure...........................
24. Indemnification of Directors and Officers..........................
25. Other Expenses of Issuance and Distribution........................
26. Recent Sales of Unregistered Securities............................
27. Exhibits...........................................................
28. Undertakings.......................................................
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED June 2, 1999
PIPELINE DATA INC.
4,002,500 shares of Stock, par value $0.001 per share
1,000,000 Class A Redeemable Warrants
1,000,000 Class B Redeemable Warrants
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This offering involves a significant degree of risk.
Prospective investors need to read the section called "Risk Factors" which
begins on page 5 of this Prospectus.
Pipeline Data Inc., an existing Delaware corporation, is an on-line direct
marketing agent designed to assist the pharmaceutical and healthcare
industries to target directly a valuable and growing volume of individual
consumers who will use our website to request specific medical and healthcare
information.
We are seeking to raise $700,000 from this offering, through the sale of (i)
1,000,000 shares of common stock, par value $0.001 (such class of share
being the "Common Stock") at a price of $0.50 per share, (ii) 1,000,000 Class
A Redeemable Warrants, at a price of $0.10 per Warrant, and (iii) 1,000,000
Class B Redeemable Warrants at a price of $0.10 per Warrant. The Common
Stock, the Class A Redeemable Warrants, and the Class B Redeemable Warrants
are referred to as the "Securities" while the Class A Redeemable Warrants and
the Class B Redeemable Warrants are referred to, collectively, as the
"Warrants". The Warrants are subject to redemption, and assuming that all
Warrants are sold and exercised, we will receive an aggregate of $8,000,000
from such exercise. There is no assurance that all the Warrants will be sold,
or if sold, will be exercised.
We will also be registering, concurrently with the offering, the sale of
1,002,500 shares of Common Stock previously issued to officers, directors and
their affiliates in connection with organizational activities rendered to us
and their original capitalization of the Company. Upon a subsequent resale of
these Securities, any proceeds and profits will be realized by these certain
shareholders and not by us. The selling shareholders may resell the Common
Stock they have previously received at prices below the initial offering
price of the Securities. They have agreed not to sell any of their shares
until we have sold all of the shares we are selling in the offering.
Purchase of our Securities must not exceed 10% of your net worth.
There is currently no public market for the Securities.
The Securities will be offered in a "best efforts" underwriting, and there is no
assurance that we will be able to find purchasers for all or any portion of
the offering.
The securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities agency, nor has any federal or
state regulatory agency
<PAGE>
passed upon the accuracy or adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
The Date of this Prospectus is June 2, 1999
Each Class A Redeemable Warrant entitles the holder to purchase one share of
Common Stock at an exercise price of $3.00 from its date of issuance until May
28, 2004. Each Class B Redeemable Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $5.00 from its date of issuance
until May 28, 2004.
The Company may call the Warrants for redemption at a price of $0.01 per Warrant
at any time upon a minimum of 30 days written notice to holders, provided that
the last sales price of the Common Stock has been at least 150% of the then
effective exercise price of the Warrants on each of the 20 consecutive trading
days, ending on the third day prior to the day on which the Notice of Redemption
is given.
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PROSPECTUS SUMMARY
THIS IS A BRIEF SUMMARY OF THE INFORMATION IN THIS PROSPECTUS. POTENTIAL
INVESTORS SHOULD READ THE ENTIRE PROSPECTUS BEFORE DECIDING WHETHER AND
HOW MUCH TO INVEST IN THE SECURITIES.
THE COMPANY
Pipeline Data Inc., a Delaware corporation, was incorporated in 1997, and began
its business operations in 1998. Under our corporate charter documents, we may
engage in any activity for which corporations may be organized under the
Delaware General Corporation Law. We are a development stage company and are
currently developing a website to provide healthcare consumers with information
on a broad range of medical conditions.
We will be an on-line direct marketing agent designed to assist the
pharmaceutical and healthcare industries to target a valuable and growing volume
of individual consumers who will use our website to request specific medical and
healthcare information.
Our website (which will be located at http://www.healthpipeline.com) has been
designed to target consumers interested in obtaining pharmaceutical and/or
healthcare information, their families and friends, as well as healthcare
marketing professionals.
Our business opportunity arises from two complementary global trends. The first
is the dramatic and continuing growth of the Internet as a source of
information. The second is the re-directing of healthcare advertising
expenditures from professionals to consumers through "direct-to-consumer" (DTC)
campaigns.
We are looking to assume a leading role in the on-line health information
delivery business through our unique, scalable system for creating and
maintaining user profiles and delivering targeted news and announcements via
e-mail, and by simultaneously cultivating a dedicated subscriber base. Our
business strategy is to attract visitors with specific medical needs to our
website and provide them with access to information, services and products
pertinent to the medical condition that concerns either themselves, their
family, or their friends.
Access to the website will be free, however special services will be available
for a fee. Our primary sources of revenue are expected to include: (1) lead
generation fees charged to pharmaceutical marketers and medical supply
companies; (2) on-line sales of books and medical supplies and (3) potential
revenue to be generated by leads for clinical trial participants. We also expect
to generate a secondary revenue stream from website advertising, sponsorships,
consulting services, franchising content, and off-line newsletter subscriptions.
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THE OFFERING
Securities consisting of 2,002,500 shares of Common Stock, par value $0.001 per
share, 1,000,000 Class A Redeemable Warrants and 1,000,000 Class B Redeemable
Warrants will be offered. An Investor must purchase one Warrant, either Class A
or Class B for each share of Common Stock purchased. Each Warrant is separable
and exercisable immediately upon its issuance. The Class A Redeemable Warrants
may be exercised for one (1) share of Common Stock from their date of issuance
until May 28, 2004 at an exercise price of $3.00 per share. The Class B
Redeemable Warrants may be exercised for one (1) share of Common Stock from
their date of issuance until May 28, 2004 at an exercise price of $5.00 per
share. Both the Class A Redeemable Warrants and the Class B Redeemable Warrants
are being offered for $0.10 per Warrant. In addition to the above Securities,
1,000,000 shares of Common Stock underlying the Class A Redeemable Warrants and
1,000,000 shares of Common Stock underlying the Class B Redeemable Warrants are
being offered.
We are also offering the Securities on a "best efforts" basis. A minimum number
of 200,000 shares of Common Stock at a price of $0.50 per share and a like
number of Warrants (the "Minimum Number") must be sold in order for the offering
to be continued. The first closing of the offering will occur after the Minimum
Number of Securities have been sold.
REGISTRATION OF ADDITIONAL SHARES OFFERED
BY SELLING SHAREHOLDERS
We will be registering, concurrently with the offering, the sale of 1,002,500
shares of Common Stock issued to certain shareholders in connection with
organizational activities rendered to us. Upon a sale of these
Securities, any proceeds and profits will be realized by these certain
shareholders and not by us. The selling shareholders may resell the Securities
they have received at prices below the initial offering price of the Securities.
OFFICES OF THE COMPANY
250 East Hartsdale Avenue, Suite 21, Hartsdale, NY 10530,
Telephone 914-725-7028
FORWARD LOOKING STATEMENTS
Some of the information in this Prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "anticipate", "continue", or other
similar words. These statements discuss future expectations, contain projections
of results of operations or of financial condition or state other
"Forward-Looking" information. When considering such forward-looking statements,
you should keep in mind the risk factors and other cautionary statements
included in this Prospectus. The risk factors noted in the "Risk Factors"
section and the other factors noted throughout this Prospectus, including
certain risks and uncertainties, could cause the actual results of the Company
to differ materially from those contained in any forward-looking statement.
4
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AN INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND
SHOULD ONLY BE MADE BY INVESTORS WHO CAN AFFORD TO LOSE UP TO THEIR
ENTIRE INVESTMENT. BEFORE PURCHASING THE SECURITIES, YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, IN ADDITION TO THE
OTHER INFORMATION IN THIS PROSPECTUS.
RISK FACTORS
Our business, financial condition and operating results could be adversely
affected by any of the following factors, in which event the trading price of
the Securities could decline, and investors could lose all or part of their
investment. The risks and uncertainties described below are not the only ones
that we face. Additional risks and uncertainties not presently known to us, or
that our management currently thinks are immaterial, may also impair our
business operations.
We Have A Limited Operating History And Have Not Fully Commenced Commercial
Operations
The initial test phase of our on-line direct marketing service is planned
for the summer of 1999. Launch of an early release phase should be completed in
the second half of 1999. We expect to have our full commercial launch follow in
late 1999. It will consist of a comprehensive database of individual subscribers
receiving medical data spanning over fifty major disease (and condition)
categories.
As of the date of this Prospectus, we have not generated any revenues from
our Internet operations. Therefore, we do not have an operating history upon
which investors can evaluate our business and/or our prospects, and investors
should not rely upon our past performance to predict our future performance. We
also face a number of challenges, including a lack of meaningful historical
financial data upon which to plan future budgets, competition from a wide range
of sources, the need to develop strategic relationships and other risks
described below.
Our Services Are New And The Industry Is Evolving
Investors should consider our prospects in light of the risks,
uncertainties and difficulties frequently encountered by companies in their
early stage of development, particularly companies in the new and rapidly
evolving Internet market. To be successful in this market, we must, among other
things:
o Develop and introduce functional and attractive service offerings;
o Attract and maintain a large base of subscribers and consumers;
o Increase awareness of our brand and develop subscriber and consumer
loyalty;
o Provide desirable services and compelling and original content to
subscribers at attractive prices;
5
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o Establish and maintain strategic relationships with service and
content providers;
o Establish and maintain relationships with healthcare sponsors and
marketers and with advertisers and their advertising agencies;
o Respond to competitive and technological developments;
o Build an operations structure to support our business; and
o Attract, motivate and retain qualified personnel.
We cannot guarantee that we will succeed in achieving these goals, and
failure to do so could have a material and adverse effect on our business,
prospects, financial condition and operating results.
Our Internet-based services will only be fully commercially launched in
late 1999. Our management cannot guarantee that these services will function as
anticipated or be desirable to our intended market.
The Internet market is at an early stage of development, rapidly evolving
and characterized by an increasing number of market entrants who have introduced
or developed competing products and services. As is typical in a new and rapidly
evolving industry, demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty and risk. Because the
market for our services is new and evolving, it is difficult to predict with any
certainty the size of this market and its growth rate, if any. We cannot
guarantee that a market for our services will develop or that demand for our
services will emerge or be sustainable. If the market fails to develop, develops
more slowly than expected, or becomes saturated with competitors, our business,
financial condition and operating results could be materially and adversely
affected.
We Are Unable To Accurately Forecast Our Revenues
As a result of the limited operating history of our Internet operations
and the emerging nature of the markets in which we intend to compete, we are
unable to forecast our revenues with any degree of certainty. We expect expenses
to increase significantly in the future, as our business continues to incur
significant sales and marketing, product development and administrative
expenses. The success of our business depends on our management's ability to
increase revenues to offset expenses. We cannot guarantee that we will be able
to generate sufficient revenues to offset operating expenses, or that we will be
able to achieve or maintain profitability. We may also need to raise additional
capital through additional securities offerings to fund the marketing and
administration of our services. However, we cannot guarantee that we will be
able to raise additional capital on favorable terms, if at all.
6
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Furthermore, our management may seek to grow the business through mergers
or acquisitions of similar companies or lines of business. Most acquisitions of
software and professional services companies involve the purchase of significant
amounts of intangible assets. Therefore, acquisitions of such businesses often
result in significant goodwill being recorded and significant amortization
charges, and may also result in charges for research and development projects.
If we were to incur additional charges for acquired in-process research and
development or amortization of goodwill with respect to acquisitions, our
business, financial condition and operating results could be materially and
adversely affected.
Our Quarterly Financial Results May Fluctuate Significantly
We expect our quarterly revenues, expenses and operating results to
fluctuate significantly in the future, as a result of a variety of factors, some
of which are outside of our control. These factors include:
o The number of consumers and/or subscribers;
o The level of traffic on our website and the level of usage of the
Internet generally;
o Our ability to establish and strengthen brand awareness;
o Our success, and the success of our strategic partners, in marketing
our services;
o The addition or loss of service or content providers, advertisers or
sponsors on our website;
o Our ability to upgrade our website;
o The amount and timing of the costs for marketing efforts or other
initiatives;
o The timing of contracts with strategic partners and other parties;
o Fees we may pay for service or content agreements and promotional
arrangements, or other costs incurred as we expand our operations;
o The timing of charges related to acquisitions;
o The level of acceptance of the Internet by the healthcare and
pharmaceutical industry;
o Our ability to compete in a highly competitive market, and the
introduction of new websites and services by competitors;
o Technical difficulties, system downtime, undetected software errors
and other problems affecting the Internet generally, or the
operation of our website; and
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o Economic conditions specific to the Internet and on-line media, as
well as general economic conditions.
Most of our expenses are fixed in the short term, and our management may
not be able to quickly reduce spending if our revenues are lower than expected.
Moreover, in an attempt to enhance our long-term competitive position, we may
from time to time make decisions regarding pricing, marketing, services and
technology that could have a near-term material and adverse effect on our
business, financial condition and operating results. Due to these factors, we
believe that quarter to quarter comparisons of our operating results may not be
a good indication of our future performance. Because of this, it is possible
that, in some future quarter, our operating results may fall below the
expectations of securities analysts or investors. In such event, it is likely
the trading price of our Common Stock and/or Warrants would decline, perhaps
significantly.
Market Acceptance Of Our Services Is Uncertain
We cannot guarantee that participants in the healthcare and pharmaceutical
industry will accept our services, or even accept the Internet itself, as a
replacement for traditional sources of these services. Market acceptance of our
services will depend upon continued growth in the use of the Internet generally
and, in particular, as a source of communications and information services for
the healthcare and pharmaceutical industry.
We Must Establish, Maintain And Strengthen The "healthpipeline.com" Brand
In order to expand our on-line traffic, and increase our subscriber and
consumer bases, we must establish, maintain and strengthen the
"healthpipeline.com" brand. To be successful in establishing our brand, the
following factors must be fulfilled: (a) healthcare marketers must, among other
things, perceive us as offering a quality, cost-effective direct marketing
service; (b) healthcare consumers must, among other things, perceive us as
offering relevant, reliable healthcare information from trustworthy sources; and
(c) medical suppliers, pharmaceutical companies and other healthcare vendors to
the healthcare community must, among other things, perceive our website as an
effective direct marketing and sales channel for their products and services.
Management May Not Be Able To Manage Growth
If our business experiences significant growth, then considerable demands
could be imposed on all aspects of our business, including our administrative
staff, technical and financial personnel, along with their respective systems.
Additional expansion may further strain our management, financial and other
resources. We cannot guarantee that our existing systems, procedures, controls
and existing space would be adequate to support expansion of our operations.
We Depend Upon Our Suppliers
In order to provide Internet access and other on-line services to our
customers, we lease long-distance fiber optic telecommunications lines from
national telecommunications services providers. We depend upon these providers
substantially.
Certain of our suppliers, including regional Bell operating companies and
competitive local exchange carriers, are currently subject to various price
constraints, including tariff controls, which in the future may change. In
addition, pending regulatory proposals may affect the prices charged to us by
the regional Bell operating companies and competitive local exchange carriers.
These regulatory changes could result in increased prices for products and
services, which could have a material adverse effect on our business, financial
condition or results of operations.
We rely wholly on other companies to supply our network infrastructure
(including telecommunications services and networking equipment), which, in the
quantities and quality we require, is available only from sole or limited
sources. We cannot assure you that our suppliers will not:
o compete directly with us;
o enter into exclusive arrangements with our competitors; or
o stop selling their products or components to us at commercially
reasonable prices, or at all.
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We Will Depend On Content Providers
We rely on independent content providers for the majority of the clinical,
educational and other general healthcare information that is to be provided
through healthpipeline.com. Our management intends to enter into strategic
relationships to obtain content for healthpipeline.com. Our success will depend
significantly on our ability to maintain relationships with our content
providers, and to build new relationships with other content providers. We
depend on the abilities of our content providers to deliver high quality content
from reliable sources, and to continually upgrade their content in response to
visitor and subscriber demand, as well as evolving healthcare industry trends.
Any failure by these parties to develop and maintain high quality, attractive
content could (a) result in visitor and subscriber dissatisfaction, (b) inhibit
our ability to convert visitors to subscribers, and (c) damage the
healthpipeline.com brand name; and any of these potential problems could have a
material and adverse effect on our business, financial condition and operating
results.
We Are Subject To Risks Associated With Possible Acquisitions
Our management regularly evaluates acquisition opportunities and, as a
result, may engage in acquisition discussions, may conduct due diligence
activities in connection with possible acquisitions, and, where appropriate, may
engage in acquisition negotiations. Any acquisition that may be consummated
would involve numerous risks, including difficulties in the assimilation of the
operations, services, products and personnel of the acquired company, the
diversion of our management's attention from other business concerns, entry into
markets in which we have little or no direct prior experience, the potential
loss of key employees of the acquired company, and our inability to maintain a
critical mass of the subscribers or goodwill of the acquired businesses. In
order to grow the business, our management may continue to acquire businesses
that they believe are complementary. The successful implementation of this
strategy depends on our management's ability to identify suitable acquisition
candidates, acquire companies on acceptable terms, integrate their operations
and technology successfully with ours, retain existing subscribers and maintain
the goodwill of the acquired business. We are unable to predict whether or when
any prospective acquisition candidate will become available, or the likelihood
that any acquisition will be completed. There are not, at the present time, any
pending acquisitions.
We Face Intense Competition And Risks Associated With Technological Change
The market for our service is characterized by rapidly changing technology
and evolving industry standards, often resulting in short product life cycles
and even product obsolescence. Accordingly, our ability to compete will be
dependent on our ability to establish a market presence for healthpipeline.com
and establish our service in the marketplace in a timely manner, and we must
continually enhance and improve our website offerings via the successful
development and marketing of new products and services. There can be no
assurance that we will be able to successfully enhance our products or develop
new products, or that competitors will
9
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not develop technologies or products that render our products and/or services
either less marketable or even obsolete.
The market we intend to enter is characterized by intense competition and
an increasing number of new entrants who have developed, or are developing,
products and services that may compete with ours. Many of the competitors will
be larger and better-financed than we are. We will face competition from
numerous sources, including other on-line health information services and
Internet service providers. It is our belief that competition will be based
primarily on ease of use, range and quality of features (including
communications capabilities and content), as well as price and, subsequently, we
believe that the specific on-line functionality of healthpipeline.com will
provide us with a competitive advantage.
According to our own research, there are over 7,500 medical and health
information sites on the world wide web; however, only a small percentage of
these sites are regularly managed and updated. Included among these websites are
Inteli-health, a site developed jointly by Aetna U.S. Healthcare and Johns
Hopkins University; Medscape, operated by Medscape, Inc.; PharmInfoNet, operated
by VirSci Corporation; HealthAnswers, operated by Orbis Broadcast Group and
MediConsult.com as well as additional sites operated by Mayo Clinic, Avicenna,
Sapient Health Network, Global Medic and HealthGate.
Recent And Continuing Publicity
Companies engaged in Internet activities have received, and may continue
to receive, a high degree of media coverage, including coverage that presents
inaccurate or incomplete investment-related information and forward-looking
statements that involve numerous risks and uncertainties. Prospective investors
should not rely on any information other than the information set forth in this
Prospectus in making a decision to purchase the Common Stock or Warrants. Our
actual results could differ materially from those stated in any forward-looking
statements as a result of numerous factors, including those set forth in these
"Risk Factors" and elsewhere in this prospectus.
Adoption Of The Internet As An Advertising Medium Is Uncertain
We expect to derive a portion of our revenues from advertising on the
healthpipeline.com website. However, we have not earned any advertising revenue
to date, and we cannot guarantee that we will be able to generate significant
advertising revenues in the future. No standards have been widely accepted to
measure the effectiveness of advertising on the Internet, and if such standards
do not develop, existing advertisers may not continue their current level of
Internet-based advertising, and those advertisers who have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
Advertisers who already have invested substantial resources in other advertising
methods may be reluctant to adopt a new strategy. Consequently, our business
could be adversely affected if the market for Internet advertising fails to
develop or develops more slowly than expected.
There May Be Substantial Sales Of Our Common Stock After The Offering
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Sales of substantial amounts of Common Stock in the public market
following this offering, or the perception that such sales will occur, could
have a material and adverse effect on the market price of the Common Stock.
After the completion of this offering, 2,002,500 shares of Common Stock will be
outstanding. All of these shares will be tradable in the public market without
restriction. Approximately 50.1% of these shares or 1,002,500 shares of the
total will be shares that have been issued to officers, directors, and their
affiliates in return for organizational efforts and initial capitalization of
the issuer. We intend to keep the Registration Statement that includes this
Prospectus effective for an extended period of time after we sell the Securities
that we are offering.
The Penny Stock Rules Could Make Selling the Common Stock More Difficult
Our Common Stock will be a "penny stock," under Rule 3a51-1 under the
Securities and Exchange Act, unless and until the shares reach a price of at
least $5.00 per share, we meet certain financial size and volume levels, or the
shares are registered on a national securities exchange or quoted on the NASDAQ
system. The shares are likely to remain penny stocks for a considerable period
of time after the offering. A "penny stock" is subject to Rules 15g-1 through
15g-10 of the Securities and Exchange Commission. Those rules require securities
broker-dealers, before effecting transactions in any "penny stock," to deliver
to the customer, and obtain a written receipt for a disclosure document set
forth in Rule 15g-10. (Rule 15g-2); to disclose certain price information about
the stock (Rule 15g-3); to disclose the amount of compensation received by the
broker-dealer (Rule 15g-4) or any "associated person" of the broker-dealer (Rule
15g-5); and to send monthly statements to customers with market and price
information about the "penny stock" (Rule 15g-6). Our Common Stock will also be
subject to Rule 15g-9, which requires the broker-dealer, in some circumstances,
to approve the "penny stock" purchasers account under certain standards, and
deliver written statements to the customer with information specified in the
rules (Rule 15g-9). These additional requirements could prevent broker-dealers
from effecting transactions and limit the ability of purchasers in this offering
to sell their shares into any secondary market for our Common Stock.
Potential Adverse Effect of Redemption of Warrants
The Class A Redeemable Warrants are exercisable at a price of $3.00 per
Warrant and the Class B Redeemable Warrants are exercisable at a price of $5.00
per Warrant. Both Warrants are exercisable until May 28, 2004. We may redeem
both Warrants at any time if the trading price of our Common Stock is at least
150% of the then current exercise price of the Warrant for a period of 20
consecutive trading days. Thus, based on the current exercise price for the
Warrants, the Class A Redeemable Warrants could be subject to redemption if the
trading price of our Common Stock were $4.50 or greater, and the Class B
Redeemable Warrants could be subject to redemption if the trading price of our
Common Stock were $7.50 or greater, in each case for the required twenty (20)
day trading period. A Notice of Redemption for the Warrants would force the
holders to (i) exercise them and pay the exercise price at a time when it might
be disadvantageous to do so, (ii) sell them at the current market price when
they might otherwise wish to hold them, or (iii) accept the redemption price,
which may be substantially less than the
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market value of the Warrants would otherwise be but for the redemption. In
addition, exercise of the Warrants may have an adverse effect upon the trading
price of and market for the Common Stock, if any such market develops, and
result in dilution to stockholders.
We Must Protect Our Intellectual Property
There can be no assurance that we will be able to secure and protect
trademark and/or service mark registrations for our marks in the United States
or in foreign countries, or that third parties will not infringe upon or
misappropriate our copyrights, trademarks, service marks, domain name and
similar proprietary rights. In addition, the global nature of the Internet makes
it impossible to control the ultimate destination of our services, and effective
copyright and trademark protection may be limited or even nonexistent in certain
foreign countries. It is possible that our competitors or others will adopt
product or service names similar to ours, thereby impeding our ability to build
brand identity, which could possibly lead to customer confusion and loss of
brand loyalty.
We may be subject to litigation for claims of infringement of the rights
of others or to determine the scope and validity of the intellectual property
rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to any mark, which
could result in substantial costs to us, due to the diversion of management's
attention and the expense of such litigation, even if we eventually obtained a
favorable outcome.
Adverse determinations in such litigation could also (a) result in the
loss of certain of our proprietary rights, (b) subject us to significant
liabilities, (c) require us to seek licenses from third parties, or (d) even
prevent us from selling our services. Any of these results could have a material
and adverse effect on the acceptance of the healthpipeline.com brand and on our
business, financial condition and operating results. In addition, our use of
third party content providers may expose us to claims for infringement because
we rely upon the information provided by such third parties as to the origin and
ownership of this licensed content.
We May Not Be Able To Prevent Internet Security Breaches
The difficulty of transmitting confidential information securely on-line
has been a significant barrier to conducting electronic commerce and engaging in
sensitive communications over the Internet. We rely on browser-level encryption,
authentication and certificate technologies, to provide the security and
authentication necessary to effect secure transmission of e-mail all of which
are licensed from third parties. However, we cannot guarantee that advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments will not result in a compromise or breach of our security
measures. Any party who is able to circumvent our security measures could
misappropriate proprietary information or confidential communications, or cause
interruptions in our operations. We may be required to spend significant capital
and other resources to protect our service against the threat of such security
breaches, or to alleviate problems caused by such breaches.
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We May Experience System Failures
To be successful as an on-line service, we must be able to operate our
website 24 hours a day, seven days a week, without interruption. Almost all of
our communications and information services are provided through third party
service and content providers. We do not maintain redundant systems or
facilities for our services. To operate without interruption, our service and
content providers must guard against:
o Damage from fire, power loss and other natural disasters;
o Communications failures;
o Software and hardware errors, failures or crashes;
o Security breaches, computer viruses and similar disruptive problems;
and
o Other potential interruptions.
We cannot guarantee that periodic system interruptions will not occur. Any
significant interruptions to our services, or an unacceptable increase in
response time to any visitor and subscriber queries, could result in a loss of
potential or existing subscribers, strategic partners or advertisers and
sponsors and, if sustained or repeated, could reduce the attractiveness of our
website to such parties.
From time to time, our website may be required to handle a high volume of
traffic and deliver frequently updated information. At such times, the website
may experience slower response times or even system failures, due to increased
website traffic, or for a variety of other reasons. We will also depend on
content providers to provide information and data feeds on a timely basis. If
our content providers fail to receive or transmit, or delay the transmission or
receipt of, this information, our website could experience disruptions or
interruptions in service. In addition, in order to access our website, our
subscribers and consumers depend on Internet Service Providers (ISPs), On-line
Service Providers (OSPs) and even other website operators. Each of these service
providers has experienced significant outages in the past and could experience
outages, delays and other difficulties in the future, due to system failures
unrelated to our systems. Moreover, the Internet infrastructure may not be able
to support continued growth in our use. Any significant interruption in our
operations, even those caused by events that are beyond our control, could have
a material and adverse effect on our business, financial condition and operating
results.
Storage Of Personal Subscriber Information
It is our policy not to disclose willfully any individually identifiable
information about any of our visitors or subscribers to a third party without
consent, and we intend to have a privacy policy statement displayed on the
healthpipeline.com website. However, despite this policy, if hackers were able
to penetrate our network security, or otherwise misappropriate
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personal information or credit card information supplied by our visitors and/or
subscribers, we could be subject to liability. Such liability could include
claims for unauthorized purchases with credit card information, impersonation or
other similar fraud claims. Liability could also include claims for other
misuses of personal information, such as for unauthorized marketing purposes,
which could involve us in litigation. In addition, the Federal Trade Commission
(FTC) and state governmental bodies have been investigating certain Internet
companies regarding their use of personal information. We could incur additional
expenses if new regulations regarding the use of personal information are
introduced, or if the FTC and/or other regulatory bodies chose to investigate
our privacy practices.
We Could Be Liable For Information Retrieved From Our Website
We may be subject to third party claims for defamation, negligence,
copyright or trademark infringement, based on the nature and content of
information supplied on our website by us or third parties, including our
content providers. These types of claims have been brought, sometimes
successfully, against on-line services in the past. Also, content that may be
accessible through our website, or via third party websites linked to the
healthpipeline.com website could also subject us to certain legal actions. For
example, claims could be made against us if material deemed inappropriate could
be accessed through our website, or if a visitor and/or subscriber relies on
healthcare information accessed through our website to their detriment. Even if
such claims do not result in liability to us, we could incur significant costs
in investigating and defending such claims, or in the implementation of measures
to reduce our exposure to such liability. Any insurance we may have may not
cover potential claims of this type, or may not be adequate to cover all costs
incurred in defense of potential claims, or may not indemnify us for all or any
liability that may be imposed.
We May Face Year 2000 Problems
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than the year 2000.
These problems are widely expected to increase in frequency and severity as the
year 2000 approaches and are commonly referred to as the "Year 2000 Problem" or
the "Y2K problem".
Assessment:
Even though we believe that our existing software, computer systems
and other equipment are Y2K compliant, we are reviewing our programs and
systems to confirm this belief. While we do not expect the cost of these
efforts to be material to our financial position or any year's operating
results, there can be no assurance to this effect.
Services Provided By Suppliers:
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Because we depend on third party content and technical suppliers for
most of the services provided through healthpipeline.com, if these parties
are affected by Y2K problems, our ability to provide services to our
subscribers may be materially and adversely affected.
We have been gathering information from and have initiated
communications with our service and content providers to identify and, to
the extent possible, resolve issues involving the Y2K problem. However, we
have limited or no control over the actions of our service and content
providers. Therefore, we cannot guarantee that any or all of the service
and content providers will resolve any or all Y2K problems with their
systems to prevent material disruption to our business. Any failure of
these third parties to timely resolve Y2K problems with their systems
could have a material and adverse effect on our business, financial
condition or operating results.
Most Likely Consequences of Y2K problems:
We expect to identify and resolve all Y2K problems that could
materially and adversely affect our business, financial condition or
operating results. However, we believe that it is not possible to
determine with complete certainty that all Y2K problems affecting our
business have been identified or corrected. The number of devices that
could be affected and the interactions among these devices are simply too
numerous. In addition, we cannot accurately predict how many failures
related to the Y2K problem will occur or the severity, duration or
financial consequences of such failures. As a result, our management
expects that we could possibly suffer the following consequences:
A significant number of operational inconveniences and inefficiencies,
which may affect our service, and the services provided by our
content providers and which may divert management time and
attention and financial and human resources away from our ordinary
business activities; and
A lesser number of serious system failures that may require
significant efforts by us, our service and content providers, or
our subscribers and consumers to prevent or alleviate material
business disruptions.
We May Be Subject To Government Regulation:
By the Securities and Exchange Commission and state regulators
Issuance of our securities is regulated by the Securities and Exchange
Commission and the securities commissions of states where we are
offering or selling our securities. Future issuance of stock, warrants and/or
options will require compliance with laws requiring registration of such
securities or the availability of an exemption therefrom. We will be able to
issue shares of our Common Stock upon exercise of the Warrants only if there is
then a current prospectus relating to the shares of Common Stock issuable upon
the exercise of the Warrants under an effective registration statement filed
with the Commission, and only if such shares of
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Common Stock are qualified for sale or exempt from qualification under
applicable state securities laws. Although the Company intends to use its best
efforts to meet such regulatory requirements, there can be no assurance that we
will be able to do so. The Warrants will be deprived of any value if a current
prospectus covering the shares of Common Stock receivable upon their exercise of
the Warrants is not then in effect, or if such shares of Common Stock are not or
cannot be qualified or exempted from qualification in the relevant
jurisdictions.
By the Federal Communications Commission
At present, there are few laws or regulations that specifically regulate
communications or commerce on the Internet; however, laws and regulations may be
adopted in the future that address issues such as on-line content, user privacy,
and pricing and quality of products and services. For example, the
Communications Decency Act of 1996 prohibited the transmission over the Internet
of certain types of information and content, even though such prohibition was
later declared unconstitutional. As an Internet service provider, we are not
currently subject to direct regulation by the Federal Communications Commission
or any other agency, other than regulations applicable to businesses generally.
In a report to Congress adopted on April 10, 1998, the Federal Communications
Commission reaffirmed that Internet service providers should be classified as
unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Telecommunications Act of
1996, as amended.
This finding is important because it means that we are not subject to
regulations that apply to telephone companies and similar carriers. We also are
not required to contribute a percentage of our gross revenues to support
"universal service" subsidies for local telephone services and other public
policy objectives, such as enhanced communications systems for schools,
libraries and certain health care providers. Although there can be no
assurance, the Federal Communications Commission action may also discourage
states from separately regulating Internet service providers as
telecommunications carriers or imposing similar subsidy obligations.
Nevertheless, Internet-related regulatory policies are continuing to
develop, and it is possible that we could be exposed to regulation in the
future. For example, in the same report to Congress, the Federal Communications
Commission stated its intention to consider whether to regulate voice and fax
telephony services provided over the Internet as "telecommunications" even
though Internet access itself would not be regulated. In addition, several
telecommunications carriers are seeking to have Internet telecommunications
regulated by the Federal Communications Commission (the "FCC") in the same
manner as other telecommunications services. Because the growing popularity and
use of the Internet has burdened the existing telecommunications infrastructure
in many areas, local exchange carriers have petitioned the FCC to regulate ISPs
and OSPs in a manner similar to long distance telephone carriers and to impose
access fees on the ISPs and OSPs.
Also, Internet user privacy has become an issue both in the United States
and abroad. Current United States privacy law consists of a few disparate
statutes directed at specific industries that collect personal data, none of
which specifically covers the collection of personal information on-line. We
cannot guarantee that the United States or foreign nations will not adopt
legislation aimed at protecting on-line privacy. Any such legislation could
affect the way in which we are allowed to conduct our business, especially those
aspects that involve the collection or use of personal information; and, as a
result, such legislation could have a material and adverse effect on our
business, financial condition and operating results. Moreover, it may take years
to determine the extent to which existing laws governing issues such as property
ownership, libel, negligence and personal privacy are applicable to the
Internet.
By Healthcare Agencies
Currently, our operations are not regulated by any healthcare agency.
However, Congress is likely to consider legislation that would establish
uniform, comprehensive federal rules about an individual's right to access his
own or someone else's medical information. This legislation would likely define
what is to be considered "protected health information" and outline steps to
ensure the confidentiality of this information. The proposed Health Information
Modernization and Security Act would provide for establishing standards and
requirements for the electronic transmission of health information.
Furthermore, the healthcare industry in general is subject to extensive,
stringent and frequently changing federal and state regulation, which is
interpreted and enforced by regulatory authorities with broad discretion. Among
other things, these regulations govern the provision of
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healthcare services and the marketing of medical devices. These regulations
generally predate the development of products and services such as those we
intend to offer on our website, and we are therefore not certain how the
application and enforcement of such regulations might affect our business or our
services. However, certain of the statutes governing the provision of healthcare
services could be construed by regulatory authorities to apply to our proposed
business activities. Consequently, there can be no assurance that regulatory
authorities do not or will not deem our business activities to constitute the
unlicenced practice of medicine.
We Could Be Subject To Sales Or Other Taxes
The tax treatment of Internet transactions and e-commerce, in particular,
has yet to be settled. A number of proposals have been made at the federal,
state and local level, and by certain foreign governments, that could impose
taxes on the sale of goods and services and certain other Internet activities. A
recently enacted law places a temporary moratorium on certain types of taxation
on Internet commerce, but we cannot predict the effect of current attempts at
taxing or regulating commerce over the Internet. Any legislation that
substantially impairs the growth of e-commerce could have a material and adverse
effect on our business, financial condition and operating results.
We Need To Attract Key Personnel
Our future success depends, in significant part, upon the continued
service of our senior management and other key personnel. The loss of the
services of Jack Rubinstein, President, R. Scott Barter, Director, or one or
more of the other executive officers or key employees, could have a material and
adverse effect on our business. Our future success also depends on our ability
to attract and retain highly qualified technical, marketing, customer service
and managerial personnel. Competition for such personnel is intense, and we
cannot guarantee that we will be able to attract or retain enough highly
qualified employees in the future. If our management is unable to hire and
retain personnel in key positions, our business, financial condition and
operating results could be materially and adversely affected.
Our Existing Shareholders May Maintain Control
Upon completion of this offering and the exercise of all Warrants, our
present directors and executive officers, holders of more than 5% of the Common
Stock, and their respective affiliates, will beneficially own approximately 50.1
% of the outstanding Common Stock. As a result, these shareholders, if they act
as a group, will be able to control all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions. Such control may have the effect of delaying or preventing a
change in control. For more information, see "Security Ownership of Certain
Beneficial Owners and Management".
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There Is No Prior Public Market For Our Common Stock Or Warrants, And The Stock
Price May Be Volatile
Prior to this offering, there has been no public market for our Common
Stock and/or the Warrants. We cannot predict whether a trading market will
develop, or how liquid that trading market might become. The initial public
offering price for the Common Stock and Warrants will be determined by us, in
our capacity, as issuers of the stock. That price has been arbitrarily
determined and may not be indicative of future market prices.
The trading price of our Common Stock and/or Warrants could be subject to
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new services or products by us or
our competitors, changes in financial estimates by securities analysts, the
operating and stock price performance of other companies, general economic
conditions and other events or factors. In addition, equity securities of
companies within certain industry groups, such as technology companies generally
and Internet-related companies in particular have shown marked volatility. Such
volatility has included rapid and significant increases in the trading prices of
certain Internet companies to levels that do not bear any reasonable
relationship to the operating performance of such companies, as well as large
interday swings in the trading prices of such securities. Extreme volatility can
also be present with price decreases, as well. These fluctuations may materially
affect the trading price of our Common Stock and/or Warrants and, consequently,
we cannot guarantee that investors will be able to sell their Common Stock
and/or Warrants at or above the initial public offering price. In the past,
following periods of volatility in the market price for a company's securities,
shareholders have often instituted securities class action litigation. Such
litigation could result in substantial costs and the diversion of our
management's attention and resources, which could have a material and adverse
effect on our business, financial condition and operating results.
We Will Have Substantial Discretion Over The Use Of Proceeds
We estimate that the net proceeds from the sale of the one million shares
of Common Stock offered by us will be approximately $ 465,000, at an initial
public offering price of $0.50 per share and estimated offering expenses of
$35,000. We estimate that the net proceeds from the sale of the two million
Warrants offered by us will be approximately $195,000, at an initial public
offering price of $0.10 per Warrant and estimated offering expenses of $5,000.
Therefore, under the above assumptions, we will realize $660,000 from the
offering. Our board of directors and management will have significant
flexibility in applying the net proceeds of this offering. In addition, should
the Warrants be fully exercised, we will realize gross exercise proceeds of (i)
$3,000,000 from the Class A Redeemable Warrants, and (ii) $5,000,000 from the
Class B Redeemable Warrants, and net exercise proceeds of $7,990,000 after
expected expenses of $10,000. The failure of our management to apply either the
offering proceeds or the net exercise proceeds effectively could have a material
and adverse effect on our business, financial condition and operating results.
For more information, see "Use of Proceeds".
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Infrastructure, Operations And Technology
Our operations will depend upon the capacity, reliability and security of
our computer system infrastructure. We currently have limited system capacity
and will be required to continually expand our system infrastructure to
accommodate significant numbers of users, visitors and subscribers, and the
increasing amounts of information such users may wish to access. Expansion of
our system infrastructure will require substantial financial, operational and
management resources. In addition, we will be dependent upon (a) web browsers
and third party Internet and on-line service providers for access to our
services, (b) hardware suppliers for prompt delivery, (c) installation and
service of computer equipment used to deliver our services, and (d) on-line
content providers to provide current up-to-date healthcare information for use
by consumers.
BUSINESS OF THE COMPANY
Company Background and History
Pipeline Data Inc., a Delaware corporation, was incorporated in June 1997.
During 1998, we made progress in developing a system to easily access and
deliver requested information from healthcare and pharmaceutical clients to
subscribers. These improvements focused on refining the process in which we
receive the relevant information from the individual, quickly relate this
information to the healthcare and/or pharmaceutical customer, and then relay
back to the customer the relevant medical and pharmaceutical information he or
she requested.
The initial test phase of our on-line direct marketing service is planned
for the summer of 1999. Launch of an early release phase should be completed in
the second half of 1999. We expect that full commercial launch will follow in
early 2000. The service will provide a comprehensive database of individual
subscribers receiving medical data spanning over fifty major disease (and
condition) categories.
Business Of The Issuer
Pipeline Data is an on-line direct marketing agent designed to assist the
pharmaceutical and healthcare industries to target directly a valuable and
growing volume of individual consumers who have utilized our website to request
specific information in the medical and healthcare arena.
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It is our intent to market our existing and future healthcare information
services, on a commercial basis, to major marketers within the pharmaceutical
and healthcare industry, who in turn will directly contact targeted subscribers
with pertinent information.
Our website (at http://www.healthpipeline.com) will be designed to target
healthcare consumers, their families, friends and associates, as well as
healthcare professionals.
Our business opportunity arises from two complementary global trends. The
first is the dramatic and continuing growth of the Internet as a source of
information. The second is the re-directing of healthcare advertising
expenditures from professionals to consumers through "direct-to-consumer" (DTC)
campaigns.
We are looking to assume a leading role in the on-line health information
delivery business through our unique, scalable system for creating and
maintaining user profiles and delivering targeted news and announcements via
e-mail, and by simultaneously cultivating a dedicated subscriber base.
Our mission is to help health care consumers (and their families) gain
access to pertinent information that will enable them to make better health care
decisions, communicate more effectively with health care providers, and promote
compliance with appropriate therapies.
Our business strategy is to attract visitors to our website and provide
them with access to information, services and products pertinent to the medical
condition that concerns either themselves, a member of their family, or one of
their friends.
Access to the website will be free, however special services will be
available for a fee. Our primary sources of revenue are expected to include: (1)
lead generation fees charged to pharmaceutical and medical supply companies; (2)
on-line sales of books and medical supplies; and (3) revenue generated by leads
for clinical trial participants.
We expect to generate a secondary revenue stream from website advertising,
sponsorships, consulting services, franchising content, and off-line newsletter
subscriptions.
Business Description
Through our Internet website, we will deliver a branded, integrated, web-
based solution for the healthcare information needs of consumers. This website,
currently under construction will be located at http://www.healthpipeline.com,
is being developed to be a single point of access to electronic data interchange
services, enhanced communications services, branded healthcare content and other
relevant web-based offerings. The website will provide premium, branded content
to assist consumers in making informed healthcare decisions, personalized
information about specific health conditions targeted according to the medical
profiles of individual consumers, and content-specific on-line communities that
allow consumers to participate in real-time discussions and support networks via
the web.
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We are primarily a "direct-to-consumer" (DTC) marketing channel utilizing
a "virtual medical and health information library" on the Internet and world
wide web, to create a high quality content destination that attracts visitors
who will find the information valuable, and so generate revenue from both
visitors and health industry marketers. We also intend to reach non-Internet
users through newsletters, CD-ROMs, television and other vehicles.
Our services are being developed in response to perceived market
opportunities, which include increased consumer demand for healthcare
information, continued pressure on the healthcare industry to control costs of
healthcare marketing and product supply, and expanded access to personal
computer technology, including the Internet.
Our website is being developed to serve the consumer demand for
top-quality, comprehensive information on specific medical topics. Our primary
target audience consists of health care consumers and their families, who are
facing acute and/or chronic, long-term medical conditions and who are looking
for detailed information about particular illnesses, the latest treatments,
drug-related and other therapies, as well as the management of side effects.
While the initial focus of the business is catering to the needs of
healthcare consumers and their families, there are many natural extensions to
pursue in the future, including primary healthcare providers, pharmacies and
other health care segments. The content is presented in English and can be
easily translated into other languages to expand the market opportunity.
The Overall Market Opportunity
Our overall market opportunity arises from two complementary global
trends. The first is the dramatic continuing growth of the Internet as a source
of information. The second is the re-directing of healthcare advertising
expenditures from professionals to consumers through DTC campaigns. We believe
that the following specific key trends will contribute favorably to expected
demand for our services:
1. Continuing Penetration of Computers and Modems in the Home:
An increasing percentage of computer owners also own modems, which are
being pre-installed in a growing number of new computers. Currently, over 51
million U.S. households have personal computers; over 75 million people use the
Internet; at least 12 million new people sign on to the Internet each year; the
median household income for US web "surfers" is approximately $65,000 per year;
the web is one of the fastest and least expensive forms of marketing and
customer service; and consumers are increasingly turning to the WWW to locate
and purchase goods and services. (Source: Information Developers, Web Site
Solution Provider -http://www.infodevelopers.com/Q&A.htm.) We believe that this
growth has been accompanied by increasing use of computers for communications
such as facsimile transmissions and electronic mail.
Connectivity is also an important factor. The standard modem speed for
individual Internet connection has rapidly grown from 14.4 kbps to 28.8 kbps and
is quickly approaching 56
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kbps. Concurrently many companies are rushing to provide the individual Internet
user with much higher speed connections via cable modems and digital subscriber
line (DSL) connections. DSL technology provides continuous high-speed Internet
access. "As a data transport service, DSL is well positioned between slow,
inexpensive analog dial-up service and high-speed expensive dedicated T1
service. The transmission speeds it provides, the continuous nature of its
connection and the price at which it can be delivered make DSL service an ideal
data solution. . . . As a result, many competitive local exchange carriers
(CLECs), Baby Bells and long distance providers such as MCI WorldCom Inc.
recently have announced plans for large-scale deployments of DSL-based access
networks to serve the increasing demands for high-speed data services among
business and residential subscribers (excerpted from Voice Brings New
Perspective to DSL, by Ken Kolderup, X-CHANGE magazine, April 1999 (c) 1999
Virgo Publishing, Inc)." An April 13, 1999 Associated Press newsfeed reported
that America Online wants Congress to force the nation's cable television
companies to grant its subscribers easier access to those companies' new high-
speed data pipelines. We believe that the higher speed connections now becoming
readily available will make our services increasingly accessible and attractive.
2. Growth of the Informational and Commercial Applications and Resources of the
Internet:
Use of the Internet has grown rapidly since commercialization in the early
1990s. An increasing number of servers and websites are being connected to the
Internet, making available educational and healthcare text, graphics and audio
and video information which may be accessed by consumers. Traditional and
emerging Internet applications, including electronic mail and the Internet, are
also increasing in popularity. Internet use is also being promoted by the
development of user-friendly navigation and search tools designed to simplify
consumer access to the Internet's resources.
3. Increasing Demand for Healthcare Information:
We believe that demand for healthcare information and services is
increasing as the "baby boomer" generation reaches its peak healthcare consuming
years. Consumers are assuming greater responsibility for their healthcare
decisions, seeking as much information as possible when choosing a health plan,
doctor or treatment. Significantly, there is also a growing propensity towards
"self-help" in regard to healthcare. According to The New York Times, the number
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of health-related websites on the Internet has grown significantly, reflecting
the growing demand from consumers for information to help them make more
informed choices about their own care.
In light of the spectacular growth of the Internet over the last few
years, estimates of the number of Internet users vary widely. Most put the
number of U.S. residents with at least minimal Internet access (i.e., e-mail) at
between 30 and 50 million, and industry studies confirm that this number
continues to increase rapidly. With tens of thousands of new users and thousands
of new websites added to the fold each day, accurate demographic profiles are
difficult to derive. Nevertheless, certain trends have been established. In
particular, it has been noted that
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health and medical issues are among the most important to Internet users as a
whole. From studies reviewed by the Company, it appears that health and medical
information is one of the fastest growing areas of interest on the Internet.
According to Media Metrix, an independent web research company,
healthcare-related content was the second most popular subject of web-based
information retrieval searches in 1997. According to Cyber Dialogue, an
independent research company, approximately 70% of the persons searching for
health and medical information on the Internet believe the Internet empowers
them by providing them with information before and after they go to a doctor's
office. Cyber Dialogue also indicates that during the 12-month period ended July
1998, approximately 17 million adults in the United States searched on-line for
health and medical information, and approximately 50% of these individuals made
off-line purchases after seeking information on-line. Furthermore, Cyber
Dialogue estimates that the number of adults in the United States searching for
on-line health and medical information will grow to approximately 30 million in
the year 2000, and they will spend approximately $150 billion for all types of
health-related products and services off-line. Accordingly, we believe that
healthcare and pharmaceutical companies will increasingly attempt to influence
the spending decisions of consumers through on-line advertising. An independent
research company, Jupiter Communications, estimates that expenditures for
on-line health and medical advertising will grow to approximately $265 million
by 2002.
The Market Niche Opportunity
The traditional personal relationship with one's physician has been
usurped by having to use physicians and specialists dictated by one's
increasingly restrictive medical plan. In addition, more physicians work in
large offices that are compartmentalized and don't have the time or the
inclination to develop long term relationships with their patients. Taken
together, these factors are causing an ever-growing number of consumers to take
greater responsibility for their own health-related decisions. As such, this
particular group forms an important target market for pharmaceutical and
healthcare marketers - hence the increase in DTC programs. Independent research
analysts estimate that DTC advertising will grow from $0.8 billion in 1997 to $3
billion in 2000 and $6 billion by 2005. On this basis, pharmaceutical DTC
advertising expenditures will surpass those of the U.S. automotive industry in
the next three years.
As would be expected, a rapidly growing number of these consumers (i.e.,
potential DTC targets) are logging on to the Internet to seek information that
will help them to address the health problems that impact their families and
themselves. Studies have shown that there are a measurably higher percentage of
Internet users among US residents with chronic medical conditions, than among
the general population; from this, it has been inferred that those with medical
conditions have made a greater effort to avail themselves of the electronic
resources available to them.
Despite the attractiveness of targeted marketing, where advertisements are
directed to exactly those users most likely to respond, advertising currently
posted on the Internet is for the most part restricted to two very different
forms of delivery: graphic advertisements on websites,
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and text promotions via e-mail. Graphic advertisements on websites most commonly
occur as "banners" placed at the top of a page on the web. Banner advertising
has a number of significant disadvantages: advertisers must fit their message,
including all text and graphics, in a relatively small space; and most users of
the web have become so immune to banner advertising that banners often go
entirely unnoticed. Yet advertisers are charged for each "impression" they
receive.
Those marketers looking to deliver an extended advertisement or promotion
directly to the consumer have sometimes turned to direct e-mail. Though, in most
forms, it cannot accommodate graphics, an e-mail message sent directly to an
Internet user can contain any amount of text and can speak directly to that
user. Unfortunately, direct e-mail marketing has most frequently taken the form
of bulk unsolicited e-mailing, in which messages have been sent to all names on
a purchased list of e-mail addresses, typically obtained without the explicit
consent of the addressees.
There is however an alternative to mass unsolicited mailings, which
involves an aspect of "push technology" - wherein a user notifies a list server
of those subjects that interest him or her, and the list server filters all
potential messages and delivers to the user only those that fit the relevancy
criteria - but it is still being employed on only a relatively small scale. The
e-mail alternative to mass unsolicited mailings is referred to as an "opt-in"
scheme, whereby a user voluntarily submits his or her e-mail address to a list
that promises to deliver messages the user is actively interested in. Marketers
then deliver their promotions only to those lists, which are appropriate, and
all users can opt-out of a given list at any time, thus eliminating the
possibility of unwanted messages.
There are currently between five and ten significant commercial operators
of opt-in e-mail lists. All of these lists except one have subscriber bases of
less than one hundred thousand. Only a few of these operators offer lists on
topics related to health and medicine, and all of these, with a few minor
exceptions, are too generic to be of any real use to either a consumer or an
advertiser because they offer discipline-specific, and even disease-specific,
websites. No single site offers consumers the ability to sign up once and
specify a range of specific interests across medical or health-related
disciplines.
The Internet Site
Our Internet site is currently under construction and is being designed
from the ground up with the healthcare consumer in mind. The objective is to
develop an empowered consumer who achieves improved health. The site strives to
provide "one-stop shopping" for customer healthcare, pharmaceutical and medical
information. The vast majority of services are provided free to the visitor.
All information and services will be organized into 50 different medical
disease and condition topics. Some of the topics include: attention deficit
disorder, AIDS, allergies, Alzheimer's disease, arthritis, asthma, breast
cancer, bronchitis, colorectal cancer, depression, diabetes, erectile
dysfunction, headache/migraines, heart disease, infertility, lung cancer,
melatonin, menopause/osteoporosis, obesity, hypertension, pregnancy, prostate
cancer, sleep
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disorder, spinal cord injury, sexually transmitted diseases, stress and strokes.
Additional linked sections will be added in the future.
The Service
For the launch phase of the service, we will create and operate an "opt-
in" e-mail delivery service covering the entire spectrum of health, medical, and
pharmaceutical interests. All that is required of a potential subscriber to this
free service is a valid e-mail address. A new subscriber creates his or her user
profile through either a web-based interface that we offer, or through an e-mail
or paper-based questionnaire. This profile is essentially a list of all topics
that the visitor or subscriber is interested in receiving information about
chosen from an extensive universal list . These profiles, which could be updated
at any time through the web, determine the information the users will receive
via e-mail.
Utilizing this unique approach to direct e-mail, we can send subscribers
capsulized news and promotional items dealing with their respective areas of
interest. Subscribers then have a convenient way of accessing additional details
on each of these items. We charge advertisers/marketers not for distribution of
their capsulized news items, but rather for each subsequent subscriber request
for additional information.
We intend to provide access to the service on a 24 hour a day, seven days
a week basis through various communications line providers.
In addition to expanding the business relationships in the healthcare and
medical information field, we see significant future opportunities by using the
service to help with drug compliance programs and e-commerce.
Under Development
We intend to offer a combination of the following services on our website
for each listed medical topic (see "The Internet Site"):
1. On-line Bookstore:
This service will provide a list of recommended reading materials with a
review prepared by us. We intend to negotiate with various on-line sales
organizations so that books can be purchased on-line through hyperlinks to
amazon.com, Barnes & Noble, and other on-line bookstores.
2. Medical Supplies:
Offering certain medical products is a logical way for the Company to
enter the growing world of e-commerce. Visitors and subscribers will be able to
purchase hard-to-find medical
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products, devices and services that would be shipped for home delivery. We
intend to operate in essence an on-line medical supply store. We are currently
negotiating with different software vendors to develop software for our proposed
on-line store.
3. Therapy Compliance Counseling:
Pharmaceutical companies forego an estimated $50 million a day in
revenues, because patients do not comply with the therapies prescribed by their
physicians. We plan to develop various on-line compliance programs that take
advantage of the interactive features of the Internet to improve patient
compliance.
The drug and/or therapy compliance and e-commerce expansion opportunities
are in keeping with our objective to generate a profit for the Company while
offering a superior product to the consumer.
4. Support Groups:
We are seeking to develop and incorporate on-line "chat" capabilities and
sponsored healthcare forums into our website capabilities. We anticipate that
these features will provide consumers with an opportunity to discuss healthcare
issues with other consumers and eventually - healthcare experts and/or
marketers. Users will be able to post messages, ideas or responses to an e-mail
bulletin board that is moderated by a health care professional.
5. Drug Information:
This database will provide detailed information on drugs used to treat
specific medical conditions. We plan to license information from the US
Pharmacopoeia database, and supplement it with information from pharmaceutical
firms and other health organizations. The database will include 30 areas of
information on each drug, including side effects, missed dosage, pregnancy
implications and interactions with other medications.
6. Patient Associations:
This service will provide links to patient associations involved with the
medical conditions covered in the various topics. A detailed introduction to the
association will be provided. Through these links, a subscriber will have access
to membership information, additional material on the medical topic, and
products and services offered by the association.
We intend to negotiate content and marketing agreements with a number of
non-profit patient support organizations. The agreements will provide for
sharing of medical information, sales of videotapes, books and other products,
on-line donation and membership registration for conferences and association
services; all via our proposed secure transactions area. Generally, these
agreements will provide that we will be paid a referral fee based on a
percentage of the purchase price of items sold through our on-line book or
medical supply stores, or other payments made to the organization plus credit
card processing charges. Organization members
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will also be able to participate in our planned on-line services, including
moderated discussion groups to obtain timely information and emotional support.
7. Educational Material:
This linked web page will include basic primer information on each topic,
as well as specific material provided by organizations such as the National
Institute of Health, major associations for each condition (as above), leading
hospitals, prominent support groups, as well as pharmaceutical companies. We
intend to host workshops for pharmaceutical executives, consult with them on a
one-to-one basis, and prepare a regular newsletter specifically tailored for the
pharmaceutical industry.
8. On-line Library:
Our website will contain an extensive database of healthcare information,
including licensed content addressing specific diseases and medical issues; a
medical encyclopedia; a pharmacy reference; information relating to self-help
groups; and numerous articles from prominent healthcare periodicals such as The
---
New England Journal of Medicine and the Journal of the American Medical
- ------------------------------- -------------------------------
Association.
- ------------
9. Journal Club:
The Journal Club will provide summaries of articles from leading,
peer-reviewed medical journals (e.g., such as The New England Journal of
--------------------------
Medicine and the Journal of the American Medical Association) that would be of
- -------- --------------------------------------------
interest to healthcare consumers, their families and friends. Summaries of the
articles will be prepared by qualified medical journalists hired as independent
contractors/consultants by us.
10. Conference Highlights:
Selected papers presented to major medical conferences will be summarized
by qualified medical journalists and presented in the same manner as the Journal
Club, as soon as practicable after the ending of the medical conference.
11. Clinical Trial Updates:
We intend to sign an agreement with a leading clinical trial organization,
which will enable us, for a flat monthly fee, to present educational and other
material on clinical trials, and provide leads to the organization.
12. Outside Sources:
This service will contain a list of hyperlinks to selected Internet sites
covering the different medical topics of interest. A brief description of each
linked site will be included to assist the subscriber in selecting the best site
for his or her needs. The website's Internet gateway
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module will permit access to the Internet for additional healthcare information,
through the use of a web browser. Access is limited to websites that we believe
will provide the most relevant healthcare information.
13. Audio and Video capabilities:
We intend to further develop and enhance our service, by expanding our
content offering to include video and audio.
14. Call Center:
We may offer a call center service that would allow consumers to speak
with a nurse or other medical practitioner by phone. We believe that a call
center capability would enhance health care consumer compliance with disease
management and therapy compliance programs. If we develop such capability, we
may become subject to increased government regulation. (See "Government
Regulation.")
15. Off-line Communications:
Stepping outside of the Internet, there are thousands of consumers and
their families, who desire to obtain the same quality of information organized
into specific topics - but who do not have access to the Internet. We have
access to an ever-growing number of pages of documents, but our service is
currently only reaching a small percentage of the people who may want that
information. To service this "off-line" demand, we intend to publish off-line
newsletters. Our management believes that it has enough content to publish a
quarterly or even bi-monthly issue on most topics that are included on the
website.
Marketing Strategy
Our marketing strategy has two components. First, we intend to execute a
consumer public relations and advertising campaign to raise awareness of the
site and subsequently attract visitors to the site. This campaign will include
on-line and off-line activities. As a first step, we have retained Rainbow Media
to act as our promotional agent. Among their activities will be arranging for
media interviews, press coverage, distributing news releases, and any other
activity that might raise the profile of our Company and our services. Second,
we intend to conduct a business-to-business public relations and advertising
campaign to attract pharmaceutical firms, pharmacy chains, medical device
manufacturers, clinical trial companies, biotechnology firms and other health
care marketers, as well as their advertising agencies, as advertisers and/or
sponsors.
We also intend to build relationships with strategic organizations in the
healthcare and information technology sectors. These organizations would include
healthcare marketers including pharmaceutical firms, medical service
companies--as well as charitable research foundations and publishers, PMBs,
pharmacies, clinical trial organizations, allied health-care
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groups, and customer media. These relationships are expected to result in
long-term partnerships.
We intend to enter into agreements with Internet "portal" companies, such
as America Online (AOL) and Microsoft Network (MSN), to ensure that AOL's and
MSN's subscribers are provided with direct access to our websites.
We also intend to place advertising banners on various Internet web search
engines, such as Yahoo, WebCrawler, America Online's NetFind, Excite, Lycos,
Alta Vista and several others. In addition, we intend to post messages to news
groups to promote the site to potential visitors and subscribers to our website
on the Internet. We also hope to reach agreements with the syndicated medical
television shows, to co-brand the shows and the sites and co-market both
companies to advertisers and marketers.
Revenue Strategy And Potential
To provide revenues during the launch phase, we will charge
advertisers/marketers not for distribution of their capsulized news items, but
rather for each subsequent subscriber request for additional information (see
"The Service"). The fee structure has a fixed and variable component. The
advertiser/marketer pays an initial annual fee for having unique access to our
qualified visitor and subscriber base. The variable fee structure is dependent
upon a number of factors, including the nature and subject of the item the
subscriber is requesting, characteristics of the subscriber domain, and the type
of information the subscriber is providing in return for more details. The
service will remain absolutely free to subscribers at all times.
Under the dual fee structure, we will be able to plan our R&D and
continually improve our service and become the pre-eminent branded
healthcare/pharmaceutical delivery service, as well as significantly grow our
revenues as our subscriber base and products and services continue to evolve.
The medical/healthcare component of the US economy will continue to be one of
the largest and most important sectors. Because of our superior delivery
mechanism, we should be a beneficiary of this trend, allied to the growth of the
Internet, to ultimately provide the consumer with better and more relevant
medical/healthcare information.
Once more of the website capabilities have been launched, we intend to
generate further revenues in the following ways:
(a) Marketing or sponsorship fees charged to pharmaceutical and medical
marketers:
We believe that we will be able to deliver to these companies a
highly-motivated, interested and targeted subscriber base and allow these
companies an opportunity to provide information describing their products
and services to this audience. We are in discussions with a number of
companies that are considering promoting their products and services on
our website. There is no assurance how many, if any, of these companies
will decide to utilize our website.
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(b) Franchising content:
We are in the process of developing a significant database of medical
information for our website, and our management intends to approach
pharmaceutical firms, pharmacy chains, and other companies in related
fields and offer to license the content on our database. We intend to
charge a license fee on a per visitor basis.
(c) On-line sales of books and medical supplies:
As mentioned earlier, we plan to enter into agreements with companies like
amazon.com and Barnesandnoble.com, the two largest booksellers on the
Internet, pursuant to which we will refers users to the amazon.com and
Barnesandnoble.com sites where subscribers can buy books, tapes and
videos. In return, these on-line booksellers would pay us a referral fee
based on the sales price. Depending on the success of book sales, we also
intend to offer, over our website, vitamins, CD-ROMs and other medical
products and supplies.
(d) Off-line newsletter subscriptions
We intend to publish off-line newsletters dealing with specific medical
conditions (e.g. a monthly AIDS newsletter) which would be distributed
through support group channels, medical supply and pharmaceutical company
marketing programs.
(e) Revenue from clinical trial referral fees:
As mentioned earlier, we expect to be paid fees for referring persons
willing to participate in clinical trials.
Dealing With Competition
Even a cursory review of one of the major Internet directories reveals a
vast number of websites focusing on health and medicine. There are general sites
as well as sites dedicated to specific issues or diseases, and there are sites
targeted at healthcare and medical professionals, as well as sites targeted at
patients and the lay populace. While a few websites have established themselves
as the leading on-line resources for physicians, no patient-targeted site has
made significant strides towards becoming a "brand name" or market leader. We
believe that the first company to establish clear brand leadership will have a
significant opportunity to capitalize on multiple revenue opportunities,
including recurring subscription, advertising and sponsorship revenue.
We believe that the broad range of capabilities of our on-line system,
combined with our potential ability to link consumers with healthcare marketers
and providers, differentiates our web-based service from competitive products
and services, and makes it attractive to potential advertising and sponsoring
organizations.
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Sources
This prospectus includes statistical data regarding the Internet industry.
This data has been taken or derived from information published by sources
including Media Metrix Inc., Cyber Dialogue Inc. and Jupiter Communications LLC,
media research firms specializing in market and technology measurement on the
Internet; as well as International Data Corporation, a provider of market and
strategic information for the technology industry. Although we believe that the
data are generally indicative of the matters they touch upon, this type of data
can be by nature imprecise, and so investors are cautioned not to place undue
reliance on such data.
Systems And Technology
In order to support our anticipated growth, we plan to engage in projects
to enhance our information systems.
Staff Recruitment And Retention
To achieve our goals, we have begun to implement a plan to attract
healthcare information and information systems professionals. To assist in
recruiting and retention of these professionals, we plan to implement a new
incentive compensation structure that relies on stock options and cash
compensation, to bring total compensation for employees to a market-competitive
level. We believe that providing equity-based compensation, as a significant
component of income, will be important in attracting future employees and
affiliated professionals, as well as retaining present staff.
The ability to attract and retain highly experienced professionals with a
long-term commitment to our Company, our clients and subscribers will be a
significant factor in our long-term growth strategy. We believe we will
experience less turnover amongst our professional employees as a publicly held
company.
As of December 31st 1998, we had 1 full-time employee and 3 part-time
employees. Our employees are not represented by any labor union, and we consider
our relationship with them to be good.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDING DECEMBER 31, 1997 AND 1998
AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999
AND THE PERIOD FROM INCEPTION (JUNE 23, 1997) TO MARCH 31, 1999.
Development stage activities.
The Company has been a development stage enterprise from its inception
June 23, 1997 to March 31, 1999. The Company is in the process of developing a
web site on the World Wide Web for the purpose of providing information to
healthcare customers and sharing its expertise by doing consulting.
During this period, management devoted the majority of its efforts to
initiating the process of the web site design and development, obtaining new
customers for sale of consulting services, developing sources of supply,
developing and testing its marketing strategy and finding a management team to
begin the process of: completing its marketing goals; furthering its research
and development for its products; completing the documentation for and selling
initial shares through the Company's private placement; and completing the
documentation for the Company's initial public offering. These activities were
funded by the Company's management and investments from stockholders. The
Company has not yet generated sufficient revenues during its limited operating
history to fund its ongoing operating expenses, repay outstanding indebtedness,
or fund its web site and product development activities. There can be no
assurance that development of the web site will be completed and fully tested
in a timely manner and within the budget constraints of management and that the
Company's marketing research will provide a profitable path to utilize the
Company's marketing plans. Further investments into web site development,
marketing research as defined in the Company's operating plan will significantly
reduce the cost of development, preparation, and processing of purchases and
orders by enabling the Company to effectively compete in the electronic market
place.
During this developmental period, the Company has been financed through
officer's loans with a balance of $72,622 from Jack Rubenstein. The Company also
financed its activities through profit earned in the first quarter ending March
31, 1999 of $24,962.
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Results of Operations for the year ended December 31, 1998 as compared to
the period from inception, June 23, 1997, to December 31, 1997.
For the year ended December 31, 1998, the Company generated net sales of
$22,500 as compared to $-0- for the period from inception, June 23, 1997, to
December 31, 1997 representing an increase of $22,500. The Company's cost of
goods sold for the year ended December 31, 1998 was $-0- as compared to $-0- for
the period from inception, June 23, 1997, to December 31, 1997. The Company's
gross profit on sales was approximately $22,500 for the year ended December 31,
1998 as compared to $-0- for the period from inception, June 23, 1997, to
December 31, 1997. The increase in gross profit is the result of offering for
sale technology that was learned as a result of organizing the business.
The Company's general and administrative costs aggregated approximately
$66,277 for the year ended December 31, 1998 as compared to $32,003 for the
period from inception, June 23, 1997, to December 31, 1997 representing an
increase of $34,274. This increase represents increased spending for office
salaries of $20,000, telephone expense of $8,351, professional fees of $13,287
and office and computer expense of $24,639 .
Results of Operations for the three months ended March 31, 1999 as compared to
the three months ended March 31, 1998.
For the three months ended March 31, 1999, the Company generated net sales
of $30,000 as compared to $-0- for the three months ended March 31, 1998
representing a increase of $30,000. The Company's cost of goods sold for the
three months ended March 31, 1999 was $-0- as compared to $-0- for the three
months ended March 31, 1998. The Company's gross profit on sales was $30,000 for
the three months ended March 31, 1999 as compared to $-0- for the three months
ended March 31, 1998. The increase in gross profit is the result of offering for
sale technologies learned as a result of organizing the Company's business.
The Company's general and administrative costs aggregated approximately
$3,988 for the three months ended March 31, 1999 as compared to $10,005 for the
three months ended March 31, 1998 representing a decrease of $6,017.
Results of Operations for the period of inception (June 23, 1997) to March 31,
1999.
For the period from the Company's inception, June 23, 1997, through March
31, 1999, a period of approximately 21 months, the Company generated net sales
of $52,500 (an average of $2,500 per month). The Company's cost of goods sold on
sales was approximately $-0- for the period from the Company's inception June
23, 1997, through March 31, 1999. The gross profit from sales for this 21 month
period is $52,500. Management believes the gross profit of an average of $2,500
for the period from inception, June 23, 1997, through March 31, 1999, will
improve and stabilize once the Company's web site facilities become realized at
the completion of the public offering and its marketing plans become fully
implemented.
The Company's general and administrative costs aggregated approximately
$102,268 for the period from inception, June 23, 1997, through March 31, 1999.
Of these initial startup costs, approximately $40,000 is attributed to wages,
telephone charges of $11,605, professional fees of $13,287, rent of $13,125, and
office and computer expenses of $24,251.
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<PAGE>
Liquidity and Capital Resources.
The Company decreased liquidity by $30,379 from a cash balance of $-0- at
June 23, 1997 to $4,367 December 31, 1998 and $30,379 at March 31, 1999. Working
capital at December 31, 1998 and March 31, 1999 was negative at $69,005 and
$44,043 respectively. For the year ended December 31, 1998 and for the three
months ended March 31, 1999, working capital was provided by the positive cash
flows from the operations of $24,962 for the three months ended March 31, 1999.
The Company continued to be funded in part through officer loans aggregating
$74,422 for the period from inception, June 23, 1997, to March 31, 1999. The
Company expended cash for the development of the business and absorbing losses
aggregating $82,004 for the period from inception, June 23, 1997, to December
31, 1998.
Management believes that it will be able to fund the Company through the
continuation of offering consulting services until the Company's web site is
developed and on-line and the process of a public offering is completed.
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USE OF OFFERING PROCEEDS
The uses of the proceeds available to us, from the sale of the Securities
in this offering are estimated below, assuming that all of the Securities are
sold. We expect to use the net proceeds over the coming 12-month period for
general corporate purposes, primarily as outlined below.
Offering Expenses $ 35,000
Working Capital $665,000
--------
Total $700,000
Estimated offering expenses include legal counsel fees and costs,
accounting fees and costs, printing costs, mailing and travel expenses, and
related costs. Our management believes that no broker/dealer assistance will be
required.
Working capital is the amount of our current assets, such as cash,
receivables and inventory, in excess of our current liabilities, such as
accounts payable. As proceeds are received, they would be added to cash bank
balances, increasing working capital. Working capital may be used to pay the
salaries and expenses of employees, including management personnel, although
management has not received any salary to date.
Our officers, directors, and their affiliates have provided us with
initial equity capital in the amount of $ 140,000. They have been issued
1,002,500 shares of Common Stock in return for this and for organizational and
developmental services rendered to us. See "Certain Relationships and Related
Transactions".
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and as adjusted, on a pro forma basis, to give effect to the issuance and sale
by us of the Securities offered hereby. The table does not assume the exercise
of the Class A Redeemable Warrants or the Class B Redeemable Warrants. It also
gives effect to $140,000 in additional capital contributions of officers and
directors, and certain of their affiliates. This table should be
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reviewed in conjunction with our December 31, 1998 audited financial statements
and the notes thereto included elsewhere in this Prospectus:
December 31, 1998
----------------------------
Actual Adjusted(1)
------ -----------
Loans payable ............................. 73,372 74,422
Stockholders' equity
Common stock, $.001 par value; .......... 10 20
20,000,000 shares authorized;
Additional paid-in capital .............. 9,748 829,748
Retained earnings (Deficit) ............. (78,754) (53,792)
------- -------
Total Stockholders' equity ............ (68,996) 775,796
------- -------
Total Capitalization ...................... 4,376 850,398
- ----------
(1) Assumes net offering proceeds of $665,000 from the complete sale of
1,000,000 shares of Common Stock, 1,000,000 Class A Redeemable Warrants,
and 1,000,000 Class B Redeemable Warrants, and additional capital
contributions of $140,000 from officers, directors, and certain of their
affiliates.
DILUTION
The following table shows, on a pro forma basis determined as of December
31, 1998, the difference between existing stockholders and new investors
purchasing Securities in this offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------------ ---------------------
Percent Percent Average Price
Number of Total Amount of Total Per Share
--------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Present stockholders 1,002,500 50.1% $140,000 17.39% $0.139
New stockholders 1,000,000 49.9% $665,000 82.61% $0.665
TOTAL 2,002,250 100% $805,000 100% $0.40
</TABLE>
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On December 31, 1998, we had a net book value of ($68,996), or ($0.07) per
share (based on 1,002,500 shares outstanding which gives effect to a 1:10,000
forward stock split). The net tangible book value per share is equal to the
Company's total tangible assets, less our total liabilities, and divided by our
total number of shares of common stock outstanding. After giving effect to the
sale of the Common Stock and associated Warrants at the public offering price of
$0.50 per Share and $0.10 per Warrant, the application of the estimated net
offering proceeds, and after giving effect to a 1:10,000 forward stock split and
additional capital contributions of $140,000 by certain of our officers,
directors, and their affiliates, our net tangible book value, as of December 31,
1998, would have been $735,995, or $0.37 per share. This represents an immediate
increase in net tangible book value of $0.45 per share to existing stockholders,
and an immediate dilution of $0.22 per share to new investors purchasing shares
in this offering. Based on the above, the following table illustrates the per
share dilution in net tangible book value per share to new investors:
Public offering price per share $0.50
of Common Stock
Value per share due to sale of Warrants $0.10
Net tangible book value per share
as of December 31, 1998 $(0.07)
Increase per share attributed to
investors in this offering $0.60
Net tangible book value per share
as of December 31, 1998,
after (i) the offering and
(ii) issuance of Securities to
management, directors and affiliates $0.38
Net tangible book value dilution per
share to new investors $0.22
DIVIDEND POLICY
We have not paid any cash dividends to date, and we do not expect to pay
dividends in the foreseeable future. We intend, in the short term at least, to
use all available funds to develop our business.
PLAN OF DISTRIBUTION
No Broker-Dealer Or Selling Agent Planned At Present
We are offering (i) one million shares of our Common Stock at an offering
price of $0.50 per share, (ii) one million Class A Redeemable Warrants at an
offering price of $0.10 per
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Warrant, and (iii) one million Class B Redeemable Warrants at an offering price
of $0.10 per Warrant, in each case, through our officers and directors on a
"best-efforts" basis. We are planning to manage the offering without the use of
an underwriter, and because of that, there will not be any underwriting
discounts or sales commissions. The Securities will be offered and sold by our
officers and directors, who will receive no sales commissions or other
compensation, except for reimbursement of expenses actually incurred on our
behalf for such activities. In connection with their efforts, they will rely on
the "safe harbor" provisions of Rule 3a4-1 of the Securities and Exchange Act of
1934, as amended (the "1934 Act"). Generally speaking, Rule 3a4-1 provides an
exemption from the broker/dealer registration requirements of the 1934 Act for
persons associated with an issuer. Following the receipt of $120,000 in gross
proceeds, all subscriptions will be paid directly to us upon receipt. No person
or group has made any commitment to purchase any or all of the Securities.
Nonetheless, the officers and directors will use their best efforts to find
purchasers for the Securities. We cannot state at this point how many Securities
will be sold.
Our officers and directors anticipate making sales of the Securities to
parties whom we believe may be interested, or who have contacted us expressing
an interest in purchasing the Securities. We may sell Securities to such parties
if they reside in a state in which (i) the Securities may be sold legally and
(ii) we are also permitted to sell the Securities. However, we are not obligated
to sell Securities to any parties and we may refuse to do so.
Minimum Offering Amount
We have established a minimum offering amount of $120,000 from the sale of
Common Stock and Warrants and will escrow investor money pending sale of this
amount. Upon receipt of the Minimum Amount, each subscription for Securities in
this offering that is accepted by us will be credited immediately to our
Company cash accounts, and such funds may be spent by us at our discretion,
without any waiting period or other contingency.
Determination Of The Offering Price
Prior to this offering, there has been no market for the Common Stock
and/or Warrants of the Company, and, as a development stage company, we have
essentially had no substantial business operations to date. The offering price
has been determined arbitrarily by our Board of Directors.
We reserve the right to reject any subscription in full or in part, and to
terminate the offering at any time.
No person, individual or group has been authorized to give any information
or to make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, that information and
representations must not be relied on as having been authorized by us or our
officers. This prospectus is not an offer to sell, or a solicitation of an offer
to buy, any of the Securities it offers to any person in any jurisdiction in
which that offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale hereunder shall,
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<PAGE>
under any circumstances, create any implication that the information in this
Prospectus is correct as of any date later than the date of this Prospectus.
The Securities may only be offered, sold or traded in those states where
the offering and/or Securities have been registered, or where there is an
exemption from registration.
Purchasers of Securities, either in this offering or in any subsequent
trading market which may develop, must be residents of states in which the
Securities are registered or exempt from registration. Some of the exemptions
are self-executing, that is to say that there are no notice or filing
requirements, and compliance with the conditions of the exemption render the
exemption applicable. See "Risk Factors - We May Be Subject to Government
Regulation".
Legal Proceedings
We have not been, nor has our property been, the subject of any pending
legal proceeding.
DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
Listed below are our Officers and Directors and their previous experience.
The Directors have been elected by the present shareholders and shall serve for
terms of one year, or until their successors are elected and have qualified.
Officers are appointed by, and serve at the pleasure of, the Board of Directors.
Officers And Directors
Jack Rubinstein, President, CEO and Director
Mr. Rubinstein, age 50, is the General Partner of DICA Partners, an
investment hedge fund located in Hartsdale, New York, which commenced operations
in 1991. Mr. Rubinstein also acts as a management and financial consultant to
various public companies in the telecommunications industry. He was a founding
public board member of CD Radio, Inc. and aided in the funding of the Molloy
Group, a help desk software developer. Mr. Rubinstein is also a founding member
of The Capital Market Advisors Network, a consortium of consultants aiding the
capital market needs of emerging private and smaller public companies.
Mr. Rubinstein began his business career as a securities analyst with
Shearson Hammill & Co., specializing in the electrical equipment and business
services industries. After seven years as an analyst, he joined Bear Stearns &
Co. where he was a Director, managing the proceeds of corporate insider
securities sales. At Bear Stearns, he also managed the derivatives investments
of several senior officers, as well as a few select individual clients. In 1988,
Mr. Rubinstein joined Morgan Stanley & Co. where, in addition to serving
corporate officers and select individual clients, he provided his expertise to
private investment partnerships. Mr. Rubinstein is a graduate of Cornell
University and received an MBA in Finance from New York University.
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R. Scott Barter, Director
Mr. Barter, age 52, is the Founder, Chairman, Chief Executive Officer and
a Director of Unifund Financial Group, Inc. and Unifund America, Inc. Mr. Barter
has been engaged in the securities industry in the United States and abroad
since August, 1975. He has been licensed with the National Association of
Securities Dealers and as a member of the National Futures Association. He has
been registered as a representative with the United Kingdom National Association
of Securities Dealers and Investment Managers (now FSA) and in addition, has
held a Representative's license to deal in securities from the United Kingdom
Department of Trade and Industry.
Mr. Barter has served as a senior officer/director of various brokerage
firms and has acted as advisor to and consultant for both publicly and privately
traded companies in the United States and the United Kingdom. He has diverse
investment experience combined with an extensive background in the areas of
corporate finance and the private client/independent investor.
Douglas Harrison-Mills, Director
Mr. Harrison-Mills, age 48, is a Director of Unifund Financial Group, Inc.
and Unifund America, Inc. and has an extensive background in financial services
and communications, working both in the City of London and on Wall Street. He is
also currently a Director of Haversham Consulting Ltd, a UK-based consulting
firm. Prior to founding Haversham, he was Marketing Manager of Elders Investment
Management Ltd. (a European subsidiary of the investment banking arm of the
international conglomerate, formerly known as Elders IXL) and was responsible
for the marketing of EIM's products and services throughout the UK, Europe and
North America.
He has been registered as a Representative with the UK National
Association of Securities Dealers and Investment Managers (now FSA), has held
both a Principal's and a Representative's license to deal in securities from the
UK Department of Trade and Industry and has been registered with IMRO (the
Investment Managers Regulatory Organization).
Mr. Harrison-Mills has advised clients from a variety of business sectors
in England, Europe, the United States and Australia; and his work has won a
number of international creative awards: a "Clio" plus eight Clio Certificates
of Excellence; a Federation of Commercial Television Stations Award and a
National Retail Merchants Association Award. His business development
experience, on both the client and consultancy side, has spanned most facets of
strategic planning, corporate communications and corporate finance, involving
him in a number of new product launches and company start-up situations.
William Bradford Smith, II, Director
Mr. Smith, age 50, has been a director of Unifund Financial Group, Inc.
since April 1999. Mr. Smith has also been a director of Unifund America, Inc.
since 1998. Since July 1991, Mr. Smith has been a Director and President of
WBS&A Ltd., a management consulting firm.
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Mr. Smith founded the Small Corporate Offering Registration Task Force,
has served as an advisor to the Texas Delegation to the 1995 White House
Conference on Small Business, and attended and has made recommendations to the
15th, 16th, and 17th Annual SEC's Government-Business Forums on Small Business
Capitalization, the Small Business Capital Foundation Committee at the 1997
North American Securities Administrators Association annual conference and the
University of Southern California's SEC and Financial Reporting Institutes Forum
on Selected Issues of Small Business Capital Formation.
Mr. Smith serves as Chairman of the Board of the non-profit Investors
Research Institute ("IRI") and has worked with IRI projects for small publicly
traded companies to be followed by securities analysts and to develop
information disclosure standards and best practices.
Mr. Smith has helped organize, sponsor and/or spoken at small business
capital formation conferences including the Dallas Federal Reserve Bank's
"Capital Solutions for Small Businesses," Greater Austin Chamber of Commerce's
SCOR conferences, Houston/Galveston Area Council's "Capitalizing a Small
Business," International Quality and Productivity Center's "Stock Trading on the
Internet," Loyola-Marymount University's Los Angeles SCOR a Million symposium,
Southern California Edison's "Understanding Equity Capital" seminar, five SEC
Town Hall Meetings on Small Business Capital Formation and the Seattle SCOR
$1,000,000 (and more) Small Business Capital Formation Seminar.
Mr. Smith was president of a division of Johnstown/Consolidated Capital,
president of Bradford Investment Company, and division vice president of Valley
Federal Savings and Loan, and Relco Industries.
Mr. Smith is the author of "Guide to Strategic Thinking" and received his
MBA from Pepperdine University and a BBA from the University of Oklahoma.
Alan Scott, Director and Secretary
Mr. Scott, age 40, has been the assistant secretary of Unifund
Financial Group, Inc. since its formation. Since 1984, Mr. Scott has been
engaged in the practice of law. Mr. Scott is admitted to the bars of the States
of Florida and New York. Mr. Scott received his B.A. from the University of
Tennessee at Knoxville and his J.D. from Cornell University.
Harold G. Halcrow, Ph.D., Advisor*
Professor Halcrow, age 87, earned his Ph.D. in Economics from the
University of Chicago and received his B.S. from North Dakota State University
and his M.S. from Montana State University. Currently, he is Professor Emeritus
of Agricultural Economics at the University of Illinois, Champaign-Urbana.
Earlier, he served on the faculties of Montana State University
* Not an officer or director, but may be deemed a "significant employee"
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and the University of Connecticut. He has also served as Visiting Professor at
Stanford University and the University of California, Berkeley.
Professor Halcrow is author or co-author of eight books, numerous research
publications, journal articles and extensive reports, and the editor of two
books. He is a Fellow of the American Agricultural Economics Association (AAEA),
and has served as the AAEA representative on the Board of Directors of the
National Bureau of Economic Research, New York. Professor Halcrow has worked as
a consultant to the US Department of Commerce, the US Department of Agriculture
and the State of Illinois Economic Technical Advisory Committee. He is
recognized for his contributions to the business and academic world by Who's Who
in America, Who's Who in the Midwest, the Directory of American Scholars, the
National Registry of Prominent Americans and International Notables and the
International Authors and Writers Who's Who.
Harris Schiff, Consultant*
Mr. Schiff, age 54, is Vice President in charge of Management Information
Systems and Internet Applications for Unifund Financial Group, Inc. Prior to
joining Unifund, he was employed by Kramer Levin Natalis & Frankel, LLP (Kramer
Levin), a large New York City law firm with a substantial corporate practice.
Mr. Schiff's responsibilities at Kramer Levin included management of the firm's
voluminous electronic financial filings via EDGAR on behalf of its corporate
clients. EDGAR is the SEC's program and interface for computerized reporting of,
and access to, SEC filing information.
Federico Brown, Consultant*
Mr. Brown, age 35, is presently the director of Interactive Concepts, an
internet investor information service based in Austin, Texas. Previously he
worked with Percentage Plus Investments, an investment advisory firm also
located in Austin. Before the advent of the world wide web, Mr. Brown conducted
financial management and national investment seminars, and operated Telestock
One, a premier computer bulletin board for investors. Mr. Brown designed and
presently maintains Money$earch.com, an interactive investment site on the
Internet. On behalf of Money$earch.com, Mr. Brown secured co-branding
arrangements with BigCharts, Zack's, Worldlyinvestor.com, EDGAR Online and other
large real-time financial data resources as well as e-commerce arrangements with
advertisers on the website.
Arthur Gager, Consultant*
Mr. Gager, age 57, is a New York based graphics artist specializing in
art direction, graphic design, desktop publishing and illustration for both
print and internet media. From 1982 through 1990 he was senior Producer and Art
Director for Grey Advertising. He assisted with various client accounts
including Mitsubishi Motors, Stroh's Brewing, Canon Cameras, General Mills,
Kraft General Foods, U.S. Government JRAP, Quaker State, B.F. Goodrich, Red
Lobster, Procter & Gamble, and Olin Chemicals. From 1975 until 1982 he worked
with other major New York advertising firms, including Kenyon & Eckhardt and
J. Walter Thompson.
* Not an officer or director, but may be deemed a significant employee
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Employment Agreements
We do not presently have any employment or consulting agreements, although
we may enter into employment agreements with certain officers, directors or
other key personnel.
Relationships Amongst Management
There are no family relationships amongst the management of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of shares of Common Stock of the Company by our officers,
directors and those holders of five percent (5%) or more of stock in our Company
both prior to the offering as well as after completion of the offering. Based on
information furnished by these individuals and/or groups, we believe that they
are the beneficial owners of the Common Stock listed below, and unless otherwise
noted, have sole investment and voting power with respect to such shares, except
in those cases where community property laws may apply.
Prior to the offering and according to the records provided by the Company
(which currently has 1,002,500 shares of Common Stock outstanding), the
officers, directors and holders of five percent (5%) or more of our Common
Stock, owned the following number of shares:
Number
Name of Shares Percentage
--------------------------------------------------------------------------
Jack Rubinstein 250,000 25.00%
Unifund Financial Group, Inc.* 250,000 25.00%
R. Scott Barter 250,000 25.00%
Unifund America, Inc. * 100,000 10.00%
Douglas Harrison-Mills 50,000 5.00%
Brad Smith 50,000 5.00%
Alan Scott 25,000 2.50%
(All officers and directors
as a group - 5 persons) 975,000 97.50%
*These entities are controlled by Mr. Barter and their share ownership in
us is attributed to him.
TOTALS 975,000 97.50%
========= =====
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Upon completion of the offering, officers, directors and holders of five
percent (5%) or more of our Common Stock will hold, in the aggregate, 975,000
shares issued and outstanding, if the Minimum Amount is sold and 975,000
shares issued and outstanding if the Maximum Amount is sold and all Warrants are
exercised:
<TABLE>
<CAPTION>
Percentage of Common Stock
Number ------------------------------
Name of Owners of Shares Minimum Maximum
-----------------------------------------------------
<S> <C> <C> <C>
Jack Rubinstein 250,000 20.45% 6.25%
Unifund Financial Group, Inc. 250,000 20.45% 6.25%
R. Scott Barter 250,000 20.45% 6.25%
Unifund America, Inc. 100,000 8.18% 2.50%
Douglas Harrison-Mills 50,000 4.09% 1.25%
Brad Smith 50,000 4.09% 1.25%
Alan Scott 25,000 2.05% 0.63%
(All officers and directors
as a group -5 persons)
TOTALS 975,000 79.76% 24.38%
========= ===== =====
</TABLE>
DESCRIPTION OF SECURITIES
The Securities offered for sale consist of (i) 1,000,000 shares of Common
Stock, par value $0.001 per share, which can be purchased for $0.50 per share,
(ii) 1,000,000 Class A Redeemable Warrants, which can be purchased for $0.10 per
Warrant, and which may be exercised for one share of Common Stock at an exercise
price of $3.00 per share, and (iii) 1,000,000 Class B Redeemable Warrants, which
can be purchased for $0.10 per Warrant and which may be exercised for one share
of Common Stock at an exercise price of $5.00 per share. Subject to applicable
offering Minimum Amounts, an investor must purchase the same number of Class A
Redeemable Warrants or Class B Redeemable Warrants as shares of Common Stock.
Common Stock
We are authorized to issue up to 20,000,000 shares of Common Stock, par
value $.001 per share, of which 1,002,500 shares are outstanding on the date
hereof. Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may be outstanding, if and when the Board of
Directors declares dividends, holders of Common Stock are entitled to ratably
receive, such dividends. Upon the liquidation, dissolution, or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities
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and payment of accrued dividends and liquidation preferences on the preferred
stock, if any. Common Stock is not convertible, nor does it have any preemptive
rights. The outstanding Common Stock is validly authorized and issued, fully
paid, and nonassessable.
We will, at all times, reserve a sufficient number of authorized but
unissued shares to accommodate the exercise of Warrants. There is no assurance
that any such exercise will take place and therefore no assurance that we will
have available to us proceeds from an exercise.
Warrants
The Company will offer Class A Redeemable Warrants and Class B Redeemable
Warrants. The following discussion of certain terms and provisions of the
Warrants is qualified in its entirety by reference to the detailed provisions of
each Warrant and its related Warrant Agreement, the forms of which have been
filed as exhibits to the registration statement of which this Prospectus forms a
part. Both the Class A Redeemable Warrant and the Class B Redeemable Warrant and
the Class A Redeemable Warrant Agreement and Class B Redeemable Warrant
Agreement can be inspected and copied by the public at the offices of the
SEC in Washington, D. C., New York, New York, and Chicago, Illinois (see
"Additional Information").
The Class A Redeemable Warrants
The Class A Redeemable Warrants will be issued in registered form pursuant
to an agreement dated the date of this Prospectus between the Company and
American Stock Transfer Company (the "Class A Redeemable Warrant Agent"). One
Class A Redeemable Warrant represents the right of the registered holder to
purchase one share of Common Stock at an exercise price of $3.00 per share,
subject to adjustment (the "Class A Exercise Price") The Class A Redeemable
Warrants are subject to adjustment in the Purchase Price and in the number of
shares of Common Stock and/or other securities deliverable upon the exercise of
the Class A Redeemable Warrants in the event of certain stock dividends, stock
splits, reclassifications, reorganizations, consolidations or mergers.
The Class A Redeemable Warrants may be exercised at any time after
issuance, until the close of business on May 28, 2004 (the "Class A Expiration
Date"). After the Expiration Date, the Class A Redeemable Warrants become void
and of no value. A holder of the Class A Redeemable Warrants may exercise them
at the office of the Class A Redeemable Warrant Agent (now located at 2
Broadway, NY, NY 10004) by surrendering his or her Warrant, and paying the
Exercise Price for each Warrant being exercised.
No holder of the Class A Redeemable Warrants will be entitled to vote or
to receive dividends or be deemed the holder of shares of Common Stock for any
purpose whatsoever until the Class A Redeemable Warrants have been duly
exercised and the Purchase Price paid in full.
The Class A Redeemable Warrants are subject to redemption by the Company
anytime on 30 days written notice at a redemption price of $.01 per Warrant,
provided that the trading price of the underlying Common Stock is at least $150%
of the then current per
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share exercise price for 20 or more consecutive trading days. Upon notice of
redemption, holders of the Class A Redeemable Warrants will forfeit all rights
thereunder except the rights to receive the $0.01 per share redemption price and
to exercise them during the relevant 30-day notice period.
If required, the Company will file a post-effective amendment to the
registration statement with the Commission with respect to the Common Stock
underlying the Class A Redeemable Warrants prior to the exercise of the Class A
Redeemable Warrants and deliver a prospectus with respect to Such Common Stock
to all Class A Redeemable Warrant holders as required by Section 10(a)(3) of the
Securities Act of 1933.
The Class B Redeemable Warrants
The Class B Redeemable Warrants will be issued in registered form pursuant
to an agreement dated the date of this Prospectus between the Company and
Continental Stock Trust and Transfer Company (the "Class B Redeemable Warrant
Agent"). One Class B Redeemable Warrant represents the right of the registered
holder to purchase one share of Common Stock at an exercise price of $5.00 per
share, subject to adjustment (the "Class B Exercise Price"). The Class B
Redeemable Warrants are subject to adjustment in the Exercise Price and in the
number of shares of Common Stock and/or other securities deliverable upon the
exercise of the Class B Redeemable Warrants in the event of certain stock
dividends, stock splits, reclassifications, reorganizations, consolidations or
mergers.
The Class B Redeemable Warrants may be exercised at any time after
issuance, until the close of business on May 28, 2004 (the "Expiration Date").
After the Expiration Date, the Class B Redeemable Warrants become void and of no
value. A holder of the Class B Redeemable Warrants may exercise them at the
office of the Class B Redeemable Warrant Agent (now located at 2 Broadway, NY,
NY 10004) by surrendering his or her Warrant, and paying the Class B Exercise
Price for each Class B Redeemable Warrant being exercised.
No holder of the Class B Redeemable Warrants will be entitled to vote or
to receive dividends or be deemed the holder of shares of Common Stock for any
purpose whatsoever until the Class B Redeemable Warrants have been duly
exercised and the Exercise Price paid in full.
The Class B Redeemable Warrants are subject to redemption by the Company
anytime on 30 days written notice at a redemption price of $.01 per Warrant,
provided that the trading price of the underlying Common Stock is at least 150%
of the then current per share exercise price for 20 or more consecutive trading
days. Upon notice of redemption, holders of the Class B Redeemable Warrants will
forfeit all rights thereunder except the rights to receive the $0.01 per share
redemption price and to exercise them during the relevant 30-day notice period.
If required, the Company will file a post-effective amendment to the
registration statement with the Commission with respect to the Common Stock
underlying the Class B Redeemable Warrants prior to the exercise of the Class B
Redeemable Warrants and deliver a
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prospectus with respect to such Common Stock to all Class B Redeemable Warrant
holders as required by Section 10(a)(3) of the Securities Act of 1933. (See
"Risk Factors--We May Be Subject to Government Regulation.")
INTERESTS OF NAMED EXPERTS AND COUNSEL
The Company's Financial Statements as of December 31, 1998 and March 31,
1999 and for the period from June 23, 1997 (Date Operations Commenced) to March
31, 1999 were passed upon by Thomas P. Monahan, independent certified public
accountant. Certain legal matters in connection with the registration of the
Securities were passed upon by Kaplan Gottbetter & Levenson, LLP, counsel to the
Company.
CERTAIN PROVISIONS OF OUR ARTICLES AND
BY-LAWS AND DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Amended Certificate of Incorporation and By-laws contain
provisions eliminating the personal liability of a director to the Company and
its stockholders for certain breaches of his or her fiduciary duty of care as a
director. This provision does not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Delaware statutory provisions making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the Board
of Directors of the Company protection against awards of monetary damages
resulting from breaches of their duty of care (except as indicated above),
including grossly negligent business decisions made in connection with takeover
proposals for the Company. As a result of this provision, the ability of the
Company or a stockholder thereof to successfully prosecute an action against a
director for a breach of his duty of care has been limited. However, the
provision does not affect the availability of equitable remedies such as an
injunction or rescission based upon a director's breach of his duty of care. The
SEC has taken the position that the provision will have no effect on claims
arising under the federal securities laws.
In addition, the Amended Certificate and By-Laws provide mandatory
indemnification rights, subject to limited exceptions, to any person who was or
is party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person is
or was a director or officer of the Company, or is or was serving at the request
of the Company as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. Such
indemnification rights include reimbursement for expenses incurred by such
person in advance of the final disposition of such proceeding in accordance with
the applicable provisions of the Delaware General Corporation Law.
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DESCRIPTION OF PROPERTY
Our principal place of business is at 250 East Hartsdale Avenue, Suite 21,
Hartsdale, New York. We believe that we could readily secure office space in the
future should we need to, although we would be required to pay prevailing rental
rates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Rubinstein was the sole shareholder of the Company during the year
ending 1997. On June 24, 1997, one day after incorporation and at a time when
the Corporation had substantially no assets and had not commenced substantial
operations, he purchased 100 shares of Common Stock in a transaction which did
not involve any public offering. During the year ending December 31, 1998,
officers, directors certain of their affiliates, and certain consultants were
issued shares. After such issuance, the officers, directors and affiliates owned
shares in the following amounts: Mr. Barter: 25 shares, Unifund Financial Group,
Inc.: 25 shares, Unifund America, Inc.: 10 shares, Mr. Rubinstein: 25 shares,
Mr. Harrison-Mills: 5 shares, Mr. Smith: 5 shares; Mr. Scott: 2.5 shares, Mr.
Halcrow: 1 share, and Mr. Schiff: 1 share, Mr. Brown: 0.5 share, Mr. Gager: 0.25
shares. These shares were all issued in transactions not involving any public
offering. On May 25, 1999, we filed an Amended and Restated Certificate of
Incorporation pursuant to which we performed a forward split of our Common Stock
in the ratio of 1:10,000. This resulted in the holdings which are reported in
the initial table of "Security Ownership of Certain Beneficial Owners and
Management".
The following officers and directors and related parties have provided us
with additional capital, which in the aggregate, totals $ 140,000.
Jack Rubinstein $80,000
Unifund Financial Group, Inc. $25,000
Unifund America, Inc. $10,000
R. Scott Barter $25,000
At the first closing, pursuant to a management agreement between ourselves
and Unifund America, Inc., merchant bank advising on this transaction and
Pipeline Data, we will commence monthly payments to Unifund America of $1,500
per month for a period of 18 months.
Mr. Rubinstein has previously provided loans to the Company which
aggregated $72,622 from inception through March 31, 1999.
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MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Shares Eligible For Future Sale
Upon completion of this offering, assuming the sale of all Common Stock
being offered, we will have outstanding 2,002,500 shares of Common Stock. All
such shares will be freely tradable without restriction or further registration
under the Securities Act, except for any shares held by an "affiliate" of the
Company (ie. a person controlling, controlled by or under common control with
us), which may be sold only while this registration statement or another
registration statement covering sales by those affiliates is effective or in
accordance with the resale limitations of Rule 144 adopted under the Securities
Act. None of the shares held by any officer, director, or their affiliates are
subject to any "lock-up" agreement or similar arrangement.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year, including "affiliates" as that term is defined under the Securities Act,
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) one percent (1%) of the then outstanding shares of
the Common Stock or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks immediately preceding the date on which the
notice of sale is filed with the Commission. Sales under Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
certain current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an "affiliate" of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned shares for at least two years is entitled to sell such
shares under Rule 144(k) without regard to these limitations.
The Company's Common Stock is not listed or quoted on any organized
exchange or other trading market, nor have we applied for a formal listing or
quotation. We do not currently meet the numerical requirements to have our
shares listed on a United States stock exchange or quoted on the NASDAQ over-
the-counter market. A trading market may not develop or be sustained. The post-
offering fair value of the Company's common stock, whether or not any secondary
trading market develops, is variable and may be impacted by the business and
financial condition of the Company, as well as factors beyond the Company's
control. Sales of substantial amounts of shares in any public market could cause
lower market prices and even make it difficult for the Company to raise capital
through a future offering of our equity securities. In that connection,
investors should note that we are registering all shares held by our officers,
directors and principal shareholders for sale after we complete the sale of all
the shares we intend to sell. This market overhang may adversely affect the
price at which our shares are quoted, whether or not any of these individuals
sell their shares.
49
<PAGE>
EXECUTIVE COMPENSATION
Our officers and directors do not currently receive any compensation, and
no officer received any compensation during the fiscal year ended December 31,
1998. However, upon the receipt of additional financing which may include the
proceeds of this offering, the board of directors may approve compensation to
both officers and members of the board.
FINANCIAL STATEMENTS
Registrant's Financial Statements as of December 31, 1998 and March 31,
1999 and for the years ended December 31, 1997 and December 31, 1998, and the
independent auditor's report of Thomas P. Monahan with respect thereto, appear
on pages F-2 through F-4 of this Registration Statement on Form SB-2.
Registrant's Unaudited Financial Statements for the period from June 23, 1997 to
March 31, 1999, for the months ended March 31, 1999, and for the three months
ended March 31, 1998 appear on pages F-3 and F-4 of this Registration Statement
on Form SB-2.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Where Can Investors Find Additional Information
A Registration Statement on Form SB-2, including amendments thereto,
relating to the shares offered hereby has been filed with the Securities and
Exchange Commission. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. For further information with respect to us and
the Securities offered hereby, reference is made to such Registration Statement,
exhibits and schedules. A copy of the Registration Statement may be inspected by
anyone without charge at the Commission's principal office located at 450 Fifth
Street, N.W., Washington, D.C. 20549, the Northeast Regional Office located at 7
World Trade Center, 13th Floor, New York, New York, 10048, and the Midwest
Regional Office located at Northwest Atrium Center, 500 Madison Street, Chicago,
Illinois 60661-2511 and copies of all or any part thereof may be obtained from
the Public Reference Branch of the Commission upon the payment of certain fees
prescribed by the Commission. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov that contains information regarding registrants
that file electronically with the Commission.
50
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(201) 790-8775
Fax (201) 790-8845
To The Board of Directors and Shareholders
of Pipeline Data, Inc. (a development stage company)
I have audited the accompanying balance sheet of Pipeline Data, Inc. (a
development stage company) as of December 31, 1998 and the related statements of
operations, cash flows and shareholders' equity for the years ended December 31,
1997 and 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pipeline Data, Inc. (a
development stage company) as of December 31, 1998 and the results of its
operations, shareholders equity and cash flows for the year ended December 31,
1997 and 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Pipeline Data, Inc. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since the date of reorganization and requires additional capital to
continue operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are described in Note 2. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of Pipeline Data, Inc. (a development
stage company) to continue as a going concern.
Thomas Monahan
--------------
Thomas P. Monahan, CPA
May 10, 1999
Paterson, New Jersey
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
---- ----
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 4,367 $ 30,379
-------- --------
Current assets 4,367 30,379
Property and equipment -0- -0-
Total assets $4,367 $30,379
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Officer loans payable $72,622 $74,422
-------- --------
Total current liabilities 72,622 74,422
Stockholders' equity
Preferred stock authorized 1,000 shares, $0.001 par value each. At December
31, 1998 and March 31, 1999 there are -0- and -0- shares outstanding
respectively.
Common Stock authorized 2,000 shares, $0.001 Par value each. At December 31,
1998 and March 31, 1999, there are 1,002,500 and
1,002,500 shares outstanding respectively. 1,002 1,002
Additional paid in capital 12,747 12,747
Deficit accumulated during development stage (82,004) (57,042)
-------- --------
Total stockholders' equity (68,255) 68,255
-------- --------
Total liabilities and stockholders' equity $ 4,367 $ 30,379
======== ========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the For the period
three months For the three from inception,
For the year For the year ended months ended June 23, 1997,
ended ended March 31, March 31, to March 31,
December 31, December 31, 1998 1999 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue $-0- $22,500 -0- $30,000 $52,500
Costs of goods sold -0- -0- -0- -0- -0-
--------- --------- --------- --------
Gross profit -0- 22,500 -0- 30,000 52,500
Operations:
General and administrative 32,003 66,277 10,005 3,988 102,268
Depreciation and amortization 2,852 2,852
--------- ---------
Total expense (34,855) 66,277 10,005 3,988 105,120
Income from operations (34,855) (43,777) (10,005) 26,012 (52,620)
Other income and expenses
Interest expense 765 2,607 900 1,050 4,422
--------- --------- --------- -------- ---------
Total other expenses 765 2,607 900 1,050 4,422
Income (loss) $(35,620) $(46,384) $(10,905) $24,962 $(57,042)
========= ========= ========= ======== =========
Net income (loss) per share - basic
Number of shares outstanding - basic 100 100 100 100 100
=== === === === ===
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
For the period from inception, February 13, 1999, to March 31, 1999
<TABLE>
<CAPTION>
For the period from
For the year For the year For the three For the three inception, June 23,
ended ended months ended months ended 1997, to March 31,
December 31, December 31, March 31, 1998 March 31, 1999 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(35,620) $(46,384) $(10,905) $24,962 $(57,042)
Non cash transactions 3,250 3,250
Depreciation 2,852 2,852
-------- --------
TOTAL CASH FLOWS FROM OPERATIONS (32,768) (43,134) (10,905) 24,962 (50,940)
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment (2,852) (2,852)
-------- --------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (2,852) (2,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Officer loan payable 35,765 37,607 25,900 1,050 74,422
Sale of common stock 9,749 9,749
-------- --------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 45,514 37,607 25,900 1,050 84,171
NET INCREASE (DECREASE) IN CASH 9,894 (5,527) 14,995 26,012 30,379
CASH BALANCE BEGINNING OF PERIOD -0- 9,894 5,641 4,367 -0-
-------- ------- ------- ------- --------
CASH BALANCE END OF PERIOD $9,894 $ 4,367 $20,636 $30,379 $ 30,379
======== ======= ======= ======= ========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit accumulated
Common Common Additional during development
Date Stock Stock paid in capital stage Total
- ---- ----- ----- --------------- ----- -----
<S> <C> <C> <C> <C> <C>
06-24-1997(1) 100 $1 $9,748 $9,749
=== == ====== ======
Forward split of shares 1,000,000 $1,000 $8,749 $9,749
12-18-1998
Cancellation of shares 12-18-1998 (75,000) $(750) $750
Net loss (35,620) (35,620)
--------- ---------
12-31-1997 restated 250,000 $250 $9,499 $(35,620) $(25,871)
Shares issued for consulting fees 752,500 $752 3,248 4,000
Net loss (46,384) (46,384)
--------- ----------
12-31-1998 1,002,500 $1,002 $12,747 $(82,004) $(68,255)
Unaudited
Net profit 24,962 24,962
--------- ---------
03-31-1999 1,002,500 1,002 $12,747 $(57,042) $(43,293)
========= ====== ======= ========= =========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 1 - Organization of Company and Issuance of Common Stock
----------------------------------------------------
a. Creation of the Company
Pipeline Data, Inc., (the "Company") was formed under the laws of
Delaware on June 23, 1997 and is authorized to issue 2,000 shares of common
stock, $0.001 par value each and 1,000 shares of preferred stock, $0.01 par
value each. In May, 1999, the Company amended its certificate of incorporation
increasing the authorized number of shares of common stock to 20,000,000, $0.001
par value each and increasing the authorized number of shares of preferred stock
to 5,000,000, $0.01 par value each.
b. Description of the Company
The Company is considered to be a development stage business that is in
the process of developing a web site on the World Wide Web for the purpose of
providing information to healthcare consumers and consulting.
c. Issuance of Shares of Common Stock
On June 24, 1997, the Company sold 100 shares to Mr. Jack Rubenstein in
consideration for $100 cash.
Between June 20, 1997 to August 20, 1997, Mr. Rubenstein contributed to
the Company's capital an additional $9,649 in expenses paid on behalf of the
Company.
On December 18, 1998, Mr. Rubenstein remitted back to the Company 75
shares of common stock for cancellation.
On December 18, 1998, the Company issued 75.25 shares of common stock for
an aggregate consideration of $4,000 in consulting services valued at $53.87 per
share to the following individuals and companies and in the following amounts:
25 shares to R. Scott Barter; 25 shares to Unifund Financial Group, Inc.; 10
shares to Unifund America, Inc.; 5 shares to Douglas Harrison-Mills; Brad Smith;
Alan Scott; Harris Schiff 1 share; 1 share to Harold Halcrow; 0.5 shares to
Federico Brown; 0.25 shares to Arthur Gager.
Subsequent to the date of the financial statements, the Company forward
split the number of shares of common stock outstanding on March 31, 1999 in a
ratio of 10,000 to one restating the number of shares of common stock from
100.25 to 1, 002,500 shares of common stock.
Subsequent to the date of the financial statements, the shareholders' of
the Company made an additional contribution of $140,000.
F-6
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
a. Basis of Financial Statement Presentation
The accompanying unaudited financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
incurred net losses of $57,042 for the period from inception June 23, 1997 to
March 31, 1999. These factors indicate that the Company's continuation as a
going concern is dependent upon its ability to obtain adequate financing. The
Company is anticipating that with the completion of a public offering and with
the increase in working capital, the Company will be able to complete its web
site and experience an increase in sales. The Company will require substantial
additional funds to finance its business activities on an ongoing basis and will
have a continuing long-term need to obtain additional financing. The Company's
future capital requirements will depend on numerous factors including, but not
limited to, continued progress developing its source of inventory of health care
products, regulations relating to the Internet marketing business and initiating
marketing penetration. The Company plans to engage in such ongoing financing
efforts on a continuing basis.
The financial statements presented consist of the balance sheet of the
Company as at December 31, 1998 and the related statements of operations and
cash flows for the period from inception, June 23, 1997 to December 31, 1997 and
for the year ending December 31, 1998.
The unaudited financial statements presented consist of the balance sheet
of the Company as at March 31, 1999 and the related statements of operations and
cash flows for the three months ended March 31, 1998 and 1999 and for the period
from inception, June 23, 1997, to March 31, 1999.
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than
three months as cash.
c. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
d. Selling and Marketing Costs
Selling and Marketing - Certain selling and marketing costs are expensed
in the period in which the cost pertains. Other selling and marketing costs are
expensed as incurred.
e. Use of Estimates
F-7
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.
f. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. There
was no effect of such adoption on the Company's financial position or results of
operations.
g. Research and Development Expenses
Research and development expenses are charged to operations when
incurred.
h. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight line
methods over a period of seven years. Maintenance and repairs are charged
against operations and betterment's are capitalized.
i. Significant Concentration of Credit Risk
At March 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
Note 3 - Related Party transactions
a. Issuance of Shares of Common Stock
On June 24, 1997, the Company sold 100 shares to Mr. Jack Rubenstein in
consideration for $100 cash.
Between June 20, 1997 to August 20, 1997, Mr. Rubenstein contributed to
the Company's capital an additional $9,649 in expenses paid on behalf of the
Company.
On December 18, 1998, Mr. Rubenstein remitted back to the Company 75
shares of common stock for cancellation.
F-8
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
On December 18, 1998, the Company issued 75.25 shares of common stock for
an aggregate consideration of $4,000 in consulting services valued at $53.87 per
share to the following individuals and companies and in the following amounts:
25 shares to R. Scott Barter; 25 shares to Unifund Financial Group, Inc.; 10
shares to Unifund America, Inc.; 5 shares to Douglas Harrison-Mills; Brad Smith;
Alan Scott; Harris Schiff 1 share; 1 share to Harold Halcrow; 0.5 shares to
Federico Brown; 0.25 shares to Arthur Gager.
Subsequent to the date of the financial statements, the Company forward
split the number of shares of common stock outstanding on March 31, 1999 in a
ratio of 10,000 to one restating the number of shares of common stock from
100.25 to 1,002,500 shares of common stock.
b. Office Location
The Company occupies office space rent free on a month to month basis at
the office of the President at 250 East Hartsdale Avenue, Hartsdale, New York,
10530
c. Officer Loan 74,422.
As of December 31, 1998 and March 31, 1999, the Company is obligated to
repay officer loans to Mr. Jack Rubenstein, President of the Company aggregating
$72,622 and $74,422 respectively including accrued interest of $2,622 and $4,422
respectively.
Note 4 - Commitments and Contingencies
-----------------------------
At December 31, 1998 and March 31, 1999, the Company has not entered into
any contracts or commitments.
Note 5 - Income Taxes
------------
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1998 and March 31,
1999, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carryforward and was fully
offset by a valuation allowance.
At March 31, 1999, the Company has net operating loss carry forwards for
income tax purposes of $57,042. This carryforward is available to offset future
taxable income, if any, and expires in the year 2010. The Company's utilization
of this carryforward against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership of the Company of more
than 50 percent.
The components of the net deferred tax asset as of March 31, 1998 are as
follows:
F-9
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Deferred tax asset:
Net operating loss carry forward $ 19,394
Valuation allowance $(19,394)
--------
Net deferred tax asset $ -0-
========
The Company recognized no income tax benefit for the loss generated in
the period from inception, June 23,1 997, to March 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is
more likely than not that some portion or all of a deferred tax asset will not
be realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
Note 6 - Property and Equipment
----------------------
Capital Assets consisted of the following at December 31, 1998:
Asset Accumulated Total
Cost Depreciation
Office equipment $2,582 $2,852 $-0-
------ ------ ----
Capital Assets consisted of the following at March 31, 1999:
Asset Accumulated Total
Cost Depreciation
Office equipment $2,582 $2,852 $-0-
------ ------ ----
Note 7 - Preferred Stock
---------------
The Company's authorized capital stock consists of 2,000 Shares of
Preferred Stock, par value $.001 per share.
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
As of December 31, 1998 and March 31, 1999, the number of shares
outstanding is -0-.
F-10
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 9 - Business and Credit Concentrations
----------------------------------
The amount reported in the financial statements for cash approximates
fair market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
Financial instruments that potentially subject the company to credit risk
consist principally of trade receivables. Collateral is generally not required.
Note 10 - Subsequent Events
-----------------
The Company has amended it certificate of incorporation increasing the
number of shares authorized to issue to 25,000,000 shares of common stock, $.001
per share and 5,000,000 shares of preferred stock, $.01 per share.
F-11
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this Prospectus in connection
with the offer made hereby. If given or made, such information or representation
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer of any securities other than the
securities to which it relates or an offer to any person in any jurisdiction in
which such an offer would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
---------------------------
TABLE OF CONTENTS
Page
----
The Company.................................................................[
The Offering................................................................
Offices of The Company......................................................
Risk Factors................................................................
Business of The Company.....................................................
Management's Discussion And Analysis of
Financial Condition And Results of Operations ............................
Use of Offering Proceeds....................................................
Dilution....................................................................
Plan of Distribution........................................................
Directors, Executive Officers,
Promoters And Control Persons...............................................
Security Ownership of
Certain Beneficial Owners
and Management............................................................
Description of Securities...................................................
Interest of Named Experts And Counsel.......................................
Disclosure of Commission Position On
Indemnification For Securities Act Liabilities ...........................
Description of Property.....................................................
Certain Relationships And
Related Transactions......................................................
Market For Common Equity
and Related Stockholder Matters...........................................
Executive Compensation......................................................
Financial Statements........................................................
Changes in And Disagreements With
Accountants on Accounting And
Financial Disclosure...................................................... ]
APPENDICES:
Appendix A Financial Statements of the Company
---------------------------
Until __________, 1999 (25 days from the date of this Prospectus), all brokers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of a broker to deliver a Prospectus when
acting as underwriter and with respect to their unsold allotments or
subscriptions.
PIPELINE DATA INC.
------------------
4,002,500 shares of Common Stock
Par Value, $0.001 per share
1,000,000 Class A Redeemable Warrants
1,000,000 Class B Redeemable Warrants
---------------------------
P R O S P E C T U S
---------------------------
, 1999
<PAGE>
PIPELINE DATA INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Company's Certificate of Incorporation contains provisions to (i)
eliminate the personal liability of our directors for monetary damages resulting
from breaches of their fiduciary duty (other than breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
Delaware General Corporation Law (the "DGCL") or for any transaction from which
the director derived an improper personal benefit) and (ii) indemnify our
directors and officers to the fullest extent permitted by Section 145 of the
DGCL, including circumstances in which indemnification is otherwise
discretionary. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers. As a result of this
provision, the ability of the Company or a stockholder thereof to successfully
prosecute an action against a director for a breach of his duty of care has been
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The Securities and Exchange Commission has taken the position
that the provision will have no effect on claims arising under the federal
securities laws.
In addition, the Certificate of Incorporation and By-Laws provide
mandatory indemnification rights, subject to limited exceptions, to any person
who was or is party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that such
person is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Such indemnification rights include reimbursement for expenses incurred by such
person in advance of the final disposition of such proceeding in accordance with
the applicable provisions of the DGCL.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of this offering are:
Registration Fees $ 2,557.95
Blue Sky Filing Fees $ 15,000.00
Attorney's Fees
Accountant's Fees $ 10,000.00
Printing and Copying $ 10,000.00
Miscellaneous
------------ -------------
TOTAL
Item 26. Recent Sales of Unregistered Securities
Mr. Rubenstein was the sole shareholder of the Company during the year
ending 1997. On June 24, 1997, one day after incorporation and at a time when
the Corporation had substantially no assets and had not commenced substantial
business operations, he purchased 100 shares of Common Stock in a transaction
which did not involve any public offering. During the year ending December 31,
1998, officers, directors and certain of their affiliates were issued shares and
after such issuance owned the following amounts: Mr. Barter: 25 shares, Unifund
Financial Group, Inc.: 25 shares, Unifund America, Inc.: 10 shares, Mr.
Rubinstein: 25 shares, Mr. Harrison-Mills: 5 shares, Mr. Smith: 5 shares; Mr.
Scott: 2.5 shares, Mr. Halcrow: 1 share, and Mr. Schiff: 1 share, Mr. Brown: 0.5
shares, Mr. Gager: 0.25 shares. These shares were all issued in transactions not
involving any public offering. On May 25, 1999, we filed an Amended and Restated
Certificate of Incorporation pursuant to which we performed a forward stock
split of our Common Stock in the ratio of 1:10,000. This resulted in the
shareholdings for these individuals which are reported in the initial table of
"Security Ownership of Certain Beneficial Owners and Management".
Item 27. Exhibits.
Exhibit No. Description
3.1 Certificate of Incorporation
3.2 Amended and Restated Certificate of Incorporation of Registrant
3.3 By-laws of Registrant
3.4 Form of Class A Redeemable Warrant
To be filed by amendment
II-2
<PAGE>
3.5 Form of Class B Redeemable Warrant
To be filed by amendment
3.6 Form of Class A Warrant Agreement
To be filed by amendment
3.7 Form of Class B Warrant Agreement
To be filed by amendment
10.1 Web site development and servicing agreement
To be filed by amendment
10.2 Marketing Agreement with Rainbow Media
To be filed by amendment
10.3 Management Agreement with Unifund America, Inc.
To be filed by amendment
23.1 Consent of Kaplan Gottbetter & Levenson, LLP,
counsel to registrant
To be filed by amendment
23.2 Consent of Thomas P. Monahan, independent public accountant
Item 28. Undertakings
The Company hereby undertakes that it will:
(1) 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
Securities Act;
II-3
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(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or change material information on the
plan of distribution.
(2) For determining liability under the Securities Act, 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.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE>
SIGNATURES
In accordance with the Securities Act of 1933, the registrant certifies
that is 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 New York, state of New York, on
May 27, 1999.
PIPELINE DATA INC.
(Registrant)
By /s/ Jack Rubinstein
-------------------------------------
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement was signed by the following persons in the
capacities and on the dates stated.
R. Scott Barter Director May 27, 1999
-------------------------- ---------------------- ------------
(Signature) (Title) (Date)
Douglas Harrison-Mills Director May 27, 1999
-------------------------- ---------------------- ------------
(Signature) (Title) (Date)
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PIPELINE DATA INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting business and promoting the purposes herein stated,
under the provisions and subject to the requirements of the laws of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and known, identified and referred
to as "General Corporation Law of the State of Delaware") hereby certifies that:
FIRST: The name of the corporation (herein called the "corporation")
is:
Pipeline Data, Inc.
SECOND: The address, including street, number, city and county, of
the registered office in the State of Delaware is 1013 Centre Street, in the
City of Wilmington, County of New Castle; and the name of the registered agent
of the corporation in the State of Delaware at such address is CORPORATION
SERVICE CORPORATION.
THIRD: The nature of the business and of the purpose to be conducted
and promoted by the corporation is:
to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock which the
corporation shall have the authority to issue is 3,000, which are divided into
2,000 shares of Common Stock, par value $.001 per share, and 1,000 shares of
Preferred Stock, par value $.01 per share.
(b) The Board of Directors is hereby expressly granted
authority to authorize, from time to time in accordance with law, the issue of
one or more series of Preferred Stock and with respect to any such series to fix
by resolution or resolutions the numbers, powers, designations, preferences and
relative, participating, optional or other special rights of such series and the
qualifications, limitations or restrictions thereof, including, but without
limiting the generality of the foregoing, the following:
(i) The number of shares to constitute such series and
the distinctive designations thereof;
(ii) The dividend rate to which such shares shall be
entitled and the restrictions, limitations and conditions upon the payment
of such dividends, whether dividends shall be cumulative, the date or
dates from which dividends (if declared) shall be payable;
<PAGE>
(iii) Whether or not the shares of such series shall be
redeemable and, if so, the terms, limitations and restrictions with
respect to such redemption, including without limitation the manner of
selecting shares for redemption if less than all shares are to be
redeemed, and the amount, if any, in addition to any accrued dividends
thereon, which the holders of shares of such series shall be entitled to
receive upon the redemption thereof, which amount may vary at different
redemption dates and may be different with respect to shares redeemed
through the operations of any purchase, retirement or sinking fund and
with respect to shares otherwise redeemed;
(iv) The amount in addition to any accrued dividends
thereon which the holder of shares of such series shall be entitled to
receive upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, which amounts may vary at different dates
and vary depending on whether such liquidation, dissolution or winding up
is voluntary or involuntary.
(v) Whether or not the shares of such series shall be
subject to the operation of a purchase, retirement or sinking fund and, if
so, the terms, limitations and restrictions with respect thereto,
including without limitation whether such purchase, retirement or sinking
fund be cumulative or non-cumulative, the extent to and the manner in
which such fund shall be applied to the purchase, retirement or redemption
of the shares of such series for retirement or to other corporate purposes
and the terms and provisions relative to the operation thereof;
(vi) Whether or not the shares of such series shall have
conversion privileges and, if so, prices or rates of conversion and the
method, if any, of adjusting the same;
(vii) The voting power, if any, of such series; and
(viii) Any other relative rights, preference and
limitations pertaining to such series.
FIFTH: The name and the mailing address of the incorporator are as
follows:
Debra B. Schupper, Esq.
Golenbock, Eisenman, Assor & Bell
437 Madison Avenue
New York, New York 10022
SIXTH: The corporation shall have the power to indemnify and advance
expenses to any person to the full extent permitted from time to time by the
General Corporation Law of the State of Delaware.
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<PAGE>
The indemnification and advancement of expenses provided by this
Article shall be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
SEVENTH: To the fullest extent permitted by the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be amended, a
director shall not be liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as director.
EIGHT: The corporation is to have perpetual existence.
NINTH: In furtherance and not in limitation of the powers conferred
upon the stockholders by statute, the board of directors of the corporation is
expressly authorized to make, alter or repeal the by-laws of the corporation,
subject to the power of the stockholders to alter or repeal the by-laws made or
altered by the board of directors.
TENTH: Except as otherwise required in the by-laws of the
corporation, election of directors need not be by written ballot.
Signed at New York, New York on June 20, 1997.
/s/ Debra B. Schupper,
----------------------------------------
Incorporator
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PIPELINE DATA INC.
----------
The undersigned, Alan Scott, under penalty of perjury, hereby certifies
that:
1. I am the duly elected Secretary of Pipeline Data Inc. (hereinafter
referred to as the "Corporation").
2. The Certificate of Incorporation of the Corporation was duly filed with
the Secretary of State of the State of Delaware on June 23, 1997 and has not
been amended or revoked since that date.
3. Following is a correct and complete copy of the Amended and Restated
Certificate of Incorporation of the Corporation, which was duly adopted in
accordance with Section 245, Section 242 and Section 228 of Chapter 1, Title 8
of the Delaware Code and the acts amendatory thereof and supplemental thereto
(hereinafter referred to as the "General Corporation Law of the State of
Delaware"):
----------
FIRST: The name of the corporation (hereinafter called the "Corporation")
is:
Pipeline Data Inc.
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington 19901, County of New Castle; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
CSC The United States Corporation Company.
THIRD: The nature of the business and the purpose to be conducted and
promoted by the Corporation, which shall be in addition to the authority of the
Corporation to conduct any lawful business, to promote any lawful purpose, and
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 25,000,000 shares of which 20,000,000 shares are
designated as common stock, par value $.001 per share and 5,000,000 shares of
which are designated as preferred stock, par value
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<PAGE>
$.01 per share. The increase in the number of authorized shares of common stock
shall be effectuated by a forward stock split in the ratio of 1:10,000 which
shall apply to both issued and unissued shares of common stock alike. The
increase in the number of authorized shares of preferred stock shall be
effectuated by a forward stock split in the ratio of 1:5,000. The par value of
both common and preferred stock shall be unaffected by such forward stock
splits.
The Board of Directors of the Corporation is hereby authorized to, by any
resolution or resolutions duly adopted in accordance with the provisions of the
General Corporation Law of the State of Delaware and the By-Laws of the
Corporation, authorize the issuance of any or all of the preferred stock in any
number of classes or series within such classes and in the resolution or
resolutions authorizing such issuance, to set all terms of such preferred stock
of any class or series, including, without limitation:
(a) the designation of such class or series, the number of shares to
constitute such class or series, whether the shares shall be of a stated
par value or no par value, and the stated value thereof if different from
the par value thereof;
(b) whether the shares of such class or series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the term of
such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such class or series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other class or
series of preferred stock;
(d) whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such class or series
upon, and the rights of the holders of such class or series in, the
voluntary or involuntary liquidation, dissolution or winding up, or upon
any distribution of the assets, of the Corporation;
(f) whether the shares of such class or series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of the shares of such class or series for
retirement or other Corporation purposes and the terms and provisions
relating to the operation thereof;
(g) whether the shares of such class or series shall be convertible into,
or exchangeable for, shares of stock of any other class or any other
series of preferred stock or any other
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<PAGE>
securities and, if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same, and
any other terms and conditions of conversion or exchange;
(h) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such class or series or of any other class
or series of Preferred Stock or of any other class; and
(i) any other powers, preferences and relative, participating, options and
other special rights, and any qualifications, limitations and
restrictions, thereof.
The powers, preferences and relative, participating optional and other
special rights of each class or series of preferred stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding. All shares of any one
series of preferred stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereof shall be
cumulative.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management for the business and the conduct of the
affairs of the Corporation shall be vested in its Board of
Directors.
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<PAGE>
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the
Bylaws. The phrase "whole Board" and the phrase "total number of
directors" shall be deemed to have the same meaning, to wit, the
total number of directors which the Corporation would have if there
were no vacancies. No election of directors need be by written
ballot.
2. After the original or other Bylaws of the Corporation have
been adopted, amended, or repealed, as the case may be, in
accordance with the provisions of Section 109 of the General
Corporation Law of the State of Delaware, and, after the Corporation
has received any payment for any of its stock, the power to adopt,
amend, or repeal the Bylaws of the Corporation may be exercised by
the Board of Directors of the Corporation; provided, however, that
any provision for the classification of directors of the Corporation
for staggered terms pursuant to the provisions of subsection (d) of
Section 141 of the General Corporation Law of the State of Delaware
shall be set forth in an initial Bylaw or in a Bylaw adopted by the
stockholders entitled to vote of the Corporation unless provisions
for such classification shall be set forth in this certificate of
incorporation.
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the Corporation shall be authorized to issue
more than one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the
right to vote at any meeting of stockholders except as the
provisions of paragraph (2) of subsection (b) of Section 242 of the
General Corporation Law of the State of Delaware shall otherwise
require; provided, that no share of any such class which is
otherwise denied voting power shall entitle the holder thereof to
vote upon the increase or decrease in the number of authorized
shares of said class.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said
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<PAGE>
section from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
Signed on May 25, 1999
/s/ Alan Scott
----------------------------------------
Alan Scott
Secretary of the Corporation
5
<PAGE>
EXHIBIT 3.3
BY-LAWS
OF
PIPELINE DATA, INC.
* * * * * * * * * *
ARTICLE I
Offices
The registered office of Pipeline Data, Inc. (the "Corporation") shall be
CSC The United State Corporation Company as Registered Agent: the City of
Wilmington, County of New Castle, State of Delaware. The Corporation also may
have offices at such other places, within or without the State of Delaware, as
the Board of Directors (the "Board") determines from time to time or the
business of the Corporation.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meetings, etc. Except as otherwise provided in
these By-laws, all meetings of the stockholders shall be held at such dates,
times and places, within or without the State of Delaware, as shall be
determined by the Board or chief executive officer and as shall be stated in the
notice of the meeting or in waivers of notice thereof. If the place of any
meeting is not so fixed, it shall be held at the registered office of the
Corporation in the State of Delaware.
Section 2. Annual Meeting. The annual meeting of stockholders for
the election of directors and the transaction of such other business as properly
may be brought before the meeting shall be held on such date after the close of
the Corporation's fiscal year as the Board may from time to time determine.
Section 3. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, may be called by the Board or the chief executive
officer and shall be called by the chief executive officer or the Secretary upon
the written request of a majority of the holders of the outstanding shares of
the Corporation's common stock. The request shall state the date, time, place
and purpose or purposes of the proposed meeting.
Section 4. Notice of Meetings. Except as otherwise required or
permitted by law, whenever the stockholders are required or permitted to take
any action at a meeting, written notice thereof shall be given, stating the
place, date and time of the meeting and, unless it is the annual meeting, by or
at whose direction it is being issued. The notice also shall designate the place
where
<PAGE>
the list of stockholders provided for in Section 8 of this Article II is
available for examination, unless such list is kept at the place where the
meeting is to be held. Notice of a special meeting also shall state the purpose
or purposes for which the meeting is called. A copy of the notice of any meeting
shall be delivered personally or shall be mailed, not less than ten (10) nor
more than sixty (60) days before the date of the meeting, to each stockholder of
record entitled to vote at the meeting. If mailed, the notice shall be given
when deposited in the United States mail, postage prepaid, and shall be directed
to each stockholder at his or her address as it appears on the record of
stockholders, or to such other address which such stockholder may have furnished
by written request to the Secretary of the Corporation. Notice of any meeting of
stockholders shall be deemed waived by any stockholder who attends the
meeting, except when the stockholder attends the meeting for the express purpose
of objecting at the beginning thereof to the transaction of any business because
the meeting is not lawfully called or convened. Notice need not be given to any
stockholder who submits, either before or after the meeting, a signed waiver of
notice. Unless the Board, after the adjournment of a meeting, shall fix a new
record date for the adjourned meeting, or unless the adjournment is for more
than thirty (30) days, notice of an adjourned meeting need not be given if the
place, date and time to which the meeting shall be adjourned is announced at the
meeting at which the adjournment is taken.
Section 5. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, at all meetings of stockholders
the holders of a majority of the outstanding shares of the Corporation entitled
to vote at the meeting shall be present in person or by proxy in order to
constitute a quorum for the transaction of business.
Section 6. Voting. Except as otherwise provided by the Certificate
of Incorporation of the Corporation, at any meeting of the stockholders every
stockholder of record having the right to vote thereat shall be entitled to one
vote for every share of stock standing in his or her name as of the record date
and entitling him to so vote. A stockholder may vote in person or by proxy.
Except as otherwise provided by law or by the Certificate of Incorporation of
the Corporation, any corporate action to be taken by a vote of the stockholders,
other than the election of directors, shall be authorized by not less than a
majority of the votes cast at a meeting by the stockholders present in person or
by proxy and entitled to vote thereon. Directors shall be elected as provided in
Section 2 of Article III of these By-laws. Written ballots shall not be required
for voting on any matter unless ordered by the Chairman of the meeting.
Section 7. Proxies. Every proxy shall be executed in writing by the
stockholder or by his or her attorney-in-fact.
Section 8. List of Stockholders. At least ten (10) days before every
meeting of stockholders, a list of the stockholders (including their addresses)
entitled to vote at the meeting and their record holdings as of the record date
shall be open for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours, at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list also shall be kept at and throughout the meeting.
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Section 9. Conduct of Meetings. At each meeting of the stockholders,
the Chairman of the Board or, in his or her absence, the President, shall act as
Chairman of the meeting. The Secretary or, in his or her absence, any person
appointed by the Chairman of the meeting shall act as Secretary of the meeting
and shall keep the minutes thereof. The order of business at all meetings of the
stockholders shall be as determined by the Chairman of the meeting.
Section 10. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation of the Corporation, any
action which may be taken at any annual or special meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed, in person or by proxy, by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take the action at a meeting at which all shares entitled to vote thereon were
present and voted in person or by proxy and shall be delivered to the
Corporation in accordance with the laws of the State of Delaware. Every written
consent shall bear the date of signature of each stockholder signing the
consent. In no event shall any corporate action referred to in any consent be
effective unless written consents signed by a sufficient number of stockholders
to take action are duly delivered to the Corporation within sixty (60) days of
the earliest dated consent delivered in accordance with the laws of the State of
Delaware. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing, but who were entitled to vote on the matter.
ARTICLE III
Board of Directors
Section 1. Number of Board Members. The Board shall consist of two
(2) or more members. The number of directors may be reduced or increased from
time to time by action of a majority of the entire Board, but no decrease may
shorten the term of an incumbent director. When used in these By-laws, the
phrase "entire Board" means the total number of directors which the Corporation
would have if there were no vacancies.
Section 2. Election and Term. The first Board shall be elected by
the incorporator or incorporators of the Corporation and the directors shall
hold office until their respective successors are duly elected and qualified or
until their earlier death, resignation or removal. Thereafter, except as
otherwise provided by law or by these By-laws, the directors shall be elected at
the annual meeting of the stockholders and the persons receiving a plurality of
the votes cast shall be so elected. Subject to his or her earlier death,
resignation or removal as provided in Section 3 of this Article III, each
director shall hold office until his or her successor shall have been duly
elected and shall have qualified.
Section 3. Removal. A director may be removed at any time, with or
without cause, by action of the Board or the stockholders.
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<PAGE>
Section 4. Resignations. Any director may resign at any time by
giving written notice of his or her resignation to the Corporation. A
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt, and, unless otherwise specified therein, the acceptance of a
resignation shall not be necessary to make it effective.
Section 5. Vacancies. Any vacancy in the Board arising from an
increase in the number of directors or otherwise may be filled by the vote of a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Subject to his or her earlier death, resignation or
removal as provided in Section 3 of this Article III, each director so elected
shall hold office until his or her successor shall have been duly elected and
shall have qualified.
Section 6. Place of Meetings. Except as otherwise provided in these
By-laws, all meetings of the Board shall be held at such places, within or
without the State of Delaware, as the Board determines from time to time.
Section 7. Annual Meeting. The annual meeting of the Board shall be
held either (a) without notice immediately after the annual meeting of
stockholders and in the same place, or (b) as soon as practicable after the
annual meeting of stockholders on such date and at such time and place as the
Board determines.
Section 8. Regular Meetings. Regular meetings of the Board shall be
held on such dates and at such places and times as the Board determines. Notice
of regular meetings need not be given, except as otherwise required by law.
Section 9. Special Meetings. Special meetings of the Board may be
called by or at the direction of the chief executive officer, and shall be
called by the chief executive officer or the Secretary upon the written request
of a majority of the directors. The request shall state the date, time, place
and purpose or purposes of the proposed meeting.
Section 10. Notice of Meetings. Notice of each special meeting of
the Board (and of each annual meeting held pursuant to subdivision (b) of
Section 7 of this Article III) shall be given, not later than 24 hours before
the meeting is scheduled to commence, by the chief executive officer or the
Secretary and shall state the place, date and time of the meeting. Notice of
each meeting may be delivered to a director by hand or given to a director
orally (whether by telephone or in person) or mailed or telegraphed to a
director at his or her residence or usual place of business, provided, however,
that if notice of less than 72 hours is given it may not be mailed. If mailed,
the notice shall be deemed to have been given when deposited in the United
States mail, postage prepaid, and if telegraphed, the notice shall be deemed to
have been given when the contents of the telegram are transmitted to the
telegraph service with instructions that the telegram immediately be dispatched.
Notice of any meeting need not be given to any director who shall submit, either
before or after the meeting, a signed waiver of notice or who shall attend the
meeting, except if such director shall attend for the express purpose of
objecting at the beginning thereof to the transaction of any business because
the meeting is not lawfully called or convened. Notice of any adjourned meeting,
including the place, date and time of the new meeting, shall be given to all
directors not
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present at the time of the adjournment, as well as to the other directors unless
the place, date and time of the new meeting is announced at the adjourned
meeting.
Section 11. Quorum. Except as otherwise provided by law or in these
By-laws, at all meetings of the Board a majority of the entire Board shall
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board. A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another place, date and time.
Section 12. Conduct of Meetings. At each meeting of the Board, the
chief executive officer or, in his or her absence, a director chosen by a
majority of the directors present, shall act as Chairman of the meeting. The
Secretary or, in his or her absence, any person appointed by the Chairman of the
meeting, shall act as Secretary of the meeting and keep the minutes thereof. The
order of business at all meetings of the Board shall be as determined by the
Chairman of the meeting.
Section 13. Committee of the Board. The Board, by resolution adopted
by a majority of the entire Board, may designate an executive committee and
other committees, each consisting of one (1) or more directors. Each committee
(including the members thereof) shall serve at the pleasure of the Board and
shall keep minutes of its meetings and report the same to the Board. The Board
may designate one or more directors as alternate members of any committee.
Alternate members may replace any absent or disqualified member or members at
any meeting of a committee. In addition, in the absence or disqualification of a
member of a committee, if no alternate member has been designated by the Board,
the members present at any. meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of the absent or disqualified member.
Except as limited by law, each committee, to the extent provided in the
resolution establishing it, shall have and may exercise all the powers and
authority of the Board with respect to all matters.
Section 14. Operation of Committees. A majority of all the members
of a committee shall constitute a quorum for the transaction of business, and
the vote of a majority of all the members of a committee present at a meeting at
which a quorum is present shall be the act of the committee. Each committee
shall adopt whatever other rules of procedure it determines for the conduct of
its activities.
Section 15. Written Consent to Action in Lieu of A Meeting. Any
action required or permitted to be taken at any meeting of the Board or of any
committee may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 16. Meetings Held Other Than in Person. Members of the Board
or any committee may participate in a meeting of the Board or committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at the
meeting.
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ARTICLE IV
Officers
Section 1. Executive Officers, etc. The executive officers of the
Corporation shall be a President, a Secretary and a Treasurer. The Board also
may elect or appoint a Chairman of the Board, one or more Vice Presidents (any
of whom may be designated as Executive Vice Presidents or otherwise), and any
other officers it deems necessary or desirable for the conduct of the business
of the Corporation, each of whom shall have such powers and duties as the Board
determines. Any officer may devote less than one hundred percent (100%) of his
or her working time to his or her activities as such if the Board so approves.
Section 2. Duties.
(a) The Chairman of the Board of Directors. The Chairman of
the Board, if any, shall be the chief executive officer of the Corporation. The
Chairman of the Board shall preside at all meetings of the stockholders and the
Board, and shall be ex officio a member of all committees established.
(b) The President. The President shall be the chief operating
officer of the Corporation. The President shall have general management of the
business and affairs of the Corporation, subject to the control of the Board,
and shall have such other powers and duties as the Board assigns to him or her.
If there is no Chairman, the President shall be the chief executive officer of
the Corporation and, as such shall preside at all meetings of the stockholders
and the Board and shall be ex officio a member of all committees established.
(c) The Vice President. The Vice President or, if there shall
be more than one, the Vice Presidents, if any, in the order of their seniority
or in any other order determined by the Board, shall perform, in the absence or
disability of the President, the duties and exercise the powers of the President
and shall have such other powers and duties as the Board or the President
assigns to him or to her or to them.
(d) The Secretary. Except as otherwise provided in these
By-laws or as directed by the Board, the Secretary shall attend all meetings of
the stockholders and the Board; shall record the minutes of all proceedings in
books to be kept for that purpose; shall give notice of all meetings of the
stockholders and special meetings of the Board; and shall keep in safe custody
the seal of the Corporation and, when authorized by the Board, shall affix the
same to any corporate instrument. The Secretary shall have such other powers and
duties as the Board or the President assigns to him or to her.
(e) The Treasurer. Subject to the control of the Board, the
Treasurer shall have the care and custody of the corporate funds and the books
relating thereto; shall perform all other duties incident to the office of
Treasurer; and shall have such other powers and duties as the Board or the
President assigns to him or her.
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Section 3. Election, Removal. Subject to his or her earlier death,
resignation or removal as hereinafter provided, each officer shall hold his or
her office until his or her successor shall have been duly elected and shall
have qualified. Any officer may be removed at any time, with or without cause,
by the Board.
Section 4. Resignations. Any officer may resign at any time by
giving written notice of his or her resignation to the Corporation. A
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt, and, unless otherwise specified therein, the acceptance of a
resignation shall not be necessary to make it effective.
Section 5. Vacancies. If an office becomes vacant for any reason,
the Board or the stockholders may fill the vacancy, and each officer so elected
shall serve for the remainder of his or her predecessor's term.
ARTICLE V
Provisions Relating to Stock
Certificates and Stockholders
Section 1. Certificates. Certificates for the Corporation's capital
stock shall be in such form as required by law and as approved by the Board.
Each certificate shall be signed in the name of the Corporation by the Chairman,
if any, or the President or any Vice President and by the Secretary, the
Treasurer or any Assistant Secretary or any Assistant Treasurer and shall bear
the seal of the Corporation or a facsimile thereof. If any certificate is
countersigned by a transfer agent or registered by a registrar, other than the
Corporation or its employees, the signature of any officer of the Corporation
may be a facsimile signature. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature was placed on any certificate
shall have ceased to be such officer, transfer agent or registrar before the
certificate shall be issued, it may nevertheless be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of issue.
Section 2. Lost Certificates, etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of the lost, mutilated, stolen or destroyed certificate, or
his or her legal representatives, to make an affidavit of that fact and to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of the certificate or the issuance of a new
certificate.
Section 3. Transfers of Shares. Transfers of shares shall be
registered on the books of the Corporation maintained for that purpose after due
presentation of the stock certificates therefor appropriately indorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
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Section 4. Record Date.
(a) The Board may fix a record date for the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof. The record date fixed for such purpose
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board and shall not be more than sixty (60) days nor less than
ten (10) days before the date of such meeting. If the Board does not fix a
record date for such purpose, the record date for such purpose shall be at the
close of business on the day next preceding the day on which notice is given
and, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
(b) The Board may fix a record date for the purpose of
determining stockholders entitled to consent to action in writing in lieu of a
meeting. The record date fixed for such purpose shall not precede the date upon
which the resolution fixing the record date is adopted by the Board and shall
not be more than ten (10) days after the adoption of such resolution fixing the
record date. If the Board does not fix a record date, the record date for the
purpose of determining stockholders entitled to consent to action in writing in
lieu of a meeting when no prior action by the Board is required by the laws of
the State of Delaware or these By- laws, the record date for such purpose shall
be the first date on which a signed written consent with respect to the action
taken or proposed to be taken is delivered to the Corporation in accordance with
the laws of the State of Delaware. If the Board does not fix a record date and
prior action by the Board is required by the laws of the State of Delaware or
these By-laws, the date for determining stockholders entitled to consent to
action in writing in lieu of a meeting shall be at the close of business on the
day on which the Board adopts the resolution taking such prior action.
(c) The Board may fix a record date for the purpose of
determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights, or the purpose of any other
action. The record date fixed for such purpose shall not precede the date upon
which the resolution fixing the record date is adopted and shall be no more than
sixty (60) days prior to such action. If the Board does not fix a record date,
the record date for determining the stockholders for any such purpose shall be
at the close of business on the date on which the Board adopts the resolution
relating thereto.
ARTICLE VI
General Provisions
Section 1. Dividends, etc. To the extent permitted by law, the Board
shall have full power and discretion, subject to the provisions of the
Certificate of Incorporation of the Corporation and the terms of any other
corporate document or instrument binding upon the Corporation, to determine
what, if any, dividends or distributions shall be declared and paid or made.
Section 2. Seal. The Corporation's seal shall be in such form as is
required by law and as shall be approved by the Board.
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Section 3. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board.
Section 4. Voting Shares in Other Corporations. Unless otherwise
directed by the Board, shares in other corporations which are held by the
Corporation shall be represented and voted only by such individual or
individuals as may be appointed by the Board of Directors.
ARTICLE VII
Amendments
By-laws may be made, altered or repealed by the Board, subject to
the right of the stockholders to alter or repeal any by-law made by the Board.
ARTICLE VII
Indemnification
Section 1. Limitation of Certain Liabilities of Directors. To the
fullest extent permitted by the laws of the State of Delaware, a director of the
Corporation shall not be liable to the Corporation or the stockholders for
monetary damages for breach of fiduciary duty as director.
Section 2. Indemnification and Insurance. (a) Each person who was or
is made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the laws of the State of Delaware, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Section 2 shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its
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final disposition, provided, however, that if the laws of the State of Delaware
require, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer, including
without limitation service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 2 or otherwise. The
Corporation may, by action of the Board, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(b) If a claim under paragraph (a) of this Section 2 is not
paid in full by the Corporation within ninety days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the laws of the State of Delaware for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including the Board,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the laws of the State of Delaware, nor an actual
determination by the Corporation (including the Board's independent legal
counsel, or the stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 3. Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses conferred in this Article VIII shall not be deemed
exclusive of any other right to which any person seeking indemnification or
payment of expenses may be entitled under any statute, provision of the
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the laws of the State of Delaware.
* * * * *
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Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANT
I hereby consent to the use of my report, dated May 10, 1999, on the
balance sheet of Pipeline Data Inc. as of December 31, 1997 and December 31,
1998 and the related statements of operations, cash flows and shareholders'
equity for the years ended December 31, 1997 and December 31, 1998, in the
Registration Statement on Form SB-2 and the related Prospectus of Pipeline Data
Inc. for the registration of its common stock, Class A Redeemable Warrants, and
Class B Redeemable Warrants.
Thomas P. Monahan
June 2, 1999
