As filed with the Securities and Exchange Commission on August 20, 1999
Registration No. 333-79831
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1
TO
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. [ ]
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. [ ]
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
<TABLE>
<CAPTION>
====================================================================================================================================
Amount Proposed Maximum Proposed 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................................................. 2,250,000 $0.50(1) $1,250,000(1) $ 347.50(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........................................................ 6,250,000 $10,450,000 $2,6275.10
====================================================================================================================================
</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.
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.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is may be completed or amended. 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 before the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of any offer to buy
nor may these securities be sold 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.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED: August 20, 1999
PIPELINE DATA INC.
4,250,000 shares of Stock, par value $0.001 per share
1,000,000 Class A Redeemable Warrants
1,000,000 Class B Redeemable Warrants
------------------------------------
This offering involves a significant degree of risk and prospective investors
need to read the section called "Risk Factors" which begins on page 6.
Securities Offered:
(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.
We will also be registering, concurrently with the offering, the sale of
1,250,000 shares of Common Stock owned by shareholders. Any proceeds and profits
from their sale will go to these shareholders and not us. The selling
shareholders may resell their Common Stock at prices below our initial offering
price. They have agreed not to sell any of their shares until one year from the
effective date of this Registration Statement.
There is currently no public market for the Securities. We intend to seek NASDAQ
"Bulletin Board" quotation of the Common Stock and warrants through one or more
market makers.
The Securities will initially be offered in a "best efforts" underwriting, and
there is no assurance that we will be able to find purchasers for them. We must
sell a minimum of 200,000 shares and associated warrants within 6 months.
Amounts received will be escrowed and returned, without interest if this
threshold is not reached.
Neither the Securities and Exchange Commission, nor any state securities
commission, has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
Page
----
Prospectus Summary.......................................................... 4
The Company.............................................................. 4
The Offering............................................................. 5
Registration of Additional Shares
Offered By Selling Shareholders ........................................ 5
Offices of The Company................................................... 5
Risk Factors................................................................ 6
Business of The Company..................................................... 12
Management's Discussion And Analysis of
Financial Condition And Results of Operations ............................ 29
Use of Offering Proceeds.................................................... 31
Capitalization ............................................................. 32
Dilution.................................................................... 33
Dividend Policy ............................................................ 34
Plan of Distribution........................................................ 34
Directors, Executive Officers,
Promoters And Control Persons.......................................... 35
Security Ownership of
Certain Beneficial Owners
and Management............................................................ 39
Description of Securities................................................... 40
Interest of Named Experts And Counsel....................................... 43
Certain Provisions of Our
Articles and By-Laws and
Disclosure of Commission Position On
Indemnification For Securities Act Liabilities ........................... 43
Description of Property..................................................... 44
Certain Relationships And
Related Transactions...................................................... 44
Market For Common Equity
and Related Stockholder Matters........................................... 45
Executive Compensation...................................................... 46
Financial Statements........................................................ 46
Changes in And Disagreements With
Accountants on Accounting And
Financial Disclosure...................................................... 46
Financial Statements of the Company F-1 through F-11
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3
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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 INVESTING
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 develop a niche role in the on-line health information
delivery business through operating a 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
We are offering securities consisting of 1,000,000 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. 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.
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 less offering expenses. There is no assurance that all the
Warrants will be sold, or if sold, will be exercised.
We are initially offering the Securities on a "best efforts", self-underwritten
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
within 6 months 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 1,250,000
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 go to these certain shareholders and not to us. The
selling shareholders may resell their Securities 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
An investment in the Securities is risky 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.
5
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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 specific to our
company but 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. For a discussion of
industry-wide and more general factors which could adversely affect us, see
"BUSINESS OF THE COMPANY - Industry Wide and Systemic Risks."
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 4th quarter of 1999. Launch of an early release phase should be
completed shortly thereafter. We expect to have our full commercial launch
follow in early 2000. 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.
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.
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.
6
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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.
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. We intend 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 completed acquisition would involve
numerous risks, including difficulties in assimilating 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, and our inability to maintain 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. Successfully
implementing 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, as of the effective date, any pending acquisitions.
There May Be Substantial Sales Of Our Common Stock After The Expiration of the
One Year "Lockup" Period
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 and prior to any warrant exercise, 2,250,000 shares
of Common Stock will be outstanding. Approximately 55.6% of these shares or
1,250,000 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. For a period of one year, these officers,
directors and affiliates will not be able to sell their stock. 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, or that third parties
will not infringe upon or misappropriate our intellectual property. 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 third parties 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 legal 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 Be Subject To Government Regulation:
By the Federal Communications Commission (the "FCC")
At present, there are few laws or regulations that specifically regulate
communications or commerce on the Internet; however, future laws and regulations
may address issues such as on-line content, user privacy, and pricing and
quality of products and services. 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 FCC 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 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 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 Will Maintain Control
Upon completion of this offering but before the exercise of any Warrants,
our present directors and executive officers, holders of more than 5% of the
Common Stock, and their respective affiliates, will beneficially own
approximately 55.0% 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.
If all Warrants and Common Stock are sold, and the Warrants are exercised,
such officers and directors and their affiliates will hold 20% of our voting
stock. Such a large block of stock, even though it does not constitute a
majority, may be enough to control us. For more information, see "Security
Ownership of Certain Beneficial Owners and Management".
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
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 produce large 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 $ 408,000, at an initial
public offering price of $0.50 per share and estimated offering expenses of
$92,000. We estimate that the net proceeds from the sale of the two million
Warrants offered by us will be approximately $194,000, at an initial public
offering price of $0.10 per Warrant and estimated offering expenses of $6,000.
Therefore, under the above assumptions, we will realize $602,000 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
$3,000,000 from the Class A Redeemable Warrants, and $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 any 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.
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.
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 4th quarter of 1999. Launch of an early release phase should be
completed in the first half of 2000 with a full commercial launch to follow
thereafter. The service will provide a comprehensive database of individual
subscribers receiving medical data spanning over fifty major disease (and
condition) categories.
Our Business
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 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,
located at http://www.healthpipeline.com, will 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 with 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. 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 informational
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 increase 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. 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)." 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 more information 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 of
health-related websites on the Internet has grown significantly, reflecting
increased consumer demand formation 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 us, 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
consumer spending decisions 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 physician/patient relationship has been usurped by having
to use physicians and specialists dictated by increasingly restrictive medical
plans. In addition, more physicians work in large compartmentalized offices and
don't have the time, inclination or incentive to develop long term patient
relationships. 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," i.e., when
advertisements are directed to exactly those users most likely to respond, most
current Internet advertising employs 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 to the interested user. 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. We believe that 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 approximately 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, we will create and operate an "opt- in" e-mail
delivery service covering the entire spectrum of health, medical, and
pharmaceutical interests. All that a potential subscriber needs for this free
service is a valid e-mail address. A new subscriber creates his or her user
profile through either a web-based interface, 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.
Using 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, barnesandnoble.com, 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 prescribed therapies. 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 profits 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 in our website. We anticipate that these features
will provide consumers with an opportunity to discuss healthcare issues with
other consumers and eventually with 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 Internet access. 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 that allows these
companies an opportunity to provide product information 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 use 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 our database content. 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 refer 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
The major Internet directories contain a vast number of websites focusing
on health and medicine. There are general sites as well as sites dedicated to
specific conditions or diseases, and there are sites targeted at healthcare and
medical professionals, as well as sites targeted at patients and the lay
populace. Websites such as drkoop.com and healthon have made significant strides
towards becoming "brand names" or market leaders. Nonetheless, we believe that
the 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.
23
<PAGE>
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 develop and 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.
Industry Wide and Systemic Risks
While we beleive that an "opt-in" healthcare-based consumer web site
offers exciting business potential, we are faced with several risks peculiar to
the Internet, and also more general in nature. These are discussed below:
We Face Intense Competition 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 and develop and market 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 not develop technologies or products that render our products and/or
services either less marketable or even obsolete.
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<PAGE>
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 us. 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.
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 development stage
companies, 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;
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.
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<PAGE>
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 of
this, 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.
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
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 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.
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<PAGE>
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 indirectly 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, 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:
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.
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<PAGE>
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 these service and content
providers will resolve their Y2K problems to prevent material disruption to
our business. Any failure of these third parties to timely resolve Y2K
problems 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 most 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 might suffer the
following consequences:
Significant operational inconveniences and inefficiencies, affecting
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 requiring significant
efforts by us, our service and content providers, or our
subscribers and consumers to prevent or alleviate material
business disruptions.
Our Securities are subject to 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 Common Stock are qualified for sale or
exempt from qualification under applicable state securities laws. Although we
intend to use our 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.
We Could Be Subject To Sales Or Other Taxes
The tax treatment of Internet transactions and e-commerce, in particular,
is unsettled. Several 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.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEARS ENDING DECEMBER 31, 1997 AND 1998
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 AND THE PERIOD
FROM INCEPTION (JUNE 23, 1997) TO JUNE 30, 1999.
The following discussion relates to the results of our operations to date, and
our financial condition:
This prospectus contains forward looking statements relating to our
Company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
Development stage activities.
The Company has been a development stage enterprise from its inception
June 23, 1997 to June 30, 1999. The Company is in the process of developing a
web site on the World Wide Web for the purpose of selling health care products
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 placements; 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
loans (with a pre-conversion balance of $43,672) from Jack Rubinstein which were
converted to additional paid in capital as of June 30, 1999. The Company also
financed its activities through the sale of shares of common stock aggregating
$80,749.
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 gleaned as a result of organizing the business.
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<PAGE>
The Company's general and administrative costs aggregated approximately
$256,402 for the year ended December 31, 1998 as compared to $35,003 for the
period from inception, June 23, 1997, to December 31, 1997 representing an
increase of $221,399. This increase represents increased spending for the
following items: office salaries of $20,000, telephone expense of $8,351,
professional fees of $13,287, rent of $10,125, office and computer expense of
$10,514, consulting expense of $188,125 paid with shares of Common Stock and
officer compensation of $6,000.
Results of Operations for the six months ended June 30, 1999 as compared to the
six months ended June 30, 1998.
For the six months ended June 30, 1999, the Company generated net sales
of $30,000 as compared to $-0- for the six months ended June 30, 1998
representing a increase of $30,000. The Company's cost of goods sold for the six
months ended June 30, 1999 was $-0- as compared to $-0- for the six months ended
June 30, 1998. The Company's gross profit on sales was $30,000 for the six
months ended June 30, 1999 as compared to $-0- for the six months ended June 30,
1998. The increase in gross profit is the result of offering for sale
technologies gleaned as a result of organizing the Company's business.
The Company's general and administrative costs aggregated approximately
$58,649 for the six months ended June 30, 1999 as compared to $14,505 for the
six months ended June 30, 1998 representing a increase of $44,144. General and
administrative expenses for the six months ended June 30, 1999 consisted of
office and computer expenses of $9,649, rent of $4,500, professional fees of
$40,000 and officer compensation of $4,500.
Results of Operations for the period of inception (June 23, 1997) to
June 30, 1999.
For the period from the Company's inception, June 23, 1997, through
June 30, 1999, a period of 24 months, the Company generated net sales of $52,500
(an average of $2,187 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 June 30, 1999. The gross profit from sales for this 24 month period is
$52,500. Management believes the average monthly profit of $2,187 for the period
from inception, June 23, 1997, through June 30, 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
$350,054 for the period from inception, June 23, 1997, through June 30, 1999. Of
these initial startup costs, approximately $40,000 is attributed to wages,
telephone of $11,605, professional fees of $53,287, rent of $17,625, and office
and computer expenses of $28,912, $188,125 in consulting expenses paid with
shares of common stock and $10,500 in officer compensation.
Liquidity and Capital Resources.
The Company increased its cash position to $4,367 at December 31, 1998
from a cash balance of $-0- at June 23, 1997 and increased cash to $22,718 at
June 30, 1999. Working capital at December 31, 1998 and June 30, 1999 was
negative at $69,005 and became positive at June 30, 1999 with a figure of $7,718
respectively. The Company continued to be funded in part through officer loans
aggregating $72,622 for the period from inception, June 23, 1997, to December
31, 1998 of which, an officer loan balance of $43,672 was converted to
additional paid in capital at June 30, 1999. In addition, the Company also sold
247,500 shares of common stock for an aggregate of $24,750 and received $83,454
as additional capital contributions from shareholders. The Company expended cash
for the development of the business and absorbed cash losses aggregating
$116,706 and issued 752,500 shares of common stock in consideration for non cash
expenses of $188,125 for the period from inception, June 23, 1997, to June 30,
1999.
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<PAGE>
Management believes that it will be able to fund the Company by
offering consulting services and receiving additional capital contributions
until the Company's web site is completed and the process of a public offering
is completed.
Capital Commitments and Future Expenditures
Our web site located at http:www.healthpipeline.com is currently operational and
may be "clicked on" for inspection. We believe that expansion and modification
of the web site and business will occur in three stages.
The first stage consists of initial web site construction and
collection of health-related data from existing web sites and service providers
and equipping our facility with hardware, primarily workstations and dedicated
data feed supply lines. This has been partially completed. The
purchase/installation of workstations and dedicated T-1 supply lines has not yet
taken place. Hardware requirements require approximately $30,000 of capital
expenditures and T-1 supply lines can be leased for approximately $1500-$2000
per month. Thus, completion of this first stage of operation/expansion would
require approximately $54,000 during the next twelve (12) months.
The second stage of expansion/operation consists of developing software
to analyze, retrieve, and process the data that the web site will collect from
users. This consists primarily of adaptations and/or modifications of existing,
proven software technology, primarily database management programs. We believe
that this will require approximately $150,000 to $200,000 in expenditures during
the next twelve months. This second stage of operation/expansion has not yet
commenced.
The third stage of operation/expansion consists of
marketing/advertising expenditures and attempts to engage in strategic alliances
with health care professionals, and users of our future healthier database. The
exact details of this stage are difficult to predict and a number of different
strategies have evolved in the current dynamic information marketplace. In
addition, web site development has increased rapidly and web site capabilities
may be achieved by purchasing future, existing sites rather than developing them
internally. Several existing health care web sites have been able to recruit
health professionals through the use of stock options and other forms of
incentive compensation which require little current, out of pocket expenditure.
We are unable to predict whether we can replicate this strategy. Accordingly, we
estimate that approximately $175,000 may be needed for this third stage of
operation/expansion.
Taken together and using these highest cost estimates, approximately
$430,000 of capital expenditures/development costs can be expected in order to
effectuate the three step process outlined above. Therefore we anticipate that a
significant portion of the net proceeds of this offering will be needed to
effectuate this strategy. This is a non-underwritten offering and we cannot
predict whether it will be completed successfully. Should we not be able to
complete this offering, we would need to seek further financing. We have no
present financing commitments and would need to seek further financing. It is
not certain that such financing could be obtained, or if obtained, would be
available at commercially reasonable rates.
USE OF OFFERING PROCEEDS
The uses of the proceeds available to us, from the sale of the Securities
in this offering, are estimated below and assumes 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 $ 92,000
Gross Offering Proceeds $608,000
--------
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. We believe that no broker/dealer assistance will be
required.
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<PAGE>
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. 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 $114,672. They have been issued
1,250,500 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 June 30, 1999 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. This table
should be reviewed in conjunction with our June 30, 1999 unaudited financial
statements and the notes thereto which are found in the "F" pages of this
Prospectus:
<TABLE>
<CAPTION>
June 30, 1999
----------------------------
Actual Adjusted(1) Adjusted(2)
------ ----------- -----------
<S> <C> <C> <C>
Long term debt $ -0- $ -0- $ -0-
Stockholders' equity
Preferred stock, $.001 par value,
5,000,000 shares authorized, At
June 30, 1999, the number of
shares outstanding is -0-
Common stock, $.001 par value; 1,250 2,250 1,450
20,000,000 shares authorized;
Additional paid-in capital 311,296 718,296 321,096
Class A warrants 1,000,000 outstanding -- 100,000 20,000
Class B warrants 1,000,000 outstanding -- 100,000 --
Deficit accumulated during development
stage (304,828) (361,828) (361,828)
-------- -------- --------
Total Stockholders' equity 7,718 617,718 35,718
--------- -------- --------
Total Capitalization $ 7,718 $ 617,718 $ 35,718
====== ======= =========
</TABLE>
- ----------
(1) Assumes net offering proceeds of $608,000 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.
(2) Assumes net offering proceeds of $28,000 from the sale of 200,000 shares of
Common Stock and 200,000 Class A Redeemable Warrants.
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<PAGE>
DILUTION
The following table shows, on a pro forma basis determined as of June 30
1999, 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 1,250,000 55.5% $312,546 34.0% $0.25
New stockholders 1,000,000 44.5 % $608,000 66.0% $0.61
TOTAL 2,250,000 100.0% $920,546 100.0% $0.41
</TABLE>
On June 30, 1999, we had a net book value of $7,718, or $.01 per share
(based on 1,250,000 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,
our net tangible book value, as of June 30, 1999, would have been $615,718, or
$0.30 per share. This represents an immediate increase in net tangible book
value of $0.27 per share to existing stockholders, and an immediate dilution of
$0.40 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 $ 0.20
Net tangible book value per share
as of June 30, 1999 $ 0.01
Increase per share attributed to
investors in this offering $ 0.26
Net tangible book value per share
as of June 30, 1999, after
(i) the offering and
(ii) issuance of Securities to
management, directors and affiliates $ 0.27
Net tangible book value dilution per
share to new investors $ 0.43
33
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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 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" self-underwritten 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 the Securities may be sold legally and 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.
Optional Use of Broker Dealer
We may use one or more broker/dealers to assist us in the securities
offering process. It is contemplated that such broker/dealers will receive a
commission equal to 7% of the aggregate gross proceeds payable to us plus a
non-accountable expense allowance of 3% of such proceeds.
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.
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<PAGE>
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, 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 51, 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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<PAGE>
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 49, 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 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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<PAGE>
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"
37
<PAGE>
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 1,250,000 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 373,750 29.90%
Unifund Financial Group, Inc.* 623,750 49.90%
R. Scott Barter 100,000 8.00%
Douglas Harrison-Mills 50,000 4.00%
Brad Smith 50,000 4.00%
Alan Scott 25,000 2.00%
(All officers and directors
as a group - 5 persons) 1,222,500 97.80%
*This entity is controlled by Mr. Barter and its share ownership in
us is attributed to him.
TOTALS 1,222,500 97.80%
========= =====
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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, 1,222,500
shares issued and outstanding, if the Minimum Amount is sold and 1,222,500
shares issued and outstanding if the Maximum Amount is sold:
<TABLE>
<CAPTION>
Percentage of Common Stock
Number ------------------------------
Name of Owners of Shares Minimum Maximum
--------------------------------------
<S> <C> <C> <C>
Jack Rubinstein 373,750 26.3% 16.8%
Unifund Financial Group, Inc. 623,750 43.8% 28.1%
R. Scott Barter 100,000 7.0% 4.5%
Douglas Harrison-Mills 50,000 3.5% 2.2%
Brad Smith 50,000 3.5% 2.2%
Alan Scott 25,000 1.8% 1.1%
--------- ----- -----
(All officers and directors
as a group -5 persons)
TOTALS 1,222,500 85.9% 55.0%
========= ===== ======
</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 1,250,000 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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<PAGE>
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
42
<PAGE>
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 June 30,
1999 and for the period from June 23, 1997 (Date Operations Commenced) to June
30, 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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<PAGE>
DESCRIPTION OF PROPERTY
Our principal place of business is at 250 East Hartsdale Avenue, Suite
21, Hartsdale, New York, in space provided to us by Mr. Jack Rubinstein, our
President, pursuant to a tenancy at will, for which we pay $500 per month plus
associated expenses. 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. On December 18, 1998, the Company issued 75.25 shares or 752,500
post split shares of Common Stock for consulting services valued at $188,125 or
$0.25 per share to the following individuals and companies and in the following
amounts: 123,750 shares to Jack Rubinstein; 100,000 to R. Scott Barter; 50,000
shares to Douglas Harrison-Mills; 50,000 to Brad Smith; 25,000 shares to Alan
Scott; and 403,750 to Unifund Financial Group, Inc. This resulted in the
holdings which are reported in the initial table of "Security Ownership of
Certain Beneficial Owners and Management".
In May 1999, we performed a 1:10,000 forward split of our common stock
and the number of shares reported above give retroactive effect to such split.
At the first closing, pursuant to a Management Agreement between
ourselves and Unifund America, Inc., a merchant bank advising us on this
transaction, we will commence monthly payments to Unifund America, Inc. of
$1,500 per month for a period of 18 months. Unifund America, Inc. is an
affiliated entity of Mr. Barter.
Mr. Rubinstein has previously provided loans to the Company which
aggregated $72,622 from inception through December 31, 1998. As of June 30,
1999, the Company repaid officer loans with $30,000 and converted $43,672 to
additional paid in capital as of June 30, 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 2,250,000 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.
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.
45
<PAGE>
EXECUTIVE COMPENSATION
For the period from inception through June 30, 1999, a total of $10,500
in expenses was incurred by the Company due to reimbursement of officers'
expenses. No officer of director of the Company currently has any employment
contract, nor do we currently operate any compensation or incentive plans for
such individuals. 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 June 30,
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-1 through F-6 of this Registration Statement on Form SB-2, and the
notes thereto appear on pages F7 - F12. Registrant's Unaudited Financial
Statements for the period from June 23, 1997 to June 30, 1999, for the month
ended June 30, 1999, and for the six months ended June 30, 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.
46
<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.
/s/ Thomas Monahan
- ---------------------
Thomas P. Monahan, CPA
May 10, 1999
Paterson, New Jersey
F-1
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1999
December 31, 1998 Unaudited
----------------- -------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 4,367 $ 22,718
--------- ---------
Current assets 4,367 22,718
Property and equipment -0- -0-
Total assets $ 4,367 $ 22,718
========= =========
Liabilities and Stockholders' Equity
Current liabilities
Accrued expenses $ 9,000 $ 15,000
Officer loans payable 72,622 -0-
--------- ---------
Total current liabilities 81,622 15,000
Stockholders' equity
Preferred stock authorized 1,000 shares, $0.001
par value each. At December 31, 1998 and
June 30, 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
June 30, 1999, there are 1,002,500 and
1,250,000 shares outstanding respectively 1,002 1,250
Additional paid in capital 196,872 311,296
Deficit accumulated during development stage (275,129) (304,828)
--------- ---------
Total stockholders' equity (77,255) 7,718
--------- ---------
Total liabilities and stockholders' equity $ 4,367 $ 22,718
========= =========
See accompanying notes to financial statements.
F-2
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF OPERATIONS
For the period from For the period from
inception, June 23, For the six For the six inception, June 23,
1997, to For the year ended months ended months ended 1997 to June
December 31, December 31, June 30, 1998 June 30, 1999 30, 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- ---------
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 35,003 256,402 14,505 58,649 350,054
Depreciation and amortization 2,852 -0- -0- -0- 2,852
----------- ----------- ----------- ----------- -----------
Total expense 37,855 256,402 14,505 58,649 352,906
Income (loss) from operations (37,855) (233,902) (14,505) (28,649) (300,406)
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) $ (38,620) $ (236,509) $ (15,405) $ (29,699) $ (304,828)
=========== =========== =========== =========== ===========
Net income (loss)
per share -basic $ (0.04) $ (0.24) $ (0.01) $ (0.02) $ (0.24)
=========== =========== =========== =========== ===========
Number of shares
outstanding-basic 1,002,500 1,002,500 1,002,500 1,250,000 1,250,000
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
F-3
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF OPERATIONS
For the For the
three months three months
ended ended
June 30, June 30,
1998 1999
--------------- ------------
Revenue $ -- $ --
Costs of goods sold -- --
----------- -----------
Gross profit -- --
Operations:
General and administrative 3,000 51,658
Depreciation and amortization -- --
----------- -----------
Total expense 3,000 51,658
Income (loss) from operations (3,000) (51,658)
total other expenses
Income (loss) $ (3,000) $ (51,658)
=========== ===========
Net income (loss)
per share -basic $ (0.00) $ (0.04)
=========== ===========
Number of shares
outstanding-basic 1,002,500 1,250,000
=========== ===========
See accompanying notes to financial statements.
F-4
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
For the period from inception, June 23, 1997, to June 30, 1999
For the period
For the For the For the six For the six from inception
year ended year ended months ended months ended June 23, 1997, to
December 31, December 31, June 30, 1998 June 30, 1999 June 30, 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (38,620) $(236,509) $ (15,405) $(29,699) $(304,828)
Non cash transactions -- 188,125 -- -- 188,125
Depreciation 2,852 -- -- -- 2,852
Accrued expenses 3,000 6,000 4,500 6,000 15,000
--------- --------- --------- -------- ---------
TOTAL CASH FLOWS
FROM OPERATIONS (32,768) (42,384) (10,905) (23,699) (98,851)
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 36,857 25,900 (72,622) -0-
Sale of Common Stock 9,749 -- -- 24,750 34,499
Additional paid in capital -- -- -- 89,922 89,922
--------- --------- --------- -------- ---------
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES 45,514 36,857 25,900 42,050 124,421
NET INCREASE
(DECREASE) IN CASH 9,894 (5,527) 14,995 18,351 22,718
CASH BALANCE
BEGINNING OF PERIOD -0- 9,894 5,641 4,367 -0-
--------- --------- --------- -------- ---------
CASH BALANCE END OF
PERIOD $ 9,894 $ 4,367 $ 20,636 $ 22,718 $ 22,718
========= ========= ========= ======== =========
Non cash activities
Issuance of 752,500 shares of Common Stock in -- -- $ 188,125 -- $ 188,125
consideration for consulting services
See accompanying notes to financial statements
F-5
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF STOCKHOLDERS EQUITY
Deficit
Additional accumulated during
Date Common Stock Common Stock paid in capital development stage Total
- ---- ------------ ------------ --------------- ---------------- -----
06-24-1997(1) 100 $ 1 $ 9,748 -- $ 9,749
========== ======= ========= ========= =========
Forward split of shares
12-18-1998 1,000,000 $ 1,000 $ 8,749 -- $ 9,749
Cancellation of shares
12-18-1998 (750,000) $ (750) $ 750 -- --
Net loss -- -- -- (38,620) (38,620)
---------- ------- --------- --------- ---------
12-31-1997 restated 250,000 $ 250 $ 9,499 $ (38,620) $ (28,871)
Shares issued for
consulting fees 752,500 $ 752 187,373 -- 188,125
Net loss -- -- -- (236,509) (236,509)
---------- ------- --------- --------- ---------
12-31-1998 1,002,500 $ 1,002 $ 196,872 $(275,129) $ (77,255)
Sale of shares 247,500 248 24,502 -- 24,750
Capital contribution -- -- 89,922 -- 83,454
Unaudited
Net loss -- -- -- (29,699) (29,699)
---------- ------- --------- --------- ---------
06-30-1999 1,259,000 $ 1,250 $ 311,296 $(304,828) $ 7,718
========== ======= ========= ========= =========
</TABLE>
See accompanying notes to financial statements
F-6
<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 was originally authorized to issue 2,000 shares of
Common Stock, $0.001 par value each and 1,000 shares of preferred stock, $0.001
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, $0.001 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
selling health care products and sharing its expertise by doing consulting.
c. Issuance of Shares of Common Stock
On June 24, 1997, the Company sold 100 shares or 100,000 post split
shares to Mr. Jack Rubinstein in consideration for $100 cash.
Between June 20, 1997 to August 20, 1997, Mr. Rubinstein contributed to
the Company's capital an additional $9,649 in expenses paid on behalf of the
Company.
On December 18, 1998, Mr. Rubinstein remitted back to the Company 75
shares or 750,000 post split shares of Common Stock for cancellation.
On December 18, 1998, the Company issued 75.25 shares or 752,500 post split
shares of Common Stock for consulting services valued at $188,125 or $0.25 per
share to the following individuals and companies and in the following amounts:
123,750 shares to Jack Rubinstein; 100,000 to R. Scott Barter; 50,000 shares to
Douglas Harrison-Mills; 50,000 to Brad Smith; 25,000 shares to Alan Scott; and
403,750 to Unifund Financial Group, Inc.
The Company forward split the number of shares of common stock
outstanding on March 31, 1999 in a ratio of 1:10,000 restating the number of
outstanding shares of common stock from 100.25 to 1,002,500 shares of Common
Stock.
The Company sold 247,500 shares of common stock for an aggregate
consideration of $24,750 or $0.10 per share.
For the period April 1, 1999 to June 30, 1999, the Company received
$46,250 as an additional contribution to capital from shareholders of the
Company.
Mr. Jack Rubinstein, converted the balance of his officer loan payable
aggregating $43,672 to additional paid in capital. 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
F-7
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
satisfaction of liabilities in the normal course of business. The Company
incurred net losses of $304,828 for the period from inception June 23, 1997 to
June 30, 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 June 30, 1999 and the related statements of
operations and cash flows for the six months ended June 30, 1998 and 1999 and
for the period from inception, June 23, 1997, to June 30, 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. Use of Estimates
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.
e. 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
F-8
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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.
f. Research and Development Expenses
Research and development expenses are charged to operations when
incurred.
g. 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 betterments are capitalized.
h. Significant Concentration of Credit Risk
At June 30, 1999, the Company has diminished 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 Rubinstein in
consideration for $100 cash.
Between June 20, 1997 to August 20, 1997, Mr. Rubinstein contributed to
the Company's capital an additional $9,649 in expenses paid on behalf of the
Company.
On December 18, 1998, Mr. Rubinstein remitted back to the Company 75
pre-split or 750,000 post-split shares of Common Stock for cancellation.
On December 18, 1998, the Company issued 75.25 shares or 752,500 post
split shares of Common Stock for consulting services valued at $188,125 or $0.25
per share to the following individuals and companies and in the following
amounts: 123,750 shares to Jack Rubinstein; 100,000 to R. Scott Barter; 50,000
shares to Douglas Harrison-Mills; 50,000 to Brad Smith; 25,000 shares to Alan
Scott; and 403,750 to Unifund Financial Group, Inc.
For the period April 1, 1999 to June 30, 1999, the Company received
$46,250 as an additional contribution to capital from shareholders of the
Company.
Mr. Jack Rubinstein, converted the balance of his officer loan payable
aggregating $43,672 to additional paid in capital.
b. Office Location
The Company occupies office space at the office of the President at 250
East Hartsdale Avenue, Hartsdale, New York, 10530 at a monthly base rental of
$500 plus additional charges. For the period from inception, June 23, 1997, to
December 31, 1997, for the year ending December 31, 1998 and for the six months
ended June 30, 1999, rent expense was $3,000, $10,125 and $4,500 respectively.
F-9
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
c. Officer Loan
As of December 31, 1998, the Company was obligated to repay officer
loans to Mr. Jack Rubinstein, President of the Company with interest at 6%,
payable on demand aggregating $72,622 including accrued interest of $2,622. As
of June 30, 1999, Mr. Jack Rubinstein had been repaid $30,000 and converted the
balance of his officer loan payable aggregating $43,672 to additional paid in
capital.
d. Officer Compensation
For the period from inception, June 23, 1997, to December 31, 1997, for
the year ending December 31, 1998 and for the six months ended June 30, 1999,
the Company has accrued a minimal compensation of $500 per month as compensation
to Mr. Rubinstein as consideration for services while the Company is in the
development stage of development as follows: $3,000, $6,000 and $4,500
respectively.
Note 4 - Commitments and Contingencies
At December 31, 1998 and June 30, 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 June 30, 1999, the Company has net operating loss carry forwards for
income tax purposes of $304,828. 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.
F-10
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
The components of the net deferred tax asset as of June 30, 1998 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 103,642
Valuation allowance $(103,642)
----------
Net deferred tax asset $ -0-
==========
The Company recognized no income tax benefit for the loss generated in
the period from inception, June 23, 1997, to June 30, 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 June 30, 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 5,000,000 Shares of
Preferred Stock, par value $.01 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 June 30, 1999, the number of shares
outstanding is -0-.
F-11
<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
-----------------
F-12
<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.
---------------------------
Until November 18, 1999 (90 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
---------------------------
AUGUST 20, 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 $ 55,000.00
Accountant's Fees $ 10,000.00
Printing and Copying $ 10,000.00
Miscellaneous
------------ -------------
TOTAL $ 92,557.95
Item 26. Recent Sales of Unregistered Securities
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
business operations, he purchased 100 shares of Common Stock of which 75 shares
were later returned to the Company for cancellation 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, 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 pursuant to Section 4(2) of the Securities Act 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
- ----------
* Previously filed.
II-2
<PAGE>
Exhibit No. Description
- ----------- -----------
3.5 Form of Class B Redeemable Warrant
3.6 Form of Class A Warrant Agreement
3.7 Form of Class B Warrant Agreement
5 Opinion on Legality of Kaplan Gottbetter & Levenson, LLP,
counsel to registrant
10.1 Web site development and servicing agreement
10.2 Management Agreement with Unifund America, Inc.
23.1** Consent of Kaplan Gottbetter & Levenson, LLP,
counsel to registrant
23.2 Consent of Thomas P. Monahan, independent public accountant
27 Financial Data Schedule
- ----------
* Previously filed.
** To be filed by amendment.
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
<PAGE>
(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.
II-4
<PAGE>
SIGNATURES
In accordance with the Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form SB-2 and authorized this amendment number one to its
registration statement on Form SB-2 to be signed on its behalf by the
undersigned, in the city of Hartsdale, state of New York, on August 20, 1999.
PIPELINE DATA INC.
(Registrant)
By /s/ Jack Rubinstein
-------------------------------------
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.
/s/ R. Scott Barter Director August 20, 1999
-------------------------- ---------------------- ----------------
R. Scott Barter (Title) (Date)
(Signature)
/s/ Douglas Harrison-Mills Director August 20, 1999
-------------------------- ---------------------- ---------------
Douglas Harrison-Mills (Title) (Date)
(Signature)
II-5
EXHIBIT 3.4
FORM OF CLASS A REDEEMABLE WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE MAY BE TRANSFERRED SEPARATELY FROM THE
COMMON STOCK CERTIFICATE WITH WHICH IT IS INITIALLY ISSUED
EXERCISABLE ON OR BEFORE, AND VOID AFTER, 5:00 P.M. NEW YORK CITY TIME,
MAY 28, 2004
No. W- _____ Certificate for __________ Warrants
WARRANT CUSIP :
WARRANTS TO PURCHASE COMMON STOCK OF PIPELINE DATA INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that ___________________________________________ or assigns, is
the owner of the number of Warrants set forth above, each of which represents
the right to purchase from Pipeline Data Inc., a Delaware corporation (the
"Company"), at any time on or before 5:00 p.m., New York City time, May 28,
2004, upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement hereinafter referred to, one share (subject to adjustments
referred to below) of the Common Stock of the Company (such shares or other
securities or property purchasable upon exercise of the Warrants being herein
called the "Shares"), by surrendering this Warrant Certificate, with the
Purchase Form on the reverse side duly executed, at the principal office of
American Stock Transfer Company or its successor, as warrant agent (the "Warrant
Agent"), and by paying in full, in cash or by certified or official bank check
payable to the order of the Company, the purchase price of $5.00 per share.
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
Upon the surrender for transfer or exchange hereof, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to the order of the holder hereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face hereof.
The Warrant Certificates are issued only as registered Warrant Certificates.
Until this Warrant Certificate is transferred in the Warrant Register, the
Company and the Warrant Agent may treat the person in whose name this Warrant
Certificate is registered as the absolute owner hereof and of the Warrants
represented hereby for all purposes, notwithstanding any notice to the contrary.
<PAGE>
This Warrant Certificate is issued under the Warrant Agreement dated as of
August _____, 1999, between the Company and the Warrant Agent and is subject to
the terms and provisions contained in said Warrant Agreement, to all of which
terms and provisions the registered holder of this Warrant Certificate consents
by acceptance hereof. Copies of said Warrant Agreement are on file at the
principal office of the Warrant Agent in New York and may be obtained by writing
to the Warrant Agent.
The number of Shares receivable upon the exercise of the Warrants represented by
this Warrant Certificate and the purchase price per share are subject to
adjustment upon the happening of certain events specified in the Warrant
Agreement (which provisions are contained in Section 3 of the Warrant Agreement
and are hereby incorporated by reference).
No fractional Shares of the Company's Common Stock will be issued upon the
exercise of Warrants. As to any final fraction of a share which a holder of
Warrants exercised in the same transaction would otherwise be entitled to
purchase on such exercise, the Company shall pay a cash adjustment in lieu of
any fractional Share determined as provided in the Warrant Agreement.
The Warrants may be redeemed by the Company, in whole, at any time on or after
issuance, and on or before May 28, 2004, at a redemption price of $.01 per
Warrant, upon notice of such redemption as set forth below, provided that (a)
the last reported sale price of the Common Stock on a national securities
exchange, if the Common Stock shall be listed or admitted to unlisted trading
privileges on a national securities exchange, or (b) the closing bid price of
the Common Stock on the NASDAQ system, if the Common Stock is not so listed or
admitted to unlisted trading privileges, or (c) if the Common Stock trades over
the counter but is not reported in the NASDAQ National Market System or traded
on any national securities exchange, the average of the mean bid and asked
prices per share, as reported by the National Quotation Bureau, Inc. or other
generally accepted quotation service, has been at least 150% of the then
effective Purchase Price on each of the 20 consecutive trading days ending on
the third day before notice of redemption is given. Notice of redemption shall
be mailed not less than thirty (30) days prior to the date fixed for redemption
to the holders of Warrants at their last registered addresses. If notice of
redemption shall have been given as provided in the Warrant Agreement and cash
sufficient for the redemption be deposited by the Company for that purpose, the
exercise rights of the Warrants identified for redemption shall expire at the
close of business on such date of redemption unless extended by the Company.
This Warrant Certificate shall not entitle the holder hereof to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, to
exercise any preemptive right, or to receive any notice of, or to attend
meetings of holders of Common Stock or any other proceedings of the Company.
This Warrant Certificate shall be void and the Warrants and any rights
represented hereby shall cease unless exercised on or before 5:00 P.M. New York
City time on May 28, 2004, unless extended by the Company.
This Warrant Certificate shall not be valid for any purpose until it shall have
been countersigned by the Warrant Agent.
<PAGE>
WITNESS the facsimile signatures of the Company's duly authorized officers.
Dated: ______________ Pipeline Data Inc.
By _________________________________
Its ________________________________
COUNTERSIGNED AND REGISTERED:
American Stock Transfer Company
as Warrant Agent
By __________________________
Authorized Signatory
<PAGE>
[REVERSE OF WARRANT CERTIFICATE]
THE CERTIFICATE OF INCORPORATION OF THE COMPANY GRANTS TO THE BOARD OF DIRECTORS
THE POWER TO ISSUE ONE OR MORE SERIES OR CLASSES OF PREFERRED STOCK AND TO FIX
THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS RELATING TO SHARES OF EACH SUCH SERIES OR CLASS. THE COMPANY
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT
OF THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF SUBSEQUENT CLASSES OR SERIES.
THE HOLDER OF THIS WARRANT CERTIFICATE WILL BE ABLE TO EXERCISE THE WARRANTS
ONLY IF A CURRENT PROSPECTUS RELATING TO THE SHARES UNDERLYING THE WARRANTS IS
THEN IN EFFECT AND ONLY IF SUCH SHARES ARE QUALIFIED FOR SALE OR EXEMPT FROM
QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF THE STATES IN WHICH THE
HOLDER OF THIS WARRANT CERTIFICATE RESIDES. ALTHOUGH THE COMPANY WILL USE ITS
BEST EFFORTS TO MAINTAIN THE EFFECTIVENESS OF A CURRENT PROSPECTUS COVERING THE
SHARES UNDERLYING THE WARRANTS, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL
BE ABLE TO DO SO, OR TO GET ANY REQUIRED AMENDMENTS DECLARED EFFECTIVE BY
FEDERAL OR STATE AUTHORITIES IN A TIMELY MANNER. THE COMPANY WILL BE UNABLE TO
ISSUE SHARES TO THOSE PERSONS DESIRING TO EXERCISE THEIR WARRANTS IF A CURRENT
PROSPECTUS COVERING THE SHARES ISSUABLE UPON THE EXERCISE OF THE WARRANTS IS NOT
KEPT EFFECTIVE OR IF SUCH SHARES ARE NOT QUALIFIED NOR EXEMPT FROM QUALIFICATION
IN THE STATES IN WHICH THE HOLDERS OF THE WARRANTS RESIDE.
<PAGE>
TO: Pipeline Data Inc.
c/o American Stock Transfer Company
Warrant Agent
PURCHASE FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
WARRANT CERTIFICATES)
The undersigned hereby irrevocably elects to exercise _____________* of the
Warrants represented by the Warrant Certificate and to purchase for cash the
Shares issuable upon the exercise of said Warrants, and herewith makes payment
of $__________ therefor, and requests that certificates for such Shares shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
REGISTERED HOLDER OF CERTIFICATE
=============================
(Print Name)
- -----------------------------
(Address)
- -----------------------------
Dated: __________________ Signature(s) __________________
------------------
* Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial exercise, the portion thereof being
exercised), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO TRANSFER
WARRANT CERTIFICATES)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
___________** of the Warrants represented by this Warrant Certificate unto
- ---------------------------------
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
- -----------------------------------
(Print name)
- -----------------------------------------
(Address)
- -----------------------------------------
and does hereby irrevocably constitute and appoint ____________________________
Attorney to transfer this Warrant Certificate on the records of the Company with
full power of substitution in the premises.
Dated: __________________ Signature(s) __________________
------------------
Signature(s)
Guaranteed: ________________________
** Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial assignment, the portion thereof being
assigned), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
NOTICE
The Signature(s) to the Purchase Form or the Assignment Form must correspond to
the name(s) as written upon the face of this Warrant Certificate in every
particular without alteration or enlargement or any change whatsoever.
-END-
Exhibit 3.5
FORM OF CLASS B REDEEMABLE WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE MAY BE TRANSFERRED SEPARATELY FROM THE
COMMON STOCK CERTIFICATE WITH WHICH IT IS INITIALLY ISSUED
EXERCISABLE ON OR BEFORE, AND VOID AFTER, 5:00 P.M. NEW YORK CITY TIME,
MAY 28, 2004
No. W- _____ Certificate for __________ Warrants
WARRANT CUSIP :
WARRANTS TO PURCHASE COMMON STOCK OF PIPELINE DATA INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that ___________________________________________ or assigns, is
the owner of the number of Warrants set forth above, each of which represents
the right to purchase from Pipeline Data Inc., a Delaware corporation (the
"Company"), at any time on or before 5:00 p.m., New York City time, May 28,
2004, upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement hereinafter referred to, one share (subject to adjustments
referred to below) of the Common Stock of the Company (such shares or other
securities or property purchasable upon exercise of the Warrants being herein
called the "Shares"), by surrendering this Warrant Certificate, with the
Purchase Form on the reverse side duly executed, at the principal office of
American Stock Transfer Company or its successor, as warrant agent (the "Warrant
Agent"), and by paying in full, in cash or by certified or official bank check
payable to the order of the Company, the purchase price of $5.00 per share.
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
Upon the surrender for transfer or exchange hereof, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to the order of the holder hereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face hereof.
<PAGE>
The Warrant Certificates are issued only as registered Warrant Certificates.
Until this Warrant Certificate is transferred in the Warrant Register, the
Company and the Warrant Agent may treat the person in whose name this Warrant
Certificate is registered as the absolute owner hereof and of the Warrants
represented hereby for all purposes, notwithstanding any notice to the contrary.
This Warrant Certificate is issued under the Warrant Agreement dated as of
August _____, 1999, between the Company and the Warrant Agent and is subject to
the terms and provisions contained in said Warrant Agreement, to all of which
terms and provisions the registered holder of this Warrant Certificate consents
by acceptance hereof. Copies of said Warrant Agreement are on file at the
principal office of the Warrant Agent in New York and may be obtained by writing
to the Warrant Agent.
The number of Shares receivable upon the exercise of the Warrants represented by
this Warrant Certificate and the purchase price per share are subject to
adjustment upon the happening of certain events specified in the Warrant
Agreement (which provisions are contained in Section 3 of the Warrant Agreement
and are hereby incorporated by reference).
No fractional Shares of the Company's Common Stock will be issued upon the
exercise of Warrants. As to any final fraction of a share which a holder of
Warrants exercised in the same transaction would otherwise be entitled to
purchase on such exercise, the Company shall pay a cash adjustment in lieu of
any fractional Share determined as provided in the Warrant Agreement.
The Warrants may be redeemed by the Company, in whole, at any time on or after
issuance, and on or before May 28, 2004, at a redemption price of $.01 per
Warrant, upon notice of such redemption as set forth below, provided that (a)
the last reported sale price of the Common Stock on a national securities
exchange, if the Common Stock shall be listed or admitted to unlisted trading
privileges on a national securities exchange, or (b) the closing bid price of
the Common Stock on the NASDAQ system, or (c) if the Common Stock trades over
the counter but is not reported in the NASDAQ National Market System or traded
on any national securities exchange, the average of the mean bid and asked
prices per share, as reported by the National Quotation Bureau, Inc. or other
generally accepted quotation service, if the Common Stock is not so listed or
admitted to unlisted trading privileges, has been at least 150% of the then
effective Purchase Price on each of the 20 consecutive trading days ending on
the third day before notice of redemption is given. Notice of redemption shall
be mailed not less than thirty (30) days prior to the date fixed for redemption
to the holders of Warrants at their last registered addresses. If notice of
redemption shall have been given as provided in the Warrant Agreement and cash
sufficient for the redemption be deposited by the Company for that purpose, the
exercise rights of the Warrants identified for redemption shall expire at the
close of business on such date of redemption unless extended by the Company.
This Warrant Certificate shall not entitle the holder hereof to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, to
exercise any preemptive right, or to receive any notice of, or to attend
meetings of holders of Common Stock or any other proceedings of the Company.
This Warrant Certificate shall be void and the Warrants and any rights
represented hereby shall cease unless exercised on or before 5:00 P.M. New York
City time on May 28, 2004, unless extended by the Company.
This Warrant Certificate shall not be valid for any purpose until it shall have
been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the Company's duly authorized officers.
Dated: ______________ Pipeline Data Inc.
By ___________________________
Its __________________________
COUNTERSIGNED AND REGISTERED:
American Stock Transfer Company
as Warrant Agent
By __________________________
Authorized Signatory
<PAGE>
[REVERSE OF WARRANT CERTIFICATE]
THE CERTIFICATE OF INCORPORATION OF THE COMPANY GRANTS TO THE BOARD OF DIRECTORS
THE POWER TO ISSUE ONE OR MORE SERIES OR CLASSES OF PREFERRED STOCK AND TO FIX
THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS RELATING TO SHARES OF EACH SUCH SERIES OR CLASS. THE COMPANY
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT
OF THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF SUBSEQUENT CLASSES OR SERIES.
THE HOLDER OF THIS WARRANT CERTIFICATE WILL BE ABLE TO EXERCISE THE WARRANTS
ONLY IF A CURRENT PROSPECTUS RELATING TO THE SHARES UNDERLYING THE WARRANTS IS
THEN IN EFFECT AND ONLY IF SUCH SHARES ARE QUALIFIED FOR SALE OR EXEMPT FROM
QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF THE STATES IN WHICH THE
HOLDER OF THIS WARRANT CERTIFICATE RESIDES. ALTHOUGH THE COMPANY WILL USE ITS
BEST EFFORTS TO MAINTAIN THE EFFECTIVENESS OF A CURRENT PROSPECTUS COVERING THE
SHARES UNDERLYING THE WARRANTS, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL
BE ABLE TO DO SO, OR TO GET ANY REQUIRED AMENDMENTS DECLARED EFFECTIVE BY
FEDERAL OR STATE AUTHORITIES IN A TIMELY MANNER. THE COMPANY WILL BE UNABLE TO
ISSUE SHARES TO THOSE PERSONS DESIRING TO EXERCISE THEIR WARRANTS IF A CURRENT
PROSPECTUS COVERING THE SHARES ISSUABLE UPON THE EXERCISE THE WARRANTS IS NOT
KEPT EFFECTIVE OR IF SUCH SHARES ARE NOT QUALIFIED NOR EXEMPT FROM QUALIFICATION
IN THE STATES IN WHICH THE HOLDERS OF THE WARRANTS RESIDE.
<PAGE>
TO: Pipeline Data Inc.
c/o American Stock Transfer Company
Warrant Agent
PURCHASE FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
WARRANT CERTIFICATES)
The undersigned hereby irrevocably elects to exercise _____________* of the
Warrants represented by the Warrant Certificate and to purchase for cash the
Shares issuable upon the exercise of said Warrants, and herewith makes payment
of $__________ therefor, and requests that certificates for such Shares shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
REGISTERED HOLDER OF CERTIFICATE
=============================
(Print Name)
- -----------------------------
(Address)
- -----------------------------
Dated: __________________ Signature(s) __________________
------------------
* Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial exercise, the portion thereof being
exercised), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
<PAGE>
ASSIGNMENT FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO TRANSFER
WARRANT CERTIFICATES)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
___________** of the Warrants represented by this Warrant Certificate unto
- ---------------------------------
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
- -----------------------------------
(Print name)
- -----------------------------------------
(Address)
- -----------------------------------------
and does hereby irrevocably constitute and appoint ____________________________
Attorney to transfer this Warrant Certificate on the records of the Company with
full power of substitution in the premises.
Dated: __________________ Signature(s) __________________
------------------
Signature(s)
Guaranteed: ________________________
** Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial assignment, the portion thereof being
assigned), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
NOTICE
The Signature(s) to the Purchase Form or the Assignment Form must correspond to
the name(s) as written upon the face of this Warrant Certificate in every
particular without alteration or enlargement or any change whatsoever.
-END-
Exhibit 3.6
CLASS A REDEEMABLE WARRANT AGREEMENT
DATE: _________, 1999
PARTIES: Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21
Hartsdale, NY 10530
American Stock Transfer Company
2 Broadway
New York, NY 10004
RECITALS:
Pipeline Data Inc., a Delaware corporation (the "Company"), proposes to issue
One Million Class A Redeemable Warrants ("Warrants") evidencing the right to
purchase an aggregate of up to one million authorized but previously unissued
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock").
The Company desires American Stock Transfer Company (the "Warrant Agent") to act
on behalf of the Company, and the Warrant Agent desires so to act, in connection
with the issuance, registration, transfer, exchange and exercise of the
Warrants.
AGREEMENT:
The Company and the Warrant Agent therefore agree as follows:
Section 1. Appointment of Warrant Agent; Issuance, Form and Execution of Warrant
Certificates.
(a) Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company, and the Warrant Agent hereby accepts the agency
established herein and agrees to perform its agency duties in accordance with
the terms and conditions of this Warrant Agreement.
(b) Warrant Certificates. The Company shall execute and deliver to the Warrant
Agent certificates which the Company has authorized to represent the Warrants
("Warrant Certificates"). The Warrant Certificates shall be substantially as set
forth in Exhibit A and may have such legends, summaries or endorsements printed,
lithographed or engraved thereon as the
1
<PAGE>
Company may deem appropriate and as are not inconsistent with the provisions of
this Warrant Agreement, or as may be required to comply with any law or with any
rule or regulation relating to listing of the Warrants on the NASDAQ system,
including the Nasdaq National Market, or on any stock exchange or to conform to
usage. The Warrant Certificates shall be dated the date of their issuance.
(c) Execution of Warrant Certificates. The Warrant Certificates shall be
executed on behalf of the Company by a duly authorized officer of the Company,
either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. Any Warrant Certificate may be
signed on behalf of the Company by the person who at the actual date of the
signing of such Warrant Certificate shall have been the proper officer of the
Company, although at the date of issuance of such Warrant Certificate any such
person has ceased to be such officer of the Company.
Section 2. Exercise of Warrants.
(a) Exercise. Any or all of the Warrants represented by each Warrant Certificate
may be exercised by the holder thereof on or before 5:00 p.m., New York City
time, on May 28, 2004, unless extended by the Company, by surrender of the
Warrant Certificate with the Purchase Form, which is printed on the reverse
thereof (or a reasonable facsimile thereof), duly executed by such holder, to
the Warrant Agent at its principal office in New York accompanied by payment, in
cash or by certified or official bank check payable to the order of the Company,
in an amount equal to the product of the number of shares of Common Stock
issuable upon exercise of the Warrant represented by such Warrant Certificate,
as adjusted pursuant to the provisions of Section 3 hereof, multiplied by the
exercise price of $3.00, as adjusted pursuant to the provisions of Section 3
hereof (the applicable price as so adjusted from time to time being herein
called the "Purchase Price"), and such holder shall be entitled to receive such
number of fully paid and nonassessable shares of Common Stock, as so adjusted,
at the time of such exercise.
(b) Time of Exercise. Each exercise of Warrants shall be deemed to have been
effective immediately prior to the close of business on the business day on
which the Warrant Certificate relating to such Warrants shall have been
surrendered to the Warrant Agent as provided in Section 2(a), and at such time
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such exercise as provided in
Section 2(c) shall be deemed to have become the holder or holders of record
thereof.
(c) Issuance of Shares of Common Stock; No Fractional Shares. As soon as
practicable after the exercise of any Warrant, and in any event within ten (10)
days after receipt by the Company of the notice of exercise under Section 2(a),
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
thereof or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, (a) a certificate or certificates for the number of
fully paid and nonassessable shares of Common Stock to which such holder shall
be entitled upon such exercise plus, in lieu of any fractional share to which
such holder would otherwise be entitled, an amount in cash equal to
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such fraction multiplied by the then current value of a share of Common Stock,
such current value to be determined as follows: (i) if the Common Stock shall be
listed or admitted to unlisted trading privileges on any single national
securities exchange, then such current value shall be computed on the basis of
the last reported sale price of the Common Stock on such exchange on the last
business day prior to the date of the exercise of such Warrant upon which a sale
shall have been effected; or (ii) if the Common Stock shall not be so listed or
admitted to unlisted trading privileges and bid and asked prices therefor in the
over-the-counter market shall be reported by NASDAQ, including the Nasdaq
National Market, then such current value shall be computed on the basis of the
Last Reported Sale Valuation Method or, in the event such method is not then
used by NASDAQ, the average of the closing bid and asked prices on the last
business day prior to the date of the exercise of such Warrant as so reported;
or (iii) if the Common Stock shall be listed or admitted to unlisted trading
privileges on more than one national securities exchange or one or more national
securities exchanges and in the over-the-counter market, then such current value
shall, if different as a result of calculation under the applicable method(s)
described above in this Section, be deemed to be the higher number calculated in
connection therewith; or (iv) if the shares of Common Stock are traded over the
counter but not on any national securities exchange and not in the NASDAQ
National Market System, the average of the mean bid and asked prices per share,
as reported by The National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, or (v) if the Common Stock shall not be so listed,
admitted to unlisted trading privileges, or traded over the counter and such bid
and asked prices shall not be so reported, then such current value shall be
computed on the basis of the book value of Common Stock as of the close of
business on the last day of the month immediately preceding the date upon which
such Warrant was exercised, as determined by the Company; and (b) in case such
exercise includes only part of the Warrants represented by any Warrant
Certificate, a new Warrant Certificate or Warrant Certificates of like tenor,
calling in the aggregate on the face or faces thereof for the number of shares
of Common Stock equal (without giving effect to any adjustment therein) to the
number of such shares called for on the face of such Warrant Certificate minus
the number of such shares designated by the holder for such exercise as provided
in Section 2(a). Warrants represented by a properly assigned Warrant Certificate
may be exercised by a new holder without first having a new Warrant Certificate
issued.
(d) Extension of Exercise Period; Change of Exercise Price. The Company may,
upon notice given to the Warrant Agent, and without the consent of the holders
of the Warrant Certificates, (a) reduce the Purchase Price during all or any
portion of the originally stated exercise period or (b) extend the period over
which the Warrants are exercisable beyond May 28, 2004, and increase or decrease
the Purchase Price for any period the Warrant exercise period is extended. In
the case of the extension of the exercise period or a change in the Purchase
Price, the Company must provide the Warrant Agent and the Warrantholders of
record notice of such extension of the exercise period, specifying, as the case
may be, the time to which such exercise period is extended, or specifying the
new Purchase Price and the periods for which such new Purchase Price is in
effect, a reasonable time prior to the date such extension or new Purchase Price
is to take effect, such reasonable time to be commercially reasonable and
consistent with applicable securities laws and regulations.
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Section 3 Antidilution Provisions.
(a)(i) Adjustment of Purchase Price. In the event that: (i) any dividends on any
class of stock of the Company payable in Common Stock or securities convertible
into Common Stock shall be paid by the Company; (ii) the Company shall subdivide
its then outstanding shares of Common Stock into a greater number of shares; or
(iii) the Company shall combine outstanding shares of Common Stock, by
reclassification or otherwise; then, in any such event, the Purchase Price in
effect immediately prior to such event shall (until adjusted again pursuant
hereto) be adjusted immediately after such event to a price (calculated to the
nearest full cent) determined by dividing (A) the number of shares of Common
Stock outstanding immediately prior to such event, multiplied by the then
existing Purchase Price, by (B) the total number of shares of Common Stock
outstanding immediately after such event (including in each case the maximum
number of shares of Common Stock issuable in respect of any securities
convertible into Common Stock), and the resulting quotient shall be the adjusted
Purchase Price per share.
(a)(ii) No adjustment of the Purchase Price shall be made if the amount of such
adjustments shall be less than $.05 per share, but in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment or adjustments so carried forward, shall
amount to not less than $.05 per share.
(b) Adjustment of Number of Shares Purchasable On Exercise of Warrants. Upon
each adjustment of the Purchase Price pursuant to Section 3(a) above, the
registered holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Purchase Price the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares specified in such Warrant (as adjusted as a result of all adjustments
in the Purchase Price in effect prior to such adjustment) by the Purchase Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
(c) Notice as to Adjustment. Upon any adjustment of the Purchase Price and an
increase or decrease in the number of shares of Common Stock purchasable upon
the exercise of the Warrants, then, and in each such case, the Company shall
within ten (10) days after the effective date of such adjustment give written
notice thereof, by first class mail, postage prepaid, addressed to each
registered Warrantholder at the address of such Warrantholder as shown on the
books of the Company, which notice shall state the adjusted Purchase Price and
the increased or decreased number of shares purchasable upon the exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(d) Effect of Reorganization, Reclassification, Merger, Etc. If at any time
while any Warrant is outstanding there should be any capital reorganization or
reclassification of the capital stock of the Company (other than the issue of
any shares of Common Stock in subdivision of outstanding shares of Common Stock
by reclassification or otherwise and other than a combination of shares provided
for in Section 3(a) hereof) or any consolidation or merger of the Company with
another corporation or any sale, conveyance, lease or other transfer by the
Company of all or substantially all of its property to any other corporation,
the holder of any Warrant shall, during
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the remainder of the period such Warrant is exercisable, be entitled to receive,
upon payment of the Purchase Price, the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from such consolidation or merger, or of the corporation to which the property
of the Company has been sold, conveyed, leased or otherwise transferred, as the
case may be, to which the Common Stock (and any other securities and property)
of the Company, deliverable upon the exercise of such Warrant, would have been
entitled upon such capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer if such Warrant
had been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale, conveyance,
lease or other transfer; and, in any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant Agreement with respect
to the rights and interests thereafter of the Warrantholders to the end that the
provisions set forth in this Warrant Agreement (including the adjustment of the
Purchase Price and the number of shares issuable upon the exercise of the
Warrants) shall thereafter be applicable, as near as may be reasonably
practicable, in relation to any shares or other property thereafter deliverable
upon the exercise of the Warrants as if the Warrants had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer and the
Warrantholders had carried out the terms of the exchange as provided for by such
capital reorganization, reclassification, consolidation or merger. The Company
shall not effect any such capital reorganization, consolidation, merger or
transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to the holder of each Warrant such shares
of stock, securities, cash or property as in accordance with the foregoing
provisions such holder shall be entitled to purchase.
(e) Prior Notice as to Certain Events. In case at any time:
the Company shall pay any dividend upon its Common Stock payable in stock or
make any distribution (other than cash dividends) to the holders of its Common
Stock; or
the Company shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other rights; or
there shall be any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with, or sale,
conveyance, lease or other transfer of all or substantially all of its assets
to, another corporation; or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then in any one or more of such cases, the Company shall give prior written
notice, by first class mail, postage prepaid, addressed to each registered
Warrantholder at the address of such Warrantholder as shown on the books of the
Company, of the date on which (x) the books of the Company shall close or a
record shall be taken for such stock dividend, distribution or subscription
rights or (y) such reorganization, reclassification, consolidation, merger,
sale,
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dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify the date as of which the holders of the Common
Stock of record shall participate in such dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up, as the
case may be. Such written notice shall be given at least twenty (20) days prior
to the action in question and not less than twenty (20) days prior to the record
date or the date on which the Company's transfer books are closed in respect
thereto.
(f) Certain Obligations of the Company. The Company will not, by amendment of
its articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant Agreement or the Warrant Certificate, but will at all
times in good faith assist in the carrying out of all such terms. Without
limiting the generality of the foregoing, the Company (a) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of such stock upon the
exercise of all Warrants from time to time outstanding, and (b) will not (i)
transfer all or substantially all of its properties and assets to any other
person or entity, or (ii) consolidate with or merge into any other entity where
the Company is not the continuing or surviving entity, or (iii) permit any other
entity to consolidate with or merge into the Company where the Company is the
continuing or surviving entity but, in connection with such consolidation or
merger, the Common Stock then issuable upon the exercise of the Warrants shall
be changed into or exchanged for shares or other securities or property of any
other entity unless, in any such case, the other entity acquiring such
properties and assets, continuing or surviving after such consolidation or
merger or issuing or distributing such shares or other securities or property,
as the case may be, shall expressly assume in writing and be bound by all the
terms of this Warrant Agreement and the Warrant Certificates.
(g) Reservation and Listing of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the exercise
of the Warrants, all shares of Common Stock from time to time issuable upon such
exercise. All such shares shall be authorized and, when issued upon such
exercise, shall be validly issued, fully paid and nonassessable with no
liability on the part of the holder thereof. The Company, at its expense, will
list on the NASDAQ system, including the Nasdaq National Market, if applicable,
and on each national securities exchange on which any Common Stock may at any
time be listed, subject to official notice of issuance, and will maintain such
listing of, the shares of Common Stock from time to time issuable upon the
exercise of the Warrants.
(h) Registration or Exemption for Common Stock. The Company will use its best
efforts (a) at all times the Warrants are exercisable to maintain an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering Common Stock issuable upon exercise of the Warrants, (b) from time to
time to amend or supplement the prospectus contained in such registration
statement to the extent necessary in order to comply with applicable law, (c) to
qualify for exemption from the registration requirements of the Act the Common
Stock issuable upon exercise of the Warrants, and (d) to maintain exemptions or
qualifications, in those
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jurisdictions in which the original registration statement relating to the
Warrants was initially qualified, to permit the exercise of the Warrants and the
issuance of the Common Stock pursuant to such exercise. The Warrant Agent shall
have no responsibility for the maintenance of such exemptions or qualifications
or for liabilities arising from the exercise or attempted exercise of Warrants
in jurisdictions where exemptions or qualifications have not been maintained or
are otherwise unavailable.
Section 4 Redemption of Warrants.
(a) Redemption Price. The Warrants may be redeemed at the option of the Company
in whole, at any time on or after issuance, and on or before May 28, 2004, upon
notice as set forth in Section 4(b), and at a redemption price equal to $.01 per
Warrant, provided that (a) the last reported sale price of the Common Stock on a
national securities exchange, if the Common Stock shall be listed or admitted to
unlisted trading privileges on a national securities exchange, or (b) the
closing bid price of the Common Stock on the NASDAQ system, if the Common Stock
is not so listed or admitted to unlisted trading privileges, or (c) the average
of the mean of the bid and asked prices as reported by The National Quotation
Bureau, or another generally accepted quotation service, has been at least 150%
of the then the effective Purchase Price on each of the 20 consecutive trading
days ending on the third day before notice of redemption is given.
(b) Notice of Redemption. In the case of any redemption of Warrants, the Company
or, at its request, the Warrant Agent in the name of and at the expense of the
Company, shall give notice of such redemption to the holders of the Warrants to
be redeemed as hereinafter provided in this Section 4(b). Notice of redemption
to the holders of Warrants shall be given by mailing by first-class mail a
notice of such redemption not less than 30 days prior to the date fixed for
redemption. Any notice which is given in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives the notice. In any case, failure duly to give such notice, or any
defect in such notice, to the holder of any Warrant Certificate shall not affect
the validity of the proceedings for the redemption of Warrants represented by
any other Warrant Certificate. Each such notice shall specify the date fixed for
redemption, the place of redemption and the redemption price of $.01 at which
each Warrant is to be redeemed, and shall state that payment of the redemption
price of the Warrants will be made on surrender of the Warrants at such place of
redemption, and that if not exercised by the close of business on the date fixed
for redemption, the exercise rights of the Warrants identified for redemption
shall expire unless extended by the Company. Such notice shall also state the
current Purchase Price and the date on which the right to exercise the Warrants
will expire unless extended by the Company.
(c) Payment of Warrants on Redemption; Deposit of Redemption Price. If notice of
redemption shall have been given as provided in Section 4(b), the redemption
price of $.01 per Warrant shall, unless the Warrant is theretofore exercised
pursuant to the terms hereof, become due and payable on the date and at the
place stated in such notice. On and after such date of redemption, provided that
cash sufficient for the redemption thereof shall then be deposited by the
Company with the Warrant Agent for that purpose, the exercise rights of the
Warrants identified for redemption shall expire. On presentation and surrender
of Warrant Certificates at such place of payment
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specified in such notice, the Warrants identified for redemption shall be paid
and redeemed at the redemption price of $.01 per Warrant. Prior to the date
fixed for redemption, the Company shall deposit with the Warrant Agent an amount
of money sufficient to pay the redemption price of all the Warrants identified
for redemption. Any monies which shall have been deposited with the Warrant
Agent for redemption of Warrants and which are not required for that purpose by
reason of exercise of Warrants shall be repaid to the Company upon delivery to
the Warrant Agent of evidence satisfactory to it of such exercise.
Section 5 Certain Other Provisions Relating to Rights of Holders of Warrant
Certificates.
(a) No Rights of Shareholders. The Warrant Certificates shall be issued in
registered form only. No Warrant Certificate shall entitle the holder thereof to
any of the rights of a holder of shares of Common Stock of the Company,
including, without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of holders of
Common Stock or any other proceedings of the Company.
(b) Loss, Theft, Destruction or Mutilation of Warrant Certificates. Upon receipt
by the Warrant Agent of evidence reasonably satisfactory to the Warrant Agent of
the loss, theft, destruction or mutilation of any Warrant Certificate, and (a)
in the case of any such loss, theft, or destruction, upon delivery to the
Warrant Agent of an indemnity bond in form and amount, and issued by a bonding
company, reasonably satisfactory to the Company, or (b) in the case of any such
mutilation, upon surrender to and cancellation by the Warrant Agent of such
Warrant Certificate, the Company at its expense will execute and cause the
Warrant Agent to countersign and deliver, in lieu thereof, a new Warrant
Certificate of like tenor.
(c) Transfer Agent; Cancellation of Warrant Certificates; Unexercised Warrants.
American Stock Transfer Company (and any successor), as transfer agent (the
"Transfer Agent"), is hereby irrevocably authorized and directed at all times to
reserve such number of authorized and unissued shares of Common Stock as shall
be sufficient to permit the exercise in full of all Warrants from time to time
outstanding. The Company will keep a copy of this Agreement on file with the
Transfer Agent. The Warrant Agent, and any successor thereto, is hereby
irrevocably authorized to requisition from time to time from the Transfer Agent
certificates for shares of Common Stock required for exercise of Warrants. The
Company will supply the Transfer Agent with duly executed certificates for
shares of Common Stock for such purpose and will make available any cash
required in settlement of fractional share interests. All Warrant Certificates
surrendered upon the exercise or redemption of Warrants shall be canceled by the
Warrant Agent and shall thereafter be delivered to the Company; such cancelled
Warrant Certificates, with the Purchase Form on the reverse thereof duly filled
in and signed, shall constitute conclusive evidence as between the parties
hereto of the numbers of shares of Common Stock which shall have been issued
upon exercises of Warrants. Promptly after the last day on which the Warrants
are exercisable (set forth in Section 2(a) above), the Warrant Agent shall
certify to the Company the aggregate number of Warrants then outstanding and
unexercised. No shares of Common Stock shall be subject to reservation with
respect to Warrants not exercised prior to the time and date identified in
Section 2(a) above as the last time and date at which Warrants may be exercised.
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Section 6 Transfer and Exchange of Warrant Certificates.
(a) Warrant Register; Transfer or Exchange of Warrant Certificates. The Warrant
Agent shall cause to be kept at the principal office of the Warrant Agent a
register (the "Warrant Register") in which, subject to such reasonable
regulations as the Company may prescribe, provisions shall be made for the
registration of transfers and exchanges of Warrant Certificates. Upon surrender
for transfer or exchange of any Warrant Certificates, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to or upon the order of the holder thereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of the Warrant Certificate so surrendered. Any
Warrant Certificate surrendered for transfer or exchange shall be cancelled by
the Warrant Agent and shall thereafter be delivered to the Company.
(b) Identity of Warrantholders. Until a Warrant Certificate is transferred in
the Warrant Register, the Company and the Warrant Agent may treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants represented thereby for all purposes, notwithstanding any
notice to the contrary, except that, if and when any Warrant Certificate is
properly assigned in blank, the Company and the Warrant Agent may (but shall not
be obligated to) treat the bearer thereof as the absolute owner of the Warrant
Certificate and of the Warrants represented thereby for all purposes,
notwithstanding any notice to the contrary.
Section 7 Concerning the Warrant Agent
(a) Taxes. The Company will, from time to time, promptly pay to the Warrant
Agent, or make provision satisfactory to the Warrant Agent for the payment of,
all taxes and charges that may be imposed by the United States or any State upon
the Company or the Warrant Agent upon the transfer or delivery of shares of
Common Stock upon the exercise of Warrants, but the Company shall not be
obligated to pay any tax imposed in connection with any transfer involved in the
delivery of a certificate for shares of Common Stock in any name other than that
of the registered holder of the Warrant Certificate surrendered in connection
with the purchase thereof.
(b) Replacement of Warrant Agent in Certain Circumstances. The Warrant Agent may
resign its duties and be discharged from all further duties and liabilities
hereunder after giving thirty (30) days notice in writing to the Company, except
that such shorter notice may be given as the Company shall, in writing, accept
as sufficient. The Company may discharge the Warrant Agent at any time with or
without reason, effective upon thirty (30) days written notice to the Warrant
Agent or 10 such shorter period as the Warrant Agent shall, in writing, accept
as sufficient. If the office of Warrant Agent becomes vacant by resignation,
discharge, incapacity to act or otherwise, the Company shall appoint in writing
a new Warrant Agent, the principal office of which shall be in Delaware. If the
Company shall fail to make such appointment within a period of thirty (30) days
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the holder of a Warrant
Certificate, then the holder of any Warrant Certificate may apply to any court
of competent jurisdiction for the appointment of a
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new Warrant Agent. Any new Warrant Agent, whether appointed by the Company or by
such a court, shall be a corporation organized and doing business under the laws
of the United States or a State thereof, of good standing, and having an office
in Delaware, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by Federal or State
authority. Any new Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to the Company an instrument accepting such appointment hereunder
and thereupon such new Warrant Agent without any further act or deed shall
become vested with all the rights, powers, duties and responsibilities of the
Warrant Agent hereunder with like effect as if it had been named as the Warrant
Agent; but if for any reason it becomes necessary or expedient to have the
former Warrant Agent execute and deliver any further assurance, conveyance, act
or deed, the same shall be done and shall be legally and validly executed and
delivered by the former Warrant Agent. Not later than the effective date of any
such appointment the Company shall file notice thereof with the former Warrant
Agent. The Company shall promptly give notice of any such appointment to the
holders of the Warrant Certificates by mail to their addresses as shown in the
Warrant Register. Failure to file or give such notice, or any defect therein,
shall not affect the legality or validity of the appointment of the successor
Warrant Agent.
(c) Successor Warrant Agent. Any company into which the Warrant Agent or any new
Warrant Agent may be merged or converted or with which it may be consolidated or
any company resulting from any merger, conversion or consolidation to which the
Warrant Agent or any new Warrant Agent shall be a party shall be the successor
Warrant Agent under this Warrant Agreement without any further act; provided
that if such company would not be eligible for appointment as a successor
Warrant Agent under the provisions of paragraph of this Section 7(b) the Company
shall forthwith appoint a new Warrant Agent in accordance with such provisions.
Any such successor Warrant Agent may adopt the prior countersignature of any
predecessor Warrant Agent and deliver Warrant Certificates countersigned and not
delivered by such predecessor Warrant Agent or may countersign Warrant
Certificates either in the name of any predecessor Warrant Agent or the name of
the successor Warrant Agent.
(d)(i) Remuneration of Warrant Agent. The Company will pay the Warrant Agent
reasonable remuneration for its services as Warrant Agent hereunder and will
reimburse the Warrant Agent upon demand for all expenditures that the Warrant
Agent may reasonably incur in the execution of its duties hereunder.
(d)(ii) Further Assurances. The Company will perform, exercise, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Warrant Agreement.
(e)(i) Limitations on Liabilities of the Warrant Agent. The Warrant Agent may
consult with legal counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
of the Warrant Agent as to any action taken or omitted by it in good faith and
in accordance with such opinion. Whenever, in the performance of its duties
under this Warrant Agreement, the Warrant Agent shall deem it necessary or
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desirable that any matter be proved or established, or that any instructions
with respect to the performance of its duties hereunder be given, by the Company
prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established, or such instructions may be given, by a
certificate or instrument signed by an officer of the Company and delivered to
the Warrant Agent; and such certificate or instrument shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon such
certificate or instrument; but in its discretion the Warrant Agent may in lieu
thereof accept other evidence of such matter or may require such further or
additional evidence as it may deem reasonable.
(ii) The Warrant Agent shall be liable hereunder only for its own negligence or
willful misconduct. The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Company
agrees to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of this Warrant Agreement except
as a result of the Warrant Agent's negligence or willful misconduct.
(iii) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Warrant Agreement or in the
Warrant Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(iv) The Warrant Agent shall not be under any responsibility in respect to the
validity or execution of any Warrant Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Warrant Agreement or in any Warrant
Certificate; nor shall it be responsible for the making of any adjustment in the
Purchase Price, or number of shares issuable upon exercise of the Warrant
Certificates or responsible for the manner, method or amount of any such
adjustment or the facts that would require any such adjustment; nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Warrant Agreement or any Warrant Certificate or as to whether any shares
of Common Stock or other securities are or will be validly authorized and issued
and fully paid and nonassessable.
(v) Amendment and Modification. The Warrant Agent may, without the consent or
concurrence of the holders of the Warrant Certificates, by supplemental
agreement or otherwise, join with the Company in making any changes or
corrections in this Warrant Agreement that they shall have been advised by
counsel (a) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (b) add to the obligations of the Company in this Warrant Agreement
further obligations thereafter to be observed by it, or surrender any right or
power reserved to or conferred upon the Company in this Warrant Agreement, or
(c) do not or will not adversely affect, alter or change the rights, privileges
or immunities of the holders of Warrant Certificates not provided for under this
Warrant Agreement; provided, however, that any term of this Warrant Agreement or
any Warrant
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Certificate may be changed, waived, discharged or terminated by an instrument in
writing signed by each party against which enforcement of such change, waiver,
discharge or termination is sought, or by which the same is to be performed or
observed.
Section 8 Other Matters.
(a) Successors and Assigns. All the covenants and provisions of this Warrant
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.
(b) Notices. Any notice or demand authorized by this Warrant Agreement to be
given or made by the Warrant Agent or by the holder of any Warrant Certificate
to or on the Company shall be sufficiently given or made if sent by first class
or registered mail, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) as follows:
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21
Hartsdale, NY 10530
Attention: Chief Financial Officer
Any notice or demand authorized by this Warrant Agreement to be given or made by
the holder of any Warrant Certificate or by the Company to or on the Warrant
Agent shall be sufficiently given or made if sent by first class or registered
mail, postage prepaid, addressed (until another address is filed in writing by
the Warrant Agent with the Company) as follows
American Stock Transfer Company
2 Broadway
New York, NY 10004
(c) Governing Law. This Warrant Agreement and the Warrant Certificates are being
delivered in the State of Delaware and shall be construed and enforced in
accordance with and governed by the laws of such State.
(d) No Benefits Conferred. Nothing in this Warrant Agreement expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company, the Warrant Agent, and the holders of the Warrant
Certificates, any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement herein; and all
covenants, conditions, stipulations, promises and agreements in this Warrant
Agreement contained shall be for the sole and exclusive benefit of the Company,
the Warrant Agent, their respective successors and the holders of the Warrant
Certificates.
(e) Headings. The descriptive headings used in this Warrant Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
12
<PAGE>
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties
hereto as of the day and year first above written.
Pipeline Data Inc.
By _________________________
Its ________________________
American Stock Transfer Company
By _______________________________________
Its _______________________________________
<PAGE>
EXHIBIT A
FORM OF CLASS A REDEEMABLE WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE MAY BE TRANSFERRED SEPARATELY FROM THE
COMMON STOCK CERTIFICATE WITH WHICH IT IS INITIALLY ISSUED
EXERCISABLE ON OR BEFORE, AND VOID AFTER, 5:00 P.M. NEW YORK CITY TIME,
MAY 28, 2004
No. W- _____ Certificate for __________ Warrants
WARRANT CUSIP :
WARRANTS TO PURCHASE COMMON STOCK OF PIPELINE DATA INC.
13
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that ___________________________________________ or assigns, is
the owner of the number of Warrants set forth above, each of which represents
the right to purchase from Pipeline Data Inc., a Delaware corporation (the
"Company"), at any time on or before 5:00 p.m., New York City time, May 28,
2004, upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement hereinafter referred to, one share (subject to adjustments
referred to below) of the Common Stock of the Company (such shares or other
securities or property purchasable upon exercise of the Warrants being herein
called the "Shares"), by surrendering this Warrant Certificate, with the
Purchase Form on the reverse side duly executed, at the principal office of
American Stock Transfer Company or its successor, as warrant agent (the "Warrant
Agent"), and by paying in full, in cash or by certified or official bank check
payable to the order of the Company, the purchase price of $5.00 per share.
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
Upon the surrender for transfer or exchange hereof, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to the order of the holder hereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face hereof.
The Warrant Certificates are issued only as registered Warrant Certificates.
Until this Warrant Certificate is transferred in the Warrant Register, the
Company and the Warrant Agent may treat the person in whose name this Warrant
Certificate is registered as the absolute owner hereof and of the Warrants
represented hereby for all purposes, notwithstanding any notice to the contrary.
This Warrant Certificate is issued under the Warrant Agreement dated as of
August __, 1999, between the Company and the Warrant Agent and is subject to the
terms and provisions contained in said Warrant Agreement, to all of which terms
and provisions the registered holder of this Warrant Certificate consents by
acceptance hereof. Copies of said Warrant Agreement are on file at the principal
office of the Warrant Agent in New York and may be obtained by writing to the
Warrant Agent.
The number of Shares receivable upon the exercise of the Warrants represented by
this Warrant Certificate and the purchase price per share are subject to
adjustment upon the happening of certain events specified in the Warrant
Agreement (which provisions are contained in Section 3 of the Warrant Agreement
and are hereby incorporated by reference).
No fractional Shares of the Company's Common Stock will be issued upon the
exercise of Warrants. As to any final fraction of a share which a holder of
Warrants exercised in the same transaction would otherwise be entitled to
purchase on such exercise, the Company shall pay a
14
<PAGE>
cash adjustment in lieu of any fractional Share determined as provided in the
Warrant Agreement.
The Warrants may be redeemed by the Company, in whole, at any time on or after
issuance, and on or before May 28, 2004, at a redemption price of $.01 per
Warrant, upon notice of such redemption as set forth below, provided that (a)
the last reported sale price of the Common Stock on a national securities
exchange, if the Common Stock shall be listed or admitted to unlisted trading
privileges on a national securities exchange, or (b) the closing bid price of
the Common Stock on the NASDAQ system, if the Common Stock is not so listed or
admitted to unlisted trading privileges, or (c) if the Common Stock trades over
the counter but is not reported in the NASDAQ National Market System or traded
on any national securities exchange, the average of the mean bid and asked
prices per share, as reported by The National Quotation Bureau, Inc. or other
generally accepted quotation service, has been at least 150% of the then the
effective Purchase Price on each of the 20 consecutive trading days ending on
the third day before notice of redemption is given. Notice of redemption shall
be mailed not less than thirty (30) days prior to the date fixed for redemption
to the holders of Warrants at their last registered addresses. If notice of
redemption shall have been given as provided in the Warrant Agreement and cash
sufficient for the redemption be deposited by the Company for that purpose, the
exercise rights of the Warrants identified for redemption shall expire at the
close of business on such date of redemption unless extended by the Company.
This Warrant Certificate shall not entitle the holder hereof to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, to
exercise any preemptive right, or to receive any notice of, or to attend
meetings of holders of Common Stock or any other proceedings of the Company.
This Warrant Certificate shall be void and the Warrants and any rights
represented hereby shall cease unless exercised on or before 5:00 P.M. New York
City time on May 28, 2004, unless extended by the Company.
This Warrant Certificate shall not be valid for any purpose until it shall have
been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the Company's duly authorized officers.
Dated: ______________ Pipeline Data Inc.
By _________________________________
Its ________________________________
COUNTERSIGNED AND REGISTERED:
American Stock Transfer Company
as Warrant Agent
By __________________________
Authorized Signatory
15
<PAGE>
[REVERSE OF WARRANT CERTIFICATE]
THE CERTIFICATE OF INCORPORATION OF THE COMPANY GRANTS TO THE BOARD OF DIRECTORS
THE POWER TO ISSUE ONE OR MORE SERIES OR CLASSES OF PREFERRED STOCK AND TO FIX
THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS RELATING TO SHARES OF EACH SUCH SERIES OR CLASS. THE COMPANY
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT
OF THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF SUBSEQUENT CLASSES OR SERIES.
THE HOLDER OF THIS WARRANT CERTIFICATE WILL BE ABLE TO EXERCISE THE WARRANTS
ONLY IF A CURRENT PROSPECTUS RELATING TO THE SHARES UNDERLYING THE WARRANTS IS
THEN IN EFFECT AND ONLY IF SUCH SHARES ARE QUALIFIED FOR SALE OR EXEMPT FROM
QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF THE STATES IN WHICH THE
HOLDER OF THIS WARRANT CERTIFICATE RESIDES. ALTHOUGH THE COMPANY WILL USE ITS
BEST EFFORTS TO MAINTAIN THE EFFECTIVENESS OF A CURRENT PROSPECTUS COVERING THE
SHARES UNDERLYING THE WARRANTS, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL
BE ABLE TO DO SO, OR TO GET ANY REQUIRED AMENDMENTS DECLARED EFFECTIVE BY
FEDERAL OR STATE AUTHORITIES IN A TIMELY MANNER. THE COMPANY WILL BE UNABLE TO
ISSUE SHARES TO THOSE PERSONS DESIRING TO EXERCISE THEIR WARRANTS IF A CURRENT
PROSPECTUS COVERING THE SHARES ISSUABLE UPON THE EXERCISE OF THE WARRANTS IS NOT
KEPT EFFECTIVE OR IF SUCH SHARES ARE NOT QUALIFIED NOR EXEMPT FROM QUALIFICATION
IN THE STATES IN WHICH THE HOLDERS OF THE WARRANTS RESIDE.
TO: Pipeline Data Inc.
c/o American Stock Transfer Company
Warrant Agent
PURCHASE FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
WARRANT CERTIFICATES)
16
<PAGE>
The undersigned hereby irrevocably elects to exercise _____________* of the
Warrants represented by the Warrant Certificate and to purchase for cash the
Shares issuable upon the exercise of said Warrants, and herewith makes payment
of $__________ therefor, and requests that certificates for such Shares shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
REGISTERED HOLDER OF CERTIFICATE
=============================
(Print Name)
- -----------------------------
(Address)
- -----------------------------
Dated: __________________ Signature(s) __________________
- ------------------
* Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial exercise, the portion thereof being
exercised), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
ASSIGNMENT FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO TRANSFER
WARRANT CERTIFICATES)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
___________** of the Warrants represented by this Warrant Certificate unto
- ---------------------------------
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
- -----------------------------------
(Print name)
- -----------------------------------------
(Address)
- -----------------------------------------
and does hereby irrevocably constitute and appoint ____________________________
Attorney to transfer this Warrant Certificate on the records of the Company with
full power of substitution in the premises.
17
<PAGE>
Dated: _________________ Signature(s) ___________________
- -------------------------
Signature(s)
Guaranteed: ________________________
** Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial assignment, the portion thereof being
assigned), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
NOTICE
The Signature(s) to the Purchase Form or the Assignment Form must correspond to
the name(s) as written upon the face of this Warrant Certificate in every
particular without alteration or enlargement or any change whatsoever.
-END-
18
Exhibit 3.7
CLASS B REDEEMABLE WARRANT AGREEMENT
DATE: _________, 1999
PARTIES: Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21
Hartsdale, NY 10530
American Stock Transfer Company
2 Broadway
New York, NY 10004
RECITALS:
Pipeline Data Inc., a Delaware corporation (the "Company"), proposes to issue
One Million Class B Redeemable Warrants ("Warrants") evidencing the right to
purchase an aggregate of up to one million authorized but previously unissued
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock").
The Company desires American Stock Transfer Company (the "Warrant Agent") to act
on behalf of the Company, and the Warrant Agent desires so to act, in connection
with the issuance, registration, transfer, exchange and exercise of the
Warrants.
AGREEMENT:
The Company and the Warrant Agent therefore agree as follows:
Section 1. Appointment of Warrant Agent; Issuance, Form and Execution of Warrant
Certificates.
(a) Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company, and the Warrant Agent hereby accepts the agency
established herein and agrees to perform its agency duties in accordance with
the terms and conditions of this Warrant Agreement.
(b) Warrant Certificates. The Company shall execute and deliver to the Warrant
Agent certificates which the Company has authorized to represent the Warrants
("Warrant
1
<PAGE>
Certificates"). The Warrant Certificates shall be substantially as set forth in
Exhibit A and may have such legends, summaries or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Warrant Agreement, or as may be
required to comply with any law or with any rule or regulation relating to
listing of the Warrants on the NASDAQ system, including the Nasdaq National
Market, or on any stock exchange or to conform to usage. The Warrant
Certificates shall be dated the date of their issuance.
(c) Execution of Warrant Certificates. The Warrant Certificates shall be
executed on behalf of the Company by a duly authorized officer of the Company,
either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. Any Warrant Certificate may be
signed on behalf of the Company by the person who at the actual date of the
signing of such Warrant Certificate shall have been the proper officer of the
Company, although at the date of issuance of such Warrant Certificate any such
person has ceased to be such officer of the Company.
Section 2. Exercise of Warrants.
(a) Exercise. Any or all of the Warrants represented by each Warrant Certificate
may be exercised by the holder thereof on or before 5:00 p.m., New York City
time, on May 28, 2004, unless extended by the Company, by surrender of the
Warrant Certificate with the Purchase Form, which is printed on the reverse
thereof (or a reasonable facsimile thereof), duly executed by such holder, to
the Warrant Agent at its principal office in New York accompanied by payment, in
cash or by certified or official bank check payable to the order of the Company,
in an amount equal to the product of the number of shares of Common Stock
issuable upon exercise of the Warrant represented by such Warrant Certificate,
as adjusted pursuant to the provisions of Section 3 hereof, multiplied by the
exercise price of $5.00, as adjusted pursuant to the provisions of Section 3
hereof (the applicable price as so adjusted from time to time being herein
called the "Purchase Price"), and such holder shall be entitled to receive such
number of fully paid and nonassessable shares of Common Stock, as so adjusted,
at the time of such exercise.
(b) Time of Exercise. Each exercise of Warrants shall be deemed to have been
effective immediately prior to the close of business on the business day on
which the Warrant Certificate relating to such Warrants shall have been
surrendered to the Warrant Agent as provided in Section 2(a), and at such time
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such exercise as provided in
Section 2(c) shall be deemed to have become the holder or holders of record
thereof.
(c) Issuance of Shares of Common Stock; No Fractional Shares. As soon as
practicable after the exercise of any Warrant, and in any event within ten (10)
days after receipt by the Company of the notice of exercise under Section 2(a),
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
2
<PAGE>
thereof or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, (a) a certificate or certificates for the number of
fully paid and nonassessable shares of Common Stock to which such holder shall
be entitled upon such exercise plus, in lieu of any fractional share to which
such holder would otherwise be entitled, an amount in cash equal to such
fraction multiplied by the then current value of a share of Common Stock, such
current value to be determined as follows: (i) if the Common Stock shall be
listed or admitted to unlisted trading privileges on any single national
securities exchange, then such current value shall be computed on the basis of
the last reported sale price of the Common Stock on such exchange on the last
business day prior to the date of the exercise of such Warrant upon which a sale
shall have been effected; or (ii) if the Common Stock shall not be so listed or
admitted to unlisted trading privileges and bid and asked prices therefor in the
over-the-counter market shall be reported by NASDAQ, including the Nasdaq
National Market, then such current value shall be computed on the basis of the
Last Reported Sale Valuation Method or, in the event such method is not then
used by NASDAQ, the average of the closing bid and asked prices on the last
business day prior to the date of the exercise of such Warrant as so reported;
or (iii) if the Common Stock shall be listed or admitted to unlisted trading
privileges on more than one national securities exchange or one or more national
securities exchanges and in the over-the-counter market, then such current value
shall, if different as a result of calculation under the applicable method(s)
described above in this Section, be deemed to be the higher number calculated in
connection therewith; (iv) if the shares of Common Stock are traded over the
counter but not on any national securities exchange and not in the NASDAQ
National Market System, the average of the mean bid and asked prices per share,
as reported by The National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, or (v) if the Common Stock shall not be so listed or
admitted to unlisted trading privileges and such bid and asked prices shall not
be so reported, then such current value shall be computed on the basis of the
book value of Common Stock as of the close of business on the last day of the
month immediately preceding the date upon which such Warrant was exercised, as
determined by the Company; and (b) in case such exercise includes only part of
the Warrants represented by any Warrant Certificate, a new Warrant Certificate
or Warrant Certificates of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of such Warrant Certificate minus the number of such shares designated by
the holder for such exercise as provided in Section 2(a). Warrants represented
by a properly assigned Warrant Certificate may be exercised by a new holder
without first having a new Warrant Certificate issued.
(d) Extension of Exercise Period; Change of Exercise Price. The Company may,
upon notice given to the Warrant Agent, and without the consent of the holders
of the Warrant Certificates, (a) reduce the Purchase Price during all or any
portion of the originally stated exercise period or (b) extend the period over
which the Warrants are exercisable beyond May 28, 2004, and increase or decrease
the Purchase Price for any period the Warrant exercise period is extended. In
the case of the extension of the exercise period or a change in the Purchase
Price, the Company must provide the Warrant Agent and the Warrantholders of
record notice of such extension of the exercise period, specifying, as the case
may be, the time to which such exercise period is extended, or specifying the
new Purchase Price and the periods for which such new Purchase Price is in
effect, a reasonable time prior to the date such extension or new Purchase Price
is to take effect, such reasonable time to be commercially reasonable and
consistent with applicable securities laws and regulations.
3
<PAGE>
Section 3. Antidilution Provisions.
(a)(i) Adjustment of Purchase Price. In the event that: (i) any dividends on any
class of stock of the Company payable in Common Stock or securities convertible
into Common Stock shall be paid by the Company; (ii) the Company shall subdivide
its then outstanding shares of Common Stock into a greater number of shares; or
(iii) the Company shall combine outstanding shares of Common Stock, by
reclassification or otherwise; then, in any such event, the Purchase Price in
effect immediately prior to such event shall (until adjusted again pursuant
hereto) be adjusted immediately after such event to a price (calculated to the
nearest full cent) determined by dividing (A) the number of shares of Common
Stock outstanding immediately prior to such event, multiplied by the then
existing Purchase Price, by (B) the total number of shares of Common Stock
outstanding immediately after such event (including in each case the maximum
number of shares of Common Stock issuable in respect of any securities
convertible into Common Stock), and the resulting quotient shall be the adjusted
Purchase Price per share.
(a)(ii) No adjustment of the Purchase Price shall be made if the amount of such
adjustments shall be less than $.05 per share, but in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment or adjustments so carried forward, shall
amount to not less than $.05 per share.
(b) Adjustment of Number of Shares Purchasable On Exercise of Warrants. Upon
each adjustment of the Purchase Price pursuant to Section 3(a) above, the
registered holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Purchase Price the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares specified in such Warrant (as adjusted as a result of all adjustments
in the Purchase Price in effect prior to such adjustment) by the Purchase Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Purchase Price.
(c) Notice as to Adjustment. Upon any adjustment of the Purchase Price and an
increase or decrease in the number of shares of Common Stock purchasable upon
the exercise of the Warrants, then, and in each such case, the Company shall
within ten (10) days after the effective date of such adjustment give written
notice thereof, by first class mail, postage prepaid, addressed to each
registered Warrantholder at the address of such Warrantholder as shown on the
books of the Company, which notice shall state the adjusted Purchase Price and
the increased or decreased number of shares purchasable upon the exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(d) Effect of Reorganization, Reclassification, Merger, Etc. If at any time
while any Warrant is outstanding there should be any capital reorganization or
reclassification of the capital stock of the Company (other than the issue of
any shares of Common Stock in subdivision of outstanding
4
<PAGE>
shares of Common Stock by reclassification or otherwise and other than a
combination of shares provided for in Section 3(a) hereof) or any consolidation
or merger of the Company with another corporation or any sale, conveyance, lease
or other transfer by the Company of all or substantially all of its property to
any other corporation, the holder of any Warrant shall, during the remainder of
the period such Warrant is exercisable, be entitled to receive, upon payment of
the Purchase Price, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the property of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, to which the Common Stock (and any other securities and property) of the
Company, deliverable upon the exercise of such Warrant, would have been entitled
upon such capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer if such Warrant
had been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation, merger, sale, conveyance,
lease or other transfer; and, in any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant Agreement with respect
to the rights and interests thereafter of the Warrantholders to the end that the
provisions set forth in this Warrant Agreement (including the adjustment of the
Purchase Price and the number of shares issuable upon the exercise of the
Warrants) shall thereafter be applicable, as near as may be reasonably
practicable, in relation to any shares or other property thereafter deliverable
upon the exercise of the Warrants as if the Warrants had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer and the
Warrantholders had carried out the terms of the exchange as provided for by such
capital reorganization, reclassification, consolidation or merger. The Company
shall not effect any such capital reorganization, consolidation, merger or
transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to the holder of each Warrant such shares
of stock, securities, cash or property as in accordance with the foregoing
provisions such holder shall be entitled to purchase.
(e) Prior Notice as to Certain Events. In case at any time:
the Company shall pay any dividend upon its Common Stock payable in stock or
make any distribution (other than cash dividends) to the holders of its Common
Stock; or
the Company shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other rights; or
there shall be any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with, or sale,
conveyance, lease or other transfer of all or substantially all of its assets
to, another corporation; or
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
5
<PAGE>
then in any one or more of such cases, the Company shall give prior written
notice, by first class mail, postage prepaid, addressed to each registered
Warrantholder at the address of such Warrantholder as shown on the books of the
Company, of the date on which (x) the books of the Company shall close or a
record shall be taken for such stock dividend, distribution or subscription
rights or (y) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up, as the case may be. Such written notice shall be given at least
twenty (20) days prior to the action in question and not less than twenty (20)
days prior to the record date or the date on which the Company's transfer books
are closed in respect thereto.
(f) Certain Obligations of the Company. The Company will not, by amendment of
its articles of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant Agreement or the Warrant Certificate, but will at all
times in good faith assist in the carrying out of all such terms. Without
limiting the generality of the foregoing, the Company (a) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of such stock upon the
exercise of all Warrants from time to time outstanding, and (b) will not (i)
transfer all or substantially all of its properties and assets to any other
person or entity, or (ii) consolidate with or merge into any other entity where
the Company is not the continuing or surviving entity, or (iii) permit any other
entity to consolidate with or merge into the Company where the Company is the
continuing or surviving entity but, in connection with such consolidation or
merger, the Common Stock then issuable upon the exercise of the Warrants shall
be changed into or exchanged for shares or other securities or property of any
other entity unless, in any such case, the other entity acquiring such
properties and assets, continuing or surviving after such consolidation or
merger or issuing or distributing such shares or other securities or property,
as the case may be, shall expressly assume in writing and be bound by all the
terms of this Warrant Agreement and the Warrant Certificates.
(g) Reservation and Listing of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the exercise
of the Warrants, all shares of Common Stock from time to time issuable upon such
exercise. All such shares shall be authorized and, when issued upon such
exercise, shall be validly issued, fully paid and nonassessable with no
liability on the part of the holder thereof. The Company, at its expense, will
list on the NASDAQ system, including the Nasdaq National Market, if applicable,
and on each national securities exchange on which any Common Stock may at any
time be listed, subject to official notice of issuance, and will maintain such
listing of, the shares of Common Stock from time to time issuable upon the
exercise of the Warrants.
6
<PAGE>
(h) Registration or Exemption for Common Stock. The Company will use its best
efforts (a) at all times the Warrants are exercisable to maintain an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering Common Stock issuable upon exercise of the Warrants, (b) from time to
time to amend or supplement the prospectus contained in such registration
statement to the extent necessary in order to comply with applicable law, (c) to
qualify for exemption from the registration requirements of the Act the Common
Stock issuable upon exercise of the Warrants, and (d) to maintain exemptions or
qualifications, in those jurisdictions in which the original registration
statement relating to the Warrants was initially qualified, to permit the
exercise of the Warrants and the issuance of the Common Stock pursuant to such
exercise. The Warrant Agent shall have no responsibility for the maintenance of
such exemptions or qualifications or for liabilities arising from the exercise
or attempted exercise of Warrants in jurisdictions where exemptions or
qualifications have not been maintained or are otherwise unavailable.
Section 4. Redemption of Warrants.
(a) Redemption Price. The Warrants may be redeemed at the option of the Company
in whole, at any time on or after issuance, and on or before May 28, 2004, upon
notice as set forth in Section 4(b), and at a redemption price equal to $.01 per
Warrant, provided that (a) the last reported sale price of the Common Stock on a
national securities exchange, if the Common Stock shall be listed or admitted to
unlisted trading privileges on a national securities exchange, or (b) the
closing bid price of the Common Stock on the NASDAQ system, if the Common Stock
is not so listed or admitted to unlisted trading privileges, or (c) if the
Common Stock trades over the counter but is not reported in the NASDAQ National
Market System or traded on any national securities exchange, the average of the
mean bid and asked prices per share, as reported by the National Quotation
Bureau, Inc. or other generally accepted quotation service, has been at least
150% of the then the effective Purchase Price on each of the 20 consecutive
trading days ending on the third day before notice of redemption is given.
(b) Notice of Redemption. In the case of any redemption of Warrants, the Company
or, at its request, the Warrant Agent in the name of and at the expense of the
Company, shall give notice of such redemption to the holders of the Warrants to
be redeemed as hereinafter provided in this Section 4(b). Notice of redemption
to the holders of Warrants shall be given by mailing by first-class mail a
notice of such redemption not less than 30 days prior to the date fixed for
redemption. Any notice which is given in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives the notice. In any case, failure duly to give such notice, or any
defect in such notice, to the holder of any Warrant Certificate shall not affect
the validity of the proceedings for the redemption of Warrants represented by
any other Warrant Certificate. Each such notice shall specify the date fixed for
redemption, the place of redemption and the redemption price of $.01 at which
each Warrant is to be redeemed, and shall state that payment of the redemption
price of the Warrants will be made on surrender of the Warrants at such place of
redemption, and that if not exercised by the close of business on the date fixed
for redemption, the exercise rights of the Warrants identified for redemption
shall expire unless extended by the Company. Such notice shall also state the
current Purchase Price and the date on which the right to exercise the Warrants
will expire unless extended by the Company.
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(c) Payment of Warrants on Redemption; Deposit of Redemption Price. If notice of
redemption shall have been given as provided in Section 4(b), the redemption
price of $.01 per Warrant shall, unless the Warrant is theretofore exercised
pursuant to the terms hereof, become due and payable on the date and at the
place stated in such notice. On and after such date of redemption, provided that
cash sufficient for the redemption thereof shall then be deposited by the
Company with the Warrant Agent for that purpose, the exercise rights of the
Warrants identified for redemption shall expire. On presentation and surrender
of Warrant Certificates at such place of payment specified in such notice, the
Warrants identified for redemption shall be paid and redeemed at the redemption
price of $.01 per Warrant. Prior to the date fixed for redemption, the Company
shall deposit with the Warrant Agent an amount of money sufficient to pay the
redemption price of all the Warrants identified for redemption. Any monies which
shall have been deposited with the Warrant Agent for redemption of Warrants and
which are not required for that purpose by reason of exercise of Warrants shall
be repaid to the Company upon delivery to the Warrant Agent of evidence
satisfactory to it of such exercise.
Section 5. Certain Other Provisions Relating to Rights of Holders of Warrant
Certificates.
(a) No Rights of Shareholders. The Warrant Certificates shall be issued in
registered form only. No Warrant Certificate shall entitle the holder thereof to
any of the rights of a holder of shares of Common Stock of the Company,
including, without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of holders of
Common Stock or any other proceedings of the Company.
(b) Loss, Theft, Destruction or Mutilation of Warrant Certificates. Upon receipt
by the Warrant Agent of evidence reasonably satisfactory to the Warrant Agent of
the loss, theft, destruction or mutilation of any Warrant Certificate, and (a)
in the case of any such loss, theft, or destruction, upon delivery to the
Warrant Agent of an indemnity bond in form and amount, and issued by a bonding
company, reasonably satisfactory to the Company, or (b) in the case of any such
mutilation, upon surrender to and cancellation by the Warrant Agent of such
Warrant Certificate, the Company at its expense will execute and cause the
Warrant Agent to countersign and deliver, in lieu thereof, a new Warrant
Certificate of like tenor.
(c) Transfer Agent; Cancellation of Warrant Certificates; Unexercised Warrants.
American Stock Transfer Company (and any successor), as transfer agent (the
"Transfer Agent"), is hereby irrevocably authorized and directed at all times to
reserve such number of authorized and unissued shares of Common Stock as shall
be sufficient to permit the exercise in full of all Warrants from time to time
outstanding. The Company will keep a copy of this Agreement on file with the
Transfer Agent. The Warrant Agent, and any successor thereto, is hereby
irrevocably authorized to requisition from time to time from the Transfer Agent
certificates for shares of Common Stock required for exercise of Warrants. The
Company will supply the Transfer Agent with duly executed certificates for
shares of Common Stock for such purpose and will make available any cash
required in settlement of fractional share interests. All Warrant Certificates
surrendered upon the exercise or redemption of Warrants shall be canceled by the
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<PAGE>
Warrant Agent and shall thereafter be delivered to the Company; such canceled
Warrant Certificates, with the Purchase Form on the reverse thereof duly filled
in and signed, shall constitute conclusive evidence as between the parties
hereto of the numbers of shares of Common Stock which shall have been issued
upon exercises of Warrants. Promptly after the last day on which the Warrants
are exercisable (set forth in Section 2(a) above), the Warrant Agent shall
certify to the Company the aggregate number of Warrants then outstanding and
unexercised. No shares of Common Stock shall be subject to reservation with
respect to Warrants not exercised prior to the time and date identified in
Section 2(a) above as the last time and date at which Warrants may be exercised.
Section 6. Transfer and Exchange of Warrant Certificates.
(a) Warrant Register; Transfer or Exchange of Warrant Certificates. The Warrant
Agent shall cause to be kept at the principal office of the Warrant Agent a
register (the "Warrant Register") in which, subject to such reasonable
regulations as the Company may prescribe, provisions shall be made for the
registration of transfers and exchanges of Warrant Certificates. Upon surrender
for transfer or exchange of any Warrant Certificates, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to or upon the order of the holder thereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of the Warrant Certificate so surrendered. Any
Warrant Certificate surrendered for transfer or exchange shall be cancelled by
the Warrant Agent and shall thereafter be delivered to the Company.
(b) Identity of Warrantholders. Until a Warrant Certificate is transferred in
the Warrant Register, the Company and the Warrant Agent may treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants represented thereby for all purposes, notwithstanding any
notice to the contrary, except that, if and when any Warrant Certificate is
properly assigned in blank, the Company and the Warrant Agent may (but shall not
be obligated to) treat the bearer thereof as the absolute owner of the Warrant
Certificate and of the Warrants represented thereby for all purposes,
notwithstanding any notice to the contrary.
Section 7. Concerning the Warrant Agent
(a) Taxes. The Company will, from time to time, promptly pay to the Warrant
Agent, or make provision satisfactory to the Warrant Agent for the payment of,
all taxes and charges that may be imposed by the United States or any State upon
the Company or the Warrant Agent upon the transfer or delivery of shares of
Common Stock upon the exercise of Warrants, but the Company shall not be
obligated to pay any tax imposed in connection with any transfer involved in the
delivery of a certificate for shares of Common Stock in any name other than that
of the registered holder of the Warrant Certificate surrendered in connection
with the purchase thereof.
9
<PAGE>
(b) Replacement of Warrant Agent in Certain Circumstances. The Warrant Agent may
resign its duties and be discharged from all further duties and liabilities
hereunder after giving thirty (30) days notice in writing to the Company, except
that such shorter notice may be given as the Company shall, in writing, accept
as sufficient. The Company may discharge the Warrant Agent at any time with or
without reason, effective upon thirty (30) days written notice to the Warrant
Agent or 10 such shorter period as the Warrant Agent shall, in writing, accept
as sufficient. If the office of Warrant Agent becomes vacant by resignation,
discharge, incapacity to act or otherwise, the Company shall appoint in writing
a new Warrant Agent, the principal office of which shall be in Delaware. If the
Company shall fail to make such appointment within a period of thirty (30) days
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the holder of a Warrant
Certificate, then the holder of any Warrant Certificate may apply to any court
of competent jurisdiction for the appointment of a new Warrant Agent. Any new
Warrant Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
a State thereof, of good standing, and having an office in Delaware, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by Federal or State authority. Any new Warrant Agent
appointed hereunder shall execute, acknowledge and deliver to the Company an
instrument accepting such appointment hereunder and thereupon such new Warrant
Agent without any further act or deed shall become vested with all the rights,
powers, duties and responsibilities of the Warrant Agent hereunder with like
effect as if it had been named as the Warrant Agent; but if for any reason it
becomes necessary or expedient to have the former Warrant Agent execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
and shall be legally and validly executed and delivered by the former Warrant
Agent. Not later than the effective date of any such appointment the Company
shall file notice thereof with the former Warrant Agent. The Company shall
promptly give notice of any such appointment to the holders of the Warrant
Certificates by mail to their addresses as shown in the Warrant Register.
Failure to file or give such notice, or any defect therein, shall not affect the
legality or validity of the appointment of the successor Warrant Agent.
(c) Successor Warrant Agent. Any company into which the Warrant Agent or any new
Warrant Agent may be merged or converted or with which it may be consolidated or
any company resulting from any merger, conversion or consolidation to which the
Warrant Agent or any new Warrant Agent shall be a party shall be the successor
Warrant Agent under this Warrant Agreement without any further act; provided
that if such company would not be eligible for appointment as a successor
Warrant Agent under the provisions of paragraph of this Section 7(b) the Company
shall forthwith appoint a new Warrant Agent in accordance with such provisions.
Any such successor Warrant Agent may adopt the prior countersignature of any
predecessor Warrant Agent and deliver Warrant Certificates countersigned and not
delivered by such predecessor Warrant Agent or may countersign Warrant
Certificates either in the name of any predecessor Warrant Agent or the name of
the successor Warrant Agent.
(d)(i) Remuneration of Warrant Agent. The Company will pay the Warrant Agent
reasonable
10
<PAGE>
remuneration for its services as Warrant Agent hereunder and will reimburse the
Warrant Agent upon demand for all expenditures that the Warrant Agent may
reasonably incur in the execution of its duties hereunder.
(d)(ii) Further Assurances. The Company will perform, exercise, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Warrant Agent for the carrying out or performing by the Warrant Agent of
the provisions of this Warrant Agreement.
(e)(i) Limitations on Liabilities of the Warrant Agent. The Warrant Agent may
consult with legal counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
of the Warrant Agent as to any action taken or omitted by it in good faith and
in accordance with such opinion. Whenever, in the performance of its duties
under this Warrant Agreement, the Warrant Agent shall deem it necessary or
desirable that any matter be proved or established, or that any instructions
with respect to the performance of its duties hereunder be given, by the Company
prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established, or such instructions may be given, by a
certificate or instrument signed by an officer of the Company and delivered to
the Warrant Agent; and such certificate or instrument shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon such
certificate or instrument; but in its discretion the Warrant Agent may in lieu
thereof accept other evidence of such matter or may require such further or
additional evidence as it may deem reasonable.
(ii) The Warrant Agent shall be liable hereunder only for its own negligence or
willful misconduct. The Warrant Agent shall act hereunder solely as agent, and
its duties shall be determined solely by the provisions hereof. The Company
agrees to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of this Warrant Agreement except
as a result of the Warrant Agent's negligence or willful misconduct.
(iii) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Warrant Agreement or in the
Warrant Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(iv) The Warrant Agent shall not be under any responsibility in respect to the
validity or execution of any Warrant Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Warrant Agreement or in any Warrant
Certificate; nor shall it be responsible for the making of any adjustment in the
Purchase Price, or number of shares issuable upon exercise of the Warrant
Certificates or responsible for the manner, method or amount of any such
adjustment or the facts
11
<PAGE>
that would require any such adjustment; nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock to be issued pursuant to this Warrant
Agreement or any Warrant Certificate or as to whether any shares of Common Stock
or other securities are or will be validly authorized and issued and fully paid
and nonassessable.
(v) Amendment and Modification. The Warrant Agent may, without the consent or
concurrence of the holders of the Warrant Certificates, by supplemental
agreement or otherwise, join with the Company in making any changes or
corrections in this Warrant Agreement that they shall have been advised by
counsel (a) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (b) add to the obligations of the Company in this Warrant Agreement
further obligations thereafter to be observed by it, or surrender any right or
power reserved to or conferred upon the Company in this Warrant Agreement, or
(c) do not or will not adversely affect, alter or change the rights, privileges
or immunities of the holders of Warrant Certificates not provided for under this
Warrant Agreement; provided, however, that any term of this Warrant Agreement or
any Warrant Certificate may be changed, waived, discharged or terminated by an
instrument in writing signed by each party against which enforcement of such
change, waiver, discharge or termination is sought, or by which the same is to
be performed or observed.
Section 8. Other Matters.
(a) Successors and Assigns. All the covenants and provisions of this Warrant
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.
(b) Notices. Any notice or demand authorized by this Warrant Agreement to be
given or made by the Warrant Agent or by the holder of any Warrant Certificate
to or on the Company shall be sufficiently given or made if sent by first class
or registered mail, postage prepaid, addressed (until another address is filed
in writing by the Company with the Warrant Agent) as follows:
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21
Hartsdale, NY 10530
Attention: Chief Financial Officer
Any notice or demand authorized by this Warrant Agreement to be given or made by
the holder of any Warrant Certificate or by the Company to or on the Warrant
Agent shall be sufficiently given or made if sent by first class or registered
mail, postage prepaid, addressed (until another address is filed in writing by
the Warrant Agent with the Company) as follows
American Stock Transfer Company
2 Broadway
New York, NY 10004
12
<PAGE>
(c) Governing Law. This Warrant Agreement and the Warrant Certificates are being
delivered in the State of Delaware and shall be construed and enforced in
accordance with and governed by the laws of such State.
(d) No Benefits Conferred. Nothing in this Warrant Agreement expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company, the Warrant Agent, and the holders of the Warrant
Certificates, any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement herein; and all
covenants, conditions, stipulations, promises and agreements in this Warrant
Agreement contained shall be for the sole and exclusive benefit of the Company,
the Warrant Agent, their respective successors and the holders of the Warrant
Certificates.
(e) Headings. The descriptive headings used in this Warrant Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties
hereto as of the day and year first above written.
Pipeline Data Inc.
By __________________________
Its ________________________
American Stock Transfer Company
By _______________________________________
Its _______________________________________
13
<PAGE>
EXHIBIT A
FORM OF CLASS B REDEEMABLE WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE MAY BE TRANSFERRED SEPARATELY FROM THE
COMMON STOCK CERTIFICATE WITH WHICH IT IS INITIALLY ISSUED
EXERCISABLE ON OR BEFORE, AND VOID AFTER, 5:00 P.M. NEW YORK CITY TIME,
MAY 28, 2004
No. W- _____ Certificate for __________ Warrants
WARRANT CUSIP :
WARRANTS TO PURCHASE COMMON STOCK OF PIPELINE DATA INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES that ___________________________________________ or assigns, is
the owner of the number of Warrants set forth above, each of which represents
the right to purchase from Pipeline Data Inc., a Delaware corporation (the
"Company"), at any time on or before 5:00 p.m., New York City time, May 28,
2004, upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement hereinafter referred to, one share (subject to adjustments
referred to below) of the Common Stock of the Company (such shares or other
securities or property purchasable upon exercise of the Warrants being herein
called the "Shares"), by surrendering this Warrant Certificate, with the
Purchase Form on the reverse side duly executed, at the principal office of
American Stock Transfer Company or its successor, as warrant agent (the "Warrant
Agent"), and by paying in full, in cash or by certified or official bank check
payable to the order of the Company, the purchase price of $5.00 per share.
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
Upon the surrender for transfer or exchange hereof, properly endorsed, to the
Warrant Agent, the Warrant Agent at the Company's expense will issue and deliver
to the order of the holder hereof a new Warrant Certificate or Warrant
Certificates of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for
14
<PAGE>
on the face hereof.
The Warrant Certificates are issued only as registered Warrant Certificates.
Until this Warrant Certificate is transferred in the Warrant Register, the
Company and the Warrant Agent may treat the person in whose name this Warrant
Certificate is registered as the absolute owner hereof and of the Warrants
represented hereby for all purposes, notwithstanding any notice to the contrary.
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<PAGE>
This Warrant Certificate is issued under the Warrant Agreement dated as of July
_____, 1999, between the Company and the Warrant Agent and is subject to the
terms and provisions contained in said Warrant Agreement, to all of which terms
and provisions the registered holder of this Warrant Certificate consents by
acceptance hereof. Copies of said Warrant Agreement are on file at the principal
office of the Warrant Agent in New York and may be obtained by writing to the
Warrant Agent.
The number of Shares receivable upon the exercise of the Warrants represented by
this Warrant Certificate and the purchase price per share are subject to
adjustment upon the happening of certain events specified in the Warrant
Agreement (which provisions are contained in Section 3 of the Warrant Agreement
and are hereby incorporated by reference).
No fractional Shares of the Company's Common Stock will be issued upon the
exercise of Warrants. As to any final fraction of a share which a holder of
Warrants exercised in the same transaction would otherwise be entitled to
purchase on such exercise, the Company shall pay a cash adjustment in lieu of
any fractional Share determined as provided in the Warrant Agreement.
The Warrants may be redeemed by the Company, in whole, at any time on or after
issuance, and on or before May 28, 2004, at a redemption price of $.01 per
Warrant, upon notice of such redemption as set forth below, provided that (a)
the last reported sale price of the Common Stock on a national securities
exchange, if the Common Stock shall be listed or admitted to unlisted trading
privileges on a national securities exchange, or (b) the closing bid price of
the Common Stock on the NASDAQ system, if the Common Stock is not so listed or
admitted to unlisted trading privileges, or (c) if the Common Stock trades over
the counter but is not reported in the NASDAQ National Market System or traded
on any national securities exchange, the average of the mean bid and asked
prices per share, as reported by the National Quotation Bureau, Inc. or other
generally accepted quotation service,has been at least 150% of the then the
effective Purchase Price on each of the 20 consecutive trading days ending on
the third day before notice of redemption is given. Notice of redemption shall
be mailed not less than thirty (30) days prior to the date fixed for redemption
to the holders of Warrants at their last registered addresses. If notice of
redemption shall have been given as provided in the Warrant Agreement and cash
sufficient for the redemption be deposited by the Company for that purpose, the
exercise rights of the Warrants identified for redemption shall expire at the
close of business on such date of redemption unless extended by the Company.
This Warrant Certificate shall not entitle the holder hereof to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, to
exercise any preemptive right, or to receive any notice of, or to attend
meetings of holders of Common Stock or any other proceedings of the Company.
This Warrant Certificate shall be void and the Warrants and any rights
represented hereby shall cease unless exercised on or before 5:00 P.M. New York
City time on _________, 2004, unless extended by the Company.
This Warrant Certificate shall not be valid for any purpose until it shall have
been countersigned by the Warrant Agent.
16
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WITNESS the facsimile signatures of the Company's duly authorized officers.
Dated: ______________ Pipeline Data Inc.
By _________________________
Its ________________________
COUNTERSIGNED AND REGISTERED:
American Stock Transfer Company
as Warrant Agent
By __________________________
Authorized Signatory
[REVERSE OF WARRANT CERTIFICATE]
THE CERTIFICATE OF INCORPORATION OF THE COMPANY GRANTS TO THE BOARD OF DIRECTORS
THE POWER TO ISSUE ONE OR MORE SERIES OR CLASSES OF PREFERRED STOCK AND TO FIX
THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS RELATING TO SHARES OF EACH SUCH SERIES OR CLASS. THE COMPANY
WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT
OF THE DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS,
AND RESTRICTIONS OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
DESIGNATION AND POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF SUBSEQUENT CLASSES OR SERIES.
THE HOLDER OF THIS WARRANT CERTIFICATE WILL BE ABLE TO EXERCISE THE WARRANTS
ONLY IF A CURRENT PROSPECTUS RELATING TO THE SHARES UNDERLYING THE WARRANTS IS
THEN IN EFFECT AND ONLY IF SUCH SHARES ARE QUALIFIED FOR SALE OR EXEMPT FROM
QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF THE STATES IN WHICH THE
HOLDER OF THIS WARRANT CERTIFICATE RESIDES. ALTHOUGH THE COMPANY WILL USE ITS
BEST EFFORTS TO MAINTAIN THE EFFECTIVENESS OF A CURRENT PROSPECTUS COVERING THE
SHARES UNDERLYING THE WARRANTS, THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL
BE ABLE TO DO SO, OR TO GET ANY REQUIRED AMENDMENTS DECLARED EFFECTIVE BY
FEDERAL OR STATE AUTHORITIES IN A TIMELY MANNER. THE COMPANY WILL BE UNABLE TO
ISSUE SHARES TO THOSE PERSONS DESIRING TO EXERCISE THEIR WARRANTS IF A
17
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CURRENT PROSPECTUS COVERING THE SHARES ISSUABLE UPON THE EXERCISE OF THE
WARRANTS IS NOT KEPT EFFECTIVE OR IF SUCH SHARES ARE NOT QUALIFIED NOR EXEMPT
FROM QUALIFICATION IN THE STATES IN WHICH THE HOLDERS OF THE WARRANTS RESIDE.
TO: Pipeline Data Inc.
c/o American Stock Transfer Company
Warrant Agent
PURCHASE FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
WARRANT CERTIFICATES)
The undersigned hereby irrevocably elects to exercise _____________* of the
Warrants represented by the Warrant Certificate and to purchase for cash the
Shares issuable upon the exercise of said Warrants, and herewith makes payment
of $__________ therefor, and requests that certificates for such Shares shall be
issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
REGISTERED HOLDER OF CERTIFICATE
=============================
(Print Name)
- -----------------------------
(Address)
- -----------------------------
Dated: __________________ Signature(s) __________________
- ------------------
* Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial exercise, the portion thereof being
exercised), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
ASSIGNMENT FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO TRANSFER
WARRANT CERTIFICATES)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
___________** of the Warrants represented by this Warrant Certificate unto
- ---------------------------------
PLEASE INSERT SOCIAL SECURITY
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OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
- -----------------------------------
(Print name)
- -----------------------------------------
(Address)
- -----------------------------------------
and does hereby irrevocably constitute and appoint ____________________________
Attorney to transfer this Warrant Certificate on the records of the Company with
full power of substitution in the premises.
Dated: _________________ Signature(s) _____________________
- -------------------------
Signature(s)
Guaranteed: ________________________
** Insert here the number of Warrants evidenced on the face of this Warrant
Certificate (or, in the case of a partial assignment, the portion thereof being
assigned), in either case without making any adjustment for additional Common
Stock or any other securities or property or cash which, pursuant to the
adjustment provisions referred to in this Warrant Certificate, may be
deliverable upon exercise.
NOTICE
The Signature(s) to the Purchase Form or the Assignment Form must correspond to
the name(s) as written upon the face of this Warrant Certificate in every
particular without alteration or enlargement or any change whatsoever.
-END-
19
Exhibit 5
_____ __, 1999
Pipeline Data Inc.
250 East Hartsdale Avenue
Hartsdale, New York 10530
Re: Pipeline Data Inc. - Registration Statement on Form SB-2
(File No. 333-79831) (the "Registration Statement")
---------------------------------------------------
Ladies and Gentlemen:
We are are acting as counsel for Pipeline Data Inc., a Delaware corporation (the
"Company"), in connection with (i) the proposed issuance and sale by the Company
of 1,000,000 shares of the Company's Common Stock, par value $.001 per share,
1,000,000 of the Company's Class A Redeemable Warrants and 1,000,000 of the
Company's Class B Redeemable Warrants, and (ii) the proposed sale by certain of
the Company's shareholders of 1,250,000 shares of such Common Stock, all
pursuant to the Registration Statement. The shares of such Common Stock to be
sold by the Company pursuant to the Registration Statement, including the shares
of such Common Stock issuable upon exercise of the Company's Class A Warrants
and Class B Warrants, are referred to in this opinion as the "Company Shares."
The shares of such Common Stock to be sold by such shareholders are referred to
in this opinion as the "Shareholder Shares."
We have examined such corporate records, certificates and other documents as we
have considered necessary for the purposes of this opinion. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to the original documents
of all documents submitted to us as copies and the authenticity of the originals
of such latter documents. As to any facts material to our opinion, we have, when
relevant facts were not independently established, relied upon the records,
certificates and documents referred to above.
Based on the foregoing, we are of the opinion that, (i) upon issuance and
delivery as described in the Registration Statement, the Shares will be duly
authorized, validly issued, fully paid and nonassessable and (ii) the
Shareholder Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
Our opinion is limited in all cases to matters arising under the Delaware
General Corporation Law and the law of the State of New York.
Very truly yours,
/s/ Kaplan, Gottbetter & Levenson LLP
- -------------------------------------
CONSULTING AGREEMENT
This Agreement is made effective as of May 20, 1999, by and between Jack
Rubinstein of Pipeline Data, Inc., 250 East Hartsdale Avenue, Suite 21,
Hartsdale, NY 10530, and Federico Brown, Moneysearch.com, 310 Golden Oaks Drive,
Suite 150, Georgetown, Texas 78628-3322.
In this Agreement, the party who is contracting to receive services shall be
referred to as "Pipeline Data, Inc.," and the party who will be providing the
services shall be referred to as "Moneysearch.com."
Moneysearch.com has a background in developing online systems for electronic
trading/commerce, searchable membership databases, web-based conferencing
systems, and other dynamic Internet-based systems needed by our clients. To add
functionality to your web site beyond standard static HTML, Moneysearch.com
offers services to create dynamic, scripted portions of web sites both directly
to clients and as a technical subcontractor to traditional web developers and is
willing to provide services to Pipeline Data, Inc. based on this background.
Pipeline Data, Inc. desires to have services provided by Moneysearch.com.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on May 28, 1999, Moneysearch.com
will provide the following services, (collectively the "Services"): 1. Assist in
the negotiation process of securing CO-branding data for the Pipeline Data web
site. 2. Development of home page template consistent with current Pipeline
Data, Inc. corporate image.
2. PAYMENT. Pipeline Data, Inc. will pay a fee to Moneysearch.com of
$12,000.00 for the Services. Upon termination of this Agreement, payments under
this paragraph shall cease; provided, however, that Moneysearch.com shall be
entitled to payments for periods or partial periods that occurred prior to the
date of termination and for which Moneysearch.com has not yet been paid. Payment
is 1/2 before starting project and the balance due upon completion of outlined
objectives.
3. NEW PROJECT APPROVAL. Moneysearch.com and Pipeline Data, Inc.
recognize that Moneysearch.com's Services will include working on various
projects for Pipeline Data, Inc. Moneysearch.com shall obtain the approval of
Pipeline Data, Inc. prior to the commencement of a new project.
4. TERM/TERMINATION. This Agreement may be terminated by either party
upon 15 days written notice to the other party.
5. RELATIONSHIP OF PARTIES. It is understood by the parties that
Moneysearch.com is an independent contractor with respect to Pipeline Data,
Inc., and not an employee of Pipeline Data, Inc. Pipeline Data, Inc. will not
provide fringe benefits, including health insurance benefits, paid vacation, or
any other employee benefit, for the benefit of Moneysearch.com.
6. INJURIES. Moneysearch.com acknowledges Moneysearch.com's obligation
to obtain appropriate insurance coverage for the benefit of Moneysearch.com (and
Moneysearch.com's employees, if any). Moneysearch.com waives any rights to
recovery from Pipeline Data, Inc. for any injuries that Moneysearch.com (and/or
Moneysearch.com's employees) may sustain while performing services under this
Agreement and that are a result of the negligence of Moneysearch.com or
Moneysearch.com's employees.
7. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage prepaid, addressed as follows:
Company:
Jack Rubinstein
President
Pipeline Data, Inc.
250 East Hartsdale Avenue
Suite 21
Hartsdale, New York 10530
Consultant:
Federico Brown
Technology Officer
Moneysearch.com
310 Golden Oaks Drive, Suite 150
Georgetown, Texas 78628-3322
Such address may be changed from time to time by either party by providing
written notice to the other in the manner set forth above.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
9. AMENDMENT. This Agreement may be modified or amended if the
amendment is made in writing and is signed by both parties.
10. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such provision
it would become valid and enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
11. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or limitation
of that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
12. APPLICABLE LAW. This Agreement shall be governed by the laws of the
State of Texas.
Jack Rubinstein
By: /s/ Jack Rubinstein
-------------------
Jack Rubinstein
President
Federico Brown
By: /s/ Federico Brown
-------------------
Federico Brown
Technology Officer
Exhibit 10.2
MANAGEMENT AGREEMENT
THIS AGREEMENT is made the ___ day of ________, 1999, between
Unifund America, Inc. , a New York corporation ("Unifund") and Pipeline
Data Inc., a Delaware corporation having its office at 575 Madison
Avenue, New York, New York (the "Company").
RECITALS:
For a number of years, Unifund has been actively engaged in a number of
corporate endeavors which have included various capital market transactions and
rendering advice and counsel to companies seeking to access the capital markets.
Pipeline Data Inc. is a development stage company that intends to commence a
publicly registered offering of its securities and which will intend to use
these proceeds to develop a healthcare-oriented website designed to aid in the
creation of a valuable marketing database. Unifund is willing to serve as a
management consultant on the terms set forth in this Agreement.
AGREEMENT:
The parties, therefore, agree as follows:
1. The Company hereby retains Unifund as a managing consultant to the
Company for a period of 60 months commencing on or about the time when
Pipeline's registration statement with the SEC for the offering of its common
stock, and certain warrants to purchase such common stock is declared effective.
This is expected to occur in August or September of 1999. As managing
consultant, Unifund shall assist the Company in (i) procuring financing, (ii)
evaluating strategic acquisitions, mergers, joint ventures, or other forms of
business combination,
<PAGE>
and (iii) exploring other capital markets strategies which may from time to time
present themselves. Unifund as a managing consultant hereunder shall have the
status of an independent contractor, and not an employee of the Company. The
parties recognize that Unifund may be engaged in other business activities
during the term of this Agreement and does not in any event intend to devote its
full time to performance of services hereunder. To the extent that Unifund and
the Company agree that travel is appropriate in connection with Unifund's
consulting services, the Company shall reimburse Unifund for reasonable travel
and other expenses incurred in the performance of its duties as managing
consultant. The managing consultant shall not be responsible for (i) filing tax
returns, (ii) making withholding payments, (iii) ordinary operations of
Pipeline, on a day to day basis, except for those which have been specifically
agreed to in writing by the parties hereto.
2. At the request of Unifund, the Company shall make available to it
such records with respect to its operations and customers as it may reasonably
request, including database usage records, inventory records, invoices,
statements, check books, financial records and reports and correspondence with
customers and suppliers.
3. As compensation for the consulting services to be performed
hereunder, the Company shall pay to Unifund a monthly consulting fee in the
amount of Fifteen Hundred Dollars ($1500) per month. Such compensation shall be
paid in semimonthly installments on the 15th and last day of each month, or on
the next succeeding business day if such dates are not business days.
4. During the term of this Agreement, Unifund shall not without the
express written consent of the Company, engage in, conduct advise or consult
with, and shall not own any direct or indirect interest in, any proprietorship,
partnership, corporation or other business organization
<PAGE>
engaged in the business of operating a healthcare-oriented website.
5. Unifund may hypothecate, pledge, or otherwise dispose of its right
to receive payments under this Agreement, but may not without the prior written
consent of the Company, delegate any duties of performance hereunder. In the
event of any attempt at assignment or transfer, the Company shall have no
liability to make any payments other than as provided in this Agreement to
Unifund.
6. The Company shall not merge, consolidate, or otherwise reorganize
with any other corporation or other business organization unless and until such
other corporation expressly assumes the duties and obligations of the Company
herein set forth.
7. No modification, amendment, addition to, or termination of this
Agreement, nor waiver of any of its provisions, shall be valid or enforceable
unless in writing and signed by both of the parties.
8. This Agreement shall be binding on the parties, their distributees,
legal representatives, successors, and assigns.
9. All notices under this Agreement shall be in writing and shall be
served by personal service, or registered mail, return receipt requested. Notice
by mail shall be addressed to each party at his address as set forth above.
Either party may notify the other party of a different address to which notices
shall be sent.
10. This Agreement shall be governed by the laws of the State of New
York.
Pipeline Data Inc.
BY:______________________________
President
Unifund America, Inc.
BY:_______________________
Title:
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.
/s/ Thomas P. Monahan
- ---------------------
Thomas P. Monahan
August 20, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the six month period ended June 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 22,718
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,718
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,718
<CURRENT-LIABILITIES> 15,000
<BONDS> 0
0
0
<COMMON> 1,250
<OTHER-SE> (6,468)
<TOTAL-LIABILITY-AND-EQUITY> 7,718
<SALES> 52,500
<TOTAL-REVENUES> 52,500
<CGS> 0
<TOTAL-COSTS> 350,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,422
<INCOME-PRETAX> (304,828)
<INCOME-TAX> 0
<INCOME-CONTINUING> (304,828)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (304,828)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
</TABLE>
