As filed with the Securities
and Exchange Commission on
January 10, 2001
Registration No. 333-79831
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PIPELINE DATA INC.
----------------------------------------------
(Name of small business issuer in its charter)
Delaware 7310 13-3953764
--------------------------------------------------------------------------------
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number Identification No.)
250 East Hartsdale Avenue, Suite 21 Jack Rubinstein, Chief Executive Officer
Hartsdale NY 10530 Pipeline Data, Inc.
(914) 725-7028 250 East Hartsdale Avenue, Suite 21
--------------------------------- Hartsdale NY 10530
(Address and telephone number of (914) 725-7028
principal executive offices) ------------------------------------
(Name, address and telephone number
of agent for service)
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. [ ]
Copy to:
Steven D. Dreyer, Esq.
Hall Dickler Kent Goldstein & Wood, LLP
909 Third Avenue, 27th Floor
New York, NY 10022
(212) 339-5580
<PAGE>
Calculation of Registration Fee
<TABLE>
<CAPTION>
Amount Proposed Maximum Proposed Maximum
Title of each Class of Securities Being To be Offering Price Aggregate Amount of
Registered Registered Per Security Offering Price Registration Fee
--------------------------------------- ---------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 3,325,000 (1) $0.50 (2) $1,662,500 (2) $462.18 (2)
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 (3) 1,000,000 (4) $1.50 (5) $1,500,000 $834.00 (6)
Common Stock Underlying class B Warrants (3) 1,000,000 $2.50 (7) $2,500,000 $1,390.00 (8)
--------- ---------- ---------
TOTAL 7,325,000 $5,862,500 $2,741.78 (9)
========= ========== =========
</TABLE>
-----------------------------------------
(1) Includes (a) 791,890 previously registered shares which were sold by
registrant after this registration statement was declared effective.
Includes 208,110 shares which had been registered for sale by the
registrant but not sold and (c) 2,325,000 shares which have been registered
for resale by the selling stockholders on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
(2) Estimated solely for purposes of calculating the registration fee and
includes shares being sold by selling stockholders.
(3) 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.
(4) Includes (a) 785,210 previously registered class A redeemable warrants
which were sold by registrant after this registration statement was
declared effective. Also includes 214,790 class A redeemable warrants which
had been registered for sale by the registrant, but not sold.
(5) At the time of effectiveness of this registration statement, the exercise
price of these warrants was $3.00 per share. That exercise price is being
reduced, pursuant to this post-effective amendment, to $1.50 per share.
(6) Represents the filing fee previously paid on the basis of a $3.00 per share
exercise price.
(7) At the time of effectiveness of this registration statement, the exercise
price of these warrants was $5.00 per share. That exercise price is being
reduced, pursuant to this post-effective amendment, to $2.50 per share.
(8) Represents the filing fee previously paid on the basis of a $5.00 per share
exercise price.
(9) registrant previously paid a fee of $2,741.78. Therefore no additional fee
is due with this filing.
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 is a post-effective amendment to our registration statement relates
to (1) our previous registration of 1,000,000 shares of common stock, 791,890 of
which were issued in our initial public offering of securities and 1,000,000
class A redeemable warrants, 785,210 of which were issued in that offering, (2)
the reduction in the exercise price of our class A redeemable warrants from
$3.00 to $1.50, (3) our previous registration of up to 1,000,000 class B
redeemable warrants for sale in our initial public offering, none of which were
sold in that offering, and all of which shall be distributed as a dividend to
the holders of our common stock, (4) the reduction in the exercise price of our
class B redeemable warrants from $5.00 to $2.50, (5) our previous registration
for resale of 2,325,000 shares of common stock by the holders of those shares,
and (6) the resale of up to 1,785,210 shares of common stock issuable upon
exercise of our outstanding class A redeemable warrants and upon exercise of our
class B redeemable warrants by the holders of such instruments.
We will not receive any proceeds from our distribution of the class B
redeemable warrants or from the resale of securities by holders of any of the
securities registered hereunder. We will receive proceeds of up to $1,177,815 in
the event that the outstanding class A redeemable warrants are exercised by the
holders of such instruments, and up to $2,500,000 in the event that the class B
redeemable warrants are exercised by the holders of such instruments.
This registration statement contains three forms of prospectus. One will be
used in connection with (1) the reduction of the exercise price of our 785,210
outstanding class A redeemable warrants, (2) the resale of 785,210 shares of our
common stock, par value $.001 per share, issuable upon the exercise of our
outstanding class A redeemable warrants by the holders of such instruments, (3)
the reduction of the exercise price of 1,000,000 class B redeemable warrants,
(4) the distribution of those class B redeemable warrants and (5) the resale of
1,000,000 shares of our common stock issuable upon the exercise of the class B
redeemable warrants by the holders of such instruments. The other two forms of
prospectus will be used in connection with an offering of shares of our common
stock which are currently held by certain selling stockholders pursuant to a
lockup agreement which prohibits the sale of such shares by the selling
stockholders until April 25, 2001. One of those two forms of selling stockholder
prospectus will be used by four affiliates who may sell up to 10%, in the
aggregate, of the issued and outstanding shares of common stock in "at the
market" transactions, and the balance of their aggregate share holdings at a
selling price of $3.00 per share. The other form of selling stockholder
prospectus will be used by selling stockholders who are not affiliates who may
sell all of their respective holdings of common stock in "at the market"
transactions. All of the forms of 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; (iv) an alternate "Selling Stockholders" section;
and (v) the rear cover page of the prospectus.
<PAGE>
[GRAPHIC OMITTED] PROSPECTUS
PROSPECTUS DATED: January 10, 2001
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
785,210 class A redeemable warrants
785,210 shares of common stock issuable upon exercise
of outstanding class A redeemable warrants
1,000,000 class B redeemable warrants and
1,000,000 shares of common stock issuable
upon exercise of the class B redeemable warrants
This prospectus relates to the reduction of the exercise price of our
785,210 outstanding class A redeemable warrants from $3.00 to $1.50 and the
resale of 785,210 shares of our common stock, par value $.001 per share,
issuable upon exercise of our outstanding class A redeemable warrants by the
holders of such instruments.
This prospectus also relates to the reduction of the exercise price of
1,000,000 class B redeemable warrants from $5.00 to $2.50, the distribution to
holders of our shares of common stock of all of those warrants and the resale of
up to 1,000,000 shares of our common stock which shall be issued by us upon
exercise of those warrants by the persons who hold them. We previously
registered all of those class B redeemable warrants for sale in our initial
public offering, but we did not sell any of them. Our class B redeemable
warrants will be distributed as a dividend to holders of record of our common
stock as of the close of business on December 29, 2000, which shall be the
record date. Each holder of our common stock will receive one class B redeemable
warrant for every three shares of our common stock held on the record date. The
distribution will occur on January 20, 2001, which shall be the distribution
date. No consideration will be paid by holders of our common stock for the class
B redeemable warrants.
In addition, 2,325,000 shares of our common stock owned by certain of our
stockholders will be subject to resale pursuant to a separate prospectus.
The shares of our common stock offered by the selling stockholders pursuant
to this prospectus involves substantial risk. See "Risk Factors" beginning on
page 4.
Each class A redeemable warrant entitles the holder to purchase one share
of common stock at an exercise price of $1.50, subject to adjustment, at any
time until April 25, 2003. Each class B redeemable warrant entitles the holder
to purchase one share of common stock at an exercise price of $2.50, subject to
adjustment, until April 25, 2005. The class A and class B redeemable warrants
are subject to redemption by us at 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.
The 2,325,000 shares of common stock to be offered and sold by certain of
our stockholders pursuant to a separate prospectus are subject to a lockup
agreement and may not be sold until April 26, 2001. 2,147,500 of those 2,325,000
shares are held by four affiliates - officers, directors and controlling
stockholders of this company. Upon expiration of the lockup agreement,
<PAGE>
o those four affiliates will be entitled to offer and sell up to an aggregate
of 311,689 of their shares at the then prevailing market price for our
shares;
o the non-affiliates who hold the 177,500 share balance of those 2,325,000
shares also will be entitled to offer and sell their shares at the then
prevailing market price; and
o our four affiliates will be entitled to offer and sell up to 1,835,811 of
their shares at a sale price of $3.00 per share.
We will not receive any of the proceeds from the resale of any of the class
A or class B redeemable warrants, or the shares of common stock underlying those
warrants, however, we are paying for the costs of registering the securities
covered by this prospectus.
The holders of the class A and class B redeemable warrants, and the shares
of common stock underlying those warrants, will receive all of the amounts
derived from any sale by them of those securities, less any brokerage
commissions or other expenses incurred by them. While this offering is not being
underwritten, the holders of the securities offered pursuant to this prospectus
and the brokers or other third parties through whom the any of the holders of
those securities sell them may be deemed "underwriters" as that term is defined
in the Securities Act of 1933, as amended, for purposes of the resale of the
securities offered in this prospectus. See "Plan of Distribution."
Neither the Securities and Exchange Commission, nor any state securities
commission, has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
2
<PAGE>
Table of Contents
Page
-----
Prospectus Summary.......................................................
The Company..............................................................
The Distribution.........................................................
Risk Factors.............................................................
Use of Distribution Proceeds.............................................
Capitalization...........................................................
Forward Looking Statements...............................................
Business of The Company..................................................
Management's Discussion And Analysis of
Financial Condition And Results of Operations............................
Price Range of Common Stock and Class A Redeemable Warrants..............
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 Stockholders.....................................................
Certain Provisions of Our Certificate of Incorporation 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..........................
Financial Statements of the Company.............................. F-1 - F-13
3
<PAGE>
Prospectus Summary
The Company
Pipeline Data Inc., a Delaware corporation, was incorporated in June 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 Distribution
o Each of the 785,210 class A redeemable warrants previously distributed
shall entitle the holder to purchase one share of common stock at an
exercise price of $1.50 subject to adjustment, at any time until April 25,
2003.
o We will distribute an aggregate of 1,000,000 class B redeemable warrants to
our stockholders.
o Each of the 1,000,000 class B redeemable warrants previously distributed
shall entitle the holder to purchase one share of common stock at an
exercise price of $2.50 subject to adjustment, at any time until April 25,
2005.
o Our class B redeemable warrants will be distributed on or about January 10,
2001, which is the distribution date, to holders of record of our common
stock as of the close of business on December 29, 2000, which is the record
date.
o Each holder of our common stock will receive one class B redeemable warrant
for every three shares of our common stock held by that stockholder on the
record date.
o American Stock Transfer and Trust Company, which is our distribution agent,
will mail, beginning on or about the distribution date, a letter advising
of the reduction in the exercise price of the class A redeemable warrants
to the class A warrant holders.
o American Stock Transfer and Trust Company will mail, beginning on or about
the distribution date, warrant certificates representing the class B
redeemable warrants to holders of our common stock on the record date.
o Our stockholders will not be required to pay for our class B redeemable
warrants.
4
<PAGE>
Risk Factors
We have had losses of $595,964 since inception (June 23, 1997), we expect
that we will continue to lose money through 2001 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 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.
5
<PAGE>
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 upon exercise of our
warrants and after the expiration of the one year "Lockup" Period which may
decrease the market price of our common stock.
The exercise of our warrants following this distribution, and the sale of
substantial amounts of our common stock in the public market following those
exercise transactions, or the perception that such sales will occur, could have
a material adverse effect on the market price of the common stock. Immediately
prior to, and upon the completion of this distribution, and prior to any
exercise of the class A or class B redeemable warrants, 3,116,890 shares of our
common stock will be outstanding. Approximately 68.9% of these shares, or
2,147,500 shares of the total, are shares that have been issued to officers,
directors, and their affiliates in return for organizational efforts and our
initial capitalization. For a period of one year which commenced on April 26,
2000, 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 distribute our
class B redeemable warrants.
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, our chief executive officer and
chairman of our board of directors, and R. Scott Barter, a director, for
guidance on our 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.
Rubinstein and 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.
6
<PAGE>
Use of Distribution Proceeds
Our stockholders will not be required to pay for the class B redeemable
warrants which will be distributed to them pursuant to this prospectus.
Accordingly, we will not receive any proceeds as a result of the distribution.
In the event all of our outstanding class A redeemable warrants are timely
exercised, we will receive aggregate proceeds of $1,177,815.
In the event that all of the class B redeemable warrants are timely
exercised, we will receive aggregate proceeds of $2,500,000. We will employ all
of such proceeds for working capital purposes.
Capitalization
The following table sets forth our capitalization as of December 31, 1999
and our unaudited capitalization as of September 30, 2000. You should read this
table together with "Management's Discussion and Analysis of Financial
Conditions and Result of Operations" and consolidated financial statements and
notes thereto appearing elsewhere in this prospectus.
September 30,
December 31, 2000
1999 (unaudited)
----------------- -------------
Long term debt $-0- $-0-
Stockholders' equity
Preferred stock, $.001 par value,
5,000,000 shares authorized,
At December 31, 1999 and September 30,
2000, the number of shares outstanding is
-0- Common stock, $.001 par value;
20,000,000 shares authorized; 2,325,000
shares outstanding at December 31,
1999; 3,116,890 shares outstanding
at September 30, 2000
2,325 3,119
Additional paid-in capital 631,346 1,105,028
Deficit accumulated during development stage (539,803) (595,964)
Total Stockholders' equity 93,868 512,183
Total Capitalization $93,868 $512,183
The information provided above:
o excludes the distribution of 1,000,000 class B redeemable warrants to our
stockholders, and
o excludes 785,210 outstanding class A redeemable warrants, 785,210 shares of
common stock issuable upon the exercise of those warrants and 1,000,000
shares of common stock issuable upon exercise of the class B redeemable
warrants. 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.
7
<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.
We have commenced our next phase of development. We anticipate that we will
remain in this phase of development through the year 2001. 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, medicine, and
pharmacy. Through this feature, we will be able to create a database of
user profiles (a knowledge base of subscribers) which we can market to
medical research companies, companies involved in clinical trials,
marketers and other sources of revenue generation.
o 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. In addition Rainbow Media was
engaged to commence an updated market study. Rainbow Media reported
consolidations and weakness in the Medical Internet sector. They presented
a negative view of the potential for success in this market. However, they
reported that the provisions of data to the public vis-a-vis the Internet
has good business potential. While we can give no assurances, we are
continuing to be diligent in our efforts to seek the best avenue to market
our company and services and to grow our business. We are aiming to develop
a successful Internet site and are considering broadening its content to
seek the greatest profit potential;
8
<PAGE>
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, other information providers as well as their
advertising agencies, as advertisers and/or sponsors; and
o the execution of an ongoing effort to build relationships with strategic
organizations in the healthcare and information technology sectors. These
organizations would include healthcare marketers including pharmaceutical
firms, medical service companies--as well as charitable research
foundations and publishers, pharmacies, clinical trial organizations,
allied health-care groups, and customer media.
On November 1, 2000, we loaned $200,000 to Accu-Search Inc., a New Jersey
corporation. The loan is evidenced by Accu-Search, Inc.'s promissory note which
accrues interest at the rate of 12% annually. The principal amount of the
promissory note together with accrued interest is due and payable on May 31,
2001. In consideration of the issuance of the loan, Accu-Search, Inc. granted us
a perpetual, non-transferable and non-sublicensable royalty free license to
utilize an automated software process which will enable us to improve the
functionality of our website. Specifically, we anticipate that we will be able
to employ the licensed software process in the internal workings of our website
to enable us to receive documents in any readable form from our contributors and
convert them into an Adobe readable format. We believe that this will enhance
accessibility to our website due to the extensive employment by Internet users
of Adobe software in order to view documents retrieved from Internet websites.
While no assurance can be given, we anticipate that we will maintain an ongoing
working relationship with Accu-Search, Inc.
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 and other information providers 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 stockholders' 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:
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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,
"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.
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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.
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.
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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.
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
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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: http://www.ehealthcareconnections.com/index2.html 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
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.
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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.
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.
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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 knowledge base 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 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.
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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-the-counter drugs, vitamins, responsible natural products, durable medical
equipment, CD-ROMs and other medical products and supplies. Secondary Revenue
Sources.
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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 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.
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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 attempt to safeguard against one unsuccessful venture. We
cannot assure you that this strategy will be successful.
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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
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:
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o online services or web sites targeted to the healthcare industry and
healthcare consumers 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 November 30, 2000, we had one full-time employee and three 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. Many competitors, even those larger and
better financed, have not achieved success in this market. 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
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Recent And Continuing Publicity
Companies engaged in Internet activities have received, and may continue to
receive, a high degree of media coverage, including coverage that presents
inaccurate or incomplete investment-related information and forward-looking
statements that involve numerous risks and uncertainties. Prospective investors
should not rely on any information other than the information set forth in this
prospectus in making a decision to purchase the common stock or warrants. Our
actual results could differ materially from those stated in any forward-looking
statements as a result of numerous factors, including those set forth in the
"Risk Factors" section and elsewhere in this prospectus.
The trading price of our common stock and/or warrants could be subject to
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new services or products by us or
our competitors, changes in financial estimates by securities analysts, the
operating and stock price performance of other companies, general economic
conditions and other events or factors. In addition, equity securities of
technology companies generally and Internet-related companies in particular have
shown marked volatility. Such volatility has included rapid and significant
increases in the trading prices of certain Internet companies to levels that do
not bear any reasonable relationship to the operating performance of such
companies, as well as large interday swings in the trading prices of such
securities. Extreme volatility can also produce large price decreases, as well.
These fluctuations may materially affect the trading price of our common stock
and/or warrants and, consequently, we cannot guarantee that investors will be
able to sell their common stock and/or warrants at or above the initial public
offering price. In the past, following periods of volatility in the market price
for a company's securities, stockholders 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
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;
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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 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
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.
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We May Experience System Failures
To be successful as an on-line service, we must be able to operate our
website 24 hours a day, seven days a week, without interruption. Almost all of
our communications and information services are provided through third party
service and content providers. We do not maintain redundant systems or
facilities for our services. To operate without interruption, our service and
content providers must guard against:
o Damage from fire, power loss and other natural disasters;
o Communications failures;
o Software and hardware errors, failures or crashes;
o Security breaches, computer viruses and similar disruptive problems; and
o Other potential interruptions.
We cannot guarantee that periodic system interruptions will not occur. Any
significant interruptions to our services, or an unacceptable increase in
response time to any visitor and subscriber queries, could result in a loss of
potential or existing subscribers, strategic partners or advertisers and
sponsors and, if sustained or repeated, could reduce the attractiveness of our
website to such parties.
From time to time, our website may be required to handle a high volume of
traffic and deliver frequently updated information. At such times, the website
may experience slower response times or even system failures, due to increased
website traffic, or for a variety of other reasons. We will also depend on
content providers to provide information and data feeds on a timely basis. If
our content providers fail to receive or transmit, or delay the transmission or
receipt of, this information, our website could experience disruptions or
interruptions in service. In addition, in order to access our website, our
subscribers and consumers depend on Internet Service Providers (ISPs), On-line
Service Providers (OSPs) and even other website operators. Each of these service
providers has experienced significant outages in the past and could experience
outages, delays and other difficulties in the future, due to system failures
unrelated to our systems. Moreover, the Internet infrastructure may not be able
to support continued growth in our use. Any significant interruption in our
operations, even those caused by events that are beyond our control, could have
a material 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.
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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.
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.
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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 application and enforcdement
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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 unlicensed
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 Have A Limited Trading Market, And The Price Of Our Common Stock May Be Quite
Volatile For Some Time To Come.
Our common stock commenced trading on the OTC Electronic Bulletin Board
maintained by the National Association of Securities Dealers, Inc. October 19,
2000. There is a limited public trading market for our common stock on the OTC
Electronic Bulletin Board. We cannot assure you that a regular trading market
for our common stock will ever develop or that, if developed, it will be
sustained. As is the case with the securities of many emerging companies, the
market price of our common stock may also be highly volatile. Factors including
our operating results and announcements by us or our competitors of new products
or services, may significantly impact the market price of our securities.
Similarly, many of the capital-raising activities we have engaged in, or may be
required to enter into in the future to obtain needed funds, have resulted in,
and may in the future result in, large blocks of stock being held by
professional investors who may from time to time release these shares into the
market place in a manner which could have a highly depressive effect on the
public market and valuation of our shares at any given time and for any given
period. Ultimately, we have no control over the schedule or timing of how these
shares may be sold in the future, nor will we likely have advance knowledge of
these releases, and therefore our stock prices may be affected significantly in
the future by these activities which, in some circumstances, could have a
material and adverse impact on the stock price of our shares for a long time.
The Penny Stock Rules Could Make Selling Our Securities More Difficult.
The Securities Enforcement and Penny Stock Reform Act of 1990 applies to
stock characterized as "penny stocks," and requires additional disclosure
relating to the market for penny stocks in connection with trades in any stock
defined as a penny stock. The Securities and Exchange Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
The exceptions include exchange-listed equity securities and any equity security
issued by an issuer that has:
o Net tangible assets of at least $2,000,000, if the issuer has been in
continuous operation for at least three years;
o Net tangible assets of at least $5,000,000, if the issuer has been in
continuous operation for less than three years; or
o Average annual revenue of at least $6,000,000, for the last three years.
Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the associated risks.
Our common stock is presently trading at less than $5.00 per share. Until
such time as the market price of our common stock increases to, and stays above
$5.00, or we are able to meet the above tests and, trading in our common stock
will be covered by Rules 15g-1 through 15g-6 and 15g-9 promulgated under the
Securities Exchange Act. Under those rules, broker-dealers who recommend such
securities to persons other than their established customers and institutional
accredited investors must make a special written suitability determination for
the purchaser and must have received the purchaser's written agreement to a
transaction prior to sale. These regulations would likely limit the ability of
broker-dealers to trade in our common stock and thus would make it more
difficult for purchasers of common stock to sell their securities in the
secondary market. The market liquidity for the common stock could be severely
affected.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion relates to the results of our operations to date,
and our financial condition:
This prospectus contains forward looking statements relating to our
company's future economic performance, plans and objectives of management for
future operations, projections of revenue mix and other financial items that are
based on the beliefs of, as well as assumptions made by and information
currently known to, our management. The words "expects, intends, believes,
anticipates, may, could, should" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section are intended to emphasize that actual results may
differ materially from those contained in any forward looking statement.
Development stage activities.
The company has been a development stage enterprise from its inception June
23, 1997 to September 30, 2000. 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
$785,351.
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.
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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.
Results of Operations for the nine months ended September 30, 1999 as
compared to the nine months ended September 30,
2000.
For the nine months ended September 30, 2000, the company generated net
sales of $-0- as compared to $30,000 for the nine months ended September 30,
1999, representing a decrease of $30,000. The company's cost of goods sold on
sales for the nine months ended September 30, 2000, was approximately $-0- as
compared to $-0- for the nine months ended September 30, 1999. The company's
gross profit from sales was approximately $-0- for the nine months ended
September 30, 2000, as compared to $30,000 for the nine months ended September
30, 1999. The company believes the gross profit will improve and stabilize once
the company's website facilities become realized as the completion of the public
offering and its marketing plans become more fully realized.
The company's general and administrative costs aggregated approximately
$58,634 for the nine months ended September 30, 2000, as compared to $69,519 for
the nine months ended September 30, 1999, representing a decrease of $10,885. An
analysis of expenses for the nine months ended September 30, 2000 includes
spending for professional fees of $28,585, rent of $4,500, office expense of
$10,614, officer compensation of $4,500, filing fees of $10,175, and other
expenses of $260.
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.
Results of Operations for the three months ended September 30, 1999 as
compared to the three months ended September 30, 2000.
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For the three months ended September 30, 2000, the company generated net
sales of $-0- as compared to $-0- for the three months ended September 30, 1999.
The company's cost of goods sold on sales for the three months ended September
30, 2000, was approximately $-0- as compared to $-0- for the three months ended
September 30, 1999. The company believes sales will improve and stabilize once
the company's website facilities become realized as the completion of the public
offering and its marketing plans become more fully realized.
The company's general and administrative costs aggregated approximately
$41,037 for the three months ended September 30, 2000, as compared to $10,870
for the three months ended September 30, 1999, representing a increase of
$30,167. An analysis of expenses for the three months ended September 30, 2000
includes spending for professional fees of $17,325, rent of $1,500, office
expense of $9,527, officer compensation of $2,250, filing fees of $10,175, and
other expenses of $260.
Liquidity and Capital Resources.
The company increased its cash position to $114,868 at December 31, 1999
and to $552,267 at September 30, 2000 from a cash balance of $-0- at June 23,
1997. Working capital at December 31, 1999 and September 30, 2000 was positive
at $93,868 and $512,183 respectively. The company continued to be funded in part
through officer loans aggregating $72,622 for the period from inception, June
23, 1997, to December 31, 1999 and $-0- at September 30, 2000, 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 $311,875 and received $105,172 as additional capital contributions
from stockholders. As of September 30, 2000, the Company sold an additional
789,890 shares of common stock for an aggregate consideration of $473,476.
As of December 31, 1999, we expended cash for the development of the
business and absorbing cash losses aggregating $46,799 for the year ended
December 31, 1999 and $158,028 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.
As September 30, 2000, we expended cash for the development of the business
and absorbing cash loss from operations of $36,077.
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.
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The first stage consists of initial web site construction and collection of
health-related data from existing web sites and service providers and equipping
our facility with hardware, primarily workstations and dedicated data feed
supply lines. This has been partially completed. 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 knowledge base of subscribers) which we can market to
medical research companies, companies involved in clinical trials,
marketers and other sources of revenue generation.
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,
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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, 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.
Price Range Of Common Stock and Class A Redeemable Warrants
Our common stock and class A redeemable warrants commenced trading on the
OTC Bulletin Board on October 19, 2000 under the trading symbol "PPDA" and
"PPDAW," respectively. The following table sets forth the highest and lowest
prices quoted for our common stock and class A redeemable warrants during the
period between October 19, 2000 and December 28, 2000, and the closing quote for
those securities on December 28, 2000. The quotations reflect inter-dealer
prices, with no retail mark-up, mark-down or commissions, and may not represent
actual transactions. The information presented has been derived from the OTC
Bulletin Board.
Security High Low Close
---------- ---- --- -----
common stock $3.00 $.375 $.93
class A redeemable
warrant $.31 $.05 $.31
As of December 23, 2000, there were 51 holders of record of our common
stock.
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.
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Plan Of Distribution
General
The board of directors has approved the distribution of all of our class B
redeemable warrants to the holders of our common stock. In the distribution,
each holder of our common stock will receive as a dividend, one class B
redeemable warrant for every three shares of our common stock held on December
29, 2000, which will be the record date.
Manner of Effecting Reduction of class A Warrant Exercise Price
American Stock Transfer and Trust Company, which is our distribution agent,
will mail, beginning on or about the distribution date, a letter advising of the
reduction in the exercise price of the class A redeemable warrants to class A
warrant holders. The reduction in exercise price will be automatically
effective.
Manner of Effecting the Distribution
The class B redeemable warrants will be distributed on January 20, 2001,
which is the distribution date, to the holders of record of our common stock as
of the close of business of the record date. The Company's transfer agent will
mail, beginning on or about the distribution date, warrant certificates to
holders of our common stock on the record date. Each holder of our common stock
will receive one class B redeemable warrant for every three full shares and each
multiple of three full shares of our common stock held on the record date. No
cash or warrants to purchase less than one full share of our common stock will
be issued to holders of fewer than three shares of our common stock.
Our stockholders will not be required to pay for the class B redeemable
warrants received in the distribution, or to surrender or exchange shares of our
common stock or to take any other action in connection with the distribution of
our class B redeemable warrants.
The holders of the 2,325,000 shares of our common stock who have been
identified as selling stockholders in this prospectus are subject to a one year
lockup agreement any may not sell their shares of common stock until April 25,
2001. Upon expiration of the lockup agreement,
o Jack Rubinstein, R. Scott Barter, Unifund Financial Group, Inc. and Douglas
Harrison-Mills, who we consider to be affiliates of our company, will be
entitled to offer and sell up to an aggregate of 311,689 of their 2,147,500
shares at the then prevailing market price for our shares;
o the non-affiliates who hold the 177,500 share balance of those 2,325,000
shares also will be entitled to offer and sell their shares at the then
prevailing market price; and
o our four affiliates will be entitled to offer and sell the balance of their
1,835,811 shares at a sale price of $3.00 per share.
The sale of:
o up to 311,689 shares of common stock by our four affiliates,
o 177,500 shares of common stock by our selling stockholders who are not
affiliates,
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o our class A and class B redeemable warrants by the holders of those
securities, and by any of the pledgees, assignees and
successors-in-interest of such holders, and
o the common stock issuable upon exercise of those warrants by the holders of
those securities and by any of the pledgees, assignees and
successors-in-interest of such holders,
may be effected, from time to time, on any stock exchange, market or trading
facility on which the securities are traded or in private transactions. These
sales may be at fixed or negotiated prices. The holders of those securities may
use any one or more of the following methods when selling them:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales
o broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The holders of our common stock, subject, where applicable, to the terms
and conditions of the lockup agreement, may also sell shares under Rule 144
under the Securities Act, if available, rather than under this prospectus. They
may also engage in short sales against the box, puts and calls and other
transactions in securities of our company or derivatives of our securities and
may sell or deliver shares in connection with these trades. The holders of the
shares of common stock being offered pursuant to this prospectus also may pledge
their securities to their brokers under the margin provisions of customer
agreements. If a selling stockholder defaults on a margin loan, the broker may,
from time to time, offer and sell the pledged shares. The holders of our common
stock who have been identified in this prospectus as selling stockholders have
advised the Company that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their shares other than ordinary course brokerage arrangements, nor
is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
Broker-dealers engaged by the holders of our common stock and our class A
and class B redeemable warrants may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
those security holders (or, if any broker-dealer acts as agent for the purchaser
of shares, from the purchaser) in amounts to be negotiated.
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The holders of our common stock and our class A and class B redeemable
warrants and any broker-dealers or agents that are involved in selling those
holders' securities may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We will pay all fees and expenses incident to the registration of the
securities offered pursuant to this prospectus, except any fees and
disbursements of counsel to the holders of such securities and any brokerage
commissions and other selling expenses incurred by those holders in connection
with the sale of their securities.
At any time a particular offer of the securities is made, a revised
prospectus or prospectus supplement, if required, will be distributed which will
contain the amount and type of securities being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
holders, selling securities and any discounts, commissions or concessions
allowed or reallowed or paid to dealers. A prospectus supplement and, if
necessary, a post-effective amendment to the registration statement of which
this prospectus is a part, will be filed with the U.S. Securities and Exchange
Commission to reflect the disclosure of additional information with respect to
the distribution of the securities.
The holders of our common stock and our class A and class B redeemable
warrants and any other person participating in such distribution will be subject
to applicable provisions of the Exchange Act and the rules and regulations under
the Exchange Act, including, Regulation M, which may limit the timing of
purchases and sales of any of the common stock by you and any other such person.
Furthermore, under Regulation M under the Exchange Act, any person engaged in
the distribution of the common stock may not simultaneously engage in
market-making activities with respect to the particular common stock being
distributed for certain periods prior to the commencement of or during such
distribution. All of the above may affect the marketability of the securities
and the availability of any person or entity to engage in market- making
activities with respect to the common stock.
We do not intend to engage in any distribution efforts on behalf of any
of the holders of our common stock and our class A and class B redeemable
warrants other than providing for registration of the securities registered for
sale with the U.S. Securities and Exchange Commission. We do not intend to
solicit or otherwise induce any selling security holders to exercise their class
A or class B redeemable warrants.
Provided that any pledge or assignment by any holder of our common stock
and our class A and class B redeemable warrants does not involve any increase in
the number of shares or dollar amount registered, or include shares from a
transaction other than the one to which this filing relates, and absent
circumstances indicating that the change is material, we expect to reflect any
such change in the filing of a Rule 424(b) prospectus supplement describing the
change. In such prospectus supplement, we would be required to set forth the
disclosure information regarding such successors in interest as required by the
rules and regulations of the U.S. Securities and Exchange Commission.
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Legal Proceedings
We have not been, nor has our property been, the subject of any pending
legal proceeding.
Directors, Executive Officers, Promoters And Control Persons
Listed below are our officers and directors and their previous experience.
The directors have been elected by the present stockholders 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, CEO, CFO, Secretary and Board Chairman
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.
Richard M. Cohen, President
Mr. Cohen, age 49, will serve our president commencing on January 2, 2001.
He has been president of Richard M. Cohen Consultants, which provides financial
consulting services primarily in the multimedia industry, since 1996. From 1993
to 1995 he was president of General Media, Inc., a publishing company with
international market presence. Mr. Cohen serves on the Boards of Directors of
Greg Manning Auctions, Inc., Directrix, Inc., Symposium Corp. and Dey & Co.
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R. Scott Barter, Director
Mr. Barter, age 53, is the Founder, Chairman, Chief Executive Officer and a
Director of Unifund Financial Group, Inc. since its inception in 1991 and
Unifund America, Inc. since its inception in 1995. Mr. Barter has been engaged
in the securities industry in the United States and abroad since August, 1975.
He has been licensed with the National Association of Securities Dealers and as
a member of the National Futures Association. He has been registered as a
representative with the United Kingdom National Association of Securities
Dealers and Investment Managers (now FSA) and in addition, has held a
Representative's license to deal in securities from the United Kingdom
Department of Trade and Industry.
Mr. Barter has served as a senior officer/director of various brokerage
firms and has acted as advisor to and consultant for both publicly and privately
traded companies in the United States and the United Kingdom. He has diverse
investment experience combined with an extensive background in the areas of
corporate finance and the private client/independent investor. Douglas
Harrison-Mills, Director
Mr. Harrison-Mills, age 49, is a Director of Unifund Financial Group, Inc.
since August 1994 and Unifund America, Inc. since September 1995 and has an
extensive background in financial services and communications, working both in
the City of London and on Wall Street. He is also currently a Director of
Haversham Consulting Ltd, a UK-based consulting firm and has been since December
1991. Prior to founding Haversham, he was Marketing Manager of Elders Investment
Management Ltd. (a European subsidiary of the investment banking arm of the
international conglomerate, formerly known as Elders IXL) and was responsible
for the marketing of EIM's products and services throughout the UK, Europe and
North America.
He has been registered as a Representative with the UK National Association
of Securities Dealers and Investment Managers (now FSA), has held both a
Principal's and a Representative's license 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),
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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.
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 after
completion of the distribution of our class B redeemable warrants. 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 distribution and according to the records provided by the
company (which currently has 3,116,890 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 of Shares Percentage
---- ---------------- ----------
Jack Rubinstein 748,750 24.02%
Unifund Financial Group, Inc.* 998,750 32.04%
R. Scott Barter 350,000 11.23%
Douglas Harrison-Mills 50,000 1.60%
(All officers and directors as a group - 4 persons)
Totals 2,147,500 68.89%
*This entity is controlled by Mr. Barter and its share ownership in us is
attributed to him.
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Description Of Securities
The following information reflects our Certificate of Incorporation and
by-laws as these documents will be in effect at the time of the distribution.
Common Stock
We are authorized to issue up to 20,000,000 shares of common stock, par
value $.001 per share, of which 3,116,890 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.
Our common stock is admitted for quotation on the NASD's OTC Bulletin Board
under the symbol "PPDA."
Warrants
We will distribute 1,000,000 class B redeemable warrants pursuant to this
prospectus. In addition, we have previously issued 785,210 class A redeemable
warrants in connection with our recently completed unit offering. By this
prospectus, we are reducing the exercise price of the class A redeemable
warrants from $3.00 to $1.50 and we are reducing the exercise price of the class
B redeemable warrants from $5.00 to $2.50.
A summary of the terms of the warrants are provided below. Each class A
redeemable warrant and class B redeemable warrant is governed by a separate
warrant agreement, the forms of such 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
Our class A redeemable warrants were issued in registered form pursuant to
an agreement dated April 26, 2000 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 $1.50 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.
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The class A redeemable warrants may be exercised at any time after
issuance, until they expire at the close of business on April 25, 2003. 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.
The class A redeemable warrants are admitted for quotation on the NASD's
OTC Bulletin Board under the symbol "PPDAW."
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 April 26, 2000 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 $2.50 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 April 25, 2005. 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%
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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.
It is our intention to have the class B redeemable warrants admitted for
quotation on the NASD's OTC Bulletin Board under the symbol "PPDAWB"). However,
we cannot assure you that we will be successful in that regard.
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 Hall Dickler Kent Goldstein & Wood LLP, counsel to the company.
Selling Stockholders
The Company has registered an aggregate of 2,325,000 shares of common stock
for sale by those stockholders named below. All of the securities held by such
stockholders are subject to a one year "lockup" period during which they will be
unable to offer and/or sell shares currently held by them. Commencing on April
25, 2001 which is the date of expiration of such period, there will be no
limitations on any such stockholder's ability to sell all of their shares
assuming that a registration statement with respect to such shares is then in
effect and any sale must occur at not less than $0.50 per share.
The shareholdings of our officers and directors is also set forth under the
heading "Security Ownership of Certain Beneficial Owners and Management". There
are 177,500 shares held by selling stockholders who are neither officers nor
directors. The names and shareholdings of all selling stockholders and their
percentage ownership of the common stock of the company are as follows:
Name of Owners Number or Shares Percentage of Common Stock
-------------- ---------------- --------------------------
Jack Rubinstein 748,750 24.02%
Unifund Financial Group, Inc.* 998,750 32.04%
R. Scott Barter 350,000 11.23%
Douglas Harrison-Mills 50,000 1.60%
Sheila Corvino 50,000 1.60%
Brad Smith 50,000 1.60%
Kaplan Gottbetter & Levenson LLP 50,000 1.60%
Harold Halcrow 10,000 0.32%
Harris Schiff 10,000 0.32%
Federico Brown 5,000 0.16%
Arthur Gager 2,500 0.08%
TOTALS 2,325,000 74.57%
-----------------------
* Thisentity is controlled by Mr. Barter and its share ownership in us is
attributable to him.
42
<PAGE>
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 entitled "Directors, Executive Officers, Promoters and Control Persons".
Certain Provisions Of Our Certificate of Incorporation 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.
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.
43
<PAGE>
Certain Relationships And Related Transactions
Mr. Rubinstein was the sole stockholder 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 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.
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.
44
<PAGE>
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
We have 3,116,890 shares of common stock outstanding, 791,890 of which are
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
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.
Our common stock commenced trading on the OTC Electronic Bulletin Board
maintained by the National Association of Securities Dealers, Inc. on October
19, 2000. There is a limited public trading market for our common stock on the
OTC Bulletin Board. We cannot assure you that a regular trading market for our
common stock will ever develop or that, if developed, it will be sustained. As
is the case with the securities of many emerging companies, the market price of
our common stock may also be highly volatile. Factors including our operating
results and announcements by us or our competitors of new products or services,
may significantly impact the market price of our securities. Similarly, many of
the capital-raising activities we have engaged in, or may be required to enter
into in the future to obtain needed funds, have resulted in, and may in the
future result in, large blocks of stock being held by professional investors who
may from time to time release these shares into the market place in a manner
which could have a highly depressive effect on the public market and valuation
of our shares at any given time and for any given period. Ultimately, we have no
control over the schedule or timing of how these shares may be sold in the
future, nor will we likely have advance knowledge of these releases, and
therefore our stock prices may be affected significantly in the future by these
activities which, in some circumstances, could have a material and adverse
impact on the stock price of our shares for a long time.
45
<PAGE>
Executive Compensation
For the period from inception through September 30, 2000, 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 audited financial statements as of December 31, 1999 and for
the years ended December 31, 1998 and December 31, 1999, together with the
independent auditor's report of Thomas P. Monahan, and the unaudited interim
financial statements for the nine months ended as of September 30, 2000, appear
on pages F-1 - 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 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.
46
<PAGE>
Thomas P. Monahan
Certified Public Accountant
208 Lexington Avenue
Paterson, New Jersey 07502
(201) 790-8775
Fax (201) 790-8845
To The Board of Directors and Shareholders
of Pipeline Data, Inc. (a development stage company)
I have audited the accompanying balance sheet of Pipeline Data, Inc. (a
development stage company) as of December 31, 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.
Thomas P. Monahan, CPA
February 28, 2000
Paterson, New Jersey
F-1
<PAGE>
PIPELINE DATA, INC.
(A development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 2000
December 31, 1999 Unaudited
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $114,868 $552,267
------- -------
Total current assets 114,868 552,267
Property and equipment -0- -0-
----------- -----------
Total assets $114,868 $552,267
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accrued expenses $ 21,000 $ 40,084
------ ------
Total current liabilities 21,000 40,084
Stockholders' Equity
Preferred stock authorized 5,000,000 shares, $.001 par value each. At
December 31, 1999 and September 30, 2000 there are -0- shares outstanding
Common stock authorized 20,000,000 shares, $.001 par value each. At
December 31, 1999 and September 30, 2000 there are 2,325,000 and 3,116,890
shares outstanding, respectively
2,325 3,119
Additional paid in capital 631,346 1,105,028
Deficit accumulated during development stage (539,803) ( 595,964)
------- ----------
Total stockholders' equity 93,868 512,183
-------- ----------
Total liabilities and stockholders' equity $114,868 $ 552,267
======= ==========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period from
For the nine months For the nine months inception, June 23,
ended Ended 1997, to September
For the year ended For the year ended September 31, 1999 September 31, 2000 30, 2000
December 31, 1998 December 31, 1999 Unaudited Unaudited Unaudited
-------------------- ------------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $22,500 $30,000 $30,000 -0- $52,500
Cost of goods sold -0- -0- -0- -0- -0-
Gross profit 22,500 30,000 30,000 -0- 52,500
------ ------ ------ --- ------
Operations
General and administrative 68,277 89,849 69,519 57,634 248,663
Non cash compensation legal
and consulting fee 188,125 205,875 -0- 1,000 395,000
Depreciation and amortization -0- -0- -0- -0- -0-
----------- ----------- ----------- --------- ------------
Total expense 256,402 295,724 69,519 58,634 646,515
------- ------- ------ ------ -------
Income (loss) from operations (233,902) (265,724) (39,519) (58,634) (594,015)
------- ------- ------ ------ -------
Other income and expenses
Interest income -0- -0- 2,473 2,473
Interest expense ( 2,607) -0- ( 1,050) -0- ( 4,422)
--------- ------------ ------------ ---------- ---------
Total other expenses ( 2,607) 1,050 ( 1,050) 2,473 ( 1,949)
--------- --------- -------- -------- ---------
Income (loss) $(236,509) $(264,674) $(40,569) $(56,161) $(595,964)
======= ======= ====== ====== =======
Net income (loss) per share - basic
$ (0.24) $ (0.21) $ (0.04) $ (0.02)
============ ============ ========= =========
Number of shares outstanding - basic
1,002,500 1,250,000 977,500 2,476,158
========= ========= ======= =========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
STATEMENT OF OPERATIONS
For the three months For the three months
Ended Ended
September 30, 1999 September 30, 2000
(Unaudited) (Unaudited)
Revenue $-0- $-0-
Cost of goods sold -0- -0-
Gross profit -0- -0-
---------- ----------
Operations
General and administrative 10,780 41,037
Non cash compensation legal
and consulting fee -0- 1,000
Depreciation and amortization -0- -0-
------------ ------------
Total expense 10,780 42,037
------ ------
Income (loss) from operations -0- -0-
Other income and expenses
Interest income -0- -0-
Interest expense -0- -0-
---------- ------------
Total other expenses -0- -0-
---------- ------------
Income (loss) $(10,870) $(42,037)
====== ======
Net income (loss) per share -
basic
$ (0.00) $ (0.00)
============ ============
Number of shares outstanding -
basic
977,500 2,476,158
======= =========
See accompanying notes to financial statements
F-4
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the period from
For the nine months For the nine months inception, June 23,
ended ended 1997, to September
For the year ended For the year ended September 31, 1999 September 31, 2000 30, 2000
December 31, 1998 December 31, 1999 Unaudited Unaudited Unaudited
-------------------- ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities
Net income (loss) $(236,509) $(264,674) $ (40,569) $ (56,161) $ (595,964)
Add items not affecting cash
Non cash compensation -
consulting fees paid with
shares of common stock 188,1 205,875 -0- 1,000 395,000
Depreciation -0- -0- -0- -0- 2,852
Changes in non cash
Operating accounts
Accrued expenses 6,000 12,000 9,000 19,084 40,084
--------- -------- --------- --------- ---------
Total Cash Flows From
Operations (42,384) (46,799) (31,569) (36,077) (158,028)
Cash Flows From
Investing Activities
Purchase of office equipment -0- -0- -0- -0- (2,852)
-------- --------- ------- --------- ---------
Total Cash Flows From
Investing Activities -0- -0- -0- -0- (2,852)
Cash Flows From
Financing Activities
Officer loans payable 36,857 (72,622) (72,622) -0- -0-
Sale of common stock -0- 124,750 24,750 473,476 598,226
Capital contribution -0- 105,172 105,172 -0- 114,921
------- ------- ----------- -------
Total Cash Flows From
Financing Activities 36,857 157,300 57,300 473,476 713,147
Net increase (decrease) in
Cash (5,527) 110,501 25,731 437,399 552,267
Cash balance - beginning of period
(9,894) 4,367 4,367 114,868 -0-
------- --------- -------- ------- -----------
Cash balance - end of period $4,367 $114,868 $30,098 $552,267 $552,267
======== ======= ======= ======= =======
Non cash activities
Issuance of common stock in
consideration for consulting
services $118,125 -0-
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
accumulated
Common Common Additional paid during
Date Stock Stock in capital devel-opment stage Total
---- -------------- ----------------- ---------- ------------------ -----
<S> <C> <C> <C> <C> <C> <C>
June 24, 1997 100 $ 1 $ 9,748 - $ 9,749
=== ======== ============ =========== ==========
Forward split of shares
December 18, 1998 1,000,000 $ 1,000 $ 8,749 - $ 9,749
Cancellation of shares
December 18, 1998 (750,000) (750) 750
Net (loss) (38,620) (38,620)
----------- ------ ----------- --------- --------
December 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)
----------- ------ ----------- ------- -------
December 31, 1998 1,002,500 $1,002 $ 196,872 $(275,129) $ (77,255)
Sale of shares 1,247,500 1,248 310,627 311,875
Capital contribution 105,172 105,172
Cancellation of shares (25,000) (25) (6,225) (6,250)
Shares issued for legal fees 100,000 100 24,900 25,000
Net (loss) (264,674) (264,674)
----------- ------ ----------- ------- -------
December 31, 1999 2,325,000 $2,325 $ 631,346 $(539,803) $ 93,868
Shares issued for services 2,000 2 998 1,000
Sale of shares and warrants 789,890 792 472,684 473,476
Net (loss) ( 56,161) ( 56,161)
----------- ------ ----------- -------- --------
Balances September 30, 2000 3,116,890 $3,119 $1,105,028 $(595,964) $512,183
========= ===== ========= ======= =======
</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 1,000,000 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 750,000
shares of common stock for cancellation.
On December 18, 1998, the company issued 752,500 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.
F-7
<PAGE>
The company has canceled 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.
As of September 30, 2000, the Company issued 2,000 shares of common stock
for $1,000 or $0.50 per share for printing services.
The company conducted an initial public offering of its common stock
and common stock purchase warrants and has sold 789,890 shares of common stock
and 785,210 class A redeemable warrants for aggregate proceeds for $473,466. No
class B redeemable warrants were sold.
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
$595,964 for the period from inception June 23, 1997, to September 30, 2000, has
a working capital deficiency and requires additional financing for its
operations and to complete web site development. The company conducted an
initial public offering of its common stock and common stock purchase warrants
and has sold 789,890 shares of common stock and 785,210 class A redeemable
warrants for aggregate proceeds for $473,466. The company is anticipating that
with the completion of this 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.
F-8
<PAGE>
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.
The unaudited financial statements presented consist of the balance sheet
of the company as at September 30, 1999 and 2000 and the related unaudited
statements of operations and cash flows for the nine months ending September 30,
1999 and 2000 and for the period from inception, June 23, 1997 to September 30,
2000.
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. 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.
F-9
<PAGE>
h. Significant Concentration of Credit Risk
At December 31, 1999 and September 30, 2000, the company has concentrated
its credit risk by maintaining deposits in several banks. The maximum loss that
could have resulted from this risk totaled $14,868 and $452,267 which represents
the excess of the deposit liabilities reported by the banks over the amounts
that would have been covered by the federal insurance.
i. 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-10
<PAGE>
c. Officer Loan
As of 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 $-0-.
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, 1999 and September 30, 2000, 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 and September 30, 2000, the company has net operating
loss carry forwards for income tax purposes of $539,803 and $595,964
respectively. 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, 2000 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 202,627
Valuation allowance $(202,627)
-------
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 and to September 30,
2000.
F-11
<PAGE>
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the company has
yet to recognize significant revenue from the sale of its products, the company
believes that a full valuation allowance should be provided.
Note 6 - Property and Equipment
Capital Assets consisted of the following at December 31, 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, and
conversion rights and sinking fund requirements, if any, of such series.
As of December 31, 1999 and September 30, 2000, 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.
Note 9 - Public Offering
The company conducted an initial public offering of its common stock and
common stock purchase warrants and has sold 789,890 shares of common stock and
785,210 class A redeemable warrants for aggregate proceeds for $473,466. No
class B redeemable warrants were sold.
As of September 30, 2000 the company has reserved 785,210 shares of common
stock pending the conversion of the warrants into shares of common stock.
class A redeemable warrants are exercisable into shares of common stock at
$1.50 per share until the third anniversary of the effective date of the
offering (April 25, 2000). class B redeemable warrants are exercisable into
shares of common stock at $2.50 per share until the fifth anniversary of the
effective date of the offering.
F-12
<PAGE>
The company also registered the sale of 1,250,000 shares of common stock
owned by prior shareholders. Any proceeds and profits from their sale will go to
these shareholders and not to the company. They have agreed not to sell any of
their shares until one year from the effective date of the registration
statement, April 26, 2001.
Note 10 - Subsequent Events
In November, 2000, the Company loaned $200,000 to Accu-Search, Inc. as
evidenced by a Note Receivable which is due on May 31, 2001 with interest at 12%
per annum. In consideration for the Note, Accu-Search, Inc. gave Pipeline Data
Inc. a perpetual license in an automated software process to convert multiple
inputted documents into transmittable Adobe PDA formats.
F-13
<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 -------- --, 2001 (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.
785,210 class A redeemable warrants
785,210 shares of Common Stock issuable upon exercise of outstanding class
A redeemable warrants
1,000,000 class B Redeemable Warrants
1,000,000 shares of common stock issuable upon
exercise of the class B redeemable warrants
P r o s p e c t u s
, 2001
PIPELINE DATA INC.
<PAGE>
[alternate prospectus front cover page for "at the
market" and fixed price secondary
offering by four selling stockholders who
are affiliates]
[GRAPHIC OMITTED]
PROSPECTUS
PROSPECTUS DATED:
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
2,147,500 SHARES OF COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of up to an aggregate of 2,147,500 shares of our common stock by
Jack Rubinstein, R. Scott Barter, Unifund Financial Group, Inc. and Douglas
Harrison-Mills, who we consider to be affiliates of our company.
311,689 of those 2,147,500 shares may be sold from time to time in one or
more transactions, in special offerings, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices.
The 1,835,811 share balance of the stock holdings of our four affiliates
may be sold from time to time pursuant to this prospectus at an offering price
of $3.00
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 stockholders pursuant
to this prospectus involves substantial risk. See "Risk Factors" beginning on
page 3.
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 stockholders are permitted by U.S. federal securities laws to offer
these securities using this prospectus, the selling stockholders 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.
<PAGE>
[alternate prospectus front cover page for fixed price secondary offering by
selling stockholders who are not affiliates]
[GRAPHIC OMITTED]
PROSPECTUS
PROSPECTUS DATED:
Pipeline Data Inc.
250 East Hartsdale Avenue, Suite 21, Hartsdale NY 10530
177,500 SHARES OF COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of up to 177,500 shares of our common stock by the selling
stockholders identified in this prospectus. Each of those selling stockholders
may sell his or her shares from time to time in one or more transactions, in
special offerings, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. We will not receive any of the proceeds from the sale of the
shares.
The shares of our common stock offered by the selling stockholders pursuant
to this prospectus involves substantial risk. See "Risk Factors" beginning on
page 3.
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 stockholders are permitted by U.S. federal securities laws to offer
these securities using this prospectus, the selling stockholders 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.
<PAGE>
[Alternate Table of Contents Page for Prospectus Relating to Secondary Shares]
Table of Contents
Page
Prospectus Summary.......................................................
The Company..............................................................
The Offering.............................................................
Risk Factors.............................................................
Use of Offering Proceeds.................................................
Capitalization...........................................................
Forward Looking Statements...............................................
Business of The Company..................................................
Management's Discussion And Analysis of
Financial Condition And Results of Operations............................
Price Range of Common Stock and Class A Redeemable Warrants..............
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....................................
Principal and Selling Stockholders.......................................
Certain Provisions of Our Certificate of Incorporation and By-Laws and
Disclosure of Commission Position On Indemnification For Securities
Act Liabilities........................................................
Description of Property
Certain Relationships And Related Transactions...........................
Relationships Among The Selling Stockholders And Pipeline Data Inc.......
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..........................
Financial Statements of the Company.............................. F-1 - F-13
<PAGE>
[Alternate Page for Prospectus Relating to Secondary Shares]
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.
<PAGE>
[Alternate Page for Prospectus Relating to Secondary Shares]
The Offering
We will not receive any proceeds from the shares sold by the selling
stockholders.
<PAGE>
[Alternate Page for Prospectus Relating to Secondary Shares]
Principal And Selling Stockholders
The following tables presents certain information regarding the beneficial
ownership of our common stock as of September 30, 2000 by the following:
o Each person who is known by us to own beneficially more than five percent
of our outstanding common stock;
o Each of our directors and executive officers named in the Summary
Compensation Table;
o Each selling stockholder; and
o All of our current executive officers and directors as a group.
The percentage of outstanding shares is based on 3,116,890 shares of our
common stock outstanding as of September 30, 2000 and 3,116,890 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> <C>
Directors, Officers
And 5% Stockholders:
Jack Rubinstein 748,750 24.02 All -0- -0-
Unifund Financial Group, Inc.* 998,750 32.04 All -0- -0-
R. Scott Barter 350,000 11.23 All -0- -0-
Douglas Harrison-Mills 50,000 1.60 All -0- -0-
(All officers and directors
as a group - 4 persons)
2,147,500 68.89 All -0- -0-
Selling Stockholders:
--------------------
Sheila Corvino 50,000 1.60% All -0- -0-
Brad Smith 50,000 1.60% All -0- -0-
Harold Halcrow 10,000 0.32% All -0- -0-
Harris Schiff 10,000 0.32% All -0- -0-
Federico Brown 5,000 0.16% All -0- -0-
Arthur Gager 2,500 0.08% All -0- -0-
</TABLE>
* This entity is controlled by Mr. Barter and its share ownership in us is
attributed to him
<PAGE>
(1) There is no assurance that the selling stockholders will sell any or all of
these shares.
(2) Assumes that the directors, officers and 5% stockholders and the selling
stockholders acquire no additional shares of our common stock prior to the
completion of this offering.
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 -------------, 2001, 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.
<PAGE>
[Alternate Page for Prospectus Relating to Secondary Shares]
Relationships Among The Selling Stockholders
And Pipeline Data Inc.
We have had material relationships with several of the selling stockholders 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 stockholders listed have sole voting and investment
power with respect to their shares. There are no family relationships between
our executive officers and directors.
<PAGE>
[alternate prospectus rear cover page for secondary offering
by selling stockholders who are affiliates]
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 ---------- --, 2001 (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.
2,147,500 Shares Of Common Stock
Offered By Certain Selling Stockholders
P r o s p e c t u s
, 2001
PIPELINE DATA INC.
<PAGE>
[alternate prospectus rear cover page for secondary offering
by selling stockholders who are not affiliates]
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 ---------- --, 2001 (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.
177,500 Shares Of Common Stock
Offered By Certain Selling Stockholders
P r o s p e c t u s
, 2001
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.
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 stockholder 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:
47
<PAGE>
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
5.1 Opinion on Legality of Hall Dickler Kent
Goldstein & Wood 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
10.4 Promissory Note dated November 1, 2000 issued by
Accu-Search, Inc. as Debtor to Pipeline Date Inc. as Payee
10.5 License Agreement for Technology dated November 1, 2000
between Pipeline Date Inc. and Accu-Search Inc.
--
23.1 Consent of Hall Dickler Kent Goldstein & Wood LLP
23.2 Consent of Thomas P. Monahan, independent public accountant
27.1* Financial Data Schedule (year ended December 31, 1999)
--------------
* Previously filed.
48
<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
stockholders 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.
49
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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 January 9, 2001.
Pipeline Data Inc.
(registrant)
By: /s/ Jack Rubinstein
--------------------------
Jack Rubinstein
Chief Executive Officer
Principal 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/ Jack Rubinstein Chief Executive Officer, January 9, 2001
-------------------------- CFO, and Director
Jack Rubinstein Secretary and Director
/s/ R. Scott Barter Director January 9, 2001
--------------------------
R. Scott Barter
/s/ Douglas Harrison-Mills Director January 9, 2001
--------------------------
Douglas Harrison-Mills
50
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