UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
Commission File Number: 0-30275
I-TRAX.COM, INC.
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(Exact name of small business issuer in its charter)
Delaware 13-3212593
------------------------------- ---------------------
(State or other jurisdiction) (I.R.S. Employer
Identification No.)
One Logan Square, 130 N. 18th Street, Philadelphia, PA 19103
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(Address of principal executive offices)
(215) 557-7488
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: As of March 31, 2000, the Registrant
had 17,828,084 shares of its $0.001 par value Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X ]
INDEX
Page
PART I FINANCIAL INFORMATION............................................... 3
Item 1. Financial Statements ........................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................15
PART II OTHER INFORMATION...................................................18
Item 1. Legal Proceedings...............................................18
Item 2. Changes in Securities...........................................18
Item 3. Defaults upon Senior Securities.................................18
Item 4. Submission of Matters to a Vote of Security Holders.............18
Item 5. Other Information...............................................18
Item 6. Exhibits and Reports on Form 8-K................................18
1
PART I Financial Statements
Item 1. Financial Statements
I-TRAX.COM, INC.
INDEX TO FINANCIAL STATEMENTS
(UNAUDITED)
Page
Number
Balance sheets at March 31, 2000 (unaudited) and
December 31, 1999 3
Statements of operations for the three months
ended March 31, 2000 and 1999 (unaudited) 4
Statement of stockholders' equity for the
three months ended March 31, 2000 (unaudited) 5
Statements of cash flows for the three months
ended March 31, 2000 and 1999 (unaudited) 6
Notes to financial statements (unaudited) 7-14
2
I-TRAX.COM, INC.
BALANCE SHEETS
ASSETS
March 31,
2000 December 31,
(unaudited) 1999
----------- ------------
Current assets:
Cash $ 1,387,547 $ 195,728
Accounts receivable 213,183 412,038
Prepaid expenses and other costs 169,524 24,770
----------------- --------------
Total current assets 1,770,254 632,536
----------------- --------------
Property and equipment, net 56,129 36,120
Security deposits 49,662 40,162
----------------- --------------
Total assets $ 1,876,045 $ 708,818
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 144,865 $ 192,578
Convertible note payable - 37,500
Due to related parties 48,048 66,048
----------------- --------------
Total current liabilities 192,913 296,126
----------------- --------------
Commitments & Contingencies (Note 5) - -
Stockholders' Equity:
Preferred Stock - $.001 par value, 2,000,000 shares authorized,
-0- issued and outstanding - -
Common Stock - $.001 par value, 50,000,000 shares authorized,
17,828,084 and 16,028,084 issued and outstanding, respectively 17,828 16,028
Additional paid-in capital 2,948,879 1,043,299
Accumulated deficit (1,283,575) (646,635)
------------------ --------------
Total stockholders' equity 1,683,132 412,692
----------------- --------------
Total Liabilities and Stockholders' Equity $ 1,876,045 $ 708,818
================== ===============
See accompanying notes to financial statements (unaudited)
3
I-TRAX.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
Three months Three months
ended ended
March 31, March 31,
2000 1999
------------ ------------
Revenue $ -- $ 223,950
------------ ------------
Operating expenses:
Cost of revenue -- 124,083
Selling, general and administrative 647,586 108,992
Research and development 583 41,707
------------ ------------
Total operating expenses 648,169 274,782
------------ ------------
Loss before other income
(expenses) and provision for income tax (648,169) (50,832)
------------ ------------
Other income (expenses):
Miscellaneous income 11,253
Interest expense (24) (168)
------------ ------------
Total other income (expenses) 11,229 (168)
------------ ------------
Loss before provision for income taxes (636,940) (51,000)
------------ ------------
Provision for income taxes -- --
------------ ------------
Net loss $ (636,940) $ (51,000)
============ ============
Basic:
Net loss $ (.04) $ (.06)
============ ============
Weighted average number of shares
outstanding 16,928,084 853,000
============ ============
See accompanying notes to financial statements (unaudited)
4
I-TRAX.COM, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- ----------- -------------- ------------- --------------
Balances at December 31, 1999 16,028,084 $ 16,028 $ 1,043,299 $(646,635) $ 412,692
Sale of common stock,
net of costs 1,800,000 1,800 1,793,080 - 1,794,880
Grant of Non-Qualified and
Non-Plan options to consultants as
consideration for services rendered - - 112,500 - 112,500
Net loss for the three months
ended March 31, 2000 - - - (636,940) (636,940)
------------ ----------- ------------- ------------- ------------
Balances at March 31, 2000 17,828,084 $ 17,828 $ 2,948,879 $ (1,283,575) $ 1,683,132
============ =========== ============= ============= =============
See accompanying notes to financial statements (unaudited)
5
I-TRAX.COM, INC
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
Operating activities:
Net loss $ (636,940) $ (53,804)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 7,204 542
Grant of non-qualified and non-plan options to
consultants for services 112,500 --
Decrease (increase) in:
Accounts receivable 198,855 42,550
Prepaid expenses and other current assets (144,754) (16,150)
Security deposits (9,500) --
(Decrease) increase in:
Accounts payable and accrued expenses (47,713) (72,231)
----------- -----------
Net cash used for operating activities (520,348) (99,093)
----------- -----------
Investing activities:
Purchase of property and equipment (27,213) (3,298)
----------- -----------
Net cash used for investing activities (27,213) (3,298)
----------- -----------
Financing activities:
(Repayment of) proceeds from notes payable (37,500) 150,000
Repayments to related parties (18,000) --
Net proceeds from sale of common stock 1,794,880 --
----------- -----------
Net cash provided by financing activities 1,739,380 150,000
----------- -----------
Net increase in cash 1,191,819 47,609
Cash and cash equivalents at beginning of year 195,728 52,882
----------- -----------
Cash and cash equivalents at end of year $ 1,387,547 $ 100,491
=========== ===========
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ 24 $ 168
=========== ===========
Income taxes $ -- $ --
=========== ===========
See accompanying notes to financial statements (unaudited).
6
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1-- ORGANIZATION AND NATURE OF BUSINESS
I-Trax.com, Inc (the "Company") was incorporated in the state of
Delaware on May 23, 1969 under the name Marmac Corporation. During
December 1979, the Company changed its name to Ibex Industries
International, Inc. During April 1996, in connection with the
acquisition of assets and the assumption of liabilities of various
medical practices (which reverted back to the original owners during
1997 as a result of cash flow deficiencies), the Company changed its
name to U.S. Medical Alliance, Inc. The Company, on August 27, 1999
changed its name to I-Trax.com, Inc. prior to the merger discussed
below.
Prior to the Company's considering a merger with Memberlink, on
September 3, 1999, it had entered into a Software and Proprietary
Product Corporate License Agreement ("License Agreement), a Technical
Service Agreement ("Technical Agreement") and a Management Service
Agreement ("Management Agreement") with Memberlink for the use and
exploitation of certain proprietary software created by Memberlink. In
consideration for the technical and management support from
Memberlink, the Company paid a $10,000 per month management fee to
Memberlink and issued an aggregate of 2,000,000 shares of its common
stock to it's officers and to key personnel responsible for the
successful implementation and customization of the proprietary
software. As consideration for the license, the Company issued
3,000,000 shares to Member Link Systems, Inc. ("Memberlink"), which
were subsequently cancelled as a result of the merger discussed below
Pursuant to a merger agreement dated as of December 14, 1999 (with an
effective date of December 30, 1999), the Company issued 8,000,082
shares of its common stock in exchange for all the issued and
outstanding common stock of Member-Link Systems, Inc. ("Memberlink").
Memberlink, which is also a Delaware corporation, is a health
information technology company which has developed certain software
technology which it sells and licenses to various organizations,
including but not limited to governmental agencies.
7
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1-- ORGANIZATION AND NATURE OF BUSINESS (cont'd)
The merger of the Company and Memberlink has been treated as a
recapitalization of Memberlink with Memberlink as the accounting
acquirer (reverse acquisition). The accompanying financial statements
reflect this transaction as if it had occurred on January 1, 1998.
Such transaction is considered a capital transaction whereby
Memberlink contributed its stock for the net assets of the Company.
Upon consummation of the merger on December 30, 1999, the shareholders
of Memberlink received 8,000,082 shares of the Company's common stock,
which in addition to the previously owned shares represented 60% of
the outstanding common stock immediately after the merger.
Simultaneously with the merger, Memberlink's former President was
elected as the Company's President. Upon consummation of the merger
transaction the Company was recapitalized and Memberlink ceased to
exist with the Company being the surviving entity. No goodwill or
intangibles were recorded as the public shell (the Company) only had
nominal assets and based on the reverse acquisition accounting rules,
the merger is valued at the net tangible assets of the Company.
The Company has incurred substantial losses since incorporation. As of
March 31, 2000, the accumulated deficit was $1,283,575. Moreover, the
Company expects that its operating losses will continue for the
foreseeable future. The Company's ability to continue as a going
concern is primarily based on raising sufficient equity to meet its
objectives.
NOTE 2-- INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited financial statements as of March 31, 2000 and for the
three month periods ended March 31, 2000 and 1999 have been prepared
by us and are unaudited. In our opinion, the unaudited financial
statements have been prepared on the same basis as the annual
financial statements and reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the
financial position as of March 31, 2000 and the results of our
operations and cash flows for the three month periods ended March 31,
2000 and 1999.
The results for the three month period ended March 31, 2000 are not
necessarily indicative of the results to be expected for any
subsequent quarter or the entire fiscal year ending December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date.
8
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 2-- INTERIM RESULTS AND BASIS OF PRESENTATION (cont'd)
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations. It is
suggested that these unaudited financial statements be read in
conjunction with our audited financial statements and notes thereto
for the year ended December 31, 1999 as included in our report on Form
10-SB filed on April 10, 2000.
The Company recognizes revenues in accordance with Statement of
Position 97-2 "Software Revenue Recognition" as further modified by
Statement of Position 98-9 "Modification of SOP 97-2, "Software
Revenue Recognition with Respect to Certain Transactions". SOP 97-2
was effective January 1, 1998 and generally requires revenue earned on
software arrangements involving multiple elements such as software
products, upgrades, enhancements, post-contract customer support,
installation and training to be allocated to each element based on the
relative fair value of the elements. SOP 98-9 amends SOP 97-2 to
require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is
vendor-specific objective evidence ("VSOE") of the fair values of all
the undelivered elements that are not accounted for by means of
long-term contract accounting, (2) VSOE of fair value does not exist
for one or more of the delivered elements, and (3) all revenue
recognition criteria of SOP 97-2 (other than the requirement for VSOE
of the fair value of each delivered element) are satisfied.
Revenue from software development contracts is recognized on a
percentage-of-completion method with progress to completion measured
based upon labor hours incurred or achievement of contract milestones.
Revenue from re-sale of hardware and software, obtained from vendors,
is recognized at the time hardware and software is delivered to
customers.
Deferred revenue represents funds received in advance in excess of
revenue recognized.
NOTE 3-- CONVERTIBLE NOTE PAYABLE
During 1996, the Company issued subordinated convertible promissory
notes to investors, accruing interest at an annual rate of 10% which
were convertible into shares of common stock at a conversion rate of
one share for each $5 of principal and accrued and unpaid interest.
9
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 3-- CONVERTIBLE NOTE PAYABLE (cont'd)
During October 1999, all such noteholders, except one, agreed to
convert their principal balance on the notes which amounted to
$405,500 at $1.50 per share. Accordingly, the Company issued 270,333
shares of its common stock to certain noteholders. All interest due
pursuant to the notes was waived by all noteholders. The convertible
note balance at December 31, 1999 amounting to $37,500 represents one
noteholder who did not convert the note to common stock, and
accordingly, was repaid the principal balance in full during the
quarter ended March 31, 2000.
NOTE 4-- DUE TO RELATED PARTIES
Due to related parties as of March 31, 2000 amounting to $48,048 is
comprised of the following:
i) Advances made by a former officer of Memberlink amounting to
$35,683. The former officer and current shareholder of the
Company has agreed to a repayment of the advances at a rate
of $3,000 per month until fully paid, without interest,
commencing April 2000.
ii) Advances made by a current officer of the Company
(previously an officer of Memberlink) amounting to $679. The
amount is due on demand and is non-interest bearing.
iii) Advances made by a relative of the officer discussed in (ii)
above amounting to $11,686. The amount is also due on demand
and is non-interest bearing.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
a) Lack of Insurance
The Company through March 14, 2000, did not maintain any
liability insurance or any other form of general insurance.
Although the Company is not aware of any claims resulting
from product malfunctions or any other type, there is no
assurance that none exists.
b) Significant customers and vendors.
For the three months ended March 31, 1999, the Company had
one unrelated customer, which accounted for 100%, of total
revenues. As of March 31, 2000, the Company had one
unrelated customer, which accounted for 76% of accounts
receivables.
10
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES (cont'd)
c) Office Lease
On October 22, 1999, the Company entered into a
non-cancelable lease agreement for its administrative
offices pursuant to a five year lease expiring October 31,
2004 with annual rent at approximately $162,000 before
annual escalations.
The Company's approximate future minimum rental payments
under non-cancelable operating leases in effect on December
31, 1999 are as follows:
2000 $ 161,376
2001 166,212
2002 171,192
2003 176,352
2004 151,370
--------
$ 826,502
Prior to October 1999, the Company rented office space on a
month to month basis at a rate of approximately $2,500 per
month for a portion of the year ended December 31, 1999.
Rent expense for the three months ended March 31, 2000 and
1999 amounted to approximately $43,439 and $7,500,
respectively.
d) Employment Agreements
i) On June 1, 1999, Member-Link entered into four employment
agreements with certain officers' of the Company. The
employment agreements terminate on May 31, 2000 with annual
salaries ranging from $125,000 to $175,000. Subsequent to
year end, the Company began renegotiating the remaining
three employment agreements (since one was terminated) due
to the merger effectuated on December 30, 1999.
ii) Effective April 4, 2000, the Company and an employee
responsible to act as in-house counsel for the Company,
executed an agreement of settlement for the termination of
the underlying employment agreement entered on June 1, 1999.
The Company agreed to pay $50,000, payable in $10,000
monthly installments commencing April 15, 2000 as settlement
payments. The Company also agreed to arrange for the sale of
70,000 shares of the employee's common stock in the Company
at a price of not less than $1.25 per share.
11
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES (cont'd)
d) Employment Agreements (contd)
iii) The Company entered into an employment agreement on November
29, 1999, with an individual to act as the Company's Chief
Medical Officer at an annual salary of $85,000. In addition,
the Company agreed to grant options to purchase 100,000
shares of common stock in accordance with the Company's
newly established 2000 Equity Compensation Plan (see note
9(c)). Such options will vest in increments to be
determined, but in no event no later than November 29, 2002.
Such individual also received additional 100,000 common
shares, valued at $12,500 for past services rendered to the
Company during the year ended December 31, 1999. Lastly, the
individual is also entitled to a sales bonus for sales
(after costs and related expenses) of the Company's
application systems for which he is primarily responsible.
e) Judgments
During 1998, several judgments were entered against U.S.
Medical Alliance, the predecessor to the Company, relating
among other things, the Company's prior line of business of
managing physician practices. The allegations made in the
underlying suits relate to wrongful discharge, general
breach of contract, breach of equipment lease agreements and
miscellaneous vendor claims. The aggregate amount of such
judgments entered against the Company and certain associated
physicians is approximately $600,000. None of the plaintiffs
in the underlying suits have attempted to collect on the
entered judgments. While it remains unclear whether the
Company can successfully satisfy the judgments in a
favorable manner, based on a reasoned opinion issued by the
Company's special counsel retained to resolve these matters,
the Company accrued, as of December 31, 1999, $22,500 as a
reserve for satisfying such judgments.
12
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 6-- STOCKHOLDERS' EQUITY
a) Issuance of common stock for settlement of debt
During 1996, the Company issued subordinated convertible
promissory notes to investors accruing interest at an annual
rate of 10% which were convertible into shares of common
stock at a conversion rate of one share for each $5 of
principal and accrued and unpaid interest.
During October 1999, all such noteholders, except one,
agreed to convert their principal balance on the notes which
amounted to $405,500 at $1.50 per share. Accordingly, the
Company issued 270,333 shares of its common stock to certain
noteholders. All accrued and unpaid interest on such notes
was waived by all noteholders. The convertible note balance
at December 31, 1999 amounting to $37,500 represents one
noteholder who did not convert the note to common stock, and
accordingly, was repaid the principal balance in full during
the quarter ended March 31, 2000.
b) Sale of common stock
During January and February 2000, the Company sold an
aggregate of 1,800,000 shares of its common stock at $1 per
share yielding net proceeds of approximately $1,794,880
after certain offering expenses. Such shares were sold
pursuant to Rule 506 of Regulation D promulgated under the
Securities Act of 1933.
c) 2000 Equity Compensation Plan
During February 2000, the Company established the 2000
Equity Compensation Plan (the "Plan") to provide (i)
designated employees of the Company and its subsidiaries,
(ii) certain consultants and advisors who perform services
for the Company or its subsidiaries, and (iii) non-employee
members of the Board of Directors of the Company with the
opportunity to receive grants of incentive stock options,
non-qualified stock options and restricted stock. The
aggregate number of shares of common stock of the Company
that may be issued or transferred under the Plan is
3,000,000 shares. The maximum aggregate number of shares of
that shall be subject to grants made under the Plan to any
individual during any calendar year shall be 350,000 shares.
13
I-TRAX.COM, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 6-- STOCKHOLDERS' EQUITY (cont'd)
c) 2000 Equity Compensation Plan (cont'd)
As of March 31, 2000, the Company has granted an aggregate
of 550,000 incentive and non-qualified stock options
pursuant to the above plan with exercise prices ranging
between $1 and $2 per shares pursuant to a vesting period
commencing June 12, 2000 through March 14, 2002.
In addition, during the three months ended March 31, 2000,
the Company granted 250,000 non-plan options to a consultant
which vest over a period of six months commencing January 1,
2000. For the three months ended March 31, 2000, the Company
recorded $112,500 of consulting expenses on account of such
options.
NOTE 7-- SUBSEQUENT EVENT
On April 10, 2000, the Company entered into a non-cancelable
lease agreement for its executive offices pursuant to a
five-year lease expiring June 29, 2005 with annual rent of
approximately $123,000 per year before annual escalations.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Basis of Presentation
The following discussion of the financial condition and related
results of operations of I-Trax.com, Inc. (the "Company") should be reviewed in
conjunction with the financial statements of the Company and related notes
appearing on the preceding pages as well as the Company's audited financial
statement for the fiscal year ended December 31, 1999, attached to our
Registration Statement on Form 10-SB, filed on April 10, 2000. The Company
believes that the merger of Member-Link Systems, Inc., into the Company
effective as of December 30, 1999 will have substantial impact on its future
operating results.
Introduction
We were incorporated in the State of Delaware under the name of
Marmac Corporation in May 1969. In December 1979, we changed the Company's name
to Ibex Industries International, Inc. On April 1, 1996, we purchased the assets
of certain physician practices, changed the Company's name to U.S. Medical
Alliance, Inc., and commenced operations as a physician practice management
company.
As U.S. Medical Alliance, we completed one additional physician
practice acquisition. However, we did not have adequate liquidity and capital
resources to withstand the downturn in the physician practice management
industry, nor the ability to acquire profitable physician practices.
During 1997, the Company, formerly known as US Medical Alliance,
Inc., ceased doing its business activities as a physician practice management
company and embarked on a program of winding down such activities, returning
physician practice assets to physicians in exchange for cancellation of stock in
the Company issued for such assets, and settling its obligations. During 1998,
the Company had no operations. In August, 1999, six principal stockholders of
the Company purchased 4,000,000 shares of the Company's Common Stock for
$400,000 to raise working capital which enabled the Company to enter into a
license agreement, a technical services agreement and a management services
agreement with Member-Link Systems, Inc., a health information technology
company, to own and develop the Internet application of an immunization tracking
system known as "I-Trax." As consideration for these agreements, we issued
3,000,000 shares of our Common Stock to Member-Link and an aggregate of
2,000,000 shares of our Common Stock to certain executive officers of
Member-Link. We also changed our name to "I-Trax.com, Inc." on August 27, 1999.
Effective as of December 30, 1999, Member-Link merged with and into
us pursuant to a Merger Agreement dated as of December 14, 1999. In the merger,
each of the 1,809,686 outstanding shares of Common Stock of Member-Link was
converted into a right to receive 4.4207 shares of our Common Stock. An
aggregate of 8,000,082 shares of our Common Stock was issued in the merger. The
3,000,000 shares of our Common Stock held of record by Member-Link at the time
of the merger were canceled. As a further consequence of the merger, each of the
license agreement, the technical services agreement and management services
agreement were canceled.
15
Overview
The Company has historically developed enterprise or client server
applications for collecting disease specific data at the point of care. The
Company has just begun the development of its Internet applications and no
revenues have been generated from these applications. The Company intends to
increase significantly its expenditures primarily in the areas of product
development, client services, business development, and sales and marketing. As
a result, the Company expects to incur substantial operating losses over the
next twelve months.
The Company's current primary sources of revenues are license fees
and product development fees it charges its customers. In the future, the
Company expects to generate a significant portion of its revenue from
subscriptions to the Company's products delivered over the Internet.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999.
Total revenues for quarter ended March 31, 2000 were $0.00 as
compared to $223,950 for the quarter ended March 31, 1999.
Cost of Revenue was $0.00 for the quarter ended March 31, 2000 as
compared to $124,083 for the same items in the first quarter of 1999, consisting
primarily of computer hardware, networking and consulting.
Research and development expenses amounted to $583 for the quarter
ended March 31, 2000, as compared to $41,707 for the quarter ended March 31,
1999, which consisted primarily of employee compensation and information systems
personnel. Although the Company has expensed its R&D costs in the past, it will
likely capitalize a significant percentage of the costs associated with the
development of its web-based versions of its existing products in the future.
Selling, general and administrative expenses consist primarily of
compensation for legal, finance, sales, management, travel, rent, telephone and
consulting services. Selling, general and administrative expenses were $647,586
for the quarter ended March 31, 2000 and $108,992 for the quarter ended March
31, 1999. The increase resulted primarily from increased costs necessary to
support the growth of the Company's business activities. The Company intends to
increase the amounts it spent in these categories to support continued growth
and expansion in future periods.
16
Liquidity and Capital Resources
The Company's accumulated deficit of $1,283,575 from inception has
been funded through capital contributions from the sale of common stock of the
Company. On February 20, 2000, the Company completed a private placement of
1,800,000 shares of its Common Stock at $1.00 per share to fund the next phase
of the Company's planned expansion. The Company believes that these funds,
together with anticipated revenue, will be sufficient to meet the Company's
present business expansion requirements until the end of the third quarter of
2000. Although the Company plans to seek additional capital during that period,
there can be no assurance that such financing will be available on acceptable
terms, if at all.
At March 31, 2000, the Company's cash and cash equivalents were
$1,387,547. The Company's principal source of liquidity is the cash obtained
from the private placement transaction. The Company currently has no available
credit facilities to fund operating cash flow or investment opportunities.
During 1998, several judgments were entered against U.S. Medical
Alliance, the predecessor to the Company, relating among other things, to the
Company's prior line of business of managing physician practices. The
allegations made in the underlying suits relate to wrongful discharge, general
breach of contract, breach of equipment lease agreements and miscellaneous
vendor claims. The aggregate amount of such judgments entered against the
Company and certain associated physicians is approximately $600,000. None of the
plaintiffs in the underlying suits has attempted to collect on the judgments.
While it remains unclear whether the Company can successfully satisfy the
judgments in a favorable manner, based on a reasoned opinion issued by the
Company's special counsel retained to resolve these matters, the Company has
accrued, as of December 31, 1999, approximately $22,500, with a related charge
to operations, as a reserve for satisfying such judgments.
Factors Affecting the Company's Business and Prospects
The Company expects to experience significant fluctuations in its
future quarterly operating results due to a variety of factors, many of which
are outside the Company's control. These issues are discussed more fully in the
Risk Factors section in Item 1 of this Form 10-SB.
Market Risk
The Company has no material interest-bearing assets or liabilities, nor
does the Company have any current exposure for changes in foreign currency
exchange rates. The Company does not use derivatives or other financial
instruments. The Company's financial instruments consist of cash and
receivables. The market values of these financial instruments approximate book
value.
Inflation
The financial statements are presented on a historical cost basis and
do not fully reflect the impact of prior years' inflation. While the U.S.
inflation rate has been modest for several years, inflation issues may impact
the Company's business in the future. The ability to pass on inflation costs is
an uncertainty due to general economic conditions and competitive situations.
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Year 2000 Preparation
Software failures due to calculations using Year 2000 dates are a known
risk. Although the most critical date (January 1, 2000) has occurred without
incident in our software, problems with Year 2000 software could nonetheless
result in system failures or miscalculations causing disruptions of operations,
including, among others, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. To date, the Company
has experienced very few problems related to Year 2000 testing and those
requiring modification have been fixed. The Company does not believe that there
is material exposure to the Year 2000 issue with respect to its electronic
commerce transaction processing and online activity since these systems
correctly define the Year 2000. The Company is nonetheless conducting an
analysis to determine whether others with whom the Company does business have
Year 2000 issues on a continual basis.
The Company has not incurred any material expenses in addressing Year
2000 compliance to date.
PART II Other Information
Item 1. Legal Proceedings
None.
Item 2. Change in Securities
On February 20, 2000, we completed the sale of 1,800,000 shares of our
Common Stock for an aggregate consideration of $1,800,000, at a price of $1.00
per share, in a series of closings pursuant to a private placement to accredited
investors. The entire proceeds of the Private Placement, $1,794,880 (net of
costs), is being used by the Company for working capital. In issuing such
private placement shares, we relied on an exemption from registration under
Section 4(2) of the Securities Act and Regulation D thereunder. We filed with
the SEC a Form D in connection with the issuance of our shares in this private
placement.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
27.1 Financial data schedule.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
I-TRAX.COM, INC.
Date: February 23, 2001 By: /s/ Frank A. Martin
-----------------------------------
Name: Frank A. Martin
Title: Chief Executive Officer
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