As filed with the Securities and Exchange Commission on April 26, 2000
Registration No. 333-79831
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------
AMENDMENT NO. 9
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)
------------------
<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)
----------------------------------------
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
<TABLE>
<CAPTION>
====================================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
to be Offering Price Aggregate Registration
Title of each Class of Securities Being Registered Registered Per Security(1) Offering Price(1) Fee
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock(2). . . . . . . . . . . . . . . . . . . . . 3,325,000 $0.50(1) $1,662,500(1) $ 462.18(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 . . . . . . . . . . . . . . . . . . . . . . . . . .7,325,000 $9,862,500 $2,741.78
========== ========== =========
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee and
includes shares being sold by selling stockholders.
(2) Includes 2,325,000 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.
--------------------------------------------------
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>
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 Warrants 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
alternate "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.
<PAGE>
[GRAPHIC OMITTED] Initial Public Offering
PROSPECTUS
PROSPECTUS DATED: April 26, 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 2,325,000 shares of our common stock owned
by share holders.
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.
<PAGE>
Table of Contents
Page
Prospectus Summary................................................... 5
The Company....................................................... 5
The Offering...................................................... 5
Risk Factors......................................................... 5
Use of Offering Proceeds............................................. 7
Capitalization ...................................................... 8
Dilution............................................................. 9
Forward Looking Statements........................................... 10
Business of The Company.............................................. 11
Management's Discussion And Analysis of
Financial Condition And Results of Operations ..................... 29
Dividend Policy ..................................................... 33
Plan of Distribution................................................. 33
Legal Proceedings.................................................... 34
Directors, Executive Officers,
Promoters And Control Persons................................... 35
Security Ownership of
Certain Beneficial Owners
and Management..................................................... 37
Description of Securities............................................ 38
Interest of Named Experts And Counsel................................ 40
Selling Shareholders................................................. 40
Certain Provisions of Our
Articles and By-Laws and
Disclosure of Commission Position On
Indemnification For Securities Act Liabilities..................... 41
Description of Property.............................................. 42
Certain Relationships And
Related Transactions............................................... 42
Market For Common Equity
and Related Stockholder Matters.................................... 43
Executive Compensation............................................... 44
Financial Statements................................................. 44
Changes in And Disagreements With
Accountants on Accounting And
Financial Disclosure............................................... 44
Where Can Investors Find Additional Information...................... 44
Financial Statements of the Company F-1 - F-11
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<PAGE>
Prospectus Summary
The Company
Pipeline Data Inc., a Delaware corporation, was incorporated in 1997, and began
its business operations in 1998. Under our corporate charter documents, we may
engage in any activity for which corporations may be organized under the
Delaware General Corporation Law. We are a development stage company and are
currently developing a website to provide healthcare consumers with information
on a broad range of medical conditions. Our telephone number is 914-725-7028.
We intend to become an on-line direct marketing agent designed to assist the
pharmaceutical, biotechnology and healthcare industries to target individual
consumers.
The Offering
o Prior to this offering, there are 2,325,000 shares of common stock
outstanding.
o Assuming the minimum number of 200,000 units are sold, there shall be
2,525,000 shares of common stock outstanding and 200,000 immediately
separable warrants exercisable into 200,000 shares of common stock.
Class A warrants are exercisable into shares of common stock at $3.00
per share until the third anniversary of the effective date of the
offering. Class B warrants are exercisable into shares of common stock
at $5.00 per share until the fifth anniversary of the effective date
of the offering. The net proceeds will be $120,000, if 200,000 class A
warrants are exercised $720,000 and, if 200,000 class B warrants are
exercised $1,120,000.
o Assuming the maximum number of 1,000,000 shares of common stock are
sold, there shall be 3,325,000 shares of common stock outstanding,
1,000,000 class A warrants exercisable into shares of common stock,
and 1,000,000 class B warrants exercisable into shares of common
stock. The net proceeds will be $700,000, and if 2,000,000 warrants
are exercised, $8,700,000.
o We intend to use our proceeds:
to conduct market research and commence our market strategy,
to research the development of a scalable web-enabled platform,
to establish strategic alliances and recruit a management team,
to develop a highly customized feature to our website to enable
profile generation, and
to establish a financial reporting system, for general corporate
and working capital.
Risk Factors
We have had losses of $333,928 since inception (June 23, 1997), we expect that
we will continue to lose money through 2000 and we may never achieve or sustain
profitability.
Because we are only developing our business model, it is difficult to
evaluate our business and prospects. Our business model is still being developed
and our revenue and income potential is unproven. We plan to allocate our
resources towards infrastructure development, applications development,
development of our marketing strategy and strategic acquisitions. As a result,
we do not
-5-
<PAGE>
expect sufficient revenue generation during the next 12 months to stem continued
losses and we may never achieve or sustain profitability. The report of our
independent accountants on our December 31, 1999 consolidated financial
statements contains an explanatory paragraph regarding our ability to continue
as an ongoing business. The "going concern" qualification may reduce our ability
to obtain necessary financing in the future to run our business.
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.
We will attempt to secure contracts with our Internet access providers and
other suppliers when we establish relationships with them. However, any or all
of these entities may refuse to enter into written contracts with us. Without a
contract, we have no assurance that the goods and services provided or fees
charged to us by these suppliers will remain constant. In the event we cannot
obtain a contract with a supplier, we will need to determine whether it is in
our best interest to continue the business relationship without a contract or to
seek another supplier. If we do not have a contract with a supplier, we will
attempt to establish relationships with as many suppliers in the same industry
as possible in order to protect us against a particular supplier's price
increases or termination of its relationship with us. 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.
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 build and maintain relationships with high
quality 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 in response to visitor and subscriber demand,
as well as evolving healthcare industry trends. We will attempt to find high
quality content providers and to establish relationships with more than one
supplier in order to protect us from the risk of a content provider halting
service to us or failing to provide us high quality content. Any failure by
these parties to develop and maintain high quality, attractive content could
o result in visitor and subscriber dissatisfaction,
o inhibit our ability to convert visitors to subscribers, and
o 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.
Further, if content providers offer information to users or our competitors on
more favorable terms than offered to us, we could become less competitive and
future profit margins and prospects could be harmed.
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, 3,325,000
shares of our common stock will be outstanding. Approximately 69.9% of these
shares or 2,325,000 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.
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<PAGE>
We rely on our senior management to direct our business endeavors. In addition,
our future success depends on our ability to attract and retain or outsource the
services of highly qualified technical, marketing, customer service and
managerial personnel. No assurance can be given that we will be able to attract
and retain such personnel or successfully outsource needed services.
We are relying on Messrs. Jack Rubinstein, president, and R. Scott Barter,
director, for guidance on our company's future. Although each individual has a
large share position in our company, neither is receiving a salary nor has an
employment agreement with us. Further, each of Messrs. Rubinstein and Barter has
agreed to devote up to 25% of their time to our business and therefore may
devote a large portion of their time to other business ventures. The loss of the
services of Messers. Jack Rubinstein and R. Scott Barter and/or the failure to
recruit and retain qualified managers may result in an adverse impact on the
development of our business. The company has not obtained any key-man life
insurance on either Messrs. Rubinstein or Barter.
Our future success also depends on our ability to attract and retain or
outsource the services of highly qualified technical, marketing, customer
service and managerial personnel. Competition for such personnel is intense, and
we cannot guarantee that we will be able to attract or retain enough highly
qualified employees in the future. If our management is unable to hire and
retain personnel in key positions, our business, financial condition and
operating results could be materially and adversely affected. During the next 12
months, we anticipate hiring or contracting with a market research person/firm
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/firm to research and develop the
web-enabled operational platform to best facilitate a scalable Internet
application that will best suit our needs. We have estimated that the completion
of our technical development and of a marketing campaign will cost several
hundred thousand dollars. Payment for these services will be made out of the
proceeds from this offering. In the event we do not raise sufficient proceeds
from this offering or from other sources, we may not be able to complete the
development of our business.
There are potential conflicts of interest as our company lacked sufficient
disinterested directors to ratify certain past transactions.
Our board of directors unanimously ratified all past transactions, In some
cases, fewer than two members of our three member board of directors were not
interested in the transaction.
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 presently intend to use the net proceeds in priority order as set
forth in the following table. We view the first three uses of proceeds to be of
virtually equal importance.
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<PAGE>
<TABLE>
<CAPTION>
Maximum
Phase One (Absent Warrant
Minimum exercises)
--------------------------------------------
Approximate Approximate
Amount % Amount %
------ ----- ------ -----
Application of Net Proceeds
<S> <C> <C> <C> <C>
Conduct market research and commence
market strategy............................. $25,000 20.8% 175,000 25%
Research Development of scalable
web-enabled platform........................ 25,000 20.8% 175,000 25%
Establish strategic alliances and
recruit management team..................... 25,000 20.8% 175,000 25%
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 16.8% 105,000 15%
Total Uses of Net Proceeds..................... $120,000 100% 700,000 100%
</TABLE>
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. We have sufficient capital to fund
our day-to-day operations for the next 12 months. The level of funds we raise
through this offering will determine the extent to which we pursue our projected
phases of development.
Capitalization
The following table sets forth our capitalization as of December 31, 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 December 31, 1999 financial
statements and the notes thereto which are found in the "F" pages of this
prospectus:
-8-
<PAGE>
<TABLE>
<CAPTION>
December 31, 1999
-----------------
Actual Adjusted(1) Adjusted(2)
------ ----------- -----------
<S> <C> <C> <C>
Long term debt $-0- $-0- $-0-
Stockholders' equity
Preferred stock, $.001 par value, 5,000,000
shares authorized, At December 31, 1999, the
number of shares outstanding is -0-
Common stock, $.001 par value;
20,000,000 shares authorized; 2, 325,000
shares outstanding; if minimum sold 2,525,000
shares outstanding; if maximum sold 3,325,000
shares outstanding 2,325 2,525 3,325
Additional paid-in capital 425,546 545,346 1,124,546
Class A warrants 1,000,000 outstanding
Class B warrants 1,000,000 outstanding
Deficit accumulated during development stage (333,928) (333,928) (333,928)
Total Stockholders' equity 93,868 213,868 793,868
Total Capitalization $93,868 $232,098 $793,868
_________________________________
(1) Assumes the net offering proceeds of $120,000 from the sale of 200,000
Units at $.60 per Unit.
(2) 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 December 31, 1999, the difference between existing
stockholders and new investors purchasing securities in this offering. The pro forma number of shares consists of 2,250,000
shares actually outstanding.
Maximum Offering (1) Total Consideration
Percent Percent Average Price
Number of Total Amount of Total Per Share
-------------- -------------- ---------------- ------------------ -----------------
Present stockholders 2,325,000 69.9% $427,796 37.9% $0.19
-------------- -------------- ---------------- ------------------ -----------------
New stockholders 1,000,000 $500,000 44.3% $0.50
New class A warrant holders 100,000 100,000 8.9% $0.10
New class B warrant holders 100,000 30.1% 100,000 8.9% $0.10
============== ============== ================ ================== =================
Total 3,325,000 100.0% $1,127,796 100.0% $0.40
============== ============== ================ ================== =================
</TABLE>
(1) This Maximum Offering table assumes the sale of 1,000,000 shares at a price
of $0.50 each and the sale of 100,000 class A units at a price of $200,000
units, each unit consisting of one share at the price of $0.50 and one
warrant at the price of $0.10 each and one class B unit at a price of
$0.10.
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<PAGE>
<TABLE>
<CAPTION>
Minimum Offering (1) Total Consideration
---------------------------------------------- ------------------------------------
Percent Percent Average Price
Number of Total Amount of Total Per Share
------------- --------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Present stockholders 2,325,000 92.0% $427,796 78.1% $0.19
------------- --------------- ---------------- ------------------ -----------------
New stockholders 200,000 $100,000 18.3% $0.50
New warrant holders (2) 200,000 8.0% $20,000 3.6% $0.10
------------- --------------- ---------------- ------------------ -----------------
Total 2,525,000 100.0% $547,796 100.0% $0.22
========= ===== ======== ===== =====
</TABLE>
(1) This Minimum Offering table is based on the sale of 200,000 units, each
unit consisting of one share of common stock at the price of $0.50 and one
warrant at the price of $0.10.
(2) Pursuant to the minimum offering, a unit shall consist of one share of
common stock and the investor's choice of either one class A warrant or one
class B warrant.
On December 31, 1999, we had a net book value of $93,868, or $.04 per share
(based on the proforma 2,325,000 shares outstanding). 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, the pro
forma net tangible book value after the offering will be $793,868 or $0.24 per
share. This represents an immediate increase in net tangible book value of $0.20
per share to existing stockholders, and an immediate dilution of $0.36 (or
18%)per share to new investors purchasing shares in this offering. After giving
effect to the minimum sale of the units, consisting of common stock and
associated warrants, the pro forma net tangible book value after the offering
will be $213,868 or $0.09 per share. This represents an immediate increase in
net tangible book value of $0.05 per share to existing stockholders, and an
immediate dilution of $0.41 (or 28%)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:
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Public offering price per share of common stock $ 0.50 $ 0.50
Value per share due to sale of warrants $ 0.10 $ 0.10
Net tangible book value per share before offering $ 0.04 $ 0.04
Pro-forma net tangible book value per share after offering $ 0.09 $ 0.24
Increase per share attributed to investors in this offering $ 0.05 $ 0.20
Net tangible book value dilution per share to new investors $ 0.41 $ 0.36
</TABLE>
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.
-10-
<PAGE>
Business of the Company
Company Background and History
We are a Delaware, development stage, corporation that was incorporated in
June 1997. We are presently developing our business model. 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. Our beta site has limited functionality and we
have received very limited revenue from it through 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. We anticipate that we will remain in this phase
of development through the year 2000. 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, among other
things:
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;
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
-11-
<PAGE>
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, pharmacies, clinical
trial organizations, allied health-care groups, and customer media.
It is difficult to evaluate our business and prospects. Our revenue and
income potential is unproven. Our business model as well as the nature of our
market is still emerging. While we plan to utilize the proceeds of this offering
to develop our technical and management infrastructure, an effective marketing
strategy and strategic relationships, we may never achieve or sustain
profitability.
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. We do not anticipate significant revenue generation
until the commercial launch of our website, which we do not expect to occur
earlier than the second quarter of 2001. Upon commercialization of our website,
we are planning 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. John Sidgemore, vice chairman, MCI Worldcom Inc. and chairman,
UUNET Technologies Inc., recently stated at a recent New York InfoTech Forum ,
"There has never been a growth model like the Internet. It took
38 years to get 50 million people to listen to radio. It took the
Internet four years to get that many people. The number of
Internet users doubles in size every three months. That's 1,000%
growth per year. This is completely new ground and it won't slow
down." as quoted in Web Finance, January 31, 2000 -- Technology -
Will 2000 Be the Year of Wireless? by Danielle Fugazy
The second global trend is the re-directing of healthcare advertising
expenditures from professionals to consumers through "direct-to-consumer"
campaigns. In a recent (March 2, 2000) Business Wire article, Sherry Jordan,
Vice President, Strategic Partnerships for the online advertising and direct
marketing solutions firm L90 stated,
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"More and more companies are becoming sophisticated marketers
with respect to online advertising. The Internet is an
increasingly important element of their marketing mix. They are
looking for innovative, strategic thinking that extends beyond
basic banner advertising to customized solutions that will help
them achieve their advertising objectives," Source: Online
Advertising Firm L90 Expands Management Team With Three Key
Hires; The Company Promotes TDI Outdoor Executive to Oversee
National Sales Effort.
We are looking to assume a successful role in the on-line health
information delivery business through a unique, scalable system for creating and
maintaining user profiles and, based upon these profiles, delivering targeted
news and announcements via e-mail, and 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 emerging business strategy will seek 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
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 and that a
significant portion of our revenues can be generated from referrals fees for
recruiting these volunteers. 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, which we do
not anticipate occurring any earlier than the second quarter of 2001. 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. Based upon an initial analysis of our
target market, 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.
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.
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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. We
want our website to 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" 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 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 direct-to-consumer
campaigns.
We believe that the following specific key trends increase demand for our
services:
o 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.
o Growth of the Informational and Commercial Applications and Resources
of the Internet:
Use of the Internet has grown rapidly since commercialization in the early
1990s. An increasing number of servers and websites are being connected to the
Internet, making available educational and healthcare text, graphics and audio
and video information which may be accessed by consumers. Traditional and
emerging Internet applications, including electronic mail and the Internet, are
also increasing in popularity. Internet use is also being promoted by the
development of user-friendly navigation and search tools designed to simplify
consumer access to the Internet's resources.
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o 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. In February 1999, On Wall
Street carried the following opinion.
"There's certainly no denying the growth of the Internet and
Internet-related advertising and commerce. There will be
320-million Internet users worldwide by 2002, compared to less
than 70-million in 1997. Worldwide transactions on the Internet
are predicted to reach $426 billion, up from $12 billion." From:
Introducing the PWE Ratio --Price to Wildest Expectations: It
explains the ridiculous rise in Internet stock prices by David W.
Tice -- On Wall Street February 01, 1999
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.
"An estimated 25.5 million people will go online to search
20,000 health-related web sites for information this year."
Source: E-Healthcare Connections Journal -- Fall 1999 Volume
2. "Each month, thousands of new health-related web sites
come online, even as millions of consumers rush headlong
onto the Net in search of healthcare information and
self-care empowerment. Keeping up with the revolution is a
growing challenge." Source: March 11, 2000
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
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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 direct to
consumer programs
An independent research company, Jupiter Communications, estimates that
expenditures for online health and medical advertising will grow to
approximately $265 million by 2002. As would be expected, a rapidly growing
number of these consumers (i.e., potential "direct to consumer" 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.
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.
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 will strive to provide "one-stop shopping" for customer healthcare,
pharmaceutical and medical information. The vast majority of services are
provided free to the visitor.
We anticipate that 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.
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The Service
We are developing an "opt- in" e-mail delivery service covering the entire
spectrum of health, medical,and pharmaceutical interests. All that a potential
subscriber will need for this free service is a valid e-mail address. A new
subscriber will create 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 approach to direct e-mail, we will be able to send subscribers
capsulized news and promotional items dealing with their respective areas of
interest. Subscribers will then have a convenient way of accessing additional
details on each of these items. While we have not completed our sales and
marketing strategy, we anticipate charging advertisers/marketers not for
distribution of their capsulized news items, but rather for each subsequent
subscriber request for additional information. To solicit advertisers, we are
considering utilizing the outsourcing services of on-line advertising agencies
such as Doubleclick.com. Part of the proceeds from this offering will be
utilized to complete a market study of the industry and of how to successfully
position our company within it.
We intend to provide access to the service on a 24 hour a day, seven days a
week basis through various communications line providers. While certain aspects
of a site can be operated by autoresponders, individuals will be required to
oversee administrative and technical aspects of our operations. Part of our
proceeds will be utilized to determine the most highly scalable, flexible and
cost effective way of running our site. Our test model contemplates outsourcing
the majority of our operating infrastructure, such as the hosting of our system
infrastructure and database servers. We will also survey the benefits of hiring
staff to maintain our site and seeking affiliate and/or co-branding
relationships with other medical sites and seeking outside consultation services
from technical product and service providers, like Computer Associates.
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 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.
Initial Business - Tapping sources of Revenue Generation
We do not anticipate significant revenue generation until the commercial
launch of our website, which we do not expect to occur within the next 12
months. In addition to developing our website, our present stage of development
contemplates developing our market strategy. Part of this exercise is to study
the most effective ways to tap sources with the highest revenue generation
potential. We believe a significant business opportunity exists in the on-line
recruitment of volunteers to participate in clinical
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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.
Primary Revenue Sources
o Revenue generated by leads for clinical trial participants.
We believe a significant business opportunity and source of revenue
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.
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. In order to attract subscribers
to our database, we are considering the inclusion of various services
such as on-line compliance programs that take advantage of the
interactive features of the Internet to improve patient compliance
with prescribed therapies, on-line "chat" capabilities and sponsored
healthcare forums in our website, and hyperlinks to selected Internet
sites covering different medical topics of interest. Presently our
test beta site contains hyperlinks to selected Internet sites covering
different medical topics of interest.
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-
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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 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 Patient Association
We want to implement a service that 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
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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.
o Franchising content:
We intend our website to contain an extensive database of healthcare
information, including licensed content addressing specific diseases
and medical issues; a medical encyclopedia; a pharmacy reference,
including information licensed from the US Pharmacopoeia database;
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. Our beta
test site includes this material to a limited extent as well as links
to many of the healthcare periodicals but does not yet contain
proprietary content or outsourced summaries.We are considering the
feasibility of approaching pharmaceutical firms, pharmacy chains, and
other companies in related fields and offer to license our database
content. We would charge a license fee on a per visitor basis.
o Off-line newsletter subscriptions
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 are determining the feasibility
of publishing off-line newsletters. Our management believes that it
will have enough content to publish a quarterly or even bi-monthly
issue on most topics that are included on the website. Our newsletter
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 commercialization of
our website;
o successfully target revenue generating sources and enter into
contractual arrangements with these sources;
o attract a large number of clients to our website and have them
join our subscriber lists;
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
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attempt to safeguard against one unsuccessful venture. We cannot
assure you that this strategy will be successful.
Our Developing Marketing Strategy
In addition to market and revenue feasibility studies, 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, pharmacies, clinical trial
organizations, allied health-care groups, and customer media. These
relationships are expected to result in long-term partnerships.
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.
Dealing With Competition
The market for healthcare information services is intensely competitive,
rapidly evolving and subject to rapid technological change. Many of our
competitors have greater financial, technical, product development, marketing
and other resources than we have. These organizations may be better known and
have more customers than us. We may be unable to compete successfully against
these organizations.
Many of our competitors have announced or introduced Internet strategies
that will compete with our proposed applications and services. We have many
competitors, including:
o healthcare information software vendors, including McKesson HBOC
and Shared Medical Systems Corporation;
o healthcare electronic data interchange companies, including ENVOY
Corporation and National Data Corporation;
o large information technology consulting service providers,
including Andersen Consulting, International Business Machines
Corporation and
Electronic Data Systems Corporation; and small regional organizations.
In addition, we expect that major software information systems companies
and others specializing in the healthcare industry will offer competitive
applications or services. Some of our large customers may also compete with us.
We will also compete for subscribers, consumers, content and service providers,
advertisers, sponsors and acquisition candidates with the following categories
of companies:
o online services or web sites targeted to the healthcare industry
and healthcare consumers
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o generally, including medscape.com, pol.net, ivillage.com,
medcareonline.com, mediconsult.com, betterhealth.com, drkoop.com,
onhealth.com, healthcentral.com, and thriveonline.com;
o publishers and distributors of traditional offline media,
including those targeted to healthcare professionals, many of
which have established or may establish web sites;
o general purpose consumer online services and portals which
provide access to healthcare-related content and services;
o public sector and non-profit web sites that provide healthcare
information without advertising or commercial sponsorships;
o vendors of healthcare information, products and services
distributed through other means, including direct sales, mail and
fax messaging; and
o web search and retrieval services and other high-traffic web
sites.
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,
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
As of December 31, 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.
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.
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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 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
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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 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.
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 emerge
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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.
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
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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.
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.
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We May Be Subject To Government Regulation:
By the Federal Communications Commission (the "FCC")
At present, there are few laws or regulations that specifically regulate
communications or commerce on the Internet; however, future laws and regulations
may address issues such as on-line content, user privacy, and pricing and
quality of products and services. As an Internet service provider, we are not
currently subject to direct regulation by the Federal Communications Commission
or any other agency, other than regulations applicable to businesses generally.
In a report to Congress adopted on April 10, 1998, the Federal Communications
Commission reaffirmed that Internet service providers should be classified as
unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Telecommunications Act of
1996, as amended.
This finding is important because it means that we are not subject to
regulations that apply to telephone companies and similar carriers. We also are
not required to contribute a percentage of our gross revenues to support
"universal service" subsidies for local telephone services and other public
policy objectives, such as enhanced communications systems for schools,
libraries and certain health care providers. Although there can be no assurance,
the Federal Communications Commission action may also discourage states from
separately regulating Internet service providers as telecommunications carriers
or imposing similar subsidy obligations.
Nevertheless, Internet-related regulatory policies are continuing to
develop, and it is possible that we could be exposed to regulation in the
future. For example, in the same report to Congress, the FCC stated its
intention to consider whether to regulate voice and fax telephony services
provided over the Internet as "telecommunications" even though Internet access
itself would not be regulated. In addition, several telecommunications carriers
are seeking to have Internet telecommunications regulated by the FCC in the same
manner as other telecommunications services. Because the growing popularity and
use of the Internet has burdened the existing telecommunications infrastructure
in many areas, local exchange carriers have petitioned the FCC to regulate ISPs
and OSPs in a manner similar to long distance telephone carriers and to impose
access fees on the ISPs and OSPs.
Also, Internet user privacy has become an issue both in the United States
and abroad. Current United States privacy law consists of a few disparate
statutes directed at specific industries that collect personal data, none of
which specifically covers the collection of personal information on-line. We
cannot guarantee that the United States or foreign nations will not adopt
legislation aimed at protecting on-line privacy. Any such legislation could
affect the way in which we are allowed to conduct our business, especially those
aspects that involve the collection or use of personal information and, as a
result, such legislation could have a material 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
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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 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.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE YEARS
ENDING DECEMBER 31, 1998 AND 1999 AND THE PERIOD
FROM INCEPTION (JUNE 23, 1997) TO DECEMBER 31, 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,
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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 December 31, 1999. The company is in the process of developing a web
site on the World Wide Web for the purpose of selling health care products and
sharing its expertise by doing consulting.
During this period, management devoted the majority of its efforts to
initiating the process of the web site design and development, obtaining new
customers for sale of consulting services, developing sources of supply,
developing and testing its marketing strategy and finding a management team to
begin the process of: completing its marketing goals; furthering its research
and development for its products; completing the documentation for and selling
initial shares through the company's private placements; and completing the
documentation for the company's initial public offering. These activities were
funded by the company's management and investments from stockholders. The
company has not yet generated sufficient revenues during its limited operating
history to fund its ongoing operating expenses, repay outstanding indebtedness,
or fund its web site and product development activities. There can be no
assurance that development of the web site will be completed and fully tested in
a timely manner and within the budget constraints of management and that the
company's marketing research will provide a profitable path to utilize the
company's marketing plans. Further investments into web site development,
marketing research as defined in the company's operating plan will significantly
reduce the cost of development, preparation, and processing of purchases and
orders by enabling the company to effectively compete in the electronic market
place.
During this developmental period, the company has been financed through
officer's loans with a balance of $43,672 from Jack Rubinstein, which were
converted to additional paid in capital as of June 30, 1999. The company also
financed its activities through the sale of shares of common stock aggregating
$230,022.
Results of Operations for the year ended December 31, 1999 as compared to the
year ended December 31, 1998.
For the year ended December 31, 1999, the company generated net sales of
$30,000 as compared to $22,500 for the year ended December 31, 1998 representing
an increase of $7,500. The company's cost of goods sold for the year ended
December 31, 1999 was $-0- as compared to $-0- for the year ended December 31,
1998. The company's gross profit on sales was approximately $30,000 for the year
ended December 31, 1999 as compared to $22,500 for the year ended December 31,
1998. 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
$295,724 for the year ended December 31, 1999 as compared to $256,402 for the
year ended December 31, 1998 representing an increase of $39,322. An analysis of
expenses for the year ended December 31, 1998 includes 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.
Included in the expenses for the year ended December 31, 1999 are rent of
$6,000, officer salaries of $6,000, legal fees of $60,000; office and computer
expenses of $17,849 and $205,875 in consulting and legal fees paid with shares
of common stock.
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Results of Operations for the period from inception (June 23, 1997) to December
31, 1999.
For the period from the company's inception, June 23, 1997, through
December 31, 1999, a period of approximately 30 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 December 31, 1999. The gross profit from sales
for this 30 month period is $52,500. Management believes the gross profit of an
average of approximately $1,700 per month for the period from inception, June
23, 1997, through December 31, 1999, will improve and stabilize once the
company's web site facilities become realized at the completion of the public
offering and its marketing plans become fully implemented.
The company's general and administrative costs aggregated approximately
$596,725 for the period from inception, June 23, 1997, through December 31,
1999. Of these initial startup costs, approximately $41,500 is attributed to
wages, telephone of $13,105, professional fees of $73,287, rent of $20,625, and
office and computer expenses of $37,708, $394,000 in consulting expenses paid
with shares of common stock and $16,500 in officer compensation.
Liquidity and Capital Resources.
The company increased its cash position to $114,868 at December 31, 1999
from a cash balance of $-0- at June 23, 1997. Working capital at December 31,
1999 was positive at $93,868. 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 and the balance of 28,950 was
paid off by the company. In addition, the company also sold 1,247,500 shares of
common stock for an aggregate of $124,750 and received $105,172 as additional
capital contributions from shareholders. The company expended cash for the
development of the business and absorbing cash losses aggregating $46,799 for
the year ended December 31, 1999 and $112,302 for the period from inception to
December 31, 1999 and issued 752,500 shares of common stock in consideration for
non cash expenses of $197,774 for the period from inception, June 23, 1997, to
December 31, 1999.
Management believes that it will be able to fund the company through its
present cash position and the continuation of offering consulting services and
the receipt of 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 several stages.
The first stage consists of initial web site construction and collection
of health-related data from existing web sites and service providers and
equipping our facility with hardware, primarily workstations and dedicated data
feed supply lines. This has been partially completed. 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, 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.
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This phase of development will commence upon receipt of the minimum
proceeds from this offering. The completion of this portion of our development
is dependent upon the receipt of the maximum proceeds from this offering. In the
event that we do not raise the maximum amount sought by this offering, we will
have to seek alternative sources of financing. We cannot assure you that we will
be able to secure financing from other sources. Assuming we raise the maximum
offering amount, we anticipate the completion of our website development around
the second quarter of 2001.
Neither the purchase/installation of workstations and dedicated T-1
supply lines nor the development of a web enabled platform with highly defined
customization has 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 workstation/T-1 supply
lines portion would require approximately $54,000 and to complete the
development of the web-site would require a total of approximately $175,000
during the next twelve (12) months. The next stage of operation/expansion
consists of marketing/advertising expenditures. To refine and commence our
marketing strategy, we require, among other things:
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. We expect to be
completed the third quarter of 2000. We expect to
commence this campaign upon receipt of the minimum
proceeds;
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.
We expect to commence this campaign after the completion
of our website, which we anticipate occurring no earlier
than the second quarter 2001. This will be an ongoing
campaign;
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. We expect to
commence this campaign during the third quarter of 2000.
This will be an ongoing campaign; 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, pharmacies, clinical trial
organizations, allied health-care groups, and customer
media. We expect to commence this campaign upon receipt
of the minimum proceeds. This will be an ongoing
campaign.
We estimate that approximately $175,000 may be needed for this stage of
operation/expansion. The completion of this phase of our development is
dependent upon the receipt of the maximum proceeds from this offering. In the
event that we do not raise the maximum amount sought by this offering, we will
have to seek alternative sources of financing. We cannot assure you that we will
be able to secure financing from other sources.
The next stage of operation/expansion consists of attempts to engage
in assembling a high quality management team and strategic alliances with health
care professionals and organizations having synergies with our company. 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
maybe achieved by purchasing future,
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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 stage of operation/expansion, which we will commence upon
the receipt of the minimum proceeds of this offering.
Taken together and using these highest cost estimates, approximately
$525,000 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 and would need to seek further financing. It is not certain that
such financing could be obtained, or if obtained, would be available at
commercially reasonable rates.
Dividend Policy
We have not paid any cash dividends to date, and we do not expect to pay
dividends in the foreseeable future. We intend, in the short term at least, to
use all available funds to develop our business.
Plan of Distribution
No Broker-Dealer Or Selling Agent Planned At Present
We are 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. No person
will sell his own shares of our company while engaged in this public
distribution. 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.
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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. The shares
offered by selling shareholders may be sold on one or more exchanges or in the
over-the-counter market, or in privately negotiated transactions. Any shares
covered by this prospectus that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under such rule rather than pursuant to this
prospectus. If a registration statement is in 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. We will not receive
any proceeds from the sale by the selling stockholders of their common stock.
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.
Legal Proceedings
We have not been, nor has our property been, the subject of any pending
legal proceeding.
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Directors, Executive Officers,
Promoters and Control Persons
Listed below are our officers and directors and their previous experience.
The directors have been elected by the present shareholders and shall serve for
terms of one year, or until their successors are elected and have qualified.
officers are appointed by, and serve at the pleasure of, the board of directors.
Officers And Directors
Jack Rubinstein, President, CEO, 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.
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He has been registered as a Representative with the UK National Association
of Securities Dealers and Investment Managers (now FSA), has held both a
Principal's and a Representative's license to deal in securities from the UK
Department of Trade and Industry and has been registered with IMRO (the
Investment Managers Regulatory Organization).
Mr. Harrison-Mills has advised clients from a variety of business sectors
in England, Europe, the United States and Australia; and his work has won a
number of international creative awards: a "Clio" plus eight Clio Certificates
of Excellence; a Federation of Commercial Television Stations Award and a
National Retail Merchants Association Award. His business development
experience, on both the client and consultancy side, has spanned most facets of
strategic planning, corporate communications and corporate finance, involving
him in a number of new product launches and company start-up situations.
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."
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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 2,325,000 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:
Name Number Percentage
of Shares
-------------------------------------------------------------------
Jack Rubinstein 748,750 32.20%
Unifund Financial Group, Inc.* 998,750 42.96%
R. Scott Barter 350,000 15.05%
Douglas Harrison-Mills 50,000 2.15%
(All officers and directors
as a group - 4 persons) 2,147,500 92.36%
*This entity is controlled by Mr. Barter and its share ownership in us
is attributed to him.
Totals 2,147,500 92.36%
- --------
* Not an officer or director, but may be deemed a "significant employee."
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Upon completion of the offering, officers, directors and holders of five percent
(5%) or more of our common stock will hold, in the aggregate, 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:
Percentage of Common Stock
Number
Name of Officer of Shares Minimum Maximum
- --------------------------------------------------------------------------------
Jack Rubinstein 748,750 29.65% 22.52%
Unifund Financial Group, Inc.* 998,750 39.55% 30.03%
R. Scott Barter 350,000 13.86% 10.52%
Douglas Harrison-Mills 50,000 2.02% 1.50%
(All officers and directors
as a group - 4 persons) 2,147,500 85.04% 64.58%
*This entity is controlled by Mr. Barter and its share ownership in us is
attributed to him..
Totals 2,147,500 85.04% 64.58%
Description of Securities
The securities offered for sale consist of
o 1,000,000 shares of common stock, par value $0.001 per share, which
can be purchased for $0.50 per share,
o 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
o 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.
Until we raise the minimum offering amount of $120,000, we will offer only units
at a price of $.60 per unit. 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.
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Common Stock
We are authorized to issue up to 20,000,000 shares of common stock, par
value $.001 per share, of which 2,325,000 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. A summary of the terms of the warrants are provided below. warrant
agreements. Forms of the warrant agreements have been filed as exhibits to the
registration statement of which this prospectus forms a part. Each of the class
A redeemable warrant, the class B redeemable warrant, 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.
The Class A Redeemable Warrants
The class A redeemable warrants will be issued in registered form pursuant
to an agreement dated the date of this prospectus between the company and
American Stock Transfer and Trust Company. 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
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 they expire at the close of business on the third anniversary of
the effective date of the offering. A holder of the class A redeemable warrants
may exercise them at the office of American Stock Transfer and Trust Company, 40
Wall Street, NY, NY 10005, by surrendering his or her warrant, and paying the
exercise price for each warrant being exercised. Upon expiration, the class A
redeemable warrants become void and of no value.
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.
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.
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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
American Stock Transfer and Trust Company. 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
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 they expire at the close of business on the fifth anniversary of
the effective date of the offering. A holder of the class B redeemable warrants
may exercise them at the office of American Stock Transfer and Trust Company, 40
Wall Street, NY, NY 10005, by surrendering his or her warrant, and paying the
exercise price for each warrant being exercised. Upon expiration, the class B
redeemable warrants become void and of no value.
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.
Interests of Named Experts and Counsel
The company's Financial Statements as of December 31, 1999 and for the
period from June 23, 1997 (Inception) to December 31, 1999 were passed upon by
Thomas P. Monahan, independent certified public accountant. Certain legal
matters in connection with the registration of the securities were passed upon
by Kaplan Gottbetter & Levenson, LLP, counsel to the company.
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 all of their shares
assuming
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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 also 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 all selling shareholders 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
- -------------------------------------------------------------------------------
Jack Rubinstein 748,750 24.65% 22.52%
Unifund Financial Group, Inc.* 998,750 39.55% 30.03%
R. Scott Barter 350,000 13.86% 10.52%
Douglas Harrison-Mills 50,000 1.98% 1.51%
Sheila Corvino 50,000 1.98% 1.51%
Brad Smith 50,000 1.98% 1.51%
Kaplan Gottbetter & Levenson LLP 50,000 1.98% 1.51%
Harold Halcrow 10,000 0.39% 0.18%
Harris Schiff 10,000 0.39% 0.18%
Federico Brown 5,000 0.19% 0.09%
Arthur Gager 2,500 0.09% 0.07%
============================================ ================ =================
TOTALS 2,325,000 92.04% 69.45%
Jack Rubinstein, R. Scott Barter and Douglas Harrison-Mils 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:
o for any breach of such director's duty of loyalty to the company or
its stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o under Delaware statutory provisions making directors personally
liable, under a negligence standard, for unlawful dividends or
unlawful stock repurchases or redemptions, or
o for any transaction from which the director derived an improper
personal benefit.
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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 that 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:
o 123,750 shares to Jack Rubinstein;
o 100,000 shares to R. Scott Barter;
o 50,000 shares to Douglas Harrison-Mills; and
o 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
-42-
<PAGE>
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.
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.
On December 31, 1999, Kaplan Gottbetter & Levenson LLP was awarded 50,000
shares of our common stock in partial consideration of legal services rendered
to our company.
While management 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.
All past transactions have been unanimously ratified by our board of
directors. In most but not all cases, at least two members of our board were
disinterested.
Future material transactions and loans may be entered into on terms no less
favorable to the issuer than those that may be obtained from unaffiliated third
parties. Further, any forgiveness of loans must be approved by a majority of the
issuer's directors who do not have an interest in the transactions and who have
access, at the issuer's expense, to issuer's or independent counsel.
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 3,325,000 shares of common stock.
3,325,000 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
o one percent (1%) of the then outstanding shares of the common stock or
-43-
<PAGE>
o 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.
Executive Compensation
For the period from inception through December 31, 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, 1999 and for the years
ended December 31, 1998 and December 31, 1999, 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.
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
-44-
<PAGE>
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.
-45-
<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, 1999 and the related statements of
operations, cash flows and shareholders' equity for the years ended December 31,
1998 and 1999 and for the period from inception, June 23, 1987 to December 31,
1999. 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, 1999 and the results of its
operations, shareholders' equity and cash flows for the years ended December 31,
1998 and 1999 and for the period from inception, June 23, 1997 to December 31,
1999 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 28, 2000
Paterson, New Jersey
F-1
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1999
--------------------
<S> <C>
Assets
Current assets
Cash and cash equivalents $114,868
--------
Current assets 114,868
Property and equipment -0-
Total assets $114,868
========
Liabilities and Stockholders' Equity
Current liabilities
Accrued expenses $ 21,000
Officer loans payable -0-
---------
Total current liabilities 21,000
Stockholders' equity
Preferred stock authorized 1,000 shares, $0.001
par value each. At December 31, 1999 there are
- -0- shares outstanding.
Common Stock authorized 2,000 shares, $0.001
Par value each. At December 31, 1999 there are
2,325,000 shares outstanding. 2,325
Additional paid in capital 631,346
Deficit accumulated during development stage (539,803)
---------
Total stockholders' equity 93,868
----------
Total liabilities and stockholders' equity $ 114,868
==========
See accompanying notes to financial statements.
F-2
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF OPERATIONS
For the period from
inception, June 23,
For the year ended For the year ended 1997, to
December 31, December 31, December 31,
1998 1999 1999
--------------- ------------------- -------------------
<S> <C> <C> <C>
Revenue $ 22,500 $ 30,000 $ 52,500
Costs of goods sold -0- -0- -0-
Gross profit 22,500 30,000 52,500
Operations:
General and administrative 68,277 89,849 199,873
Non cash compensation legal and
consulting fee 188,125 205,875 394,000
Depreciation and amortization -0- -0- 2,852
----------- ----------- -----------
Total expense 256,402 295,724 596,725
Income (loss) from operations (233,902) (265,724) (544,225)
Other income and expenses
Interest expense 2,607 1,050 4,422
----------- ----------- -----------
total other expenses 2,607 1,050 4,422
Income (loss) $ (236,509) $(264,674) $ (539,803)
=========== =========== ===========
Net income (loss)
per share -basic $ (0.24) $ (0.21) $ (0.49)
=========== =========== ===========
Number of shares
outstanding-basic 1,002,500 1,250,000 1,250,000
=========== =========== ===========
See accompanying notes to financial statements.
F-3
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF OPERATIONS
For the For the
three months three months
ended ended
December 31. December 31,
1998 1999
-------------- ----------------
<S> <C> <C>
Revenue $ 22,500 $ -0-
Costs of goods sold -0- -0-
----------- -----------
Gross profit 22,500 -0-
Operations:
General and administrative 221,725 176,980
Depreciation and amortization -0- -0-
----------- -----------
Total expense 221,725 176,980
Income (loss) from operations (199,225) (176,980)
Income (loss) $ (199,225) $ (176,980)
=========== ===========
Net income (loss)
per share -basic $ (0.02) $ (0.01)
=========== ===========
Number of shares
outstanding-basic 1,002,500 1,250,000
=========== ===========
See accompanying notes to financial statements.
F-4
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
For the period from
inception, June 23,
For the year ended For the year ended 1997, to
December 31, December 31, December 31,
1998 1999 1999
--------------- ------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(236,509) $(264,674) $(539,803)
Add Items not affecting cash
Non cash compensation - consulting fees paid with
shares of common stock 188,125 205,875 394,000
Depreciation -0- -0- 2,852
Changes in non-cash operating accounts
Accrued expenses 6,000 12,000 21,000
------------- ------------------ ---------------
Total Cash Flows From Operations (42,384) (46,799) (121,951)
Cash Flows From Investing Activities
Purchase of office equipment t -0- -0- (2,852)
------------- ------------------ ---------------
Total Cash Flows From Investing Activities -0- -0- (2,852)
Cash Flows From Financing Activities
Officer loan payable 36,857 (72,622) -0-
Sale of Common Stock -0- 124,750 124,850
Capital contribution 105,172 114,821
------------- ------------------ ---------------
Total Cash Flows From Financing Activities 36,857 157,300 239,671
Net Increase (Decrease) in Cash (5,527) 110,501 114,868
Cash Balance Beginning of Period 9,894 $4,367 -0-
------------- ------------------ ---------------
Cash Balance End of Period $4,367 114,868 $ 114,868
============= ================== ===============
Non cash activities
Issuance of shares of common stock in consideration
for consulting services $ 188,125 -0- $ 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 752,500 $ 752 187,373 -- 188,125
Net loss -- -- -- (236,509) (236,509)
---------- ---------- ---------- ---------- ----------
12-31-1998 1,002,500 $ 1,002 $ 196,872 $ (275,129) $ (77,255)
Sale of shares 1,247,500 1,248 310,627 -0- 311,875
Capital contribution -0- -0- 105,172 -0- 105,172
Cancellation of shares (25,000) (25) (6,225) -0- (6,250)
Issuance of shares for legal fees 100,000 100 24,900 -0- 25,000
Net loss
-0- -0- -0- (264,674) (264,674)
---------- ---------- ---------- ---------- ----------
12-31-1999 2,325,000 $ 2,325 $ 631,346 $ (539,803) $ 93,868
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
a. Organization of company and issuance of common stock
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 1,000,000 post split
shares to Mr. Jack Rubinstein in consideration for $100 cash.
Between June 20, 1997 and August 20, 1997, Mr. Rubinstein contributed to
the company's capital an additional $9,649 in expenses paid on behalf of the
company.
On December 18, 1998, Mr. Rubinstein remitted back to the company 75 shares
or 750,000 post split shares of common stock for cancellation.
On December 18, 1998, the company issued 75.25 shares or 752,500 post split
shares of common stock for consulting services valued at $188,125 or $0.25 per
share to the following individuals and companies and in the following amounts:
123,750 shares to Jack Rubinstein; 100,000 to R. Scott Barter; 50,000 shares to
Douglas Harrison-Mills; 50,000 shares to Brad Smith; 25,000 shares to Alan
Scott; and 403,750 to Unifund Financial Group, Inc.
The company forward split the number of shares of common stock outstanding
on March 31, 1999 in a ratio of 10,000 to one restating the number of
outstanding shares of common stock from 100.25 to 1, 002,500 shares of common
stock. The number of shares of common stock outstanding have been retroactively
restated for all periods presented.
The company sold an aggregate of 247,500 shares of common stock for an
aggregate consideration of $61,875 which includes partial payment with cash
aggregating $24,750 or $0.10 per share and in consideration of the payment of
consulting fees aggregating $37,125 or $.15 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 from a
shareholder of the company.
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 valued
at $12,500 or $.25 per share.
The company has cancelled the issuance of 25,000 shares of common stock
issued to Alan Scott and has adjusted operations for the cancellation
aggregating $3,125 or $.25 per share.
On December 31, 1999, Kaplan Gottbetter & Levenson LLP was awarded 50,000
shares of our common stock in partial consideration of legal services rendered
to our company aggregating $12,500 or $.25 per share.
As of December 31, 1999, the company sold an aggregate of 1,000,000 shares
of common stock for an aggregate consideration of $250,000 which includes
partial payment of cash aggregating $100,000 or $0.10 per share and in
consideration of the payment of consulting fees, aggregating $150,000 or $.15
per share.
F-7
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 2- Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying unaudited financial statements have been prepared on a
going concern basis of accounting principles applicable to a "going concern",
which assumes that the company will continue in operation for at least one year
and will be able to realize its assets and discharge its liabilities in the
normal course of operations.
Several conditions and events cast doubt about the Company's ability as a
"going concern". The Company has incurred losses before interest expense of
$539,803 for the period from inception June 23, 1997, to December 31, 1999,has a
working capital deficiency and requires additional financing for its operations
and to complete web site development. As of December 31, 1999 the Company is
preparing documentation for an initial public offering aggregating $700,000 if
the maximum offering is sold and has completed the sale of 1,000,000shares of
common stock for an aggregate consideration of $100,000. The company is
anticipating that with the completion of an initial 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.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned as described
above, will mitigate the adverse conditions and events which raise doubt about
the validity of the "going concern assumption used in preparing these financial
statements, there can be no assurance that these actions will be successful.
The financial statements presented consist of the balance sheet of the
company as at December 31, 1999 and the related statements of operations and
cash flows for the years ending December 31, 1998 and 1999 and for the period
from inception, June 23, 1997 to December 31, 1999.
b. Cash and cash equivalents
The company treats temporary investments with a maturity of less than three
months as cash.
c. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
d. 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, 1999
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 December 31, 1999, the company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been
coveredby the federal insurance.
i. Recent Accounting Pronouncements
In March, 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-1 (SOP 98-1), Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 is effective
for financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use including the requirement to capitalize specified costs and
amortization of such costs. The implementation of SOP 98-1 does not have a
material impact on the Company's financial position or results of operations.
Computer software costs that are incurred in the preliminary project stage are
expensed as incurred. Once the capitalization criteria of the SOP have been met,
costs incurred when developing computer software for internal are capitalized.
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 $188,125 or $0.25 per
share to the following individuals and companies and in the following amounts:
123,750 shares to Jack Rubinstein; 100,000 to R. Scott Barter; 50,000 shares to
Douglas Harrison-Mills; 50,000 to Brad Smith; 25,000 shares to Alan Scott; and
403,750 to Unifund Financial Group, Inc.
For the period April 1, 1999 to 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
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, 1999, for the year
ending December 31, 1999, rent expense was $15,000 and $6,000 respectively.
F-9
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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, 1999, for the
year ending December 31, 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: $15,000
and $6,000 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, 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 December 31, 1999, the company has net operating loss carry forwards for
income tax purposes of $539,803. 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 $ 183,533
Valuation allowance $(183,533)
----------
Net deferred tax asset $ -0-
==========
The company recognized no income tax benefit for the loss generated in the
period from inception, June 23, 1997, to December 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the company has
yet to recognize significant revenue from the sale of its products, the company
believes that a full valuation allowance should be provided.
F-10
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 6 - Property and Equipment
Capital Assets consisted of the following at December 31, 1999:
Asset Accumulated
Cost Depreciation Total
---- ------------ -----
Office equipment $2,582 $2,852 $ -0-
Note 7 - Preferred Stock
The company's authorized capital stock consists of 5,000,000 shares of
preferred stock, par value $.001 per share.
The board of directors of the company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences,
andconversion rights and sinking fund requirements, if any, of such series.
As of December 31, 1999, the number of shares outstanding is -0-.
Note 8 - 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
PROSPECTUS DATED: April 26, 2000
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
-------------------------------------------------------------------------------
2,325,000 SHARES OF COMMON STOCK
-------------------------------------------------------------------------------
This prospectus relates to the public offering, which is not being underwritten,
of up to 2,325,000 shares of our common stock by some of our shareholders.
Shares sold pursuant to this prospectus will be sold for $5.00 per share. 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]
A-1
<PAGE>
Table of Contents
Page
Prospectus Summary..............................................................
The Company.....................................................................
The Offering...................................................................
Risk Factors....................................................................
Use of Offering Proceeds........................................................
Capitalization .................................................................
Dilution........................................................................
Forward Looking Statements......................................................
Business of The Company.........................................................
Management's Discussion And Analysis of
Financial Condition And Results of Operations ................................
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
A-2
<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]
A-3
<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]
A-4
<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 29.65 All -0- -0-
Unifund Financial Group, Inc.* 998,750 39.55 All -0- -0-
R. Scott Barter 350,000 13.86 All -0- -0-
Douglas Harrison-Mills 50,000 1.98 All -0- -0-
(All officers and directors
as a group - 4 persons)
2,147,500 85.04 All -0- -0-
Selling Shareholders:
Sheila Corvino 50,000 1.98% All -0- -0-
Brad Smith 50,000 1.98% All -0- -0-
Harold Halcrow 10,000 0.39% All -0- -0-
Harris Schiff 10,000 0.39% All -0- -0-
Federico Brown 5,000 0.19% All -0- -0-
Arthur Gager 2,500 0.19% 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>
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 April 26, 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]
A-5
<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]
A-6
<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 June __, 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.
5,325,000 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
April 26, 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 $ 2,741.78
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 $ 92,741.78
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. All parties except for Mr. Gager are
sophisticated investors. All parties were given the opportunity to request
financial and non-financial information about the company and ask the Mr.
Rubinstein questions about the company. 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. 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. On December 31, 1999,
Kaplan Gottbetter & Levenson LLP was awarded 50,000 shares of our common stock
in partial consideration of legal services rendered to our company. 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 nine 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 April 26, 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 April 26, 2000
------------------- -------- ----------------
R. Scott Barter (Title) (Date)
(Signature)
/s/ Douglas Harrison-Mills Director April 26, 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 (together the "Securities");
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 individual parties 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. Prohibitive Transfers. Each of the individual parties hereto, hereby
agrees 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"), not
to offer pledge, sell, assign, transfer, contract to sell, grant any
option for the sale of, or otherwise dispose of, directly or
indirectly any Securities, without the prior consent of Pipeline.
Notwithstanding the foregoing, nothing herein shall be deemed to
prohibit the transfer of any Securities by gift or bequest or through
inheritance, so long as the donee or beneficiary agrees in writing to
be bound by the foregoing restriction.
2. 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
Securities. However, this Agreement cannot be assigned by any party
except by or with the written consent of Pipeline. Nothing herein
expressed or implied is intended or shall be construed to confer upon
or to give any person, firm or corporation other than the parties
hereto and their respective legal representatives, successors and
assigns any rights or benefits under or by reason of this Agreement.
3. Transfer Agent. The Company's transfer agent shall be notified of the
restrictions imposed by this Agreement and shall place such
restrictions in its books and records.
4. 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.
5. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between them or any
of them as to such subject matter.
6. Further Agreements. Each of the parties hereto agrees to execute all
such further instruments and documents and to take all such further
actions as any other party may reasonably require in order to
effectuate the term and purposes of this Agreement.
7. Amendments. Except as otherwise expressly provided herein, this
Agreement may not be amended except by an instrument in writing
executed by both of the parties.
8. Severability. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement and such invalid illegal and unenforceable provision shall
be reformed and construed so that it will be valid, legal and
enforceable to the maximum extent permitted by law.
9. 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.
10. 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 April 26, 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)
Kaplan Gottbetter & Levenson
/s/ Adam Gottbetter
- -------------------
Adam Gottbetter
(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
March 17, 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 2,325,000 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 February 28, 2000 on the
balance sheet of Pipeline Data Inc. as of December 31, 1998 and December 31,
1999 and for the period from inception, June 23, 1997 to December 31, 1999 and
the related statements of operations, cash flows and shareholders' equity for
the years ended December 31, 1998 and December 31, 1999, 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
April 18, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the TWELVE month period ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 114,868
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 114,868
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114,868
<CURRENT-LIABILITIES> 21,000
<BONDS> 0
0
0
<COMMON> 2,325
<OTHER-SE> 91,618
<TOTAL-LIABILITY-AND-EQUITY> 93,868
<SALES> 52,500
<TOTAL-REVENUES> 52,500
<CGS> 0
<TOTAL-COSTS> 350,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,422
<INCOME-PRETAX> (539,803)
<INCOME-TAX> 0
<INCOME-CONTINUING> (539,803)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (539,803)
<EPS-BASIC> (.21)
<EPS-DILUTED> (.21)
</TABLE>
