U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Fiscal Year Ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________
TO ____________
Commission File Number 0-24768
MEDIX RESOURCES, INC.
(Name of small business issuer in its charter)
Colorado 84-1123311 (State or Other Jurisdiction of (IRS
Employer Incorporation or Organization Identification No.)
7100 E. Belleview Avenue, Suite 301
Englewood, Colorado 80111
(Address of Principal Executive Offices)
Issuer's Telephone Number: (303) 741-2045
Securities Registered Under Section 12(b) of the Exchange Act: None
Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock. $.001 Par Value;
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]
Registrant's revenues for its most recent fiscal year: $24,000
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of March 17, 2000 was approximately
$238,678,000 (for purposes of the foregoing calculation only, each of the
registrant's officers and directors is deemed to be an affiliate).
There were 34,932,311 shares of registrant's Common Stock outstanding as of
March 17, 2000.
Documents incorporated by reference:
None
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
PART I..............................................................2
ITEM 1. DESCRIPTION OF BUSINESS....................................2
ITEM 2 DESCRIPTION OF PROPERTY...................................12
ITEM 3. LEGAL PROCEEDINGS.........................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......13
PART II............................................................13
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................................13
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION..............................................14
ITEM 7. FINANCIAL STATEMENTS......................................18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE....................18
PART III...........................................................18
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION
16(A) OF THE EXCHANGE ACT.................................18
ITEM 10. EXECUTIVE COMPENSATION....................................21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND AGREEMENT.............................................26
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............28
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..........................29
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Our Company
Medix Resources, Inc., a Colorado corporation ("Medix" or the "Company"),
is an information technology company headquartered in Denver, Colorado, with
offices in Thousand Oaks, California, East Brunswick, New Jersey and New York
City. We specialize in the development, marketing and management of software and
connectivity solutions for clinical and business transactions within the
healthcare industry. Through our wholly owned subsidiary, Cymedix Lynx
Corporation, a Colorado corporation ("Cymedix"), we have developed
Cymedix.com(R), a unique healthcare communication technology product. Created by
a team of healthcare professionals, Cymedix.com provides instantaneous access to
patient clinical, financial and administrative information. Its software
supplies healthcare institutions, such as health plans, insurers, and hospitals,
as well as practicing physicians, with a set of non-invasive technology tools
that can be attached to their existing software applications and provide
Internet-enabled transaction capability between all parties.
Implementation of the Cymedix.com software suite promises to speed and
improve the efficacy of daily interactions between health caregivers and their
staffs, other ancillary providers(such as labs or pharmacy benefit managers),
insurance companies, hospitals, Integrated Delivery Networks (IDNs) and Health
Management Organizations (HMOs). We believe that the market for robust and
practical healthcare solutions is growing rapidly, and that segment growth will
continue to accelerate as the joined emphases of consumer choice, quality,
administrative service and cost containment ratchets up demand for ever more
efficient and user-friendly methods of delivering quality healthcare.
Medix was incorporated in the State of Colorado on April 22, 1988. For the
next decade, the Company operated as a temporary healthcare staffing company,
with offices at various times in Colorado, New York, Texas and California. Medix
disposed of the its remaining healthcare staffing operations on February 19,
2000. In January 1998, the Company acquired Cymedix Corporation, a California
corporation, which was merged into our wholly owned subsidiary, Cymedix Lynx
Corporation. We issued 7,212,987 shares of our Common Stock to the shareholders
of the acquired company and granted or committed to grant options covering
1,200,000 shares of our Common Stock to employees of the subsidiary.
In 1999, we quickly transitioned from a traditional, temporary healthcare
staffing company to an Internet healthcare transaction company. In October 1999,
Mr. John R. Prufeta was appointed Chief Executive Officer of our company and has
since been appointed President of Medix Resources, Inc. and Chairman of the
Cymedix subsidiary Board. The Company's Board of Directors was strengthened with
the additions of Dr. David B. Skinner, Vice Chairman and CEO of The New York and
Presbyterian Hospital, Samuel H. Havens, former President of the Prudential
Healthcare Group Operations and John. T. Lane, a former senior executive at J.P.
Morgan & Co. During the first quarter of 2000, Mr. Prufeta recruited the core of
his senior management team and Mr. David R Pfeil, our Chief Technology Officer,
was appointed President and Chief Operating Officer of our Cymedix(R)
subsidiary.
Currently, Medix has contract agreements for our Cymedix.com product with
four customers, WellPoint Pharmacy Management, Advance Paradigm, Advica
Healthcare Services and Loyola University Medical Center of Chicago. These
agreements, which are still in the initial testing and development stage, should
position us as one of the technology leaders in the emerging iHealth industry.
On March 15, 2000, Medix, through its wholly owned subsidiary Cymedix,
completed the acquisition of Automated Design Concepts, Inc. ("ADC"), a software
development firm owned by David Pfeil, the President and Chief Operating Officer
of Cymedix and the Chief Technology Officer and a Director of the Company. The
acquisition was structured as a merger (the "ADC Merger") of ADC into Cymedix,
which entered into new employment agreements with Mr. Pfeil and four other ADC
software engineers who had provided consulting services to Cymedix since April
1999. As a group, they were responsible for the refinement of the Cymedix.com
technology and, as employees of Cymedix, they are expected to continue to
spearhead the advancement of its online healthcare transaction solutions. In the
ADC Merger, the outstanding capital stock of ADC owned by Mr. Pfeil was
converted into 60,400 shares of Medix Common Stock plus a cash payment of
$100,000. See "Certain Relationships and Related Transactions". The ADC Merger
is expected to provide us with the dedicated software engineering staff needed
to complete the development of Cymedix.com software to full production
capability.
Our principal administrative office is at 7100 E. Belleview Avenue, Suite
301, Englewood, Colorado 80111 and we can be reached at (303) 741-2045.
Our Industry
The U.S. Health Care Finance Administration estimates that healthcare
costs currently amount to approximately $1.2 trillion dollars annually or 14% of
the U.S. gross domestic product. Driven by increasingly sophisticated clinical
technology, an aging population base and newly-empowered, health conscious
consumers, healthcare expenditures are expected to grow to approximately $2.0
trillion by 2007. Today, the industry conducts its business by executing more
than 30 billion transactions a year with more than 90% of those transactions
untouched by integrated automation. Everything from enrollment and eligibility
verification, referrals and authorizations, medical record keeping, billing and
claims and script-writing/drug interaction checks are processed through a matrix
of disjointed and isolated systems, including paper, fax and phone, with each
provider, payer or supplier using its own, often antiquated computer system.
Duplication is rampant, error probabilities are enormous and the waste of
precious resources is glaring.
Most health economists estimate that 20 % or more of the nation's total
healthcare tab is spent on backroom administration. Another 10% funds the
fallout of adverse health events that are created by clinical errors made with
inaccurate patient information. In effect, more than 4% of the nation's wealth
is being consumed by a service and transactions environment that pleases no one
and angers many.
The genesis of today's reality lies in a number of related factors. First,
healthcare is characterized by fragmentation with approximately 645,000
practicing physicians, 6,200 hospitals, 16,500 nursing homes, 8,000 home health
care agencies, 4,500 independent laboratories and thousands of managed care and
other organizations of health care providers--usually local in focus.
Historically, healthcare has been the quintessential cottage industry. Second,
access to capital by healthcare's various stakeholders has been sharply
different. Typically, insurers have had the financial wherewithal to fund
systems development while physicians have not. That tilt in the playing field
has produced an industry rich in proprietary claim systems but poor in
patient-focused care systems. Third, government regulation of the industry is
splintered across 50 states, mixed with substantial federal intervention.
Finally, healthcare is an exceedingly complex business. The consequences of
error are literally life-threatening. Until recently, technology capable of
earning an authentic hand-off from wasteful but comparatively safe
administrative practices was not available.
We believe, along with many of our competitors, that the Internet provides
a platform for catalytic change within the industry. The factors discussed above
may be solved or at least mitigated through the use of Internet channels. The
Internet's open architecture, universal accessibility and growing acceptance
make it an increasingly critical tool for business-to-business and
business-to-consumer interaction and transaction. Internet use is undergoing a
transformation from simple information publishing, messaging, and data gathering
to critical business transactions and confidential, core business
communications. In many industries, work is in progress to harness the
Internet`s power to interleave previously disconnected business processes and
allow companies to automate workflows, reduce distribution and administrative
costs and leverage their market reach. We believe that the healthcare industry,
because of its size, fragmentation, complexity and extreme dependence on
accurate, timely information exchange, is particularly well suited to benefit
from the connectivity and data integration solutions offered by the Internet.
We believe that today's emerging iHealth marketplace can be sized at $300
to $350 billion. At present, iHealth companies have captured a mere fraction of
the potential traffic. News reports aside, fewer than 20,000 physicians use
online solutions to complement or replace practice management processes. Our
challenge is to position our Company to take advantage of the opportunities
offered and bring authentic value to all of the stakeholders within healthcare.
Our belief is that our Cymedix.com product is the right product to advance
iHealth solutions.
Our Products and Technology
Our business focuses on creating solutions that move clinical and
administrative information and transactions from one facility or institution to
another. Our chief product, Cymedix.com, is a suite of software systems,
networking technologies and data integration tools. Collectively, they create a
universal communication vehicle that, we believe, achieves an inexpensive
electronic link between the disparate computer systems that are scattered
throughout the healthcare industry. The product connects existing physician
office practice hardware and software to a private network and permits the
secure exchange of on-line clinical and administrative information with insurers
and service providers (pharmacies, labs, hospitals, other physicians) across the
enterprise.
Realizing that wide-bandwidth, 24/7, browser-based technology is still a
luxury in most physician offices, we elected to develop a secure Internet
transaction system based upon encrypted email messages. We also recognized that
there are hundreds if not thousands of proprietary practice management systems
installed at physician and other healthcare offices. Our goal was to provide a
practical and user-friendly solution that would allow the physician's staff to
utilize the Cymedix product without discarding their legacy practice management
system or have to re-key critical patient data. This goal became the driving
force behind development of our patented Universal Interface. The Universal
Interface approach permits the Cymedix.com product to non-invasively integrate
with virtually any practice management system, allowing healthcare professionals
to interact with payers and institutions through the Internet for everything
from lab orders and script-writing, to eligibility checking and claims
processing.
Cymedix.com utilizes encapsulation or tunneling technology to enclose the
data within packets of other communication network protocols (such as TCP/IP)
for transport across it's secure private network. Cymedix.com harnesses the
power of Internet technology to create its universal network and to effectively
carve-out a private communication channel across the public information highway.
Our software has two main components:
1. Cymedix.com Remote- The Remote application tool set includes a Cymedix
patented Universal Interface module that allows the system to
non-invasively interact with the physician's system to extract patient
data for use with the Internet transaction request module. The result is a
major timesaving to the physician in utilizing the Cymedix product since
data previously keyed into his or her practice management software will be
already available in the Cymedix Remote database if needed for an
Internet-based transaction. Healthcare professionals do not have to
replace or upgrade their expensive practice management systems in order to
share their data with other healthcare organizations.
2. Cymedix.com Host - The Host application is installed at the healthcare
organization that sponsors patient-related information services such as
insurers, pharmacy benefit managers, pharmacies, labs, medical benefit
managers, hospitals, and even other physicians. The Host product manages
the decryption of information requests and encryption of responses to the
Remote. It also provides a tool set to communicate in real-time or batch
mode with the sponsor's legacy application utilizing the latest industry
standards such as HL7, NSF, ANSI X12, and CCOW.
There are many practical applications for the Cymedix.com family of
products, including:
o Insurance eligibility and authorization o Laboratory and radiology orders
and results
o Pharmacy benefit management
o Referrals and referral authorizations
o Claims processing o Hospital database management
As of March17, 2000, we had four contracts with potential users of our
Cymedix.com system. All are in the initial testing phase. In each case we are
working with an existing user network to integrate our Cymedix.com system into
that network and enable healthcare providers, such as doctors, to be able to use
Cymedix.com for pharmacy management, laboratory order processing and claims
processing. On the above date, a nominal number of healthcare providers were
using the Cymedix.com system for pharmacy management.
Other Services. Through the recent merger of ADC into Cymedix, the Company
has expanded its capabilities to include custom web development and Internet
hardware systems design work for the medical industry, as well as the general
e-commerce marketplace. Marketed under the ADC brand name, the following
services also will be sold to customers:
o Internet turn-key project management. From installing hardware, networks
and operating systems to developing meaningful web content, Medix's ADC
product line can create full-featured data base applications for a wide
variety of industries, including education and retail
o Intranets and virtual private networks. The Company has a staff of
Microsoft Certified Systems Engineers who are able to assist in the sharing
of information and software applications over the Internet while
maintaining the highest level of security. Medix also has the hardware and
system technology to host application service provider (ASP) software
products both from a web-developed software application to a Windows
developed product running Citrix MetaFrame servers. Currently, we host e
-mail and sales contact management software in an ASP mode.
o Custom e-commerce design. Medix maintains a staff of graphical design
artists and virtual retailing programmers. ADC has installed more than 50
sites in a wide variety of industries including sales of medical
equipment, office supplies, recreational equipment, to name a few.
Our Strategy and Business Model
Our market strategy has several components for the near term. First, we
believe that there is significant and substantial value in offering products
that employ today's commonly available technology infrastructure. For Medix,
that means bringing to market the connectivity and software solutions that fit
with the realities of their users. As noted earlier, most physicians do not
dwell in the world of wide bandwidth. We believe that the initial steps toward
migrating and integrating the disparate entities of healthcare will happen
through the humble dial-up connection. Our product suite, Cymedix.com,
accomplishes that goal.
Second, we believe that the functionality provided by the product suite,
in tandem with our patented Universal Interface gives us a distinct competitive
advantage. By providing users with the means to continue to use their existing
systems while also accessing our non-invasive technology, we have recognized and
honored the prior investment made in those legacy systems. More importantly,
that approach recognizes that, as in medicine, our first duty is to do no harm.
Our product suite, Cymedix.com does not put at risk any of the assumed "safe"
features of today's processes.
Third, our approach to market is that of partner for our customers and
users. Our intent is to leave medicine to physicians and managed care to managed
care companies. Our focus is to bring value to them by constructing safe and
secure, high-speed data highways that connect the pieces and provide hassle-free
productivity tools for all users.
Fourth, we believe that our approach and products must and will make a
frontal attack on the wasteful administration costs that accrue to the present
work processes of all of healthcare's stakeholders. Our focus and internal
scorecard is to make a substantive difference in this area. We will ask our
users and customers to judge us accordingly.
Longer term, we intend to provide our customers and users with an
expanded, robust product spectrum that keeps pace with changing technologies,
including offering browser-based, ASP services to those that can take advantage
of them. Internal development work on next generation products is already in
progress. The Company is also engaged in various strategic relationship
discussions, some of which may speed or alter future product designs.
Our business model is a per-click, transaction fee model, paid for by
large institutional "sponsors" to enable their connectivity and information
sharing with physician offices. The model is designed to allow physician offices
to free-ride on the private networks financed by the sponsoring institution. We
believe that this approach will offer rewarding returns to sponsoring
institutions through aggregate administrative cost savings while also enabling
physician offices to reduce paperwork and cost with no front-end investment.
We believe that our model will position our Company to earn substantial,
recurring revenue streams at margins that are attractive to our investors.
Moreover, once critical density is reached, we expect that continued growth in
our core product line, Cymedix.com, can be supported without massive
reinvestment in added support/fulfillment infrastructure, leveraging our margins
for the future.
<PAGE>
Our Marketing and Sales Approach
The Company intends to pursue a focused but multi-dimensional marketing
and sales strategy over the next several years.
Specifically:
o We will concentrate our energies on selected, target markets that provide
an ample population base and offer us the opportunity to penetrate a major
market share of physician desktops.
o We will seek to partner first with a leading, anchor client in each of the
selected markets, providing "first mover" incentives to the market share
leader.
o Following platform development with the anchor client, we will concentrate
our sales focus on enlisting the second tier of potential customers,
including corollary contracts with ancillary suppliers such as pharmacy
benefit managers, labs and radiology enterprises and large, organized
provider groups. Our goal is to achieve major market density.
o Concurrent with the market breadth effort described above, the Company will
aggressively seek added market depth by up-selling and cross-selling the
full portfolio of product services to existing customers and their
affiliates.
o Finally, the Company will consistently seek to leverage our position on the
physician's desktop with a host of value-added services provided by
strategic partners. Specifically, we will seek to enable user-friendly,
online access to activities such as medical/surgical supply purchasing,
office supply purchasing, CME training and other patient/physician/staff
education or reference resources.
As of March 17, 2000, we employ five full time sales representatives and
technical sales engineers, primarily located in the Colorado office. Also in
March 2000, we have recruited and now employ one Director of Sales and one
Senior Vice President of Sales and Business Development. Over the next several
months, we intend to add to this number, locating sales executives in each of
our targeted markets. Also, separate sales staff has been hired to accelerate
our growth in e-commerce and related healthcare informational web-sites for our
ADC product line.
Several outside contractors have been retained to develop marketing and
sales literature for the Cymedix.com application software. As of March 2000,
Cymedix has begun a healthcare information systems magazine advertising campaign
to raise brand awareness of the Cymedix.com product. Promotional material aimed
at the various Cymedix.com applications is being developed for deployment at
several national trade shows and for direct mailing to healthcare providers
affiliated with the customers of Cymedix.
Our Customers
As of March 17, 2000, we have secured four major customer contracts for
Cymedix.com. Those contracts include:
o WellPoint Health Networks
o Advance Paradigm
o Advica Health Resources
o Loyola University Medical Center of Chicago
The WellPoint contract calls for the installation of the Cymedix.com
pharmacy management suite of Internet transaction software. The agreement
includes a six month pilot period which began in earnest during the month of
January, 2000. To date, a nominal number of sites and physicians have been
installed with the product. All providers are based in the state of California
and are affiliated with WellPoint's Blue Cross of California Health Plan. At
present, the key deliverable is to ramp up the number of provider locations
installed each month, with the contract expected to change from a fixed-fee
pilot to fee for transactions later this year. Upon successful completion, the
affiliate health plans associated with WellPoint will be targeted for similar
roll-outs, all immediately starting with fee for transaction processing.
Advance Paradigm ("API") is a Pharmacy Benefit Management (PBM) firm
managing prescription benefits for health plans covering 38 million persons. At
present the Company has a pilot program with API, targeting approximately 15
provider locations for five separate health plans. Installation of the Cymedix
interface tools to the API information systems is expected to be accomplished
during April 2000. The pilot includes health plans in California, Maryland, and
West Virginia. API and various pharmaceutical manufacturers are funding the
pilot's expenses. The fixed-fee pilots are expected to last through August of
2000, at which time, plans will be finalized for transaction-based processing in
the markets selected and agreed upon by API and Medix.
Advica Health Resources is a health care management service organization
("MSO") that has contracted with Cymedix to install the Cymedix.com application
on its physician-member's practice management systems for the purpose of
Internet-based electronic claims processing. The Development Plan agreement,
executed during the first quarter of 2000, calls for the joint development of an
interface between the Cymedix Host system and the front-end database management
systems of Advica.
During the course of the first quarter, 2000, the Company also
renegotiated a contract with Loyola University Medical Center of Chicago to
allow providers to order laboratory tests and receive results via the Internet.
Our system, expected to be installed in the second quarter, will connect the
Cymedix software to Loyola's SunQuest laboratory information systems. SunQuest
is a leading provider of laboratory information systems and is currently
installed in more than 1800 hospitals nationwide.
As a result of the merger with ADC, the Company maintains support for more
than 75 web sites, which we host on Internet servers maintained in our New
Jersey office. One of our larger customers includes Vision Management, the
owners of IEPPlanet. IEPPlanet, developed by ADC for Vision, allows school
districts to enter data regarding special education students. The information is
used to track and evaluate their performance and generate the necessary reports
required by each state and the federal government. Currently, the IEPPlanet
system is utilized by school systems in the Northeastern United States. Vision
plans a major marketing effort for the remainder of 2000, which may lead to
substantive hosting fees and programming customizations by the Company. Using
the ADC product line, the Company has also targeted manufacturers of medical
equipment and has developed e-commerce web sites which allow the manufacturers
to sell directly to patients as well as maintain secured distributor price lists
and ordering capabilities.
Competition
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 believes 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.
Patents, Trademarks and Copyrights
US Patent No 5,995,939 was issued on November 30, 1999 to our wholly-owned
subsidiary, Cymedix Lynx Corporation. The patent covers its Cymedix Lynx
automated service request and fulfillment system. The subsidiary decided not to
proceed with foreign patent applications on the system, and allowed a related
filing under the Patent Cooperation Treaty to expire. A divisional U.S. patent
application, including five claims directed to the method by which the system
operates, was filed by subsidiary on October 1, 1999. The U.S. Patent and
Trademark Office ("USPTO") has not yet issued a substantive response to the
divisional application, and accordingly it is not clear what the scope of any
patent issuing on the divisional application will be.
The USPTO issued to Cymedix U.S. Trademark Registration No.2,269,377 for
the mark CYMEDIX in connection with "computer software for data base and
electronic record management in the healthcare field" on August 10, 1999, and
U.S. Trademark Registration No. 2,316,240 for the mark LYNX in connection with
"computer software to provide secure communication on a global communication
information network" on February 8, 2000. The subsidiary has also filed an
application with the USPTO for protection of the mark CYMEDIX.COM. A Notice of
Allowance was issued for the application on December 14, 1999. A trademark
registration is expected to issue after the subsidiary has filed a declaration
of trademark use in commerce.
Cymedix has obtained seven copyright registrations for two versions of
each of three modular software components of the Cymedix Lynx Product, as well
as a technical evaluation document that describes the software products. No
assurance can be given that any of our software products will receive additional
patent or other intellectual property protection.
We seek to protect our software, documentation and other written materials
primarily through a combination of trade secret, trademark and copyright laws,
confidentiality procedures and contractual provisions. In addition, we seek to
avoid disclosure of our trade secrets, by, among other things, requiring those
persons with access to our proprietary information to execute confidentiality
agreements with us and restricting access to our source code.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult. While we are unable to determine the extent to which
piracy of our products exists, software piracy can be expected to be a
persistent problem, particularly in foreign countries where the laws may not
protect our proprietary rights as fully as in the United States.
From time to time, we may be involved in intellectual property disputes.
We have not been notified that any of our products infringe the proprietary
rights of other parties. However, in the future, others may claim infringement
against us with respect to current or future products. We expect that providers
of iHealth solutions will increasingly be subject to infringement claims as the
number of products and competitors in our industry grows and traditional
suppliers of health care data and transaction solutions begin to offer
Internet-based products. If our proprietary technology is subjected to
infringement claims, we may have to pay damages or seek a license from third
parties, which could delay sales of our products, and if our proprietary
technology is infringed upon, we may experience losses. Government Regulation
Government Regulation of the Internet. Laws and regulations may be adopted
with respect to the Internet or other on-line services covering issues such as
user privacy, pricing, content, copyrights, distribution and characteristics and
quality of products and services. The adoption of any additional laws or
regulations may impede the growth of the Internet or other on-line services,
which could, in turn, decrease the demand for our software applications and
services, increase our cost of doing business, or otherwise have an adverse
effect on our business, financial condition and results of operations. Moreover,
the applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve. Any such new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws and regulations to the Internet and other online
services could have a material adverse effect on our business, financial
condition and results of operations.
Standards. The Health Insurance Portability and Accountability Act of 1996
mandates the use of standard transactions, standard identifiers, security and
other provisions by the year 2000. We are designing the Cymedix.com software
platform and product offerings to comply with the proposed regulations. However,
until such regulations become final, they could change, which could require us
to expend additional resources to comply with the revised standards. In
addition, the success of our compliance efforts may be dependent on the success
of health care participants in dealing with the standards.
Confidentiality. The confidentiality of patient records and the
circumstances under which such records may be released for inclusion in our
databases are subject to regulation by state governments. State laws and
regulations govern both the disclosure and the use of confidential patient
medical records. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal level. Such
legislation could require holders of such information, including us, to
implement costly security measures, or may materially restrict the ability of
health care providers to submit information from patient records using our
applications.
We utilize an architecture that incorporates encrypted email messaging and
a secured socket layer encryption which surpasses required security protection.
Additionally the use of firewalls and other security schemes assure customers of
a compliant and secure computing environment. Additionally, we utilize a formal,
authority-based use of digital certificates to assure the identity of electronic
trading partners.
False Claims Act. Under the federal False Claims Act, liability may be
imposed on any individual or entity who knowingly submits or participates in
submitting claims for payment to the federal government which are false or
fraudulent, or which contain false or misleading information. Liability may also
be imposed on any individual or entity who knowingly make or use a false record
or statement to avoid an obligation to pay the federal government. Certain state
laws impose similar liability. Claims under the federal False Claims Act may be
brought by the federal government or private whistleblowers. If we are found
liable for a violation of the federal False Claims Act, or any similar state
law, it may result in substantial civil and criminal penalties. In addition, we
could be prohibited from processing Medicaid or Medicare claims for payment.
Government Investigations. There is increasing scrutiny by law enforcement
authorities, the U.S. Department of Health and Human Services Office of
Inspector General, the courts and Congress of agreements between health care
providers and suppliers or other contractors which have a potential to increase
utilization of government health care resources. In particular, scrutiny has
been placed on the coding of claims for payment and contracted billing
arrangements. Investigators have demonstrated a willingness to look beyond the
formalities of business arrangements to determine the underlying purposes of
payments between health care participants. Although, to our knowledge, neither
we nor any of our customers is the subject of any investigation, we cannot tell
whether we or our customers will be the target of governmental investigations in
the future.
Federal and State Anti-Kickback Laws. Provisions of the Social Security
Act, which are commonly known as the Federal Anti-Kickback Law, prohibit
knowingly or willfully, directly or indirectly, paying or offering to pay, or
soliciting or receiving, any remuneration in exchange for the referral of
patients to a person participating in, or for the order, purchase or
recommendation of items or services that are subject to reimbursement by,
Medicare, Medicaid and similar other federal or state healthcare programs.
Violations may result in civil and criminal sanctions and penalties. If any of
our health care communications or electronic commerce activities were deemed to
be inconsistent with the Federal Anti-Kickback Law or with state anti-kickback
or illegal remuneration laws, we could face civil and criminal penalties or be
barred from such activities. Further, we could be required to restructure our
existing or planned sponsorship compensation arrangements and electronic
commerce activities in a manner that could harm our business.
FDA Regulation of Medical Devices. The FDA is responsible for assuring the
safety and effectiveness of medical devices under the Federal Food, Drug and
Cosmetic Act. Computer applications and software are considered medical devices
and subject to regulation by the FDA when they are indicated, labeled or
intended to be used in the diagnosis of disease or other conditions, or in the
cure, mitigation, treatment or prevention of disease, or are intended to affect
the structure or function of the body. We do not believe that any of our current
applications, services or product offerings are subject to FDA jurisdiction or
regulation; however, we may expand our applications, services and offerings into
areas that may subject it to FDA regulation. We have no experience in complying
with FDA regulations and compliance with FDA regulations could prove to be time
consuming, burdensome and expensive, which could impede our ability to introduce
new applications, services or product offerings in a timely manner.
If compliance with government regulation of healthcare becomes costly and
difficult for us and our customers, we may not be able to grow our business as
we plan, or we may have to abandon a product or service we are providing or plan
to provide altogether.
Employees
As of March 17, we had 27 full-time and 3 part-time employees. 15 of these
employees are involved in software programming and support of the Cymedix.com
network, 6 are involved in the distribution of product, and 9 are involved in
our administrative and financial operations. None of our employees is
represented by a labor union, and we have never experienced a work stoppage. We
believe our relationship with our employees to be good. However, our ability to
achieve our financial and operational objectives depends in large part upon our
continuing ability to attract, integrate, retain and motivate highly qualified
sales, technical and managerial personnel, and upon the continued service of our
senior management and key sales and technical personnel. See "Executive Officers
Compensation - Employment Agreements." Competition for such qualified personnel
in our industry and the geographical locations of our offices is intense,
particularly in software development and technical personnel.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
Our administrative offices are located at 7100 East Belleview Ave., Suite
301, Englewood, Colorado. However, our executives operate out of four different
offices, including our administrative offices. Three of those offices are leased
by us. The fourth office used by us is in New York City and is leased by
Creative Management Strategies, Inc., an affiliate of our President and Chief
Executive Officer. Currently, three of our executive officers operate out of
that office, which is also used by the employees of such affiliate. See "Certain
Relationships and Related Transactions" for a discussion of the terms upon which
we use such space. A summary of our leased facilities is provided below:
Square Expiration 1999
Footage Date Rent
----------- -------- -------------
Englewood, Colorado(1) 5,236 7/31/03 $96,000
Thousand Oaks, California 3,223 11/30/00 $50,000
East Brunswick, New Jersey(2) 1,400 2/28/02 n.a.
Totals: 9,859 $146,000
- - -----
(1) In connection with our recent sale of our remaining staffing business, we
subleased 2,735 square feet of this space to the purchaser, who will pay
$50,000 in rent annually for such space. However, we remain jointly liable
for rental payments on such subleased space until the end of the lease
indicated above.
(2) This space was recently leased by us from David R. Pfeil and his wife in
connection with our acquisition from him of Automated Design Concepts, Inc.
("ADC"). We will pay them $1,000 monthly, to lease such space. The
operations acquired by us from him continue to be operated out of this
office.
We believe these facilities will be suitable for our needs for the
foreseeable future, with the exception of increased capacity planned for the New
Jersey office. We have insured all of our properties at the levels required to
meet our lease obligations. We believe that these levels are reasonable measures
of adequate levels of insurance.
ITEM 3. LEGAL PROCEEDINGS
Legacy Business
On or about November 7, 1997, an action was filed against us in the U. S.
District Court, Eastern District of New York, under the caption New York
Healthcare, Inc. v. International Nursing Services, Inc., et al.(CV 97 6549),
alleging, among other things, breach of contract against us and seeking damages
in excess of $175,000 plus court costs and attorney fees. We filed answers and
counterclaims in this action. On February 15, 2000, we agreed in principle to
settle this claim, although a settlement order has not yet been issued. In
connection with the settlement, we issued a warrant to purchase 35,000 of the
Company's common stock at $3.96 per share. The Company recorded Black/Scholes
expense of approximately $137,000 related to the issuance of the warrant.
On or about April 13, 1999, a subsidiary of the Company engaged in the
staffing business, National Care Resources, Inc. was named as a party in a
lawsuit filed in the District Court of Montgomery County, TX under the caption
Marvin Breland, Individually and as Personal Representative of the Estate of
Mildred Breland, deceased vs. The Memorial Hermann Hospital System; Memorial
Hospital - The Woodlands; et al. (98-07-02657-CV), alleging, among other things,
defendants' acts and omissions constituting negligence were a proximate cause of
the death of Mildred Breland and seeking damages of $1,250,000 plus court costs
and attorney fees. On March 11, 2000, our insurance company agreed in principle
to settle this claim, although a settlement order has not yet been issued. The
settlement was fully covered by our insurance.
Current Business
On November 12, 1999, an action was filed in State of California Superior
Court, which has been removed to the U. S. District Court, Central District of
California, (CV 00-703 MMM), against Medix Resources, Inc. and its wholly owned
subsidiary, Cymedix Lynx Corporation under the caption Leslie Wolf v. Medix
Resources, Inc., Cymedix Lynx Corporation, John Yeros, Bill Lyons, alleging,
among other things, gender discrimination, breach of contract and wrongful
termination. Plaintiff is seeking damages of $2,000,000 in commissions, plus
lost wages and other benefits and stock options in an indeterminate amount . We
do not believe the claims have any merit and intend to vigorously defend this
action. Our attorneys have filed a motion to dismiss the complaint, which motion
is currently pending before the court. We do not expect any resolution of this
matter to have a material effect on our financial condition.
From time to time, we are involved in claims and litigation that arise out
of the normal course of our business. At the present time, there are no other
pending matters that in management's judgment might be considered material to
us. We do not believer that any of the litigation described above will have a
material adverse effect on us.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No vote of security holders was solicited during the last quarter of the
fiscal year ending December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the OTC Bulletin Board under the symbol
"MDIX." Prior to our change of name effective February 19, 1998, its symbol was
"NURS." The following table shows high and low bid price information for each
quarter in the last two calendar years as reported by Prophet Information
Services, Inc., a provider of online historical stock price data for all major
U. S. securities markets. Such quotations reflect inter-dealer prices, without
retail mark-ups, markdowns or commissions, and may not necessarily represent
actual transactions. On March 17, 2000, the last sales price was reported to be
$6.875.
Common Stock Bid Price
----------------------
High Low
------- -------
1998
First Quarter $ .38 $ .25
Second Quarter .81 .25
Third Quarter .44 .06
Fourth Quarter .31 .05
1999
First Quarter $ .55 $ .07
Second Quarter .80 .34
Third Quarter .62 .23
Fourth Quarter $3.75 .30
There were approximately 440 holders of record (and approximately 4,200
beneficial owners) of our common stock as of March 17, 2000. The number of
record holders includes shareholders who may hold stock for the benefit of
others.
We do not expect to pay any dividends on its common stock in the
foreseeable future. Management currently intends to retain all available funds
for the development of its business and for use as working capital. The payment
of dividends on the common stock is subject to our prior payment of all accrued
and unpaid dividends on any preferred stock outstanding.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
We are an information technology company headquartered in Denver,
Colorado, with offices in Thousand Oaks, California, East Brunswick, New Jersey
and New York City. We specialize in the development, marketing and management of
software and connectivity solutions for clinical and business transactions
within the healthcare industry Through our wholly owned subsidiary, Cymedix Lynx
Corporation, a Colorado corporation, we have developed Cymedix.com, a unique
healthcare communication technology product. Created by a team of healthcare
professionals, Cymedix.com provides instantaneous access to patient clinical,
financial and administrative information. Its software also supplies healthcare
institutions, such as health plans, insurers and hospitals, as well as
practicing physicians with a set of non-invasive technology tools that can be
attached to their existing software applications and provide Internet-enabled
transaction capability between all parties.
Implementation of the Cymedix.com software suite promises to speed and
improve the efficacy of daily interactions between health caregivers and their
staffs, other ancillary providers (such as labs or pharmacy benefit managers),
insurance companies, hospitals, Integrated Delivery Networks (IDNs) and Health
Management Organizations (HMOs). We believe that the market for robust and
practical healthcare solutions is growing rapidly, and that segment growth will
continue to accelerate as the joined emphases of consumer choice, quality,
administrative service and cost containment ratchets up demand for ever more
efficient and user-friendly methods of delivering quality healthcare.
Forward-Looking Statements and Associated Risks
This Report contains forward-looking statements, which mean that such
statements relate to events or transactions that have not yet occurred, our
expectations or estimates for our future operations and economic performance,
our growth strategies or business plans or other events 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 paragraphs contain
discussions of important factors that should be considered by prospective
investors for their potential impact on forward-looking statements included in
this Report. 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.
We have reported net losses of ($4,847,000), ($5,422,000) and ($515,000)
for the years ended December 31, 1999, December 27, 1998 and December 28, 1997.
At December 31, 1999, we had an accumulated deficit of ($18,008,000). We expect
to continue to experience loses, in the near term, as we attempt to develop and
market our Cymedix software products. The current operation of our business and
our ability to continue to develop and market our Cymedix software products will
depend upon our ability to obtain additional financing. At present, we are not
receiving any significant revenues from the sale of our Cymedix software
products. We are attempting to meet our current cash flow needs by raising
capital in the private debt and equity markets and through the exercise of
currently outstanding warrants. 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 our
company.
Our company, through its subsidiary Cymedix Lynx Corporation, has only
recently begun its medical software line of business through the acquisition of
a development stage medical software business in 1998. Our company has little
experience in marketing software products, providing software support services,
evaluating demand for products, financing a software business and dealing with
government regulation of software products. While we have recently put together
a team of experienced executives, they have come from different backgrounds and
may require some time to develop an efficient operating structure and corporate
culture for our company. We believe our structure of multiple offices serves our
customers well, but it does present an additional challenge in building our
corporate culture and operating structure.
Our products are still in the development stage and have not yet proven
their effectiveness or their marketability. As a developer of software products,
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 continued and rapid technological advances in both hardware and
software development, requiring ongoing expenditures for research and
development, and timely introduction of new products and enhancements to
existing products. The establishment of standards is largely a function of user
acceptance. Therefore, such standards are subject to change. Our future success,
if any, 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 healthcare
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 healthcare
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 our products or technologies noncompetitive or obsolete.
Certain of our products provide applications that relate to patient
medical histories and treatment plans. Any failure by our products to provide
accurate, secure and timely information could result in product liability claims
against us by our clients or their affiliates or patients. We maintain insurance
that we believe is adequate to protect against claims associated with the use of
our products, but there can be no assurance that our insurance coverage would
adequately cover any claim asserted against us. A successful claim brought
against us in excess of our insurance coverage could have a material adverse
effect on our results of operations, financial condition or business. Even
unsuccessful claims could result in the expenditure of funds in litigation, as
well as diversion of management time and resources.
We have been granted certain patent rights, a trademark and copyrights
relating to its software business. However, 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 we are 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 our
products overseas. We cannot give any assurance that the scope of the rights we
have 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 our financial
potential over the long term.
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. We cannot predict
with any certainty what impact, if any, proposals for healthcare reforms might
have on our software business.
As with any business, growth in absolute amounts of selling, general and
administrative expenses or the occurrence of extraordinary events could cause
actual results to vary materially and adversely from the results contemplated by
the forward-looking statements. Budgeting and other management decisions are
subjective in many respects and thus susceptible to incorrect decisions and
periodic revisions based on actual experience and business developments, the
impact of which may cause us to alter our marketing, capital expenditures or
other budgets, which may, in turn, affect our results of operation. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond our control. Although we believe the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate, and therefore, there can be no assurance that the
results contemplated in the forward-looking statements will be realized.
In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by us or any other person that our objectives or
plans for the Company will be achieved.
Results of Operation
Comparison of Years Ended December 31, 1999 and December 27, 1998
Total revenues for the year ended December 31, 1999 ("1999") were $24,000
compared with $0 for the year ended December 27, 1998 ("1998"). Cymedix
currently provides all of our revenues. Cymedix first recorded revenue in
November 1999 for pilot program fees.
Selling, general, and administrative expenses increased approximately
$2,009,000 or 85% from $2,364,000 in 1998 to $4,373,000 in 1999. This increase
included $2,163,000 of expenses related to options and warrants issued for
services, which was partially offset by a reduction in other expenses.
Loss from operations increased approximately $1,987,000 from $2,364,000 in
1998 to $4,351,000 in 1999. This increase is primarily related to the increase
in selling, general, and administrative expenses.
Interest expense increased approximately 32% from $149,000 in 1998 to
$197,000 in 1999. The increase is primarily due to interest paid and imputed on
a convertible promissory note in 1999.
Net loss from continuing operations increased approximately $2,035,000 from
$2,513,000 in 1998 to $4,548,000 due to all of the reasons discussed above.
Loss from discontinued operations decreased approximately $2,610,000 from
$2,909,000 in 1998 to $299,000 in 1999. The decrease was primarily due to
$2,040,000 impairment of goodwill in 1998.
Net loss decreased approximately $575,000 from $5,422,000 in 1998 to
$4,847,000 in 1999 due to the reasons discussed above.
Liquidity and Capital Resources
We have $1,229,000 in cash as of December 31, 1999 compared with $40,000
as of December 27, 1998. Net working capital was $644,000 as of December 31,
1999 compared with a working capital deficit of ($2,612,000) as of December 27,
1998. During 1999, net cash used in operating activities was $3,241,000. During
1999, we raised $4,112,000 from private placements of preferred stock, $500,000
from issuance of a convertible promissory note, and $150,000 from exercise of
options and warrants.
In February of 2000, we sold the assets of our remaining staffing
businesses for $1,000,000. The purchase price was paid with $500,000 cash at
closing and a $500,000 subordinated note which is payable in May 2001. During
2000, we expect to generate approximately $800,000 in net cash related to the
sale.
Subsequent to year-end and through March 17, 2000 we received
approximately $2,080,000 from the exercise of options and warrants. As of March
17, 2000, we had 1,026,000 warrants with a total exercise price of $633,000,
which are callable for $.01 per warrant upon thirty days written notice. Also as
of March 17, 2000, we had 7,980,000 warrants with a total exercise price of
$3,990,000 which are callable for $.01 per warrant upon thirty days written
notice if the trading price of our common stock remains above $2.00 for ten
consecutive days subsequent to April 1, 2000. We expect to receive $4,623,000
from the exercise of these callable warrants over the next several months.
However, there can be no assurance that any of these warrants will be exercised.
We expect to continue to experience loses and negative cash flows from
operations, 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. At present, we are not receiving any significant revenues
from the sale of our Cymedix software products. We are attempting to meet our
current cash flow needs by raising capital in the private debt and equity
markets and through the exercise of currently outstanding warrants. The
development and marketing of the Cymedix software products require substantial
capital investments. We believe that we have adequate cash on hand and available
from likely exercise of currently outstanding options and warrants to fund
operations for the year ended December 31, 2000. However, there can be no
assurance that additional funding, if needed, will be available on terms
acceptable to us, or at all.
ITEM 7. FINANCIAL STATEMENTS
Attached hereto and filed as a part of this Form 10-KSB are our
Consolidated Financial Statements.
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Table of Contents
Page
Independent Auditors' Report........................................F-1
Financial Statements
Consolidated Balance Sheet......................................F-2
Consolidated Statements of Operations...........................F-3
Consolidated Statement of Changes in Stockholders' Equity.......F-4
Consolidated Statements of Cash Flows...........................F-5
Notes to Consolidated Financial Statements..........................F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Medix Resources, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Medix Resources,
Inc. and Subsidiaries, as of December 31, 1999, and the related consolidated
statements of operations and changes in stockholders' equity, and cash flows for
the years ended December 31, 1999 and December 27, 1998. These consolidated
financial statements are the responsibility of the management of Medix
Resources, Inc. and Subsidiaries. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Medix
Resources, Inc. and Subsidiaries, as of December 31, 1999, and the results of
their operations and their cash flows for the years ended December 31, 1999 and
December 27, 1998 in conformity with generally accepted accounting principles.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
March 10, 2000, except the second
paragraph of Note 6, as to which
the date is March 20, 2000
Denver, Colorado
F-1
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1999
Assets
Current assets
Cash .................................................... $ 1,229,000
Accounts receivable ..................................... 35,000
Prepaid expenses and other .............................. 176,000
Assets of discontinued operations ....................... 1,057,000
------------
Total current assets ................................. 2,497,000
Property and equipment, net ............................... 115,000
Other assets
Intangible assets, net .................................. 2,017,000
------------
Total ..................................................... $ 4,629,000
============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable ........................................... $ 84,000
Line-of-credit .......................................... 484,000
Accounts payable ........................................ 257,000
Accrued expenses ........................................ 504,000
Accrued payroll taxes, interest and penalties ........... 502,000
Liabilities of discontinued operations .................. 22,000
------------
Total current liabilities ............................ 1,853,000
Note payable .............................................. 400,000
------------
Total liabilities .................................... 2,253,000
------------
Commitments and contingencies
Stockholders' equity
1996 Preferred stock, 10% cumulative convertible,
$1 par value 488 shares authorized, 155 issued,
1.00 outstanding, liquidation preference $35,000 ....... --
1997 convertible preferred stock, $1 par value 300
shares authorized 167.15 shares issued, 5.00
outstanding, liquidation preference $50,000 ............ --
1999 Series A convertible preferred stock, $1 par
value, 300 shares authorized, 300 shares issued,
185 shares outstanding, liquidation preference
$185,000 ............................................... --
1999 Series B convertible preferred stock, $1 par
value, 2,000 shares authorized, 1,832 shares issued,
817 shares outstanding, liquidation preference
$817,000 ............................................... 1,000
1999 Series C convertible preferred stock, $1 par
value, 2,000 shares authorized, 1,995 shares issued,
1,995 shares outstanding, liquidation preference
$1,995,000 ............................................. 2,000
Common stock, $.001 par value, 100,000,000 shares
authorized, 27,642,691 issued and outstanding .......... 27,000
Dividends payable with common stock ..................... 25,000
Additional paid-in capital .............................. 20,329,000
Accumulated deficit ..................................... (18,008,000)
------------
Total stockholders' equity ........................... 2,376,000
------------
Total ..................................................... $ 4,629,000
============
See notes to consolidated financial statements
F-2
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the For the Year
Year Ended Ended
December 31, December 27,
1999 1998
------------ ------------
<S> <C> <C>
Revenues ....................................... $ 24,000 $ --
Direct costs of services ....................... 2,000 --
------------ ------------
Gross margin ................................... 22,000 --
Selling, general, and administrative expenses .. 4,373,000 2,364,000
------------ ------------
Loss from operations ........................... (4,351,000) (2,364,000)
Interest expense ............................... 197,000 149,000
------------ ------------
Net loss from continuing operations ............ (4,548,000) (2,513,000)
Net loss from discontinued operations .......... (299,000) (2,909,000)
------------ ------------
Net loss ....................................... $(4,847,00) $ (5,422,000)
============ ============
Loss per common share on continuing operations . $ (.29) $ (.12)
============ ============
Loss per common share on discontinued operations $ (.01) $ (.14)
============ ============
Net loss per common share ...................... $ (.30) $ (.26)
============ ============
Weighted average common shares outstanding ..... 23,384,737 20,772,801
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes In Stockholders' Equity
For the Years Ending December 31, 1999 and December 27, 1998
<TABLE>
<CAPTION>
1999 Series A
1996 Preferred Stock 1997 Preferred Stock Preferred Stock
----------------------- ----------------------- ------------------------
Number of Number of Number of
Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 28, 1997 ................ 26.25 $ -- 100.50 $ -- -- $ --
Common stock issued in connection with
Cymedix merger ............................ -- -- -- -- -- --
Issuance of options and warrants in
connection with Cymedix merger ............ -- -- -- -- -- --
Conversion of preferred stock and accrued
dividends ................................. (18.25) -- (5.00) -- -- --
Common stock issued in connection with
purchase of warrants ...................... -- -- -- -- -- --
Common stock and warrants issued in
settlement ................................ -- -- -- -- -- --
1997 preferred stock redemption payable .... -- -- (76.00) -- -- --
Net loss ................................... -- -- -- -- -- --
Dividends declared ......................... -- -- -- -- -- --
---------- ---------- ---------- ----------- ---------- ----------
Balance at December 27, 1998 ............... 8.00 -- 19.50 -- -- --
Issuance of warrants with convertible note
payable ................................... -- -- -- -- -- --
1999 preferred stock issuances (net of
15,500 of offering costs) ................. -- -- -- -- 300 --
Preferred stock conversions ................ (4.50) -- (14.50) -- (115) --
Repurchase of 1996 preferred stock ......... (2.50) -- -- -- -- --
Conversion of note payable into common stock -- -- -- -- -- --
Conversion of redemption payable into common
stock ..................................... -- -- -- -- -- --
Exercise of warrants ....................... -- -- -- -- -- --
Exercise of stock options .................. -- -- -- -- -- --
Stock issued for services .................. -- -- -- -- -- --
Stock options and warrants issued for
services .................................. -- -- -- -- -- --
Net loss ................................... -- -- -- -- -- --
Dividends declared ......................... -- -- -- -- -- --
---------- ---------- ---------- ----------- ---------- ----------
Balance at December 31, 1999 ............... 1.00 $ -- 5.00 $ -- 185 $ --
========== =========== ========== =========== ========== ==========
</TABLE>
Continued below.
<TABLE>
<CAPTION>
1999 Series B 1999 Series C
Preferred Stock Preferred Stock
----------------------- ----------------------
Number of Number of
Shares Amount Shares Amount
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance - December 28, 1997 ................ -- $ -- -- $ --
Common stock issued in connection with
Cymedix merger ............................ -- -- -- --
Issuance of options and warrants in
connection with Cymedix merger ............ -- -- -- --
Conversion of preferred stock and accrued
dividends ................................. -- -- -- --
Common stock issued in connection with
purchase of warrants ...................... -- -- -- --
Common stock and warrants issued in
settlement ................................ -- -- -- --
1997 preferred stock redemption payable .... -- -- -- --
Net loss ................................... -- -- -- --
Dividends declared ......................... -- -- -- --
------- ------- ------- -------
Balance at December 27, 1998 ............... -- -- -- --
Issuance of warrants with convertible note
payable ................................... -- -- -- --
1999 preferred stock issuances (net of
15,500 of offering costs) ................. 1,832 2,000 1,995 2,000
Preferred stock conversions ................ (1,015) (1,000) -- --
Repurchase of 1996 preferred stock ......... -- -- -- --
Conversion of note payable into common stock -- -- -- --
Conversion of redemption payable into common
stock ..................................... -- -- -- --
Exercise of warrants ....................... -- -- -- --
Exercise of stock options .................. -- -- -- --
Stock issued for services .................. -- -- -- --
Stock options and warrants issued for
services .................................. -- -- -- --
Net loss ................................... -- -- -- --
Dividends declared ......................... -- -- -- --
------- ------- ------- -------
Balance at December 31, 1999 ............... 817 $ 1,000 1,995 $ 2,000
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes In Stockholders' Equity
For the Years Ending December 31, 1999 and December 27, 1998
<TABLE>
<CAPTION>
Common Stock Dividend
---------------------------- Payable with
Number of Paid-in Common Accumulated
Shares Amount Capital Stock Deficit
----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance - December 28, 1997 .............. 12,843,567 $ 13,000 $ 12,191,000 $ 39,000 $ (7,739,000)
Common stock issued in connection with
Cymedix merger .......................... 7,212,987 7,000 1,385,000 -- --
Issuance of options and warrants in
connection with Cymedix merger .......... -- -- 37,000 -- --
Conversion of preferred stock and accrued
dividends ............................... 1,118,270 2,000 9,000 (11,000) --
Common stock issued in connection with
purchase of warrants .................... 175,900 -- -- -- --
Common stock and warrants issued in
settlement .............................. 150,000 -- 31,000 -- --
1997 preferred stock redemption payable .. -- -- (760,000) -- --
Net loss ................................. -- -- -- -- (5,422,000)
Dividends declared ....................... -- -- (11,000) 11,000 --
------------ ------------ ------------ ------------ ------------
Balance at December 27, 1998 ............. 21,500,724 22,000 12,882,000 39,000 (13,161,000)
Issuance of warrants with convertible note
payable ................................. -- -- 238,000 -- --
1999 preferred stock issuances (net of
15,500 of offering costs) ............... -- -- 4,108,000 -- --
Preferred stock conversions .............. 3,161,342 3,000 10,000 (12,000) --
Repurchase of 1996 preferred stock ....... -- -- (17,000) (8,000) --
Conversion of note payable into
common stock ............................ 200,000 -- 100,000 -- --
Conversion of redemption payable
into common stock ....................... 2,115,241 2,000 633,000 -- --
Exercise of warrants ..................... 400,000 -- 123,000 -- --
Exercise of stock options ................ 256,384 -- 27,000 -- --
Stock issued for services ................ 9,000 -- 5,000 -- --
Stock options and warrants issued for
services ................................ -- -- 2,226,000 -- --
Net loss ................................. -- -- -- -- (4,847,000)
Dividends declared ....................... -- -- (6,000) 6,000 --
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 ............. 27,642,691 $ 27,000 $ 20,329,000 $ 25,000 $(18,008,000)
============ ============ ============ ============ ============
</TABLE>
Continued below.
Total
------------
Balance - December 28, 1997 .............. $ 4,504,000
Common stock issued in connection with
Cymedix merger .......................... 1,392,000
Issuance of options and warrants in
connection with Cymedix merger .......... 37,000
Conversion of preferred stock and accrued
dividends ............................... --
Common stock issued in connection with
purchase of warrants .................... --
Common stock and warrants issued in
settlement .............................. 31,000
1997 preferred stock redemption payable .. (760,000)
Net loss .................................
Dividends declared ....................... --
------------
Balance at December 27, 1998 ............. (218,000)
Issuance of warrants with convertible note
payable ................................. 238,000
1999 preferred stock issuances (net of
15,500 of offering costs) ............... 4,112,000
Preferred stock conversions .............. --
Repurchase of 1996 preferred stock ....... (25,000)
Conversion of note payable into
common stock ............................ 100,000
Conversion of redemption payable
into common stock ....................... 635,000
Exercise of warrants ..................... 123,000
Exercise of stock options ................ 27,000
Stock issued for services ................ 5,000
Stock options and warrants issued for
services ................................ 2,226,000
Net loss ................................. (4,847,000)
Dividends declared ....................... --
------------
Balance at December 31, 1999 ............. $ 2,376,000
============
See notes to consolidated financial statements.
F-5
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
December 31, December 27,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss .................................... $ (4,847,000) $ (5,422,000)
------------ ------------
Adjustments to reconcile net loss to net
cash provided by operating activities -
Discontinued operations .................. 299,000 2,909,000
Depreciation and amortization ............ 243,000 654,000
Common stock, options and warrants
issued for services ..................... 2,231,000 --
Change in net assets of discontinued
operations .............................. (1,243,000) --
Imputed interest expense on convertible
debt .................................... 238,000 --
Change in assets and liabilities -
Accounts receivable, net ............... 2,046,000 1,943,000
Prepaid expenses and other ............. 5,000 42,000
Checks written in excess of bank balance (72,000) 72,000
Accounts payable and accrued expenses .. (2,141,000) 864,000
------------ ------------
1,606,000 6,484,000
------------ ------------
Net cash (used in) provided by
operating activities ............... (3,241,000) 1,062,000
------------ ------------
Cash flows from investing activities
Proceeds from sale of divisions ............. -- 1,350,000
Business acquisitions (net of cash acquired) -- (20,000)
Purchase of property and equipment .......... (72,000) (35,000)
Proceeds from the sale of fixed assets ...... -- 3,000
Payments on notes receivable ................ 563,000 93,000
------------ ------------
Net cash provided by investing
activities ......................... 491,000 1,391,000
------------ ------------
Cash flows from financing activities
Proceeds from issuance of debt and notes
payable .................................... 500,000 43,000
Advances under financing agreement .......... 11,272,000 17,425,000
Payments under financing agreement .......... (11,781,000) (19,975,000)
Principal payments on debt and notes payable (289,000) (64,000)
Issuance of preferred and common stock, net
of offering costs .......................... 4,112,000 --
Proceeds from the exercise of options and
warrants ................................... 150,000 --
Repurchase of preferred stock ............... (25,000) --
------------ ------------
Net cash provided by (used in)
financing activities ............... 3,939,000 (2,571,000)
------------ ------------
Net increase (decrease) in cash ................ 1,189,000 (118,000)
Cash, beginning of period ...................... 40,000 158,000
------------ ------------
Cash, end of period ............................ $ 1,229,000 $ 40,000
============ ============
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid during the year for interest was $324,000 and $496,000 for December
31, 1999 and December 27, 1998, respectively.
Continued on next page.
See notes to consolidated financial statements.
F-6
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Continued from previous page.
Non-cash investing and financing activities:
During 1998, the Company acquired Cymedix Corporation, and received certain
assets and liabilities in exchange for 7,212,987 shares of the Company's
common stock (Note 3). Assets and liabilities acquired included: Cash of
$20,000; Fixed Assets of $21,000; Forgiveness of $298,000 note receivable;
$250,000 Note Payable; and Other Liabilities of $380,000.
During 1998, the Company capitalized as additional paid-in-capital $68,000
of settlements.
During 1998, the Company converted 18.25 units of preferred stock, 5.0
units of 1997 preferred stock and accrued dividends of $11,000 to 1,118,270
shares of common stock.
During 1998, the Company sold two divisions with net book value of goodwill
of $2,038,000 for cash of $1,000,000 and notes receivable of $463,000 (Note
4).
During 1998, the Company accrued a liability to purchase $760,000 of
preferred stock.
Dividends declared payable in common stock were $6,000 and $11,000 for
December 31, 1999 and December 27, 1998, respectively.
During 1999, the Company issued a $500,000 convertible note payable and
warrants to purchase common stock, of which $100,000 of principal was
converted into 200,000 shares of common stock. The warrant was valued at
$238,000 and recorded as additional interest expense.
During 1999, the Company converted $635,000 of preferred stock redemption
payable into 2,115,241 shares of common stock.
During 1999, 4.50 units of the 1996 preferred stock, 14.50 units of the
1997 preferred stock, 115 shares of the 1999 series A preferred stock, and
1,015 of the series B preferred stock were converted into 3,161,342 shares
of common stock.
See notes to consolidated financial statements.
F-7
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Policies
Organization
Medix Resources, Inc. and subsidiaries (the Company) main business focus is a
suite of fully secure, patented internet communication software for the
healthcare industry. The Company divested its remaining healthcare related
staffing businesses in February of 2000 (Note 2).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Medix
Resources, Inc. and its wholly-owned subsidiaries, National Care Resources -
Colorado, Inc., National Care Resources - Texas, Inc., TherAmerica, Inc. and
Cymedix Lynx Corporation (Cymedix). All intercompany transactions have been
eliminated.
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 amounts of assets and liabilities and disclosures 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.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of accounts receivable. The Company periodically
performs credit analysis and monitors the financial condition of its clients in
order to minimize credit risk.
Financial Instruments
The carrying value of the Company's accounts and notes receivable, accounts
payable and accrued expenses approximate their fair values due to the short-term
nature of the financial instruments.
Due to current interest rates available to the Company for debt being similar to
rates on the Company's remaining maturities, the fair value of existing debt
approximates its carrying value.
F-8
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Policies (continued)
Revenue Recognition
The Company recognizes revenue on its Internet connectivity solutions software
business on a per usage basis as services are provided.
Revenue from its temporary staffing business is recognized as services are
provided.
Income Taxes
The Company recognizes deferred tax liabilities and assets based on the
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements that will result in taxable or deductible
amounts in future years. The Company's temporary differences result primarily
from the cash to accrual transition adjustment due to a required change from the
cash to accrual basis and depreciation and amortization.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the related assets which
range from five to seven years.
Intangible Assets
Intangible assets are stated at cost, and consist of goodwill which is being
amortized using the straight-line method over fifteen years.
The Company reviews its long-lived asset for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recovered. The Company looks primarily to the undiscounted future cash flows
of its acquisition in its assessment of whether or not goodwill has been
impaired.
In 1998, the Company's revenue from its TherAmerica Division decreased
significantly. This was primarily a result of a change in rate structure from
medicare related to physical therapy and also a result of decreased revenues as
hospitals and third party users started hiring therapists rather than using
external sources. As a result of these decreases, the Company reviewed its
future projected cash flows from TherAmerica and determined that under the
current market and rate structure, TherAmerica would not generate positive cash
flow after general and administrative expenses, and as a result impaired
goodwill associated with TherAmerica totaling $2,040,000 at December 31, 1998.
The Company has included this impairment as a component of discontinued
operations in the accompanying financial statements (Note 2).
F-9
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1998 consolidated financial statements have been
reclassified to conform to the 1999 presentation.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses for the
years ended December 31, 1999 and December 27, 1998 were approximately $45,000
and $100,000, respectively.
Basic Loss Per Share
The Company applies the provisions of Statement of Financial Accounting Standard
No. 128, "Earnings Per Share" (FAS 128). All dilutive potential common shares
have an antidilutive effect on diluted per share amounts and therefore have been
excluded in determining net loss per share. The Company's basic and diluted loss
per share are equivalent and accordingly only basic loss per share has been
presented.
Managements Plans for Continued Existence
The Company's recurring losses and negative cash flow from operations raised
substantial doubt about its ability to continue as a going concern. The Company
has raised additional capital through the issuance of convertible debt,
preferred stock, and the exercise of options and warrants of $3,177,000 during
the fourth quarter of 1999 and $1,562,000 through March 7, 2000. Management's
plans included divesting itself of the Company's staffing business segment and
raising additional capital. Management plans also include further development
and marketing of the Company's proprietary technology. Management believes that
the Company has adequate cash on hand and avalable through the exercise of
outstanding options and warrants to fund operations through December 31, 2000.
Note 2 - Discontinued Operations
In February of 2000, the Company closed on the sale of the assets of its
remaining staffing businesses for $1,000,000. The purchase price was paid with
$500,000 cash at closing and the Company receiving a $500,000 subordinated note
receivable. The note provides for interest at prime plus 1% and is due in May of
2001. This sale was the final step of a plan approved by the board of directors
in December 1999 for the Company to divest itself of on the staffing businesses
and focus its efforts on its Internet communication software products for the
healthcare industry.
The accompanying financial statements reflect the results of operations of the
staffing businesses as a discontinued business segment. The discontinued results
of operations include those direct revenues and expenses associated with running
the staffing businesses as well as an allocation of corporate costs.
F-10
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Discontinued Operations (continued)
The results of operations of the Company's discontinued staffing businesses for
the years ended December 31,1999 and December 27, 1998 are as follows:
December 31, December 27,
1999 1998
------------ ------------
Revenue .................................... $ 10,812,000 $ 17,412,000
Direct costs of services ................... 8,472,000 13,462,000
------------ ------------
Gross margin ............................... 2,340,000 3,950,000
------------ ------------
Selling, general and administrative expenses 2,193,000 3,794,000
Impairment of goodwill ..................... -- 2,040,000
Loss on sale of division ................... -- 316,000
Interest expense ........................... 446,000 709,000
------------ ------------
Net loss ................................... $ (299,000) $ (2,909,000)
============ ============
The Company's 1998 loss on sale of divisions includes the following transactions
and events.
In April 1998, the Company entered into an agreement to sell its remaining
staffing service businesses. In connection with the sale, the Company received a
deposit of $350,000. The purchaser defaulted on the terms of the sales agreement
and the Company retained the deposit. This has been reflected as a reduction in
the loss on sale of divisions.
During the third quarter of 1998, the Company consummated the sale of its Ellis
and STAT healthcare staffing operations for approximately $1,000,000 in cash and
two note receivables for $325,000 each. The Ellis and STAT sale resulted in a
loss of $666,000.
F-11
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Discontinued Operations (continued)
Also reflected in the accompanying balance sheet at December 31, 1999 are the
following assets and liabilities related to the Company's discontinued staffing
business segment.
Current assets
Cash ........................................ $ 1,000 (1)
Accounts receivable, net of 148,000 allowance 908,000 (1)
Prepaid expenses and other .................. 57,000 (2)
Property and equipment ...................... 91,000
-----------
Total current liabilities .................. $ 1,057,000
===========
Current liabilities
Accounts payable ............................ (3,000)
Accrued expenses ............................ (19,000)
-----------
Total current assets ....................... $ (22,000)
===========
(1) The purchaser did not acquire these assets.
(2) The purchaser acquired only $15,000 of these assets.
During the first quarter of 2000, the Company expects to report the following
gain on the disposal of the assets of its staffing business:
(Unaudited)
Sales price ........................ $ 1,000,000
Accounts receivable collection costs (100,000)
-----------
900,000
Assets acquired
Property and equipment ........... (91,000)
Deposits ......................... (15,000)
Liabilities assumed
Accounts payable ................. 3,000
Accrued liabilities .............. 19,000
-----------
Net gain on disposal ............... $ 816,000
===========
The expected gain resulting from the sale does not take into account any reserve
that may be required on the $500,000 subordinated note receivable.
F-12
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Discontinued Operations (continued)
Also as previously noted the purchaser did not acquire the Company's accounts
receivable as part of the sale. However, in connection with the sale, the
purchaser will collect the Company's receivables and remit the proceeds to the
Company net of a 10% collection fee. The $100,000 reflected above represents the
Company's estimate of the collection costs to be paid to purchaser for
performing this function.
Note 3 - Balance Sheet Disclosures
Property and equipment consists of the following:
Furniture and fixtures ....... $ 39,000
Computer hardware and software 240,000
---------
279,000
Less accumulated depreciation (164,000)
---------
$ 115,000
=========
Depreciation expense was $86,000 and $96,000 for the years ended December 31,
1999 and December 27, 1998, respectively.
Intangible assets consist of the following:
Goodwill from the acquisition of Cymedix $ 2,332,000
Less accumulated amortization .......... (315,000)
-----------
$ 2,017,000
===========
Amortization expense was $157,000 and $558,000 for the years ended December 31,
1999 and December 27, 1998, respectively.
Accrued liabilities consist of the following:
Accrued payroll and benefits $317,000
Health claims payable ...... 57,000
Accrued rents payable ...... 91,000
Other ...................... 39,000
--------
$504,000
========
At various times during the year the Company was delinquent with payroll tax
deposits. At December 31, 1999, $300,000 was accrued for estimated interest and
penalties.
F-13
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 4 - Line-of-Credit and Notes Payable
The Company has entered into an agreement with a financial institution for a
revolving line-of-credit with a maximum principal balance of $1,500,000 which is
limited by a borrowing base calculation of 80% of qualified accounts receivable.
Interest accrues on the outstanding balance at 2% above bank prime (10.5% at
December 31, 1999). Additionally, the Company is required to pay the lender a
loan management fee on a monthly basis equal to 0.35% of the average outstanding
principal balance of the preceding month. Interest and fees paid to this
financial institution for the year ended December 31, 1999 and December 27, 1998
approximated $187,000 and $470,000, respectively. The outstanding principal
balance including accrued interest and fees was $484,000 at December 31, 1999.
The agreement expires May 2000 and can be terminated by the lender without
notice or by the Company with a thirty day notice to the lender and payment of
defined early payment penalties. The loan is collateralized by substantially all
the Company's assets. The line-of-credit was paid in full upon closing the sale
of the Company's remaining staffing businesses (Note 2).
Notes payable consist of the following:
December 31,
1999
-----------
Note payable - finance company, interest accrues at 9.75%,
monthly payments and principal and interest of $4,166 are
payable through August 2000................................. $ 28,000
Note payable - finance company, interest accrues at 10%,
monthly principal and interest of $8,250 are payable
through July 2000........................................... 56,000
----------
$ 84,000
==========
In October 1999, the Company raised approximately $488,000 net of expenses
through the issuance of a $500,000 14% Convertible Promissory Note and warrants
to purchase 500,000 shares of the Company's common stock at $.50 per share. The
$500,000 in principal plus accrued interest are payable on June 28, 2000. The
note is convertible into the Company's common stock at a conversion price of
$.50 per share, for the first 90 days outstanding, and at the lower of $.50 per
share or 80% of the lowest closing bid price for the Common Stock during the
last five trading days prior to conversion, for the remaining life of the note.
The note is secured by the intellectual property of the Company's wholly owned
subsidiary Cymedix Lynx Corporation. The warrants were recorded as a discount on
the debt valued at $238,000 using the Black-Scholes option pricing model. The
discount was fully amortized at December 31, 1999, as the debt was converted in
January 2000 into 800,000 shares of common stock.
F-14
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 5 - Commitments and Contingencies
Operating Leases
The Company leases office facilities and equipment under non-cancelable
operating leases. Rent expense for the years ended December 31, 1999 and
December 27, 1998 was $292,000 and $318,000, respectively.
Future minimum lease payments under these leases are approximately as follows:
Fiscal Year Ended December Amount
-------------------------- --------
2000...................... $273,000
2001...................... 162,000
2002...................... 103,000
2003...................... 61,000
2004...................... 4,000
--------
$603,000
========
Litigation
During the fourth quarter of 1997, an action was filed against the Company in
the Eastern District of New York under the caption New York Healthcare, Inc. v.
International Nursing Services, Inc., et al., alleging, among other things,
breach of contract against the Company and seeking damages in excess of $175,000
plus court costs and attorney fees. The Company has filed answers and
counterclaims in this action. On February 15, 2000, the Company agreed in
principle to settle this claim. In connection with the settlement, the Company
issued a warrant to purchase 35,000 of the Company's common stock at $3.96 per
share. The Company recorded expense of approximately $137,000 related to the
issuance of the warrant.
In the normal course of business, the Company is party to litigation related to
its staffing employees. The Company maintains insurance to cover these claims
and believes that it will not incur any material losses in excess of accrued
amounts.
Note 6 - Stockholders' Equity
On June 11, 1999, the stockholders of the Company approved an increase in the
number of authorized shares of common stock from 25,000,000 to 50,000,000.
On March 20, 2000, the stockholders of the Company approved an increase in the
number of authorized shares of common stock from 50,000,000 to 100,000,000. The
Company has also authorized 2,500,000 shares of preferred stock.
F-15
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Stockholders' Equity (continued)
1996 Private Placement
In July and September 1996, the Company completed a private placement of 244
units, each unit consisting of a share of convertible preferred stock, $10,000
per unit, $1 par value ("1996 Preferred Stock"), a warrant to purchase 8,000
shares of the Company's common stock at $2.50 per share and a unit purchase
option to purchase an additional unit at $10,000 per unit.
During 1998, 18.25 units were converted resulting in the issuance of an
additional 939,320 shares of common stock in 1998.
During 1999 4.5 units were converted into 241,072 shares of common stock.
Additionally, the Company repurchased from another holder 2.5 units in a
negotiated agreement for $25,000. The Company has 1.0 remaining unit of its 1996
preferred stock outstanding at December 31, 1999. The remaining unit may be
converted into the Company's common stock including accrued dividends at the
lesser of $1.25 per common share or 75% of the prior five day trading average of
the Company's common stock.
1997 Private Placement
In January and February 1997, the Company completed a private placement of
167.15 Units, each unit consisting of one share of convertible preferred stock,
$10,000 per unit, $1 par value, "1997 Preferred Stock", and a warrant to
purchase 10,000 shares of common stock at $1.00 per share.
In 1998, 5.0 units were converted resulting in the issuance of 178,950 shares of
common stock.
During 1999 14.5 units were converted into 572,694 shares of common stock. The
Company has 5.0 remaining units of its 1997 preferred stock outstanding at
December 31, 1999. The remaining units may be converted into the Company's
common stock including accrued dividends at the lesser of $1.00 per common share
or 75% of the prior five day trading average of the Company's common stock.
1999 Private Placements
During 1999, the Company initiated three private placement offerings each
consisting of one share of preferred stock (as designated) and warrants to
purchase common stock. There are no dividends payable on the preferred stock if
a registration statement is filed by a certain date as specified in the offering
agreements and remains effective for a two year period. If dividends are
payable, the preferred stock will provide for a 10% dividend per annum for each
day during which the registration statement is not effective. The preferred
shares are also redeemable at the option of the Company after a date as
specified in the offering agreements for $1,000 per share plus any accrued
unpaid dividends. In addition, if a registration statement is not effective by
date as specified in the offering agreements, the shares may be redeemed at the
request of the holder at $1,000 per share plus any accrued unpaid dividends.
F-16
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Stockholders' Equity (continued)
1999 Private Placements (continued)
The first private placement consisted of 300 shares of Series A preferred stock
each with 1,000 warrants for $1,000 per unit, which raised total proceeds of
$300,000. The warrants included with each unit entitle the holder to purchase
common shares at $1.00 per share, expiring in October 1, 2000. The preferred
shares are currently convertible into common shares at $.25 per common share
through March 1, 2003. During 1999, 115 shares of Series A preferred stock were
converted into 460,000 common shares. The warrants are callable by the Company
for $.01 upon thirty days written notice if the trading price of the Company's
common stock remains above $3.00 for five consecutive days. During January of
2000, the Company's stock traded above $3.00 for more than five consecutive
days. The Company has not called any of these warrants as of the date hereof.
The second private placement consisted of 1,832 shares of Series B preferred
stock each with 2,000 warrants for $1,000 per unit, which raised total proceeds
of $1,816,500 (net of offering costs of $15,500). The Company also issued a
warrant to purchase 50,000 shares of common stock at $.50 which expire in May
2002 for services rendered in connection with the private placement. The
warrants included with each unit entitle the holder to purchase common shares at
$.50 per share, expiring in October 1, 2003. The preferred shares are currently
convertible into common shares at $.50 per common share through October 1, 2003.
During 1999, 1,015 shares of Series B preferred stock were converted into
2,030,000 common shares. The warrants are callable by the Company for $.01 upon
thirty days written notice if the trading price of the Company's common stock
remains above $3.00 for five consecutive days. During January of 2000, the
Company's stock traded above $3.00 for more than five consecutive days. The
Company has not called any of these warrants as of the date hereof.
The third private placement consisted of 1,995 shares of Series C preferred
stock each with 4,000 warrants for $1,000 per unit, which raised total proceeds
of $1,995,000. The warrants included with each unit entitle the holder to
purchase common shares at $.50 per share, expiring in April 1, 2003. The
preferred shares are convertible beginning April 1, 2000 into common shares at
$.50 per common share through April 1, 2003. During 1999, no shares of the
Series C preferred stock were converted into common shares. After April 1, 2000,
the warrants are callable by the Company for $.01 upon thirty days written
notice if the trading price of the Company's common stock remains above $2.00
for ten consecutive days.
Preferred Redemption Payable
During 1998, the Company entered into an agreement with holders of 76.0 units of
1997 preferred stock to repurchase those units. The total redemption price was
$760,000 and was payable in installments due April 15, May 15 and September 1,
1998. The holders had the option to convert the redemption price into common
stock at $.50 a share. If the Company did not make payments on the required due
dates then the Company is obligated to issue common stock at a price equal to
75% of the NASDAQ Small Cap Market Price. The Company paid $125,000 leaving
$635,000 due under these agreements.
F-17
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Stockholders' Equity (continued)
Preferred Redemption Payable (continued)
In 1999, the remaining $635,000 payable under the redemption agreement was
settled, by the Company issuing 2,115,241 shares of common stock.
Litigation Settlement
During the year ended December 31, 1998, the Company settled a legal dispute in
which it was the defendant by issuing 150,000 shares of common stock.
Stock Options
In May 1988, the Company adopted an incentive stock option plan (ISO), which
provides for the grant of options representing up to 100,000 shares of the
Company's common stock to officers and employees of the Company upon terms and
conditions determined by the Board of Directors. Options granted under the plan
are generally exercisable immediately and expire up to ten years after the date
of grant. Options are granted at a price equal to the market value at the date
of grants, or in the case of a stockholder who owns greater than 10% of the
outstanding stock of the Company, the options are granted at 110% of the fair
market value.
In 1994, the Board of Directors established, the Omnibus Stock Plan of 1994
(1994 Plan) and reserved 500,000 shares of the Company's common stock for grant
under terms which could extend through January 2004. All options and warrants
issued under this plan are non-qualified. Grants under the 1994 Plan may be to
employees, non-employee directors, and selected consultants to the Company, and
may take the form of non-qualified options, not lower than 50% of fair market
value. To date, the Company has not issued any options below fair market value
at the date of grant.
In 1996, the Board of Directors established the 1996 Stock Option Plan (the
"1996 Plan") with terms similar to the 1994 Plan. The Board of Directors of the
Company reserved 4,000,000 shares of common stock for issuance under the 1996
Plan.
In August 1999, the Board of Directors established the 1999 Stock Option Plan
(the "1999 Plan") which provides for the grant of incentive stock options
("ISOs") to officers and other employees of the Company and non-qualified
options to directors, officers, employees and consultants of the Company. If the
approval of the 1999 Plan by the Company's stockholders is not obtained by
August 16, 2000, any grants of ISOs under the plan will convert to non-qualified
options. Options granted under the plan are generally exercisable immediately
and expire up to ten years after the date of grant. Options are granted at a
price equal to the market value at the date of grant. The Board of Directors
reserved 7,000,000 shares of common stock for granting of options under the 1999
Plan.
F-18
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Stockholders' Equity (continued)
Stock Options (continued)
The following is a summary of options and warrants granted, all of which expire
at various times through 2009.
<TABLE>
<CAPTION>
Number of Options Exercise Price Exercise Price
--------------------- Per Number of Per
Plan Non-Plan Share Warrants Share
--------- --------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Outstanding
December 28, 1997 2,441,345 7,500 $0.25 - $6.00 5,338,354 $0.15 - $5.00
Options/warrants
granted 1,000,000 1,163,050(1) $0.02 - $0.50 375,000 $0.12 - $0.19
Cancellations (387,280) (13,500) $0.19 - $1.88 (869,400) $1.00 - $4.00
Purchased - - - (1,380,000)(2) $0.63
--------- --------- ------------- ---------- -------------
Outstanding
December 27, 1998 3,054,065 1,157,050 $0.02 - $6.00 3,463,954 $0.12 - $5.00
Options/warrants
granted 5,050,000 662,500 $.25 - $1.50 12,721,000 $ .21 - $1.00
Cancellations (586,188) (930,366) $.19 - $6.00 (993,828) $1.88 - $5.00
Exercised - 256,184 $.02 - $ .19 (400,000) $ .12 - $ .50
--------- --------- ------------- ---------- -------------
Outstanding
December 31, 1999 7,517,877 633,000 $.25 - $1.88 14,791,126 $ .15 - $1.88
========= ========= ============= ========== =============
</TABLE>
(1)In connection with the acquisition of Cymedix, the Company issued to non
employees options to acquire 123,050 shares of stock at approximately $.02
and 175,000 at $.19. The Company imputed a value and recorded additional
goodwill of approximately $37,000 to the options using the Black Scholes
pricing model.
(2)In 1998, the Company purchased 1,380,000 warrants to acquire common stock at
$.63 per share by issuing 175,900 shares of common stock. Since this
transaction involved equity components, no gain or loss was recorded on the
transaction.
The weighted average exercise price of options and warrants outstanding at
December 31, 1999 is $.45. The weighted average remaining contractual maturity
of options and warrants outstanding at December 31, 1999 is 4.92 years. The
weighted average exercise price for options and warrants currently exercisable
at December 31, 1999 is $.45. The weighted average remaining contractual
maturity for those options and warrants currently exercisable at December 31,
1999 is 2.93 years.
F-19
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Stockholders' Equity (continued)
Stock Options (continued)
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation cost for the Corporation's two stock option plans been
determined based on the fair value at the grant date for awards consistent with
the provisions of SFAS No. 123, the Corporation's net loss and loss per share
would have been increased to the pro forma amounts indicated below:
1999 1998
----------- -----------
Net loss - as reported................... $(4,847,000) $(5,422,000)
Net loss - pro forma..................... (6,136,000) (5,899,000)
Basic loss per share - as reported....... (.30) (.26)
Basic loss per share - pro forma......... (.36) (.28)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998, respectively: dividend yield of
0%; expected volatility of 225% and 173%, respectively; discount rate of 5.5%;
and expected lives of 10 years.
Warrants
The Company has an obligation to issue up to 6,000,000 warrants under an
agreement with a pharmacy management company for the Company's proprietary
software to be interfaced with core medical service providers. The agreement
provides for 3,000,000 warrants with an exercise price of $.30 and 3,000,000
warrants with an exercise price of $.50 all expiring five years from the date
of grant. The warrants to be issued by the Company are granted in 1,000,000
increments based on certain performance criteria. At December 31, 1999,
1,000,000 of the warrants had been granted but were not issued yet. In
connection with the obligation to issue the 1,000,000 warrants earned, the
Company recorded expense of $1,364,000 valued using the Black-Scholes option
pricing model.
The table below reflects the future performance criteria outlined in the
agreement.
Number of
Warrant
Shares Performance Criteria
- - -------------- -------------------------------------------------------------
1,000,000 Completion of certain administrative performance criteria as
defined
1,000,000 25,000 total Providers in the Production Programs
1,000,000 50,000 total Providers in the Production Programs
1,000,000 75,000 total Providers in the Production Programs
1,000,000 100,000 total Providers in the Production Programs
At December 31, 1999, the Company may have the obligation to grant 5,000,000
warrants under the agreement in the future if the performance criteria specified
are met. If these warrants were earned currently, this would result in the
Company recording a non-cash expense in excess of $25,000,000 based on the
Company's current stock price as a result of these warrants being in the money.
F-20
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 7 - Income Taxes
As of December 31, 1999, the Company has net operating loss (NOL) carryforwards
of approximately 9,800,000 which expire in the years 1999 through 2014. The
utilization of the NOL carryforward is limited to $469,000 on an annual basis
for net operating loss carryforwards generated prior to September 1996, due to
an effective change in control which occurred as a result of the 1996 private
placement. The Company has concluded it is currently more likely than not that
it will not realize its deferred tax asset and accordingly has established a
valuation allowance of $9,800,000. As a result of the significant sale of
securities during 1999, the Company's net operating loss carryforwards will be
further limited in the future due to current changes in control.
Note 8 - Loss Per Common Share
During 1999, as a result of issuing preferred stock with convertible features
that are in the money at the time of issuance, the Company has imputed a value
associated with such conversion features and has recorded the value as a
discount on the preferred stock. The Company amortizes the imputed discount on
the preferred stock over the period from issuance of the preferred stock to the
earliest period at which the preferred stock becomes convertible. The Company
recorded additional dividends to preferred stockholders of approximately
$2,206,000 for the year ended December 31, 1999, which represents an imputed
increase to the dividend yield and not a contractual obligation on the part of
the Company to pay such imputed dividends.
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net loss from continuing operations ........... $ (4,548,000) $ (2,513,000)
Preferred stock dividends based on stated rate (6,000) (11,000)
Preferred stock dividends based on imputed
discount at issuance ......................... (2,206,000) --
------------ ------------
Net loss applicable to common stockholders for
continuing operations ........................ $ (6,760,000) $ (2,524,000)
============ ============
Basic loss per common share ................... $ (.29) $ (.12)
============ ============
Weighted average shares outstanding ........... 23,384,737 20,772,801
============ ============
</TABLE>
F-21
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 9 - Retirement Savings Plan
Effective March 25, 1997, the Company adopted a defined contribution retirement
savings plan which covers all employees age 21 or older with one thousand hours
of annual service. Matching contributions are made by the Company at $0.25 for
each $1 that the employee contributes up to 8% of compensation during 1998.
Company contributions vest as follows:
Years of Service Vested
---------------- --------
1 10%
2 20%
3 30%
4 40%
5 60%
6 80%
7 100%
Contributions for the year December 27, 1998 were $21,000, with the Company also
contributing $14,000 to the plan in 1999 for 1998 matching contributions. No
matching contributions were made by the Company for 1999.
The Company has certain violations under the plan which are considered
reportable transactions. The Company is also delinquent in filing a complete
Form 5500, and was notified by the Department of Labor it has until April 27,
2000 to complete its filing. The Company believes it will comply within the
specified time period. This may subject the Company to certain penalties.
Note 10 - Related Party Transactions
Prior to being elected to the board of directors of the Company in 1999, a
Company affiliated with one of the Company's directors, entered into agreements
with us to provide executive search services and sales and marketing service to
us. In connection with those agreements, the Company issued a 3-year option to
acquire up to 25,000 shares of the Company's common stock at an exercise price
of $.55 per share. An expense of approximately $13,000 related to the issuance
of the option was recorded. The Company paid the related company approximately
$71,000 during 1999. In addition, for service to the Company as chief executive
officer, and the above services provided by the affiliated company, $100,000 was
accrued as of December 31, 1999 to be paid over the next 12 months. The Company
also entered into an agreement with the affiliated company for rental space, use
of clerical employees and to pay a portion of utility and telephone costs.
F-22
<PAGE>
MEDIX RESOURCES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 10 - Related Party Transactions (continued)
During the year, the Company paid two companies affiliated with another of the
Company's directors $171,000 for services and related expenses and approximately
$113,000 for software development and web-site hosting and development services
and purchase of computer equipment. As of December 31, 1999, we owed the two
affiliated companies approximately $3,000.
During the year, the Company paid a related party $6,000 in fees for
introductory services.
Note 11 - Subsequent Events (Unaudited)
Subsequent to year end through March 17, 2000, the Company issued 50,000 common
shares upon conversion of the 5.0 remaining units of the 1997 preferred stock;
340,000 shares upon conversion of 85 shares of the 1999 Series A Preferred
Stock; and 1,654,000 upon conversion of 827 shares of the 1999 Series B
Preferred Stock. We also issued 3,798,620 common shares upon exercise of
warrants with proceeds to the Company of $1,905,000 and 586,600 common shares
upon exercise of options with proceeds to the Company of $174,550.
The Company also issued 60,400 shares of common stock and paid $100,000 in
connection with the merger of Cymedix with Automated Design Concepts, Inc. an
entity owned by a director of the Company. The Company also entered into a
two-year lease for $1,000 per month expiring in February 2002.
F-23
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers
Our directors and executive officers, as of the March 17, 2000, and their
biographical information are set forth below:
Name Age Position Director Since
- - --------------------- ------ ---------------------------- ---------------
John R. Prufeta(1)(4) 39 President, Chief Executive 1999
Officer and a Director
David R. Pfeil 40 President and Chief Operating 2000
Officer of our subsidiary,
Cymedix Lynx Corporation, and
a Director
Patricia A. Minicucci 50 Executive Vice President for N.A.
Operations
Michael Knepper 36 Senior Vice President for N.A.
Mergers and Acquisitions
Brian R. Ellacott 43 Senior Vice President for N.A.
Corporate Development
David Kinsella 38 Controller and Chief Accounting N.A.
Officer
Thomas J. Oberle(2)(3) 56 Director 1988
(4)
Dr. David B. Skinner(1) 64 Director 1999
John T. Lane(1)(2)(3) 57 Director and Chairman of 1999
The Board
Samuel H. Havens(2)(3) 56 Director 1999
(4)
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of Nominating Committee
All of the our executive officers devote full-time to our company's
business and affairs. Biographical information on each current executive officer
and director is set forth below.
Biographical Information
John R. Prufeta. Mr. Prufeta joined the Company as a full time employee and as
its President and Chief Executive Officer on March 1, 2000. Mr. Prufeta also is
the Chairman of the Board of the Company's Cymedix Lynx subsidiary. He had been
appointed to the position of Chief Executive Officer while a consultant to the
Company in October 1999. Prior to that he was the Managing General Partner of
The Creative Group, Creative Health Concepts, and TCG Development, and the
President and Chief Executive Officer of Creative Management Strategies, Inc.
for over 11 years. Those affiliated companies cover a wide spectrum of services
within the healthcare industry. He was elected to the Company's Board of
Directors in April 1999. A 1983 graduate of St. John's University with a B.S. in
management, Mr. Prufeta graduated from the Executive Program, OPM at Harvard
University, Graduate School of Business.
David R. Pfeil In addition to his current duties as President and COO of our
Cymedix subsidiary, Mr Pfeil has acted as Chief Technology Officer for Medix
Resources, Inc. since April 1999. He has 20 years of senior management
experience in healthcare automation and information systems. In 1981, he founded
Dezine Healthcare Solutions (Dezine), a software company with separate divisions
for healthcare and engineering design. Mr. Pfeil successfully completed the sale
of Dezine to Blue Cross Blue Shield of South Carolina in 1997. In 1997, he
organized Arrow Professional Enterprises (Arrow), a health care automation
consulting company. Arrow provides health care professionals with technical
expertise in evaluating and implementing information systems and strategies. He
worked for Arrow until he joined us as an employee in early 2000.
Patricia A. Minicucci In March 2000, Ms. Minicucci joined the Company as
Executive Vice President of Operations. Prior to joining Medix's staff, Ms.
Minicucci served as executive vice president and a principal of Creative Health
Concepts. In 1995, she founded and was chief executive officer of Practice
Paradigms, an organization serving primary care physicians. Prior to founding
Practice Paradigms, Minicucci was senior vice president-managed care with Empire
Blue Cross Blue Shield and, before that, president-employee benefits division
with Washington National Corporation. Ms. Minicucci began her career in
healthcare at CIGNA Corporation where she held numerous positions, including
president-South Central Division, CIGNA Healthplan Inc.; vice president-human
resources division, Employee Benefits Group; vice president-human resources
department, Group Insurance Division; and regional vice president-field claim
operations, Group Insurance Division. She holds a B.A. in History from Russell
Sage College.
Michael R. Knepper. In March 2000, Mr. Knepper joined the Company as Sejnior
vice President of Mergers and Acquisitions. From 1997 to 1999, Mr Knepper served
as vice president of health technology research for Punk, Ziegel & Co. Mr.
Knepper was responsible for re-building the firm's healthcare technology
investment franchise. Prior to joining Punk, Ziegel in 1997, he was a research
analyst at Volpe Brown Whelan & Co. in San Francisco. Earlier, Mr. Knepper held
positions as senior software engineer at TRW; product support engineer at Verdix
Corporation; and software engineer at Honeywell Federal Systems. He holds an MBA
in Finance from Columbia University and an AB in Computer Science from Brown
University.
Brian Ellacott In March 2000, Mr. Ellacott joined the Company as Senior Vice
President of Business Development. Mr. Ellacott served as president of Cosmetic
Surgery Consultants from November 1998 until March 2000, when he joined Medix
Resources, Inc. From 1996 to 1998 he was executive vice president of Alignis
Inc., an alternative healthcare PPO. Before that, he was president-Bibb
Hospitality (Atlanta) for The Bibb Company. Mr. Ellacott began his career in
healthcare at Baxter International/American Hospital Supply where he held
numerous positions, including director of national accounts (Chicago); director
of marketing (Australia); director of marketing (Canada); systems manager
(Canada); regional manager (British Columbia); and product manager (hospital
products). He holds a B.A. in Business Administration, with Honors, from Wilfrid
Laurier University (Waterloo, Canada).
David Kinsella. Mr. Kinsella joined the company in 1997 as Controller of the
Company. Before joining the Company, he was employed by SBR, Inc., a private
company in the retail sector, since May 1991. He held various positions with
SBR, Inc., including Accounting Supervisor, divisional Controller and divisional
Director of Accounting. He graduated from the University of Colorado with a
degree in Business Administration - Accounting. Mr. Kinsella has resigned from
his positions and employment with the Company effective April 7, 2000.
Thomas J. Oberle. Since September 1999, Mr. Oberle has been a partner in
EquityLinks, a mortgage banking business near Denver, Colorado. From 1993 to
1999, Mr. Oberle was the Director of the Colorado Dental Association. From
January 1991 to January 1993, he served as an independent insurance agent in
Denver, Colorado. From October 1989 to December 1991, Mr. Oberle was a Vice
President of Equicor, a health maintenance organization in Denver, Colorado.
From May 1987 to October 1989, he served as President of RMS, Inc., a
corporation involved in organizing various companies associated with the
Children's Hospital in Denver, Colorado. He graduated from St. Mary's College in
Winona, Minnesota with a Bachelor of Science degree.
Dr. David B. Skinner. Dr. Skinner is President Emeritus of the New
York-Presbyterian Hospital and the New York-Presbyterian Healthcare System. He
was Vice Chairman/President and CEO of the Society of the New York Hospital and
its Healthcare System and subsequently of the merged institution for 13 years.
He is also a professor of cardiothoracic surgery and surgery at the Weill
Medical College of Cornell University, professor of surgery at Columbia
University College of Physicians and Surgeons, and an attending surgeon at New
York Presbyterian Hospital. He was professor of surgery at Johns Hopkins
University School of Medicine from 1968 to 1972, and professor and chairman of
surgery at the University of Chicago, Pritzker School of Medicine from 1973 to
1987. Dr. Skinner has been awarded numerous honorary degrees, faculty
appointments, corporate directorships, and domestic and international honors,
awards, and prizes. Dr. Skinner holds a BA degree, with high distinction, from
the University of Rochester and an MD degree, cum laude, from Yale University.
John T. Lane. Prior to his retirement from J.P. Morgan & Company in 1994, Mr.
Lane was head of that firm's U.S. Private Clients Group. He also served as
Chairman of J.P. Morgan, Florida; a Director of Morgan Shareholder Services,
J.P. Morgan of California, and Morgan Futures; and a member of the firm's Credit
Policy committee. Earlier, he held a number of positions in the J. P. Morgan
organization, which he joined in 1968. Since retiring from J.P. Morgan, Lane has
served as a consultant to various organizations. Mr. Lane currently serves or
the Boards of Acme Metals Incorporated and Biospecifics Technologies Corp.,
whose common shares are publicly traded. Mr. Lane holds an MBA degree from the
University of Michigan, and a BA degree from Dartmouth College.
Samuel H. Havens. Prior to his retirement in 1996, Mr. Havens served as
President of Prudential Healthcare for five years. He had begun his career with
The Prudential Insurance Company as a group sales representative in 1965, and
served in various posts in Prudential healthcare operations over three decades.
Since retiring, Mr. Havens has served on the Board and as a consultant to
various healthcare organizations. He is a member of the Board of Advisors of
Temple Law School and the Editorial Board of Managed Care Quarterly. Havens
completed the Executive Program in Business Administration at Columbia
University. He holds a JD degree from Temple Law School, a CLU from the American
College of Life Underwriters, and a BA degree from Hamilton College.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and executive officers, and persons who own more than 10% of a
registered class of a company's equity securities, to file with the U. S.
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Company's common stock and other equity securities.
Officers, directors and greater than 10% shareholders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon such reports, we believe that
none of such persons failed to comply with the requirements of Section 16(a)
during 1999, except for John Prufeta, who inadvertently omitted to list certain
securities of the Company on his Firm 3. Such omission was later corrected.
ITEM 10. EXECUTIVE COMPENSATION
Executive Officer Compensation
Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company for the
three years ended December 31, 1999, awarded or paid to, or earned by, John P.
Yeros, John R. Prufeta, David R. Pfeil and David Kinsella (the "Named
Officers"). No officer or employee of the Company other than these four earned
an annual salary and bonus exceeding $100,000 in 1999.
<PAGE>
Long-Term
Compensation
Securities
Underlying
Annual Compensation Options/
Name and Principal Fiscal ----------------------- Warrants
Position Year Salary Bonus Other (Shares)
- - ----------------- ---------- ----------- ---------- ------- -----------
John P. Yeros 1999 $199,650 0 (2) 1,250,000
Former President 1998 $180,442 0 500,000
and CEO (1) 1997 $142,272 $15,000 1,259,768(3)
John R. Prufeta 1999 $171,000(4) 925,000(4)
President and CEO
David R. Pfeil 1999 $287,000(5) 800,000
President and
COO of Company
Subsidiary
David Kinsella(6) 1999 $88,462 $30,000 450,000
Secretary and 1998 $77,692 0 110,000
Controller 1997 $23,000 0 50,000
- - ------------
(1) Mr. Yeros resigned as Chief Executive Officer on October 14, 1999, and as
President, Chairman of the Board and a Director on March 1, 2000.
(2) Other annual compensation is made up of automobile allowances, and
disability and health insurance premiums, in amounts less than 10% of the
officer's annual salary plus bonus.
(3) In August 1997, options and warrants covering 736,313 shares of Common
Stock granted to Mr. Yeros in prior years, and 273,455 shares of Common
Stock granted to him earlier in 1997, were re-priced to an exercise price
of $0.25 per share, the then market price of a share of the Company's
Common Stock. In addition, Mr. Yeros was granted new options covering
250,000 shares at an exercise price of $0.25 per share.
(4) During 1999, Mr. Prufeta served as a consultant to the Company pursuant to
a consulting agreement between the Company and his employer, Creative
Management Strategies, Inc., which company was paid or accrued the amount
shown above and received options to purchase 25,000 shares of Common
Stock, included in the amount shown.
(5) During 1999, we paid two companies affiliated with Mr. Pfeil approximately
$135,000 for Mr. Pfeil's services, approximately $36,000 for travel related
expenses and approximately $113,000 for software development and web-site
hosting and development services and purchase of computer equipment. As of
December 31, 1999 we owe the two affiliated companies approximately $3,000.
(6) Mr. Kinsella has resigned from his positions and employment with the
Company, effective April 7, 2000.
Stock Option Awards. In 1996, we adopted our 1996 Stock Incentive Plan
(the " 1996 Plan"). Such Plan could only grant non-qualified stock options, as
described below. In August 1999, our Board of Directors approved and authorized
our 1999 Stock Option Plan (the "1999 Plan"), which is intended to grant either
non-qualified stock options or incentive stock options, as described below.
However, the 1999 Plan has yet to be approved by our stockholders, which
approval will be sought at our 2000 annual meeting of shareholders. The purpose
of the either Plan is to enable our company to provide opportunities for certain
officers and key employees to acquire a proprietary interest in our company, to
increase incentives for such persons to contribute to our performance and
further success, and to attract and retain individuals with exceptional
business, managerial and administrative talents, who will contribute to our
progress, growth and profitability. As of March 17, 2000, we had issued 536,720
shares of our Common Stock upon exercise of options to current or former
employees and directors, and have 8,839,277 shares currently covered by
outstanding options held by current or former employees and directors, with
exercise prices ranging form $.19 to $4.97.
Options granted under our 1999 Plan include both incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and non-qualified stock options ("NQOs"). Under
the terms of the Plan, all officers and employees of our company are eligible
for ISOs. Our company determines in its discretion, which persons will receive
ISOs, the applicable exercise price, vesting provisions and the exercise term
thereof. The terms and conditions of option grants differ from optionee to
optionee and are set forth in the optionees' individual stock option agreement.
Such options generally vest over a period of one or more years and expire after
up to ten years. In order to qualify for certain preferential treatment under
the Code, ISOs must satisfy the statutory requirements thereof. Options that
fail to satisfy those requirements will be deemed NQOs and will not receive
preferential treatment under the Code. Upon exercise, shares will be issued upon
payment of the exercise price in cash, by delivery of shares of Common Stock, by
delivery of options or a combination of any of these methods. In order for
grants under the 1999 Plan to be treated as ISOs, the Plan must be approved by
the shareholders of the Company. This is expected to occur at our 2000 annual
meeting of shareholders. However, if such approval is not received within 12
months of the Board's adoption of the Plan, the terms of the Plan provide that
all grants under the 1999 Plan that have already been made will become NQOs.
Option information for fiscal 1999 relating to the Named Officers is set
forth below:
Option Grants in
Name Number of Fiscal 1999
Shares of Percentage
Common Stock of Total
Underlying Options
Options Granted to
Granted in Employees in Exercise Expiration
1999 1999 Price Date
------------ ------------ ------- ---------
John P. Yeros 1,250,000 34.4 $.26 8/16/09
John R. Prufeta 0.7 $.55 4/21/02
25,000(1) 13.7 $.26 8/16/09
500,000 11.0 $.50 10/14/09
400,000
David R. Pfeil 100,000 2.7 $.55 4/21/02
500,000 13.7 $.26 8/16/09
200,000 5.5 $.50 10/14/09
David Kinsella 200,000 5.5 $.25 3/19/09
250,000 6.9 $.26 8/16/09
- - -----------
(1) These options, covering 25,000 shares of Common Stock, were granted to a
company that is an affiliate of Mr. Prufeta for executive search services.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year End at Year End(1)
Shares Value -------------------------- -------------------------
Name Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
- - --------------- ---------- -------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
John P. Yeros 0 0 2,309,768 700,000 $6,221,362 $1,918,000
John R. Profeta 0 0 137,500(2) 787,500 $ 369,500 $2,061,750
David R. Pfeil 0 0 350,000 450,000 $ 930,000 $1,185,000
David Kinsella 0 0 422,500 187,500 $1,133,750 $ 513,750
- - --------------
</TABLE>
(1) The dollar values are calculated by determining the difference between $3.00
per share, the fair market value of the Common Stock at December 31, 1999,
and the exercise price of the respective options.
(2) Options covering 25,000 of these shares were granted to a company that is
an affiliate of Mr. Prufeta for executive search services.
The Company has no retirement, pension or profit-sharing program for the
benefit of its directors, executive officers or other employees, but the Board
of Directors may recommend one or more such programs for adoption in the future.
Employment Agreements.
During 1999, Mr. Yeros' employment was pursuant to a five-year Employment
Agreement, which would have terminated on December 31, 2001. Such Employment
Agreement provided for Mr. Yeros to receive a minimum annual salary of $165,000
for the fiscal 1997 year, and adjusted upwards at a minimum of 10% annually
after 1997. Mr. Yeros agreed to reduce his salary for fiscal 1997 to $142,000.
On March 1, 2000, this employment agreement was terminated by mutual agreement
and Mr. Yeros resigned as President, Chairman of the Board and a Director of the
Company. At the same time, Mr. Yeros and the Company entered into a Consulting
Agreement with a term that ends on December 31, 2001, and retains Mr. Yeros'
services for the Company, on a part-time basis, to undertake special projects
from time to time as directed by the Company's President and CEO. Mr. Yeros will
be compensated at the same levels provided for in the terminated employment
agreement during the term of the Consulting Agreement.
Mr. Prufeta's Employment Agreement, which has an initial term of two
years, ending on January 31, 2002, provides that he will be compensated at the
base salary of $120,000 annually, plus a commission of 2.5% of certain gross
revenue of the Company, subject to certain exclusions. He will hold the
positions of President and Chief Executive Officer and report to the Board of
Directors. Pursuant to his Employment Agreement, Mr. Prufeta has been granted
options to purchase 400,000 shares of Common Stock at $.50 per share, and
600,000 shares of Common Stock at $4.97 per share, which vest upon the
occurrence of certain performance goals. His Employment Agreement provides for
termination at any time by the employee with or without cause or by the Company
with cause. The Employment Agreement is also subject to termination by the
Company without cause after the initial one-year term, subject to the right of
the employee to continue to receive compensation for 6 months. The Employment
Agreement also contains a non-compete provision that extends for a period of one
year after termination or resignation of the employee, as well as certain
confidentiality provisions. The Employment Agreement contains provisions
providing that, upon the occurrence of a "Triggering Event" (defined to include
a change in ownership of 50% of the outstanding shares of the Company's Common
Stock through a merger or otherwise) during the term of his employment, he will
receive a lump sum payment equal to his then current year's base and bonus pay.
Mr. Pfeil's Employment Agreement, which has an initial term of two years,
ending on January 31, 2002, provides that he will be compensated at the base
salary of $200,000 in 2000, and $220,000 in 2001. His Employment Agreement is
with the Company's wholly-owned subsidiary, Cymedix Lynx Corporation, and he
will hold the positions of President and Chief Operating Officer of the
subsidiary. He will report to the subsidiary's Board of Directors and Chairman
of the Board. Pursuant to his Employment Agreement, Mr. Pfeil has been granted
options to purchase 200,000 shares of the Company's Common Stock at $.50 per
share, which vest upon the occurrence of certain performance goals. His
Employment Agreement provides for termination at any time by the employee with
or without cause or by the Company with cause. The Employment Agreement is also
subject to termination by the Company without cause after the initial one-year
term, subject to the right of the employee to continue to receive compensation
for 6 months. The Employment Agreement also contains a non-compete provision
that extends for a period of one year after termination or resignation of the
employee, as well as certain confidentiality provisions. The Employment
Agreement contains provisions providing that, upon the occurrence of a
"Triggering Event" (defined to include a change in ownership of 50% of the
outstanding shares of the Company's Common Stock through a merger or otherwise)
during the term of his employment, he will receive a lump sum payment equal to
his then current year's base and bonus pay.
Ms. Minicucci's Employment Agreement, which has an initial term of two
years, ending on March 1, 2002, provides that she will be compensated at the
salary of $200,000 annually. She will hold the position of Executive Vice
President, Operations, and report to the President and CEO. Pursuant to her
Employment Agreement, she has been granted options to purchase 400,000 shares of
Common Stock at $4.97 per share, which vest over the 2-year term of his
Employment Agreement. Her Employment Agreement provides for termination at any
time by the employee with or without cause or by the Company with cause. The
Employment Agreement is also subject to termination by the Company without cause
after the initial one-year term, subject to the right of the employee to
continue to receive compensation for 6 months. The Employment Agreement also
contains a non-compete provision that extends for a period of one year after
termination or resignation of the employee, as well as certain confidentiality
provisions. The Employment Agreement contains provisions providing that, upon
the occurrence of a "Triggering Event" (defined to include a change in ownership
of 50% of the outstanding shares of the Company's Common Stock through a merger
or otherwise) during the term of her employment, she will receive a lump sum
payment equal to his then current year's base and bonus pay.
Mr. Knepper's Employment Agreement, which has an initial term of two
years, ending on March 7, 2002, provides that he will be compensated at the
salary of $175,000 annually. He will hold the position of Senior Vice President
for Mergers and Acquisitions, and report to the President and CEO. Pursuant to
his Employment Agreement, he has been granted options to purchase 400,000 shares
of Common Stock at $3.97 per share, which vest over the 2-year term of his
Employment Agreement. His Employment Agreement provides for termination at any
time by the employee with or without cause or by the Company with cause. The
Employment Agreement is also subject to termination by the Company without cause
after the initial one-year term, subject to the right of the employee to
continue to receive compensation for 6 months. The Employment Agreement also
contains a non-compete provision that extends for a period of one year after
termination or resignation of the employee, as well as certain confidentiality
provisions. The Employment Agreement contains provisions providing that, upon
the occurrence of a "Triggering Event" (defined to include a change in ownership
of 50% of the outstanding shares of the Company's Common Stock through a merger
or otherwise) during the term of his employment, he will receive a lump sum
payment equal to his then current year's base and bonus pay.
Mr. Ellacott's Employment Agreement, which has an initial term of two
years, ending on March 1, 2002, provides that he will be compensated at the
salary of $150,000 annually. He will hold the position of Senior Vice President,
Development, and report to the President and CEO. Pursuant to his Employment
Agreement, he has been granted options to purchase 150,000 shares of Common
Stock at $3.97 per share, which vest over the 2-year term of his Employment
Agreement. His Employment Agreement provides for termination at any time by the
employee with or without cause or by the Company with cause. The Employment
Agreement is also subject to termination by the Company without cause, subject
to the right of the employee to continue to receive compensation for 6 months.
The Employment Agreement also contains a non-compete provision that extends for
a period of one year after termination or resignation of the employee, as well
as certain confidentiality provisions.
Mr. Kinsella's Employment Agreement, which has an initial term of two
years, ending on September 30, 2001, provides that he will be compensated at the
salary of $100,000 annually. He will hold the position of Chief Accounting
Officer, and report to the President and CEO. His Employment Agreement provides
for termination at any time by the employee with or without cause or by the
Company with cause. The Employment Agreement is also subject to termination by
the Company without cause after the initial one-year term, subject to the right
of the employee to continue to receive compensation for 3 months. The Employment
Agreement also contains a non-compete provision that extends for a period of one
year after termination or resignation of the employee, as well as certain
confidentiality provisions. Mr. Kinsella has resigned from his positions and
employment with the Company effective April 7, 2000.
Director Compensation
In the last quarter of 1999, the Board of Directors adopted the following
compensation schedule for non-employee Directors, $1,000 for attending each
regular quarterly Board meeting, and $250 for attending each special Board or
committee meeting. The Board of Directors has also authorized payment of
reasonable travel or other out-of-pocket expenses incurred by non-employee
directors for attending Board or committee meetings. During 1999, former
Directors Mr. Charles Powell and Dr. Brian McLean were each paid $500 and $250,
respectively, and current Directors Mr. Thomas Oberle, Mr. Samuel Havens, Dr.
David Skinner and Mr. John T. Lane were each paid $750, $250, $250, and $250,
respectively, for their services to the Company as Directors. From time to time,
the Board of Directors grant non-employee Directors options to acquire shares of
Common Stock as compensation for their services to the Company as Directors.
During 1999, Mr. Oberle, and former Directors Mr. Joel Newman, Mr. Douglas Stahl
and Dr. McLean each received options covering 250,000 shares of Common Stock,
and Messrs Havens, Skinner and Lane each received options covering 200,000
shares of Common Stock. During 1999, we paid Mr. Havens $6,000 in fees for
consulting services.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of March 17, 2000 by (i) each person known by the
Company to own beneficially more than 5 % of the outstanding shares of Common
Stock. (ii) each director, named executive officer and (iii) all executive
officers and directors as a group. On such date, we had 34,932,311 shares off
Common Stock outstanding. Shares not outstanding but deemed beneficial1y owned
by virtue of the right of any individual to acquire shares within 60 days are
treated as outstanding only when determining the amount and percentage of Common
Stock owned by such individual. Each person has sole voting and investment power
with respect to the shares shown, except as noted.
Name and Address Number of Shares Percentage of Class
John P. Yeros 3,167,262(1) 8.4%
9763 S. Tall Grass Circle
Lone Tree, Colorado
John R. Prufeta 1,173,000(2) 3.3%
305 Madison Avenue
New York, New York
Thomas J. Oberle 713,250(3) 2.0%
7100 E. Belleview Avenue
Englewood, Colorado
David R. Pfeil 350,000(4) 1.0%
72 Brunswick Woods Drive
East Brunswick, New Jersey
John T. Lane 550,000(5) 1.6%
94 Sixth Street
Garden City, New Jersey
Dr. David B. Skinner 200,000(4) 0.6%
525 East 68th Street
New York, New York
Samuel H. Havens 200,000(4) 0.6%
58 Winged Foot Drive
Livingston, New Jersey
Patricia A. Minicucci 50,000(4) 0.1%
305 Madison Avenue
New York, New York
Michael G. Knepper 80,000(6) 0.2%
305 Madison Avenue
New York, New York
Brian Ellacott 50,000(4) 0.1%
101 Village Parkway
Building One
Marietta, Georgia
David Kinsella
7100 E. Belleview Avenue 610,000(4) 1.7%
Englewood, Colorado
All directors and executive
officers as a group (10
persons) 3,976,250 10.3%
- - -------------------
(1) Mr. Yeros owns 295,120 shares of Common Stock, with the remainder available
upon the conversion or exercise of convertible preferred stock, warrants
and options held by him, including 25 shares of the Company's 1999 Series C
Convertible Preferred Stock (1.25% of the outstanding shares of that
class).
(2) Mr. Prufeta owns 185,500 shares of Common Stock, with the remainder
available upon the conversion or exercise of convertible preferred stock,
warrants and options held by him, including 100 shares of the Company's
1999 Series A Convertible Preferred Stock (33.33% of the outstanding shares
of that class), and 25 shares of the Company's 1999 Series C Convertible
Preferred Stock (1.25% of the outstanding shares of that class).
(3) All of Mr. Oberle's reported holdings are available upon the conversion or
exercise of convertible preferred stock, warrants and options held by him,
including 25 shares of the Company's 1999 Series C Convertible Preferred
Stock (1.25% of the outstanding shares of that class).
(4) Represents shares of Common Stock available upon the exercise of
outstanding options.
(5) All of Mr. Lane's reported holdings are available upon the conversion or
exercise of convertible preferred stock, warrants and options held by him,
including 50 shares of the Company's 1999 Series B Convertible Preferred
Stock (2.73% of the outstanding shares of that class), and 25 shares of the
Company's 1999 Series C Convertible Preferred Stock (1.25% of the
outstanding shares of that class).
(6) Mr. Knepper owns 30,000 shares of Common Stock, with the remainder
available upon the exercise of options held by him.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted a policy that any transactions with directors or officers
or any entities in which they are also officers or directors or in which they
have a financial interest, will only be on terms that would be reached in an
arms-length transaction, consistent with industry standards and approved by a
majority of our disinterested directors. This policy provides that no such
transaction by shall be either void or voidable solely because of such
relationship or interest of such directors or officers or solely because such
directors are present at the meeting of the Board of Directors or a committee
thereof that approves such transaction or solely because their votes are counted
for such purpose. In addition, interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee thereof that approves such a transaction. We have also adopted a
policy that any loans to officers, directors and 5% or more shareholders are
subject to approval by a majority of the disinterested directors.
Prior to being elected to our Board of Directors in 1999, Creative
Management Services, Inc. ("CMS"), a company affiliated with Mr. John Prufeta,
entered into agreements with us to provide executive search services and sales
and marketing services to us. In connection with those agreements, we issued a
3-year option to acquire up to 25,000 shares of our Common Stock at an exercise
price of $0.55 per share. We recorded Black/Scholes expense of approximately
$13,000 related to the issuance of the option. We also paid such company $71,000
during 1999. In addition, for Mr. Prufeta's service to us as Chief Executive
Officer, and the above services provided by the affiliated company we have
accrued $100,000 as of December 31, 1999, and an additional $10,000 in 2000 in
payments to such company, to be paid over 12 months. At the time Mr. Prufeta
became a full-time employee of the Company, such agreements with CMS were
terminated.
Three of our executive officers, including Mr. Prufeta, are operating out
the New York City offices of CMS. We have entered into an agreement with CMS to
reimburse CMS for its rental costs of the space occupied by our employees, the
amount of time certain clerical employees spend on matters for us, and the cost
of utilities including telephone lines and charges that relate to us. CMS has
agreed to provide us with secure storage space and communications facilities in
order to protect the confidentiality of our business records. In addition, CMS
will provide us with employee search services from time to time as appropriate,
at its standard billing rates. CMS is a recognized provider of executive and
employee search services to all areas of the health care industry.
During 1999, we paid two companies affiliated with Mr. David Pfeil,
approximately $135,000 for Mr. Pfeil's services, approximately $36,000 in
reimbursements for his travel and related expenses, and approximately $113,000
for software development and web-site hosting and development services and
purchases of computer equipment. As of December 31, 1999 we owed the two
affiliated companies approximately $3,000.
On March 15, 2000, our subsidiary, Cymedix Lynx Corporation, merged with
Automated Design Concepts, Inc. ("ADC"), which had been wholly-owned by Mr.
Pfeil. Mr. Pfeil received $100,000 in cash and 60,400 shares of our common stock
valued at $300,000, as consideration for such acquisition. In connection with
that acquisition, we leased certain office spaced used by the acquired business
form Mr. Pfeil and his wife. The lease has a term two-year term ending February
28, 2002 and provides for rental payments at the rate of $1,000 per month. The
operations acquired by the Company from him continue to be operated out of this
office. Prior to the merger, the leased offices were used by ADC and another
company owned by Mr. Pfeil, who moved from a consulting role to positions as
President and Chief Operating Officer of Cymedix in connection with the merger.
We have entered into a consulting agreement with Mr. Samuel Havens, which
provides that we pay Mr. Havens $5,000 per month for his consulting services in
connection with our marketing efforts.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B. We will furnish to
its shareholders of record as of the record date for its 1999 Annual Meeting of
Stockholders, a copy of any of the exhibits listed below upon payment of $.25
per page to cover the costs of the Company of furnishing the exhibits.
Exhibit No. Description
3.1.1 Articles of incorporation of the Company as filed on April 22, 1988
with the Secretary of State of the State of Colorado, incorporated by
reference to Exhibit 3.1.1 to the Registration Statement on Form SB-2
(Reg. No. 33-81582-D), filed with the SEC in July 14,1994 (the "1994
Registration Statement").
3.1.2 Articles of Amendment to Articles of Incorporation of the Company as
filed on May 24, 1988 with the Secretary of State of the State of
Colorado, incorporated by reference to Exhibit 3.1.2 to the 1994
Registration Statement.
3.1.3 Articles of Amendment to Articles of Incorporation of the Company as
filed on February 16, 1990 with the Secretary of State of the State
of Colorado, incorporated by reference to Exhibit 3.1.3 to the 1994
Registration Statement.
3.1.4 Articles of Amendment to Articles of Incorporation of the Company as
filed on August 12, 1994 with the Secretary of State of the State of
Colorado, incorporated by reference to Exhibit 3.1.4 to Amendment No.
1 to the 1994 Registration Statement, filed with the SEC on August
15, 1994.
3.1.5 Articles of Amendment to Articles of Incorporation of the Company as
filed on September 12, 1994 with the Secretary of State of the State
of Colorado, incorporated by reference to Exhibit 3.1.5 to Amendment
No. 3 to the 1994 Registration Statement, filed with the SEC on
September 12, 1994.
3.1.6 Certificate of Designation of 1996 Convertible Preferred Stock,
incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the
Registration Statement of the Company on Form S-3, filed with the SEC
October 10, 1996.
3.1.7 Articles to Amendment to Articles of Incorporation filed with the
Secretary of State of the State of Colorado on October 9, 1996,
incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the
Registration Statement of the Company on Form S-3 filed with the SEC
on October 10, 1996.
3.1.8 Articles of Amendment containing Articles of Designation of 1997
Convertible Preferred Stock, incorporated by reference to Exhibit
3.1.8 to the Company's Form 10-KSB filed with the SEC on March 31,
1997.
3.1.9 Articles of Amendment to Articles of Incorporation of the Company as
filed on November 14, 1997 with the Secretary of State of the State
of Colorado incorporated by reference to Exhibit 3.1.9 to the
Company's Form 10-KSB filed with the SEC on March 30, 1998.
3.1.10 Articles of Amendment to Articles of Incorporation of the Company as
filed on February 17, 1998 with the Secretary of State of the State
of Colorado, incorporated by reference to Exhibit 3.1.10 to the
Company's Form 10-KSB filed with the SEC on March 30, 1998.
3.1.11 Articles of Amendment to Articles of Incorporation of the Company as
filed on March 17, 1998 with the Secretary of State of the State of
Colorado, incorporated by reference to Exhibit 3.1.11 to the
Company's Form 10-KSB filed with the SEC on March 30, 1998.
3.1.12 Articles of Amendment of Articles of Incorporation establishing the
1999 Series A Convertible Preferred Stock as filed on April 21, 1999,
with Secretary of State of the State of Colorado.*
3.1.13 Articles of Amendment of Articles of Incorporation increasing the
authorized capital of the Company as filed on June 11, 1999, with
Secretary of State of the State of Colorado.*
3.1.14 Articles of Amendment of Articles of Incorporation establishing the
1999 Series B Convertible Preferred Stock as filed on July 22, 1999,
with Secretary of State of the State of Colorado.*
3.1.15 Articles of Amendment of Articles of Incorporation establishing the
1999 Series C Convertible Preferred Stock as filed on January 21,
2000, with Secretary of State of the State of Colorado.*
3.1.16 Articles of Amendment of Articles of Incorporation increasing the
authorized capital of the Company as filed on March 22, 2000, with
Secretary of State of the State of Colorado.*
3.2.1 Amended and Restated By-Laws of the Company, incorporated by
reference to Exhibit 3.2.2 to Amendment No. 1 to the Registration
Statement filed with the SEC on August 15, 1994.
4.1 Form of specimen certificate for common stock of the Company,
incorporated by reference to Exhibit 4.1. to the Company's Form
10-KSB filed with the SEC on March 30, 1998.
4.2.1 Form of specimen certificate for 1994 Warrants of the Company,
incorporated by reference to Exhibit No. 4.1.3 to Amendment No. 1
to the 1994 Registration Statement, filed with the SEC on August 15,
1994.
4.2.2 Form of Warrant Agreement by and between the Company and American
Securities Transfer, Inc., incorporated by reference to Exhibit No.
4.1.4 to Amendment No. 2 to the 1994 Registration Statement, filed
with the SEC on
September 1, 1994.
4.3 Form of Representative`s Warrants issued by the Company to the
underwriters' representative in connection with the Company's 1994
public offering, incorporated by reference to Exhibit No. 4.2 to
Amendment No. 3 to the 1994 Registration Statement, filed with the
SEC on September 12, 1994 .
4.4 Form of 1996 Unit Warrant, incorporated by reference to Exhibit 4.1
to Amendment No. 1 to the Registration Statement of the Company on
Form S-3 filed with the SEC on
October 10, 1996.
4.5 Warrant issued January 28, 1997 to Millenco, L.P, incorporated by
reference to Exhibit 4.9 to the Company's Form 10-KSB filed with the
SEC on March 31, 1997.
4.6 Form of 1997 Unit Warrant, incorporated by reference to Exhibit 4.11
to the Company's Form 10-KSB filed with the SEC on March 31, 1997.
4.7 Form of Warrant issued with the 1999 Series A, B, and C Convertible
Preferred Stock.*
10.1 Employment Agreement, dated January 7, 1997, by and between John
Yeros and the Company, incorporated by reference to Exhibit 10.22 to
the Company's Form 10-KSB filed with the SEC on March 31, 1997.
10.2.1 Incentive Stock Option Plan, adopted May 5, 1988, authorizing 100,000
shares of common stock for issuance pursuant to the Plan,
incorporated by reference to Exhibit No. 10.2.1 of the 1994
Registration Statement.
10.2.2 Omnibus Stock Option Plan, adopted effective January 1, 1994,
authorizing 500,000 shares of common stock for issuance pursuant to
the Plan, incorporated by reference to Exhibit No. 10.2.2 of the 1994
Registration Statement.
10.2.3 1996 Stock Incentive Plan, adopted by the Company's Board of
Directors on November 27, 1996, authorizing 4,000,000 shares of
common stock for issuance pursuant to the Plan., incorporated by
reference to Exhibit 10.2.3 to the Company's Form 10-KSB filed with
the SEC on March 30, 1998.
10.2.4 1999 Stock Option Plan, adopted by the Board of Directors on
August 16, 1999, authorizing 7,000,000 shares of common stock for
issuance under the Plan, incorporated by reference to Exhibit 99.1
to the Company's Form S-8 (Reg. No. 333-31684) filed with the SEC on
March 3, 2000.
10.3 Asset Purchase and Sale Agreement, dated May 2, 1994 and as amended
June 1, 1994, by and between the Company and Paxxon Services, Inc.,
incorporated by reference to Exhibit 2.2 to the 1994 Registration
Statement.
10.4 Asset Purchase and Sale Agreement dated April 15, 1994 and as amended
June 1, 1994, by and between the Company and Mint Energy Corporation,
d/b/a the Nurse Connection, incorporated by reference to Exhibit 2.4
to the 1994 Registration Statement.
10.5 Asset Purchase Agreement between the Company and STAT Health Care
Services, Inc. dated January 10, 1996, incorporated by reference to
Exhibit 10.18 to Form 8-K of the Company, filed with the SEC on
January 11, 1996.
10.6 Asset Purchase and Sale Agreement, dated as of April 17, 1996, by and
between Ellis Home Care Services, Inc., JJ Care Resources, Inc. and
the Company, incorporated by reference to Exhibit No. 10.1 to Form
8-K of the Company, filed with the SEC in April 1996.
10.7 First Amendment to Purchase Agreement, dated as of July 17, 1996,
between the Company, JJ Care Resources, Inc. and STAT Health Care
Services, Inc., incorporated by reference to Exhibit 10.19 to Form
8-K of the Company, filed with the SEC on August 1, 1996.
10.8 Form of Registration Rights/Purchase Agreement relating to 1996 Unit
Offering, incorporated by reference to Exhibit 10.1 to Amendment No.
1 to the Registration Statement of the Company on Form S-3, filed
with the SEC on October 10, 1996.
10.9 Asset Purchase Agreement, dated as of January 31, 1997 by and among
Colorado Therapists on Call, Inc., Professional HealthCare Providers,
Inc., CoreStaff, Inc. and the Company, incorporated by reference to
Exhibit 2.1 to the Form 8-K of the Company filed on February 14,
1997.
10.10 Form of Registration Rights/Purchase agreement relating to 1997 unit
offering, incorporated by reference to Exhibit 10.21 to the Company's
Form 10-KSB filed with the SEC on March 31, 1997.
10.11 Agreement of Purchase and Sale (Assets), dated as of September 1,
1997, by and between National Care Resources, Inc. and Life Source
Service, Inc., incorporated by reference to Exhibit 2.1 in the
Company's Form 10-QSB for the Quarterly Period ended September 28,
1997, filed with the SEC on November 14, 1997.
10.12 Purchase and Sale Agreement, between International Nursing Services,
Inc., National Care Resources - New York, Inc., National Health
Enterprises - NV, Inc., and National Health Enterprises, Inc., dated
October 19, 1997, incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed with the SEC on November
26, 1997.
10.13 Agreement and Plan of Merger, dated as of November 17, 1997, among
International Nursing Services, Inc., Cymedix Lynx Corporation and
Cymedix Corporation, incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed with the SEC on December
24, 1997.
10.14 Amendment No. 1 to Agreement and Plan of Merger, dated as of December
10, 1997, among International Nursing Services, Inc., Cymedix Lynx
Corporation and Cymedix Corporation, incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K filed with
the SEC on December 24, 1997.
10.15 Purchase and Sale Agreement, dated September 14, 1998, among Premier
Home Health Care Services, Inc., National Care Resources-New York,
Inc., and Medix Resources, Inc., incorporated by reference to Exhibit
10.23 to the Company's Form 8-K, filed with the SEC on September 28,
1998.
10.16 Employment Agreement between the Company and Mr. John R. Prufeta,
dated as of December 1, 1999**
10.17 Employment Agreement between the Company and Mr. David R. Pfeil,
dated as of December 1, 1999**
10.18 Employment Agreement between the Company and Mr. Michael G. Knepper,
dated as of February 11, 2000**
10.19 Employment Agreement between the Company and Mr. David Kinsella,
dated as of September 27, 1999 , and as amended as of January 26,
2000**
10.20 Consulting Agreement between the Company and Mr. John P. Yeros, dated
as of March 1, 2000**
10.21 Employment Agreement between the Company and Mr. Brian R. Ellacott,
dated as of February 11, 2000**
10.22 Employment Agreement between the Company and Ms. Patricia A.
Minicucci, dated as of February 15, 2000**
10.23 Asset Purchase Agreement, dated as of February 19, 2000, among Medix
Resources, Inc., Medical Staffing Network, Inc., National Care
Resources - Texas, Inc., National Care Resources - Colorado, Inc. and
TherAmerica, Inc., incorporated by reference to Exhibit 10.2 to the
Company's Form 8-K, filed with the SEC on March 7, 2000
10.24 Agreement and Plan of Merger, dated as of March 8, 2000, among Medix
Resources, Inc., Cymedix Lynx Corporation, Automated Design Concepts,
Inc. and David R. Pfeil**
10.25 Consulting Agreement between the Company and Mr. Samuel H. Havens,
dated as of October 1, 1999.**
21. Subsidiaries of the Company.*
23. Consent of Ehrhardt Keefe Steiner & Hottman PC*
27. Financial Data Schedule.*
- - --------------
*Filed herewith
** To be filed as an amendment to this Form 10-KSB.
(b) Reports on Form 8-K. The Company filed seven reports on Form 8-K during the
last quarter of 1999 as follows:
1. Report filed with the SEC on October 7, 1999, reporting under Item 5 the
issuance of a press release relating the preliminary grant of a patent for
certain software applications owned by the Company.
2. Report filed with the SEC on October 7, 1999, reporting under Item 5 the
issuance of a press release announcing the signing of a letter of intent
between the Company and Wellpoint Pharmacy Management.
3. Report filed with the SEC on November 4, 1999, reporting under Item 5 the
issuance of a press release announcing the election of Mr. John T. Lane and
Mr. Samuel H. Havens to the Company's Board of Directors.
4. Report filed with the SEC on November 4, 1999, reporting under Item 5 the
issuance of a press release announcing the appointment of John R. Prufeta
as interim Chief Executive Officer.
5. Report filed with the SEC on November 4, 1999, reporting under Item 5 the
issuance of a press release announcing the election of Dr. David B. Skinner
to the Company's Board of Directors.
6. Report filed with the SEC on November 4, 1999, reporting under Item 5 the
issuance of a press release announcing the signing of an agreement between
the Company and Advica Health Resources, Inc. to undertake a pilot project
testing of the use of the Company's software by Advica's health providers
7. Report filed with the SEC on December 30, 1999, reporting under Item 5 the
issuance of a press release announcing the final grant of a patent and the
patent number.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on behalf by the
undersigned, thereunto duly authorized on March 30, 2000.
MEDIX RESOURCES, INC.
By: /s/ John R. Prufeta
President and CEO
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated and on the dates indicated.
Signature Title Date
- - ---------------------- ----------------- ---------------
/s/John R Prufeta President and Chief Executive March 30, 2000
- - ------------------- Officer (Principal Executive
John R. Prufeta Officer)
/s/ David Kinsella Controller (Principal March 30, 2000
- - ------------------- Accounting and Financial
David Kinsella Officer
/s/Thomas J. Oberle Director March 30, 2000
- - -------------------
Thomas J. Oberle
/s/ David R. Pfeil Director March 30, 2000
- - ------------------
David R. Pfeil
/s/ John T. Lane Director March 30, 2000
- - ------------------
John T. Lane
/s/Samuel H. Havens Director March 30, 2000
- - ------------------
Samuel H. Havens
EXHIBIT 3.1.12
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
MEDIX RESOURCES, INC., a corporation organized under the laws of the State
of Colorado, by its President and Chief Executive Officer does hereby certify:
1. The name of the Corporation is MEDIX RESOURCES, INC.
2. The Board of Directors of the Corporation, at a meeting on April 13,
1999, has approved and adopted the amendment to the Corporation's
Articles of Incorporation contained herein, which amendment sets forth
the text of a determination by the board of directors of the
designations, preferences, limitations and relative rights of a series
of Preferred Stock and which amendment is effective without shareholder
action as provided in Section 7-106-102 of the Colorado Business
Corporation Act.
3. Article IV of the Articles of Incorporation of the Corporation is
hereby amended by the addition of a new Section 8 thereto, to read in
its entirety as follows:
"Section 8. 1999 Series A Convertible Preferred Stock.
I. Designation and Amount.
Three hundred (300) shares of the authorized shares of Preferred Stock of
the Company are hereby designated "1999 Series A Convertible Preferred Stock"
(the "1999 Preferred Stock"). All shares of 1999 Preferred Stock shall rank
prior, as to both payment of dividends and as to distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company,
to all of the Company's now or hereafter issued common stock (the "Common
Stock"), and any other series of capital stock of the Company, other than the
1996 Convertible Preferred Stock, and the 1997 Convertible Preferred Stock, that
is not, by its terms, senior to or pari passu with the 1999 Preferred Stock, and
shall rank junior in all respects to the 1996 Convertible Preferred Stock, and
the 1997 Convertible Preferred Stock of the Company.
II. Dividends.
(1) Except as specifically described herein, the registered owners of the
1999 Preferred Stock, shall not be entitled to receive any dividends. If a
registration statement under the Securities Act of 1933, as amended, (the "Act")
registering the shares of Common Stock of the Company into which the 1999
Preferred Stock is convertible is not declared effective by September 30, 1999,
or if any such registration statement ceases to be effective at any time prior
to the second anniversary of the date on which such registration statement first
becomes effective, the registered owners of each share of 1999 Preferred Stock
shall be entitled to receive out of assets of the Company legally available
therefor, dividends for any period after September 30, 1999, during which such
registration statement is not effective, at the rate of ten percent (10%) per
annum, for each day during which the registration statement is not effective.
Dividends shall be calculated on the amount of the Liquidation Value of each
share. Dividends, if any as provided hereunder, shall accrue without interest
and be cumulative and shall be payable to the registered owners of 1999
Preferred Stock out of assets of the Company legally available therefore,
quarterly in arrears on the last day of each fiscal quarter of the Company.
Dividends shall be payable to shareholders of record on the fifteenth day
immediately preceding such dividend payment date, or if such day is not a
business day, on the immediately preceding business day.
(2) So long as any share of 1999 Preferred Stock is outstanding, the
Company shall not (a) declare or pay any dividend or make any other
distribution (other than dividends payable solely in Common Stock or other
capital stock ranking junior as to dividend rights to the 1999 Preferred
Stock) on the Common Stock or any other class or series of capital stock of
the Company ranking, as to dividends, junior to the 1999 Preferred Stock, or
set funds aside therefor, or (b) purchase, redeem or otherwise acquire, any of
the Common Stock, or any other class of capital stock of the Company ranking
junior as to dividends to the 1999 Preferred Stock (other than in exchange for
Common Stock or other class of capital stock ranking junior as to dividends to
the 1999 Preferred Stock) or set funds aside therefor.
(3) If at any time any dividend on any capital stock of the Company
ranking senior as to dividends to the 1999 Preferred Stock ("Senior Dividend
Stock") shall be in default, in whole or in part, then no dividend shall be
paid or declared and set apart for payment on the 1999 Preferred Stock unless
and until all accrued and unpaid dividends with respect to the Senior Dividend
Stock shall have been paid or declared and set apart for payment. No dividends
shall be paid or declared and set apart for payment on the 1999 Preferred
Stock or on any capital stock ranking pari passu with the 1999 Preferred Stock
in the payment of dividends (the "Parity Dividend Stock") for any period
unless a pro rata dividend has been, or contemporaneously is, paid or declared
and set apart for payment on the Parity Divided Stock or the 1999 Preferred
Stock, as the case may be, so that the amount of dividends paid or declared
and set aside for payment per share on the 1999 Preferred Stock and the Parity
Dividend Stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividend per share on the shares of 1999 Preferred Stock
and the Parity Dividend Stock bear to each other. Notwithstanding the
foregoing, the Company agrees, to the extent that there are funds legally
available therefore, to declare all outstanding Senior Dividend Stock and
Party Dividend Stock as may be necessary to permit the payment of the full
dividends payable with respect to the 1999 Preferred Stock.
(4) Subject to the foregoing provisions, the holders of Common Stock, the
Parity Dividend Stock and each other class of capital stock of the Company
which is junior as to dividends to the 1999 Preferred Stock shall be entitled
to receive, as and when declared by the Board of Directors out of the
remaining assets of the Company legally available therefor, such dividends
(payable in cash, capital shares or otherwise) as the Board of Directors may
from time to time determine.
(5) Any reference to "distribution" contained in this Section II shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution, or winding up of the Company.
III. Liquidation
(1) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, then out of the assets of the Company
before any distribution or payment to the holders of the Common Stock or any
other class of capital stock of the Company ranking junior as to liquidation
preferences to the 1999 Preferred Stock, but after distribution to and subject
to the rights of holders of capital stock of the Company ranking senior as to
liquidation rights to the 1999 Preferred Stock, the holders of the shares of
1999 Preferred Stock the outstanding shall be paid the Liquidation Value of the
shares of 1999 Preferred Stock then outstanding and such holders shall be
entitled to no other or further distribution.
(2) The Liquidation Value of each share of the 1999 Preferred Stock shall
be $1,000 per share plus the amount of any dividends which have accrued thereon
to the close of business on the date of such liquidation, dissolution or winding
up and remain unpaid, whether or not such dividends have been earned or
declared.
(3) After payment in full to the holders of (a) any capital stock ranking
senior as to liquidation rights to the 1999 Preferred Stock, (b) the 1999
Preferred Stock and (c) any class of stock hereafter issued that ranks on a
parity as to liquidation rights with the 1999 Preferred Stock, of the sums which
such holders are entitled to receive in such case, the remaining assets of the
Company shall be distributed among and paid to the holders of the Common Stock
and any other class of capital stock of the Company ranking junior to the 1999
Preferred Stock.
(4) If the assets of the Company available for distribution to its
shareholders shall be insufficient to permit payment in full to the holders of
the 1999 Preferred Stock and all other series of preferred shares ranking
equally as to liquidation preferences with the 1999 Preferred Stock of sums
which such holders are entitled to receive, then all of the assets available for
distribution to such holders shall be distributed among and paid to such holders
ratably in proportion to the respective amounts that would be payable per share
if such assets were sufficient to permit payment in full.
(5) The consolidation or merger of the Company with any other corporation
or corporations or a sale of all or substantially all of the assets of the
Company shall not be deemed a liquidation, dissolution or winding up of the
Company within the meaning of this Section III.
IV. Redemption.
(1) If on September 30, 1999 a registration statement under the Act
registering the Common Stock of the Company into which the 1999 Preferred Stock
is convertible is not effective, the Company shall, at the written election of
the registered owner of any outstanding shares of 1999 Preferred Stock received
on or before October 31, 1999, redeem such shares of 1999 Preferred Stock at the
redemption price per share of $1,000 plus any accrued and unpaid dividends
thereon, whether or not declared, to the date of redemption.
(2) The redemption price for any shares of 1999 Preferred Stock to be
redeemed hereunder shall be payable in cash, out of funds legally available
therefore, as soon as practicable after October 31, 1999. If the Company has
insufficient funds legally available to pay the redemption price of all of the
shares of 1999 Preferred Stock tendered for redemption, the Company shall redeem
as many shares as it has legally available therefore pro rata among the
shareholders tendering 1999 Preferred Stock for redemption and shall continue to
be obligated to redeem the remaining shares tendered for redemption when and as
funds become legally available therefore, subject to the right of any tendering
shareholder to withdraw its election to have such shares redeemed. Any election
to have any shares of 1999 Preferred Stock redeemed pursuant hereto shall be
accompanied with the certificates representing the shares being tendered for
redemption.
(3) At the option of the Company, at any time after March 1, 2003, the
shares of the 1999 Preferred Stock may be redeemed by the Company, in whole or
in part, at any time, at a redemption price of $1,000 per share, plus any
accrued and unpaid dividends thereon, whether or not declared, to the date of
redemption, if the holders of the shares to be redeemed are given at least
thirty (30) days notice of such redemption in writing.
V. Voting Rights.
The holders of the 1999 Preferred Stock shall have no voting rights except
as required by law.
VI. Conversion: Anti-dilution Provisions.
(1) Subject to the provisions of this Section VI, each share of 1999
Preferred Stock
may be converted, at the option of the holder thereof at any time on or after
October 1, 1999 and prior to March 1, 2003, into fully paid and non-assessable
shares of Common Stock of the Company, in the manner and upon the terms and
conditions hereinafter set forth in paragraphs (2) and (3) of this Section VI.
(2) The holder of each share of 1999 Preferred Stock may convert such
share of 1999 Preferred Stock into the number of shares of Common Stock
determined by dividing $1,000, by $ 0.25 (the "Conversion Price").
(3) In order to convert the 1999 Preferred Stock into Common Stock, the
holder thereof shall surrender at the principal office of the Company (or at
such other place as the Board of Directors of the Corporation shall have
reasonably designated for the purpose) the certificate or certificates for such
1999 Preferred Stock properly endorsed in blank for transfer or accompanied by a
proper instrument of assignment or transfer in blank, together with a written
request for conversion stating the name or names in which such holder wishes the
certificate or certificates for such Common Stock to be issued and, if the
certificate or certificates are to be issued in a name or names other than such
holder, payment by such holder of all applicable transfer taxes. The Company
shall, as soon as practicable thereafter, issue and deliver to such holder, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The 1999 Preferred Stock shall be deemed to be converted, and the
person or persons in whose name or names any certificate or certificates for
Common Stock shall be issuable upon such conversion shall be deemed to have
become for all purposes a holder or holders of record of such Common Stock, at
the close of business on the date upon which the Company receives the written
request for conversion covering such shares (which may be delivered by facsimile
transmission). The Company will pay all issue taxes, if any, incurred upon the
issue of Common Stock upon conversion of the 1999 Preferred Stock, provided that
the Company will not pay any transfer or other taxes incurred by reason of the
issue of such Common Stock in a name or names other than that in which such 1999
Preferred Stock so converted were registered. No fractional shares shall be
issued upon conversion, and the Company shall pay cash in lieu of issuing
fractional shares based upon the closing bid price or other fair market value as
determined by the Board of Directors of one share of Common Stock on the
business day immediately preceding the date of conversion. If more than one
certificate representing shares of 1999 Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of 1999 Preferred Stock represented by such certificates, or the
specified portions thereof to be converted, so surrendered. All 1999 Preferred
Stock which shall have been converted as provided in this Section VI shall no
longer be deemed to be outstanding and all rights with respect to such 1999
Preferred Stock shall forthwith cease and terminate except for the right of the
holders thereof to receive Common Stock. Any 1999 Preferred Stock surrendered
for conversion shall be cancelled, retired and thereafter not reissued.
(4) (A) If at any time or from time to time after the date of issuance of
1999 Preferred Stock, the Company determines to distribute to the holders of the
Common Stock (i) securities other than Common Stock, or (ii) property other than
cash, without payment therefor, then, in each such case, the Company shall
provide written notice to each holder of the 1999 Preferred Stock at least 30
days prior to the effective date of any such distribution. During such 30 day
period, the holder of the 1999 Preferred Stock may, at its election, convert the
1999 Preferred Stock into Common Stock of the Company and, if so converted, the
holders shall be entitled to receive such securities or property, other than
cash, which are distributable upon the Common Stock of the Company at the
effective date.
(B) In case the Company shall, after the date of issuance of any 1999
Preferred Stock, (i) pay a dividend or make a distribution on its capital shares
in Common Stock in capital stock or securities convertible into capital stock,
(ii) subdivide its outstanding shares of Common Stock into a greater number of
shares (a stock split), (iii) combine its outstanding shares of Common Stock
into a smaller number of shares (a reverse stock split), or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the Company,
the number of shares of Common Stock into which the 1999 Preferred Stock may be
converted in effect immediately prior thereto shall be adjusted so that the
holder of any 1999 Preferred Stock surrendered for conversion immediately
thereafter would be entitled to receive the number of shares of Common Stock or
other capital shares of the Company which he would have owned immediately
following such action had such 1999 Preferred Stock been converted immediately
prior thereto. An adjustment made pursuant to this subsection shall become
effective immediately after the record date of such action. If, as a result of
an adjustment made pursuant to this subsection, the holder of any 1999 Preferred
Stock thereafter surrendered for conversion shall become entitled to receive two
or more classes of capital shares of the Company, the Board of Directors shall
determine the allocation of the adjustment between or among such classes of
capital shares.
(C) Whenever the number of shares of Common Stock into which the 1999
Preferred Stock may be converted is adjusted as provided in this Section VI and
upon any modification of the rights of a holder of 1999 Preferred Stock in
accordance with this Section VI, the Company shall promptly mail to the holders
of the 1999 Preferred Stock a certificate of the Secretary of the Company
setting forth the number of shares of Common Stock into which the 1999 Preferred
Stock is convertible after such adjustment or the effect of such modification, a
brief statement of the facts requiring such adjustment or modification and the
manner of computing such adjustment or modification.
(D) In case of any consolidation or merger to which the Company
is a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holders of 1999 Preferred Stock shall have
the right thereafter to convert such 1999 Preferred Stock into the kind and
amount of securities, cash or other property which such holders would have owned
or have been entitled to receive immediately after such consolidation, merger,
statutory exchange, sale or conveyance had such 1999 Preferred Stock been
converted immediately prior to the effective date of such consolidation, merger,
statutory exchange, sale or conveyance, and effective provision shall be made in
the Articles of Incorporation of the resulting or surviving corporation or
otherwise so that the provisions set forth in this paragraph (D) of Section VI
for the protection of the conversion rights of the 1999 Preferred Stock shall
thereafter be applicable, as nearly as reasonably may be, to any such shares and
other securities and property deliverable upon conversion of the 1999 Preferred
Stock remaining outstanding or other convertible securities received by the
holders in place thereof, and any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon the exercise of the conversion
privilege, such shares, securities or property as the holders of the 1999
Preferred Stock, or other convertible securities receive in place thereof, shall
be entitled to receive pursuant to the provisions hereof, and to make provisions
for the protection of the conversion right as above provided. The provisions of
this subsection (D) shall similarly apply to successive consolidation, merger,
statutory exchanges, sales or conveyances. Notice of any such consolidations,
mergers, statutory exchanges, sales or conveyances and of said provisions so
proposed to be made, shall be mailed to the holders of 1999 Preferred Stock not
less than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for consideration consisting primarily of securities shall
be deemed a consolidation or merger for the foregoing purposes.
(5) The Company shall at all times after October 1, 1999 reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of 1999 Convertible Preferred Stork, the
number of shares of Common Stock from time to time issuable upon the conversion
of 1999 Preferred Stock then outstanding and shall take all such action and
obtain all such permits or orders as may be necessary to enable the Company
lawfully to issue Common Stock upon the conversion of 1999 Preferred Stock. In
addition, the Company shall also reserve and keep available such other
securities and property as may from time to time be deliverable upon conversion
of the 1999 Preferred Stock and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Company lawfully to deliver
such other securities and property upon the conversion of such 1999 Preferred
Stock. So long as any 1999 Preferred Stock shall be outstanding, the Company
will use its best efforts to take all corporate action necessary in order that
the Company may validly and lawfully issue fully paid and non-assessable Common
Stock upon conversion of the 1999 Preferred Stock, including, without
limitation, the calling of a special shareholders meeting for the purpose of
increasing the number of authorized but unissued shares of Common Stock of the
Company as may be necessary."
4. The amendment contained in these Articles of
Amendment to Articles of
Incorporation was duly adopted by the board
of directors of the
Corporation
pursuant to Section 7-106-102 of the Colorado
Business Corporation Act.
IN WITNESS WHEREOF, MEDIX RESOURCES, INC. has caused these Articles of
Amendment to Articles of Incorporation to be signed by its President and Chief
Executive Officer, effective as of the date of filing with the Secretary of
State of the State of Colorado.
MEDIX
RESOURCES, INC.
By:_________________________
John P. Yeros
President and Chief
Executive Officer
(Exhibit 3.1.13)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, as
amended (the "Act"), Medix Resources, Inc., a corporation organized under the
laws of the State of Colorado, by its Chief Executive Officer, does hereby
certify as follows:
1. The name of the Corporation is Medix Resources, Inc.
2. The Board of Directors of said Corporation at a meeting duly called
and held has authorized and passed resolutions declaring that the amendment to
the Articles of Incorporation contained herein is advisable and directed the
officers of the Corporation to present such amendment to the shareholders of
the Corporation at the Annual Meeting of shareholders.
3. Upon notice given to each shareholder of record entitled to vote on
such amendment to the Articles of Incorporation in accordance with the
requirements of the Act, the Annual Meeting of the shareholders of the
Corporation was held on June 11, 1999, at which meeting shareholders
representing a quorum of the voting power were present in person or
represented by proxy, and the number of votes cast for the amendment by each
voting group entitled to vote separately on the amendment was sufficient for
approval by the voting group.
4 . The amendment approved was as follows:
Section 1 of Article IV of the Corporation's Articles of Incorporation is
amended in its entirety to read as follows:
ARTICLE IV
CAPITAL STOCK
Section 1. Classes and Shares Authorized. The total number of shares of
Common Stock that the Corporation shall have authority to issue is Fifty
Million (100,000,000) shares of Common Stock, $0.001 par value per share. The
total number of shares of Preferred Stock that the Corporation shall have
authority to issue is Two Million Five Hundred Thousand (2,500,000) shares of
Preferred Stock, $1.00 par value per share.
IN WITNESS WHEREOF, Medix Resources, Inc. has caused these Articles of
Amendment to Articles of Incorporation to be signed by its Chief Executive
Officer and Secretary, effective as of the date of filing of these Articles of
Amendment to Articles of Incorporation with the Secretary of State of the
State of Colorado.
MEDIX RESOURCES, INC.
By: _/s/ John P. Yeros
John P. Yeros
Its Chief Executive Officer and
Secretary
3.1.14
ARTICLES OF
AMENDMENT EXHIBIT A
OF
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
MEDIX RESOURCES, INC., a corporation organized under the laws of the State
of Colorado, by its President and Chief Executive Officer does hereby certify:
1. The name of the Corporation is MEDIX RESOURCES, INC.
2 . The Board of Directors of the Corporation has adopted by
unanimous written
consent in lieu of meeting, effective May 10, 1999, the amendment to the
Corporation's Articles of Incorporation contained herein, which amendment sets
forth the text of a determination by the board of directors of the designations,
preferences, limitations and relative rights of a series of Preferred Stock and
which amendment is effective without shareholder action as provided in Section
7-106-102 of the Colorado Business Corporation Act.
3 . Article IV of the Articles of Incorporation of the Corporation is
hereby amended by the addition of a new Section 9 thereto, to read in its
entirety as follows:
"Section 9. 1999 Series B Convertible Preferred Stock.
I. Designation and Amount.
Two thousand (2,000) shares of the authorized shares of Preferred Stock
of the Company are hereby designated "1999 Series B Convertible Preferred Stock"
(the "Series B Preferred"). All shares of Class B Preferred shall rank prior, as
to both payment of dividends and as to distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Company, to all of
the Company's now or hereafter issued common stock (the "Common Stock"), and any
other series of capital stock of the Company, other than the 1996 Convertible
Preferred Stock, the 1997 Convertible Preferred Stock and the 1999 Class A
Convertible Preferred Stock , that is not, by its terms, senior to or pari passu
with the Class B Preferred, and shall rank junior in all respects to the 1996
Convertible Preferred Stock, the 1997 Convertible Preferred Stock and the 1999
Class A Convertible Preferred Stock of the Company.
II. Dividends.
(1) Except as specifically described herein, the registered owners of the
Class B Preferred, shall not be entitled to receive any dividends. If a
registration statement under the Securities Act of 1933, as amended, (the "Act")
registering the shares of Common Stock of the Company into which the Class B
Preferred is convertible is not declared effective by September 30, 1999, or if
any such registration statement ceases to be effective at any time prior to the
second anniversary of the date on which such registration statement first
becomes effective, the registered owners of each share of Class B Preferred
shall be entitled to receive out of assets of the Company legally available
therefor, dividends for any period during such two-year period and after
September 30, 1999, during which such registration statement is not effective,
at the rate of ten percent (10%) per annum, for each day during which the
registration statement is not effective. Dividends shall be calculated on the
amount of the Liquidation Value (as set forth below) of each share. Dividends,
if any as provided hereunder, shall accrue without interest and be cumulative
and shall be payable to the registered owners of 1999 Preferred Stock out of
assets of the Company legally available therefore, quarterly in arrears on the
last day of each fiscal quarter of the Company. Dividends shall be payable to
shareholders of record on the fifteenth day immediately preceding such dividend
payment date, or if such day is not a business day, on the immediately preceding
business day.
(2) So long as any share of Class B Preferred is outstanding, the Company
shall not (a) declare or pay any dividend or make any other distribution
(other than dividends payable solely in Common Stock or other capital stock
ranking junior as to dividend rights to the Class B Preferred) on the Common
Stock or any other class or series of capital stock of the Company ranking, as
to dividends, junior to the Class B Preferred, or set funds aside therefor, or
(b) purchase, redeem or otherwise acquire, any of the Common Stock, or any
other class of capital stock of the Company ranking junior as to dividends to
the Class B Preferred (other than in exchange for Common Stock or other class
of capital stock ranking junior as to dividends to the Class B Preferred) or
set funds aside therefor.
(3) If at any time any dividend on any capital stock of the Company
ranking senior as to dividends to the Class B Preferred ("Senior Dividend
Stock") shall be in default, in whole or in part, then no dividend shall be
paid or declared and set apart for payment on the Class B Preferred unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock shall have been paid or declared and set apart for payment. No dividends
shall be paid or declared and set apart for payment on the Class B Preferred
or on any capital stock ranking pari passu with the Class B Preferred in the
payment of dividends (the "Parity Dividend Stock") for any period unless a pro
rata dividend has been, or contemporaneously is, paid or declared and set
apart for payment on the Parity Divided Stock or the Class B Preferred, as the
case may be, so that the amount of dividends paid or declared and set aside
for payment per share on the Class B Preferred and the Parity Dividend Stock
shall in all cases bear to each other the same ratio that accrued and unpaid
dividend per share on the shares of Class B Preferred and the Parity Dividend
Stock bear to each other. Notwithstanding the foregoing, the Company agrees,
to the extent that there are funds legally available therefore, to declare all
outstanding Senior Dividend Stock and Party Dividend Stock as may be necessary
to permit the payment of the full dividends payable with respect to the Class
B Preferred.
(4) Subject to the foregoing provisions, the holders of Common Stock, the
Parity Dividend Stock and each other class of capital stock of the Company
which is junior as to dividends to the Class B Preferred shall be entitled to
receive, as and when declared by the Board of Directors out of the remaining
assets of the Company legally available therefor, such dividends (payable in
cash, capital shares or otherwise) as the Board of Directors may from time to
time determine.
(5) Any reference to "distribution" contained in this Section II shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution, or winding up of the Company.
III. Liquidation
(1) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, then out of the assets of the Company
before any distribution or payment to the holders of the Common Stock or any
other class of capital stock of the Company ranking junior as to liquidation
preferences to the Class B Preferred, but after distribution to and subject to
the rights of holders of capital stock of the Company ranking senior as to
liquidation rights to the Class B Preferred, the holders of the shares of Class
B Preferred the outstanding shall be paid the Liquidation Value of the shares of
Class B Preferred then outstanding and such holders shall be entitled to no
other or further distribution.
(2) The Liquidation Value of each share of the Class B Preferred shall be
$1,000 per share plus the amount of any dividends which have accrued thereon to
the close of business on the date of such liquidation, dissolution or winding up
and remain unpaid, whether or not such dividends have been earned or declared.
(3) After payment in full to the holders of (a) any capital stock ranking
senior as to liquidation rights to the Class B Preferred, (b) the Class B
Preferred and (c) any class of stock hereafter issued that ranks on a parity as
to liquidation rights with the Class B Preferred, of the sums which such holders
are entitled to receive in such case, the remaining assets of the Company shall
be distributed among and paid to the holders of the Common Stock and any other
class of capital stock of the Company ranking junior to the Class B Preferred.
(4) If the assets of the Company available for distribution to its
shareholders shall be insufficient to permit payment in full to the holders of
the Class B Preferred and all other series of preferred shares ranking equally
as to liquidation preferences with the Class B Preferred of sums which such
holders are entitled to receive, then all of the assets available for
distribution to such holders shall be distributed among and paid to such holders
ratably in proportion to the respective amounts that would be payable per share
if such assets were sufficient to permit payment in full.
(5) The consolidation or merger of the Company with any other corporation
or corporations or a sale of all or substantially all of the assets of the
Company shall not be deemed a liquidation, dissolution or winding up of the
Company within the meaning of this Section III.
IV. Redemption.
(1) If on September 30, 1999 a registration statement under the Act
registering the Common Stock of the Company into which the Class B Preferred is
convertible is not effective, the Company shall, at the written election of the
registered owner of any outstanding shares of Class B Preferred received on or
before October 31, 1999, redeem such shares of Class B Preferred at the
redemption price per share of $1,000 plus any accrued and unpaid dividends
thereon, whether or not declared, to the date of redemption.
(2) The redemption price for any shares of Class B Preferred to be
redeemed hereunder shall be payable in cash, out of funds legally available
therefore, as soon as practicable after October 31, 1999. If the Company has
insufficient funds legally available to pay the redemption price of all of the
shares of Class B Preferred tendered for redemption, the Company shall redeem as
many shares as it has legally available therefore pro rata among the
shareholders tendering Class B Preferred for redemption and shall continue to be
obligated to redeem the remaining shares tendered for redemption when and as
funds become legally available therefore, subject to the right of any tendering
shareholder to withdraw its election to have such shares redeemed. Any election
to have any shares of Class B Preferred redeemed pursuant hereto shall be
accompanied with the certificates representing the shares being tendered for
redemption.
(3) At the option of the Company, at any time after October 1, 2003, the
shares of the Class B Preferred may be redeemed by the Company, in whole or in
part, at any time, at a redemption price of $1,000 per share, plus any accrued
and unpaid dividends thereon, whether or not declared, to the date of
redemption, if the holders of the shares to be redeemed are given at least
thirty (30) days notice of such redemption in writing.
V. Voting Rights.
The holders of the Class B Preferred shall have no voting rights except as
required by law.
VI. Conversion: Anti-dilution Provisions.
(1) Subject to the provisions of this Section VI, each share of Class B
Preferred
may be converted, at the option of the holder thereof at any time on or after
October 1, 1999 and prior to October 1, 2003, into fully paid and non-assessable
shares of Common Stock of the Company, in the manner and upon the terms and
conditions hereinafter set forth in paragraphs (2) and (3) of this Section VI.
(2) The holder of each share of Class B Preferred may convert such share
of Class B Preferred into the number of shares of Common Stock determined by
dividing $1,000, by $0.50 (the "Conversion Price").
(3) In order to convert the Class B Preferred into Common Stock, the
holder thereof shall surrender at the principal office of the Company (or at
such other place as the Board of Directors of the Corporation shall have
reasonably designated for the purpose) the certificate or certificates for such
Class B Preferred properly endorsed in blank for transfer or accompanied by a
proper instrument of assignment or transfer in blank, together with a written
request for conversion stating the name or names in which such holder wishes the
certificate or certificates for such Common Stock to be issued and, if the
certificate or certificates are to be issued in a name or names other than such
holder, payment by such holder of all applicable transfer taxes. The Company
shall, as soon as practicable thereafter, issue and deliver to such holder, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The Class B Preferred shall be deemed to be converted, and the person
or persons in whose name or names any certificate or certificates for Common
Stock shall be issuable upon such conversion shall be deemed to have become for
all purposes a holder or holders of record of such Common Stock, at the close of
business on the date upon which the Company receives the written request for
conversion covering such shares (which may be delivered by facsimile
transmission). The Company will pay all issue taxes, if any, incurred upon the
issue of Common Stock upon conversion of the Class B Preferred, provided that
the Company will not pay any transfer or other taxes incurred by reason of the
issue of such Common Stock in a name or names other than that in which such
Class B Preferred so converted were registered. No fractional shares shall be
issued upon conversion, and the Company shall pay cash in lieu of issuing
fractional shares based upon the closing bid price or other fair market value as
determined by the Board of Directors of one share of Common Stock on the
business day immediately preceding the date of conversion. If more than one
certificate representing shares of Class B Preferred shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Class B Preferred represented by such certificates, or the
specified portions thereof to be converted, so surrendered. All Class B
Preferred which shall have been converted as provided in this Section VI shall
no longer be deemed to be outstanding and all rights with respect to such Class
B Preferred shall forthwith cease and terminate except for the right of the
holders thereof to receive Common Stock. Any Class B Preferred surrendered for
conversion shall be cancelled, retired and thereafter not reissued.
(4) (A) If at any time or from time to time after the date of issuance of
Class B Preferred, the Company determines to distribute to the holders of the
Common Stock (i) securities other than Common Stock, or (ii) property other than
cash, without payment therefor, then, in each such case, the Company shall
provide written notice to each holder of the Class B Preferred at least 30 days
prior to the effective date of any such distribution. During such 30 day period,
the holder of the Class B Preferred may, at its election, convert the Class B
Preferred into Common Stock of the Company and, if so converted, the holders
shall be entitled to receive such securities or property, other than cash, which
are distributable upon the Common Stock of the Company at the effective date.
(B) In case the Company shall, after the date of issuance of any
Class B Preferred, (i) pay a dividend or make a distribution on its capital
shares in Common Stock in capital stock or securities convertible into capital
stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares (a stock split), (iii) combine its outstanding shares of Common
Stock into a smaller number of shares (a reverse stock split), or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the Company,
the number of shares of Common Stock into which the Class B Preferred may be
converted in effect immediately prior thereto shall be adjusted so that the
holder of any Class B Preferred surrendered for conversion immediately
thereafter would be entitled to receive the number of shares of Common Stock or
other capital shares of the Company which he would have owned immediately
following such action had such Class B Preferred been converted immediately
prior thereto. An adjustment made pursuant to this subsection shall become
effective immediately after the record date of such action. If, as a result of
an adjustment made pursuant to this subsection, the holder of any Class B
Preferred thereafter surrendered for conversion shall become entitled to receive
two or more classes of capital shares of the Company, the Board of Directors
shall determine the allocation of the adjustment between or among such classes
of capital shares.
(C) Whenever the number of shares of Common Stock into which the
Class B Preferred may be converted is adjusted as provided in this Section VI
and upon any modification of the rights of a holder of Class B Preferred in
accordance with this Section VI, the Company shall promptly mail to the holders
of the Class B Preferred a certificate of the Secretary of the Company setting
forth the number of shares of Common Stock into which the Class B Preferred is
convertible after such adjustment or the effect of such modification, a brief
statement of the facts requiring such adjustment or modification and the manner
of computing such adjustment or modification.
(D) In case of any consolidation or merger to which the Company
is a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holders of Class B Preferred shall have the
right thereafter to convert such Class B Preferred into the kind and amount of
securities, cash or other property which such holders would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had such Class B Preferred been converted
immediately prior to the effective date of such consolidation, merger, statutory
exchange, sale or conveyance, and effective provision shall be made in the
Articles of Incorporation of the resulting or surviving corporation or otherwise
so that the provisions set forth in this paragraph (D) of Section VI for the
protection of the conversion rights of the Class B Preferred shall thereafter be
applicable, as nearly as reasonably may be, to any such shares and other
securities and property deliverable upon conversion of the Class B Preferred
remaining outstanding or other convertible securities received by the holders in
place thereof, and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon the exercise of the conversion privilege,
such shares, securities or property as the holders of the Class B Preferred, or
other convertible securities receive in place thereof, shall be entitled to
receive pursuant to the provisions hereof, and to make provisions for the
protection of the conversion right as above provided. The provisions of this
subsection (D) shall similarly apply to successive consolidation, merger,
statutory exchanges, sales or conveyances. Notice of any such consolidations,
mergers, statutory exchanges, sales or conveyances and of said provisions so
proposed to be made, shall be mailed to the holders of Class B Preferred not
less than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for consideration consisting primarily of securities shall
be deemed a consolidation or merger for the foregoing purposes.
(5) The Company shall at all times after October 1, 1999 reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of 1999 Convertible Preferred Stork, the
number of shares of Common Stock from time to time issuable upon the conversion
of Class B Preferred then outstanding and shall take all such action and obtain
all such permits or orders as may be necessary to enable the Company lawfully to
issue Common Stock upon the conversion of Class B Preferred. In addition, the
Company shall also reserve and keep available such other securities and property
as may from time to time be deliverable upon conversion of the Class B Preferred
and shall take all such action and obtain all such permits or orders as may be
necessary to enable the Company lawfully to deliver such other securities and
property upon the conversion of such Class B Preferred. So long as any Class B
Preferred shall be outstanding, the Company will use its best efforts to take
all corporate action necessary in order that the Company may validly and
lawfully issue fully paid and non-assessable Common Stock upon conversion of the
Class B Preferred, including, without limitation, the calling of a special
shareholders meeting for the purpose of increasing the number of authorized but
unissued shares of Common Stock of the Company as may be necessary."
4. The amendment contained in these Articles of Amendment
to Articles of
Incorporation was duly adopted by the board of directors of the Corporation
pursuant to Section 7-106-102 of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, MEDIX RESOURCES, INC. has caused these Articles of
Amendment to Articles of Incorporation to be signed by its President and Chief
Executive Officer, effective as of the date of filing with the Secretary of
State of the State of Colorado.
MEDIX
RESOURCES, INC.
By:_________________________
<PAGE>
(Exhibit 3.1.15)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
MEDIX RESOURCES, INC., a corporation organized under the laws of the State
of Colorado, by its President does hereby certify:
1. The name of the Corporation is MEDIX RESOURCES, INC.
2. The Board of Directors of the Corporation has adopted at Special
Meetings of the Board of Directors, duly called and held on December 1, 1999 and
January 5, 2000, the amendment to the Corporation's Articles of Incorporation
contained herein, which amendment sets forth the text of a determination by the
board of directors of the designations, preferences, limitations and relative
rights of a series of Preferred Stock and which amendment is effective without
shareholder action as provided in Section 7-106-102 of the Colorado Business
Corporation Act.
3. Article IV of the Articles of Incorporation of the Corporation is
hereby amended by the addition of a new Section 10 thereto, to read in its
entirety as follows:
"Section 10. 1999 Series C Convertible Preferred Stock.
I. Designation and Amount.
Two Thousand (2,000) shares of the authorized shares of Preferred Stock
of the Company are hereby designated "1999 Series C Convertible Preferred Stock"
(the "Series C Preferred"). All shares of Series C Preferred shall rank prior,
as to both payment of dividends and as to distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company,
to all of the Company's now or hereafter issued common stock (the "Common
Stock"), and any other series of capital stock of the Company, other than the
1996 Convertible Preferred Stock, the 1997 Convertible Preferred Stock, the 1999
Series A Convertible Preferred Stock, and the 1999 Series B Convertible
Preferred Stock, that is not, by its terms, senior to or pari passu with the
Series C Preferred, and shall rank junior in all respects to the 1996
Convertible Preferred Stock, the 1997 Convertible Preferred Stock, the 1999
Series A Convertible Preferred Stock, and the 1999 Series B Convertible
Preferred Stock of the Company.
II. Dividends.
(1) Except as specifically described herein, the registered owners of the
Series C Preferred shall not be entitled to receive any dividends. If a
registration statement under the Securities Act of 1933, as amended, (the "Act")
registering the shares of Common Stock of the Company into which the Series C
Preferred is convertible is not declared effective by March 31, 2000, or if any
such registration statement ceases to be effective at any time prior to the
second anniversary of the date on which such registration statement first
becomes effective, the registered owners of each share of Series C Preferred
shall be entitled to receive out of assets of the Company legally available
therefor, dividends for any period during such two-year period and after March
31, 2000, during which such registration statement is not effective, at the rate
of ten percent (10%) per annum, for each day during which the registration
statement is not effective. Dividends shall be calculated on the amount of the
Liquidation Value (as set forth below) of each share. Dividends, if any as
provided hereunder, shall accrue without interest and be cumulative and shall be
payable to the registered owners of Series C Preferred out of assets of the
Company legally available therefore, quarterly in arrears on the last day of
each fiscal quarter of the Company. Dividends shall be payable to shareholders
of record on the fifteenth day immediately preceding such dividend payment date,
or if such day is not a business day, on the immediately preceding business day.
(2) So long as any share of Series C Preferred is outstanding, the
Company shall not (a) declare or pay any dividend or make any other
distribution (other than dividends payable solely in Common Stock or other
capital stock ranking junior as to dividend rights to the Series C Preferred)
on the Common Stock or any other class or series of capital stock of the
Company ranking, as to dividends, junior to the Series C Preferred, or set
funds aside therefor, or (b) purchase, redeem or otherwise acquire, any of the
Common Stock, or any other class of capital stock of the Company ranking
junior as to dividends to the Series C Preferred (other than in exchange for
Common Stock or other class of capital stock ranking junior as to dividends to
the Series C Preferred) or set funds aside therefor.
(3) If at any time any dividend on any capital stock of the Company
ranking senior as to dividends to the Series C Preferred ("Senior Dividend
Stock") shall be in default, in whole or in part, then no dividend shall be
paid or declared and set apart for payment on the Series C Preferred unless
and until all accrued and unpaid dividends with respect to the Senior Dividend
Stock shall have been paid or declared and set apart for payment. No dividends
shall be paid or declared and set apart for payment on the Series C Preferred
or on any capital stock ranking pari passu with the Series C Preferred in the
payment of dividends (the "Parity Dividend Stock") for any period unless a pro
rata dividend has been, or contemporaneously is, paid or declared and set
apart for payment on the Parity Divided Stock or the Series C Preferred, as
the case may be, so that the amount of dividends paid or declared and set
aside for payment per share on the Series C Preferred and the Parity Dividend
Stock shall in all cases bear to each other the same ratio that accrued and
unpaid dividend per share on the shares of Series C Preferred and the Parity
Dividend Stock bear to each other. Notwithstanding the foregoing, the Company
agrees, to the extent that there are funds legally available therefore, to
declare all outstanding Senior Dividend Stock and Party Dividend Stock as may
be necessary to permit the payment of the full dividends payable with respect
to the Series C Preferred.
(4) Subject to the foregoing provisions, the holders of Common Stock, the
Parity Dividend Stock and each other class of capital stock of the Company
which is junior as to dividends to the Series C Preferred shall be entitled to
receive, as and when declared by the Board of Directors out of the remaining
assets of the Company legally available therefor, such dividends (payable in
cash, capital shares or otherwise) as the Board of Directors may from time to
time determine.
(5) Any reference to "distribution" contained in this Section II shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution, or winding up of the Company.
III. Liquidation
(1) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, then out of the assets of the Company
before any distribution or payment to the holders of the Common Stock or any
other class of capital stock of the Company ranking junior as to liquidation
preferences to the Series C Preferred, but after distribution to and subject to
the rights of holders of capital stock of the Company ranking senior as to
liquidation rights to the Series C Preferred, the holders of the shares of
Series C Preferred the outstanding shall be paid the Liquidation Value of the
shares of Series C Preferred then outstanding and such holders shall be entitled
to no other or further distribution.
(2) The Liquidation Value of each share of the Series C Preferred shall be
$1,000 per share plus the amount of any dividends which have accrued thereon to
the close of business on the date of such liquidation, dissolution or winding up
and remain unpaid, whether or not such dividends have been earned or declared.
(3) After payment in full to the holders of (a) any capital stock ranking
senior as to liquidation rights to the Series C Preferred, (b) the Series C
Preferred and (c) any class of stock hereafter issued that ranks on a parity as
to liquidation rights with the Series C Preferred, of the sums which such
holders are entitled to receive in such case, the remaining assets of the
Company shall be distributed among and paid to the holders of the Common Stock
and any other class of capital stock of the Company ranking junior to the Series
C Preferred.
(4) If the assets of the Company available for distribution to its
shareholders shall be insufficient to permit payment in full to the holders of
the Series C Preferred and all other series of preferred shares ranking equally
as to liquidation preferences with the Series C Preferred of sums which such
holders are entitled to receive, then all of the assets available for
distribution to such holders shall be distributed among and paid to such holders
ratably in proportion to the respective amounts that would be payable per share
if such assets were sufficient to permit payment in full.
(5) The consolidation or merger of the Company with any other corporation
or corporations or a sale of all or substantially all of the assets of the
Company shall not be deemed a liquidation, dissolution or winding up of the
Company within the meaning of this Section III.
IV. Redemption.
(1) If on March 31, 2000 a registration statement under the Act
registering the Common Stock of the Company into which the Series C Preferred is
convertible is not effective, the Company shall, at the written election of the
registered owner of any outstanding shares of Series C Preferred received on or
before March 31, 2000, redeem such shares of Series C Preferred at the
redemption price per share of $1,000 plus any accrued and unpaid dividends
thereon, whether or not declared, to the date of redemption.
(2) The redemption price for any shares of Series C Preferred to be
redeemed hereunder shall be payable in cash, out of funds legally available
therefore, as soon as practicable after March 31, 2000. If the Company has
insufficient funds legally available to pay the redemption price of all of the
shares of Series C Preferred tendered for redemption, the Company shall redeem
as many shares as it has legally available therefore pro rata among the
shareholders tendering Series C Preferred for redemption and shall continue to
be obligated to redeem the remaining shares tendered for redemption when and as
funds become legally available therefore, subject to the right of any tendering
shareholder to withdraw its election to have such shares redeemed. Any election
to have any shares of Series C Preferred redeemed pursuant hereto shall be
accompanied with the certificates representing the shares being tendered for
redemption.
(3) At the option of the Company, at any time after April 1, 2003, the
shares of the Series C Preferred may be redeemed by the Company, in whole or in
part, at any time, at a redemption price of $1,000 per share, plus any accrued
and unpaid dividends thereon, whether or not declared, to the date of
redemption, if the holders of the shares to be redeemed are given at least
thirty (30) days notice of such redemption in writing.
V. Voting Rights.
The holders of the Series C Preferred shall have no voting rights except as
required by law.
VI. Conversion: Anti-Dilution Provisions.
(1) Subject to the provisions of this Section VI, each share of Series C
Preferred
may be converted, at the option of the holder thereof at any time on or after
March 1, 2000 and prior to March 1, 2003, into fully paid and non-assessable
shares of Common Stock of the Company, in the manner and upon the terms and
conditions hereinafter set forth in paragraphs (2) and (3) of this Section VI.
(2) The holder of each share of Series C Preferred may convert such share
of Series C Preferred into the number of shares of Common Stock determined by
dividing $1,000, by $0.50 (the "Conversion Price").
(3) In order to convert the Series C Preferred into Common Stock, the
holder thereof shall surrender at the principal office of the Company (or at
such other place as the Board of Directors of the Corporation shall have
reasonably designated for the purpose) the certificate or certificates for such
Series C Preferred properly endorsed in blank for transfer or accompanied by a
proper instrument of assignment or transfer in blank, together with a written
request for conversion stating the name or names in which such holder wishes the
certificate or certificates for such Common Stock to be issued and, if the
certificate or certificates are to be issued in a name or names other than such
holder, payment by such holder of all applicable transfer taxes. The Company
shall, as soon as practicable thereafter, issue and deliver to such holder, or
to the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. The Series C Preferred shall be deemed to be converted, and the
person or persons in whose name or names any certificate or certificates for
Common Stock shall be issuable upon such conversion shall be deemed to have
become for all purposes a holder or holders of record of such Common Stock, at
the close of business on the date upon which the Company receives the written
request for conversion covering such shares (which may be delivered by facsimile
transmission). The Company will pay all issue taxes, if any, incurred upon the
issue of Common Stock upon conversion of the Series C Preferred, provided that
the Company will not pay any transfer or other taxes incurred by reason of the
issue of such Common Stock in a name or names other than that in which such
Series C Preferred so converted were registered. No fractional shares shall be
issued upon conversion, and the Company shall pay cash in lieu of issuing
fractional shares based upon the closing bid price or other fair market value as
determined by the Board of Directors of one share of Common Stock on the
business day immediately preceding the date of conversion. If more than one
certificate representing shares of Series C Preferred shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Series C Preferred represented by such certificates, or the
specified portions thereof to be converted, so surrendered. All Series C
Preferred which shall have been converted as provided in this Section VI shall
no longer be deemed to be outstanding and all rights with respect to such Series
C Preferred shall forthwith cease and terminate except for the right of the
holders thereof to receive Common Stock. Any Series C Preferred surrendered for
conversion shall be cancelled, retired and thereafter not reissued.
(4) (A) If at any time or from time to time after the date of issuance of
Series C Preferred, the Company determines to distribute to the holders of the
Common Stock (i) securities other than Common Stock, or (ii) property other than
cash, without payment therefor, then, in each such case, the Company shall
provide written notice to each holder of the Series C Preferred at least 30 days
prior to the effective date of any such distribution. During such 30 day period,
the holder of the Series C Preferred may, at its election, convert the Series C
Preferred into Common Stock of the Company and, if so converted, the holders
shall be entitled to receive such securities or property, other than cash, which
are distributable upon the Common Stock of the Company at the effective date.
(B) In case the Company shall, after the date of issuance of any
Series C Preferred, (i) pay a dividend or make a distribution on its capital
shares in Common Stock in capital stock or securities convertible into capital
stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares (a stock split), (iii) combine its outstanding shares of Common
Stock into a smaller number of shares (a reverse stock split), or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the Company,
the number of shares of Common Stock into which the Series C Preferred may be
converted in effect immediately prior thereto shall be adjusted so that the
holder of any Series C Preferred surrendered for conversion immediately
thereafter would be entitled to receive the number of shares of Common Stock or
other capital shares of the Company which he would have owned immediately
following such action had such Series C Preferred been converted immediately
prior thereto. An adjustment made pursuant to this subsection shall become
effective immediately after the record date of such action. If, as a result of
an adjustment made pursuant to this subsection, the holder of any Series C
Preferred thereafter surrendered for conversion shall become entitled to receive
two or more classes of capital shares of the Company, the Board of Directors
shall determine the allocation of the adjustment between or among such classes
of capital shares.
(C) Whenever the number of shares of Common Stock into which the
Series C Preferred may be converted is adjusted as provided in this Section VI
and upon any modification of the rights of a holder of Series C Preferred in
accordance with this Section VI, the Company shall promptly mail to the holders
of the Series C Preferred a certificate of the Secretary of the Company setting
forth the number of shares of Common Stock into which the Series C Preferred is
convertible after such adjustment or the effect of such modification, a brief
statement of the facts requiring such adjustment or modification and the manner
of computing such adjustment or modification.
(D) In case of any consolidation or merger to which the Company
is a party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another entity
of the property of the Company as an entirety or substantially as an entirety,
or in the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the holders of Series C Preferred shall have the
right thereafter to convert such Series C Preferred into the kind and amount of
securities, cash or other property which such holders would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had such Series C Preferred been converted
immediately prior to the effective date of such consolidation, merger, statutory
exchange, sale or conveyance, and effective provision shall be made in the
Articles of Incorporation of the resulting or surviving corporation or otherwise
so that the provisions set forth in this paragraph (D) of Section VI for the
protection of the conversion rights of the Series C Preferred shall thereafter
be applicable, as nearly as reasonably may be, to any such shares and other
securities and property deliverable upon conversion of the Series C Preferred
remaining outstanding or other convertible securities received by the holders in
place thereof, and any such resulting or surviving corporation shall expressly
assume the obligation to deliver, upon the exercise of the conversion privilege,
such shares, securities or property as the holders of the Series C Preferred, or
other convertible securities receive in place thereof, shall be entitled to
receive pursuant to the provisions hereof, and to make provisions for the
protection of the conversion right as above provided. The provisions of this
subsection (D) shall similarly apply to successive consolidation, merger,
statutory exchanges, sales or conveyances. Notice of any such consolidations,
mergers, statutory exchanges, sales or conveyances and of said provisions so
proposed to be made, shall be mailed to the holders of Series C Preferred not
less than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for consideration consisting primarily of securities shall
be deemed a consolidation or merger for the foregoing purposes.
(5) The Company shall at all times after April 1, 2000 reserve and keep
available out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of Series C Preferred, the number of shares
of Common Stock from time to time issuable upon the conversion of Series C
Preferred then outstanding and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Company lawfully to issue
Common Stock upon the conversion of Series C Preferred. In addition, the Company
shall also reserve and keep available such other securities and property as may
from time to time be deliverable upon conversion of the Series C Preferred and
shall take all such action and obtain all such permits or orders as may be
necessary to enable the Company lawfully to deliver such other securities and
property upon the conversion of such Series C Preferred. So long as any Series C
Preferred shall be outstanding, the Company will use its best efforts to take
all corporate action necessary in order that the Company may validly and
lawfully issue fully paid and non-assessable Common Stock upon conversion of the
Series C Preferred, including, without limitation, the calling of a special
shareholders meeting for the purpose of increasing the number of authorized but
unissued shares of Common Stock of the Company as may be necessary."
4. The amendment contained in these Articles of Amendment
to Articles of
Incorporation was duly adopted by the board of directors of the Corporation
pursuant to Section 7-106-102 of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, MEDIX RESOURCES, INC. has caused these
Articles of Amendment to Articles of Incorporation to be signed by
its President, effective as of the date of filing with the Secretary
of State of the State of Colorado.
MEDIX
RESOURCES, INC.
By: /s/ John P. Yeros
John P. Yeros, President
<PAGE>
(Exhibit 3.1.16)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, as
amended (the "Act"), Medix Resources, Inc., a corporation organized under the
laws of the State of Colorado, by its Secretary, does hereby certify as
follows:
1. The name of the Corporation is Medix Resources, Inc.
2. The Board of Directors of said Corporation has consented to, and
authorized by a unanimous written consent, the amendment to the Articles of
Incorporation contained herein, and passed resolutions declaring that it is
advisable, and decided to present such amendment to the shareholders of the
Corporation at the Special Meeting of shareholders.
3. Upon notice given to each shareholder of record entitled to vote on
such amendment to the Articles of Incorporation in accordance with the
requirements of the Act, the Special Meeting of the shareholders of the
Corporation was held on February 14, 2000 and adjourned to March 20, 2000, at
which meeting holders representing quorum power were present in person or
represented by proxy, and the number of votes cast for the amendment by each
voting group entitled to vote separately on the amendment was sufficient for
approval by the voting group.
4 . The amendment approved was as follows:
Section 1 of Article IV of the Corporation's Articles of Incorporation is
amended in its entirety to read as follows:
ARTICLE IV
CAPITAL STOCK
Section 1. Classes and Shares Authorized. The total number of shares of
Common Stock that the Corporation shall have authority to issue is One Hundred
Million (100,000,000) shares of Common Stock, $0.001 par value per share. The
total number of shares of Preferred Stock that the Corporation shall have
authority to issue is Two Million Five Hundred Thousand (2,500,000) shares of
Preferred Stock, $1.00 par value per share.
IN WITNESS WHEREOF, Medix Resources, Inc. has caused these Articles of
Amendment to Articles of Incorporation to be signed by its Secretary,
effective as of the date of filing of these Articles of Amendment to Articles
of Incorporation with the Secretary of State of the State of Colorado.
MEDIX RESOURCES, INC.
By: /s/ David Kinsella
David Kinsella
Its Secretary
EXHIBIT 4.7
SAMPLE WARRANT AGREEMENT
Neither these Warrants nor the shares of Common Stock issuable on exercise of
these Warrants have been registered under the Securities Act of 1933, as amended
(the "Act") or applicable state securities laws. None of such securities may be
sold, assigned, pledged, transferred or otherwise disposed of in the absence of
registration under the Act and registration or qualification under applicable
state securities laws, or an opinion of counsel acceptable to the Company to the
effect that such registrations or qualifications are not required.
MEDIX RESOURCES, INC.
1999 SERIES _ WARRANT CERTIFICATE
DATE ISSUED: ________, 1999
Number of Warrants: ________
Holder: ___________
Address: ____________
Telephone number: _____________
THIS CERTIFIES THAT the holder of this Certificate named above ("Holder") is
entitled to purchase from MEDIX RESOURCES, INC., a Colorado corporation
(hereinafter called the "Company"), on or after __________ and prior to
__________, at $____ per share, the number of shares of the Company's common
stock set forth above ("Common Stock"). The Warrants and all rights thereunder
shall expire on _______________. However, if the closing or last price of the
Common Stock as reported on the OTC Bulletin Board or other recognized quotation
system is $______ or above for ten consecutive trading days after ___________,
the Company, at its option, may upon thirty (30) days prior notice to the
Holder, re-purchase the Warrants from the Holder, at a re-purchase price of $.01
per Warrant, if they are not exercised within such 30-day period or prior to the
end of the three-year exercise period of the Warrants, whichever is shorter. The
further terms and conditions of the Warrants are as follows:
1. These Warrants and the Common Stock issuable on exercise of these Warrants
(the "Underlying Shares") may be transferred, sold, assigned or hypothecated,
only if registered by the Company under the Securities Act of 1933 (the "Act")
and registered or qualified under any applicable state securities laws, or if
the Company has received from counsel to the Holder who is reasonably
satisfactory to the Company a written opinion which is reasonably satisfactory
to the Company to the effect that registration of the Warrants or the Underlying
Shares is not necessary in connection with such transfer, sale, assignment or
hypothecation. Certificates evidencing the Warrants and the Underlying Shares
shall be appropriately legended to reflect this restriction and stop transfer
instructions shall apply.
2. Any permitted assignment of any Warrants shall be effected by the Holder by
(i) executing a form of assignment in the form furnished by the Company, (ii)
surrendering the Warrant Certificate for cancellation at the principal executive
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the Holder), accompanied by the opinion of
counsel referred to above, and (iii) unless in connection with an effective
registration statement which covers the sale of the Warrants and or the
Underlying Shares, delivery to the Company of a statement by the transferee (in
a form acceptable to the Company and its counsel) that such Warrants are being
acquired by the transferee for investment and not with a view to its
distribution or resale, whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) new Warrant Certificates
representing in the aggregate rights to purchase the same number of Shares as
are purchasable under the Warrant Certificate surrendered. Such Warrants shall
be exercisable immediately upon any such assignment of the number of Warrants
assigned. The transferor will pay all relevant transfer taxes. Replacement
Warrant Certificates shall bear the same legend as is borne by this Certificate
3. The term "Holder" should be deemed to include any permitted record
transferee of this Warrant.
4. The Company covenants and agrees that all shares of Common Stock which
may be issued upon exercise hereof will, upon issuance, be duly and validly
issued, fully paid and non-assessable and no personal liability will attach to
the holder thereof. The Company farther covenants and agrees that, other than as
disclosed to the Holder at the time of its purchase of the Warrants, during the
periods within which this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
for issuance upon exercise of the Warrants.
5. The Warrants shall not entitle the Holder to any voting rights or other
rights as a stockholder of the Company.
6. In the event that as a result of reorganization, merger, consolidation,
liquidation, recapitalization, stock split, combination of shares or stock
dividends payable with respect to such Common Stock, the outstanding shares of
Common Stock of the Company are at any time increased or decreased or changed
into or exchanged for a different number or kind of share or other security of
the Company or of another corporation, then appropriate adjustments in the
number and kind of such securities then subject to the Warrants and/or the
exercise price of the Warrants shall be made effective as of the date of such
occurrence so that both the position of the Holder upon exercise and the total
exercise price payable on such exercise will be the same as they would have been
had Holder owned immediately prior to the occurrence of such events the Common
Stock subject to the Warrants. Such adjustment shall be made successively
whenever any event listed above shall occur and the Company will notify the
Holder of the Warrants of each such adjustment. Any fraction of a share
resulting from any adjustment shall be eliminated and the price per share of the
remaining shares subject to the Warrants adjusted accordingly.
7. The rights represented by this Warrant Certificate may be exercised at any
time within the period above specified by (i) surrender of this Warrant
Certificate at the principal executive office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder), (ii) payment to the Company of the exercise price for the number of
Shares the represented by the Warrants then held by the Holder, together with
any applicable stock transfer taxes, and (iii) unless in connection with an
effective registration statement which covers the sale of Underlying Shares, the
delivery to the Company of a statement by the Holder (in a form acceptable to
Company and its counsel) that such Underlying Shares are being acquired by the
Holder for investment and not with a view to their distribution or resale.
The certificates for the Common Stock so purchased shall be delivered to
the Holder within a reasonable time, not exceeding three business days after all
requisite documentation has been provided, after the rights represented by this
Warrant Certificate shall have been so exercised, and shall bear a restrictive
legend with respect to any applicable securities laws.
8. This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Colorado. The Colorado courts shall have exclusive
jurisdiction over this instrument and the enforcement thereof. Service of
process shall be effective if by certified mail, return receipt requested. All
notices shall be in writing and shall be deemed given upon receipt by the party
to whom addressed. This instrument shall be enforceable by decrees of specific
performances well as other remedies.
IN WITNESS WHEREOF, MEDIX REOSURCES, INC. has caused this Warrant
Certificate to be signed by a duly authorized officer, and to
completed and dated as of the date first written above.
MEDIX RESOURCES, INC.
By: ___________________
Title:
National Care Resources - New York, Inc.
National Care Resources - Texas, Inc.
National Care Resources - Colorado, Inc.
JJ Care Resources, Inc.
TherAmerica, Inc.
Cymedix Lynx Corporation
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement No.
333-12241 and 333-24659 of Medix Resources, Inc. (formerly International Nurses,
Inc.) on Forms S-3 and the registration statement No. 333-31684 on Form S-8 of
or report dated March 10, 2000, except the second paragraph of Note 6, as to
which the date is March 20, 2000 appearing in this annual report on Form 10-KSB
of Medix Resources, Inc. for the year ended December 31, 1999.
/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
March 29, 2000
Denver, Colorado
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,229,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,497,000
<PP&E> 279,000
<DEPRECIATION> 164,000
<TOTAL-ASSETS> 4,629,000
<CURRENT-LIABILITIES> 1,853,000
<BONDS> 400,000
0
3,000
<COMMON> 27,000
<OTHER-SE> 2,346,000
<TOTAL-LIABILITY-AND-EQUITY> 4,629,000
<SALES> 0
<TOTAL-REVENUES> 24,000
<CGS> 0
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 4,373,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197,000
<INCOME-PRETAX> (4,548,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,548,000)
<DISCONTINUED> (299,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,847,000)
<EPS-BASIC> (.30)
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