As filed with the Securities and Exchange Commission on December 27, 2000
Registration No. 333-52396
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
To
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
InfoActiv, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 7371 23-2882596
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
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208 Union Wharf
Boston, Massachusetts 02109
(617) 557-4444
(Address and Telephone Number of Principal Executive
Offices and Principal Place of Business)
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Samuel D. Cannavo
Chief Executive Officer
InfoActiv, Inc.
208 Union Wharf
Boston, Massachusetts 02109
(617) 557-4444
(Name, Address and Telephone Number of Agent For Service)
Copies to:
Martin C. Licht, Esq.
Silverman, Collura & Chernis, P.C.
381 Park Avenue South, Suite 1601
New York, New York 10016
Telephone (212) 779-8600
Facsimile (212) 779-8858
Approximate Date of Commencement of Proposed sale to the Public: As soon
as practicable after the effective date of this Registration Statement.
<PAGE>
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 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 the earlier effective
registration statement for the same offering. [ ]
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 this form is a post-effective registration statement filed pursuant to
Rule 462(d) 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,
check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Share(1) Offering Price (1) Registration Fee
=====================================================================================================================
<S> <C> <C> <C> <C>
Common Stock 11,604,500 $3.00 $34,813,500 $9,190.76(2)
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 of the Securities Act.
(2) A filing fee in the amount of $8,794.76 was paid upon the initial filing
of this Registration Statement.
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 thereafter 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 said Section 8(a), may determine.
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. The securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to buy these
securities in any jurisdiction where the sale is not permitted.
Preliminary Prospectus Dated December 27, 2000
Subject to Completion
11,604,500 Shares
InfoActiv, Inc.
Common Stock
This is a public offering of shares of common stock of InfoActiv, Inc. by
selling stockholders. No public market currently exists for our shares. We
intend to apply for listing of our common stock on the National Association of
Securities Dealers, Inc. ("NASD") OTC Bulletin Board. Sales may be made by the
selling stockholders at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. We will not receive any
proceeds from the sale of the shares of common stock.
Before buying the shares of common stock, carefully read this prospectus,
especially risk factors beginning on page 5. The purchase of our securities
involves a high degree of risk.
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is ____________ __, 2000
______________________
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY .................................................... -1-
RISK FACTORS .......................................................... -5-
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS .................. -12-
USE OF PROCEEDS ....................................................... -13-
DIVIDEND POLICY ....................................................... -13-
CAPITALIZATION ........................................................ -14-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................................................ -15-
BUSINESS .............................................................. -20-
MANAGEMENT ............................................................ -28-
PRINCIPAL STOCKHOLDERS ................................................ -32-
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION ......................... -34-
DESCRIPTION OF SECURITIES ............................................. -38-
SHARES ELIGIBLE FOR FUTURE SALE ....................................... -40-
LEGAL MATTERS ......................................................... -41-
EXPERTS ............................................................... -41-
HOW TO GET MORE INFORMATION ........................................... -41-
FINANCIAL STATEMENTS .................................................. F-1
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You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information contained elsewhere in this
prospectus. You should carefully read the entire prospectus, including the "Risk
Factors" section, the financial statements and the notes to the financial
statements. This summary does not contain all of the information that investors
should consider before investing in our common stock.
Our business
We provide advanced telecommunications products and services to enhanced
service providers and communications platform vendors in the telecommunications
industry. We intend to focus our efforts on the development and marketing of our
MessageFinder(TM) service, a proprietary unified messaging service that allows
subscribers to:
o access personal messaging services such as voice, fax, e-mail messaging
or home answering machines;
o perform advanced messaging functions including conference calling,
communicating with messaging services, returning calls and instant messaging;
o access personal information services such as bank accounts, stock
information and credit card balances;
o maintain personal information such as address books, calendar and
favorite Web and telephone sites on a secure MessageFinder(TM) storage site;
o access public information sites such as news, stock quotes, sports and
weather;
o initiate telephone calls; and
o receive notification of the arrival of new messages, stock prices,
personal appointments and other information over a pager, e-mail or mobile
phone.
We commenced offering Internet-based unified messaging on a trial basis in
February 2000. We currently have approximately 1,000 subscribers utilizing our
services. We anticipate that we will complete the development of our
MessageFinder(TM) service prior to the end of this year.
Our strategy
Our objective is to establish ourselves as a leading provider of unified
messaging services. We plan to accomplish our objective by increasing our
subscriber base, developing strategic alliances and establishing recognition of
the MessageFinder(TM) brand name. We plan to derive revenue from the sale of our
services to end users as well as the licensing of our products and services to
service providers.
Corporate background
We were incorporated in Pennsylvania in February 1997 following the
reorganization of our predecessor company, Infologue, Inc., which was organized
in 1988, and became a Delaware corporation in December, 2000. Our headquarters
are located at 208 Union Wharf, Boston, MA 02109. Our
<PAGE>
telephone number is (617) 557-4444. Information contained in our web sites is
not intended to be part of this prospectus.
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<PAGE>
The Offering
Securities Offered ............... This prospectus relates to the offering of
11,604,500 common stock which are being
offered for sale by the selling
stockholders. See "Description of
Securities" and "Selling Stockholders and
Plan of Distribution."
Price Per Share .................. Sales may be made at fixed prices which may
be changed, at market prices prevailing at
the time of sale, or at negotiated prices.
Common Stock Outstanding ......... 27,283,477 shares.
Use of Proceeds .................. We will not receive any of the proceeds from
the sale of shares by the selling
stockholders.
Risk Factors ..................... You should read the "Risk Factors" section
as well as the other cautionary statements
throughout the entire prospectus, so that
you understand the risks associated with an
investment in our securities.
-3-
<PAGE>
Summary Financial Data
Statement of operations data:
<TABLE>
<CAPTION>
Nine Month Period
Ended September 30, Year Ended December 31,
2000 1999 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $426,169 $722,203 $1,212,294 $ 982,532
----------- -------- --------- ---------
Cost of Sales 147,847 255,631 429,456 390,361
Selling, general and administrative 379,120 222,312 252,044 425,108
Research and development 1,795,020 251,886 424,533 306,791
Depreciation and amortization 134,020 105,102 157,119 22,620
----------- -------- --------- ---------
Total operating expenses 2,456,007 834,931 1,263,152 1,144,880
----------- -------- --------- ---------
Operating loss 2,029,838 112,728 50,858 162,348
Interest Expense 30,236 5,615 12,716 55
----------- -------- --------- ---------
Net loss $(2,060,074) $118,343 $ (63,574) $(162,403)
=========== ======== ========= =========
Net loss per common share $(0.60) $(0.03) $(0.02) $(0.04)
====== ====== ====== ======
Weighted average number of common
shares outstanding 4,576,300 4,147,010 4,147,010 4,147,010
========= ========= ========= =========
</TABLE>
Balance sheet data:
September 30, 2000 December 31, 1999
------------------ -----------------
Cash and cash equivalents $9,032 $27,551
Working capital (deficit) $(876,850) $(622,101)
Total assets $1,014,973 917,013
Total current liabilities $1,037,376 $791,336
Total liabilities $1,037,376 $791,336
Stockholders' equity (deficit) $(22,403) $125,677
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<PAGE>
RISK FACTORS
The offering involves a high degree of risk. You should carefully
consider the following factors and other information in the prospectus before
deciding to invest in our shares of common stock.
Our MessageFinder(TM) is a new product and we may face difficulties
encountered by early stage companies in gaining acceptance for it in a new and
rapidly evolving market.
Our MessageFinder(TM) service, is not fully developed and has
undergone only limited market testing to date. Although we commenced operations
in 1997, our operating history is based on products which we do not intend to
expand. Our ability to achieve profitability will depend upon our ability to:
o attract subscribers for our services;
o increase awareness of our brand;
o strengthen user loyalty;
o maintain current and develop new strategic relationships;
o attract a large number of advertisers from a variety of
industries;
o manage growth and respond effectively to competitive pressures;
o continue to develop and upgrade our technology; and
o attract, retain and motivate qualified personnel.
We anticipate increased operating expenses and expect to incur losses in
developing and marketing our MessageFinder(TM) service.
We have incurred losses since our inception and we expect to continue
incurring losses for at least the next 12 months. As of September 30, 2000 we
had a working capital deficit of $(876,850). We do not expect to realize
significant increases in our revenues from the sale of our current line of
products and services. We expect that our operating expenses will increase
substantially as we complete the development and final customer testing of our
MessageFinder(TM) service and implement our business strategy. We may never be
profitable. If profitability is achieved, we may not be able to sustain it.
We require substantial funds and we need to raise additional capital to
implement our plans to develop and manage our MessageFinder(TM) service.
We anticipate that we have sufficient capital to satisfy our contemplated
cash requirements for approximately three months. We will then require
significant additional financing in order to market our MessageFinder(TM)
service. If we do not obtain necessary financing, then we may have to curtail or
cease operations. If any future financing involves the sale of our equity
securities, the shares of our common stock held by our stockholders would be
substantially diluted. If we incur indebtedness or issue debt securities, we
will be subject to various risks, including the risk that interest rates may
fluctuate and the possibility that we may not be able to pay principal or
interest.
-5-
<PAGE>
Other companies are offering free services supported by advertising, which may
cause subscribers to become unwilling to pay for our services.
Many services provided over the Internet are provided free of charge to
attract traffic to the service provider's web site. These free services include
free voice mail, free e-mail and free facsimile-to-e-mail services, which are
being offered by other companies which will be in competition with our
MessageFinder(TM) service. The providers of free services attempt to recover
their expenses and make a profit by selling advertising based on the traffic
generated by free services. We expect that as these free services become
increasingly popular with users, they will require our MessageFinder(TM) service
to provide clear incremental benefits over free services to justify paying for
our services.
If we cannot establish and maintain market acceptance and an acceptable pricing
structure for our MessageFinder(TM) service, we may not achieve profitability.
Market acceptance of our MessageFinder(TM) service is uncertain. We intend
to undertake a marketing campaign, to establish and promote the
MessageFinder(TM) service, to commit the resources necessary to achieve market
acceptance and to coordinate our sales, marketing and support activities with
those of the service providers to whom we will be selling our MessageFinder(TM)
service. We cannot assure you that we will have the necessary resources to
implement our business and marketing strategy or that we will achieve our
objectives.
Fees for our MessageFinder(TM) service may be higher than those charged by
our competitors. We may need to reduce proposed prices for our service to remain
competitive. We cannot predict whether our pricing structure will prove to be
viable, whether demand for our services will materialize at the prices we would
like to charge or whether we will be able to sustain adequate future pricing
levels as competitors introduce competing services.
If we do not establish the MessageFinder(TM) brand name and reputation, we may
be unable to attract users.
We believe that establishing and maintaining our brand name and reputation
will be critical to achieving widespread use of our unified messaging service.
Promoting and positioning our brand name will depend largely on the success of
our marketing efforts and our ability to provide high quality services. In order
to promote our brand, we will need to increase our marketing budget and our
financial commitment to creating and maintaining brand loyalty among users. If
we fail to promote and maintain our brand or incur substantial expenses in an
unsuccessful attempt to promote and maintain our brand, our business would be
harmed and our prospects for profitability substantially reduced.
Our business may suffer because of our dependence upon third parties.
We rely on several technology partners to adapt various core technologies to
accomplish the MessageFinder(TM) functions. In addition, we will be relying on
Internet service providers and other resellers of messaging and communications
services to purchase or license our service for use by their
-6-
<PAGE>
clients and consumers. We cannot assure you that our technology partners will
continue to provide us with the core technologies and products necessary for the
effective functioning of our MessageFinder(TM) service, or that the service
providers and other resellers of our service will use or purchase our service
We access the Internet and other data transmission media through dedicated
or shared connections to third party service providers. In many cases, we pay
fixed monthly fees for Internet and other access, regardless of our usage or the
volume of our customers' traffic. We cannot assure you that the current pricing
structure for access to these media will not change and that our business will
be able to avoid increased operating costs and reduced profits.
Our business could suffer if we cannot obtain telephone numbers.
Our future success will depend upon our ability to procure large quantities
of telephone numbers in the United States and foreign countries. Our ability to
procure large quantities of phone numbers will be particularly limited in area
codes of large metropolitan areas, and we may at some point be unable to provide
our customers with phone numbers in the most desirable area codes (e.g., 212 in
Manhattan and 171 in London) in such areas, having to rely instead on new area
codes created for these areas. Our ability to procure telephone numbers depends
on applicable regulations, the practices of telecommunications carriers that
provide telephone numbers and the level of demand for new telephone numbers. If
we cannot readily obtain these numbers cost effectively, we may not be able to
enter some foreign markets, our growth may be slowed in domestic markets, and
our business would be harmed.
Our business could be harmed if we were unable to adequately protect our
intellectual property and proprietary rights.
We currently rely on a combination of patents, trade secrets, copyright and
trademark law, together with non-disclosure agreements and technical measures,
to establish and protect proprietary rights in our services. Existing
intellectual property laws provide only limited protection. We may be required
to enter into costly litigation to defend our intellectual property rights. We
cannot assure you that our applications for patent protection will be granted or
that our proprietary technology will remain a trade secret. In addition, we
cannot assure you that the technologies used by our gateway server and
MessageFinder(TM) service do not infringe the proprietary rights of others.
We may be found to have infringed the intellectual property rights of others
which could expose us to substantial damages or restrict our operations.
We could be subject to claims that we have infringed the intellectual
property rights of others. In addition, we may be required to indemnify our
resellers and users for similar claims made against them. Any claims against us
could require us to spend significant time and money in litigation, pay damages,
develop new intellectual property or acquire licenses to intellectual property
that is the subject of the infringement claims. These licenses, if required, may
not be available at all or on acceptable terms. As a result, intellectual
property claims against us could divert amounts of our financial resources and
reduce profits.
-7-
<PAGE>
If we do not complete the development of our MessageFinder(TM) service our
business will suffer.
We anticipate that we will complete the initial development of our
MessageFinder(TM) service by the end of the year. If we do not complete the
development of our MessageFinder(TM) service in a timely manner our plans to
market our service will be impaired.
Our business may be adversely affected by the application of future
communications industry regulations.
We are not a telecommunications carrier and do not currently charge
customers for using our MessageFinder(TM) service. We believe that we are not
subject to direct regulation by any governmental agency, other than regulations
applicable to businesses generally. Many of the Internet service providers and
other service providers to whom we anticipate selling or licensing our
MessageFinder(TM) service are subject to varying degrees of federal, state and
local regulation, including regulation by the Federal Communications Commission.
We anticipate that we will be subject to regulation by the FCC and other
government agencies at such time as we commercialize our MessageFinder(TM)
service and become a telecommunications carrier for hire. Future regulations
applicable to our service provider customers could be adopted by the FCC or
other regulatory bodies. If these regulations are adopted and adversely impact
our partners, our business, financial condition and operating results may be
materially adversely affected.
As competition in the unified messaging services market intensifies, our
business may suffer.
The unified messaging services market is highly competitive. Deployment of
patented technologies constitutes one of the substantial barriers to market
entry, but the cost of licensing these technologies is not prohibitive. We face
intense competition in the unified messaging market from such companies as
Lucent, Comverse, Jfax, MessageASAP and ESA. We expect that the intensity of
competition will increase as additional competitors with greater financial
resources and industry experience enter the unified messaging services market.
We cannot assure you that we will be able to compete effectively or that we will
be able to increase, or even maintain, market share. In addition, should a
competitor reduce market prices for its services, we might be required to
implement price reductions in order to remain competitive, which could severely
reduce our profit margins.
Our business may be constrained because we support a limited number of operating
system platforms.
Our MessageFinder(TM) service is available only to those users whose
computers are run by Windows 3.1, Windows 95, Windows 98, Windows 2000, Windows
NT, Macintosh, and UNIX operating systems. Since there are other operating
system platforms, we cannot provide our service to all potential customers. To
the extent other operating systems proliferate in the future, our ability to
attract new customers and keep existing customers could be significantly
impaired.
-8-
<PAGE>
If we cannot respond quickly to new technological advances in the unified
messaging services market we may not be able to attract and retain customers.
We believe that we must continue to enhance and improve the responsiveness,
functionality and features of our MessageFinder(TM) service, web site and the
underlying technology of our gateway server. The telecommunications and
electronic messaging industries are characterized by rapid technological change,
changes in user requirements and preferences, frequent new product and service
introductions embodying new technologies and the emergence of new industry
standards and practices that could render our technology and services obsolete.
Our success will depend on our ability to obtain leading telecommunications
technologies. If we are unable to adapt to changing market conditions, client
requirements or emerging industry standards, we may not be able to attract and
retain customers.
As the Internet becomes more widely accepted as a medium for telecommunications,
our business may not benefit from growth in the use of the Internet.
The use of the Internet for e-mail communication is rapidly evolving and
expanding. We depend upon the continued growth in the use of the Internet both
for e-mail communications and advertising on our web site and elsewhere through
our MessageFinder(TM) service. We cannot gauge the extent of long-term reliance
on the Internet by customers as compared to more traditional telecommunications
media such as voice mail and facsimile transmission.
Our MessageFinder(TM) service may be vulnerable to system failure or system
defects.
Our ability to provide uninterrupted service and high quality customer
support will depend on the efficient and uninterrupted operation of our computer
and communications systems and those of our partners. These computer hardware
and operating systems are vulnerable to damage or interruption from earthquakes,
floods, fires, power loss, telecommunication failures and similar events. They
are also subject to break-ins, sabotage, intentional acts of vandalism and
similar misconduct. Our business could be adversely affected if our systems were
affected by any of these occurrences.
Our software may have defects and we may encounter development delays
Software-based services and equipment, such as our MessageFinder(TM)
service, may contain undetected errors or failures when introduced or when new
versions are released. We cannot assure you that errors will not be found in our
software or that we will not experience development delays, resulting in delays
in market acceptance which could have a material adverse effect on our plan to
market our service and reduce our prospects for profitability.
Internet security concerns could hinder the growth of e-mail communications and
the demand for our service.
Our MessageFinder(TM) service collects confidential user data. A significant
barrier to electronic communications is the secure transmission of confidential
information over public networks. We rely
-9-
<PAGE>
on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary for secure transmission of
personal and confidential information. A party who is able to circumvent our
security measures could misappropriate personal information, such as credit card
or bank account balances and access codes, or interrupt our operations. Any such
compromise or breach of our security could have a material adverse effect on our
market acceptance, brand name and reputation, revenues and profitability.
Concerns over the security of the Internet, the transmission of personal and
confidential information and other on-line transactions and the privacy of users
may also inhibit the growth of the Internet and other on-line services.
We may be subject to future government regulation and legal liabilities that
may be costly and may interfere with our ability to conduct business.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. These laws and regulations
could expose us to compliance costs and substantial liability. In addition, the
growth of the Internet, coupled with publicity regarding Internet fraud, may
lead to the enactment of more stringent consumer protection laws. These laws
would also be likely to impose additional burdens on our business.
Management will control approximately 59.2% of InfoActiv and its interests may
differ and conflict with yours.
Our executive officers and directors beneficially own approximately 59.2% of
the outstanding shares of our capital stock. As a result, they have the ability
to effectively control the affairs and business of InfoActiv, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing a change in control of InfoActiv, and make some transactions more
difficult or impossible without the support of such stockholders.
There is no public market for our common stock and any public market that
develops upon completion of this offering may be limited.
There is currently no public market for our common stock and any public
market that develops may be limited. We intend to apply for listing on the OTC
Bulletin Board, but we cannot assure you that we will be approved for listing.
We cannot assure you that any market for the shares will develop or, if it
develops, that it will be sustained.
The market for our common stock, if any develops, may be volatile.
We intend to apply for listing of our common stock on the OTC Bulletin
Board. The OTC Bulletin Board experiences a high level of price and volume
volatility. Market prices for many companies, particularly small and emerging
growth companies have experienced wide price fluctuations
-10-
<PAGE>
not necessarily related to their operating performance as such:
o The market price for our common stock may be affected by general stock
market volatility;
o Purchasers may have trouble reselling their stock;
o Broker/dealers may not be able to resell our stock as easily as stocks
which are traded on larger exchanges;
o Financial results and various factors affecting our industry in general
may significantly affect the market price for our common stock.
We cannot assure you that we can sustain an active trading market.
The Commission's penny stock rules may severely limit the liquidity of an
investment in our common stock.
Our shares of common stock may be subject to Rule 15g-9 under the Exchange
Act. This rule imposes additional sales practice requirements on broker/dealers
which sell such securities to persons other than established customers and
accredited investors. Generally, these individuals have a net worth in excess of
$1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their
spouses. For transactions covered by this Rule, a broker/dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
Rule may affect the ability of broker/dealers to sell our common stock and may
affect the ability of purchasers in the offering to sell their shares.
We intend to apply for listing of our common stock on the OTC Bulletin
Board. The Commission has adopted regulations which generally define a penny
stock as any non-Nasdaq equity security that has a market price of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. The market price for our common stock, if any market
develops, may be less than $5.00 per share. The following rules apply to
non-exempt penny stock:
o For any transaction by broker/dealers involving a penny stock, the rules
require delivery, prior to a transaction in a penny stock, of a
risk-disclosure document relating to the penny stock market;
o Disclosure is also required to be made about compensation payable to
both the broker/dealer and the registered representative and current
quotations for the securities;
o Finally, monthly statements are required to be sent disclosing recent
price information for the penny stock held in the account and
information on the limited market in penny stocks.
The penny stock restrictions will not apply to our common stock if it is
listed on Nasdaq and certain price and volume information is provided on a
current and continuing basis, or we meet certain
-11-
<PAGE>
minimum net tangible assets or average revenue criteria. We cannot assure you
that our securities will qualify for exemption from these restrictions at any
time in the foreseeable future. Even if our common stock were exempt from such
restrictions, it would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the Commission the authority to prohibit any person that is engaged
in unlawful conduct while participating in a distribution of penny stock from
associating with a broker/dealer or participating in a distribution of penny
stock, if the Commission finds that such a restriction would be in the public
interest. If our common stock were subject to the rules on penny stocks, the
market liquidity for our securities could be severely limited.
We must satisfy certain listing requirements in order to qualify for a
listing on Nasdaq. These requirements include: (a) a minimum of $4,000,000 in
total assets and $2,000,000 in stockholder's equity and (2) a minimum bid price
of $4.00 for our common stock. We cannot assure you that we will qualify for a
listing of our common stock on Nasdaq or that such a listing, if obtained, can
be maintained.
Shares eligible for public sale after this offering could impair our stock
price.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
We do not anticipate paying dividends on our common stock.
We have not paid dividends on our common stock to date and we do not
anticipate declaring or paying any dividends in the foreseeable future; rather,
we intend to retain our earnings, if any, for the operation and expansion of our
business.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
"expects," "intends," "plans," "projects," "believes," "seeks," "estimates" and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our view only as of the date of this prospectus. We
are not obligated to update these statements or publicly release the result of
any revisions to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
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USE OF PROCEEDS
We will not receive any proceeds from this offering. All proceeds will go to
the selling stockholders.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We do not intend to
declare or pay dividends on our common stock; rather, we intend to retain our
earnings, if any, for the operation and expansion of our business. Dividends
will be subject to the discretion of our board of directors and will be
contingent on future earnings, if any, our financial condition, capital
requirements, general business conditions, and such other factors as our board
of directors deems relevant.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2000:
o on an actual basis; and
o on a pro forma basis to reflect:
o the issuance of 6,345,625 shares of our common stock during the
fourth quarter of 2000 in a private financing transaction at a
purchase price of $.16 per share resulting in gross proceeds of
$1,015,300, including $700,000 of stock subscriptions receivable;
o the issuance of 3,312,500 shares of common stock to Samuel D.
Cannavo, our chairman and chief executive officer, in exchange for
the cancellation of indebtedness in the amount of $541,500 in the
fourth quarter of 2000; and
o the issuance of 1,446,375 shares of common stock in the fourth
quarter of 2000 for consulting services.
You should read this table in conjunction with our financial statements,
including the notes to our financial statements, which appear elsewhere in this
prospectus.
<TABLE>
<CAPTION>
September 30, 2000
------------------
Actual Pro Forma
------ ---------
<S> <C> <C>
Preferred stock, $.001 par value, 3,000,000 shares
authorized; no shares issued and outstanding $ - $ -
Common stock, $.001 par value, 50,000,000
shares authorized; 16,178,977 shares 16,179 27,283
issued and outstanding; pro forma
27,283,477 shares issued and outstanding
Additional paid-in capital 96,910 1,874,026
Accumulated deficit (135,492) (366,912)
Stock subscriptions receivable - (700,000)
-------- ----------
Total capitalization $(22,403) $ 834,397
======== ==========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
information of InfoActiv appearing elsewhere in this prospectus.
Overview
We provide advanced telecommunications products and services to enhanced
service providers and communications platform vendors in the telecommunications
industry. Our current products include IntellActiv, a consulting service for
voice/fax and unified messaging service providers, and two software products for
the Unisys VoiceSource Platform, NetProJ Internet Provisioning System, a
non-proprietary service provisioning system, and ProActiv(TM) Design Reporter, a
statistical reporting system. Both programs, collectively known as ProProducts,
are distributed pursuant to a long-term contract with Unisys to enhanced
telephony service provider clients of Unisys. We intend to focus our efforts on
the development and marketing of our MessageFinder(TM) service.
Results of Operations
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Revenues
Our revenues for the nine months ended September 30, 2000 were $426,169 as
compared to revenues for the nine months ended September 30, 1999 of $722,203, a
decrease of 41%. Management believes that the decrease in revenues is primarily
attributable to the redirection of our marketing and sales efforts toward our
MessageFinder(TM) service and away from our other businesses.
Cost of Sales
Cost of sales for the nine months ended September 30, 2000 were $147,847,
34.7% as a percentage of revenues as compared to $255,631, 35.4% as a percentage
of revenues for the nine months ended September 30, 1999. Management believes
that the decrease in cost of sales as a percentage of revenues is primarily
attributable to a decrease in the sale of services and an increase in higher
profit margin sales of software.
Selling, general and administrative expenses
Selling, general and administrative expenses were $379,120, 88.9% as a
percentage of revenues, for the nine months ended September 30, 2000 as compared
to $222,312, 30.8% as a percentage of revenues for the nine months ended
September 30, 1999. Management believes that the increase in selling, general
and administrative expenses is primarily attributable to the redirection of our
marketing and sales efforts toward our MessageFinder(TM) service and away from
our other businesses.
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Research and development expenses
Research and developments for the nine months ended September 30, 2000 were
$1,795,020 as compared to $251,886 for the nine months ended September 30, 1999,
an increase of 612.6%. Management believes that the increase in research and
development expenses is primarily attributable to increased research and
development expenses for our MessageFinder(TM) service.
Depreciation and amortization
Depreciation and amortization expenses for the nine months ended September
30, 2000 were $134,020 as compared to $105,102 for the nine months ended
September 30, 1999, an increase of 27.5%. Management believes that the increase
in depreciation and amortization expenses is primarily attributable to an
increased investment in depreciable assets.
Interest expenses
Interest expenses for the nine months ended September 30, 2000 were $30,236
as compared to interest expenses of $5,615 for the nine months ended September
30, 1999. Management attributes the increase in interest expenses to an increase
in borrowings.
Year Ended December 31, 1999 Compared to Fiscal Year Ended December 31, 1998
Revenues
Our revenues for the year ended December 31, 1999 were $1,212,294 as
compared to revenues for the year ended December 31, 1998 of $982,532, an
increase of 23.4%. Management believes that the increase was primarily
attributable to revenues from a consulting contract with Sprint PCS.
Cost of sales
Cost of sales for the year ended December 31, 1999 were $429,456, 35.4% as a
percentage of revenues as compared to $390,361, 39.7% as a percentage of
revenues. Management believes that the decrease in cost of sales as a percentage
of revenues is primarily attributable to an increase in the sale of higher
margin software products.
Research and development
Research and development expenses for the year ended December 31, 1999 were
$252,044 as compared to research and development expenses of $425,108 for the
year ended December 31, 1998, a decrease of 40.7%. Management believes that the
decrease in research and development expenses is primarily attributable to the
decrease in research and development expenses attributable to our
MessageFinder(TM) service.
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Depreciation and amortization
Depreciation and amortization expenses were $157,119 for the year ended
December 31, 1999 as compared to $22,620 for the year ended December 31, 1998,
an increase of 594.6%. Management believes that the increase in deprecation and
amortization expenses is primarily attributable to a higher investment in
depreciable assets.
Interest expenses
Interest expenses for the year ended December 31, 1999 were $12,716 as
compared to interest expenses of $55 for the year ended December 31, 1998.
Management attributes the increase in interest expenses to an increase in
borrowings.
Termination of S Corporation Status
As a result of terminating our S corporation status as of June 30, 2000,
we were required to record a one-time, non-cash tax benefit added to retained
earnings in the amount of $2,161,031.
Liquidity and Capital Resources
We have funded our requirements for working capital to support operations
and the development of our MessageFinder(TM) service from net cash received from
operations and from capital contributed by our principal executive officers and
founders. As of September 30, 2000, we had a working capital deficit of
$876,850.
For the year ended December 31, 1999, cash provided by operating activities
was $218,344 which was primarily attributable to an increase in accounts payable
and accrued expenses of $61,006 a decrease in accounts receivable of $61,748,
issuance of common stock for services rendered of $12,501 and depreciation and
amortization of $157,119 offset by a net loss in the amount of $63,574 and other
changes in assets and liabilities of $10,456.
For the year ended December 31, 1998, cash provided by operating activities
was $123,544 which was primarily attributable to an increase in accounts payable
and accrued expenses of $312,402 and depreciation and amortization of $22,620
offset by a net loss in the amount of $162,403, an increase in accounts
receivable of $38,863 and other changes in assets and liabilities of $10,212.
For the year ended December 31, 1999, net cash used in investing activities
was $316,853 which was attributable to the purchase of property and equipment of
$4,863 and the capitalization of software of $311,990.
For the year ended December 31, 1998, net cash used in investing activities
was $308,719 which was attributable to the purchase of property and equipment of
$35,049 and the capitalization of software of $273,670.
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For the year ended December 31, 1998, net cash provided by financing
activities was $211,949 which was attributable to a net increase in advances
from shareholders.
For the year ended December 31, 1999, net cash provided by financing
activities was $81,660 which was attributable to an increase in advances from
shareholders.
For the nine months ended September 30, 2000 net cash used by operating
activities was $570,833 which was attributable to a net loss of $2,060,074
offset by depreciation and amortization of $134,020, the issuance of common
stock for services of $1,326,994 and other changes in assets and liabilities of
$28,227.
For the nine months ended September 30, 1999, net cash provided by operating
activities was $26,196 which was attributable to a net loss of $118,343 offset
by depreciation and amortization of $105,102, increases in accounts payable of
$59,867 and other increases of $16,999 and increased by decreases in accounts
receivable and pre-paid expenses in the aggregate amount of $37,429.
For the nine months ended September 30, 2000 net cash used in investing
activities was $452,383 which was attributable to capitalization of software of
$429,475 and purchases of property and equipment of $22,908.
For the nine months ended September 30, 1999 net cash used in investing
activities of $218,041 which was primarily attributable to capitalization of
software.
For the nine months ended September 30, 2000 net cash provided by financing
activities was $1,004,697 which was primarily attributable to proceeds from
loans of $300,000 proceeds from sale of stock of $335,000, a decrease in due
from shareholders of $206,427 and increases in advances from shareholders of
$163,270.
For the nine months ended September 30, 1999 net cash provided by financing
activities was $147,505 which was attributable to increase in advances from
shareholders of $277,730 offset by an increase in due from shareholders of
$130,225.
In May, 2000 we issued a promissory note to Fusion Fund, Inc. in the
principal amount of $250,000, bearing interest at the rate of 12% per annum. The
Fusion Fund note is payable at the earlier of (i) six months from issuance, (ii)
the closing of any public or private debt or equity in the gross amount of
$1,000,000 or (iii) the closing of any transaction in which our securities are
exchanged for securities of another entity. In July 3, 2000, Fusion Fund
exercised its option under the note to convert the principal and accrued
interest thereon into 1,562,500 shares of common stock at the rate of $.16 per
share.
In July, 2000 through December, 2000 we issued an aggregate of 10,001,875
shares of common stock to approximately 30 accredited investors in a private
placement at a purchase price of $.16 per share, from which we realized
$1,600,000 in gross proceeds. Of such proceeds $700,000 are payable to us
pursuant to investor notes bearing interest at the rate of 10% per annum due 30
days to 180 days
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from the subscription date.
Although we have no material commitments for capital expenditures, we
anticipate a substantial increase in our capital expenditures consistent with
anticipated growth in operations, infrastructure and personnel.
Our capital requirements depend on numerous factors, including, market
acceptance of our products and services, the resources we devote to marketing
and selling our services and our brand promotions, capital expenditures and
other factors. We have experienced a substantial increase in our capital
expenditures since our inception consistent with the growth in our operations
and staffing; we anticipate that this may continue for the foreseeable future
particularly related to the development and marketing of our MessageFinder(TM)
service. We believe that our current cash will be sufficient to meet our
anticipated needs for working capital, capital expenditures and business
expansion for the next three months. After three months, if cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities or to obtain a credit facility. The
sale of additional equity or convertible debt securities could result in
additional dilution to our stockholders. We currently have no material
commitments for any additional financing. There can be no assurance that
financing will be available in amounts or on terms acceptable to us, if at all.
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BUSINESS
Company Overview
We are an Internet-based unified messaging and telecommunications services
provider to individuals, businesses and Internet service providers. We provide
advanced telecommunications products to providers of such enhanced services as
voice mail, e-mail and fax mail and communications equipment vendors in the
telecommunications industry. Our current products include IntellActiv, a
consulting service, for voice/fax and unified messaging service providers, and
two software products for the Unisys VoiceSource Platform, NetPro(TM) Internet
Provisioning System, a non-proprietary service provisioning system, and
ProActiv(TM) Design Reporter, a statistical reporting system. The software
products are marketed under the ProProducts brand name and are distributed
pursuant to a long-term contract with Unisys to enhanced telephony service
provider clients of Unisys. We also provide outsource software development and
software administration services to Unisys and its clients.
We intend to focus our efforts on the development and marketing of our
MessageFinder(TM) service, a proprietary unified messaging service that allows
subscribers to perform advanced messaging functions, including accessing
personal messaging and information services and public information sites.
Industry Overview
Growth of Electronic Commerce, E-Mail and Internet-Related Services
The Internet has experienced rapid growth and has developed into a
significant medium for global communication and commerce, enabling millions of
people to exchange information and transact business electronically. As the
Internet has become more widely accepted and used by consumers and businesses,
e-mail has become one of the most widely adopted Internet applications, ranging
from a personal messaging tool to a strategic business tool. Growth in the use
of e-mail, in turn, has prompted a corresponding expansion of service providers
who offer messaging, information and content services. Such services include
multiple devices and interfacesB which include voice, fax and e-mail messaging
as well as information services involving web pages, news services, weather and
traffic services, stock quotations and telephone and Internet banking services.
A typical user today may have home voice mail, an answering machine, mobile
phone, voice and e-mail provided by an employer, home e-mail accounts and bank
balance and stock information accounts. All of these services are unlikely to be
integrated and are usually offered by more than one company. Additionally, each
service has its own discrete telephone number, user ID and password, requiring
the user to retain multiple user codes and passwords and execute numerous
entries for each transaction.
Fax Messaging
Although e-mail traffic is growing rapidly, we believe that faxing also
continues to grow due to decreasing telephone rates and the migration of fax
traffic to the Internet, a movement prompted by recent advances in technology
which allow users to send and receive faxes from their computers via e-mail over
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the Internet. Internet faxing reduces labor costs associated with traditional
faxing by allowing users to send and receive faxes from their computers, and
reduces the cost of sending messages because of the use of the Internet rather
than telephone lines as the transmission medium. For these reasons, we expect
that worldwide fax transmissions will increase in the next few years, even as
the use of traditional fax machines declines.
Telephone Line Voice Mail
In the late 1970's, the local telephone companies in the United States
introduced home voice messaging or voice mail. The service uses automated
"call-forwarding" features programmed on the telephone line to transfer incoming
calls to a central voice mail system when the line is busy or a call is
unanswered. Voice mail service is generally provided as an additional option by
the provider of the telephone line or mobile phone and is a secondary function.
Users often have several voice mailboxes: one for business on their business
line, one for home on their home line and one attached to their mobile phone. To
streamline the personal communications practices of users, voice mail services
are changing as new technology is developed.
Unified Messaging Service
The unified messaging market consists of the three existing markets of
voice, e-mail and fax. Unified messaging is a single "in-box" for voice, e-mail
and fax messages that is accessible by both telephone and personal computer.
Based upon information generally available such industry sources as Ovum Limited
and Yankee Group, we estimate that voice mailboxes worldwide grew at a rate of
64% in 1998. There were an estimated 569 million e-mail accounts at the end of
1999, according to www.messagingonline.com. We anticipate that the size of the
online Internet fax market will grow at a lower rate than voice mail.
Accordingly, although each messaging market will grow independently, we believe
that the unified messaging market will grow as a function of users= needs for
unifying their messaging and the corresponding willingness of service providers
to serve their needs.
Our MessageFinder(TM) Service
MessageFinder(TM) is designed to be a comprehensive communications portal to
serve the marketplace of consumers and businesses, whether purchased directly
from us or indirectly through a wireless service provider or Internet service
provider. MessageFinder(TM) provides simple and integrated access to multiple
providers' multi-media messaging and content services and personal accounts in a
single communication session. It allows users to retain current services from
existing providers, but enables them to access these services without having to
remember access codes, account numbers and passwords for each individual
service. A single user-ID and password provide access to our service. Our
MessageFinder(TM) service provides subscribers with the following abilities:
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Outgoing Services
o to access personal voice, fax or e-mail messaging services or home
answering machines from any service provider and communicate with any messaging
service;
o to initiate telephone and conference calls and return telephone calls;
o to access personal information services such as bank accounts, stock
information and credit card balances;
o to maintain and retrieve personal information such as address books,
calendar and favorite Web and telephone sites on a secured MessageFinder(TM)
storage site; and
o to access public information sites such as news, stock quotes, sports and
weather;
Incoming Services
o to receive notification of arrival of personal messages from voice, fax or
e-mail messages from any service provider;
o to receive notification of stock prices, personal appointments and other
information; and
o to receive telephone and conference calls.
Because MessageFinder.com(TM) is an Internet site, users may register
online. The current capacity of the MessageFinder(TM) gateway server is
approximately 10,000 users. Our goal is to complete testing of the initial
product and to increase the capacity of our gateway server to over 150,000 users
in the next 12 months. However, we cannot assure you that we will achieve this
goal. We intend to enhance MessageFinder(TM) to enable subscribers to use the
foregoing services any time from any device, including:
o a wired telephone;
o a wireless mobile telephone;
o a pager
o an Internet personal computer;
o an Internet-enabled mobile phone;
o a voice and data enabled personal digital assistant; and
o an Internet-enabled television.
Business Strategy
Our objective is to establish InfoActiv as a leading provider of unified
messaging services. The key elements of our business strategy are set forth
below.
Creating Brand Recognition
We believe that creating brand recognition is critical to marketing our
MessageFinder(TM) unified messaging service to service providers and end users.
We have developed a marketing database which covers a majority of the mobile
phone and fixed line service providers in the U.S. and Western Europe. We intend
to advertise our MessageFinder(TM) service in popular industry magazines and
newspapers such
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as Global Mobil and Wireless System Design. The full implementation of our
marketing plans to create brand recognition and establish market share, however,
will require additional financing. We cannot assure you that we will be able to
obtain such additional financing.
Establishing Service Provider Relationships
We intend to develop relationships with service providers who will bundle
our MessageFinder(TM) service with their own services and sell the package of
services to their customers. We also plan to broaden the use of our service by
offering to host the service provider's users on our servers. By offering access
to voice mail, fax mail, e-mail, answering machines and other information
services over the Internet, the Internet service providers who incorporate our
MessageFinder(TM) service with their own can differentiate themselves from other
Internet service providers who offer only Internet access or a limited range of
other messaging services. Revenues from this type of arrangement would be
derived from a subscription fee charged to a service provider for each of its
users who use the MessageFinder(TM) service.
Deriving Revenue
We intend to provide our MessageFinder(TM) service directly to end users and
to license our service to service providers, such as Internet service providers,
wireless service providers and Internet/voice portal service providers, who can
then package our MessageFinder(TM) service with other services offered to their
customers and host the entire package at their own locations or pay us to host
it on our gateway server. We also believe that we will be able to offer
MessageFinder(TM) service free to consumer end users in appropriate situations
by supporting the cost with advertising revenues.
o Subscription fees. We will charge a base subscription fee to end users
who subscribe to our service directly from us or indirectly through a
service provider for whom we host our service on our gateway server.
This fee could be pre-paid by credit card for a base number of units of
usage and supplemented with charges for incremental usage beyond
coverage of the base fee. We can also charge a subscription fee to the
end users of service providers for whom we will host the service
provider's users.
o Software license fees. We intend to charge a one-time license fee to
service providers who package our MessageFinder(TM) service with other
services and host our service at their own locations or pay us an
additional fee to host their package of services on our gateway server.
This license fee would be graduated according to the number of end users
of the service provider.
o On-going maintenance fees. We intend to charge an on-going maintenance
fee to service providers to whom we have licensed our MessageFinder(TM)
o Fees from banner ads from the Internet browser. When a user navigates
our web site for registering, service set-up and service access, a
banner ad can be placed on each Web page the user accesses. We believe
that the banner ad would be effective when the user
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accesses e-mail or voice mail service, as it is likely that the user
would spend a considerable amount of time reviewing messages.
o Fee from audio ads from the telephone. When a user waits for
MessageFinder(TM) to connect him to external voice/fax mail or other
automated services, an audio message can be played for the amount of
time it takes MessageFinder(TM) to dial the mailbox telephone number,
enter the account number and password.
MessageFinder(TM) User Interfaces
o Service Set-Up Interface - A subscriber will sign up for the service
over the Internet and create a service profile for each of the messaging
or information services which the subscriber wishes to access. Users may
also store a personal address book, contact list and calendar.
o Telephone Access - A user will be able to call to retrieve messages or
information content from any of the services previously set up in the
user's personal communications profile, or to make calls to any
telephone number either by searching the personal address book entered
in the user's profile or entering the telephone number manually.
o Internet Interface - A user will be able to access any type of
communication service over an Internet browser and connect automatically
to a telephone number previously entered into the subscriber's address
book or manually initiate a telephone call from the Internet by manually
entering the telephone number.
o Wireless Web Interface - Our wireless interface permits a subscriber to
access the subscriber's own pre-programmed communications services,
address book or calendar through the Internet browser capabilities on an
Internet-enabled mobile phone. This capability will provide the
combination of Internet (data) and telephone (voice) interface to the
subscriber.
Marketing
The Company has three potential target markets for its MessageFinder(TM)
service.
Service Providers
Initially we intend to market our MessageFinder(TM) service to enhanced
service providers such as:
o wireless operators;
o local, regional and national Internet service providers;
o local, regional and national wireline telephone companies;
o application service providers; and
o portal service providers.
We plan to supply our MessageFinder(TM) service to these service providers,
who in turn will
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package and provide the unified messaging service to their customers. We believe
that our gateway server will create opportunities for increased revenues by
increasing use of wireless handsets (for both voice and data) to access messages
and other information services regardless of the provider of the host mailbox
services.
Consumers
We intend to market our MessageFinder(TM) unified messaging service directly
to consumers through advertising, marketing and retail sales channels.
Businesses
We believe there is substantial potential for distribution in the enterprise
solutions marketplace for medium to large businesses.
Competition
We face competition from regional wireline telephone companies which supply
voice messaging services and other companies which provide unified messaging
services. In addition, we will compete with personalized portals which are used
to store frequently visited web-site accounts, such as those recently announced
by VerticalOne and EZLogin. Among the traditional telephone companies, we
believe that the "baby bells" have the largest share of the North American voice
messaging market. Companies such as Lucent, Comverse, Jfax, MessageASAP and ESA
offer unified messaging. Most of these competing companies in the voice
messaging and unified messaging services market are considerably larger and
better financed than we are, have more experience with their products in the
marketplace and extensive marketing capabilities. A significant disadvantage of
existing unified messaging solutions, however, is that users have to get all
their messaging services, such as voice mail, e-mail, fax and mobile phone, and
other online services from service providers which require the bundling of
individual services into a single platform. Our service is not a single store
system. On the contrary, our service enables end users to keep their existing
communication services, such as voice mail (including answering machines), fax
mail, e-mail, bank-by-phone accounts or other online accounts from different
service providers, as they are. This is beneficial to both the end user and the
traditional telephony or Internet service provider. End users do not have to
change their telephone numbers or e-mail addresses to a "single-box" number or
address, and service providers do not have to invest in large infrastructure
changes to accommodate IP and voice storage within the same box. Further, other
personalized portals, such as those offered by VerticalOne and EZLogin, do not
integrate Internet-based services and telephony services, nor do they allow
simultaneous access to both, as does our MessageFinder(TM) service. This is
because our gateway server has traditional telephony as well as voice over IP
technology.
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Technology
The core technology of MessageFinder(TM) is our gateway server for which we
have applied for patent protection. This server is designed to interact with
other servers on the Internet and to integrate, through MessageFinder, the
Internet, telephone and wireless networks so that users can retrieve messages
from all media and communicate with any type of service from any device. Our
gateway server technology integrates these networks and provides translations
from telephone voice mail to Internet provider voice or data, and from Internet
provider voice or data to telephone voice mail. The current implementation of
the gateway server uses a combination of Microsoft NT, the UNIX operating
system, traditional telephony and Internet telephony solutions. We are presently
engaged in the development of advanced technology incorporating natural language
understanding and artificial intelligence that will refine the accuracy of voice
to text translation, fax to voice translation and generally improve the
collection of messages from different types of voice, fax and e-mail servers for
accurate notification and translation to the end user. We have also applied to
the U.S. Patent and Trademark Office for patent protection of certain portions
of this advanced technology.
Intellectual Property
We regard our patents, copyrights, trademarks, trade names, trade secrets,
and similar intellectual property as critical to our success, and we intend to
rely on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, independent
contractors, partners and others to protect our intellectual property rights.
Patent applications for the protection of our technology for retrieving
data, for unified notification and for retrieval of multiple, multimedia
messages from a single point of access have been filed with the United States
Patent and Trademark Office.
We cannot assure you that the steps we have taken to protect our proprietary
rights will be adequate or that third parties will not infringe or
misappropriate our patents, copyrights, trademarks and similar proprietary
rights. In addition, we cannot assure you that other parties will not assert
claims of infringement of intellectual property or alter proprietary rights
against us.
Government Regulation
There is currently only a small body of laws and regulations directly
applicable to access to or commerce on the Internet, and there is substantial
uncertainty as to the applicability to the Internet of other laws governing
issues such as property ownership, copyrights and other intellectual property
issues, taxation, libel, obscenity and personal privacy. The vast majority of
these laws were adopted prior to the advent of the Internet and, as a result,
did not contemplate the unique issues of the Internet.
We provide our services through data transmissions over public telephone
lines and other facilities provided by telecommunications companies. These
transmissions are subject to regulation by the Federal Communications
Commission, state public utility commissions and foreign governmental
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authorities. However, as an Internet messaging services provider, we are not
subject to direct regulation by the FCC or any other governmental agency, other
than regulations applicable to businesses generally. Nevertheless, as Internet
services and telecommunications services converge or the services we offer
expand, there may be increased regulation of our business, including regulation
by agencies having jurisdiction over telecommunications services. Additionally,
existing telecommunications regulations affect our business through regulation
of the prices we pay for transmission services, and through regulation of
competition in the telecommunications industry.
The FCC has ruled that calls to Internet service providers are
jurisdictionally interstate and that Internet service providers should not pay
access charges applicable to telecommunications carriers. Several
telecommunications carriers are advocating that the FCC regulate the Internet in
the same manner as other telecommunications services by imposing access fees on
Internet service providers. The FCC is examining inter-carrier compensation for
calls to Internet service providers, which could affect Internet service
providers' costs and consequently substantially increase the costs of
communicating via the Internet. This increase in costs could slow the growth of
Internet use and thereby decrease the demand for our services.
Employees
As of September 30, 2000, the Company had 19 full-time employees, 15 of whom
were involved in MessageFinder(TM) activities and four of whom were involved in
other business. We have no collective bargaining agreement with our employees.
We believe that our relationship with our employees is satisfactory.
Insurance
We have business policies covering each of our offices in Boston and West
Chester, Pennsylvania for the loss of personal injury and advertising injury in
the amount of $1,000,000 per occurrence with a general aggregate limitation of
$2,000,000.
Property
Our corporate headquarters consist of approximately 2,079 square feet
located at Union Wharf Condominium, Unit 208, Boston, Massachusetts. We pay
monthly rental of $5,024 plus utilities and real estate taxes. Our lease is for
a term of five years, expiring on September 30, 2002.
In addition to our corporate headquarters, we have operations, research and
development offices consisting of approximately 3,660 square feet located at 999
West Chester Pike, Suite 202, West Chester, Pennsylvania. We pay a monthly rent
of $4,000 pursuant to a written agreement for a month-to-month tenancy. The
lease payments include real estate taxes and utilities. Our lease may be
terminated by us or our landlord upon 90 days' written notice.
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<PAGE>
MANAGEMENT
The directors, officers and key employees of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Samuel D. Cannavo 54 Chairman and Chief Executive Officer, Director
Kasim E. Mun 40 President and Chief Operating Officer, Director
Martin J. Le Brun 39 Executive Vice President and Chief Technology Officer,
Secretary, Director
Kasturi Mudambi 52 Vice President of Product Development
Robert C. Bankay 56 Vice President of Product Management
</TABLE>
Samuel D. Cannavo. Mr. Cannavo has been our Chairman and Chief Executive
Officer since May 1997. From 1995 to 1997 he was employed at NYNEX (Verizon)
where he was Managing Director in charge of consumer voice mail marketing. Mr.
Cannavo holds a B.B.A. degree from the University of Massachusetts and an M.B.A.
degree from Pace University. He also holds patents in various areas of
telecommunications.
Kasim Mun. Mr. Mun became our President and Chief Operating Officer in
February 1997 following the reorganization of our predecessor, Infologue, Inc.
Previously he had been President of Infologue, which he founded in 1988. Mr. Mun
holds a Bachelor of Electrical Engineering degree from Bombay University,
Bombay, India.
Martin J. Le Brun. Mr. Le Brun joined us in February 1997 when he was
appointed our Executive Vice President and Chief Technology Officer. From 1988
to 1997 Mr. Le Brun was Vice President of Engineering at Infologue, Inc., of
which he was also a co-founder. Mr. Le Brun holds a Bachelor of Science Honours
degree in mathematics with computer science from the University of Sussex,
Sussex, United Kingdom.
Kasturi Mudambi. Mr. Mudambi has been our Vice President of Product
Development since February 1997. From 1990 to 1997 Mr. Mudambi was Director of
Custom Services and Operations at Infologue, Inc., where he developed various
custom products and provisioning and telephony applications. Mr. Mudambi holds a
Bachelor of Science degree in mathematics from the University of Mysore, Mysore,
India and a Bachelor of Science degree in business administration from Widener
University.
Robert C. Bankay. Mr. Bankay became our Vice President of Product Management
in June 1999. From 1970 to 1998 Mr. Bankay was employed by Unisys at its
California laboratories, where he was the principal architect for the worldwide
voice messaging platform for customers of Unisys. Mr.
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<PAGE>
Bankay holds a Higher National Diploma in physics from the Middlesex Polytechnic
Institute, United Kingdom. Mr. Bankay is a licentiate of the Royal Institute of
Physics in the United Kingdom.
Board Composition
Our board of directors currently consists of three directors. At each annual
meeting of our stockholders, all of our directors are elected to serve until the
earlier to occur of the election and qualification of their respective
successors at the next annual meeting or until their respective deaths,
resignations or removals by our stockholders from such positions. In addition,
our By-laws provide that the number of directors may be changed by the board of
directors at any regular or special meeting.
Directors' Compensation
Directors of the Company do not currently receive any fixed compensation for
their services as directors.
Executive Compensation
The following table provides a summary of cash compensation for the years
ended December 31, 1999 with respect to the following officers of the Company:
Summary Compensation Table
Name Year Salary (1)
---- ---- ----------
Samuel D. Cannavo 1999 -
Kasim Mun 1999 -
Martin J. Le Brun 1999 -
Kasturi Mudambi 1999 -
Robert C. Bankay 1999 $ 22,250
(1) Excludes perquisites and other personal benefits that in the aggregate do
not exceed 10% of such individual's salary and bonus.
Consulting Agreements
We have entered into various consulting agreements which provide for the
issuance of an aggregate of 1,446,375 shares of common stock.
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<PAGE>
Stock Option Plan
Under our 2000 Stock Option Plan we have reserved 500,000 shares of our
common stock for issuance. Our board of directors will administer the plan and
has the power to determine the terms of any options granted under the plan,
including the exercise price, the number of shares subject to the option, and
conditions of exercise. Options granted under the plan are generally not
transferable, and each option will generally be subject to a vesting schedule,
but shall in no event be exercisable beyond 10 years from the date of the grant.
The exercise price of all incentive stock options granted under the plan must be
at least equal to the fair market value of the shares of common stock on the
date of the grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of our stock, the exercise
price of any incentive stock option granted must be equal to at least 110% of
the fair market value on the grant date. Our board of directors approves the
terms of each option. These terms are reflected in a written stock option
agreement.
The board of directors has the right to grant options pursuant to the plan
whereby the holder, under the conditions of exercise, may, in lieu of payment of
the exercise price in cash, surrender the option and receive a net amount of
shares. Such number of shares will be based upon the fair market value of the
Company's common stock at the time of the exercise of the option, after
deducting the aggregate exercise price. We have not granted any options under
our plan as of the date of this prospectus.
Section 203 of the Delaware General Corporation Law
Section 203 of the Delaware General Corporation Law prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless (i)
prior to the date of the business combination, the transaction is approved by
the board of directors of the corporation; (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board of directors and by the affirmative vote of at least 66
2/3% of the outstanding voting stock that is not owned by the interested
stockholder. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person, who, together with affiliates and associates, owns (or
within three years, did own) 15% or more of the corporation's voting stock. This
provision of law could discourage, prevent or delay a change in management or
stockholder control of the Company, which could have the effect of discouraging
bids for the Company and thereby prevent stockholders from receiving the maximum
value for their shares, or a premium for their shares in a hostile takeover
situation.
Indemnification of Officers and Directors
Our Certificate of Incorporation provides that we shall indemnify to the
fullest extent permitted by Delaware law any person whom we may indemnify
thereunder, including our directors, officers, employees and agents. Such
indemnification (other than as ordered by a court) shall be made by us only
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<PAGE>
upon a determination that indemnification is proper in the circumstances because
the individual met the applicable standard of conduct. Advances for such
indemnification may be made pending such determination. In addition, the
Certificate of Incorporation provides for the elimination, to the extent
permitted by Delaware law, of personal liability of directors to the Company and
our stockholders for monetary damages for breach of fiduciary duty as directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 15, 2000, the number and
percentage of outstanding shares of stock beneficially owned by:
o each person who we know beneficially owns more than 5% of the
outstanding shares of our common stock;
o each of our officers and directors; and
o all of our officers and directors as a group. Except as otherwise noted,
the persons named in this table, based upon information provided by
these persons, have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. Unless otherwise
indicated, the address of each beneficial owner is c/o InfoActiv, Inc.,
208 Union Wharf, Boston, MA 02109.
<TABLE>
<CAPTION>
Approximate Percentage of
Shares Beneficially Owned Shares Beneficially Owned
------------------------- -------------------------
<S> <C> <C>
Name
----
Samuel D. Cannavo 7,422,125 27.2%
Kasim Mun 2,591,090 9.5%
Martin Le Brun 2,875,117 10.5%
Kasturi Mudambi 1,701,438 6.2%
Robert C. Bankay 615,239 2.3%
Michael Kesselbrenner (1) 1,875,000 6.8%
Fusion Fund, Inc. (2) 1,562,500 5.7%
All present officers and
directors as a group (5
persons) 16,152,270 59.2%
</TABLE>
(1) The address of Michael Kesselbrenner is 10 Devonshire Road,
Livingston, New Jersey 07039.
(2) The address of the Fusion Fund, Inc. is One World Trade Center, New
York, New York 10048.
CERTAIN TRANSACTIONS
As of September 30, 2000, Samuel D. Cannavo, our chairman, chief executive
officer and principal stockholder was owed advances in the aggregate amount of
$541,500. In November 2000, Mr. Cannavo converted such amount into 3,312,500
shares of our common stock.
As of December 31, 2000, we were owed an aggregate of $206,427 from
shareholders. In June 2000 such amount was charged to operations as additional
compensation for services. Of such amounts, $56,008 was owed by Kasim Mun, our
president, director and principal shareholder and $86,886 by Katsuri Mudambi,
our vice president of product development and a principal shareholder.
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<PAGE>
In June 2000, we issued an aggregate of 8,105,568 shares of common stock to
the following individuals in the amounts set forth below, as additional
compensation.
Individual Number of Shares
---------- ----------------
Samuel D. Cannavo 2,668,343
Kasim Mun 1,738,132
Martin Le Brun 2,093,618
Robert C. Bankay 429,883
Katsuri Mudambi 1,175,592
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<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The registration statement, of which this prospectus forms a part, relates
to our registration, for the account of the selling stockholders, of an
aggregate of 10,001,875 shares of our common stock issued pursuant to a private
offering of our securities to approximately 30 accredited investors from July,
2000 through December, 2000 together with 1,602,625 additional shares of common
stock issued for services.
The sale of the selling stockholders shares may be effected by the selling
stockholders from time to time in transactions, which may include block
transactions by or for the account of the selling stockholders on Nasdaq, in the
over-the-counter market or in negotiated transactions, or through the writing of
options on the selling stockholders= shares, a combination of these methods of
sale, or otherwise. Sales may be made at fixed prices which may be changed, at a
market prices prevailing at the time of sale, or at negotiated prices.
The selling stockholders may effect the transactions by selling their shares
directly to purchasers, through broker/dealers acting as agents for the selling
stockholders, or to broker/dealers who may purchase shares as principals and
thereafter sell the selling stockholders shares from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. These
broker/dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders and/or the purchaser
for whom which broker-dealers may act as agents or to whom they may sell as
principals or both, which compensation as to a particular broker-dealer may be
in excess of customary commissions.
The selling stockholders and broker-dealers, if any, acting in connection
with these sales might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any commission they receive and any profit
upon the resale of the securities might be deemed to be underwriting discounts
and commissions under the Securities Act.
Sales of any shares of common stock by the selling stockholders may depress
the price of the common stock in any market that may develop for the common
stock.
At the time a particular offer of the shares is made by or on behalf of a
selling stockholder, to the extent required, a prospectus supplement will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers,
or agents, the purchase price paid by any underwriter for shares purchased from
the selling stockholder and any discounts commissions, or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
Under the Exchange Act and its regulations, any person engaged in the
distribution of shares of common stock, or securities convertible into common
stock, offered by this prospectus may not simultaneously engage in market-making
activities with respect to the common stock during the applicable "cooling off"
period prior to the commencement of this distribution. In addition, and without
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<PAGE>
limiting the foregoing, the selling stockholders will be subject to applicable
provisions of the Exchange Act and its rules and regulations, including without
limitation Regulation M promulgated under the Exchange Act, in connection with
transactions in the shares, which provisions may limit the timing of purchases
and sales of shares of common stock by the selling stockholders
The following table sets forth information known to us regarding ownership
of our common stock by the selling stockholders as of December 15, 2000. Neither
the selling stockholders nor any of their affiliates has had any position with,
held any office of, or had any other material relationship with us during the
past three years. We believe, based on information supplied by the selling
stockholders, that the selling stockholders have sole voting and investment
power with respect to all shares of common stock which it beneficially owns.
<TABLE>
<CAPTION>
Common Stock Shares Owned
Name of Selling Shares Beneficially Offered by After Offering
Stockholder Owned Beneficial Owner Number Percent
----------- ----- ---------------- ------ -------
<S> <C> <C> <C> <C>
Fusion Fund, Inc. 1,562,500 1,562,500 - -
Benitz & Partners, Ltd. 781,250 781,250 - -
C.L. Capital 781,250 781,250 - -
Gerald F. Holland 312,500 312,500 - -
Arab Commerce Bank 468,750 468,750 - -
Lufeng Investments Ltd. 171,250 171,250 - -
Steven Bushansky 31,250 31,250 - -
Leonard Dahlgren 156,250 156,250 - -
Randy Rea 62,500 62,500 - -
Michael Kesselbrenner 1,875,000 1,875,000 - -
Paterson Equities 625,000 625,000 - -
Beechwood Partners, Ltd. 625,000 625,000 - -
Five Star Fund, LLC 312,500 312,500 - -
Brock Chidester 31,250 31,250 - -
Scott Chidester 31,250 31,250 - -
Kate Edwards 31,250 31,250 - -
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Common Stock Shares Owned
Name of Selling Shares Beneficially Offered by After Offering
Stockholder Owned Beneficial Owner Number Percent
----------- ----- ---------------- ------ -------
<S> <C> <C> <C> <C>
GAR Inc. 134,375 134,375 - -
Dr. Michael & Elizabeth Person 468,750 468,750 - -
Dental Services, P.A. 468,750 468,750 - -
Silverman, Collura &
Chernis, P.C. 156,250 156,250 - -
Tina Bennett 62,500 62,500 - -
Robert A. & Elizabeth A. Walsh 31,250 31,250 - -
John J. Walsh 31,250 31,250 - -
William M. Walsh 62,500 62,500 - -
Jeffrey S. Currier 62,500 62,500 - -
John B. Smith, Jr. 500,000 500,000 - -
Comp Acquisition Corp. 93,750 93,750 - -
William McDonald 31,250 31,250 - -
Dan Fitzgerald 62,500 62,500 - -
Michael Rubin 31,250 31,250 - -
Norman Carey 80,000 80,000 - -
Sheldon Janowitz 15,625 15,625 - -
Jean-ne Carmichael 78,125 78,125 - -
Lewis Don Moore 46,875 46,875 - -
Phil Priolo 31,250 31,250 - -
E. C. Lewis 22,000 22,000 - -
Christopher Price 35,000 35,000 - -
C. Max Rockwell 60,000 60,000 - -
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Common Stock Shares Owned
Name of Selling Shares Beneficially Offered by After Offering
Stockholder Owned Beneficial Owner Number Percent
----------- ----- ---------------- ------ -------
<S> <C> <C> <C> <C>
Mark Angelo 170,000 170,000 - -
Hunter Singer 170,000 170,000 - -
Joseph Donahue 170,000 170,000 - -
Robert Farrell 170,000 170,000 - -
Persia Consultants, Inc. 500,000 500,000 - -
</TABLE>
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<PAGE>
DESCRIPTION OF SECURITIES
The following section does not purport to be complete and is qualified in
all respects by reference to the detailed provisions of our certificate of
incorporation and bylaws, copies of which have been filed with our registration
statement of which this prospectus forms a part. Our capital stock is also
governed by the provisions of applicable Delaware law.
General
The authorized capital stock of the Company consists of 50,000,000 shares of
common stock, $0.001 par value per share, and 3,000,000 shares of preferred
stock, $0.001 par value per share. As of the date of this prospectus, we have
27,283,477 shares of common stock issued and outstanding and approximately 40
stockholders.
Common Stock
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 the election of directors. Subject to the prior rights of
any series of preferred stock, which may from time to time be outstanding,
holders of common stock are entitled to receive ratably, dividends when, as and
if declared by the board of directors out of funds legally available therefor
and, upon the liquidation, dissolution, or winding up of the Company, 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. Except as described in this prospectus, holders of common stock
have no preemptive rights, and have no rights to convert their common stock into
any other securities, and no other subscription rights. The outstanding shares
of common stock have been duly authorized and validly issued and are fully paid
and nonassessable.
The rights, preferences and privileges of the holders of common stock may be
adversely affected by the rights of the holders of any series of preferred stock
that the Company may designate in the future.
Preferred Stock
The board of directors is authorized, without stockholder approval, from
time to time to issue up to an aggregate of 3,000,000 shares of preferred stock
in one or more series. The board of directors can fix the rights, preferences
and privileges of the shares of each series and any qualifications, limitations
or restrictions. Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third-party to
acquire, or of discouraging a third-party from attempting to acquire, a majority
of our outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
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<PAGE>
Private Financing
From July 2000 through December 2000 we issued an aggregate of 10,001,875
shares of common stock to approximately 30 accredited investors in a private
placement at a purchase price of $.16 per share. This offering and sale of our
common stock was exempt from registration as a private offering pursuant to
Section 4(2) and Regulation D of the Securities Act. Of such proceeds $700,000
are payable to us pursuant to investor notes bearing interest at the rate of 10%
per annum due 30 days to 180 days from the subscription date. The selling
stockholders are offering the shares of common stock offered in the private
financing in this offering.
Delaware Law and Certificate of Incorporation and By-Law Provisions
We are subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents us from engaging, under
some circumstances, in a business combination, which includes a merger or sale
of more than 10% of our assets, with any interested stockholder, defined as a
stockholder who owns 15% or more of our outstanding voting stock, as well as
affiliates and associates of any such persons, for three years following the
date such stockholder became an interested stockholder unless:
(1) the transaction in which the stockholder became an interested
stockholder is approved by the board of directors prior to the date the
interested stockholder attained that status;
(2) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors or
officers and shares owned by employee stock plans; or
(3) the business combination is approved by the board of directors and
authorized by the affirmative vote of at least two-thirds of the
outstanding voting stock not owned by the interested stockholder.
Some of the provision of our certificate of incorporation and bylaws could
discourage, delay or prevent an acquisition of InfoActiv at a premium price. Our
bylaws provide that any vacancy on the board of directors may be filled by a
majority of the directors then in office. Our bylaws provide that special
meetings of stockholders may be called only by a majority of the directors of
our board or the president or by at least 25% of the holders of shares of common
stock.
In addition, the certificate of incorporation also authorizes the board of
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of InfoActiv.
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<PAGE>
Transfer Agent
We intend to appoint Continental Stock Transfer & Trust Company as the
transfer agent and registrar for our shares of common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the availability of shares for sale, could adversely affect the prevailing
market price of our common stock and our ability to raise capital through an
offering of equity securities.
After the offering, the 11,604,500 shares sold in this offering will be
immediately tradeable without restriction under the Securities Act, except for
any shares purchased by an "affiliate" of ours, as that term is defined in the
Securities Act. Affiliates will be subject to the resale limitations of Rule 144
under the Securities Act.
We issued the remaining 15,678,977 shares of common stock in private
transactions in reliance upon one or more exemptions contained in the Securities
Act. These shares will be deemed "restricted securities" as defined in Rule 144.
Of these restricted securities, 4,043,671 have been held for more than two years
and may be sold by any holder thereof 90 days after such stockholder ceases to
be an "affiliate" of InfoActiv in accordance with the requirements of Rule 144.
In addition, 185,356 shares have been held for more than one year as of the date
of this prospectus and these shares, together with all of the foregoing shares
held for more than two years by stockholders who are affiliates or have been our
affiliates within the preceding 90 days, are eligible for public sale as of the
date of this prospectus in accordance with the volume limitations and other
requirements of Rule 144.
In general, under Rule 144, a stockholder, or stockholder whose shares are
aggregated, who has beneficially owned "restricted securities" for at least one
year will be entitled to sell an amount of shares within any three month period
equal to the greater of:
o 1% of the then outstanding shares of common stock; or
o the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which notice of the
sale is filed with the commission, provided certain requirements are
satisfied.
In addition, our affiliates must comply with additional requirements of Rule
144 in order to sell shares of common stock, including shares acquired by
affiliates in this offering. Under Rule 144, a stockholder who had not been our
affiliate at any time during the 90 days preceding a sale by him, would be
entitled to sell those shares without regard to the Rule 144 requirements if he
owned the restricted shares of common stock for a period of at least two years.
The foregoing summary of Rule 144 is not a complete description.
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<PAGE>
LEGAL MATTERS
The validity of the common stock being offered in this prospectus will be
passed upon for us by Silverman, Collura & Chernis, P.C., New York, New York.
Silverman, Collura & Chernis, P.C. owns 156,250 shares of our common stock.
EXPERTS
The financial statements of InfoActiv as of December 31, 1999 and 1998
appearing in this prospectus and registration statement have been audited by
Feldman Sherb & Co., P.C., independent auditors, as set forth in their report
thereon appearing in the registration statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the to the exhibits for a
complete statement of their terms and conditions. The registration statement and
other information may be read and copied at the Commission's Public Reference
Room at 450 Fifth Street N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
public may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Exchange Act and we intend to furnish
our stockholders annual reports containing financial statements audited by our
independent auditors and to make available quarterly reports containing
unaudited financial statements for each of the first three quarters of each
year.
We intend to apply for the listing of our common stock on the NASD OTC
Bulletin Board. After this offering is effective, you may obtain certain
information about us on Nasdaq"s Internet site (http://www.Nasdaq-Amex.com).
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<PAGE>
INFOACTIV, INC.
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report .......................... F-1
Balance Sheets ........................................ F-2
Statements of Operations .............................. F-3
Statements of Stockholders' Equity .................... F-4
Statements of Cash Flows .............................. F-5
Notes to Financial Statements ......................... F-6-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and
Board of Directors of
Infoactiv, Inc.
Boston, Massachusetts
We have audited the accompanying balance sheet of Infoactiv, Inc. as of
December 31, 1999, and the related statements of operations, stockholders'
equity and cash flows, for the years ended December 31, 1999 and 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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 used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Infoactiv, Inc. as of
December 31, 1999, and the results of their operations and their cash flows, for
the years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
/s/Feldman Sherb & Co., P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
June 6, 2000
F-1
<PAGE>
INFOACTIV, INC.,
----------------
BALANCE SHEETS
--------------
ASSETS
------
September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
CURRENT ASSETS:
Cash $ 9,032 $ 27,551
Accounts receivable 115,535 122,608
Prepaid expenses 35,959 19,076
---------- --------
TOTAL CURRENT ASSETS 160,526 169,235
DUE FROM SHAREHOLDERS - 206,427
PROPERTY AND EQUIPMENT, net 51,309 64,181
SOFTWARE, less accumulated amortization
of $217,677 and $119,438 797,457 466,222
DEPOSITS AND OTHER ASSETS 5,681 10,948
---------- --------
$1,014,973 $917,013
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 445,876 418,770
Note payable 50,000 -
Due to shareholders 541,500 372,566
---------- --------
TOTAL CURRENT LIABILITIES 1,037,376 791,336
---------- --------
STOCKHOLDERS EQUITY (DEFICIT):
Common Stock, $0.001 par value;
50,000,000 shares authorized;
16,178,977 and 4,229,027 shares
issued and outstanding 16,179 4,229
Additional paid-in capital 96,910 357,897
Accumulated deficit (135,492) (236,449)
---------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (22,403) 125,677
---------- --------
$1,014,973 $917,013
========== ========
See notes to financial statements.
F-2
<PAGE>
INFOACTIV, INC.
---------------
STATEMENT OF OPERATIONS
-----------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------- ------------------------------
2000 1999 1999 1998
----------- --------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 426,169 $ 722,203 $1,212,294 $ 982,532
----------- --------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 147,847 255,631 429,456 390,361
Selling, general and administrative 379,120 222,312 252,044 425,108
Research and development 1,795,020 251,886 424,533 306,791
Depreciation and amortization 134,020 105,102 157,119 22,620
----------- --------- ---------- ----------
TOTAL OPERATING EXPENSES 2,456,007 834,931 1,263,152 1,144,880
----------- --------- ---------- ----------
OPERATING LOSS 2,029,838 112,728 50,858 162,348
INTEREST EXPENSE 30,236 5,615 12,716 55
----------- --------- ---------- ----------
NET LOSS $(2,060,074) $ (118,343) $ (63,574) $ (162,403)
=========== ========== ========== ==========
NET LOSS PER COMMON SHARE,
Basic and diluted $ (0.45) $ (0.03) $ (0.02) $ (0.04)
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,576,300 4,147,010 4,147,010 4,147,010
=========== ========== ========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
INFOACTIV, INC.
---------------
STATEMENTS OF STOCKHOLDERS EQUITY
---------------------------------
<TABLE>
<CAPTION>
Common Stock $.001 Par Value
---------------------------- Additional Total
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
-------------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE - January 1, 1998 (adjusted
for 2.26 for 1 forward stock-split) 4,043,671 4,044 345,581 (10,472) $ 339,153
Net loss - - - (162,403) (162,403)
---------- ------- ----------- ---------- ---------
BALANCE - December 31, 1998 4,043,671 4,044 345,581 (172,875) 176,750
Issuance of common stock for
services 185,356 185 12,316 - 12,501
Net loss - - - (63,574) (63,574)
---------- ------- ----------- ---------- ---------
BALANCE - December 31, 1999 4,229,027 4,229 357,897 (236,449) 125,677
Issuance of common stock for:
Cash 2,093,750 2,094 332,906 - 335,000
Conversion of note payable 1,562,500 1,562 248,438 - 250,000
Services - at fair value of $.16
per share 8,293,700 8,294 1,318,700 - 1,326,994
Net loss - - - (2,060,074) (2,060,074)
Adjustment for "S Corp" termination - - (2,161,031) 2,161,031 -
---------- ------- ----------- ---------- ---------
BALANCE - September 30, 2000 (unaudited) 16,178,977 $ 16,179 $ 96,910 $ (135,492) $ (22,403)
========== ======== =========== =========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
INFOACTIV, INC.
---------------
STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30, Years Ended December 31,
---------------------------------- ------------------------------
2000 1999 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net loss $(2,060,074) $(118,343) $ (63,574) $ (162,403)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization 134,020 105,102 157,119 22,620
Issuance of common stock for services 1,326,994 12,501 12,501 -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 7,073 (31,551) 61,748 (38,863)
Increase in prepaid expenses (16,883) (5,878) (9,756) (9,320)
Decrease (increase) in deposits and other
assets 5,268 4,498 (700) (892)
Increase in accounts payable and accrued
expenses 32,769 59,867 61,006 312,402
--------- --------- -------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (570,833) 26,196 218,344 123,544
--------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (22,908) (951) (4,863) (35,049)
Capitalization of software (429,475) (217,090) (311,990) (273,670)
--------- --------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (452,383) (218,041) (316,853) (308,719)
--------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans 300,000 - - -
Proceeds from sale of stock 335,000 - - -
Decrease (increase) in due from shareholders 206,427 (130,225) 80,212 (286,639)
Increase in advances from shareholders 163,270 277,730 1,448 498,588
--------- --------- -------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,004,697 147,505 81,660 211,949
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN CASH (18,519) (44,340) (16,849) 26,774
CASH - beginning of period 27,551 44,400 44,400 17,626
--------- --------- -------- ---------
CASH - end of period $ 9,032 $ 60 $ 27,551 $ 44,400
========== ========= ======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 30,236 $ 5,615 $ 12,716 $ 55
========== ========= ======== =========
SUPPLEMENTAL NONCASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of 1,562,500 common shares on
conversion of note payable $ 250,000 $ - $ - $ -
========== ========= ======== =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
INFOACTIV, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1. BUSINESS
Infoactiv, Inc. (the "Company") was incorporated in Pennsylvania on
February 1, 1997. The Company provides advanced telecommunications
products to providers of such enhanced services as voice mail, e-mail and
fax mail and communications equipment to vendors in the telecommunications
industry. The Company intends to focus its efforts on the development and
marketing of its MessageFinder.com(TM) service, a proprietary unified
messaging service that allows subscribers to perform advanced messaging
functions, including accessing personal messaging and information services
and public information sites.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amount 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.
b. Revenue Recognition - Product revenues from the sale of software
licenses are recognized when evidence of a license agreement exists,
the fees are fixed and determinable, collectibility is probable and
vendor specific objective evidence exists to allocate the total fee
to elements of the arrangements. The Company's standard software
license agreement does not (i) entitle the buyer to any right of
return or exchange, or (ii) grant the customer any right to product
upgrades or enhancements.
The Company provides customer support and maintenance on a
contractual fee basis to purchasers of its products and such
revenues are deferred and recognized over the period of service.
Service revenues from consulting and systems integration are
recognized upon performance of the services where the customer
contract is of a time and material nature and there are no
significant remaining obligations, and upon acceptance of the
completed project where the contract is of a short duration for a
fixed price.
c Research and Development Software - Development costs are expensed
as incurred. Certain software development costs subsequent to the
establishment of technological
F-6
<PAGE>
feasibility are generally capitalized. The Company has capitalized
internally developed software costs of $311,990 and $273,670 for the
years ended December 31, 1999 and 1998, respectively. The software
is being amortized over three years. Amortization of software was
$119,438 and $0 in 1999 and 1998, respectively.
d. Property and Equipment - Property and equipment are stated at cost.
Depreciation is calculated on the straight-line method over three
years, the estimated useful life of the assets.
e. Fair Value of Financial Instruments - The Company considers its
financial instruments, which are carried at cost, to approximate
their fair value, due to their near-term maturities.
f. Impairment of Long-Lived Assets - The Company reviews long-lived
assets and certain identifiable assets on a quarterly basis for
impairment whenever circumstances and situations change such that
there is an indication that the carrying amounts may not be
recovered. At December 31, 1999, the Company did not believe that
any impairment had occurred.
g. Stock Based Compensation - The Company accounts for stock-based
compensation using the intrinsic value method whereby compensation
cost for stock options is measured by the excess, if any, of the
quoted market price of the Company's stock at grant date over the
strike price. The Company has adopted the proforma disclosure
requirements of SFAS 123.
h. Income Taxes - The Company was a Subchapter S corporation, under the
Internal Revenue Code, whereby income or loss is reported for tax
purposes by each stockholder based on their proportional ownership
of common stock. Accordingly, the financial statements reflect no
provision for income taxes (recoveries). "S Corporation" status was
terminated as of June 30, 2000 at which date the Company's
accumulated deficit was eliminated by offset against additional
paid-in capital.
i Earnings Per Share - Net loss per common share is based on the
weighted average number of shares outstanding. Potential common
shares includable in the computation of fully diluted per share
results are not presented in the financial statements as their
effect would be anti-dilutive.
j. New Accounting Pronouncements - The Company will adopt Statement of
Financial Accounting Standard No. 133 ("SFAS No. 133"), AAccounting
for Derivative Instruments and Hedging activities@ for periods
beginning after June 15, 1999. SFAS No, 133 establishes a new model
for accounting for derivatives and hedging activities and supersedes
and amends a number of existing standards. The application of the
new pronouncement is not expected to have a material impact on the
Company's financial statements.
F-7
<PAGE>
k. Basis of Presentation (unaudited financial statements) - The balance
sheet at September 30, 2000 and the statements of operations,
stockholders' equity and cash flows for the nine months ended
September 30, 2000 and 1999 are unaudited, but include all
adjustments which in the opinion of management, are necessary for a
fair presentation of the financial position and results of
operations for the periods then ended. All such adjustments are of a
normal recurring nature. The results of the operations for any
interim periods are not necessarily indicative of results to be
expected for the fiscal year.
3. PROPERTY AND EQUIPMENT
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Computer equipment $ 127,838 $ 104,930
Furniture and fixtures 30,552 30,553
------------ ------------
158,390 135,483
Less: accumulated depreciation 107,081 71,302
------------ ------------
$ 51,309 $ 64,181
============ ============
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Trade payables $ 76,643 $ 8,641
Salaries-officers 210,558 316,121
Payroll and related costs 134,892 59,832
Other 23,783 34,176
------------ ------------
$ 445,876 $ 418,770
============ ============
F-8
<PAGE>
5. NOTE PAYABLE
In September 2000, the Company borrowed $50,000 from an unrelated party.
The loan was repayable on demand with interest at 10% per annum and was
unsecured. In October 2000 the loan was repaid in full.
COMMON STOCK SPLIT
In June 2000 the Company effected a 2.26 for 1 forward stock split and
concurrently increased the authorized common shares to 50,000,000 shares
with a par value of $.001 per share. The financial statements give
retroactive effect to these transactions.
PREFERRED STOCK
The Board of directors is authorized, to issue up to an aggregate of
3,000,000 shares of preferred stock in one or more series. The directors
may fix the rights, preferences and privileges of the shares of each
series. No shares have been issued as of September 30, 2000.
STOCK OPTION PLAN
The Company approved the "2000 Stock Option Plan" in June 2000. A total of
500,000 shares of common stock is reserved for issuance. The board of
directors administers the plan and has the power to determine the terms of
any options granted under the plan, including the exercise price, the
number of shares subject to the option, and conditions of exercise.
Options granted under the plan are generally not transferable, and each
option will generally be subject to a vesting schedule, but shall not be
exercisable beyond 10 years from the date of the grant. The exercise price
of all incentive stock options granted under the plan must be at least
equal to the fair market value of the shares of common stock on the date
of the grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of stock, the exercise
price of any incentive stock option granted must be at least 110% of the
fair market value on the grant date.
The board of directors has the right to grant options pursuant to the plan
whereby the holder, under the conditions of exercise, may, in lieu of
payment of the exercise price in cash, surrender the option and receive a
net amount of shares. The number of such shares will be based upon the
fair market value of the Company's common stock at the time of the
exercise of the option, after deducting the aggregate exercise price. The
Company has not granted any options under the plan as of September 30,
2000.
9. DUE TO/FROM SHAREHOLDERS
Advances to shareholders are interest free, and unsecured. Advances from
shareholders are unsecured, payable on demand and bear interest at a rate
of 9% per annum commencing May 19, 2000. In June 2000, the amount of
$206,427, due from shareholders at December 31, 1999 was charged to
operations as additional compensation for services.
F-9
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
The Company is obligated under a lease of its facilities for monthly
rental payments of $5,042 plus utilities and real estate taxes, through
September 2002. The Company is also obligated for monthly rental payments
of $4,000, under a month-to-month lease arrangement for its Pennsylvania
facilities. Rent expense for the years ended December 31, 1999 and 1998
was $91,353 and $62,164, respectively.
Future minimum annual lease payments under noncancellable operating leases
are approximately, $59,000, $61,000 and $47,000 for the years ended
December 31, 2000, 2001 and 2002, respectively.
11. REVENUE FROM MAJOR CUSTOMER
Transactions with one customer represented approximately 78% and 98% of
the revenues for the years ended December 31, 1999 and 1998, respectively.
F-10
<PAGE>
INFOACTIV, INC.
11,604,500 Shares of Common Stock
----------
PROSPECTUS
----------
December __, 2000
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide any information or to make any representations
other than those contained in this prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by InfoActiv, Inc. This prospectus does not constitute an offer or solicitation
to any person in any jurisdiction where such offer or solicitation would be
unlawful. Neither delivery of this prospectus nor any sale of the shares of
common stock hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of InfoActiv, Inc. since the date
hereof.
----------
Until , 2000 (25 days after the date of this prospectus), all dealers 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 dealers to deliver a prospectus when acting as underwriters.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 9,190
Printing and Engraving Expenses $ 10,000 *
Legal Fees and Expenses $ 75,000 *
Accounting Fees and Expenses $ 35,000 *
Transfer Agents Fees and Expenses $ 5,000 *
Blue Sky Fees and Expenses $ 5,000 *
Miscellaneous Expenses $ 5,000 *
---------
TOTAL $ 144,190 *
* Estimated.
The Selling Stockholders will not pay any portion of the foregoing
expenses of issuance and distribution.
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
InfoActiv's Certificate of Incorporation and Bylaws limit the liability of
directors and officers to the maximum extent permitted by Delaware law. Delaware
law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, including
gross negligence, except liability for (i) breach of the directors' duty of
loyalty; (ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) the unlawful payment of a
dividend or unlawful stock purchase or redemption, and (iv) any transaction from
which the director derives an improper personal benefit. Delaware law does not
permit a corporation to eliminate a director's duty of care, and this provision
of InfoActiv's Certificate of Incorporation has no effect on the availability of
equitable remedies, such as injunction or rescission, based upon a director's
breach of the duty of care.
InfoActiv is planning to enter into indemnification agreements with each
of its current and future directors and officers which provide for
indemnification of, and advancing of expenses to, such persons to the maximum
extent permitted by Delaware law, including by reason of action or inaction
occurring in the past and circumstances in which indemnification and the
advancing of expenses are discretionary under Delaware law.
II-1
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of InfoActiv
pursuant to the foregoing provisions, or otherwise, InfoActiv 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.
Corporation Takeover Provisions
Section 203 of the Delaware General Corporation Law
InfoActiv is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (InfoActiv did not make such an election) (ii) the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to render or vote stock held by
the plan) or, (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during t he previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who,
together with affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of InfoActiv and
therefore could discourage attempts to acquire InfoActiv.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The sales of the securities listed below were exempt from registration
under Section 4(2) of the Securities Act and/or Rule 506 of Regulation D
promulgated thereunder.
II-2
<PAGE>
(1) In December 1997 we issued an aggregate of 1,367,038 shares of common
stock to the following individuals for services:
Name Amount
---- ------
Samuel Cannavo 640,592
Martin Le Brun 347,343
Kasim Mun 379,103
(2) In December 1997 in a transaction pursuant to Section 4(2) of the
Securities Act of 1933, as amended, we issued 239,040 shares of common
stock to Beth Mahoney for an aggregate purchase price of $33,335.
(3) In January 1999 we issued 185,356 shares of common stock to Robert Bankay
for services.
(4) In June 2000, we issued an aggregate of 8,137,450 shares of common stock
tothe individuals and in the amounts set forth below as additional
compensation.
Name Amount
---- ------
Samuel D. Cannavo 2,668,343
Kasim Mun 1,738,132
Martin Le Brun 2,093,618
Kasturi Mudambi 1,175,592
Robert C. Bankay 429,883
Beth Mahoney 31,793
Nisreen Mun 89
(4) In July through December 2000, in a private offering pursuant to Section
4(2) of the Securities Act and/or Regulation D Promulgated thereunder, we
sold to accredited investors an aggregate of 10,001,875 shares of Common
Stock at a purchase price of $0.16 per share.
Name Amount
---- ------
Benitz & Partners, Ltd. 781,250
C.L. Capital 781,250
Gerald Holland 312,500
Fusion Fund, Inc. 1,562,500
Arab Commerce Bank 468,750
Lufeng Investments Ltd. 156,250
Steven Bushansky 31,250
II-3
<PAGE>
Leonard Dahlgren 156,250
Randy Rea 62,500
Tina Bennett 62,500
Robert A. & Elizabeth A. Walsh 31,250
John J. Walsh 31,250
William M. Walsh 62,500
Jeffrey S. Currier 62,500
John B. Smith, Jr. 500,000
Comp Acquisition Corp. 93,750
William McDonald 31,250
Dan Fitzgerald 62,500
Michael Rubin 31,250
Norman Carey 80,000
Sheldon Janowitz 15,625
Jean-ne Carmichael 78,125
Lewis Don Moore 46,875
Phil Priolo 31,250
Michael Kesselbrenner 1,875,000
Paterson Equities 625,000
Beechwood Partners Ltd. 625,000
Five Star Fund, LLC 312,500
Brock Chidester 31,250
Scott Chidester 31,250
Kate Edwards 31,250
Dr. Michael & Elizabeth Person 468,750
Dental Services, P.A. 468,750
(6) In November 2000, we issued an aggregate of 3,312,500 shares of Common
Stock to Samuel D. Cannavo in exchange for the cancellation of
indebtedness in the aggregate amount of $541,500.
(6) In July 2000, we issued 156,250 shares of common stock to Silverman,
Collura & Chernis, P.C. for legal services.
(7) In December 2000, we issued an aggregate of 1,446,375 shares of Common
Stock to the following persons for consulting services:
Name Amount
---- ------
Lufeng Investments Ltd. 15,000
E.C. Lewis 22,000
Christopher Price 35,000
C. Max Rockwell 60,000
II-4
<PAGE>
Mark Angelo 170,000
Hunter Singer 170,000
Joseph Donahue 170,000
Robert Farrell 170,000
G.A.R. Inc. 134,375
Persia Consultants, Inc. 500,000
ITEM 27. EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Certificate of Incorporation.(1)
3.2 By-laws.(1)
4.1 Specimen certificate of Common Stock.(2)
5.1 Opinion of Silverman, Collura & Chernis, P.C., counsel to
InfoActiv, Inc.(2)
10.1 Lease dated October 1, 1997 between Mahmoud Ketabi, as
landlord, and InfoActiv, Inc., as tenant.(1)
10.2 Lease dated April 30, 1999 between Executive Center
Associates, as landlord, and InfoActiv, Inc., as tenant.(1)
10.3 Software License and Support Agreement dated August 19, 1999
between Unisys S.R.O. and InfoActiv, Inc.(1)
10.4 Software License Agreement between Unisys Worldwide
Communications and InfoActiv, Inc.(1)
10.5 2000 Stock Option Plan.(2)
23.1 Consent of Silverman, Collura & Chernis, P.C. (included in
Exhibit 5.1).(2)
23.2 Consent of Feldman Sherb & Co., P.C.
24.1 Power of Attorney (set forth on signature page of the
Registration Statement).
27.1 Financial Data Schedule.
----------
(1) Previously filed.
(2) To be filed by Amendment.
b. Financial Statement Schedules.
II-5
<PAGE>
None.
ITEM 28. UNDERTAKINGS.
(a) Rule 415 Offerings.
InfoActiv 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; and
(iii) Include any additional or changed material information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Request for acceleration of effective date.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of InfoActiv
pursuant to the foregoing provisions, or otherwise, InfoActiv 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. In the event that a claim for indemnification
against such liabilities (other than the payment by InfoActiv of expenses
incurred or paid by a director, officer or controlling person of InfoActiv in
the successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the securities being
registered, InfoActiv will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such court.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing this Registration Statement on this Amendment
No. 1 to Form SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned, in the City of Boston, State of Massachusetts, on
December 26, 2000.
INFOACTIV, INC.
By: /s/ Samuel D. Cannavo
------------------------------------
Samuel D. Cannavo
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities with InfoActiv and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Samuel D. Cannavo Chairman of the Board and Chief December 26, 2000
----------------------- Executive Officer
Samuel D. Cannavo
President and Chief Operating December , 2000
----------------------- Officer
Kasim Mun
/s/ Martin J. Le Brun Executive Vice President and Chief December 26, 2000
----------------------- Technology Officer
Martin J. Le Brun
II-7
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Certificate of Incorporation.(1)
3.2 By-laws.(1)
4.1 Specimen certificate of Common Stock.(2)
5.1 Opinion of Silverman, Collura & Chernis, P.C., counsel to
InfoActiv, Inc.(2)
10.1 Lease dated October 1, 1997 between Mahmoud Ketabi, as
landlord, and InfoActiv, Inc., as tenant.(1)
10.2 Lease dated April 30, 1999 between Executive Center
Associates, as landlord, and InfoActiv, Inc., as tenant.(1)
10.3 Software License and Support Agreement dated August 19, 1999
between Unisys S.R.O. and InfoActiv, Inc.(1)
10.4 Software License Agreement between Unisys Worldwide
Communications and InfoActiv, Inc.(1)
10.5 2000 Stock Option Plan.(1)
23.1 Consent of Silverman, Collura & Chernis, P.C. (included in
Exhibit 5.1).(2)
23.2 Consent of Feldman Sherb & Co., P.C.
24.1 Power of Attorney (set forth on signature page of the
Registration Statement).
27.1 Financial Data Schedule.
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(1) Previously filed.
(2) To be filed by Amendment.
b. Financial Statement Schedules.
None.
