As filed with the Securities and Exchange Commission on February 4, 2000
Registration No. 333-79831
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 5
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>
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 to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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
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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). . . . . . . . . . . . . . . . . . . . . 3,275,000 $0.50(1) $1,637,500(1) $456.00(1)
Class A Warrants . . . . . . . . . . . . . . . . . . . . 1,000,000 $0.10 $100,000 $27.80
Class B Warrants . . . . . . . . . . . . . . . . . . . . 1,000,000 . $0.10 $100,000 $27.80
Common Stock Underlying Class A Warrants(2) . . . . . . .1,000,000 $3.00 $3,000,000 $834.00
Common Stock Underlying Class B Warrants(2) . . . . . . .1,000,000 $5.00 $5,000,000 $1,390.00
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . .7,275,000 $9,887,500 $2,735.60
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(1) Estimated solely for purposes of calculating the registration fee and
includes shares being sold by selling stockholders.
(2) Includes 2,275,000 shares being registered for resale by the selling
stockholders on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act. 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. These additional shares are not issuable by reason of
the anti-dilution provisions of other derivative securities we may issue in
the future.
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The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall become effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to Section
8(a), may determine.
<PAGE>
Information contained herein 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 nor 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.
[GRAPHIC OMITTED] Initial Public Offering
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED: FEBRUARY 3, 2000
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
Minimum offering: 200,000 Units @ $.60 per unit, consisting of one share of
common stock and either one 3-year redeemable class A warrant or one 5-year
redeemable class B warrant
Maximum offering: 1,000,000 shares of common stock @ $.50 per share, 1,000,000
class A warrants @ $.10 per warrant and 1,000,000 class B warrants @ $.10 per
warrant
Underwriting
Discounts & Proceeds to
Price to Public Commissions Company
Per Unit $.60 -0- $.60
Total Minimum $120,000 -0- $120,000
Total Maximum $700,000 -0- $700,000
This offering involves a significant degree of risk and prospective investors
need to read the section called "Risk Factors" which begins on page 6.
We have also registered the sale of 2,275,000 shares of our common stock owned
by share holders. The price of these shares are undetermined at this time.
However, the selling shareholders have agreed not to resell their common stock
at prices below our initial offer ing price. Any proceeds and profits from their
sale will go to these shareholders and not to us.
We must sell a minimum of 200,000 units within 12 months from the effective date
of this prospectus. Amounts received will be escrowed and promptly returned,
without inter est, if this threshold is not reached.
These securities will be offered in a self under written offering by our
officers and directors. We can give you no assurance that we will be able to
find purchasers for them.
Neither the Securities and Exchange Com mission, nor any state securities
commission, has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any repre sentation to the contrary is
a criminal offense.
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Table of Contents
Page
Prospectus Summary................................................... 5
The Company....................................................... 5
The Offering...................................................... 5
Registration of Additional Shares
Offered By Selling Shareholders ............................... 6
Offices of The Company............................................ 6
Risk Factors......................................................... 7
Forward Looking Statements........................................... 9
Business of The Company.............................................. 9
Management's Discussion And Analysis of
Financial Condition And Results of Operations ..................... 32
Use of Offering Proceeds............................................. 35
Capitalization ...................................................... 38
Dilution............................................................. 38
Dividend Policy ..................................................... 39
Plan of Distribution................................................. 40
Legal Proceedings.................................................... 41
Directors, Executive Officers,
Promoters And Control Persons................................... 41
Security Ownership of
Certain Beneficial Owners
and Management..................................................... 44
Description of Securities............................................ 45
Interest of Named Experts And Counsel................................ 48
Selling Shareholders................................................. 48
Certain Provisions of Our
Articles and By-Laws and
Disclosure of Commission Position On
Indemnification For Securities Act Liabilities..................... 48
Description of Property.............................................. 49
Certain Relationships And
Related Transactions............................................... 49
Market For Common Equity
and Related Stockholder Matters.................................... 50
Executive Compensation............................................... 51
Financial Statements................................................. 51
Changes in And Disagreements With
Accountants on Accounting And
Financial Disclosure............................................... 51
Where Can Investors Find Additional Information...................... 51
Financial Statements of the Company F-1 - F-11
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Explanatory Note: This Registration Statement contains two forms of prospectus.
One will be used in connection with our offering of our Common Stock, Class A
Warrants, Class B War rants and the other will be used in connection with an
offering of shares of our common stock which are currently held by certain
selling shareholders pursuant to a Lockup Agreement. The prospectus will be
identical except for (i) the front cover page of the prospectus; (ii) an alter
nate "Table of Contents" page; (iii) an alternate description of the offering to
be inserted in the "Prospectus Summary" section; and (iv) an alternative
"Selling Shareholders" section.
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Prospectus Summary
The Company
Pipeline Data Inc., a Delaware corporation, was incorporated in 1997, and began
its business opera tions in 1998. Under our corporate charter documents, we may
engage in any activity for which corpo rations 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 launched the initial beta-version of
our website (at http:/www.healthpipeline.com) in August 1999. This beta version
contains the initial collection of an on-line library of current healthcare,
pharmaceutical and biotechnology information. Through our beta site, we have
received very limited revenue from sales of advertisements. We plan to continue
the de velopment of our company through various phases.
We intend to become an on-line direct marketing agent designed to assist the
pharmaceutical, biotech nology 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.
The Offering
o Prior to this offering, there are 2,275,000 shares of common stock
outstanding.
o Each unit sold pursuant to the minimum offering consists of one share of
our common stock and either one class A redeemable warrant or one class B
redeemable warrant. The common stock and warrants underlying the units may
be transferred separately upon issuance.
o Assuming the minimum number of 200,000 units are sold, there shall be
2,475,000 shares of common stock outstanding.
o Assuming the maximum number of 1,000,000 shares of common stock are sold,
there shall be 3,275,000 shares of common stock outstanding.
o Assuming the maximum number of 1,000,000 shares of common stock are sold
and all of the 1,000,000 class A warrants and 1,000,000 class B warrants
are sold and exercised, there shall be 5,000,000 shares of common stock
outstanding.
o There shall be net proceeds to our company of $120,000, assuming the
minimum of 200,000 units is sold.
o There shall be net proceeds to our company of $700,000, assuming the
maximum of 1,000,000 shares of common stock, 1,000,000 class A warrants and
1,000,000 class B warrants is sold.
o There shall be net proceeds to our company of $8,700,000, assuming the
maximum of 1,000,000 shares of common stock is sold and the maximum of
1,000,000 class A warrants and 1,000,000 class B warrants is sold and
exercised.
o We intend to use our proceeds for the following purposes:
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1. To conduct market research and commence market strategy.
2. To research the development of a scalable web-enabled platform.
3. To establish strategic alliances and recruit management team.
4. To develop a highly customized feature to our website to enable
profile generation.
5. To establish a financial reporting system.
6. For general corporate and working capital purposes including to fund
the capital requirements associated with our growth, including,
without limitation, the retention and training of personnel, the
establishment of a secondary trading market for our securities and an
investor relations program, and to acquire or invest in complementary
businesses, products or technologies.
Registration of Additional Shares Offered by Selling Shareholders
We will be registering, concurrently with the offering, the sale of 2,275,000
shares of our 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 shareholders and not to us. The selling
shareholders may resell their securities at prices below their initial offering
price.
Offices of the Company
250 East Hartsdale Avenue, Suite 21, Hartsdale, NY 10530,
Telephone 914-725-7028
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Risk Factors
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.
We have had losses of $309,448 since inception and expect continued
losses in the foreseeable future.
We may depend upon suppliers with whom we have no contracts, who could
compete against us and who could increase the prices for their goods and
services.
In order to provide Internet access and other on-line services to our
customers, we intend to lease long-distance fiber optic telecommunications lines
from national telecommunications services providers. We depend upon these
providers substantially.
Certain 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 anticipate relying 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: compete
directly with us; enter into exclusive arrangements with our competitors; or
stop selling their products or components to us at commercially reasonable
prices, or at all.
Our Internet access providers and other suppliers may refuse to enter
into written contracts with us. Without a contract, we have no assurance that
the fees charged to us by these suppliers will remain constant.
We will depend on content providers to provide high quality content
from reliable sources; failure by these providers could result in customer
dissatisfaction and loss of business.
We anticipate relying on independent content providers for much 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
anticipate depending on the abilities of our content providers to deliver high
quality content from reliable sources, and to continually upgrade their content
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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 adverse effect on our business, financial
condition and operating results.
There may be substantial sales of our common stock after the expiration
of the one year "Lockup" Period which may decrease the market price of our
common stock.
Sales of substantial amounts of our common stock in the public market
following this offering, or the perception that such sales will occur, could
have a material adverse effect on the market price of the common stock.. After
the completion of this offering and prior to any warrant exercise, 3,275,000
shares of our common stock will be outstanding. Approximately 67.9% of these
shares or 2,225,000 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 our securities 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" purchaser's account under certain standards, and
deliver written statements to the customer with information specified in the
rules. 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.
We rely on our senior management to direct our business endeavors. We
anticipate the need to attract highly qualified personnel in areas of
management, technical support, marketing and customer support.
The loss of the services of Jack Rubinstein, President, R. Scott
Barter, Director, and/or the failure to recruit and retain qualified managers
and technicians may adversely affect our performance. 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
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condition and operating results could be materially and adversely affected.
During the next 12 months, we anticipate hiring or contracting with a market
research person to conduct a market study to determine the largest recruiters of
clinical trial participants and their recruitment methods. We also anticipate
hiring or contracting with a technical consultant to research and develop the
web-enabled operational platform to best facilitate a scalable Internet
application that will best suit our needs. Payment for a portion of these
services will be made out of the minimum proceeds from this offering.
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
We are a Delaware, development stage, corporation that was incorporated in
June 1997. During 1998, we made progress in researching and developing an online
system to easily access and deliver requested information from members of the
healthcare, pharmaceutical and biotechnology industries to subscribers to our
site. This research 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.
We launched the initial beta-version of our website (at
http:/www.healthpipeline.com) in August 1999. This beta version contains the
initial collection of an on-line library of current healthcare, pharmaceutical
and biotechnology information. Through our beta site, we have received very
limited revenue from sales of advertisements. We plan to continue the
development of our company through various phases.
Our next phase of development will commence upon receipt of the minimum
proceeds of this offering, although we will require funds in excess of the
minimum to complete this phase. This phase contemplates the further research and
development of our site's operating infrastructure and the refinement of our
marketing strategy. After completion of this phase of development, we anticipate
the initial test phase of our on-line direct marketing service. This test phase
is planned for the 2nd quarter of 2000. Launch of an early release phase should
be completed in the second half of 2000 with a full commercial launch to follow
thereafter. We anticipate that our service will provide a comprehensive database
of individual subscribers receiving medical data and clinical trial references
spanning over fifty major disease (and condition) categories.
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Our Business
Pipeline Data intends to become an on-line direct marketing agent and
referral site designed to assist the healthcare, pharmaceutical and
biotechnology 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. We are also interested in
developing business concepts in all areas of health and science. We actively
engage in discussions with business persons and professionals in the fields of
medicine, biology, chemistry, technology and the other sciences in the hopes of
developing a successful, cutting edge business to maximize the value of our
company as well as our shareholders' investment in us.
Our website (at http://www.healthpipeline.com) is being designed to
target healthcare consumers, their families, friends and associates, as well as
healthcare professionals. Upon commercialization of our website, we intend to
provide a range of online services, including providing access to:
o a library of current information on various aspects of healthcare,
pharmaceuticals and biotechnology;
o personalized information about specific health conditions targeted
according to the medical profiles of our individual subscribers;
o content-specific on-line communities that allow consumers to
participate in real-time discussions and support networks via the web;
o Information on and the ability to participate in clinical trials; and
o Health related books and other products.
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 a unique, scalable system for
o creating and maintaining user profiles and, based upon these profiles,
delivering targeted news and announcements via e-mail, and
o simultaneously cultivating a dedicated subscriber base, which we can
utilize for marketing and revenue generating purposes.
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 our website will be free, however we may
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offer premium services for a fee. The creation of premium service and the
assessment of any associated fees will be based upon the market place and the
marketing practices of competitors.
While developing our website, we also will be refining our marketing
strategy. We believe a significant business opportunity exists in the on-line
recruitment of volunteers to participate in clinical trials. We believe that our
site can provide us with the ability to recruit potential participants for
clinical trials on behalf of pharmaceutical and biotechnology companies,
universities, teaching hospitals, contract research organizations and site
management organizations. We intend to conduct a market study on the largest
recruiters of clinical trial participants and their recruitment methods in the
hopes of tapping this potential revenue producing source upon the
commercialization of our site. We do not anticipate any revenue generation until
the commercial launch of our website. In the meantime, we will continue to study
the best ways to tap sources with the highest revenue generation potential. We
anticipate generating future revenue opportunities from multiple sources. We
anticipate, that our primary sources of revenues will include:
o lead generation fees for recruiting clinical trial participants;
o lead generation fees charged to pharmaceutical and healthcare
marketers; and;
o on-line sales of books and medical supplies ("e-commerce");
We anticipate that secondary sources of revenue will include:
o sales of website advertising and commercial sponsorships,
o franchising content;
o off-line newsletter subscriptions; and
o consulting services.
Business Description
Through our Internet website, we intend to deliver a branded,
integrated, web- based solution for the healthcare information needs of
consumers. We envision our website, located at http://www.healthpipeline.com, to
be a single point of access to electronic data interchange services, enhanced
communications services, branded healthcare content and other relevant web-based
offerings. The website will provide premium, branded content to assist consumers
in making informed healthcare decisions, personalized information about specific
health conditions targeted according to the medical profiles of individual
consumers, and content-specific on-line communities that allow consumers to
participate in real-time discussions and support networks via the web.
We intend to be primarily a "direct-to-consumer" (DTC) marketing
channel with a "virtual medical and health information library" on the Internet
and world wide web, that will 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 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
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looking for detailed information about particular illnesses, the latest
treatments, drug-related and other therapies, as well as the management of side
effects.
Our content is presented in English and can be easily translated into
other languages to expand the market opportunity. Our research, development and
market exploration leads us to various opportunities that we might seek to grow,
if management determines that the opportunity is a meaningful and potentially
successful one.
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 redirecting 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 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
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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 for information to help them make more informed
choices about their own care.
In light of the spectacular growth of the Internet over the last few
years, estimates of the number of Internet users vary widely. Most put the
number of U.S. residents with at least minimal Internet access (i.e., e-mail) at
between 30 and 50 million, and industry studies confirm that this number
continues to increase rapidly. With tens of thousands of new users and thousands
of new websites added to the fold each day, accurate demographic profiles are
difficult to derive. Nevertheless, certain trends have been established. In
particular, it has been noted that 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
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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, 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.
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The Internet Site
We launched the initial beta-version of our Internet site (at
http:/www.healthpipeline.com) in August 1999. We have been designing our
Internet site 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 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 need to continue the research and development of our website in
order to bring it from the beta phase to full commercialization. To accomplish
this goal, we need to develop:
o a web-enabled platform by which we can implement an Internet
application that will be scalable (capable of growing to support
additional users) enough to handle hundreds or
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thousands of users, yet flexible enough to meet continually changing
business requirements; and
o a highly defined customization feature to our website, which will
enable a subscriber to specify his fields of interest within the
entire spectrum of health, medicine, and pharmacy. Through this
feature, we will be able to create a database of user profiles (a
knowledgebase of subscribers) which we can market to medical research
companies, companies involved in clinical trials, marketers and other
sources of revenue generation.
Upon completion and commercializaion of our website, we intend to offer
a combination of the following services for each listed medical topic:
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. Our beta website
presently contains book advertisements for amazon.com and barnesandnoble.com. We
do not anticipate significant revenue generation until the commercial launch of
our website.
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 products, devices and services that would be
shipped for home delivery. We anticipate operating, 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.
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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 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
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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 seek contractual relationships with clinical trial
organizations, 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 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.
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Initial Business - Tapping sources of Revenue Generation
We do not anticipate significant revenue generation until the
commercial launch of our website. In the meantime, we will continue to study the
best ways to tap sources with the highest revenue generation potential. We will
also continue to refine our marketing strategy. We believe a significant
business opportunity exists in the on-line recruitment of volunteers to
participate in clinical trials. We also believe that our site can provide us
with the ability to recruit potential participants for clinical trials on behalf
of pharmaceutical and biotechnology companies, universities, teaching hospitals,
contract research organizations and site management organizations. We intend to
conduct a market study on the largest recruiters of clinical trial participants
and their recruitment methods in the hopes of tapping this potential revenue
producing source upon the commercialization of our site. We anticipate
generating future revenue opportunities from multiple sources. We anticipate
that our primary sources of revenues will include:
o lead generation fees for recruiting clinical trial participants;
o lead generation fees charged to pharmaceutical and healthcare
marketers; and
o on-line sales of books and medical supplies ("e-commerce");
We anticipate that secondary sources of revenue will include:
o sales of website advertising and commercial sponsorships,
o consulting services,
o franchising content;
o off-line newsletter subscriptions; and
o consulting services.
Primary Revenue Sources
o Revenue generated by leads for clinical trial participants.
We believe a significant business opportunity exists in the on-line
recruitment of volunteers to participate in clinical trials. The speed with
which clinical trials can be completed is significantly affected by the
rate at which participants are enrolled. We believe the inability to
recruit a sufficient number of patients in a timely manner is a recurring
problem and one of the most frequent causes of clinical trial delays, as
well as a major cost for clinical research sponsors. We believe that our
site can provide us with the ability to recruit potential participants for
clinical trials on behalf of pharmaceutical and biotechnology companies,
universities, teaching hospitals, contract research organizations and site
management organizations. We believe that revenue generating opportunities
could be cultivated by entering into contracts with these types of
organizations. Revenue of this type may consist of annual fees paid by
organizations to recruit on our site and fees based on the number of
volunteers recruited from our site who meet the general criteria for a
trial and who are accepted into a study. We have not had any revenue from
clinical trial recruitment to date and do not currently have any
contractual arrangements that provide us with revenue for clinical trial
recruitment.
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o Lead generation fees charged to pharmaceutical and healthcare/medical
marketers (of services products, books, drugs, magazines and
articles).
We plan to pursue relationships with pharmaceutical and
healthcare/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, products and services to this audience. We
anticipate that the advertiser/marketer would pay an annual fee for
having access to our subscriber base.
o On-line sales of books and medical supplies.
We are considering the development of e-commerce operations to address
the increasing number of consumers who we believe are interested in
buying health-related products over the Internet. Currently, we have
contractual relationships with Amazon.com, Barnesandnoble.com and
Egghead software pursuant to which we will refer users to their sites
where subscribers can buy their products. In return, these on-line
companies will pay us a referral fee based on the sales price. We have
begun to derive only negligible revenue from Amazon.com for referring
users to its site. We plan to pursue additional relationships upon the
commercialization of our website. We anticipate that relationships of
this sort could cause us to recognize revenues from sales as made or
access fees generally over the term of the contract. Depending on our
initial success or failure of these sales, we also may offer, over our
website, pharmaceuticals, over-the-counter drugs, vitamins,
responsible natural products, durable medical equipment, CD-ROMs and
other medical products and supplies.
Secondary Revenue Sources
o Sales of website advertising and commercial sponsorship.
We believe that open access to the Internet and the rapidly increasing
number of Web users have resulted in the emergence of the Web as a
potent new medium for advertising. We believe the effectiveness of
Internet advertising is not proven and the success of business models
relying principally on advertising revenue is uncertain. However, to
the extent that Internet advertising and related business models prove
successful, we believe our site is being designed to generate
advertising revenue opportunities because of its interactivity,
flexibility, targetability and measurability. In particular, we
believe our site will be designed to enable advertisers to reach large
consumer audiences and target advertisements to specific regional
populations, specific consumer audiences or selected individuals. Our
site is designed to display "banner" advertisements that allow
consumers to link directly to the advertiser's Web site. We plan to
market banner advertising on our site to traditional advertisers, such
as pharmaceutical companies, medical device manufacturers and other
healthcare companies. We plan to pursue advertising contracts under
which we guarantee a minimum number of user "impressions," which are
the number of times that an advertisement is displayed on the screen
of our users, to be delivered over a specified
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period for a fixed fee. Revenues of this type are also generated based
on the number of visitors to our sites or the number of visitors who
"click through" our site to the sponsor's site. Currently, our beta
site contains one banner advertisement from which we derive no
revenue.
A potential revenue generating source which we have seen other medical
sites utilize is to provide hospital sponsors with exclusive access to
an audience of potential consumers located in the geographic area,
defined by zip code, served by the hospital. When developed, our site
could provide each hospital sponsor with its own Web page on our site,
which may feature an image of the hospital, a description of its
services and facilities, directions to the hospital and a link to its
Web site, if one exists, or other promotional content provided by the
sponsor. The sponsor could be given the opportunity to provide
consumers free medical information and exposure to the sponsor's own
doctors. When visitors enter our site for the first time they will be
requested to provide their state and zip code information. Each time
after the initial visit that the user visits our site, our site would
automatically identify the applicable sponsor hospital, delivering the
sponsor's marketing message directly to the user's screen. Revenue of
this type would be generated by a flat annual fee potentially based on
the number of consumers in the sponsor's market, the scope of
geographic exclusivity, the number of zip codes purchased, or the
competitiveness of the hospital's market.
o 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.
o 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.
o Consulting services.
We are developing plans to utilize the knowledge gained from the
design, production and marketing of our web-site to provide consulting
services to other non competitive web-sites.
Whether we can generate revenues or be able to operate profitably will
depend, among other things, on our ability to achieve the following objectives,
in order to:
o successfully complete the development and commercialisation of our
website;
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o successfully target revenue generating sources and enter into
contractual arrangements with these sources;
o successfully implement our marketing strategy;
o respond effectively to competitive pressures;
o continue to develop and upgrade our technology;
o attract, integrate, retain and motivate qualified personnel;
o effectively execute our plan to develop additional online content,
applications and products;
o respond effectively to increased business operation demands; and
o access additional necessary funding.
We may be unable to accomplish one or more of the above, which could
cause our business be unsuccessful. In addition, accomplishing one or more of
the above could be very costly, which could harm our financial results. Note
that we do not believe that the failure of one revenue stream will cause our
business to be unsuccessful. Rather, we intend to diversify our sources of
revenue generation as an attempt to safeguard against one unsuccessful venture.
We cannot assure you that this strategy will be successful.
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, charitable research foundations and publishers, PMBs, pharmacies,
clinical trial organizations, allied health-care 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.
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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 Healtheon have made
significant strides towards becoming "brand names" or market leaders.
Nonetheless, we believe that the broad range of capabilities of our on-line
system, combined with our potential ability to link consumers with healthcare
marketers and providers, differentiates our web-based service from competitive
products and services, and makes it attractive to potential advertising and
sponsoring organizations.
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 the 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 September 30, 1999, we had 1 full-time employee and 3 part-time
employees. Our employees are not represented by any labor union, and we consider
our relationship with them to be good.
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Industry Wide and Systemic Risks
While we believe 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.
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.
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.
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.
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
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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
Intellihealth, 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 the 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 the "Risk Factors" section and elsewhere in this
prospectus.
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 adverse effect on our business, financial condition and operating
results.
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
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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 subscribers with desirable services and compelling, original
content at attractive prices;
o Establish and maintain strategic relationships with service and
content providers;
o Establish and maintain relationships with healthcare sponsors,
marketers, 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 adverse effect on our business,
prospects, financial condition and operating results.
Our Internet-based services will only be fully commercially launched in
late 2000. Our management cannot guarantee that these services will function as
anticipated or be desirable to our intended market.
The Internet market is still 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
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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.
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 as a source of communications and information services for the
healthcare and pharmaceutical industry.
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.
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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 adverse effect on our business, financial
condition and operating results.
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 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 obtain a
favorable legal outcome.
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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 will 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.
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
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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
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 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 May Face Latent 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 may still
increase in frequency and severity during year 2000 and are commonly referred to
as the "Year 2000 Problem" or the "Y2K problem." We have not experienced any Y2K
problems with our existing software, computer systems and other equipment. We
cannot assure you that there are no latent problems which have not yet come to
our attention.
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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 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 it believes 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.
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, 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 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 adverse
effect on our business, financial condition and operating results.
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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 $ 500,000, at an
initial public offering price of $0.50 per share. We estimate that the net
proceeds from the sale of the two million warrants offered by us will be
approximately $200,000, at an initial public offering price of $0.10 per
warrant. Our offering expenses have already been paid. Therefore, under the
above assumptions, we will realize $700,000 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,
resulting in net exercise proceeds of $8,000,000. The failure of our management
to apply any net exercise proceeds effectively could have a material adverse
effect on our business, financial condition and operating results. For more
information, see "Use of Proceeds".
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.
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Years Ending
December 31, 1997 and 1998
andfor the Nine Months Ended September 30, 1998 and 1999
and the Period From Inception (June 23, 1997) to
September 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 September 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
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begin the process of: completing its marketing goals; furthering its research
and development for its products; completing the documentation for and selling
of 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 and
marketing research as defined in the company's operating plan will significantly
reduce the cost of development, preparation, and processing of purchases and
orders by enabling the company to effectively compete in the electronic market
place.
During this developmental period, the company has been financed through
officer's loans with a balance of $43,672 from Jack Rubinstein which was
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
of $95,999.
Results of Operations for the year ended December 31, 1998 as compared to the
period from inception, June 23, 1997, to December 31, 1997.
For the year ended December 31, 1998, the company generated net sales
of $22,500 as compared to $-0- for the period from inception, June 23, 1997, to
December 31, 1997, representing an increase of $22,500. The company's cost of
goods sold for the year ended December 31, 1998 was $-0- as compared to $-0- for
the period from inception, June 23, 1997, to December 31, 1997. The company's
gross profit on sales was approximately $22,500 for the year ended December 31,
1998 as compared to $-0- for the period from inception, June 23, 1997, to
December 31, 1997. The increase in gross profit is the result of offering for
sale technology that was learned as a result of organizing the business.
The company's general and administrative costs aggregated approximately
$256,402 for the year ended December 31, 1998 as compared to $32,003 for the
period from inception, June 23, 1997, to December 31, 1997 representing an
increase of $224,399. This increase represents increased spending for 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 nine months ended September 30, 1999 as compared
to the nine months ended September 30, 1998.
For the nine months ended September 30, 1999, the company generated net
sales of $30,000 as compared to $-0- for the nine months ended September 30,
1998 representing an increase of $30,000. The company's cost of goods sold for
the nine months ended September 30, 1999 was $-0- as compared to $-0- for the
nine months ended September 30, 1998. The company's gross profit on sales was
$30,000 for the nine months ended September 30, 1999 as compared to $-0- for the
nine months ended September 30, 1998. The increase in gross profit is the result
of offering for sale technologies learned as a result of organizing the
company's business.
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The company's general and administrative costs aggregated approximately
$69,519 for the nine months ended September 30, 1999 as compared to $36,384 for
the nine months ended September 30, 1998 representing an increase of $33,135.
General and administrative expenses for the nine months ended September 30, 1999
represents office and computer expenses of $14,519, rent of $6,000, professional
fees of $40,000 and officer compensation of $6,000.
Results of Operations for the period of inception (June 23, 1997) to September
30, 1999.
For the period from the company's inception, June 23, 1997, through
September 30, 1999, a period of approximately 27 months, the company generated
net sales of $52,500 (an average of $1,944 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 September 30, 1999. The gross profit from sales
for this 27 month period is $52,500. Management believes the average gross
profit of $1,944 per month for the period from inception, June 23, 1997, through
September 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
$360,924 for the period from inception, June 23, 1997, through September 30,
1999. Of these initial startup costs, approximately $40,000 is attributed to
wages telephone of $13,105, professional fees of $53,287, rent of $19,125,
office and computer expenses of $32,282, $188,125 in consulting expenses paid
with shares of common stock and $15,000 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
September 30, 1999. Working capital at December 31, 1998 and June 30, 1999 was
negative at $(69,005) and became positive at September 30, 1999 at $12,098. 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 $98,704 as additional capital
contributions from shareholders. The company expended cash for the development
of the business and absorbed cash losses aggregating $124,573 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 September 30, 1999.
Management believes that it will be able to fund the company by
continuing to offer consulting services and additional capital contributions
until the company's web site is developed and on-line 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.
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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
demand 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 health 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
$425,000 of capital expenditures/development costs can be expected in order to
effectuate the three step process outlined above. Therefore we anticipate that
most of the net proceeds of this offering will be consumed in effectuating 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. 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 net proceeds of the offering, excluding warrant exercises, are
approximately $120,000 if the minimum offering is sold and $700,000 if the
maximum offering is sold, prior to warrant exercises. We expect all of our
organizational and offering expenses will be paid prior to the effective date of
this prospectus, including legal, accounting and other professional fees,
printing costs, transfer and escrow agent fees and other related offering
expenses. We are offering the securities through our officers and directors. No
commissions or other compensation will be paid to our officers and directors in
connection with this offering. We will not receive any proceeds from the sale by
the selling stockholders of their common stock. We will, however, receive
proceeds from the exercise of the warrants, if any warrants are exercised. We
presently intend to use the net proceeds as follows:
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<TABLE>
<CAPTION>
Maximum
Phase One (Absent Warrant
Minimum exercises)
---------------------- --------------------------
Approximate Approximate
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Application of Net Proceeds
Conduct market research and
commence market strategy.................... $25,000 20.8% 210,000 30%
Research Development of scalable
web-enabled platform......................... 25,000 20.8% 210,000 30%
Establish strategic alliances and
recruit management team....................... 15,000 12.5% 105,000 15%
Establish financial reporting system.......... 10,000 8.4% -0- -0-
Development of highly customized
feature to our website to enable profile
generation.................................... 25,000 20.8% 70,000 10%
General corporate and working capital
purposes...................................... 20,000 16.7% 105,000 10%
------ ---- ------- --
Total Uses of Net Proceeds.................... $120,000 100% 700,000 100%
======== === ======= ===
</TABLE>
We plan to continue the development of our company through various
phases. Our next phase of development will commence upon receipt of the minimum
proceeds of this offering, although we will require funds in excess of the
minimum to complete this phase. This phase contemplates the refinement and
commencement of our marketing strategy and the further research and development
of our site's operating infrastructure. To complete the development of our
web-site, we require:
o a web-enabled platform by which we can implement an Internet
application that will be scalable (capable of growing to support
additional users) enough to handle hundreds or thousands of users, yet
flexible enough to meet continually changing business requirements and
o highly defined customization enabling a subscriber to specify his/her
fields of interest within the entire spectrum of health, medicince,
and pharmacy. Through this feature, we will be able to create a
database of user profiles (a knowledgebase of subscribers) which we
can market to medical research companies, companies involved in
clinical trials, marketers and other sources of revenue generation.
To refine and commence our marketing strategy, we require:
o a market study on the largest recruiters of clinical trial
participants and their recruitment methods in the hopes of tapping
this potential revenue producing source upon the commercialization of
our site;
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o the execution of 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 and press coverage, distributing news releases, and any
other activity that might raise the profile of our company and our
services;
o the execution of 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; and
o the execution of an ongoing effort 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 groups, and customer
media.
This offering will not be sufficient to complete the full development
and implementation of our business plan. However, we believe that the minimum
proceeds from this offering can be effectively utilized by applying the net
proceeds as described in Phase One of the table above.
It is our vision to continue to develop our company through additional
capital infusions, potential strategic alliances, and the momentum created by
implementing our business plan through the launch of a fully functional website
supported by necessary infrastructure and an effective marketing plan.
We will use the estimated net proceeds of this offering allocated to
general corporate and working capital purposes to fund the capital requirements
associated with our growth, including, without limitation, the retention and
training of personnel, the establishment of a secondary trading market for our
securities and an investor relations program. We may, when the opportunity
arises, use a portion, or all of the net proceeds to acquire or invest in
complementary businesses, products or technologies. We may use the net proceeds
to obtain the right or license to use complementary technologies, and may enter
into joint ventures and strategic relationships with other companies that may
expand or complement our business. Although we anticipate that we will evaluate
possible acquisition candidates, we are not currently engaged in any discussions
for any material acquisitions, and have no agreements, plans or arrangements
with respect to any acquisition or investment.
The foregoing represents our best estimate of the allocation of the net
proceeds of the sale of the securities offered in this offering based on our
contemplated operations, our business plan, and current industry conditions and
is subject to reapportionment of proceeds among the categories listed above or
to new categories in response to changes in our plans, regulations, industry
conditions, and future revenues and expenditures. The amount and timing of our
expenditures will vary depending on a number of factors, including the timing of
offering receipts, changes in our contemplated operations or business plan, and
changes in economic and industry conditions.
Until we use the net proceeds for a particular purpose, we will invest
them in short-term interest bearing securities, which may be investment grade
securities, money market funds, certificates of deposit, or direct or guaranteed
obligations of the United States government.
-37-
<PAGE>
Our officers, directors, and their affiliates have provided us with
initial equity capital in the amount of $214,672. They have been issued
1,797,500 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 September 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 September 30, 1999
unaudited financial statements and the notes thereto which are found in the "F"
pages of this prospectus. :
<TABLE>
<CAPTION>
September 30, 1999
------------------
Actual Adjusted(1) Adjusted(3)
------ ----------- -----------
<S> <C> <C> <C>
Long term debt $ -0- $ -0- $ -0-
Stockholders' equity
Preferred stock, $.001 par value,
5,000,000 shares authorized,
At September 30, 1999, the
number of shares outstanding is -0-
Common stock, $.001 par value; 2,275 2,475 3,275
20,000,000 shares authorized;
Additional paid-in capital 581,771 701,571 1,180,771
Class A warrants 1,000,000 outstanding
Class B warrants 1,000,000 outstanding
Deficit accumulated during development stage (471,948) (471,948) (471,948)
Total Stockholders' equity 112,098 232,098 712,098
--------- -------- --------
Total Capitalization $ 112,098 232,098 712,098
========= ======= =========
</TABLE>
- ---------------------------------
(1) Assumes actual balances at September 30, 1999 adjusted for the issuance of
1,050,000 shares of common stock in consideration for $100,000 cash and
$162,500 in consulting and legal fees.
(2) Assumes the net offering proceeds of $120,000 from the sale of 200,000
Units at $.60 per Unit.
(3) Assumes net offering proceeds of $700,000 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.
Dilution
The following table shows, on a pro forma basis determined as of
September 30, 1999, the difference between existing stockholders and new
investors purchasing securities in this offering. The
-38-
<PAGE>
pro forma number of shares consists of 1,250,000 shares actually outstanding
plus an additional 1,050,000 shares issued for $100,000 cash and $162,500 in
consulting and legal fees.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
--------------------------------------------------------------------------
Percent Amount Percent Average Price
Number of Total of Total Per Share
----------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Present stockholders 2,275,000 69.5% $575,046 48.6% $0.25
New stockholders 1,000,000 30.5% $608,000 51.4% $0.61
TOTAL 3,275,000 100.0% $1,183,046 100.0% $0.36
</TABLE>
On September 30, 1999, we had a net book value of $112,098, or $.05 per
share (based on the proforma 2,275,000 shares outstanding which gives effect to
issuance of an additional 1,050,000 shares of common stock issued in
consideration for the receipt of $100,000 cash and $162,500 in consulting and
legal fees. 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 maximum
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, our pro forma net tangible book value, as of September 30,
1999, would have been $0.22 per share. This represents an immediate increase in
net tangible book value of $0.17 per share to existing stockholders, and an
immediate dilution of $0.38 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:
Minimum Maximum
------- -------
Public offering price per share $ 0.50 $0.50
of common stock
Value per share due to sale of Warrants $ 0.10 $0.10
Net tangible book value per share
as of September 30, 1999 $ 0.05 $0.22
Increase per share attributed to
investors in this offering $ 0.04 $0.17
Net tangible book value dilution per
share to new investors $ 0.51 $0.38
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.
-39-
<PAGE>
Plan of Distribution
No Broker-Dealer Or Selling Agent Planned At Present
We are initially offering a minimum of 200,000 units. Each unit
consists of one share of our common stock and either one class A redeemable
warrant or one class B redeemable warrant. Each unit will be offered at a price
of $.60 per unit. The common stock and warrants underlying the units may be
transferred separately upon issuance. After we sell 200,000 units, we will sell,
pursuant to this prospectus, the remaining number of our shares and warrants
separately. A share of common stock will be offered at a price of $.50 per
share. The class A warrants and the class B warrants each will be offered at a
price of $.10 per warrant. We are offering these securities through our officers
and directors on a self-underwritten basis. The public offering price of our
securities will not change until completion of the public offering distribution.
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. Insiders and affiliates will not
purchase units in order to reach the minimum. We will be calling upon the
expertise of our chief executive officer, Mr. Jack Rubinstein, to market our
securities. Mr. Rubinstein has a record of expertise in effectively marketing
and developing development stage companies. He has worked with CD Radio,
Catapult Communications, Cattorion Network Systems, and ONSI (acquired by
Loral). 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.
We will sell our securities in the following states:
Colorado
Connecticut
Illinois
Maryland
New Jersey
New York
Washington D.C.
Wyoming
All securities held by existing shareholders will be subject to a one year
"lockup" agreement during which they will be unable to offer and/or sell shares
currently held by them. After the expiration of such period, there will be no
limitations on any such shareholder's ability to sell shares assuming that a
registration statement with respect to such shares is then in effect. If a
registration statement is in
-40-
<PAGE>
effect, the shareholders may sell all, or any portion, of their shares. The
selling shareholders have agreed not to sell their securities below the public
offering price.
Minimum Offering Amount
We have established a minimum offering amount of $120,000 from the sale
of common stock and warrants and will escrow investor money pending sale of this
amount. Upon receipt of the minimum amount, each subscription for securities in
this offering that is accepted by us will be credited immediately to our company
cash accounts, and such funds may be spent by us at our discretion, without any
waiting period or other contingency.
Determination Of The Offering Price
Prior to this offering, there has been no market for the common stock
and/or warrants of the company, and, as a development stage company, we have
essentially had no substantial business operations to date. The offering price
has been determined arbitrarily by our board of directors.
We reserve the right to reject any subscription in full or in part, and
to terminate the offering at any time.
No person, individual or group has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this prospectus and, if given or made, such
information or representation 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.
-41-
<PAGE>
Officers And Directors
Jack Rubinstein, President, CEO, Secretary and Director
Mr. Rubinstein, age 51, is, since commencement of its operations in
1991, the General Partner of DICA Partners, an investment hedge fund located in
Hartsdale, New York. 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.
R. Scott Barter, Director
Mr. Barter, age 53, is the Founder, Chairman, Chief Executive Officer
and a Director of Unifund Financial Group, Inc. since its inception in 1991 and
Unifund America, Inc. since its inception in 1995. 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. since August 1994 and Unifund America, Inc. since September 1995 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 and has been since December
1991. 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
-42-
<PAGE>
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.
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 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*
Since April 1999, Mr. Schiff, age 55, has been the Vice President in
charge of Management Information Systems and Internet Applications for Unifund
Financial Group, Inc. Mr. Schiff was a consultant for Unifund Financial Group
from July 1998 to April 1999. 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 from February 1996 through March
1999. 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. Prior to Mr. Schiff's
employment by Kramer Levin, he was a free-lance document production consultant
for the legal and financial industries in New York from 1989 through February
1996.
- --------
* Not an officer or director, but may be deemed a "significant employee."
- -43-
<PAGE>
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.
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 2,275,000 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:
- --------
* Not an officer or director, but may be deemed a "significant employee."
-44-
<PAGE>
Number
Name of Shares Percentage
- -------------------------------------------------------------------------------
Jack Rubinstein 748,750 32.91%
Unifund Financial Group, Inc.* 998,750 43.90%
R. Scott Barter 350,000 15.38%
Douglas Harrison-Mills 50,000 2.20%
(All officers and directors 2,147,500 92.19%
as a group - 4 persons)
*This entity is controlled by Mr. Barter and its share ownership in us is
attributed to him.
TOTALS 2,147,500 92.19%
========= =====
Upon completion of the offering, officers, directors and holders of
five percent (5%) or more of our common stock will hold, in the aggregate,
2,147,500 shares issued and outstanding, if the Minimum Amount is sold and
2,147,500 shares issued and outstanding if the Maximum Amount is sold:
<TABLE>
<CAPTION>
Percentage of Common Stock
--------------------------------------
Number
Name of Officer of Shares Minimum Maximum
- ------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C>
Jack Rubinstein 748,750 30.25% 22.85%
Unifund Financial Group, Inc.* 998,750 40.35% 30.49%
R. Scott Barter 350,000 14.14% 10.69%
Douglas Harrison-Mills 50,000 2.02% 1.53%
(All officers and directors 2,147,500 86.76% 65.56%
as a group - 4 persons)
*This entity is controlled by Mr. Barter and its share ownership in us is attributed to him..
TOTALS 2,147,500 86.76% 65.56%
========= ===== =====
</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.
-45-
<PAGE>
Common Stock
We are authorized to issue up to 20,000,000 shares of common stock, par
value $.001 per share, of which 2,275,000 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 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 Continental Stock Transfer and Trust 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 Exercise 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 the third anniversary of the effective
date of the offering (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 Exercise Price paid in full.
-46-
<PAGE>
The class A redeemable warrants are subject to redemption by the
company any time 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 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 Securities and Exchange 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 Transfer and Trust 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 the fifth anniversary of the effective
date of the offering (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 Securities and Exchange 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 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.")
-47-
<PAGE>
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
September 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.
Selling Shareholders
All securities held by existing shareholders will be subject to a one
year "lockup" period during which they will be unable to offer and/or sell
shares currently held by them. After the expiration of such period, there will
be no limitations on any such shareholder's ability to sell shares assuming that
a registration statement with respect to such shares is then in effect and any
sale must occur at not less than $0.50 per share.
The shareholdings of our officers and directors is set forth under the
heading "Security Ownership of Certain Beneficial Owners and Management". There
are 127,500 shares held by individuals who are neither officers nor directors.
The names and shareholdings of such individuals and their percentage ownership
of the common stock of the company if the minimum and maximum number of shares
are sold are as follows:
Percentage of Common Stock
Name of Owners Number of Shares Minimum Maximum
- ---------------------- ---------------------------- ---------------- --------
Sheila Corvino 50,000 2.02% 1.53%
Brad Smith 50,000 2.02% 1.53%
Harold Halcrow 10,000 0.40% 0.30%
Harris Schiff 10,000 0.40% 0.30%
Federico Brown 5,000 0.20% 0.15%
Arthur Gager 2,500 0.10% 0.08%
=============================================================================
TOTALS 127,500 5.15% 3.89%
None of the individuals listed above are officers and/or directors. All of these
individuals, except Mr. Gager, are sophisticated investors. They may be
considered to be "significant employees" and a description of their activities
during the prior three years is included in the section entitiled "Directors,
Executive Officers, Promoters and Control Persons".
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.
-48-
<PAGE>
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.
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 company 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 shares to R. Scott Barter;
50,000 shares to Douglas Harrison-Mills; 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.
On March 15, 1999 we entered into a Consulting Agreement with Unifund
America, Inc. and Unifund Financial Group. They agreed to provide us with
various consulting services in such areas as corporate planning, management, and
marketing. They assisted us in assembling a team of lawyers, accountants and
business and technology consultants to provide services to our company. In
addition, Scott Barter, the president of Unifund America and Unifund Financial
Group joined our board and will continue to aid in our growth. We compensated
Unifund Financial Group for these services by issuing them 623,750 shares of our
common stock.
-49-
<PAGE>
On October 1, 1999, Sheila Corvino was awarded 50,000 shares of our
common stock in partial consideration of legal services rendered to our company.
In December 1999 bridge financing in the amounts of $37,500, $37,500
and $25,000 was contributed by Unifund Financial Group, Inc., Jack Rubinstein
and Scott Barter, respectively. In consideration of these amounts, each of
Unifund Financial Group, Inc. and Jack Rubinstein were issued 375,000 shares of
our common stock and Scott Barter was issued 250,000 shares of our common stock.
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 in the amount of $30,000 and converted
$43,672 to additional paid in capital as of June 30, 1999.
While managment will not purchase any portion of the minimum offering
amount, it reserves the right to purchase securities of our company once the
minimum threshold has been reached.
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 3,275,000 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 Securities and Exchange 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.
-50-
<PAGE>
Executive Compensation
For the period from inception through September 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 September
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 September 23, 1997 to September 30, 1999, for the
nine months ended September 30, 1999, and for the nine months ended September
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 Securities and Exchange 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 Securities and
Exchange Commission upon the payment of certain fees prescribed by the
Securities and Exchange Commission. The Securities and Exchange 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 Securities
and Exchange Commission.
-51-
<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
February 3, 2000
Paterson, New Jersey
F-1
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1999
December 31, 1998 Unaudited
----------------- ------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 4,367 $ 30,098
--------- ---------
Current assets 4,367 30,098
Property and equipment -0- -0-
Total assets $4,367 $ 30,098
===== =====
Liabilities and Stockholders' Equity
Current liabilities
Accrued expenses $9,000 $ 18,000
Officer loans payable 72,622 -0-
--------- ---------
Total current liabilities 81,622 18,000
Stockholders' equity
Preferred stock authorized 1,000 shares, $0.001
par value each. At December 31, 1998 and
September 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
September 30, 1999, there are 977,500 and
1,225,000 shares outstanding respectively 978 1,226
Additional paid in capital 190,646 320,320
Deficit accumulated during development stage (268,879) (309,448)
---------- -----------
Total stockholders' equity (77,255) 12,098
---------- -----------
Total liabilities and stockholders' equity $ 4,367 $ 30,098
========= ==========
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 nine For the nine inception, June 23,
1997, to For the year ended months ended months ended 1997 to September
December 31, December 31, September 30, 1998 September 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 35,003 250,152 36,384 69,519 354,674
Depreciation and amortization 2,852 -0- -0- -0- 2,852
----------- ----------- ----------- ----------- -----------
Total expense 37,855 250,152 36,384 69,519 357,526
Income (loss) from operations (37,855) (227,652) (36,384) (39,519) (305,026)
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) $ (230,259) $ (37,284) $ (40,569) $ (309,448)
=========== =========== =========== =========== ===========
Net income (loss)
per share -basic $ (0.30) $ (0.82) $ (0.15) $ (0.04) $ (0.32)
=========== =========== =========== =========== ===========
Weighted average
Number of shares
outstanding-basic 125,000 280,312 250,000 977,500 977,500
=========== =========== =========== =========== ===========
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
September 30, September 30,
1998 1999
(Unaudited) (Unaudited)
--------------- ------------
Revenue $ -0- $ -0-
Costs of goods sold -0- -0-
----------- -----------
Gross profit -0- -0-
Operations:
General and administrative 21 879 10,870
Depreciation and amortization -0- -0-
----------- -----------
Total expense 21,879 10,870
Income (loss) from operations (21,879) (10,870)
total other expenses
Income (loss) $ (21,879) (10,870)
=========== ===========
Net income (loss)
per share -basic $ (0.09) $ (0.01)
=========== ===========
Weighted average
Number of shares
outstanding-basic 250,500 977,500
=========== ===========
See accompanying notes to financial statements.
F-4
<PAGE>
Pipeline Data, Inc.
(A development stage company)
Statement of Cash Flows
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, September 30, 1998 September 30, 1999 September 30, 1999
1997 1998 Unaudited Unaudited Unaudited
---- ---- --------- --------- -----------
Cash Flows From Operating Activities
Net income (loss) $ (38,620) $(230,509) $ (37,284) $(40,569) $(309,448)
Non cash transactions -- 181,875 -- -- 188,875
Depreciation 2,852 -- -- -- 2,852
Accrued expenses 3,000 6,000 4,500 9,000 18,000
--------- --------- --------- -------- ---------
Total Cash Flows
From Operations (32,768) (42,384) (32,784) (31,569) (106,721)
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 42,998 (72,622) -0-
Sale of Common Stock 9,749 -- -- 24,750 34,499
Additional paid in capital -- -- -- 105,172 105,172
--------- --------- --------- -------- ---------
Total Cash Flows From
Financing Activities 45,514 36,857 42,998 57,300 139,671
Net Increase
(Decrease) in Cash 9,894 (5,527) 10,214 25,731 30,098
Cash Balance
Beginning of Period -0- 9,894 5,641 4,367 -0-
--------- --------- --------- -------- ---------
Cash Balance End of
Period $ 9,894 $ 4,367 $ 15,855 $ 30,098 $ 30,098
========= ========= ========= ======== =========
Non cash activities
Issuance of 752,500 shares of
Common Stock in consideration for
consulting services -- -- $ 188,125 -- $ 188,125
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 727,500 $ 728 181,147 -- 181,875
Net loss -- -- -- (230,259) (230,259)
---------- ------- --------- --------- ---------
12-31-1998 977,500 $ 978 $ 190,646 $(268,879) $ (77,255)
Sale of shares 247,500 248 24,502 -- 24,750
Capital contribution -- -- 105,172 -- 105,172
Unaudited
Net loss -- -- -- (40,569) (40,569)
---------- ------- --------- --------- ---------
06-30-1999 1,225,000 $ 1,226 $ 320,320 $(309,448) $ 12,098
========== ======= ========= ========= =========
</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 $181,875 or $0.25
per share to the following individuals and companies and in the following
amounts: 123,750 shares to Jack Rubinstein; 100,000 shares to R. Scott Barter;
50,000 shares to Douglas Harrison-Mills; 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 10,000 to one.
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 September 30, 1999, the company
received an aggregate of $105,172 as an additional contribution to capital a
shareholder of the company.
Mr. Jack Rubinstein converted the balance of his officer loan payable
aggregating $43,672 to additional
paid in capital.
As of September 30, 1999, the company rescinded the issuance of 25,000
shares of common stock to Alan Scott.
F-7
<PAGE>
Pipeline Data, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1998
Note 2-Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As of December 31, 1998, the
company incurred net losses of $268,879and an aggregate of $309,448 for the
period from inception June 23, 1997 to September 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 September 30, 1999 and the related statements of
operations and cash flows for the nine months ended September 30, 1998 and 1999
and for the period from inception, June 23, 1997, to September 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
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-8
<PAGE>
Pipeline Data, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1998
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 betterment's are capitalized.
h. Significant Concentration of Credit Risk
At September 30, 1999, the company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
i. Unaudited financial information
In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Company as of
September 30, 1999 and the results of its operations and its cash flows for the
nine months ended September 30, 1998 and 1999. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
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 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 $181,875 or $0.25
per share to the following individuals and companies and in the following
amounts: 123,750 shares to Jack Rubinstein; 100,000 shares to R. Scott Barter;
50,000 shares to Douglas Harrison-Mills and 403,750 to Unifund Financial Group,
Inc.
For the period April 1, 1999 to September 30, 1999, the company received
$105,172 as an additional contribution to capital from a shareholder 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
F-9
<PAGE>
Pipeline Data, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1998
The company occupies office space at the office of the President at 250
East Hartsdale Avenue, Hartsdale, New York, 10530 at a monthly rental of $500.
For the period from inception, June 23, 1997, to December 31, 1997, for the year
ending December 31, 1998 and for the nine months ended September 30, 1999, rent
expense was $3,000, $10,125 and $6,000 respectively.
c. Officer Loan
As of December 31, 1998 and September 30, 1999, the company is
obligated to repay officer loans to Mr. Jack Rubinstein, President of the
company with interest at 6%, payable on demand aggregating $72,622 and $-0-
respectively including accrued interest of $2,622 and $-0- respectively.
As of June 30, 1999, Mr. Jack Rubinstein, 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 nine months ended September 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 September 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 September 30,
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 September 30, 1999, the company has net operating loss carry
forwards for income tax purposes of $309,448. This carryforward is available to
offset future taxable income, if any, and expires in the year 2010. The
Company's utilization of this carryforward against future taxable income may
become subject to an annual limitation due to a cumulative change in ownership
of the company of more than 50 percent.
The components of the net deferred tax asset as of September 30, 1998
are as follows:
Deferred tax asset:
Net operating loss carry forward $ 105,212
Valuation allowance $(105,212)
Net deferred tax asset $ -0-
F-10
<PAGE>
Pipeline Data, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1998
The company recognized no income tax benefit for the loss generated in
the period from inception, June 23, 1997, to September 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 September 30, 1999:
Asset Accumulated Total
Cost Depreciation
Office equipment $2,582 $2,852 $-0-
------ ------ ----
Note 7 - Preferred Stock
The Company's authorized capital stock also includes 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 September 30, 1999, the number of shares
outstanding is -0-.
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.
F-11
<PAGE>
[GRAPHIC OMITTED] Initial Public Offering
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED: FEBRUARY 3, 2000
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
-------------------------------------------------------------------------------
2,275,000 SHARES OF COMMON STOCK
-------------------------------------------------------------------------------
This prospectus relates to the public offering, which is not being underwritten,
of up to 2,275,000 shares of our common stock by some of our shareholders. The
prices at which such shareholders may sell the shares will be determined by the
prevailing market prices for the shares or in negotiated transactions. We will
not receive any of the proceeds from the sale of the shares.
The shares of our common stock offered by the selling shareholders pursuant to
this involves substantial risk. See "Risk Factors" beginning on page 6.
---------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
-------------------------------------------------------------------------------
We will amend and complete the information in this prospectus. Although the
Selling shareholders are permitted by U.S. federal securities laws to offer
these securities using this prospectus, the selling shareholders may not sell
them or accept your offer to buy them until the documentation filed with the SEC
relating to these securities has been declared effective by the SEC. This
prospectus is not an offer to sell these securities or our solicitation of your
offer to buy these securities in any jurisdiction where that would not be
permitted or legal.
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
Table of Contents
Page
Prospectus Summary..............................................................
The Company.....................................................................
The Offering...................................................................
Registration of Additional Shares
Offered By Selling Shareholders ..........................................
Offices of The Company..........................................................
Risk Factors....................................................................
Forward Looking Statements......................................................
Business of The Company.........................................................
Management's Discussion And Analysis of
Financial Condition And Results of Operations ................................
Use of Offering Proceeds........................................................
Capitalization .................................................................
Dilution........................................................................
Dividend Policy ................................................................
Plan of Distribution............................................................
Legal Proceedings...............................................................
Directors, Executive Officers,
Promoters And Control Persons..............................................
Security Ownership of
Certain Beneficial Owners
and Management................................................................
Description of Securities.......................................................
Interest of Named Experts And Counsel...........................................
Selling Shareholders...........................................................
Certain Provisions of Our
Articles and By-Laws and
Disclosure of Commission Position On
Indemnification For Securities Act Liabilities................................
Description of Property.........................................................
Certain Relationships And
Related Transactions..........................................................
Market For Common Equity
and Related Stockholder Matters...............................................
Executive Compensation..........................................................
Financial Statements............................................................
Changes in And Disagreements With
Accountants on Accounting And
Financial Disclosure............................................................
Where Can Investors Find Additional Information.................................
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
The Sale of The Shares of Our Common Stock Registered Pursuant to This
Prospectus Has Been Declared Effective in The Following States:
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sale made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Pipeline
Data Inc. have not changed since the date hereof.
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
The Offering
We will not receive any proceeds from the shares sold by the selling
shareholders.
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
Principal and Selling Shareholders
The following tables presents certain information regarding the beneficial
ownership of our common stock as of September 30, 1999 by the following:
Each person who is known by us to own beneficially more than five percent of our
outstanding common stock;
Each of our directors and executive officers named in the Summary Compensation
Table;
Each selling shareholder; and
All of our current executive officers and directors as a group. The percentage
of outstanding shares is based on 2,275,000 shares of our common stock
outstanding as of September 30,1999 and 2,475,000 shares of our common stock
outstanding immediately following completion of this offering.
<TABLE>
<CAPTION>
Shares Owned Shares Owned
Prior to the Offering After the Offering(2)
--------------------- ---------------------
Shares
Number Percent Offered(1) Number Percent
------ ------- ---------- ------ -------
<S> <C> <C> <C> <C>
Directors, Officers and 5%
Shareholders
Jack Rubinstein 748,750 30.25 All -0- -0-
Unifund Financial Group, Inc.* 998,750 40.35 All -0- -0-
R. Scott Barter 350,000 14.14 All -0- -0-
Douglas Harrison-Mills 50,000 2.02 All -0- -0-
(All officers and directors 7
as a group - 4 persons)
2,147,500 86. 6 All -0- -0-
Selling Shareholders:
Sheila Corvino 50,000 2.02% All -0- -0-
Brad Smith 50,000 2.02% All -0- -0-
Harold Halcrow 10,000 0.40% All -0- -0-
Harris Schiff 10,000 0.40% All -0- -0-
Federico Brown 5,000 0.20% All -0- -0-
Arthur Gager 2,500 0.10% All -0- -0-
====================================================================
*This entity is controlled by Mr. Barter and its share ownership in us is attributed to him..
==============================
(1) There is no assurance that the selling shareholders will sell any or all of these shares.
(2) Assumes that the directors, officers and 5% shareholders and the selling shareholders acquire no additional
shares of our common stock prior to the completion of this offering.
</TABLE>
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
The SEC deems a security holder the beneficial owner of a security when
that person maintains voting or investment power with respect to security,
subject to community property laws, where applicable. If stock options are
presently exercisable or exercisable within 60 days of February 3, 2000, the SEC
will deem the shares underlying those options to be outstanding and beneficially
owned by their holder when computing the percentage of common stock held by that
person. However, the SEC will not deem shares underlying these options to be
outstanding when computing the percentage of common stock held by others.
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
Relationships among the Selling Shareholders and Pipeline Data Inc.
We have had material relationships with several of the selling shareholders in
the past three years. See the discussion set forth in "Directors, Executive
Officers, Promoters and Control Persons " for a description of business
relationships with Pipeline Data Inc.
Unless otherwise noted, all shareholders listed have sole voting and investment
power with respect to their shares. There are no family relationships between
our executive officers and directors.
[Alternate Page for Prospectus Relating to Secondary Shares]
<PAGE>
PIPELINE DATA, INC
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 May __, 2000 (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.
5,275,000 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
February 3, 2000
PIPELINE DATA INC.
<PAGE>
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 $ 2,627.95
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 $ 92,627.95
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, Mr.
Schiff 1 share, Mr. Brown: 0.5 shares and 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
3.5* Form of Class B Redeemable Warrant
3.6* Form of Class A Warrant Agreement
3.7* Form of Class B Warrant Agreement
3.8 Form of Lock-up Agreement
5 Opinion on Legality of Kaplan Gottbetter & Levenson, LLP,
counsel to registrant
10.1* Web site development and servicing agreement
10.2* Consulting Agreement with Unifund America, Inc.
10.3* Agreement with Rainbow Media
23.1** Consent of Kaplan Gottbetter & Levenson, LLP,
counsel to registrant, see exhibit 5
23.2 Consent of Thomas P. Monahan, independent public accountant
27* Financial Data Schedule
* Previously filed.
** To be filed by amendment.
II-2
<PAGE>
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) 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 Securities and Exchange
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;
(iii) Include any additional or change in material information on the
plan of distribution.
(iv) Reflect the sale of more than 125,000 shares held by existing
shareholders which are subject to a one-year "lockup" period from
the effective date of this registration statement.
(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.
(5) Attach a supplementary "sticker" to each prospectus used after more
than 62,500 of the shares subject to the initial one-year "lockup" period from
the effective date of this registration statement have been sold.
II-3
<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 five 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 February 3, 2000.
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 February 3, 2000
------------------- -------- ----------------
R. Scott Barter (Title) (Date)
(Signature)
/s/ Douglas Harrison-Mills Director February 3, 2000
-------------------------- -------- ----------------
Douglas Harrison-Mills (Title) (Date)
(Signature)
Exhibit 3.8
Lockup Agreement
Whereas, Pipeline Data, Inc. has filed a Registration Statement with
the Securities and Exchange Commission under which it intends to sell common
stock, class A warrants, and class B warrants;
Whereas, Pipeline believes that its ability to sell such securities
will be enhanced if the individuals party hereto agree to refrain from selling
their current shareholdings in Pipeline subject to the terms and Conditions set
forth herein;
Whereas, the individuals party hereto are substantial shareholders in
Pipeline and are amenable to having their share holdings being so restricted as
they believe that a public offering will be beneficial for Pipeline;
Now therefore, in consideration of the foregoing and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Restriction of Shares for One year period: Each of the individuals
party hereto, severally and not jointly, hereby agree that during the period
commencing on the date when the Registration Statement with respect to the
above-noted securities is declared, or deemed to be effective, under the
Securities Act of 1933, as amended and associated rules thereunder, and for a
period of one year thereafter (such one year period being the "Lockup Period"),
that such individual's present beneficial holdings shareholdings (as set forth
beside the signature of such individual) in Pipeline, may not be offered, sold,
transferred, assigned, pledged, hypothecated, or otherwise alienated, nor may
any executory interest be created which would allow, or permit any of the
foregoing during the Lockup Period.
2. Definition of beneficial ownership: For the purposes of this
Agreement, "beneficial ownership" shall have the same meaning as that set forth
in Rule 13d-3, as in effect on the date hereof, promulgated under the Securities
and Exchange Act of 1934, as amended.
3. Lockup Period not to be amended or altered: The One Year Lockup
Period has been described in the Registration Statement filed by Pipeline, and
the parties hereto agree and acknowledge and agree that any amendment,
shortening or attenuation of the Lockup Period, or its terms and restrictions,
would create a possibility of material misstatement with respect to its terms as
set forth in such Registration Statement, and any amendment or alteration
purporting to do so shall be null and void.
4. Successors and assigns: The restrictions set forth herein shall be
binding upon the parties, their successors, assigns, legal representatives,
distributees, and any other person, whether a natural person or a legal entity,
who shall be vested with any interest in the Restricted Shares.
5. Shares to be Legended: The shares subject to this Agreement shall be
marked with a prominent legend stating that such shares are conditions hereof,
and may only be transferred subject to the prior presentation of a legal opinion
of counsel to the transferor, satisfactory to Pipeline and its counsel, to the
effect that any such transfer may be validly effected under the terms of this
Agreement and other applicable law.
6. Governing law and submission to jurisdiction: By their execution
below, the parties hereto acknowledge that this Agreement shall be governed by
the internal laws of the State of New York, determined without reference to
principles of conflicts of laws, and that any legal proceeding with respect to
this Agreement shall be subject to the jurisdiction of the federal and/or state
courts located in the Borough of Manhattan, New York.
<PAGE>
7. Counterparts and Facsimile Delivery: This Agreement may be executed
in one or more counterparts with all such counterparts to constitute but one and
the same agreement, and facsimile transmission of signature pages shall be
effective as manual delivery thereof.
8. Minimum Price. Notwithstanding the foregoing, no shareholder may
offer or sell shares for less than $0.50 per share at any time.
Dated as of February 3, 2000
Pipeline Data, Inc.
By: /s/ Jack Rubinstein
-----------------------
Name: Jack Rubinstein
Title: Chief Executive Officer
/s/ Jack Rubinstein
- -------------------
Jack Rubinstein
(748,750 Shares)
/s/ R.Scott Barter
- ------------------
R.Scott Barter
(350,000 Shares)
Unifund Financial Group, Inc.
By R.Scott Barter
/s/ R.Scott Barter
- ------------------
R.Scott Barter, President
(998,750 Shares)
/s/ Douglas Harrison-Mills
- --------------------------
Douglas Harrison-Mills
(50,000 Shares)
/s/ Sheila Corvino
- ------------------
Sheila Corvino
(50,000 Shares)
/s/ Brad Smith
- --------------
Brad Smith
(50,000 Shares)
/s/ Harold Halcrow
- ------------------
Harold Halcrow
(10,000 Shares)
/s/ Harris Schiff
- -----------------
Harris Schiff
(10,000 Shares)
/s/ Federico Brown
- ------------------
Federico Brown
(5,000 Shares)
/s/ Arthur Gager
- ----------------
Arthur Gager
(2,500 Shares)
Exhibit 5
_____ __, 2000
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 (collectively, the "Warrants", and (ii)
the proposed sale by certain of the Company's shareholders of 2,275,000 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 Company Shares and
Warrants 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
- -------------------------------------
Exhibit 23.2
Consent of Independent Accountant
I hereby consent to the use of my report, dated December 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
February 3, 2000
