Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
United States Securities and Exchange Commission October 6, 1999
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20459
Re: Medix Resources, Inc.
Registration Statement on Form S-2
Reg. No. 333-85483
Dear Madams and Sirs:
On behalf of my client, Medix Resources, Inc., I am filing herewith a Prospectus
pursuant to Rule 424(b)(3) relating to the above referenced Registration
Statement.
If you have any questions about this filing, please contact the undersigned at
the telephone or fax numbers indicated above.
Very truly yours
/s/
Lyle B. Stewart
PROSPECTUS
MEDIX RESOURCES, INC.
11,098,000 Shares of Common Stock
Some shareholders of Medix Resources, Inc. will have the right to offer
and sell up to 11,098,000 shares of our common stock under this Prospectus. Up
to 5,864,000 of these shares may be issued upon conversion of currently
outstanding preferred shares and debt securities. The remaining 5,234,000 shares
are issuable upon exercise of outstanding warrants and options.
Medix will not receive directly any of the proceeds from the sale of
these shares by the selling shareholders. Medix will pay the expenses of
registration of these shares.
The common stock is traded on the OTC Bulletin Board under the symbol
"MDIX". On September 29, 1999, the last sale price of the common stock was
reported as $0.56.
The securities offered hereby involve a high degree of risk. See "RISK
FACTORS" for certain risks that should be considered by prospective purchasers
of the securities offered hereby.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is October 5, 1999
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by us, the
selling shareholders or any other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such an
offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in our affairs since such date.
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference into this
Prospectus contain forward-looking statements, which mean that they relate to
events or transactions that have not yet occurred, our expectations or estimates
for Medix's future operations, our growth strategies or business plans or other
facts that have not yet occurred. Such statements can be identified by the use
of forward-looking terminology such as "might," "may", "will", "could",
"expect", "anticipate", "estimate", "likely", "believe", or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
following risk factors contain discussions of important factors that should be
considered by prospective investors for their potential impact on
forward-looking statements included in this Prospectus and in the documents
incorporated by reference into this Prospectus. These important factors, among
others, may cause actual results to differ materially and adversely from the
results expressed or implied by the forward-looking statements.
RISK FACTORS
An investment in our common stock:
o has a high degree of risk;
o is highly speculative;
o should only be considered by those persons or entities who can
afford to loose their entire investment.
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating our business
and an investment in our shares. The order in which the following risk factors
are presented does not indicate the relative magnitude of the risks described.
We Have Prior Operating Losses and a Going Concern Exception from our
Auditors
We reported net losses of ($5,422,000), ($515,000) and ($1,207,000) for
the years ended December 27, 1998, December 28, 1997 and December 29, 1996,
respectively, and ($1,199,000) for the six months ending June 27, 1999. At June
27, 1999, we had an accumulated deficit of ($14,360,000) and a working capital
deficit of ($2,088,000). We are currently delinquent in the payment of certain
of our current liabilities, including liabilities related to withholding tax
delinquencies. If any of those creditors instituted collection proceedings, we
could face financial failure if payments could not be made or extension
arrangements could not be negotiated. There is no assurance that we will achieve
a specific level of revenues, or that we will operate profitably in the future.
Our auditor's reports relating to the their audits of recent annual financial
statements have contained an explanatory paragraph describing that there is
substantial doubt about our ability to continue as a going concern.
On September 6, 1999, the U.S. Internal Revenue Service informed us
that, by its calculations, $478,000 was owed to the Service in delinquent
federal income tax withholdings from employees and employer payroll taxes,
interest and penalties. We dispute the claim that it is delinquent in the
payment of any Federal income tax payroll withholdings or employer payroll
taxes, although we do owe a yet to be determined amount of interest and
penalties on amounts of withholding taxes that were delinquent but had been paid
earlier this year. On September 14, 1999, the Service indicated that we had
until October 14, 1999 to pay all delinquent amounts, including interest and
penalties, and if such amounts were not paid by that time, the Service would
place a tax lien on our assets. We are seeking a clarification from the Service
regarding the amounts that are due and owing to it in this matter and to obtain
the funds to satisfy our obligations. In addition, we owe approximately $300,000
in delinquent state income tax withholdings from employees and employer payroll
taxes, interest and penalties. We are attempting to determine the exact amounts
owed to the states and to make payments in an orderly manner. As of June 27,
1999, we had accrued $970,000 in current liabilities for payroll taxes, interest
and penalty, as reported in our most recent Form 10-QSB.
Our Continuing Losses and Our Need for Additional Financing
We had negative working capital of ($2,088,000) at June 27, 1999. We
expect to continue to experience losses, in the near term, as we attempt to
develop our Cymedix software products. The current operation of our business and
our ability to continue to develop our Cymedix software products will depend
upon our ability to obtain additional financing. We do not currently have a
source of funds for the funding of the development of our Cymedix software
products. We are attempting to meet our current cash flow needs by offering to
sell our medical staffing business, the financing of accounts receivable under
terms that have resulted in significant financing costs, and raising capital in
the private debt and equity markets. The sale of our medical staffing business,
if it occurs, will not be sufficient to fund our development budget for Cymedix.
The development and marketing of the Cymedix software products require
substantial capital investments. There can be no assurance that additional
investments or financings will be available to us as needed to support the
development of Cymedix products. Failure to obtain such capital on a timely
basis could result in lost business opportunities, the sale of the Cymedix
business at a distressed price or the financial failure of Medix.
Our Revenues are Subject to Significant Fluctuations
Our operating results have experienced significant fluctuations in
the past and may do so in the future due to a number of factors
including:
o the effect of regulatory and legislative developments on us;
o pricing trends in the healthcare staffing and the medical
information software industries;
o changes in third-party payor policies;
o availability of qualified personnel;
o reductions in demand for our services and products due to
competition, regulation and other factors;
o the ability of management to coordinate and implement a
marketing strategy; and
o costs associated with maintenance of quality control
standards.
The impact of any of these factors could cause operating results to decline
significantly from prior periods. Any significant decrease in revenues for any
reason would have an immediate adverse impact on our ability to operate
profitably and our ability to continue as an operating entity. No assurances can
be given that we will be able to obtain sufficient debt or equity financing on
acceptable terms to enable us to survive periods of decreased cash flows.
There is Great Uncertainty in the Healthcare Industry
The healthcare and medical services industry in the United States is in a
period of rapid change and uncertainty. Governmental programs have been
proposed, and some adopted, from time to time, to reform various aspects of the
U.S. healthcare delivery system. Some of these programs contain proposals to
increase government involvement in healthcare, lower reimbursement rates and
otherwise change the operating environment for our customers. In this process,
healthcare facilities are curtailing the use of interim staffing provided by
vendors such as us. We cannot predict with any certainty what impact, if any,
proposals for healthcare reforms might have on our business. As a result, major
third party payors of hospital services (insurance companies, Medicare and
Medicaid) have significantly revised payment procedures in an effort to contain
healthcare costs. These and other factors affecting the healthcare industry may
have a significant adverse impact on our operating results.
Our Dependence on Customer Relationships and Absence of Customer and Care-giver
Contracts
Our business is dependent on its ability to establish and maintain close
working relationships with hospitals, clinics, nursing homes, physician groups,
assisted living facilities, health maintenance organizations, educational
institutions, third party payors and other referral sources, and with care
givers providing services on our behalf. Although we have established customer
and care giver relationships in the markets in which we presently operate, there
can be no assurance these relationships will continue. None of the contracts by
and between us and our customers is exclusive, and these contracts do not
obligate the customers to utilize a designated number of interim or home care
staff for any specific period of time. Although certain customer contracts
provide that we will be the first interim staffing firm contacted by the
hospital, this "first call" right does not guarantee that we will achieve a
specific level of, or any, revenues as a result of such right. Likewise,
contracts between us and our care givers are non-exclusive and do not obligate
the care giver to render services for any specific period of time. Accordingly,
it is possible that we may not be able to meet customer demand for qualified
personnel, or that it can do so on a cost-efficient basis
Our New Software Business Line
We acquired, through our subsidiary Cymedix Lynx Corporation, in January of
1998, a development stage medical software business. The uncertainties and risks
that accompany forward-looking statements are enhanced by our lack of experience
in this business. We had no experience in marketing of software products,
providing software support services, evaluating demand for products, financing a
software business and dealing with government regulation of software products.
As a developer of information systems, we will be required to anticipate and
adapt to evolving industry standards and new technological developments. The
market for our software products is characterized by:
o continued and rapid technological advances in both hardware and
software development;
o ongoing expenditures for research and development;
o the timely introduction of new products and enhancements to
existing products; and
o standards that are largely a function of user acceptance, and,
therefore, subject to change.
Our future success, if any at all, will depend in part upon our ability to
enhance existing products, to respond effectively to technology changes, and to
introduce new products and technologies to meet the evolving needs of its
clients in the health care information systems market. We are currently devoting
significant resources toward the development of products. There can be no
assurance that we will successfully complete the development of these products
in a timely fashion or that our current or future products will satisfy the
needs of the health care information systems market. Further, there can be no
assurance that products or technologies developed by others will not adversely
affect our competitive position or render its products or technologies
noncompetitive or obsolete.
Risks of Infringement of Proprietary Technology
Our wholly-owned subsidiary, Cymedix Lynx Corporation, has been granted
certain patent rights, a trademark and copyrights relating to its software
business.
The patent and intellectual property legal issues for software programs, such
as the Cymedix products, are complex and currently evolving. Since patent
applications are secret until patents are issued, in the United States, or
published, in other countries, we cannot be sure that it is first to file any
patent application. In addition, there can be no assurance that competitors,
many of which have far greater resources than we do, will not apply for and
obtain patents that will interfere with our ability to develop or market product
ideas that we have originated. Further, the laws of certain foreign countries do
not provide the protection to intellectual property that is provided in the
United States, and may limit our ability to market its products overseas. We
cannot give any assurance that the scope of the rights that we have been granted
to Cymedix are broad enough to fully protect our Cymedix software from
infringement.
Litigation or regulatory proceedings may be necessary to protect our
intellectual property rights, such as the scope of our patents. In fact, the
computer software industry in general is characterized by substantial
litigation. Such litigation and regulatory proceedings are very expensive and
could be a significant drain on our resources and divert resources from product
development. There is no assurance that we will have the financial resources to
defend our patent rights or other intellectual property from infringement or
claims of invalidity.
We also rely upon unpatented proprietary technology and no assurance can be
given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to or disclose
our proprietary technology or that we can meaningfully protect our rights in
such unpatented proprietary technology. We will use our best efforts to protect
such information and techniques, however, no assurance can be given that such
efforts will be successful. The failure to protect our intellectual property
could cause us to loose substantial revenues and to fail to reach its financial
potential over the long term.
Our Buinesses are Highly Competitive
Medical Staffing Services. The market for supplemental medical staffing and
home care services is highly competitive. Many of our existing and potential
competitors have substantially greater financial, marketing and personnel
resources than we do and have established reputations in the supplemental
staffing industry. Accordingly, we are at a disadvantage in competing with such
entities. It is likely that the current trend toward increased consolidation in
the health care industry will accelerate. Some of the our larger competitors may
gain an additional advantage by offering enterprise-wide supplemental staffing
for health care facilities.
Medical Personnel. In addition, our operations depend, to a significant
degree, on its ability to recruit qualified health care personnel. We face
competition from other companies in recruiting qualified health care personnel
and there is no assurance that qualified personnel will be available to us in
the future or the costs at which such personnel might be available. Our failure
to recruit qualified personnel, or a significant increase in our cost of such
personnel, could have a material adverse effect on our financial position and
operations. There can be no assurance that we will be able to continue to
compete successfully in the markets in which it is active or in any markets it
enters in the future.
Medical Information Software. Competition can be expected to emerge from
established healthcare information vendors and established or new Internet
related vendors. The most likely competitors are companies with a focus on
clinical information systems and enterprises with an Internet commerce or
electronic network focus. Many of these competitors will have access to
substantially greater amounts of capital resources than we have access to, for
the financing of technical, manufacturing and marketing efforts. Frequently,
these competitors will have affiliations with major medical product companies or
software developers, who will assist in the financing of such competitor=s
product development. We will seek to raise capital to develop Cymedix products
in a timely manner, however, so long as our operations remain underfunded, as
they now are, we will be at a competitive disadvantage.
Software Development Personnel. The success of the development of our
Cymedix software is dependent to a significant degree on our key management and
technical personnel. We believe that our success will also depend upon our
ability to attract, motivate and retain highly skilled, managerial, sales and
marketing, and technical personnel, including software programmers and systems
architects skilled in the computer languages in which our Cymedix products
operate. Competition for such personnel in the software and information services
industries is intense. The loss of key personnel, or the inability to hire or
retain qualified personnel, could have a material adverse effect on our results
of operations, financial condition or business.
We Have Personnel Risks
Medical staff providers, like us, are in the business of employing people and
placing them in the workplace of other businesses. Attendant risks of such
activity include possible claims of discrimination and harassment, employment of
illegal aliens, unqualified or unlicensed medical personnel and other similar
claims. We have policies, guidelines and screening procedures in place to reduce
its exposure to these risks. However, a failure to follow these policies and
guidelines may result in negative publicity and the payment by us of money
damages or fines. From time to time, we become involved in litigation for
injuries or damages caused by the acts of its staff. See ALegal Proceedings@ in
item 1 of Part II of our most recent Form 10-QSB, filed with the SEC. While we
maintain insurance providing coverage for certain negligent acts in an amount we
believe is customary for the industry, there can be no assurance that our
insurance policies will be sufficient so as to offset any claims received. In
addition, such policies exclude certain acts, usually involving criminal
behavior from coverage. Moreover, costs of insurance may escalate beyond
anticipated levels, or certain types of losses may be uninsurable or may exceed
coverage. Any substantial uninsured loss suffered by Medix would have a material
adverse effect on our business.
Securities Law Issues
We raised substantial amounts of capital in private placements from time to
time. The securities offered in such private placements were not registered with
the Securities and Exchange Commission or any state agency in reliance upon
exemptions from such registration requirements. Such exemptions are highly
technical in nature and if we inadvertently failed to comply with the
requirements of any of such exemptive provisions, investors would have the right
to rescind their purchase of our securities or sue for damages. If one or more
investors were to successfully seek such rescission or institute such suit,
Medix could face severe financial demands that could material and adversely
affect our financial position.
Impact of Shares Eligible for Future Sale
As of September 29, 1999, we had 24,743,691 shares of common stock
outstanding. Of these shares, approximately 5,298,404 shares are restricted and
not freely transferable. As of the date hereof, approximately 19,665,469 shares
were issuable upon the exercise of outstanding options or warrants and the
conversion of preferred stock and convertible debt. The exercise prices of
options and warrants to acquire common stock presently outstanding range from
$0.15 per share to $1.88 per share. During the respective terms of the
outstanding options, warrants, preferred stock and other outstanding underlying
securities, the holders are given the opportunity to profit from a rise in the
market price of the common stock, and the exercise of any options or warrants
may dilute the book value per share of the common stock. The existence of the
options, conversion rights, or any outstanding warrants may adversely affect the
terms on which we may obtain additional equity financing. Moreover, the holders
of such securities are likely to exercise their rights to acquire common stock
at a time when we would otherwise be able to obtain capital on terms more
favorable than could be obtained through the exercise or conversion of such
securities.
Lack of Authorized Shares
At the date hereof, the Company's Articles of Incorporation authorize the
issuance of 50,000,000 shares of its Common Stock. We currently have 24,743,691
shares of Common Stock issued and outstanding. Currently outstanding options,
warrants, convertible stock and convertible debt issued by the Company would
require the issuance of 19,665,496 shares of Common Stock if all such options,
warrants, convertible stock and convertible debt were exercised or converted. We
have also issued rights to earn 6,000,000 warrants based on contractual
performance. We expect to issue additional Common Stock rights in excess of our
current authorization in connection with future financings. We expect to seek
authorization from our shareholders to increase the number of authorized shares
at our next shareholders' meeting. It is possible that we could be subject to
litigation as a result of committing to issue shares in excess of our authorized
number of shares.
Volatility of Our Stock Price
Historically, our common stock has experienced significant price
fluctuations. This has been caused by factors such as:
o quarterly fluctuations in operating results;
o negative announcements by our company or others;
o regulatory, legislative or other developments affecting our
company or the health care industry generally;
o overhang of substantial amounts of common stock issuable upon
conversion of outstanding convertible securities and
exercise of outstanding warrants and options;
o conversion of our preferred stock into common stock at
conversion rates based on current market prices of our
common stock; and
o market conditions specific to the health care industry and
general market conditions.
In addition, in recent years the stock market has experienced significant
price and volume fluctuations. These fluctuations, which are often unrelated to
the operating performance of specific companies, have had a substantial effect
on the market price for many health care related companies. Factors such as
those cited above, as well as other factors that may be unrelated to our
operating performance may adversely affect the price of our common stock.
Application of Penny Stock Rules to Our Common Stock
Trading of our common stock is subject to the penny stock rules under the
Securities Exchange Act of 1934, as amended, unless an exemption from such rules
is available. Broker-dealers making a market in our common stock will be
required to provide disclosure to their customers regarding the risks associated
with our common stock, the suitability for the customer of an investment in our
common stock, the duties of the broker-dealer to the customer and information
regarding bid and ask prices for our common stock and the amount and description
of any compensation the broker-dealer would receive in connection with a
transaction in our common stock. The application of these rules will likely
result in fewer market makers making a market of our common stock and further
restrict the liquidity of our common stock.
Absence of Common Stock Dividends
We are required to pay dividends on our 1996 Preferred Stock, and, in certain
circumstances, on our other classes of Preferred Stock. We have not had
earnings, but if earnings were available, it is our general policy to retain
any earnings for use in our operation. Therefore, we do not anticipate paying
any cash dividends on our common stock in the foreseeable future. Any payment of
cash dividends on our common stock in the future will be dependent upon our
financial condition, results of operations, current and anticipated cash
requirements, plans for expansion, as well as other factors that the Board of
Directors deems relevant. We anticipate that our future financing agreements
will prohibit the payment of common stock dividends without the prior written
consent of our lender(s).
THE COMPANY
General
Medix Resources, Inc., a Colorado corporation, formerly known as
International Nursing Services, Inc., currently operates in two principal lines
of business, healthcare staffing services and medical information software.
Doing business as National Care Resources and TherAmerica, Inc., we
provide skilled nursing, therapists, rehabilitation and other medical personnel
for supplemental staffing in home care and in a broad spectrum of health care
and educational facilities. Our supplemental staffing services are provided
through a pool of approximately 900 caregivers including licensed and registered
nurses, rehabilitation, physical, respiratory, occupational and speech
therapists, medical social workers, home care aides and other unlicensed
personnel. Our supplemental and home care staff currently serves over 300
hospitals, clinics, nursing homes, physician groups, assisted living facilities,
health maintenance organizations and other health care institutions, a variety
of educational facilities and individual home care clients. We operate through
offices located in Houston and San Antonio, Texas, Emeryville and Ontario,
California, and Englewood, Colorado. We currently provide supplemental staffing
services and therapists in Texas, Colorado and California. Travel nurses and
therapists are provided in seventeen states and the District of Columbia.
We acquired Cymedix in January of 1998. Cymedix has developed an
Internet-based communications and information management product, which we began
marketing to medical professionals nationwide. Growth of the medical information
management marketplace is being driven by the need to share significant amounts
of clinical and patient information between physicians, their outpatient service
providers, hospitals, insurance companies and managed care organizations. This
market is one of the fastest-growing sectors in healthcare today, commanding a
projected two-thirds of health care capital investments. The Cymedix software is
a secure medical communications product, with patent application pending, that
makes use of the Internet. Using the Cymedix software, medical professionals can
order, prescribe and access medical information from insurance companies and
managed care organizations, as well as from any participating outpatient service
provider such as a laboratory, radiology center, pharmacy or hospital. We will
provide the software free of charge to physicians and clinics, and will collect
user fees whenever these products are sold on the Internet. The product=s
relational database technology provides physicians with a permanent, ongoing
record of each patient's name, address, insurance or managed care affiliation,
referral status, medical history, personalized notes and an audit trail of past
encounters. Physicians can electronically order medical procedures, receive and
store test results, check patient eligibility, make medical referrals, request
authorizations, and report financial and encounter information in a
cost-effective, secure and timely manner.
Our principal executive office is located at 7100 East Belleview Ave.,
Englewood, Colorado 80111, and its telephone number is (303) 741-2045.
USE OF PROCEEDS
The net proceeds from the sale of shares will be received by the selling
shareholders. Medix will not receive any of the proceeds from any sale of the
shares by the selling shareholders.
SELLING SHAREHOLDERS
The table below sets forth information as of September 29, 1999 with
respect to the selling shareholders, including names, holdings of shares of
common stock prior to the offering of the shares, the number of shares being
offered for each account, and the number and percentage of shares of common
stock to be owned by the selling shareholders immediately following the sale of
the shares, assuming all of the offered shares are sold.
Shares of
Common Stock
Beneficially Shares of Shares of Common Stock to
Owned Before Common Stock be Beneficially Owned After
Name the Offering Being Offered the Offering
------------- -------------- --------------- ------------------------
Number Percentage
---------- ------------
Ananian, Fred 88,000 60,000 0 *
Banov, Robert 200,000 200,000 28,000 0%
Baron, Eric 128,000 128,000 0 0%
Baron, Eugene 124,000 124,000 0 0%
Bergquist, Dennis
and Leslie 200,000 200,000 0 0%
Bernabei, John 125,000 125,000 0 0%
Black Hills Investment
Corporation 560,000 560,000 0 0%
Blank, Michael 100,000 100,000 0 0%
Brock, David 125,000 125,000 0 0%
Brown, Lisa Dake 200,000 200,000 0 0%
Cadence Capital
Corporation 1,500,000 1,500,000 0 0%
Carl Fricke Trust 80,000 80,000 0 0%
Cohen, Darryl 520,000 500,000 20,000 *
Colwell, John 110,000 100,000 10,000 *
Counterpoint Capital
Management, L.L.C. 400,000 400,000 0 0%
Counterpoint Master, L.L.C. 700,000 700,000 0 0%
Dimare, Marcy 60,000 40,000 20,000 *
Duck Partners 400,000 400,000 0 0%
Elmes, Tim & Tristina,
JTWROS 40,000 40,000 0 0%
Frigg Ltd. 200,000 200,000 0 0%
Hackett, D. Kim 40,000 40,000 0 0%
Harmonic Money Purchase
Pension Plan 100,000 100,000 0 0%
Harris, Robert 24,000 24,000 0 0%
Higgins, Nicola 40,000 40,000 0 0%
Hoffman, Craig 100,000 100,000 0 0%
Kaufman, Peter 200,000 200,000 0 0%
Klem, Michael 20,000 20,000 0 0%
Knepper, Michael 60,000 60,000 0 0%
Lane, John 200,000 200,000 0 0%
Laura Huberfeld/Naomi
Bodner Partnership 1,200,000 1,200,000 0 0%
Lyons, William 250,000 250,000 0 0%
Martineau, Steven 50,000 50,000 0 0%
McCullogh, Robert 250,000 250,000 0 0%
McKenzie Webster Limited 972,000 292,000 680,000 2.7%
Millenco, LP 520,000 520,000 0 0%
Neiman, Brian 40,000 40,000 0 0%
Oberrotman, Alain 100,000 100,000 0 0%
Peterson, James P. 160,000 160,000 0 0%
Prufeta, John 500,000 500,000 0 0%
Richard B & Jacqueline
M. WassonTTEES FBO
Wasson Family Trust 520,000 520,000 0 0%
Rockwell Investment LTD. 100,000 100,000 0 0%
Smokowski, Kevin 250,000 250,000 0 0%
Stone, Jay 123,000 100,000 23,000 *
Stone, Kendall 123,000 100,000 23,000 *
Weatherford, Randy 100,000 100,000 0 0%
---------- ---------- ----------
Total 11,902,000 11,098,000 804,000
========== ========== ==========
* less than 1%
Relationship Between Medix and the Selling Shareholders
The selling shareholders have or will acquire the shares of common stock
indicated above in one of the following ways: (i) upon the conversion of
preferred stock and debt securities issued by us in 1999, (ii) upon the exercise
of warrants issued with such preferred stock and debt securities, and (iii) upon
the exercise of warrants issued to a creditor, and (iv) upon the exercise of
options issued to a consultant.
Of the shares of Common Stock offered by this Prospectus, 1,500,000 shares
underlie the Company's Series A Units, each of which consists of one share of
the Company's 1999 Series A Convertible Preferred Stock (the "Series A
Preferred") and one thousand Common Stock Warrants. The Series A Preferred is
convertible into common stock at a price of $0.25 per share from through March
1, 2003. Each Warrant entitles the holder to purchase one share of common stock
at $1.00 through October 1, 2000.
An additional 7,328,000 shares offered by this Prospectus underlie the Company's
Series B Units, each of which consists of one share of the Company's 1999 Series
B Convertible Preferred Stock (the "Series B Preferred") and two thousand Common
Stock Warrants. The Series B Preferred is convertible into common stock at a
price of $0.50 per share through October 1, 2003. Each Warrant entitles the
holder to purchase one share of Common Stock at $0.50 through October 1, 2002.
An additional 1,500,000 shares offered by this Prospectus underlie convertible
debt and a Common Stock Warrant issued to a creditor of the Company. The debt is
convertible until March 27, 2000 at either (i) $.50 per share until December 27,
1999, or (ii) thereafter, the lesser of $.50 per share or an amount equal to 80%
of the lowest closing bid prices for the Common Stock during the last five
trading days prior to the conversion date. The Warrant entitles the holder to
purchase one share of Common Stock at $0.50 through September 27, 2002.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 50,000,000 shares of common stock, par
value $.001 per share, and 2,500,000 shares of preferred stock. As of September
29, 1999, we had outstanding 24,743,691 shares of common stock, 3.5 shares of
1996 Preferred Stock, 5 shares of 1997 Preferred Stock, 300 shares of 1999
Series A Preferred Stock and 1,832 shares of 1999 Series B Preferred Stock. As
of such date, our common stock was held of record by approximately 417 persons
and beneficially owned by approximately 2,100 persons.
Common Stock
Each share of common stock is entitled to one vote at all meetings of
shareholders. Shareholders are not permitted to cumulate votes in the election
of directors. Currently, the Board of directors consists of six directors, who
serve for staggered terms of three years, with at least two directors elected at
every annual meeting. All shares of common stock are equal to each other with
respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional common stock. In the event of liquidation,
dissolution or winding up of Medix, holders of the common stock will be entitled
to receive on a pro rata basis all assets of Medix remaining after satisfaction
of all liabilities and preferences of the outstanding preferred stock. The
outstanding shares of common stock and the shares of common stock issuable upon
conversion or exercise of derivative securities are or will be, as the case may
be, duly and validly issued, fully paid and non-assessable.
Transfer Agent
We have retained American Securities Transfer, Inc., 12039 W.
Alameda Parkway, Suite Z-2, Lakewood, Colorado 80228, as Transfer
Agent for the our common stock.
PLAN OF DISTRIBUTION
This Prospectus has been prepared, as a part of a registration statement, to
satisfy our obligations to the selling shareholders to register the common stock
beneficially owned by them. These obligations were made to induce the selling
shareholders to invest in Medix.
Any distribution of shares by the selling shareholders, or by their pledgees,
donees, transferees or other successors in interest, may be effected from time
to time in one or more of the following transactions:
(a) to underwriters who will acquire the shares for their own account
and resell them in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale (any public offering price and any
discount or concessions allowed or reallowed or paid to dealers may
be changed from time to time);
(b) through brokers, acting as principal or agent, in transactions
(which may involve block transactions) on one or more
exchanges on which shares are then listed, in special
offerings, exchange distributions pursuant to the rules of
the applicable exchanges or in the over-the-counter
market, or otherwise, at market prices prevailing at the
time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices;
(c) directly or through brokers or agents in private sales at negotiated
prices; or
(d) by any other legally available means.
In addition, any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 of the Securities Act ("Rule 144") may be sold under Rule
144 rather than pursuant to this Prospectus. All discounts, commissions or fees
incurred in connection with the sale of the common stock offered hereby will be
paid by the selling shareholders, except that the expenses of preparing and
filing this Prospectus and the related Registration Statement with the
Securities and Exchange Commission, and of registering or qualifying the common
stock will be paid by Medix.
The selling shareholders and such underwriters, brokers, dealers or agents,
upon effecting a sale of the shares, may be considered "underwriters" as that
term is defined by the Securities Act.
Underwriters participating in any offering made pursuant to this Prospectus
(as amended or supplemented from time to time) may receive underwriting
discounts and commissions, discounts or concessions may be allowed or reallowed
or paid to dealers, and brokers or agents participating in such transaction may
receive brokerage or agent's commissions or fees.
If required at the time a particular offering of the shares is made, a
Prospectus Supplement would be distributed which would set forth the amount of
the shares being offered and the terms of the offering, including the purchase
price or public offering price, the name or names of any underwriters, dealers
or agents, the purchase price paid by any underwriter for the shares purchased
from the selling shareholders, any discounts, commissions and other items
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers. To our
knowledge, as of the date of this Prospectus, none of the selling shareholders
have entered into any agreement, arrangement or understanding with any
particular broker or market maker with respect to the shares offered by them,
nor do we know the identity of the brokers or market makers which might
participate in such offering.
In order to comply with the securities laws of certain states, if applicable,
the shares will be sold in such jurisdictions, if required, only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless the Shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and complied with.
We have agreed that Medix will bear all costs, expenses and fees in
connection with the registration of the shares being sold through this
Prospectus.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 109 of the Colorado Business Corporation Act generally provides that
a corporation may indemnify its directors, officers, employees and agents
against liabilities and action, suit or proceeding whether civil, criminal,
administrative or investigative and whether formal or informal (a "Proceeding"),
by reason of being or having been a director, officer, employee, fiduciary or
agent Medix, if such person acted in good faith and reasonably believed that his
conduct, in his official capacity, was in the best interests of Medix (or, with
respect to employee benefit plans, was in the best interests of the participants
of the plan), and in all other cases that his conduct was at least not opposed
to Medix's best interests. In the case of a criminal proceeding, the director,
officer, employee or agent must have had no reasonable cause to believe that his
conduct was unlawful. Under Colorado Law, Medix may not indemnify a director,
officer, employee or agent in connection with a proceeding by or in the right of
Medix if the director is adjudged liable to Medix, or in a proceeding in which
the directors, officer employee or agent is adjudged liable for an improper
personal benefit.
Our Articles of Incorporation provide that we shall indemnify its directors,
and officers, employees and agents to the extent and in the manner permitted by
the provisions of the laws of the State of Colorado, as amended from time to
time, subject to any permissible expansion or limitation of such
indemnification, as may be set forth in any shareholders' or directors'
resolution or by contract.
Insofar as indemnification for liabilities under the Act may be permitted to
directors, officers or persons controlling Medix pursuant to the foregoing
provisions, Medix has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
AVAILABLE INFORMATION
We are reporting company and file our annual, quarterly and current reports,
proxy material and other information with the Securities and Exchange
Commission. Reports, proxy statements and other information concerning Medix
filed with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at its office at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at Citicorp Center, 300 West Madison Street, Chicago, Illinois 60661
and Seven World Trade Center, New York, New York 10048. Copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Our SEC filings are
also available at the SEC's Website at "http:\\www.sec.gov".
We have filed a registration statement on Form S-2 under the Securities Act
of 1933, with respect to the securities offered pursuant to this Prospectus.
This Prospectus does not contain all of the information set forth in the
registration statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the registration statement and the exhibits filed as a part thereof,
which may be found at the locations and Website referred to above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file with
them, which means that we can disclose important information to you by referring
you to the documents filed with them that contains that information. The
information incorporated by reference is an important part of this Prospectus,
and the information that we file with the SEC after the date of this Prospectus
will automatically update and supercede the information contained in this
Prospectus or incorporated by reference into this Prospectus. We incorporate by
reference the documents listed below and any future filing we will make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934:
(a) a copy of our latest Annual Report on Form 10-KSB, which as of the
date of this Prospectus is our Form 10-KSB for the fiscal year ended
December 27, 1998;
(b) a copy of our latest Proxy Statement, which as of the date of this
Prospectus is our Proxy Statement for our 1999 Annual Meeting held on
June 11, 1999; and
(b) a copy of our latest Quarterly Report on Form 10-QSB, which as of the
date of this Prospectus is our Form 10-QSB for the fiscal quarter
ended June 27, 1999.
We are delivering with this Prospectus a copy of each of the above three
documents. All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year referred to in item (a) above
shall be deemed to be incorporated herein by reference and to be a part of this
Prospectus. All documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of such filings. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
We will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon oral or written request of any such person, a copy
of any or all of the documents incorporated herein by reference, other than the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates). Requests
should be directed to John P. Yeros, Medix Resources, Inc., 7100 E. Belleview
Avenue, Suite 301, Englewood, Colorado 80111, telephone (303) 741-2045.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for us by Lyle B.
Stewart, P.C., Denver, Colorado. Mr. Stewart has been granted stock options to
purchase 25,000 shares of common stock at $0.26 per share.
EXPERTS
The consolidated financial statements of Medix as of December 27, 1998, and
for each of the two years in the period ended December 27, 1998 appearing in the
Form 10-KSB have been audited by Ehrhardt Keefe Steiner & Hottman PC,
independent auditors, as stated in their report appearing therein, and have been
incorporated herein by reference in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing. With respect to the
unaudited interim consolidated financial information in our quarterly reports
that have been filed or will be filed in the future on Forms 10-QSB, the
independent certified public accountants have not and will not have audited or
reviewed such consolidated financial information and have not and will not have
expressed an opinion or any other form of assurance with respect to such
consolidated financial information.
