SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. [No Fee Required)
For the fiscal year ended March 31, 1999
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. [No Fee Required]
For the transition period from to
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Commission file number 0-24140
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LIFESTAR CORPORATION
(Name of small business issuer in its charter)
Utah
(State of incorporation 87-64268939
or organization) (I.R.S. Employer Identification No.)
233 Wilshire Blvd., Suite 325, Santa Monica, CA 90401
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(Address of principal executive offices) (Zip Code)
310-395-1134
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common stock, no par value
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Title of Class
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 preceding 12 months, and
(2) has been subject to such filing requirement for the past 90 days.
[X] YES [ ] NO
As of March 31, 1999. 49,033,829 common shares were outstanding and the
aggregate market value of the common shares (based upon the average bid and
asked prices on such date) of the Registrant held by nonaffiliates was
approximately $1,000.00.
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 statement
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
Revenues for the fiscal year ended March 31, 1999 totaled $-0-.
Documents incorporated by reference: None.
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LIFESTAR CORPORATION
FORM 10-KSB
TABLE OF CONTENTS
PART I
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Item 1 Description of Business 3
Item 2 Description of Property 34
Item 3 Legal Proceedings 34
Item 4 Submission of Matters to a Vote of Security Holders 34
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 34
Item 6 Management's Discussion and Analysis of Plan of Operation 35
Item 7 Financial Statements 40
Item 8 Changes in and Disagreement with Accountants on Accounting
and Financial Disclosure 41
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 41
Item 10 Executive Compensation 42
Item 11 Security Ownership of Certain Beneficial Owners and Management 42
Item 12 Certain Relationships and Related Transactions 43
Item 13 Exhibits, List and Reports on Form 8-K 46
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ITEM 1. DESCRIPTION OF BUSINESS
History of the Company
LifeStar Corporation ("LifeStar") and HealthCare Express Limited ("HCX")
(jointly referred to herein as "the Company"). The Company was incorporated in
Utah in September, 1985 under the name Zohoz Funding, Inc. and went public in
December of 1985 under that name. Thereafter, its name was changed twice before
changing its name to LifeStar Corporation in May, 1994. Management changed at
that time and an entirely new board of directors and officers were elected.
Prior to that date, the Company had not engaged in any active business but has
attempted to acquire several on-going businesses which acquisition never were
consummated. In May, 1994, the Company acquired an exclusive United States
license for the LifeStar technology from the National Medical Research Council.
This license allows the Company to commercialize on the Council's patented
LifeStar technology which consists of Interactive Medicine software technology
and its interactive-content PersonalCast and HouseCalls programs.
The Directors of the National Medical Research Council felt that this technology
has potentially significant commercial applications and that their profitable
realization as outside the scope of its non-profit charter. As a result, the
Council reorganized its management to permit the rapid and widespread
commercialization of its technology. The development team responsible for this
technologies conception and design left the Council and joined the Company in
March, 1995. (See "Relationship with the National Medical Research Council.")
The commercialization of its licensed LifeStar technology is at an early stage
of development. Other than grant proceeds from the National Institute of Health
and National Institute on Aging for the development of its licensed LifeStar
technology, the Company has recognized no revenues to date.
The Company
LifeStar is building the first single-focused telecommunication network service
to deliver streamlined healthcare in a more economical manner. It has identified
and targeted a vast profit opportunity--the high-end of value-added telecom
services created specifically for medical care. LifeStar is now developing the
network infrastructure to capture this opportunity. It is building a universal
telecommunication highway that provides specialized mass connectivity for better
quality care delivery. This infrastructure will eventually link nearly every
individual over the age of 40 to healthcare databases. LifeStar calls this new
patented1 network service Medical Dial Tone.
Medical Dial Tone economically monitors and tracks patients in their daily
lives. It uniquely uses proactive or outbound communication that creates greater
efficiency and convenience for both medical provider and patient. LifeStar first
identifies each healthcare organization's patient communication needs. It then
immediately delivers precisely tailored patient-centric solutions for healthcare
providers that create cost reduction, productivity gains, risk identification,
prediction and more confident decision support. Medical Dial Tone's superior
communicating functionality is derived from its ability to reach out to each
patient and motivate better self-care on a proactive basis, while at the same
time gathering invaluable medical data.
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LifeStar sees new converging technologies in the field of telecommunications and
the Internet, combined with current healthcare market conditions, as an ideal
business opportunity. This dynamic creates the foundation for a new kind of
telecommunication enterprise. In seizing this telecommunication opportunity,
LifeStar seeks to capture only the highest profit kernel of value-added network
services and adapt them to specialized healthcare offerings.
LifeStar's Game Plan for Speed to Market Roll-out
LifeStar has created a game plan that guarantees its speed to market roll-out.
Traditionally, fixed infrastructure bound telecoms spend years building costly
facilities. LifeStar's approach forsakes traditional return from fixed
infrastructure investment. Instead, LifeStar has uncovered the need for a
service offering that incurs a smaller fixed investment and creates a more
favorable risk to reward ratio and gross internal ratio of return of 250:1 over
five years with minimal downside. LifeStar has identified potential profit that
can be created by a unique high value-added service delivered by scalable
communication servers run from a central facility. LifeStar's end-to-end
flexible communications infrastructure creates the central communication gateway
for the healthcare industry using servers and convenient access interfaces
overlayed upon existing public switched networks, as well as the Internet.
During the past year, LifeStar has attained the following accomplishments for
accelerating its deployment of Medical Dial Tone network services:
(1) Attained broad patent and intellectual property coverage;
(2) Secured a $13.4 million investment commitment from an industry leader
(NYSE) in information processing technology;
(3) Completed a field-tested stand-alone working system and competitively
bid the construction of its network facility;
(4) Successfully demonstrated proof-of-concept of a 100:1 productivity
advantage at a major national managed care organization; and
(5) Brought aboard a proven management team.
Successful Field Trials
Prototype field trial systems and application modules of LifeStar's technology
have been tested in the field on over 1,100 patients of one of America's largest
and most respected managed care organizations. An independent audit of these
results by the Department of Communication at San Diego State University
dramatically revealed that the frequency of care delivered using LifeStar
technology resulted in a 69% decline in physician visits.
(See LifeStar Field Trial Results)
A second, just completed, controlled study showed a statistically significant
and dramatic reduction in stress levels of patients receiving LifeStar's planned
network services. (The control group showed no significant change in stress
levels during the same period.). The experimental group showed a reduction in
medical visits of 68%, cross-validating the earlier retrospective study. An
analysis of these studies can demonstrate a potential $500 in medical cost
savings per year for each chronic care patient when LifeStar's basic level
network services are used. Overall, these findings corroborate the system's
significant impact on improved care and resulting cost reductions, as well as on
greater patient satisfaction for members of managed care organizations.
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LifeStar's Clear Communication Advantage
The Journal of the American Medical Association, researchers at the government's
Centers for Disease Control and medical researchers at Harvard University have
recently called for the establishment of a truly universal healthcare
communication highway directly to the patient. The Internet is often cited as a
likely mode. However, projections for U.S. individuals online through 2003
suggest that the Internet alone would not be sufficient to provide truly
universal population access.
[Graphic Ommitted]
Projected U.S. and Europe Individuals Online*
*Source: Nortel Networks and Jupiter Communications
It is now projected that Internet access will still be a little over 55% in the
U.S and less than 35% in Western Europe in 2003. Moreover, healthcare is
recognized as being one of the most notoriously technophobic industries, thereby
slowing Internet adoption for remote healthcare.
LifeStar has successfully bridged this problem with a intermodal communication
strategy. It has created Medical Dial Tone, which integrates both the telephone
and the Internet for what they do best for healthcare delivery. The telephone,
after all, is presently universally accepted and reaches 95% of the population
in the U.S. and 85% in Europe. And while the Internet is ideal for economically
delivering content-rich healthcare information, its use is inherently restricted
by often cited problems associated with navigation, literacy, comprehension and
individual motivation.
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The simplicity, ubiquity and reliability of the telephone complements the
Internet in fine-tuning care delivery. To many patients the telephone represents
a trusted intimate space, and it supplements the Internet's information delivery
capability as a more effective mode for individual motivation, encouragement,
support and comfort. Furthermore, the telephone can reach patients in a
proactive outbound mode. Embracing both the telephone and the Internet through
Medical Dial Tone permits LifeStar to create a recognizably superior tool for
healthcare communication, as follows:
(6) Medical Dial Tone provides more frequent, efficient and low cost
contact with patients anywhere, anytime. It creates, in effect, a
dedicated line between patients and caregivers 24 hours a day. For the
first time, it permits the micro-management and fine-tuning of large
patient population care delivery for chronic disease. More precise
fine-tuning of care reduces medical risk, keeps chronic disease under
control, and helps patients to make minor adjustments over time in
their own self-care. It prevents the need for major adjustments later.
(7) By leveraging provider time 100:1 or more, the low cost frequent
contact delivered through Medical Dial Tone ensures higher quality care
while permitting physicians more time to see patients. (It has recently
been proven to reduce routine office visits by 69%.)
(8) Medical Dial Tone directly connects patients to healthcare databases to
create what will become the world's largest real world laboratory
environment. The network becomes the laboratory.
(9) A new higher level of healthcare communication is created by Medical
Dial Tone which uses more convenient proactive and outbound contact
with patients originated from their own healthcare provider. This
streamlined direct care delivery from a concerned healthcare
professional guarantees better patient cooperation with medical
programs, energizes individual motivation, and results in greater
customer satisfaction.
Integrating the simplicity of the telephone with the Internet creates objective
true universal access and connectivity for everyone. Medical Dial Tone brings
back the personal touch to the art and science of the practice of medicine.
Internet Strategy
Medical Dial Tone creates an entirely new medium of communication - radial
personal networks - which allow a single individual (such as a physician,
pharmacist or nurse) to personally interact with 500 or more patients each day.
LifeStar's Internet strategy is, in part, to permit the thousands of existing
eHealth websites to transform their role as routine healthcare information
distribution vehicles into a mass care delivery medium using individual local
healthcare professionals.
Personal healthcare is essentially local in nature and subject to local
licensing requirements. In contrast to personal face-to-face care by local
healthcare professionals, eHealth websites publish customized information and
content. Each eHealth website represents a potential entry-point for
distributing LifeStar's localized outbound telecommunication services. As part
of an expanded offering, LifeStar believes non face-to-face care delivery by
local healthcare providers through eHealth portals habituates the patient to
return to the site, thus guaranteeing the more frequent delivery of care. This
results in selected eHealth websites being able to warrant premium advertising
rates and have greater transaction volume consistent with their present business
models. Medical Dial Tone represents an additional revenue stream to Web site
operators, who will share in LifeStar's telecommunications usage charges
generated by local healthcare providers. The balance of LifeStar's
telecommunication strategy for the Internet is subject to non-disclosure
protocols.
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Business Model
LifeStar has designed a business model unique to both healthcare and
telecommunications. Designed as a telecom, LifeStar charges by the minute for
facilitating more frequent, economical and personalized care delivery while it
gathers vital patient data. It charges premium rates for convenient, streamlined
access and instant remote availability to busy patients on the go anywhere,
anytime. As a healthcare telecom network, LifeStar sees the entire care delivery
process in terms of a closed-loop system, with feed-forward of highly
personalized care to the patient, and feedback of essential qualitative data
from the patient, for precise management of outpatient populations.
LifeStar's comprehensive solution provides a new context for informed medical
decision making that results in the creation of a significant source of
competitive advantage for healthcare organizations. LifeStar's business model
includes the following key elements:
(10) It capitalizes on the obvious market for specialized healthcare
telecommunications through a telecom per-minute usage model;
(11) It executes through a unique switchboard/exchange profit strategy; and
(12) It leverages advanced database technology and analytics originally
developed in other industries for more economical management of mass
patient populations.
Market Opportunity
Presently, two-thirds or more of all patient medical costs are associated with
chronic rather than infectious disease. Chronic disease patients require
frequent monitoring and tracking, often for the remainder of their lives.
Telecommunications today is ideally suited to chronic disease care delivery in
following-up on large patient populations for healthcare organizations. LifeStar
believes a huge market exists for its telecommunication network services in the
monitoring and follow-up of the aging, non-acute chronic disease patient
population of over 200 million in the United States and Europe combined. This
opportunity has compelled LifeStar Corporation to create the unique
infrastructure for building a next-generation international telecommunication
enterprise focused on healthcare.
LifeStar's Value Proposition for Healthcare Organizations
The LifeStar value proposition for its Medical Dial Tone network service is
based on four fundamental benefits to the healthcare industry as a whole:
(13) a 100:1 or greater productivity cost advantage in routine care delivery
in addition to higher quality and more frequent care;
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(14) economical connectivity previously unavailable between millions of
chronic disease patients and healthcare databases resulting in more
effective population, provider and contractor management;
(15) previously inaccessible and invaluable qualitative data for scientific
validation, differentiation and cost comparison of existing and new
pharmaceuticals, medical processes and treatment regimens;
(16) no front-end capital cost of software and implementation for the
customer; and
(17) the much needed patient-centric tool for creating a limitless variety
of new services and products, and increasing customer satisfaction.
For the first time LifeStar's network service, Medical Dial Tone, enables
healthcare providers, managed care organizations and pharmaceutical researchers
to now track hundreds of invaluable metrics, such as:
(18) the rate of progression or alleviation of illness;
(19) severity and sequence of symptoms; and
(20) degree of effectiveness of medication and treatment over time, while at
the same time delivering less expensive and more frequent care.
Value-Based Pricing
Using value-based pricing of specialized its telecom services, LifeStar will
seek to charge for each component of its combined care and data feedback loop
based on a small fraction of the value it creates. This is accomplished by
developing service levels or tiers of service tailored to both the present and
anticipated needs of the healthcare industry. Initially, LifeStar is deploying
five levels of specialized network services for two identified primary segments
of the healthcare industry: managed care organizations and pharmaceutical
manufacturers. Parallel offerings will be made to self-insured corporate
employers and eHealth website operators, to be followed later by home
healthcare, pharmacy, psychotherapy and other professional specialists.
Additional higher premium service levels and niche specific offerings will
eventually be added by LifeStar, based on anticipated market demand. Due to the
essential nature of each individual level of service, bundles or packages of
service offerings will later be created, following roll-out and introduction of
each separate level.
Technology Description
LifeStar's patented technology delivers personalized two-way voice care to
patients on a synchronized basis through voice and/or text, either separately or
simultaneously. It also collects data in the form of patient responses to
queries in a digital format. Patients and members of managed care organizations
are most often called by telephone on an outbound and proactive basis and asked
questions about their treatment regimen. E-mail and personal web pages are used
to support the treatment plan.
LifeStar has adapted evolving methodology in database analytics, call center
management, and Internet and computer telephony to mass medical population
management. Key telecommunication patents are licensed on an exclusive basis
from LifeStar's affiliate non-profit foundation, National Medical Research
Council.
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Network Service Roll Out
Following an extensive competitive bidding process by LifeStar for a prime
network builder for Medical Dial Tone, Affiliated Computer Services, Inc. (NYSE)
was chosen as the prime contractor and systems integrator for all aspects of
infrastructure construction, development, operation, monitoring, billing and
facilities management. Later, Affiliated Computer Services (ACS) agreed to
invest $13.4 million in LifeStar, staged to its network infrastructure build-out
costing $89 million. LifeStar network service will be built in three phases: (1)
a mini-system for further testing; (2) a Dallas stateside standby system; and
(3) a Bermuda based international service facility.
Barriers to Entry/Competitive Advantage for Medical Dial Tone
LifeStar's competitive advantage over other telecoms lies in the fact that it
enjoys potentially wider margins through offering tightly focused value-added
services without related costly transmission infrastructure and overhead.
LifeStar's proven business strategy is to rapidly establish its competitive
advantage by building relationships with healthcare organizations to provide
needed administrative and clinical solutions. As these relationships are
consummated, LifeStar establishes itself as the low-cost provider of focused
patient/member access using its exclusive and patented core competency.
LifeStar's greatest source of initial competitive advantage for its patented
solution is that it more conveniently and economically delivers personal care to
500 or more patients/members per provider per day.
LifeStar's business design and related network service create a growing
repertoire of strategic control points for competitive advantage. Below is a
list of principal control points with analogous corporate examples in
parentheses:
|X| Patent Protection (Pfizer, Merck)
|X| Ownership of Customer Relationship (GE, IBM)
|X| Significant Product Development Lead Time and Experience Curve (Intel)
|X| 100:1 Cost Differential (Level 3)
|X| Control of Distribution/Delivery Mechanism (AOL)
|X| Regulatory Tax Advantage (Starwood, Global Crossing)
|X| Proprietary Network /Open Architecture (Cable Industry)
|X| Specialization in a Vertical Market (MBNA, EDS)
|X| High Switching Costs (Microsoft, IBM)
|X| Enabling Technology (SAP)
|X| Value Chain Position (Blockbuster, Yahoo, VerticalNet)
|X| Stickiness (AOL, Fed Ex)
|X| Network Centric Architecture (DoubleClick, National Data Corporation)
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LifeStar HEDCOM HealthCare Express, JV
Phase I Phase II Phase III
LifeStar Corporation (USA) HealthCare Express, Ltd. (Bermuda) HealthCare Express JV (Europe)
HEDCOM Joint Venture
Software development, systems Construction and acceptance of planned Formation of joint marketing ventures for
integration and testing; Data and Communication Center; country-by-country marketing;
Preview telecommunications facility for Level II marketing to health care European population and disease management
advance marketing of Bermuda center; organization in America; supported by the Bermuda facility;
Level I Advance marketing to healthcare Application of advanced outcomes Joint development of advanced healthcare
organzations and testing within academic research tools for data mining of applications catering to the European
medical community; longitudinal outcomes; market.
Convert system after construction of Support for large ptient connectivity
Bermuda facility to support standby and disease management programs.
capability.
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Specialization in Telecommunication -Three Vital Questions
Q: What is the economic logic for building a telecom entirely around the
healthcare industry?
A: With deregulation and globalization of telecommunications, a company must
either have overwhelming physical and intangible scale advantages, or the
ability to add new functionality and service dimensions to a product in
order to permit commoditization. At the moment, unique economies clustered
around rapidly increasing capacity and commodity type pricing in
telecommunications favor specialization. Advancing technology in computer
telephony allow a new generation of specialized networks to be overlayed on
the public networks and the Internet by utilizing customized communication
servers and proprietary interfaces.
The healthcare industry is a natural market for specialized
telecommunication services that provide labor-saving solutions. Faced
with growing costs, large patient populations, and a need to increase
medical follow-up services, the healthcare industry is always searching
for labor-saving alternatives and innovative solutions. The need now
exists to extend patient care beyond the face-to-face visits into
ongoing and long-term interactive relationships. This is particularly
true for the management of chronic disease patients, who require
frequent monitoring, reinforcement and support in order to change their
lifestyles and improve their health status. As a telecom, LifeStar
offers such tightly focused telecommunication-based productivity
solutions, more economical care delivery and decision support.
LifeStar believes healthcare provides the largest opportunity in the
field of telecommunications for delivering higher value-added pricing
based of services. Services that deliver lower medical costs, better
decision support and greater convenience can demand premium rates.
Generally, industry tailored customized offerings enjoy wider profit
margins and increased profits which can enable the creation of even
more specialized offerings. This cycle of increasing returns based on
specialized services becomes an additional source of competitive
advantage. Such a portfolio of specialized healthcare applications will
constitute a formidable barrier for others hoping to break into the
market.
Q: Why is LifeStar's network service the optimal solution for healthcare
communication?
A: LifeStar first identified the field of healthcare as benefiting from
the impact of advanced computing and communications technology on
labor-intensive interaction costs. LifeStar has been first to
demonstrate these dramatic potential cost savings in field trials and
to then translate these findings up to low-cost industrial strength
network architecture that will deliver service to patient populations
on both sides of the Atlantic. It is first to use simple, ubiquitous
and convenient front-end interfaces that mask a high degree of back-end
data and communication processing complexity. LifeStar has a clear
telecom first mover advantage protected by a broad patent portfolio. In
designing its advanced communication service for healthcare, LifeStar
has drawn widely from research leaders and theorists in the fields of
Learning, Cognition and Behavioral Medicine at Harvard, Yale, Stanford
and the University of California. LifeStar has shaped and crafted its
business design with the aid of market intelligence from Andersen
Consulting, Ernst & Young, McKinsey & Company, Mercer Management and
First Consulting Group.
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Three Vital Questions (cont.)
Q: How will Medical Dial Tone change the practice of medicine?
A: Discovery lies at the heart of medicine. The vast majority of medical
procedures, treatments, protocols and pharmaceuticals have not been
scientifically validated in a real world environment with patients over
extended time intervals. Side effects, safety profiles, drug
interactions and real world lifestyle factors all influence the
therapeutic effectiveness of diagnosis and treatment.
LifeStar believes that the mass connectivity to healthcare databases
afforded by Medical Dial Tone creates what will grow to become the
world's largest real world laboratory environment. The telecom network
becomes the laboratory. Mass patient connectivity to healthcare
databases provides an enormous payoff for international research in
prediction, diagnosis and treatment of human ailments such as cancer,
arthritis, diabetes and heart disease, as well as for the ability to
eventually forestall the effects of aging.
Measurement provides the basis for all risk assessment and prediction.
Whether in finance, engineering, or medicine, measurement lies at the
heart of risk assessment and informed decision making. Medical Dial
Tone economically tracks and measures the degree of effectiveness and
safety of medications and medical treatments. It dynamically plots the
progression or alleviation of illness and measures the severity and
sequence of symptoms by types in real world time. It measures the
impact of patient health characteristics, their health behaviors, and
choices on the progression and management of their illness. Medical
Dial Tone facilitates lower overall medical costs, more profitable and
accurate pricing of healthcare services, more effective disease
management and self-care programs, and an entire new prescription
formulary of individually tailored and personally customized drugs.
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LIFESTAR FIELD TRIAL RESULTS
LifeStar has prototyped and field-tested its initial platform application and
other network services under the guidance of its head of clinical studies, Dr.
Brian Alman. Most recently, two studies were conducted to evaluate the efficacy
and usefulness of LifeStar's new prototype to end-users (patients) and potential
customers (managed care organizations). Over 1,100 patients (mostly from Kaiser
Permanente) have received prototype network services for varying periods of
time. An independent sampling of these patients was surveyed by Dr. Wayne Beach
at the Department of Communication, San Diego State University.
Controlled Study Finds Cost Savings of $500 per Patient per Year
LifeStar conducted a controlled study using prototypes of its Stress and Anxiety
Management Application. Preliminary results show that both patient anxiety and
medical utilization levels are reduced as a result of relaxation response and
patient instruction in self-regulatory skills using LifeStar's service. Medical
utilization was shown to be significantly reduced (68% or 2.84 visits over 5
months - see figure below) for the experimental group (who received network
services), while the control group failed to show any significant change.
Most valuable to managed care organizations is the actual reduction in medical
visits and resulting reduction in medical costs. A cost analysis suggests an
additional $209.40 savings (costs saved by the experimental group minus costs
saved by the control group) to managed care was obtained using the LifeStar
system over five months, which translates to a cost saving of approximately $500
per patient per year. LifeStar believes that these results can be achieved for
patient populations that exhibit other related medical conditions such as
anxiety, depression, cancer, heart disease and diabetes. An in depth review of
the findings and background in the field of interactive healthcare communication
applications is contained in the LifeStar Internal Report Interim Field Trials.
[Chart depicting]
Reduction in Trait-Anxiety levels for control
and experimental group.
Reduction in medical visits for control and
experimental group.
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Longitudinal and Retrospective Study Finds High Level of Satisfaction
In another independent longitudinal, retrospective study (Beach, 1999) conducted
by the Department of Communication, San Diego State University, similar
reductions were observed in the utilization of medical resources associated with
provider visits. Patients currently receiving or who had received LifeStar
network services were surveyed as to: (i) their satisfaction with the service
and the level of appropriateness of its communication functionality, and (ii)
medical resource utilization before, during and after receiving LifeStar
service.
[Chart depicting]
Self-reported medical visits before and after LifeStar service intervention.
Over 90% of the patients reported that they were satisfied with the
communication service and that their needs as patients were consequently better
met. A very high percentage (91%) reported that they experienced the service as
individually tailored to their medical needs. An average reduction of 39.3
visits to the healthcare provider, or 69% change, was reported by these patients
- - suggesting a dramatic reduction in costly healthcare resource utilization (see
chart).
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COMPETITIVE ADVANTAGE & POTENTIAL COMPETITION
Competitive Advantage and Barriers to Competition
Competitive advantage and barriers to competition are of foremost concern to
security analysts and investors because they can ensure stable, long-term
revenue streams. We will jointly address competitive advantage and barriers to
competition as an integrated concept. First, LifeStar believes that as a
telecommunication company, its emphasis on providing specialized custom tailored
healthcare services for reduces the threat of immediate competition from larger
universal provider telecoms. Past business experience shows that threat of
competition is usually low in market niches until a robust business case is
proven. By then, a niche telecommunication player such as LifeStar has had an
opportunity to build leadership based on delivering focused solutions. LifeStar
believes the timing of its execution will provide further competitive advantage
as follows:
Specialization
The LifeStar system is an enabling technology. This feature can translate into
an overwhelming competitive advantage for LifeStar by enabling a myriad of new
communication performance vectors that buy needed cost savings, greater customer
satisfaction, new products and higher quality care delivery.
LifeStar is marketing to a vertical telecommunications market - healthcare.
Presently, telecommunication companies are not creating customer healthcare
applications, but rather acting as universal service providers and they lack an
intimate knowledge of the needs of the vast healthcare marketplace. They also
lack the requisite medical science base required to configure advanced
telecommunication platforms to the specialized needs of managed care. The
relationship and intimacy created in developing telecommunication solutions
customized to customer needs builds an entrenched and formidable barrier to
competition.
Jumbo vertical markets like healthcare are often ideal places to make money. By
sequentially drilling-down on individual segments of the healthcare market to a
degree that competing telecommunication companies are either unwilling or unable
to match, LifeStar has the opportunity to own the customer and exclude tough
competition.
LifeStar has developed a profound understanding of the true dynamics and value
chain of each of its chosen healthcare market segments in order to address their
needs for greater profits. This, in turn, permits value-based pricing, which is
the most profitable form of pricing. Business history also shows that once a
market segment adopts a market leading solution, loyalty lasts to the grave. An
additional advantage of specialization is that each highly competitive vertical
market segment in healthcare has its own professional trade association and
strong word of mouth channel, which in turn, reduces LifeStar marketing costs.
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Timing
Speed to market, product development lead-time and the timing of entry into a
market all confer advantage. The firm that has more experience developing and
delivering a product or service generally is more profitable than a firm without
experience. The market for direct to patient telecommunication has been primed
by heightened managed care motivation to find ways to create "clinical
outreach", "distance medicine", "access" and "availability". In its industry
review, First Consulting Group identified outreach, access and availability of
members as a strategy being adopted by nearly all managed care organizations.
The report states "Outreach is important in establishing a partnership in care
and managing care needs in a more timely and reliable way. Outreach requires new
mechanisms for tracking patients and following up with them." And, Anderson
Consulting has found, "Soon, healthcare will be available at anytime, in any
place. The winning strategy is to bring care directly to consumers through
telecommunications. Thus, the need for consumers or providers to travel to
receive services - most of which are information based - is largely
diminished."2
Establishing ongoing connectivity to the end-user customer enables patient
self-reporting. The self-reporting facility shifts healthcare from an episodic
encounter to a continuous flow of patient information allowing managed-care
firms to view the direction and flow of patient behavior. It allows these firms
to anticipate where the patient is heading and to develop their service
responses and offerings in response to these movements.
Over ten thousand websites are now providing medical information to consumers.
The establishment of the Science Panel on Interactive Communication and Health
by the U.S. Department of Health and Human Services, and a growing science base
of peer reviewed literature, supports the timeliness of an entry into healthcare
telecommunications. A well-timed entry with a needed solution creates an
opportunity for strategic advantage. First-to-market in healthcare
telecommunications provides the opportunity to create the standard in a vertical
market against which all later competitors must fight. It confers a huge
competitive advantage to grasp market share, which can last for years to come.
LifeStar's product development time also confers advantage. LifeStar has
licensed ground breaking patents on an exclusive basis from the National Medical
Research Council (NMRC), a non-profit foundation where LifeStar's senior
management was part of the original development team at. The underlying
healthcare communication technology strategy was developed with the
contributions of over a dozen department heads at such academic institutions as
Harvard, Yale, UCLA and Stanford and represents the state of the art in the
field of Behavioral Medicine, Learning and Cognition. LifeStar benefits from the
extensive experience curve, experiments and field testing of its
telecommunication system. Experience curve is in itself identified as a separate
and distinct component of profit strategy and is a source of competitive
advantage.
Network-Centric Architectural Model
The network-centric design presently appears to be the last evolution for some
time to come in both computing and telephony. Presently, no competing computing
paradigm is forecast to replace the network centric model for sometime according
to industry leaders. The present large commitment and heavy investment in
telecommunication infrastructure by telecom acts as a barrier to change and
obsolescence for the foreseeable future.
High Switching Cost
Rapidly building lifetime patient connectivity to healthcare organizations'
databases creates an installed base. Once established, the work to swap it out
might be prohibitively costly. Like a personal telephone directory, LifeStar One
Touch Personal IVR (Interactive Voice Retrieval) menu selection keys each
individual's own providers, pharmacists, nurses, therapists, trainers and
becomes a one-touch means of communication.
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LifeStar's approach to creating a critical mass of users is to have open and
free interfaces allowing disease management program developers to integrate
their products with its network service. By proliferating usage through LifeStar
proprietary network infrastructure with its open and free interfaces, in
addition to distributing development tools, LifeStar eliminates bottlenecks to
growth and accomplishes its goal of rapid market development while increasing
switching costs.
In general, the emergence of managed care has reduced traditional bonds between
the patient, healthcare providers and healthcare management organizations. In
response to this challenge, many healthcare organizations are working to
minimize the lifetime cost and understand the value of each member. As in retail
offerings, companies that succeed in better understanding their customers can
provide better service through providing more personalized interactions.
Information derived from either retail customers or healthcare patients allow
companies to better anticipate or predict demand and optimize service delivery.
It has been shown in the marketing of retail products and services that this
personalization results in more frequent customer interactions, which in turn
further enriches the organization's knowledge of its customers.
LifeStar believes that the principles learned in database marketing and
Web-based marketing of products apply readily to healthcare delivery. As in
retail marketing, the frequency of customer interactions and a personalized
relationship can become so compelling that working with competition becomes an
inconvenient alternative. In the process of building a personal relationship for
managed care delivery, LifeStar network services will leverage the strength of
its end-user relationship to execute health specific marketing strategies and
sell complementary service packages.
Tax Free Status
By operating its network service facility offshore, LifeStar affiliate,
Healthcare Express, enjoys the flexibility to devote a significantly larger
portion of its revenues to building value on a pre-taxed basis. When competition
for its services emerges from larger telecommunication providers, LifeStar will
have the advantage of being able to lower its usage prices while still retaining
a greater portion of tax-free profit than its competitors.
Strategic Control Points in LifeStar's Business Design
LifeStar sees building strategic control as a derivation of its ability to
protect its profit stream against both competition and customer power. In one
sense, strategic control points and business models represent bundles of future
options. Stock market capitalization is derived from future prospects. A company
benefits from this option effect when its stock represents more than one
potential source of competitive advantage - the more sources and models, the
greater the effect.3 Strategic control points protect the profit stream of the
business. The greater the strategic control the greater the predictability of
earnings; and the greater the predictability, the higher the valuation. This is
based on the idea that part of the value of the equity is that it participates
in more than one possible future.
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LifeStar's business design and related network service create a growing
repertoire of strategic control points for competitive advantage. Below is a
list of principal control points with analogous corporate examples in
parentheses:
|X| Patent Protection (Pfizer, Merck)
|X| Ownership of Customer Relationship (GE, IBM)
|X| Significant Product Development Lead Time and Experience Curve (Intel)
|X| 100:1 Cost Differential (Level 3)
|X| Control of Distribution/Delivery Mechanism (AOL)
|X| Regulatory Tax Advantage (Starwood, Global Crossing)
|X| Proprietary Network /Open Architecture (Cable Industry)
|X| Specialization in a Vertical Market (MBNA, EDS)
|X| High Switching Costs (Microsoft, IBM)
|X| Enabling Technology (SAP)
|X| Value Chain Position (Blockbuster, Yahoo, VerticalNet)
|X| Stickiness (AOL, Fed Ex)
|X| Network Centric Architecture (DoubleClick, National Data Corporation)
Potential Competition
Within the field of telecommunications, there presently are no companies
specializing in communication solutions for healthcare. LifeStar recognizes that
the total market size and wide value-added margins found in healthcare
communications will make it attractive for telecommunication carriers to enter
at some point. LifeStar believes that traditional telecommunication companies do
not recognize the real drivers of profitability nor have they created
specialized value-added solutions for the healthcare industry. Therefore,
LifeStar does not anticipate immediate competition from existing
telecommunication companies such as AT&T, Worldcom MCI (and Sprint), Regional
Bell Operating Companies (RBOCs).
Several next-generation companies, such as Qwest, Level 3 or Enron
Communications, are looking to vertical markets. However, these companies are
generally facilities-based with huge up-front investments of time and money for
building the network backbone. In comparison, LifeStar's network roll out is
low-cost and roll out time is short. LifeStar does not necessarily compete with
these providers but could potentially engage in partnerships in order to jointly
market their bandwidth along with LifeStar's network service. Most competition
might be from smaller telecommunication companies that provide value-added
services. At the present time, there is no telecommunication company that
provides healthcare services such as Medical Dial Tone and on the scale proposed
by LifeStar. Therefore, LifeStar believes that competition from such companies
would not have a substantial impact on the marketplace.
There are currently 10,000 or more medical websites (e.g., drkoop.com,
healthcentral.com, Ask Dr. Weil, Medscape) offering health information, chat
rooms and online support groups, administration of electronic medical records,
updates on clinical trials, etc. The Internet is presently passive and cannot
proactively engage the patient on an outbound basis in his or her care, a
critical element in healthcare delivery. It is limited in its scope for
healthcare. LifeStar's Internet Strategy is to integrate communication over the
telephone with communication through the Internet and provide a comprehensive
solution for healthcare communication.
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COMPANY BACKGROUND
National Medical Research Council
The National Medical Research Council (the "Council"), in conjunction with the
National Institutes of Health ("NIH"), has spent years of intensive research on
the problem of reducing medical costs associated with chronic disease. Upon
receiving landmark United States patents, NIH licensed this valuable proprietary
technology to a for-profit company, LifeStar Corporation. LifeStar has been
created to commercialize this technology and now holds exclusive rights to these
patents.
Intellectual Property
The LifeStar Advanced Telecommunication Network Service for the healthcare
industry is based on core patents granted to National Medical Research Council,
a healthcare technology nonprofit research foundation, located in Santa Monica,
CA. LifeStar holds the exclusive rights to these patents for the United States.
Its sister company, Healthcare Express, Ltd. holds the exclusive rights to
Europe with additional rights to the United States for network services. These
granted patents stake out the entire field of prevention and management of
chronic disease through telecommunications.
Beginning with United States Patent 5,377,258, the National Medical Research
Council described a telecommunications system that would be used to provide a
two-way or interactive dialogue with patients to reinforce specific self-care
behavior while motivating individuals to follow medical protocols--the LifeStar
Personal Cast. At the same time design patents Des. 363,069 and Des. 372,126
were issued covering wireless devices for medical care. These patents were
followed by United States Patent 5,596,994, which describes the use of computer
databases in conjunction with a variety of telecommunication platforms for the
delivery of patient protocols in the field of medicine. United States Patent
5,722,418 was also granted to the National Medical Research Council for a
telecommunications guidance system for medical information exchange processes.
Additional patents are pending, as submitted by the Council, covering all
aspects of LifeStar's network-centric, value added telecommunication services,
utilizing both public and private networks. Patents have now been granted or
applied for covering all aspects of the LifeStar system throughout European and
Asian markets, which comprise three-fifths of the world's population.
Research Advisors
Pursuant to its Technology Sharing Agreement between the National Medical
Research Council and LifeStar, the Council has agreed to make available the
services of certain members of its current roster of distinguished research
advisors. In the past, the Council has retained the services of various
university research personnel at Harvard, Yale, Stanford, UCLA, USC and so on,
with whom it has had a continuing relationship. Many of these professionals have
provided support in the development of the Council's LifeStar Project including
Dr. Herbert Benson, LifeStar's Chief Consulting Scientist.
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The Council has agreed to provide certain liaison functions in facilitating the
availability of these advisors, wherever possible and to the extent their
schedules permit, to the Company for technical support of its LifeStar
technology. The Council will be paid a nominal overhead fee plus its out of
pocket costs for the consulting services of each individual researcher. LifeStar
has agreed, under the terms of the Technology Sharing Agreement, not to compete,
consult directly, nor separately, or to retain the service of these researchers
for a period of two years upon the termination of the agreement. Presently, the
services of the following researchers are covered under the terms of the
agreement.
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EMPLOYEES & MANAGEMENT
Staffing
LifeStar is currently moving from the development and testing phase of its
technology to a commercialization phase consisting of ramp-up, pre-launch and
roll out activities. Its plan with respect to staffing for commercialization
consists of outsourcing all network service technical operations while retaining
marketing and financial administration in-house. LifeStar has organized its
staffing and recruitment needs into two phases.
Organizational charts depicting LifeStar's present executive officers and
directors and planned recruits for Phase I and II are displayed below.
Executives whose recruitment is planned during Phase I are indicated in boxes
with dotted lines.
Phase I
Staffing during the architectural and mini-system construction period of 8
months, and Phase II-Staffing at the beginning of the first full marketing year.
[graphic omitted, but included the following information:]
Board of Directors
Chairman - Carson E. Beadle
Vice Chairman - W. Douglass
Director - Lyle Breaux ----- Strategic Review & Staffing, Ernst & Young
Systems Integration ACS
Chief Technology Officer/VP-Technology - Ram S. Payaga
- -----Director of MIS & ACS Liaison
- -----chief financial Officer/Treasurer
Controller - George C. Keck
Senior VP-Markets
- -----VP-Managed Care Markets
- -----VP-Corporate Employer Markets
- -----VP-Pharmaceutical Markets
- -----VP-eHealth Markets
VP-Seminars & Communications - Kimberley Heart
Chief Consulting Scientist
VP-Clinical Studies - Brian Alman, Ph.D.
VP-Application Development - Rena Brar
Board of Advisors NMRC
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Phase II
Phase II provides for planned succession based on support of network build-out.
During this period, LifeStar, with the aid of executive search firms and Ernst
&Young, will select a CEO with broad marketing experience in the managed care
industry. A CFO will be selected in consultation with LifeStar's newly
designated CEO. Sales and Product Managers will then be hired.
[graphic omitted, but included the following information:]
Board of Directors
Chairman - Carson E. Beadle
Vice Chairman - W. Douglass
Director
Director
Director - Lyle Breaux ----- Strategic Review & Staffing, Ernst & Young
Strategic Review by Ernst & Young
President & CEO
Systems Integration ACS
Chief Technology Officer/VP-Technology - Ram S. Payaga
- -----Director of MIS & ACS Liaison
- -----VP Product Development
- -----Chief Operating Officer
- -----Chief Financial Officer/Treasurer
Controller - George C. Keck
Senior VP-Markets
- -----VP-Managed Care Markets
- -----VP-Corporate Employer Markets - Carson Beadle (int.)
- -----VP-Pharmaceutical Markets
- -----VP-Internet Markets
VP-Seminars & Communications - Kimberley Heart
- -----VP-Professional Services
Chief Consulting Scientist - Herbert Benson, MD
VP-Clinical Studies - Brian Alman, Ph.D.
VP-Application Development - Rena Brar
Board of Advisors NMRC
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Executive Officers, Directors and Consultants
Carson E. Beadle--Chairman, Senior Vice President Marketing
Prior to joining Lifestar, Mr. Beadle held management roles as the director
responsible for the New York and Eastern Canada regions of William M. Mercer. In
his corporate role, he initiated national marketing, public relations and
insurer performance standards. During this period, he developed a deep
understanding of strategic planning and the needs of corporate America and the
healthcare industry. He held these posts for twenty-five years during which
Mercer became the world's largest actuarial and employee benefits consulting
firm, with over one thousand actuaries, more than one hundred offices and
consulting revenues exceeding one billion dollars.
An original developer of the innovative flexible benefits concept, he has been
in constant demand as a lecturer and consultant on all aspects of employee
benefits and in negotiations on behalf of the nation's largest corporations with
insurance carriers and healthcare providers. He has chaired health committees of
the Business Roundtable, the US Chamber of Commerce and major legislative
organizations in Washington, DC. These experiences have earned him the respect
of a broad array of senior executives and have produced a highly significant
network of contacts at the highest administrative level within the healthcare
industry.
As founder and president of the White House supported Health Project, Mr. Beadle
has worked closely with senior members of the healthcare industry in developing
the high profile C. Everett Koop National Health Awards. He is also chairman of
the Business Forum on Aging of the American Society on Aging, focusing on
bridging the essential areas of aging and healthcare, the two most significant
influences on the U.S. economy of the future.
He currently serves as a director and member of the Executive, Finance and
Personnel Committees of the Security Mutual Life Insurance Company of New York
and chairs their Strategic Marketing Committee. The company's broad range of
products includes specialized services for the vast credit union field. He is
also a director, member of the Audit Committee and chairman of the Marketing
Committee of the Security Equity Life Insurance Company of New York, a company
focusing on high net-worth individuals.
In addition to his management, consulting and marketing roles, Mr. Beadle has
authored over100 articles on healthcare appearing in such publications as the
New England Journal of Medicine, Fortune, Wall Street Journal and The New York
Times and has been the featured speaker at many leading human relations-related
conferences in the U.S. and abroad. Education: University of Toronto and Queen's
University, Ontario, Canada.
Lyle Breaux --President and Director
While at National Medical Research Council, he was responsible for heading up
the research team that developed the LifeStar project. Mr. Breaux has over a
dozen domestic and foreign patents to his credit and is considered the leading
pioneer and innovator in the field of healthcare telecommunications.
While at NMRC, he was first to file landmark patents for modifying human
behavior using computer telephony and database technology. Soon after, he was
first to patent the use of the strong principles of learning, cognition and
behavioral medicine delivered through telecommunications. Later, he was first to
apply network based telecommunications and database technology to the individual
management of mass patient populations. Working with patients and Dr. Alman, he
showed that two-way and interactive telephony could provide near comparable
results to face-to-face treatment in chronic disease management at a far lower
cost.
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Mr. Breaux is responsible for setting LifeStar's strategic business direction
and overseeing the firm's international expansion, beginning with Germany. It is
anticipated that within six to eight months a chief executive officer will be
recruited with a strong background in healthcare industry sales and marketing,
in addition to other members of an expanded management team. Mr. Breaux has
agreed to serve in a transitional capacity as President and chief evangelist
until the management team recruitment process is completed, at which time he
will direct overall corporate development, applications research and
international expansion.
Prior to joining the National Medical Research Council, of which he was a
founder with Mr. Smith and others, Mr. Breaux was founder and Chief Executive
Officer of Radiographic Systems, a nationwide medical products and service
company, directing its expansion and later profitable sale. Mr. Breaux was a
founder of First Pacific Bank, Beverly Hills, serving as Director for ten years.
Mr. Breaux has been associated with Mr. Smith in a variety of investments over
the past two decades. He obtained his B.Sc. degree with honors in business
administration at the University of California, Los Angeles and completed an
additional course of study at UCLA Medical School.
Robert Chan, Pharma D., Director, Executive Vice President --Chief, Healthcare
Markets Dr. Chan possesses a distinguished background in both telecommunications
and healthcare. He has a doctorate in clinical pharmacology. He will head up
LifeStar's consultative sales initiative to both the managed care and
pharmaceutical markets. Early in 2000, Dr. Chan left Ernst & Young to join
LifeStar. While at Ernst & Young he served as their National Director of Managed
Care Alliances, giving him access to managed care, pharmaceutical and chain
pharmacy organizations at their highest administrative level. Dr. Chan's
combined telecommunications, information processing and healthcare background
uniquely fits LifeStar's business model as a specialized healthcare telecom.
Herbert Benson, MD--Chief Consulting Scientist
Dr. Benson of Harvard Medial School is without question the preeminent
researcher in the field of patient self-regulation of chronic disease. Through
his work he discovered the relaxation response and continues to lead research
into its efficacy in counteracting the harmful effects of stress and pain while
improving self-care. His laboratory studies and field research have resulted in
a towering body of work consisting of more than 150 scientific studies and
publications in such peer reviewed journals as The New England Journal of
Medicine, Journal of American Medical Associations, Lancet and Nature. More than
four million copies of Dr. Benson's books have been printed. He is the founder
and President of the world famous Mind/Body Medical Institute of Harvard Medical
School and Beth Israel Deaconess (a Harvard Medical School teaching hospital).
In addition, Dr. Benson is Chief of the Division of Behavioral Medicine at Beth
Israel Deaconess Medical Center. Each year Dr. Benson, in conjunction with
Harvard, hosts seminars both at Harvard and in other major cities attended by
over a thousand healthcare providers.
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The recipient of numerous national and international awards, Dr. Benson is the
world's pioneering scientist on the effects of stress. In laboratories at
Harvard Medical School, he first proved the existence and therapeutic benefits
of evoking the relaxation response, an inborn natural human reflex that is
available to counteract the equally natural fight-or-flight reflex. Dr. Benson
showed that the relaxation response decreases oxygen consumption, blood
pressure, heart rate and respiratory rate--the exact opposite to those that
occur during the stress response--and is effective in the treatment of
hypertension, cardiac arrhythmia, chronic pain, infertility, insomnia,
premenstrual syndrome, gastrointestinal disorders, anxiety, mild depression and
chronic fatigue. Working at Harvard Medical School's Thorndike Memorial
Laboratory, Boston City Hospital, Beth Israel Hospital and New England Deaconess
Hospital, Dr. Benson and his staff further defined the relaxation response and
determined its clinical usefulness. Later, he extended his discoveries on
physiologic self-regulation to cognitive self-regulation for self-care of
chronic disease, including cardiac rehabilitation and the many stress related
symptoms of both cancer and AIDS.
Dr. Benson first identified and later quantified the extent of relationship
between unnecessary visits to healthcare providers and the patient's involvement
in self-regulation. He showed that 60-90% of all medical office visits in the
United States stem from stress related disorders and that stress in some form is
a precursor to much of chronic disease. He demonstrated that an understanding of
the mechanisms of stress and its treatment is increasingly important in the
contemporary management of medical conditions. After identifying one of the root
causes of all unnecessary medical costs, Dr. Benson recognized the ongoing work
and patents by National Medical Research Council as key to using
telecommunications to refocus patients on more frequent self-care within their
daily lives. Dr. Benson extended this concept into using telecommunications to
both deliver care and to gather previously unavailable medical data and
longitudinal outcomes leading to what will become the world's largest medical
laboratory-like facility operating in a real world environment--LifeStar's
Healthcare Communications Facility (HEDCOM). Dr. Benson is an internationally
respected leader in the field of medicine. He is now acting as LifeStar's Chief
spokesman and is chairman of its Board of Medical Advisors.
Ram S. Prayaga--Chief Technology Officer
Prior to joining LifeStar as Chief Technology Officer, he was responsible for
the design of the patented PersonalCast(TM) System at the National Medical
Research Council. He joined LifeStar Corporation as CTO and was responsible for
the development of the service level prototypes and network service
architectural specifications. More recently, he has been responsible for
outsourcing the network development and system integration for the LifeStar
System. As CTO, he is responsible for articulating the technical architecture of
the System and the central coordination of LifeStar's relationship with its
partners, Affiliated Computer Services, Inc.
His past development experience includes design and development of an advanced
virtual reality system for medical teaching and design and development of an
expert system for manufacturing. He has conducted extensive research work in
neural networks, human vision, artificial intelligence and human interface
design. He has a BS in Computer Science from University of Bergen, Norway, an MS
in Computer Science from University of Southern California and an MA in
cognitive Science from University of California, San Diego, where he had been
employed as a researcher while working on his doctorate in cognitive Science.
25
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Brian Alman, Ph.D.--Vice President, Clinical Studies
He has supervised LifeStar's field trials and application development in
collaboration with Dr. Benson of Harvard Medical School. For the past four
years, he has specialized in applying distance medicine and interactive
healthcare communications to a variety of patient groups suffering from chronic
disease. He is an internationally recognized authority on self-regulation in
chronic disease management. He has authored three medical textbooks on that
subject, one of which is the definitive text in the area. Dr. Benson lectures
annually at seminars in France, Germany, Belgium, India and the United States at
medical institutions such as Harvard Medical School, the University of
Paris-Sorbonne, University of California, Scripps Medical Institute and Kaiser
Permanente, one of the largest healthcare delivery systems in the world.
Together with Dr. Benson, he has consulted with Procter & Gamble on applications
of LifeStar technology to various healthcare initiatives. For several years, Dr.
Alman has been testing the evolving LifeStar prototype network services on
patients referred by Kaiser Permanente in nearly 20 chronic disease issues. He
holds a Bachelors degree from Suffolk University in Boston, Massachusetts and an
MA and Ph.D. in Clinical Psychology from the California School of Professional
Psychology in San Diego.
Rena Brar--Vice President, Application Development
She joined the National Medical Research Council in 1992 where she directed the
original theoretical research for the commercial application of its LifeStar
project and collaborated with Mr. Breaux on authoring a variety of research
papers and tutorials to support application for funding for prototype
development. She is extending and integrating current research findings into the
construction of predictive, compliance and self-regulation models to support the
roll out of network services.
Prior to joining the Council, she worked on research in human memory and
cognition at the Andrus Gerontology Institute at the University of Southern
California. She is a member of the California Bar. She has extensive experience
in applied research derived originally from judicial research and later in human
cognition and behavior and received a Juris Doctor from USC and an MA in
experimental psychology from the University of California, San Diego.
Kimberly Heart--Vice President, Communication and Seminars
She is a pioneer in the experimental application and delivery of care through
both telecommunications and broadcast media. From 1994 until the present, she
has worked with National Medical Research council on the development and
implementation of its patented LifeStar technology. She has appeared as a stress
expert on CBS and various local stations, including her own interactive radio
talk show. She is a published author and has written a text on human stress in
relationships. She has extensive experience in demonstrating the LifeStar
PersonalCast interface to large numbers of healthcare providers and focus
individuals. She received an MA in psychology from the University of Colorado, a
PA in psychology from the Medical College of Georgia and BS from the University
of Wisconsin.
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ACS-LifeStar Systems Development Management
The LifeStar systems development project requires careful organization and
experienced management. Together with ACS, LifeStar has planned a joint
management team with an Executive Steering Committee and Project Oversight
Committee. The following organization chart illustrates the proposed team:
[graphic omitted, but included the following information:]
Strategic Review, Ernst & Young ACS/LifeStar Lyle Breaux
Executive Steering Ram S. Prayaga
Committee Darin LaGrange
Tom Latham
Bernie Wess
Project Oversight Ram S.Prayaga
Operational Mike O'Donnell
Committee ken Housman
Dave Arthurs
ACS Project Executive
(lateral)
ADT Development Team Leader - (reporting) Engineers
AIMS Team Leader - (reporting) Engineers
HEDCOM Team Leader - (reporting) Engineers
Data Warehouse Director - (reporting) Engineers
Documentation Manager
[graphic omitted, but included the following information:]
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RELATED PARTIES TRANSACTIONS
Relationship with National Medical Research Council
Employment of Key Officers And Directors
For several years, National Medical Research Council (NMRC) a non-profit medical
foundation, has had a top priority of creating a viable economic solution to the
problem of spiraling medical costs in the United States. Several of LifeStar's
officers and directors directly contributed to the development of LifeStar
technology. Present officers or directors of LifeStar who formerly have worked
for NMRC are its President, Lyle Breaux; Rena Brar, Vice President, Application
Development; Ram Prayaga, Vice President, Technology and LifeStar's Chief
Technology Officer, Herbert Benson, MD, Chief Consultation Scientist; Brian
Alman, Ph.D, Vice President, Clinical Studies; and W. Douglass Smith, Director
and Chief of Marketing. From time to time in the past, Messrs. Bro and Smith
have been principal contributors to NMRC.
Incorporation of HealthCare Express Limited, a Bermuda Company
In 1998, NMRC incorporated HealthCare Express to commercialize on developing a
network service computer architecture for its PersonalCast patient communication
technology for both the United States and Europe. NMRC saw that a network
service would be complimentary to PersonalCast technology, licensed previously
to LifeStar Corporation. Pursuant to an exclusive agency agreement, LifeStar
Corporation represents HealthCare Express, Limited for the sale of its network
services for both the United States and Canada. LifeStar Corporation will not
participate in HealthCare Express's provision of its network services to Europe.
Exclusive License and Royalty Agreement with NMRC
Both LifeStar Corporation and HealthCare Express have executed an exclusive
license and royalty agreement with NMRC. Both agreements require each respective
company to pay royalties to NMRC equivalent to 5% of gross revenue for use of
the LifeStar technology and product or corporate names LifeStar, PersonalCast,
Medical Dial Tone, AIMS, PULSE and HealthCare Express. In addition, LifeStar
Corporation and HealthCare Express, Limited have agreed to pay a license fee of
$2.5 million of which $250,000 has been paid thus far, and $5 million
respectively to NMRC as consideration for executing these exclusive licenses.
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REGULATORY ISSUES
Tax Considerations
Taxation of the Company
LifeStar believes that a significant portion of its income will not be subject
to tax in Bermuda, which currently has no corporate income tax, or other
countries in which the Issuer or its affiliates conduct activities or in which
customers of LifeStar are located, including the United States. However, this
belief is based upon the anticipated nature and conduct of the business of
LifeStar, which may change, and upon LifeStar's understanding of its position
under the tax laws of the various countries in which LifeStar has assets or
conducts activities, which position is subject to review and possible challenge
by taxing authorities and to possible changes in law (which may have retroactive
effect). The extent to which certain taxing jurisdictions may require LifeStar
to pay tax or to make payments in lieu of tax cannot be determined in advance.
In addition, the operations of and payments due to LifeStar may be affected by
changes in taxation, including retroactive tax claims or assessments of
withholding on amounts payable to LifeStar or other taxes assessed at the
source, in excess of the taxation anticipated by LifeStar based on business
contacts and practices of LifeStar and the current tax regimes. There can be no
assurance that these factors will not have a material adverse effect on
LifeStar.
Bermuda Tax Considerations
Under current Bermuda law, LifeStar is not subject to tax on income or capital
gains. Furthermore, LifeStar has obtained from the Minister of Finance of
Bermuda under the Exempted Undertakings Tax Protection Act 1966 (as amended), an
undertaking that, in the event that Bermuda enacts any legislation imposing tax
computed on profits, income, any capital asset, gain or appreciation, or any tax
in the nature of estate duty or inheritance tax, then the imposition of such tax
will not be applicable to LifeStar or to any of its operations, or the shares,
capital or Common Stock of LifeStar, until March 28, 2016. This undertaking does
not, however, prevent the imposition of property taxes on any company owning
real property or leasehold interests in Bermuda.
United States Federal Income Tax Considerations
The Issuer and its non-United States subsidiaries will be subject to United
States federal income tax at regular corporate rates (and to United States
branch profits tax) on their income that is effectively connected with the
conduct of a trade or business within the United States, and will be required to
file federal income tax returns reflecting that income. LifeStar intends to
conduct its operations to minimize the amount of its effectively connected
income. However, no assurance can be given that the Internal Revenue Service
(the "IRS") will agree with the positions taken by LifeStar in this regard.
Moreover, the United States subsidiaries of the Issuer will be subject to United
States federal income tax on their worldwide income regardless of its source
(subject to reduction by allowable foreign tax credits), and distributions by
such United States subsidiaries to the Issuer or its foreign subsidiaries
generally will be subject to United States withholding.
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Taxation of Stockholders
Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the Common Stock or
on any payments thereunder. See "Taxation of LifeStar--Bermuda Tax
Considerations" for a description of the undertaking on taxes obtained by
LifeStar from the Minister of Finance of Bermuda.
United States Federal Income Tax Considerations
The following is a summary of certain material United States federal income tax
considerations that apply to the acquisition, ownership and disposition of
Common Stock by United States Holders (as defined below) as of the date hereof.
This summary deals only with Common Stock that is held as a capital asset by a
United States Holder, and does not address tax considerations applicable to
United States Holders that may be subject to special tax rules, such as dealers
or traders in securities, financial institutions, insurance companies,
tax-exempt entities, United States Holders that hold Common Stock as part of a
straddle, conversion transaction, constructive sale or other arrangement
involving more than one position, United States Holders that own (or are deemed
for United States tax purposes to own under certain attribution or constructive
ownership rules) 10% or more of the voting stock of the Issuer ("10%
stockholders"), United States Holders that have a principal place of business or
"tax home" outside the United States or United States Holders whose functional
currency is not the United States dollar. In addition, the summary generally
does not address the tax consequences to 10% Shareholders (as defined below).
10% Shareholders are advised to consult their own tax advisors regarding the tax
considerations incident to an investment in Common Stock.
The discussion below is based upon the provisions of the Code, and regulations,
rulings and judicial decisions thereunder as of the date hereof; any such
authority may be repealed, revoked or modified, perhaps with retroactive effect,
so as to result in United States federal income tax consequences different from
those discussed below.
THE DISCUSSION SET OUT BELOW IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE COMMON STOCK.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE COMMON STOCK, INCLUDING THE APPLICATION TO
THEIR PARTICULAR SITUATIONS OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL
AS THE APPLICATION OF STATE, LOCAL, FOREIGN OR OTHER FEDERAL TAX LAWS. THE
STATEMENTS OF UNITED STATES FEDERAL INCOME TAX LAW SET OUT BELOW ARE BASED ON
THE LAWS IN FORCE AND INTERPRETATIONS THEREOF AS OF THE DATE OF THIS PROSPECTUS,
AND ARE SUBJECT TO ANY CHANGES OCCURRING AFTER THAT DATE.
As used herein, a "United States Holder" of Common Stock means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust which is subject to the supervision of a court within the United
States and the control of a United States person as described in section
7701(a)(30) of the Code.
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Taxation of Dividends
The gross amount of dividends paid to United States Holders of Common Stock will
be treated as dividend income to such United States Holders, to the extent paid
out of current or accumulated earnings and profits, as determined under United
States federal income tax principles. Such income will be included in the gross
income of a United States Holder as ordinary income on the day received by the
United States Holder. Such dividends will not be eligible for the dividends
received deduction allowed to corporations under the Code. Subject to the PFIC
rules described below, to the extent that the amount of any distribution exceeds
the Issuer's current and accumulated earnings and profits for a taxable year,
the distribution will first be treated as a tax-free return of capital, causing
a reduction in the adjusted basis of the Common Stock (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the United
States Holder on a subsequent disposition of the Common Stock), and the balance
in excess of adjusted basis will be taxed as capital gain. The Issuer does not
anticipate paying cash dividends in the foreseeable future. See "Dividend
Policy."
For so long as the Issuer is a "United States-owned foreign corporation,"
distributions with respect to the Common Stock that are taxable as dividends
generally will be treated for United States foreign tax credit purposes as
either (i) foreign source "passive income" (or, in the case of certain United
States Holders, foreign source "financial services income") or (ii) United
States source income, in proportion to the earnings and profits of the Issuer in
the year of such distribution allocable to foreign and United States sources,
respectively. For this purpose, the Issuer will be treated as a United
States-owned foreign corporation so long as stock representing 50% or more of
the voting power or value of the Issuer is owned, directly or indirectly, by
United States Holders.
Taxation of Capital Gains
For United States federal income tax purposes, a United States Holder will
recognize taxable gain or loss on any sale or exchange of Common Stock in an
amount equal to the difference between the amount realized for the Common Stock
and the United States Holder's adjusted basis in the Common Stock. Subject to
the PFIC rules discussed below, such gain or loss will be capital gain or loss.
Capital gain of individuals derived with respect to capital assets held for more
than one year is eligible for reduced rates of taxation depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to limitations. Any gain recognized by a United States Holder generally
will be treated as United States source income. It is presently unclear whether
any loss realized by a United States Holder will be treated as United States or
foreign source.
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Risk Evaluation
LifeStar's management is keenly aware of the risks associated with building a
significant and profitable business. In this regard, management has carefully
analyzed these risk factors in its efforts to achieve the objectives as
described herein and has taken steps contained in its business design to lessen
these risks. An examination of the most significant of these risk factors in the
opinion of management and a brief summary of management's attempt to mitigate
them are as follows:
Limited Operating History
Because National Medical Research, the licensor of LifeStar's technology on an
exclusive basis, has absorbed or deferred nearly all of LifeStar's development
costs and its network service infrastructure has not yet been constructed, it is
presently difficult to forecast its business prospects. Therefore, LifeStar's
prospects must be considered in the light of the risks, expenses and
difficulties encountered in the establishment of a business in a highly
competitive business such as telecommunication services. Based on this and other
factors, there can be no assurance that the financial properties contained
herein which show positive operating profit and cash flow will be met.
Acceptance of LifeStar's Solution by the Healthcare Industry
To be successful, LifeStar must attract a significant number of customers
throughout the healthcare industry. LifeStar may not achieve the critical mass
of users it believes is necessary to become successful. In addition, LifeStar
expects to generate a significant portion of its revenue from per-minute usage
fees. Consequently, any significant shortfall in the amount of usage fees
occurring over LifeStar's network service infrastructure would adversely affect
its financial results.
Obsolescence
Delivering healthcare telecommunications competes with other forms of care
delivery such as face-to-face and inpatient treatment. Further, medical
information is increasingly available through medical websites, ask-a-nurse
hotlines, disease management pamphlets, physicians on-line, etc.
Dependence on Management and Key Personnel
At present LifeStar is dependent on the services of its management staff, the
loss of one or more of whom could have a material adverse effect on the company.
Capital Requirements
LifeStar expects that funds raised up to each development milestone will be
sufficient to meet its requirements. This is due to the predetermined and fixed
nature of its development costs with ACS, the present foreseability of budgeted
corporate overhead and the anticipated continuing decline of telecommunication
charges. The overall development cycle of LifeStar network service facility has
been designed to create a series of investable options and to minimize
development risk. Each development milestone and its related funding creates
identifiable value which forms the basis for raising additional capital.
LifeStar anticipates raising additional funds by selling debt or equity
securities, by entering into strategic relationships or through other
arrangements. LifeStar may be unable to raise additional amounts on a basis
considered reasonable by management when they are needed.
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If the financing plans described in this Profile and Business Plan are a
success, LifeStar is expected to have sufficient capital to implement its plan.
If, however, the funds raised are less than anticipated, LifeStar may have to
curtail some of its immediate plans, reschedule the planned roll out of one or
more of its service levels or obtain financing from other sources. No assurance
can be given that additional financing will be available at any time in the
future.
Competition
There can be no assurance a variety of national, regional or local
telecommunication enterprises will no commence emphasizing healthcare
communication services with offerings similar to those of the Company and
compete more directly with LifeStar, that new competitors will not enter the
market or that other businesses will not themselves introduce competing
services. There also can be no assurance that LifeStar" potential competitors
will not provide services comparable or superior to those provided by LifeStar
at lower rates or adapt more quickly than LifeStar to evolving healthcare
industry trends or changing market requirements. Competition would possibly
introduce price reductions, reduce gross margins and loss of market share, any
of which could materially adversely affect LifeStar's business, financial
condition and results of operations.
33
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Item 2. DESCRIPTION OF PROPERTY
The Company presently is occupying 2,000 aq. ft. of space in Santa Monica,
California for administrative purposes.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceeding which, Management
believes would have a material impact on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATERS
Market Information
There is no established public trading market for shares of the Company's Common
Stock.
Market Makers: None.
As of March 31, 1999, 49,033,829 shares of the Company's Common Stock ere
eligible for sale under Rule 144, subject to certain limitations included in
such rule. In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a two-year holding period, under certain
circumstances, may sell within any three-month period a number of shares which
does not exceed the greater of 1% of the Company's then outstanding Common Stock
or the average weekly trading volume of such Common stock during the four
calendar weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a person
who has satisfied a three-year holding period and who is no, and has no been for
the preceding three months, an "affiliate" of the Company.
There are not presently outstanding any option, warrants or other rights to
purchase, or any securities convertible into or exchangeable for, shares of the
Common Stock of the Company.
The Company has not granted any rights, or otherwise agreed, to register any
shares of the Common Stock of the Company under the Securities Act for any
security holder.
The Company has no present intention of publicly offering any shares of its
Common Stock.
Holders.
As of March 31, 1999, there were 197 record holders of the Company's Common
Stock. See "Description of Securities."
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Dividends
A. Since inception, the Company has not paid any dividends on any of their
respective shares of capital stock.
B. The Company does not foresee that it will have the ability to pay any
dividends on its capital stock during the fiscal year ending March 31,
1999, nor does management have any present intention to pay any
dividends in the foreseeable future. It is management's intention to
retain any earning of the Company for future expansion and development
purposes.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
Plan of Operation
LifeStar Corporation ("LifeStar") and HealthCare Express Limited ("HCX")
(jointly referred to herein as "the Company") are deploying the first advanced
telecommunication system for delivery of healthcare to large populations on an
international basis. The Company's planned system is designed to apply new
computer-telephony technology to the prediction prevention, measurement, and
management of disease for more rapid, frequent and lower-cost care. The advanced
network service planned by the Company will allow users to access and respond in
both voice using the telephone or the Internet in a national and personalized
two-way dialogue with medical providers and researchers using the Company's
end-to-end open system architecture.
The Company believes as a result of rapid competitive and technological changes
in the international healthcare management, pharmaceutical and telecommunication
industries, that a significant opportunity exists for a highly focused
enterprise to create a new generation of medical care through specializing in
the delivery of new communication technologies for the healthcare industry. The
Company believes the healthcare industry, because of its extreme dependence on
two-way communication in patient-care, is particularly well suited to benefit
from greater use of enhanced telecommunication processes. At the heart of the
Company's system is an open telecommunication platform for the creation and
delivery of healthcare communication. The Company's system architecture
describes an environment which enables and manages a new generation of computer
telephony interfaces, application development tools, medical call centers and
data warehouses. The Company's planned network service will manage both inbound
and outbound patient communication. The advanced service will answer provider
inbound calls to patients and either allow the caller to leave the appropriate
message and guidance or, if the patient has no elected none, will call and track
each individual to different phone numbers and Internet addresses in an effort
to locate that person. The result is a totally unique and patented process of
managing and automating a significant portion of personal healthcare
communication. The goal of this planned telecommunication system is ease of use,
greater convenience and both labor and time savings for patients and healthcare
consumers.
When completed, the Company's advanced network service will utilize the existing
public telecommunication and healthcare infrastructure as its delivery platform
and leverage it in turn to provide mass patient connectivity and a single
lifetime point of contact and permanent address for healthcare
telecommunications. This specialized telecommunication system will first be be
used by America's healthcare industry and then in many other nations for two
broad functions: (1) healthcare delivery - the network is designed to deliver
more frequent and economical medical care within each patient's daily life, and
(2) healthcare informatics and state of the art medical research - the network
is designed to more economically access new forms of vital data which provide a
more complete and cumulative medical portrait of each individual patient. This
form of advanced patient data has not been previously available and is useful
for healthcare decision support and medical investigation. When available,
healthcare data of this type allows medical providers to understand the totality
of an individual's healthcare profile. In addition to healthcare delivery, the
Company's network platform is designed to function as a real-world laboratory
environment for more scientifically developing, testing, and analyzing new
products and the entire spectrum of medical treatment. See HealthCare Express,
Limited - "Medical Outcomes Data."
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Progress to Date
The Company has completed the initial design specifications, prototype
development, internal and external testing of components of its network based
telecommunication system. The Company's system design specifications permit its
HealthCare Express Data and Communication Center (HEDCOM) when completed to
scale up to simultaneously handle hundreds of thousands of streams of voice and
data from patients on an international basis. Pursuant to a detailed request for
proposal (RFP), the Company has solicited final price bids on a competitive
basis from information technology (IT) services and computer system integration
organizations with international experience to act as prime vendor and general
contractor to LifeStar Corporation. As a result, the Company has substantially
narrowed the costs and development risks associated with its system construction
and planned roll-out. The Company believes its network specifications provide it
with the flexibility to implement new software, hardware and system developments
without incurring substantial redesign costs or downtime. Planned network
roll-out and application development will be in three phases. (See Network
Roll-out and Implementation Plan). These phases when completed will form a
state-of-the-art international healthcare patient communication network. The
Company believes that its HEDCOM network operation and communication center
model will differentiate its services from potential competitors by eliminating
any capital investment required of its customers. The Company's
telecommunication system is being designed and engineered with a scalable
architecture to economically allow multiple upgrades of its initial capacity
through the addition of computer servers at its planned Data and Communication
Center hub located in Bermuda. System architecture utilizes existing proven
components, which are presently in use, in a variety of commercial environments
and configures them to create a new method of healthcare communication.
LifeStar Corporation through its contractors will be responsible for the
system's development in America which will consist of the following stages: (i)
software development, stateside integration testing, system testing, stress
testing, acceptance testing by HealthCare Express Limited, operational readiness
testing and construction of a pilot facility in America which can be scaled to
eventually act as a standby for the planned Bermuda facility; construction of
the Company's Data and Communication Center in Bermuda, and; (ii)marketing to
healthcare organizations in America; (iii) development of disease and behavior
applications in conjunction with the academic medical community within the
United States. HealthCare Express, Limited through its contractors will be
responsible for the international deployment of its HEDCOM network-based
platform which will consist of formation of joint marketing ventures by
HealthCare Express Limited for the country by country marketing to the
healthcare industry in Europe of the Company's planned telecommunication system
to be based in Bermuda.
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Markets and Offerings
The Company was formed to capitalize on the need by healthcare organizations,
pharmaceutical researchers and medical providers for a streamlined, more
frequent means for communicating with patients and their members. This need, in
part, has been influenced by increasing costs of medical treatment and the
related need to reduce the utilization of scarce medical resources. It has been
driven by the increasing need for fast access to patients and members of the
organizations, the rapid growth of medical information management, and the
increasing focus on accountability and improved outcomes for chronic disease
issues in an aging population. The existence of clinical and quality of care
databases will become increasingly important to healthcare organizations as
healthcare continues to become more patient-focused. In response to the growing
need of healthcare organizations for low-cost access to patient populations, the
Company adopted a business strategy designed to establish it as a leading
provider of advanced communication solution for patient communication. In the
pharmaceutical industry, the rapid growth of new product development,
direct-to-consumer marketing and increasing need for post-launch follow-up for
differentiating the long-term effectiveness of a drug from others in its class
has driven the need for an ongoing telecommunication link to large patient
populations.
For managed care organizations, pharmaceutical manufacturers, medical
researchers, medical providers and telecommunication carriers, a direct channel
to patients as planned by the Company is a means to more frequently monitor and
gather new forms of qualitative patient data which have not been previously
available from within each patient's daily life. The Company believes the value
of such qualitative data to the healthcare industry will grow as it is used for:
(i) earlier detection of the effectiveness of a treatment; (ii) the rate of
progression or alleviation of illness; (iii) the severity and sequence of
symptoms; and (iv) more accurately predicting risk and the course of an ailment
and its treatment. The need for a single point of contact and more convenient
channel to patients and other healthcare beneficiaries is increasingly
attractive to telecommunication providers for building and marketing higher
perceived value-added features, increasing brand alligence and utilizing network
capacity.
Business Strategy Summary
The Company's mission is to create an international telecommunication facility
which more conveniently links patients, members of healthcare organizations and
employees of corporations which purchase healthcare to the managers and
providers who are responsible for their health and well being. In order to
accomplish this objective, LifeStar Corporation and HealthCare Express Limited
have jointly adopted a business strategy which includes:
LifeStar Corporation, marketing the United States segment of the
telecommunication system as the new standard for conveniently
communicating with patients and members of managed care organizations.
LifeStar Corporation will deploy the system by providing a range of
patented access interfaces;
HealthCare Express, Limited acting as an international
telecommunication company and wholesale service provider confining its
focus to specializing in the healthcare industry. HealthCare Express
Limited will own the telecommunication system in a manner to minimized
cost and risk;
LifeStar Corporation will charge customers based on the value they
receive; and, select applications as solutions based upon their
recognized value to each segment of the healthcare industry in America
utilizing existing access modes already in patients lives;
HealthCare Express, Limited will rapidly build-out and test its Data
and Communication Center using scalable components and modular
architecture permitting lower initial costs of fixed plant
infrastructure;
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Both companies will leverage the HEDCOM Center's capacity over other
industry segments and markets. LifeStar Corporation will market the
System's service to secondary markets such as the home healthcare,
psychotherapy, physical rehabilitation and pediatric care. HealthCare
Express, Limited will market the system to the healthcare industry in
Europe through joint-ventures with local partners; and
Both Companies will utilize a state-of-the-art technology and design
architecture that provides future cost advantages over existing
alternatives.
In addition, HealthCare Express, Limited believes it can develop a favorable
position as a low-cost provider of specialized healthcare telecommunication
services to the entire healthcare industry on an international basis. This
low-cost position of these services in relation to other telecommunication
organizations, can be sustained as a result of its: (i) early entrance into the
Distance Medicine and patient communication niche of the telecommunication
market permitting it to engage in targeted marketing in conjunction with
LifeStar Corporation in America to large industry accounts with relatively low
sales, marketing, general and administrative expense and to form relationships
with a diverse range of healthcare organizations; (ii) freedom from legacy
infrastructure; (iii) pricing based on incremental cost savings to healthcare
organizations and providers as related to disease and research specific enhanced
or value-added telecommunication applications; (iv) economies of scale with
respect to equipment utilization derived from its unique software and
reconfiguration of state-of-the-art computer telephony equipment and related
fault tolerant data-base communication servers; (v) scalar economies of
leveraging its Data and Communication Center Bermuda hub facility to the
European healthcare marketplace following initial penetration of the managed
care and pharmaceutical markets in America. This leveraging of its network based
platform across healthcare market segments will be accomplished first, by the
marketing by LifeStar Corporation of the facilities services to additional
segments of the healthcare industry, such as; home healthcare, chain pharmacies,
psychotherapy, physical rehabilitation, weight management, smoking cessation,
alcohol and drug abuse, long-term prevention and disease management programs,
city and county social workers; and (vi) subsequently, additional economies are
planed to be derived by HealthCare Express, Limited from the leveraging of the
Data and Communication Center through marketing its services into the European
healthcare market; lastly, (vii) HealthCare Express Limited presently favored
taxation status with respect to earnings, if any, as compared to traditional
telecommunication service providers. See "Tax Considerations."
Planned New Product and Scientific Research Facility
The Company has entered into a Joint Scientific Collaboration with Dr. Herbert
Benson of Harvard Medical School to oversee the creation of new healthcare
treatment products through development of disease management, self care and
utilization management solutions using new network based communication
technologies. Dr. Benson is widely recognized as a leading pioneer in the field
of behavioral medicine. His research has emphasized patient self-regulation as
the foundation for all self-care and disease management programs. His
investigation into medical treatment through patient self-regulation has been
peer reviewed and published in such journals as the Journal of the American
Medical Association (JAMA), New England Journal of Medicine, Lancet, Nature and
the Annual Review of Medicine, and his various books on self-care have sold over
4,000,000 copies. He has served as President of the Society of Behavioral
Medicine and is the founder and president of the Mind/Body Institute at Harvard
Medical School.
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The HEDCOM Data and Communication Center in Bermuda will be owned by HealthCare
Express, Limited. The network segment to be delivered into the United States as
a planned component of the LifeStar System will be developed by LifeStar
Corporation for HealthCare Express, Limited, of which LifeStar presently owns
33% of its common stock. HealthCare Express, Limited was founded by the National
Medical Research Council, a nonprofit medical research corporation, and Dr.
Benson to create a specialized healthcare telecommunication facility which could
deliver a variety of American discoveries in medical treatment to the
international market place. The Company and Dr. Benson believed that such a
specialized telecommunication facility could improve medical treatment and also
act as a real world medical research environment, in similar fashion to a
laboratory, using advanced telecommunications for assessing, developing, testing
and delivering new healthcare products and services to patients. (See Certain
Transactions.) HealthCare Express, Limited has applied to the Federal
Communications Commission for an international carrier license with respect to
service delivery within the United States. The telecommunication network segment
in the United States of the LifeStar System will utilize the world's fastest,
highest capacity, coast-to-coast communication facility, the 16,000-mile
fiber-optic cable system under development by Qwest Communications International
Inc. ("Qwest"). The Company believes that the Qwest infrastructure backbone
within the United States presently affords significant advantages for the higher
security and data integrity requirements of healthcare service delivery.
The Company has thus far had no revenues from operations and does not expect to
do so within the next 12 months. The opening of its planned centers and the
provision of its services will be dependent upon it raising significant amounts
of additional capital. Initially, the Company estimates that it requires a
minimum of $3,600,00 to commence the roll out of its planned center expansion.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Company had no operations from inception through September 1993, when it
acquired a license agreement and a subsidiary from third parties in exchange for
the issuance of restricted stock.
Fiscal Years Ended December 31, 1998 and 1999.
The Company has no revenues from operations in either fiscal 1998 or 1999. All
revenues received in both fiscal years come from grant wards for the U.S.
Department of Health and Human Services, Public Health Service, National
Institute of Health.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company's independent
auditor has included an explanatory paragraph in his report on the Company's
consolidated balance sheet as at March 31, 1999, and the related consolidated
statement of operation, stockholder equity and cash flows for the year then
ended which states that the Company's continuing losses from operations raises
substantial doubt about the ability to continue as a going concern.
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Management recognizes the need to raise additional cash in fiscal 1999 to
continue the commercial development of its technologies. Management is
diligently pursuing various sources of financing and is focusing its immediate
efforts on securing additional equity financing, licensing its technology and
forming strategic alliances to financially assist with the development of its
technology. The Company will be dependent upon the proceeds to be raised from
these sources to continue it business operations. Management is presently
involved in discussions with both potential private investors and strategic
partners to secure additional financing and anticipates completing one or more
of such transactions. However, Management can give not assurances as to its
ability to raise the funds necessary to enable it to conduct its business. If
the Company is unable to obtain the necessary cash, other more substantial
restructuring options may become necessary.
Since September of 1993, through March 31, 1999, the Company has incurred
operating expenses, which were incurred and deferred by the Council in the
amount of $1,096,686. This amount is now evidenced by a five-year promissory
note dated March 31, 1999 bearing interest at the rate of 7% per annum, which is
payable interest only on an annual basis. Prior to the Company raising the
capital required for its operating needs, it is estimated that it will incur
additional expenses for which it presently lacks sufficient operating resources.
See "Plan of Operation."
ITEM 7. FINANCIAL STATEMENTS
Financial Statements
See page F-1 through F-9 attached here to for copies of the Company's audited
financial statement from inception through March 31, 1999.
Unaudited Quarterly Financial Statements:
Quarter ended December 31, 1999.
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INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Shareholders and Board of Directors
LifeStar Corporation (A Development Stage Company)
I have audited the accompanying consolidated balance sheet of LifeStar
Corporation (A Development Stage Company) as of March 31, 1999 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows, for each of the two years in the period ended March 31, 1999 and for the
period from inception on September 17, 1985 through March 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
LifeStar Corporation (A Development Stage Company) as of March 31, 1999, and the
results of its operations and its cash flows for each of the two years in the
period ended March 31, 1999 and for the period from inception on September 17,
1985 through March 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses
from operations that raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Beverly Hills, California
/s/Jaack Olesk
- --------------
Jaack Olesk
April 16, 1999
F-1
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Consolidated Balance Sheet
March 31, 1999
ASSETS
Current Assets
Cash $ --
-----------
Total current assets --
Other Assets
License Agreement (Note 5) 2,500,000
(Less) valuation allowance (2,500,000)
-----------
Total other assets --
$ 0
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accrued expenses $ 6,000
Note payable (Note 6) 1,096,686
-----------
Total current liabilities 1,102,686
Stockholders' equity (deficit)
Preferred Stock, $.01 par
value 1,000 shares
authorized, issued and
outstanding 10
Common stock, no par value,
900,000,000 shares authorized;
49,033,829 shares issued and
outstanding 222,763
Additional Paid-in Capital 1,605,088
(Deficit) accumulated during
the development stage (2,930,547)
-----------
Total stockholders' equity (deficit) (1,102,686)
-----------
$ 0
===========
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Consolidated Statements of Operations
(Inception)
Year Year Sept. 7,
Ended Ended 1985 to
March 31, March 31 March 31,
1999 1998 1999
----------- ---------- --------
Revenues $ -- $ -- $ --
Expenses:
General and
Administrative 89,776 55,227 549,429
License Agreement
Valuation Allowance -- -- 2,500,000
---------- ---------- ----------
Operating (Loss) (89,776) (55,227) (3,049,429)
Other Income:
Grant Revenue 30,624 48,967 118,882
(Loss) before
income taxes (59,152) (6,260) (2,930,547)
Provision for
income taxes -- -- --
---------- ---------- ----------
NET (LOSS) $ (59,152) $ (6,260) $ (2,930,547)
========== ========== ==========
Net (loss) per
common share $ (.01) $ (.01) $ (.11)
========== ========== ==========
Weighted average
outstanding shares 42,858,829 30,508,829 27,588,667
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LifeStar Corporation
(A Development Stage Company)
Statement of Changes in Consolidated Stockholders' Equity (Deficit) (1 of 2)
(Deficit)
Accumulated
Additional During the
Common Stock Preferred Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------ ------- ----- -----
Balance at
Inception on
<S> <C> <C> <C> <C> <C> <C> <C>
Sept. 17,1985 -- $ -- -- $ -- $ -- $-- $ --
Issuance of
shares to
officers,
directors and
others
on Sept. 24, 1985 2,400,000 2,400 -- -- 12,600 -- 15,000
Public Offering
at $.02 (Net of
Offering Costs)-
1986 7,000,000 7,000 -- -- 105,025 -- 112,025
Issuance of
shares to
Officers,
Directors and
others for
services- 1988 40,600,000 40,600 -- -- -- -- 40,600
8 for 1
reverse stock
split-1988 (43,750,000) (43,750) -- -- 43,750 -- --
Issuance of
shares to
officers,
directors and
others for
services-1989 26,312,000 26,312 -- -- -- -- 26,312
Issuance of
shares to
officers,
Directors
and others for
services-1992 125,000 125 -- -- -- -- 125
Business
combination-
1994 282,000,000 -- -- -- 10,000 -- 10,000
License
Acquisition
1995 -- -- -- -- 1,403,314 -- 1,403,314
1 for 30
reverse split-
May 31, 1995 (304,197,433) (30,399) -- -- 30,399 -- --
See accompanying notes to con solid ated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
LifeStar Corporation
(A Development Stage Company)
Statement of Changes in Consolidated Stockholders' Equity (Deficit) (2 of 2)
(Deficit)
Accumulated
Additional During the
Common Stock Preferred Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
------ ------ ------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
Shares issued
for cash-
Jan. 1,1995-
March 31,
1997 117,333 176,000 1,000 10 -- -- 176,010
Shares issued
for services
Jan. 1, 1995-
March 31,
1997 19,901,929 25,950 -- -- -- -- 25,950
Net (loss)
for period
Sept. 7, 1985
(inception)-
March 31,
1997 -- -- -- -- -- (2,865,135) (2,865,135)
Balance,
March 31,
1997 30,508,829 204,238 1,000 10 1,605,088 (2,865,135) (1,055,799)
Net (loss)
for year
ended March
31, 1998 -- -- -- -- -- (6,260) (6,260)
Balance,
March 31, 1998 30,508,829 204,238 1,000 10 1,605,088 (2,871,395) (1,062,059)
Shares issued
for services
during year
ended March 31,
1999 18,525,000 18,525 -- -- -- -- 18,525
Net (loss) for
year ended
March 31, 1999 -- -- -- -- -- (59,152) (59,152)
Balance,
March 31, 1999 49,033,829 $ 222,763 1,000 $ 10 $ 1,605,088 $(2,930,547) $(1,102,686)
========== ========== ===== ========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Statements of Cash Flows
(Inception)
Year Year Sept. 7,
Ended Ended 1985 to
March 31, March 31, March 31,
1999 1998 1999
----------- ----------- -----------
Operating Activities:
Net (loss) $ (59,152) $ (6,260) $(2,930,547)
Adjustments to reconcile
net (loss) to net cash
(used by) operating
activities:
Write off of subsidiary -- -- 10,000
Common stock issued
for services 18,525 -- 111,522
Valuation allowance 2,500,000
Changes in operating assets
and liabilities:
Accrued expenses 6,000 -- 6,000
Other 34,627 6,260 --
----------- ----------- -----------
Net Cash (used)
by operating Activities -- -- (303,025)
Investing Activities: -- -- --
Cash flows from
Financing Activities
Common stock issued
for cash -- -- 303,025
----------- ----------- -----------
Net cash provided
by Financing Activities -- -- 303,025
Increase (Decrease)
in Cash -- -- --
Cash at beginning of period -- -- --
----------- ----------- -----------
Cash at end of period $ -- $ -- $ --
----------- ----------- -----------
Supplemental cash flows information:
Cash paid during the period for:
Interest $ -- $ -- $ --
----------- ----------- -----------
Income taxes $ -- $ -- $ --
----------- ----------- -----------
Non-cash financing transactions:
Shares for services $ 18,525 $ -- $ 111,522
----------- ----------- -----------
Acquisition of license
agreement for stock
and note $ -- $ -- $ 2,500,000
----------- ----------- -----------
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
March 31, 1999
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
LifeStar Corporation (the "Company"), a Utah corporation, was
incorporated on September 17, 1985. The Company has been formerly known as Zohoz
Funding, Inc., U.S. Care Industries, Inc. and Rand Industrial Group, Inc. The
Company, a development stage enterprise, is attempting to develop operations as
a supplier of health care services through telecommunications. The Company has
had no revenues from these operations.
The consolidated financial statements include the accounts of LifeStar
Corporation and its wholly-owned subsidiary, LifeStar Advanced Behavioral
Technologies. All intercompany accounts and transactions have been eliminated.
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Loss per Share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding during the periods presented.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Shares for services
Valuation of shares for services is based on the fair market value of
services.
Grant Revenue
Grant revenue consists of monies received by the Company pursuant to a
grant by a United States government agency. The Company is the recipient of an
award from the U.S. Department of Health and Human Services, Public Health
Service, National Institutes of Health.
F-7
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements (Continued)
March 31, 1999
Note 1 - Summary of Significant Accounting Policies (continued)
Research and Development Costs
Research and development costs are expensed as incurred.
Reclassifications
Certain prior year amounts have been reclassified to conform with 1999
classifications.
Income Taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". (See Note 4). Note 2 - Basis of presentation and considerations related
to continued existence (going concern)
The Company's consolidated financial statements have been presented on the
basis that it is a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company incurred net losses of $59,152 and $6,260 for the year ended March 31,
1999 and for the year ended March 31, 1998, respectively. This raises
substantial doubt about its ability to continue as a going concern.
The Company's management intends to raise additional operating funds for
the building of its planned network service through equity and/or debt
offerings. However, there can be no assurance management will be successful in
this endeavor.
Note 3 - Development Stage Company
A Development Stage Company is one for which principal operations have
not commenced or principal operations have generated an insignificant amount of
revenue. A development stage company's management devotes most of its activities
to establishing a new business. However, there can be no assurance that the
Company's management will be successful in establishing an operating business.
F-8
<PAGE>
LifeStar Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements (Continued)
March 31, 1999
Note 4 - Income Taxes
The Company records its income tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" which requires the use of the liability method of accounting for deferred
income taxes.
Since the Company has not generated taxable income since inception, no
provision for income taxes has been provided. At March 31, 1999, the Company did
not have any significant tax net operating loss carryforwards (tax benefits
resulting from losses for tax purposes have been fully reserved due to the
uncertainty of a going concern). At March 31, 1999, the Company did not have any
significant deferred tax liabilities or deferred tax assets.
The Company is delinquent on income tax return filings. The Company has
not filed required federal and state tax returns for approximately the last four
years.
Note 5 - License Agreement and Related Valuation Allowance
The Company possesses a license agreement from a non-profit medical
research entity (see also Note 6) assigning the Company exclusive rights in the
United States for commercial application of licensed software, hardware,
programs, patent rights, trademarks and copyrights relating to the fields of
medicine and health promotion.
Due to uncertainty of recovery the Company has recorded a valuation
allowance for the full amount of this intangible asset.
Note 6 - Note Payable
The $1,096,686 note payable is due to a non-profit medical research
entity (the same entity mentioned in Note 5) This note is a non-interest
bearing, unsecured, demand note.
F-9
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C>
Carson E. Beadle 64 Chairman of the Board and Senior Vice President - Marketing
Lyle Breaux 60 President, CEO, Treasurer, Director
Robert Chan 58 Executive Vice President - Chief, Healthcare Markets and Director
Brian Alman, Ph.D 46 Senior Vice-President - Behavioral Research
Kimberly Heart 46 Vice-President - Communications
Ram Prayaga 28 Director of Technology
Harold A. Abeles 75 Secretary
</TABLE>
The Directors serve as such until the next annual meeting or until their
successors are elected and qualified. See pages 23 to 26 for the employment
history of each of the officers and directors.
See pages 23 to 26 for the employment history of each of the above named
individuals.
41
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers, and persons who own more than ten percent of a registered class of the
Company's equity securities (collectively, "Section 16 reporting persons"), to
file with the Securities an exchange Commission (the "SEC"( initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Section 16 reporting persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended March 31, 1999, all Section 16(a) filing
requirement applicable to the Company's Section16 reporting persons were
satisfied.
ITEM 10. EXECUTIVE COMPENSATION
No executive officer of the Company earned in excess of $100,000 during the
fiscal year ended March 31, 1999.
All executive officers as a group (4 persons) received no cash compensation
during the fiscal year ended March 31, 1999.
No executive officer receives a salary from the Company.
The Company does not have any formal bonus plans, stock option plans or any
other similar compensation plans for its executive officers.
Directors of the Company do not receive any compensation for attendance at
meetings of the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information's of May 1, 2000, with
respect to the beneficial ownership of the Company's Common Stock, no par value
per share, by holders of more than 5% of the Company's Common Stock, by each
Director of the Company and by all Directors and Officers of the Company as a
group.
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned (1) of Class (2)
- ------------------------ ---------------------- ------------
W. Douglas Smith 2,333,334 5.1%
North Star Trust 2,333,334 5.1%
Eily Limited 4,500,000 9.1%
Taradata Investments Ltd. 4,500,000 9.1%
Lakco Limited 11,666,670 23.7%
Rigo Limited 11,670,670 23.7%
All directors and officers
As a group (6 individuals) 2,333,334 5.1%
------
- ----------------------
42
<PAGE>
(1) Unless otherwise indicated, all shares are beneficially owned and sole
voting and investment power is held by the person or entity named in
the table above. The address for each beneficial holder is 122 Ocean
Park blvd., Suite 411, Santa Monica, CA 90405
(2) Based upon 49,033,829 shares of Common Stock outstanding. See
"Description of Securities."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1994, four nominees of the National Medical Research Council (the
"Council") acquired an aggregate of 92,574 shares of the Company's common stock
(constituting approximately 85% of the outstanding shares), from the holders
thereof pursuant to a Stock Purchase Agreement dated September 3, 1993. The
aggregate purchase price was $15,000. The four nominee purchasers are not
affiliated with the Company. Until March 1995, W. Douglas Smith, Chairman of the
Board of the Company, and Lyle Breaux, Vice Chairman of the Board, Treasurer and
director of the Company, were officers of the Council.
In May 1994, the Company entered into a license agreement ("License") with the
Council. This license and its related technology is at the core of the Company's
business plan. In connection with the License, the Company issued 473,333 shares
of its common stock to the Council and issued a promissory note for $500,000
("Original Note").
The Company was in default under the terms of the Original Note. As a result,
the License Agreement was amended in March of 1995 to provide for a cash payment
of $250,000 and this issuance by the Company of a new $2,250,000 Promissory note
which is payable over three years. The Original Note has been canceled and the
473,333 shares were returned to the Company by the Council and were canceled.
In May 1994, the Company issued 473,333 shares of its common stock to Viking
Properties Corporation, in exchange for all of the issued and outstanding shares
of LifeStar Advanced Behavioral Technologies ("LABT"). Lyle Breaux, the Vice
Chairman of the Board, Treasurer of the Company was the President of Viking
Properties. LABT was the recipient of the Grant Award from the U.S. Department
of Health and Human Services Public Health Service.
In June 1994, the Company's Articles of Incorporation were amended to change its
name to LifeStar Corporation and to increase the authorized number of shares
from 50,000,000 to 900,000,000.
43
<PAGE>
In March 1995, the Company's Articles of Incorporation were amended to authorize
the issuance of preferred stock. As amended, the Articles provide that the total
number of shares of stock which the Company shall have the authority to issue is
910,001,000 consisting of 900,000,000 shares of Common Stock, no par value
("Common Stock"), 1,000 shares of Preferred Stock, have a par value of $.01 per
share (the "Original Preferred Stock") and 10,000,000 shares of Preferred stock,
have a par value of $.01 per share (the "Class A Preferred Stock").
Except as provided in (ii) below, each holder of Common Stock shall have one (1)
vote for each share of Common Stock shall have one (1) vote for each share of
Common Stock held by him or record on the books of the Company for the election
of directors and on all matters submitted to vote of the stock holders of the
Company.
Until December 31, 2010, with respect to the election of directors, holders of
Common Stock shall be entitled to elect that number of directors which
constitutes tow-fifths (2/5ths of the authorized number of members of the Board
of Directors and, if such two-fifths (2/5ths) is not a whole number of directors
that is closest to, but not in excess of, tow-fifths (2/5th) of such membership.
If permitted by the By-Laws, the Board of Directors my increase the number of
directors and any vacancy so created my be filled by the Board of directors,
provided, that so long as the holders of Common Stock have the right to elect
only tow-fifths (2/5ths ) of the directors, the Board of Directors may be so
enlarged by the Board of Directors only to the extent that tow-fifths (2/5ths)
of the enlarged Board consists of Common Stock Directors.
The holder of Common Stock shall have exclusive voting power on all matters at
any time no Preferred Stock is issued and outstanding.
Excepts as provided below, the holders of Original Preferred stock shall not be
entitled to vote except as to matters in respect of which they shall at the time
be indefeasibly vested by statute with such right. A holder of Original
Preferred Stock shall have one (1) vote for each share of Original Preferred
stock held by him or record on the books of the Corporation on all matters as to
which he shall have the right to vote.
Until December 31, 2010, with respect to the election of directors, holders of
Original Preferred Stock shall be entitled to elect that number of directors
which constitutes three-fifths (3/4ths) of the authorized number of members of
the Board of Directors and, if such three-fifths (3/5ths) is not a whole number,
then the holders of Original Preferred stock shall be entitled to elect the
nearest higher whole number of directors that is at lease three-fifths (3/5ths)
of such membership.
If permitted by the By-Laws, the Board of Directors may increase the number of
directors and any vacancy so created may be filled by the Board of Directors
provided, that, so long as the holders of the Original Preferred Stock have the
right to elect three-fifths (3/5ths) of the directors, the Board of Directors
may be so enlarged by the Board of Directors only to the extent that
three-fifths (3/5ths) of the enlarged Board consists of Original Preferred Stock
Directors. This right to elect three-fifths (3/5th) of the Board of Directors
shall expire on December 31, 2010.
44
<PAGE>
The holders of shares of Original Preferred Stock shall not be entitled to
receive any dividends.
The holder of record of shares of Original Preferred Stock shall, at their
option, be entitled to convert each shares or Original Preferred Stock into
10,000,000 shares of fully paid and non-accessible Common Stock.
In March 1995, the Company issued (I) 700,000,000 shares of its common stock to
Go Irish, Ltd., a Delaware corporation in exchange for $50,000 cash and $200,000
non-interest bearing Promissory note which is due June 30, 19995 and (ii) 1,000
shares of Original Preferred Stock in exchange for $25,000 cash and a
non-interest bearing promissory note which is due June 30, 1995. No officer,
director or principal shareholder of the Company is affiliated with Go Irish,
ltd.
In April, 1995, the Company issued 524,449 shares of its common stock to Dr.
Brian M Alman, the Company's Senior Vice President - Behavioral Research, for
prior services rendered in connection with research and development activities
of the Company's subsidiary, LifeStar Advanced Behavioral Technologies.
On May 31, 1995, the Company affected a 30 to 1 reverse stock split.
From October 1995 through August 1999, the Company issued an aggregate of
19,675,667 shares of its common stock to various persons and entities for
services rendered to the Company.
45
<PAGE>
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
A. Exhibits
Ex. No. Description of Document.
------------------------------------------
2.1 Stock Purchase Agreement, dated as of September 3, 1993 between
National Medical Research Council ("Council") and TXV Industries, Inc.
(1)
3.1 Articles of Incorporation of the Registrant, as amended. (1)
3.2 Bylaws of the Registrant, as amended. (1)
3.3 Articles of Amendment to Registrant's Articles of Incorporation -
Creation of Preferred stock. (1)
10.1 Exclusive License Agreement, dated may 10, 1994, between National
medical Research Council and Registrant (1)
10.2 Notice of Grant - Department of Health and Human Services Public Health
Service, dated September 30, 1993. (1)
10.3 Form of Amendment No. 1 to Exclusive License Agreement. (1)
10.4 Promissory Note, dated May 25, 1994 for $500,000, payable to Registrant
to the Council. (2).
10.5 Promissory Note, dated March 15, 1995 for $2,250,000 payable by
Registrant to the Council. (2)
10.6 Stock Acquisition Agreement, dated as of march 1, 1995, between Go
Irish, Ltd. ("GIL") and Registrant, as amended. (2)
10.7 Preferred stock Acquisition Agreement, dated as of March 1, 1995,
between GIL and Registrant, as amended. (2)
10.8 Promissory Note dated March 31, 1995, for $292,514, payable by
Registrant to the Council.(2)
- ------------------------------
(1) Filed as an Exhibit to Registrant's Form 10 SB dated May 13, 1994.
(2) Filed as an Exhibit to Registrant's Form 10KSB for the fiscal year
ended December 31, 1994.
B. Reports on Form 8-K
None filed.
46
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: May 15, 2000
By: \s\ Lyle Breaux
Lyle Breaux, President
In accordance with the Securities Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature/ Date
Title
/s/ Lyle Breaux May 15, 2000
---------------
President, Chief Executive Officer
(Principal Executive Officer) and Director
/s/ Lyle Breaux May 15, 2000
---------------
Treasurer (Principal Financial Officer)
And Director
/s/ Carson E. Beadle May 15, 2000
--------------------
Director
/s/ Robert Chan May 15, 2000
----------------
Director
47
