<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
Commission File Number: 0-30275
I-TRAX.COM, INC.
------------------------------------------
(Exact name of small business issuer in its charter)
Delaware 13-3212593
- -------------------------------------- ---------------------
(State or other jurisdiction) (I.R.S. Employer
Identification No.)
12020 Sunrise Valley Drive, Suite 350, Reston, VA 20191
-----------------------------------------------
(Address of principal executive offices)
(703) 860-0600
-----------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: As of March 31, 2000, the Registrant
had 17,828,084 shares of its $0.001 par value Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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INDEX
Page
PART I FINANCIAL INFORMATION................................................ 2
Item 1. Financial Statements ......................................... 2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................13
PART II OTHER INFORMATION....................................................16
Item 1. Legal Proceedings.............................................16
Item 2. Changes in Securities.........................................16
Item 3. Defaults upon Senior Securities...............................16
Item 4. Submission of Matters to a Vote of Security Holders...........17
Item 5. Other Information.............................................17
Item 6. Exhibits and Reports on Form 8-K..............................17
1
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PART I Financial Statements
Item 1. Financial Statements
I-TRAX.COM, INC.
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2
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I-TRAX.COM, INC.
INDEX TO FINANCIAL STATEMENTS
(UNAUDITED)
Page
Number
Balance sheets at March 31, 2000 (unaudited) and
December 31, 1999 4
Statements of operations for the three months
ended March 31, 2000 and 1999 (unaudited) 5
Statement of stockholders' equity for the
three months ended March 31, 2000 (unaudited) 6
Statements of cash flows for the three months
ended March 31, 2000 and 1999 (unaudited) 7
Notes to financial statements (unaudited) 8 to 12
3
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I-TRAX.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
March 31,
2000 December 31,
(unaudited) 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 1,387,547 $ 195,728
Accounts receivable 213,183 412,038
Prepaid expenses and other costs 169,524 24,770
----------- -----------
Total current assets 1,770,254 632,536
----------- -----------
Property and equipment, net 56,129 36,120
Security deposits 49,662 40,162
----------- -----------
Total assets $ 1,876,045 $ 708,818
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 144,865 $ 192,578
Convertible note payable - 37,500
Due to related parties 48,048 66,048
----------- -----------
Total current liabilities 192,913 296,126
----------- -----------
Commitments & Contingencies (Note 5) - -
Stockholders' Equity:
Preferred Stock - $.001 par value, 2,000,000 shares authorized,
-0- issued and outstanding - -
Common Stock - $.001 par value, 50,000,000 shares authorized,
17,828,084 and 16,028,084 issued and outstanding, respectively 17,828 16,028
Additional paid - in capital 2,836,379 1,043,299
Accumulated deficit (1,171,075) (646,635)
----------- -----------
Total stockholders' equity 1,683,132 412,692
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,876,045 $ 708,818
=========== ===========
</TABLE>
See accompanying notes to financial statements (unaudited)
4
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I-TRAX.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- ----------
<S> <C> <C>
Revenue $ - $ 223,950
----------- ----------
Operating expenses:
Cost of revenue - 124,083
Selling, general and administrative 535,086 108,992
Research and development 583 41,707
----------- ----------
Total operating expenses 535,669 274,782
----------- ----------
Loss before other income
(expenses) and provision for income tax (535,669) (50,832)
----------- ----------
Other income (expenses):
Miscellaneous income 11,253
Interest expense (24) (168)
----------- ----------
Total other income (expenses) 11,229 (168)
----------- ----------
Loss before provision for income taxes (524,440) (51,000)
----------- ----------
Provision for income taxes - -
----------- ----------
Net loss $ (524,440) $ (51,000)
=========== ==========
Basic
Net loss $ (.03) $ (.06)
=========== ==========
Weighted average number of shares
outstanding 16,928,084 853,000
=========== ==========
</TABLE>
See accompanying notes to financial statements (unaudited)
5
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I-TRAX.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1999 16,028,084 $ 16,028 $ 1,043,299 $ (646,635) $ 412,692
Sale of common stock,
net of costs 1,800,000 1,800 1,793,080 - 1,794,880
Net loss for the three months
ended March 31, 2000 - - - (524,440) (524,440)
---------- ----------- ------------- ------------ -------------
Balances at March 31, 2000 17,828,084 $ 17,828 $ 2,836,379 $ (1,171,075) $ 1,683,132
========== =========== ============= ============ =============
</TABLE>
See accompanying notes to financial statements (unaudited)
6
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I-TRAX.COM, INC
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (524,440) $ (53,804)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 7,204 542
Decrease (increase) in:
Accounts receivable 198,855 42,550
Prepaid expenses and other current assets (144,754) (16,150)
Security deposits (9,500) -
(Decrease) increase in:
Accounts payable and accrued expenses (47,713) (72,231)
----------- -----------
Net cash used for operating activities (520,348) (99,093)
----------- -----------
Investing activities:
Purchase of property and equipment (27,213) (3,298)
----------- -----------
Net cash used for investing activities (27,213) (3,298)
----------- -----------
Financing activities:
(Repayment of) proceeds from notes payable (37,500) 150,000
Repayments to related parties (18,000) -
Net proceeds from sale of common stock 1,794,880 -
----------- -----------
Net cash provided by financing activities 1,739,380 150,000
----------- -----------
Net increase in cash 1,191,819 47,609
Cash and cash equivalents at beginning of year 195,728 52,882
----------- -----------
Cash and cash equivalents at end of year $ 1,387,547 $ 100,491
=========== ===========
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ 24 $ 168
=========== ===========
Income taxes $ - $ -
=========== ===========
</TABLE>
See accompanying notes to financial statements (unaudited).
7
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I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 -- ORGANIZATION
Nature of Business
------------------
I-Trax.com, Inc (the "Company") was incorporated in the state of
Delaware on May 23, 1969 under the name Marmac Corporation. During
December 1979, the Company changed its name to Ibex Industries
International, Inc. During April 1996, in connection with the
acquisition of assets and the assumption of liabilities of various
medical practices (which reverted back to the original owners during
1997 as a result of cash flow deficiencies), the Company changed its
name to U.S. Medical Alliance, Inc. The Company, on August 27, 1999
changed its name to I-Trax.com, Inc. prior to the merger discussed
below.
Pursuant to a merger agreement dated as of December 14, 1999 (with an
effective date of December 30, 1999), the Company issued 8,000,082
shares of its common stock in exchange for all the issued and
outstanding common stock of Member-Link Systems, Inc. ("Memberlink").
Memberlink which is also a Delaware corporation, is a health
information technology company which has developed certain software
technology which it sells and licenses to various organizations,
including but not limited to governmental agencies.
The merger of the Company and Memberlink has been treated as a
recapitalization of Memberlink with Memberlink as the acquirer
(reverse acquisition). The accompanying financial statements reflect
this transaction as if it had occurred on January 1, 1998. Such
transaction is considered a capital transaction whereby Memberlink
contributed its stock for the net assets of the Company. Upon
consummation of the merger on December 30, 1999, the shareholders of
Memberlink received 8,000,082 shares of the Company's common stock,
which then represented 49.9% of the outstanding common stock
immediately after the issuance. Simultaneously with the merger,
Memberlink's former President was elected as the Company's President.
Upon consummation of the merger transaction the Company was
recapitalized and Memberlink ceased to exist with the Company being
the surviving entity.
Memberlink was originally incorporated in the state of New York on
June 8, 1993. On June 29, 1999, Memberlink as a New York corporation
was merged into Memberlink - Delaware pursuant to an agreement and
plan of merger dated June 29, 1999. In connection with such merger,
the previous shareholders of Memberlink New York exchanged their stock
on a one for one basis for a total of 1,323,518 shares of MemberLink -
Delaware.
NOTE 2 -- INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited financial statements as of March 31, 2000 and for the
three month periods ended March 31, 2000 and 1999 have been prepared
by us and are unaudited. In our opinion, the unaudited financial
statements have been prepared on the same basis as the annual
financial statements and reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the
financial position as of March 31, 2000 and the results of our
operations and cash flows for the three month periods ended March 31,
2000 and 1999.
8
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I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 2 -- INTERIM RESULTS AND BASIS OF PRESENTATION (cont'd)
The results for the three month period ended March 31, 2000 are not
necessarily indicative of the results to be expected for any
subsequent quarter or the entire fiscal year ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations. It is
suggested that these unaudited financial statements be read in
conjunction with our audited financial statements and notes thereto
for the year ended December 31, 1999 as included in our report on Form
10-SB filed on April 10, 2000.
NOTE 3 -- CONVERTIBLE NOTE PAYABLE
During 1996, the Company issued subordinated convertible promissory
notes to investors, accruing interest at an annual rate of 10% which
were convertible into shares of common stock at a conversion rate of
one share for each $5 of principal and accrued and unpaid interest.
During October 1999, all such noteholders, except one, agreed to
convert their principal balance on the notes which amounted to
$405,500 at $1.50 per share. Accordingly, the Company issued 270,333
shares of its common stock to certain noteholders. All interest due
pursuant to the notes was waived by all noteholders. The convertible
note balance at December 31, 1999 amounting to $37,500 represents one
noteholder who did not convert the note to common stock, and
accordingly, was repaid the principal balance in full during the
quarter ended March 31, 2000.
NOTE 4 -- DUE TO RELATED PARTIES
Due to related parties as of March 31, 2000 amounting to $48,048 is
comprised of the following:
i) Advances made by a former officer of Memberlink
amounting to $35,683. The former officer and current
shareholder of the Company has agreed to a repayment
of the advances at a rate of $3,000 per month until
fully paid, without interest, commencing April 2000.
ii) Advances made by a current officer of the Company
(previously an officer of Memberlink) amounting to
$679. The amount is due on demand and is non-interest
bearing.
iii) Advances made by a relative of the officer discussed
in (ii) above amounting to $11,686. The amount is
also due on demand and is non-interest bearing.
9
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I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
a) Lack of Insurance
-----------------
The Company through March 14, 2000, did not maintain any liability
insurance or any other form of general insurance. Although the
Company is not aware of any claims resulting from product
malfunctions or any other type, there is no assurance that none
exists.
b) Significant customers and vendors.
---------------------------------
For the three months ended March 31, 1999, the Company had one
unrelated customer, which accounted for 100%, of total revenues. As
of March 31, 2000, the Company had one unrelated customer, which
accounted for 76% of accounts receivables.
c) Office Lease
------------
On October 22, 1999, the Company entered into a non-cancelable
lease agreement for its administrative offices pursuant to a five
year lease expiring October 31, 2004 with annual rent at
approximately $162,000 before annual escalations.
The Company's approximate future minimum rental payments under
non-cancelable operating leases in effect on December 31, 1999 are
as follows:
2000 $ 161,376
2001 166,212
2002 171,192
2003 176,352
2004 151,370
---------
$ 826,502
Prior to October 1999, the Company rented office space on a month
to month basis at a rate of approximately $2,500 per month for a
portion of the year ended December 31, 1999.
Rent expense for the three months ended March 31, 2000 and 1999
amounted to approximately $43,439 and $7,500, respectively.
d) Employment Agreements
---------------------
i) On June 1, 1999, Memberlink entered into four employment
agreements with certain officers' of the Company. The employment
agreements terminate on May 31, 2000 with annual salaries ranging
from $125,000 to $175,000. Subsequent to year end, the Company
began renegotiating the remaining three employment agreements
(since one was terminated) due to the merger effectuated on
December 30, 1999.
10
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I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 5 -- COMMITMENTS AND CONTINGENCIES (cont'd)
d) Employment Agreements (cont'd)
------------------------------
Effective April 4, 2000, the Company and an employee responsible to
act as in-house counsel for the Company, executed an agreement of
settlement for the termination of the underlying employment
agreement entered on June 1, 1999. The Company agreed to pay
$50,000, payable in $10,000 monthly installments commencing April
15, 2000 as settlement payments. The Company also agreed to arrange
for the sale of 70,000 shares of the employee's common stock in the
Company at a price of not less than a $1.25 per share.
ii) The Company entered into an employment agreement on November
29, 1999, with an individual to act as the Company's Chief Medical
Officer at an annual salary of $85,000. In addition, the Company
agreed to grant options to purchase 100,000 shares of common stock
in accordance with the Company's newly established 2000 Equity
Compensation Plan (see note 9(c)). Such options will vest in
increments to be determined, but in no event no later than November
29, 2002. Such individual also received additional 100,000 common
shares, valued at $12,500 for past services rendered to the Company
during the year ended December 31, 1999. Lastly, the individual is
also entitled to a sales bonus for sales (after costs and related
expenses) of the Company's application systems for which he is
primarily responsible.
e) Judgments
---------
During 1998, several judgments were entered against U.S. Medical
Alliance, the predecessor to the Company, relating among other
things, the Company's prior line of business of managing physician
practices. The allegations made in the underlying suits relate to
wrongful discharge, general breach of contract, breach of equipment
lease agreements and miscellaneous vendor claims. The aggregate
amount of such judgments entered against the Company and certain
associated physicians is approximately $600,000. None of the
plaintiffs in the underlying suits have attempted to collect on the
entered judgments. While it remains unclear whether the Company can
successfully satisfy the judgments in a favorable manner, based on
a reasoned opinion issued by the Company's special counsel retained
to resolve these matters, the Company accrued, as of December 31,
1999, $22,500 as a reserve for satisfying such judgments.
NOTE 9 -- STOCKHOLDERS' EQUITY
a) Issuance of common stock for settlement of debt
-----------------------------------------------
During 1996, the Company issued subordinated convertible promissory
notes to investors accruing interest at an annual rate of 10% which
were convertible into shares of common stock at a conversion rate
of one share for each $5 of principal and accrued and unpaid
interest.
11
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I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 9 -- STOCKHOLDERS' EQUITY
a) Issuance of common stock for settlement of debt (cont'd)
--------------------------------------------------------
During October 1999, all such noteholders, except one, agreed to
convert their principal balance on the notes which amounted to
$405,500 at $1.50 per share. Accordingly, the Company issued
270,333 shares of its common stock to certain noteholders. All
accrued and unpaid interest on such notes was waived by all
noteholders. The convertible note balance at December 31, 1999
amounting to $37,500 represents one noteholder who did not convert
the note to common stock, and accordingly, was repaid the principal
balance in full during the quarter ended March 31, 2000.
b) Sale of common stock
--------------------
During January and February 2000, the Company sold an aggregate of
1,800,000 shares of its common stock at $1 per share yielding net
proceeds of approximately $1,794,880 after certain offering
expenses. Such shares were sold pursuant to Rule 506 of Regulation
D promulgated under the Securities Act of 1933.
c) 2000 Equity Compensation Plan
-----------------------------
During February 2000, the Company established the 2000 Equity
Compensation Plan (the "Plan") to provide (i) designated employees
of the Company and its subsidiaries, (ii) certain consultants and
advisors who perform services for the Company or its subsidiaries,
and (iii) non-employee members of the Board of Directors of the
Company with the opportunity to receive grants of incentive stock
options, non-qualified stock options and restricted stock.
The aggregate number of shares of common stock of the Company that
may be issued or transferred under the Plan is 3,000,000 shares.
The maximum aggregate number of shares of that shall be subject to
grants made under the Plan to any individual during any calendar
year shall be 350,000 shares.
During March 2000, the Company granted pursuant to the above Plan
an aggregate of 550,000 shares of its common stock at $1.00 per
share pursuant to a vesting period commencing June 12, 2000 through
March 14, 2002.
NOTE 10 -- SUBSEQUENT EVENT
On April 10, 2000, the Company entered into a non-cancelable lease
agreement for its executive offices pursuant to a five year lease
expiring June 29, 2005 with annual rent of approximately $123,000
per year before annual escalations.
12
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Basis of Presentation
The following discussion of the financial condition and related
results of operations of I-Trax.com, Inc. (the "Company") should be reviewed in
conjunction with the financial statements of the Company and related notes
appearing on the preceding pages as well as the Company's audited financial
statement for the fiscal year ended December 31, 1999, attached to our
Registration Statement on Form 10-SB, filed on April 10, 2000. The Company
believes that the merger of Member-Link Systems, Inc., into the Company
effective as of December 30, 1999 will have substantial impact on its future
operating results.
Introduction
We were incorporated in the State of Delaware under the name of
Marmac Corporation in May 1969. In December 1979, we changed the Company's name
to Ibex Industries International, Inc. On April 1, 1996, we purchased the assets
of certain physician practices, changed the Company's name to U.S. Medical
Alliance, Inc., and commenced operations as a physician practice management
company.
As U.S. Medical Alliance, we completed one additional physician
practice acquisition. However, we did not have adequate liquidity and capital
resources to withstand the downturn in the physician practice management
industry, nor the ability to acquire profitable physician practices.
During 1997, the Company, formerly known as US Medical Alliance,
Inc., ceased doing its business activities as a physician practice management
company and embarked on a program of winding down such activities, returning
physician practice assets to physicians in exchange for cancellation of stock in
the Company issued for such assets, and settling its obligations. During 1998,
the Company had no operations. In August, 1999, six principal stockholders of
the Company purchased 4,000,000 shares of the Company's Common Stock for
$400,000 to raise working capital which enabled the Company to enter into a
license agreement, a technical services agreement and a management services
agreement with Member-Link Systems, Inc., a health information technology
company, to own and develop the Internet application of an immunization tracking
system known as "I-Trax." As consideration for these agreements, we issued
3,000,000 shares of our Common Stock to Member-Link and an aggregate of
2,000,000 shares of our Common Stock to certain executive officers of Member-
Link. We also changed our name to "I-Trax.com, Inc." on August 27, 1999.
Effective as of December 30, 1999, Member-Link merged with and into
us pursuant to a Merger Agreement dated as of December 14, 1999. In the merger,
each of the 1,809,686 outstanding shares of Common Stock of Member-Link was
13
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converted into a right to receive 4.4207 shares of our Common Stock. An
aggregate of 8,000,082 shares of our Common Stock was issued in the merger. The
3,000,000 shares of our Common Stock held of record by Member-Link at the time
of the merger were canceled. As a further consequence of the merger, each of the
license agreement, the technical services agreement and management services
agreement were canceled.
Overview
The Company has historically developed enterprise or client server
applications for collecting disease specific data at the point of care. The
Company has just begun the development of its Internet applications and no
revenues have been generated from these applications. The Company intends to
increase significantly its expenditures primarily in the areas of product
development, client services, business development, and sales and marketing. As
a result, the Company expects to incur substantial operating losses over the
next twelve months.
The Company's current primary sources of revenues are license fees
and product development fees it charges its customers. In the future, the
Company expects to generate a significant portion of its revenue from
subscriptions to the Company's products delivered over the Internet.
Results of Operations
Three Months Ended December 31, 2000 Compared to Three Months Ended
March 31, 2000. Total revenues for quarter ended March 31, 2000 were $0.00 as
compared to $223,950 for the quarter ended March 31, 1999.
Cost of Revenue was $0.00 for the quarter ended March 31, 2000 as
compared to $124,083 for the same items in the first quarter of 1999, consisting
primarily of computer hardware, networking and consulting.
Research and development expenses of $583 for the quarter ended March
31, 2000, as compared to $41,707 for the quarter ended March 31, 1999, which
consisted primarily of employee compensation and information systems personnel.
Although the Company has expensed its R&D costs in the past, it will likely
capitalize a significant percentage of the costs associated with the development
of its web-based versions of its existing products in the future.
Selling, general and administrative expenses consist primarily of
compensation for legal, finance, sales, management, travel, rent, telephone and
consulting services. Selling, general and administrative expenses were $535,086
for the quarter ended March 31, 2000 and $108,992 for the quarter ended March
31, 1999. The increase resulted primarily from increased costs necessary to
support the growth of the Company's business activities. The Company intends to
increase the amounts spent in these categories to support continued growth and
expansion in future periods.
14
<PAGE>
Liquidity and Capital Resources
The Company's accumulated deficit of $1,171,075 from inception has
been funded through capital contributions from the sale of common stock of the
Company. On February 20, 2000, the Company completed a private placement of
1,800,000 shares of its Common Stock at $1.00 per share to fund the next phase
of the Company's planned expansion. The Company believes that these funds,
together with anticipated revenue, will be sufficient to meet the Company's
present business expansion requirements until the end of the third quarter of
2000. Although the Company plans to seek additional capital during that period,
there can be no assurance that such financing will be available on acceptable
terms, if at all.
At March 31, 2000, the Company's cash and cash equivalents were
$1,387,547. The Company's principal source of liquidity is the cash obtained
from the private placement transaction. The Company currently has no available
credit facilities to fund operating cash flow or investment opportunities.
During 1998, several judgments were entered against U.S. Medical
Alliance, the predecessor to the Company, relating among other things, to the
Company's prior line of business of managing physician practices. The
allegations made in the underlying suits relate to wrongful discharge, general
breach of contract, breach of equipment lease agreements and miscellaneous
vendor claims. The aggregate amount of such judgments entered against the
Company and certain associated physicians is approximately $600,000. None of the
plaintiffs in the underlying suits has attempted to collect on the judgments.
While it remains unclear whether the Company can successfully satisfy the
judgments in a favorable manner, based on a reasoned opinion issued by the
Company's special counsel retained to resolve these matters, the Company has
accrued, as of December 31, 1999, approximately $22,500, with a related charge
to operations, as a reserve for satisfying such judgments.
Factors Affecting the Company's Business and Prospects
The Company expects to experience significant fluctuations in its
future quarterly operating results due to a variety of factors, many of which
are outside the Company's control. These issues are discussed more fully in the
Risk Factors section in Item 1 of this Form 10-SB.
Market Risk
The Company has no material interest-bearing assets or liabilities, nor
does the Company have any current exposure for changes in foreign currency
exchange rates. The Company does not use derivatives or other financial
instruments. The Company's financial instruments consist of cash and
receivables. The market values of these financial instruments approximate book
value.
15
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Inflation
The financial statements are presented on a historical cost basis and
do not fully reflect the impact of prior years' inflation. While the U.S.
inflation rate has been modest for several years, inflation issues may impact
the Company's business in the future. The ability to pass on inflation costs is
an uncertainty due to general economic conditions and competitive situations.
Year 2000 Preparation
Software failures due to calculations using Year 2000 dates are a known
risk. Although the most critical date (January 1, 2000) has occurred without
incident in our software, problems with Year 2000 software could nonetheless
result in system failures or miscalculations causing disruptions of operations,
including, among others, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. To date, the Company
has experienced very few problems related to Year 2000 testing and those
requiring modification have been fixed. The Company does not believe that there
is material exposure to the Year 2000 issue with respect to its electronic
commerce transaction processing and online activity since these systems
correctly define the Year 2000. The Company is nonetheless conducting an
analysis to determine whether others with whom the Company does business have
Year 2000 issues on a continual basis.
The Company has not incurred any material expenses in addressing Year
2000 compliance to date.
PART II Other Information
Item 1. Legal Proceedings
None.
Item 2. Change in Securities
On February 20, 2000, we completed the sale of 1,800,000 shares of our
Common Stock for an aggregate consideration of $1,800,000, at a price of $1.00
per share, in a series of closings pursuant to a private placement to accredited
investors. The entire proceeds of the Private Placement, $1,794,880 (net of
costs), is being used by the Company for working capital. In issuing such
private placement shares, we relied on an exemption from registration under
Section 4(2) of the Securities Act and Regulation D thereunder. We filed with
the SEC a Form D in connection with the issuance of our shares in this private
placement.
Item 3. Defaults Upon Senior Securities
None.
16
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
27.1 Financial data schedule.
17
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
I-TRAX.COM, INC.
Date May 15, 2000 By: /s/ Frank A. Martin
-------------------------------------
Name: Frank A. Martin
Title: Chief Executive Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1, of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,387,547
<SECURITIES> 0
<RECEIVABLES> 213,183
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,770,254
<PP&E> 56,129
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,876,045
<CURRENT-LIABILITIES> 192,913
<BONDS> 0
0
0
<COMMON> 17,828
<OTHER-SE> 1,665,304
<TOTAL-LIABILITY-AND-EQUITY> 1,876,045
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 535,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> (524,440)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (524,440)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
