Rule 424(b)(3)
Reg. No. 333-100650
PROSPECTUS
MEDIX RESOURCES, INC.
19,158,753 Shares of Common Stock
The shareholders of Medix Resources, Inc. named herein will have the right
to offer and sell up to an aggregate of 19,158,753 shares of our common stock
under this Prospectus.
Medix will not receive directly any of the proceeds from the sale of these
shares by the selling shareholders. However, Medix will receive the proceeds of
the exercise of warrants to purchase some of the shares to be sold hereunder.
See "Use of Proceeds." Medix will pay the expenses of registration of these
shares.
The common stock is traded on the American Stock Exchange under the symbol
"MXR". On November 15, 2002, the closing price of the common stock was reported
as $0.71.
The securities offered hereby involve a high degree of risk. See "Risk
Factors" beginning on page 3 for certain risks that should be considered by
prospective purchasers of the securities offered hereby.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is November 15, 2002
No dealer, salesman or othe rperson has been authorized to give any
information or to make any representation not contained in or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by us, the
selling shareholders or any other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such an
offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in our affairs since such date.
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TABLE OF CONTENTS
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SUMMARY
RISK FACTORS
FORWARD-LOOKING STATEMENTS
THE COMPANY
USE OF PROCEEDS
SELLING SHAREHOLDERS
DESCRIPTION OF SECURITIES
PLAN OF DISTRIBUTION
INDEMNIFICATION OF OFFICERS AND DIRECTORS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
LEGAL MATTERS
EXPERTS
SUMMARY
This Prospectus covers the offering and sale of up to 19,158,753 shares of
our common stock to the public by certain selling shareholders listed under the
heading "Selling Shareholders" further back in this Prospectus. As of November
15, 2002, we had 71,490,315 shares of our common stock outstanding, and
approximately 31,723,062 shares were issuable upon the exercise of outstanding
options, warrants or other rights, and the conversion of outstanding preferred
stock.
We develop, distribute and deploy connectivity products for Internet-based
communications and information management by medical service providers. We have
nominal revenue from current operations and are funding the development and
deployment of our products through the sales of our securities. See "The
Company-Recent Developments" and "Risk Factors."
Because of our continuing losses, and the lack of a certain source of
capital to fund our development of connectivity products, our independent
accountants included a "going concern" exception in their audit report on our
audited financial statements for the year 2001. The "going concern" exception
signifies that significant questions exist about our ability to continue in
business. See "Risk Factors."
At a Board of Directors meeting held on September 24, 2002, our previous
President and CEO stepped down and was replaced by Mr. Darryl R. Cohen as
President and CEO. See "The Company-Recent Developments."
Our principal executive office is located at 420 Lexington Avenue, Suite
1830, New York, NY 10170, and its telephone number is (212) 697-2509.
RISK FACTORS
An investment in our common stock:
o has a high degree of risk;
o is highly speculative;
o should only be considered by those persons or entities who can
afford to lose their entire investment.
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating our business
and an investment in our shares. The order in which the following risk factors
are presented does not indicate the relative magnitude of the risks described.
Our continuing losses endanger our viability and have caused our
accountants to issue a "going concern" exception in their annual audit report.
We reported net losses of ($10,636,000), ($5,415,000) and ($4,847,000) for
the years ended December 31, 2001, 2000 and 1999, respectively, and a net loss
of ($4,718,000) for the nine months ending September 30, 2002. At September 30,
2002, we had an accumulated deficit of ($38,777,000) and a negative working
capital of ($1,949,000). Our Cymedix(R) products are in the development and
early deployment stage and have not generated any significant revenue to date.
We are funding our operations through the sale of our securities. Our
independent accountants have included a "going concern" exception in their audit
reports on our audited 2000 and 2001 financial statements. See our Form 10-K, as
amended, for the fiscal year ended December 31, 2001.
Our need for additional financing is acute and failure to obtain it could
lead to the financial failure of our company.
We expect to continue to experience losses, in the near term, until such
time as our Cymedix(R)products can be successfully deployed with physicians and
produce revenue. The continuing development, marketing and deployment of the
Cymedix connectivity products will depend upon our ability to obtain additional
financing. Our Cymedix(R)products are in the development and early deployment
stage and have not generated any significant revenue to date. We are funding our
operations through the sale of our securities. There can be no assurance that
additional investments or financings will be available to us as needed to
support the development and deployment of Cymedix(R)products. Failure to obtain
such capital on a timely basis could result in lost business opportunities, the
sale of the Cymedix business at a distressed price or the financial failure of
our company. See "The Company-Recent Developments."
Medix has frequent cash flow problems that often cause us to be delinquent
in making payments to our vendors and other creditors, which may cause damage to
our business relationships and cause us to incur additional expenses in the
payment of late charges and penalties.
During 2001, from time to time, its lack of cash flow caused Medix to delay
payment of its obligations as they came due in the ordinary of its business. In
some cases, Medix was delinquent in making payments by the legally required due
dates. At its four office locations, Medix had 48 monthly payments due in the
aggregate during 2001. 31 of those payments were late. 23 of those payments were
paid within 30 days of their due date, and 8 of those payments were between 31
and 60 days late. All payments plus any required penalties were ultimately paid
in full during 2001. Medix had 33 Federal withholding and other payment due
dates. Of those, 17 due dates were missed. The resulting delinquencies ranged
from 1 to 58 days, before the required payments were made. Medix pays the
resulting penalties as they are billed. Medix had state withholding obligations
in five states, Colorado, California, Georgia, New Jersey and New York. Medix
was late in making 45 of 97 withholding payments in those five states. The
length of these delinquencies ranged from 3 to 60 days, before the required
payments were made. Medix pays the resulting penalties as they are billed. Medix
was late in making its deposits of its employees' 401(k) contributions 21 of 26
times during 2001. The length of these delinquencies ranged from 10 to 60 days.
All of the above late payments were made before the end of 2001. During 2002,
the Company continues to be delinquent, from time to time, in meeting its
obligations as they become due.
We are a development stage company, which means our products and services
have not yet proved themselves commercially viable and therefore our future is
uncertain.
o We develop products for Internet-based communications and information
management for medical service providers, through our wholly owned
subsidiary, Cymedix Lynx Corporation. Our Cymedix(R)products are still
in the development and early deployment stage and have not generated
any significant revenue to date. We are funding our operations through
the sale of our securities. Our ability to continue to sell our
securities can not be assured.
o We are still in the process of gaining experience in marketing
physician connectivity products, providing support services,
evaluating demand for products, financing a technology business and
dealing with government regulation of health information technology
products. While we are putting together a team of experienced
executives, they have come from different backgrounds and may require
some time to develop an efficient operating structure and corporate
culture for our company. See "The Company-Recent Developments."
We rely on healthcare professionals for the quality of the information that
is transmitted through our interconnectivity systems, and we may not be paid for
our services by third-party payors if that quality does not meet certain
standards.
The success of our products and services in generating revenue may be
subject to the quality and completeness of the data that is generated and stored
by the physician or other healthcare professional and entered into our
interconnectivity systems, including the failure to input appropriate or
accurate information. Failure or unwillingness by the healthcare professional to
accommodate the required information quality may result in the payor refusing to
pay Medix for its services.
Our market, healthcare services, is rapidly changing and the introduction
of Internet connectivity services and products into that market has been slow,
which may cause us to be unable to develop a profitable market for our services
and products.
o As a developer of connectivity technology products, we will be
required to anticipate and adapt to evolving industry standards and
new technological developments. The market for our products is
characterized by continued and rapid technological advances in both
hardware and software development, requiring ongoing expenditures for
research and development, and timely introduction of new products and
enhancements to existing products. The establishment of standards is
largely a function of user acceptance. Therefore, such standards are
subject to change. Our future success, if any, will depend in part
upon our ability to enhance existing products, to respond effectively
to technology changes, and to introduce new products and technologies
that are functional and meet the evolving needs of our clients and
users in the healthcare information systems market.
o The introduction of physician connectivity products in our market has
been slow due, in part, to the large number of small practitioners who
are resistant to change and the implicit costs associated with change,
particularly in a period of rising pressure to reduce costs in the
market. In addition, the integration of processes and procedures with
several payors and management intermediaries in a market area has
taken more time than anticipated. The resulting delays continue to
prevent the receipt of significant transaction fees and cause us to
continue to raise money by the sale of our securities to finance our
operations.
o Our early-stage market approach concentrated product distribution
efforts in a single market (Atlanta, GA), thereby amplifying the
effect of localized market restrictions on Company prospects, and
delaying large-scale distribution of our products. While the Company
intends to mitigate these local factors with an aggressive strategy to
develop alternate distribution channels in multiple markets, there can
be no assurance of near term success.
o We are currently devoting significant resources toward the
development, distribution and deployment of our Cymedix(R)products.
There can be no assurance that we will successfully complete the
development of these products in a timely fashion or that our current
or future products will satisfy the needs of the healthcare
information systems market. Further, there can be no assurance that
products or technologies developed by others will not adversely affect
our competitive position or render our products or technologies
noncompetitive or obsolete.
As a provider of medical connectivity products and services, we may become
liable for product liability claims that could have a materially adverse impact
on our financial condition.
Certain of our products provide applications that relate to patient medical
histories and treatment plans. Any failure by our products to provide accurate,
secure and timely information could result in product liability claims against
us by our clients or their affiliates or patients. We do not yet have
significant transactions over our network, so that the risks of a product
liability claim are low. However, we are seeking product liability coverage,
which may be prohibitive in cost. There can be no assurance that we will be able
to obtain such coverage at an acceptable cost or that our insurance coverage
would adequately cover any claim asserted against us. Such a claim could be in
excess of the limits imposed by any policy we might be able to obtain. A
successful claim brought against us in excess of any insurance coverage we might
have could have a material adverse effect on our results of operations,
financial condition or business. Even unsuccessful claims could result in the
expenditure of funds in litigation, as well as diversion of management time and
resources.
Our industry, healthcare, continually experiences rapid change and
uncertainty that could result in issues for our business planning or operations
that could severely impact on our ability to become profitable.
The healthcare and medical services industry in the United States is in a
period of rapid change and uncertainty. Governmental programs have been
proposed, and some adopted, from time to time, to reform various aspects of the
U.S. healthcare delivery system. Some of these programs contain proposals to
increase government involvement in healthcare, lower reimbursement rates and
otherwise change the operating environment for our physician users and
customers. Particularly, the Health Insurance Portability and Accountability Act
of 1996, and the regulations that are being promulgated thereunder, are causing
the healthcare industry to change its procedures and incur substantial cost in
doing so. Although we expect these regulations to have the beneficial effect of
spurring adoption of our software products we cannot predict with any certainty
what impact, if any, these and future healthcare reforms might have on our
business.
We rely on intellectual property rights, such as patents, copyrights,
trademarks and unprotected propriety technology in our business operations and
to create value in our company, however, protecting intellectual property
frequently requires litigation and close legal monitoring and may adversely
impact our ability to become profitable.
o Our wholly owned subsidiary, Cymedix Lynx Corporation, has been
granted certain patent rights, trademarks and copyrights relating to
its software business. These patents and copyrights have been assigned
by our subsidiary to the parent company, Medix. The patent rights and
intellectual property legal issues for software programs, such as the
Cymedix(R)products, are complex and currently evolving. Since patent
applications are secret until patents are issued, in the United
States, or published, in other countries, we cannot be sure that we
are the first to file any patent application. In addition, there can
be no assurance that competitors, many of which have far greater
resources than we do, will not apply for and obtain patents that will
interfere with our ability to develop or market product ideas that we
have originated. Further, the laws of certain foreign countries do not
provide the protection to intellectual property that is provided in
the United States, and may limit our ability to market our products
overseas. While we have no prospects for marketing or operations in
foreign countries at this time, future opportunities for growth in
foreign markets, for that reason, may be limited. We cannot give any
assurance that the scope of the rights that we have been granted are
broad enough to fully protect our Cymedix(R)software from
infringement.
o Litigation or regulatory proceedings may be necessary to protect our
intellectual property rights, such as the scope of our patent. In
fact, the information technology and healthcare industries in general
are characterized by substantial litigation. Such litigation and
regulatory proceedings are very expensive and could be a significant
drain on our resources and divert resources from product development.
There is no assurance that we will have the financial resources to
defend our patent rights or other intellectual property from
infringement or claims of invalidity. A party has notified us that it
believes our pharmacy product may infringe on patents that it holds.
We have retained patent counsel who has made a preliminary
investigation and determined that our product does not infringe on the
identified patents. At this time no legal action has been instituted.
o We also rely upon unprotected proprietary technology and no assurance
can be given that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain
access to or disclose our proprietary technology or that we can
meaningfully protect our rights in such unpatented proprietary
technology. We will use our best efforts to protect such information
and techniques, however, no assurance can be given that such efforts
will be successful. The failure to protect our intellectual property
could cause us to lose substantial revenues and to fail to reach its
financial potential over the long term.
Because our business is highly competitive and there are many competitors
who are financially stronger than we are, we are at risk of being outperformed
in staffing, marketing, product development and customer services, which could
severely limit our ability to become profitable.
o eHealth Services. Competition can be expected to emerge from
established healthcare information vendors and established or new
Internet related vendors. The most likely competitors are companies
with a focus on clinical information systems and enterprises with an
Internet commerce or electronic network focus. Many of these
competitors will have access to substantially greater amounts of
capital resources than we have access to, for the financing of
technical, manufacturing and marketing efforts. Frequently, these
competitors will have affiliations with major medical product or
software development companies, who may assist in the financing of
such competitor's product development. We will seek to raise capital
to develop Cymedix products in a timely manner, however, so long as
our operations remain under-funded, as they now are, we will be at a
competitive disadvantage.
o Personnel. The success of the development, distribution and deployment
of our Cymedix(R)products is dependent to a significant degree on our
key management and technical personnel. We believe that our success
will also depend upon our ability to attract, motivate and retain
highly skilled, managerial, sales and marketing, and technical
personnel, including software programmers and systems architects
skilled in the computer languages in which our Cymedix(R)products
operate. Competition for such personnel in the software and
information services industries is intense. The loss of key personnel,
or the inability to hire or retain qualified personnel, could have a
material adverse effect on our results of operations, financial
condition or business.
We have relied on the private placement exemption to raise substantial
amounts of capital, and could suffer substantial losses if that exemption was
determined not to have been properly relied upon.
We have raised substantial amounts of capital in private placements from
time to time. The securities offered in such private placements were not
registered with the SEC or any state agency in reliance upon exemptions from
such registration requirements. Such exemptions are highly technical in nature
and if we inadvertently failed to comply with the requirements of any of such
exemptive provisions, investors would have the right to rescind their purchase
of our securities or sue for damages. If one or more investors were to
successfully seek such rescission or institute such suit, Medix could face
severe financial demands that could material and adversely affect our financial
position.
The impact of shares of our common stock that may become available for sale
in the future may result in the market price of our stock being depressed.
As of November 15, 2002, we had 71,490,315 shares of common stock
outstanding. As of that date, 31,723,062 shares were issuable upon the exercise
of outstanding options, warrants or other rights, and the conversion of
preferred stock. Most of these shares will be immediately saleable upon exercise
or conversion under registration statements we have filed with the SEC. The
exercise prices of options, warrants or other rights to acquire common stock
presently outstanding range from $0.19 per share to $4.97 per share. During the
respective terms of the outstanding options, warrants, preferred stock and other
outstanding derivative securities, the holders are given the opportunity to
profit from a rise in the market price of the common stock, and the exercise of
any options, warrants or other rights may dilute the book value per share of the
common stock and put downward pressure on the price of the common stock. The
existence of the options, conversion rights, or any outstanding warrants may
adversely affect the terms on which we may obtain additional equity financing.
Moreover, the holders of such securities are likely to exercise their rights to
acquire common stock at a time when we would otherwise be able to obtain capital
on terms more favorable than could be obtained through the exercise or
conversion of such securities. See also the impact of our equity line of credit
financing discussed in the following paragraphs.
Because of dilution to our common stock outstanding from the below market
pricing features of financings that are available to us, the market price of our
stock may be depressed.
Financings that may be available to us under current market conditions,
frequently involve below market current sales, as well as warrants or
convertible debt that require exercise or conversion prices that are calculated
in the future at a discount to the then market price of our common stock. Any
agreement to sell, or convert debt or equity securities into, common stock at a
future date and at a price based on the then current market price will provide
an incentive to the investor or third parties to sell the common stock short to
decrease the price and increase the number of shares they may receive in a
future purchase, whether directly from us or in the market. The issuance of the
common stock in connection with such exercise or conversion may result in
substantial dilution to the common stock holdings of other holders of our common
stock.
Because of market volatility in our stock price, investors may find that
they have a loss position if emergency sales become necessary.
Historically, our common stock has experienced significant price
fluctuations. One or more of the following factors influence these fluctuations:
o unfavorable announcements or press releases relating to the technology
sector;
o regulatory, legislative or other developments affecting our company or
the health care industry generally;
o conversion of our preferred stock and convertible debt into common
stock at conversion rates based on current market prices or below of
our common stock and exercise of options and warrants at below current
market prices;
o sales by those financing our company through an equity line of credit
or convertible securities which have been registered with the SEC and
may be sold into the public market immediately upon receipt; and
o market conditions specific to technology and internet companies, the
health care industry and general market conditions.
In addition, in recent years the stock market has experienced significant
price and volume fluctuations. These fluctuations, which are often unrelated to
the operating performance of specific companies, have had a substantial effect
on the market price for many health care related technology companies. Factors
such as those cited above, as well as other factors that may be unrelated to our
operating performance may adversely affect the price of our common stock.
The application of the "penny stock" rules to our common stock may depress
the market for our stock.
Trading of our common stock may be subject to the penny stock rules under
the Securities Exchange Act of 1934, as amended, unless an exemption from such
rules is available. Broker-dealers making a market in our common stock will be
required to provide disclosure to their customers regarding the risks associated
with our common stock, the suitability for the customer of an investment in our
common stock, the duties of the broker-dealer to the customer and information
regarding bid and ask prices for our common stock, and the amount and
description of any compensation the broker-dealer would receive in connection
with a transaction in our common stock. The application of these rules may
result in fewer market makers making a market of our common stock and further
restrict the liquidity of our common stock.
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future.
We have not had earnings, but if earnings were available, it is our general
policy to retain any earnings for use in our operation. Therefore, we do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. Any payment of cash dividends on our common stock in the future will be
dependent upon our financial condition, results of operations, current and
anticipated cash requirements, plans for expansion, as well as other factors
that the Board of Directors deems relevant. We anticipate that our future
financing agreements will prohibit the payment of common stock dividends without
the prior written consent of those providers.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference into this
Prospectus contain forward-looking statements, which mean that they relate to
events or transactions that have not yet occurred, our expectations or estimates
for Medix's future operations, our growth strategies or business plans or other
facts that have not yet occurred. Such statements can be identified by the use
of forward-looking terminology such as "might," "may," "will," "could,"
"expect," "anticipate," "estimate," "likely," "believe," or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
above risk factors contain discussions of important factors that should be
considered by prospective investors for their potential impact on
forward-looking statements included in this Prospectus and in the documents
incorporated by reference into this Prospectus. These important factors, among
others, may cause actual results to differ materially and adversely from the
results expressed or implied by the forward-looking statements.
THE COMPANY
General
In 2002, we introduced our next generation of proprietary, point-of-care
products, Cymedix(R)III. Our improved suite of connectivity products is based
upon a robust and device-neutral architecture that leverages proven workstation,
handheld and wireless technologies and is being installed and tested for
Pharmacy, Laboratory and PlanConnect services. The marketing and development of
our Cymedix(R)suite of products is our sole business at this time, and a
substantial portion of our net operating loss is due to such efforts. We are
funding such expenses as well as our administrative expenses through the sale of
our securities. We have no significant long-term debt financing available to us.
We acquired the Cymedix business in January of 1998. Cymedix has developed
Internet-based communications and information management product, which we have
begun marketing to medical professionals in selected regional markets. Growth of
the medical information management marketplace is being driven by the need to
share significant amounts of clinical and patient information between
physicians, their outpatient service providers, hospitals, insurance companies
and managed care organizations. This market is one of the fastest-growing
sectors in healthcare today, commanding two-thirds of projected healthcare
capital investments. The Cymedix(R)connectivity products contain patented
elements that can be used to develop secure medical communications products that
make use of the Internet. Using the Cymedix(R)tools, medical professionals can
order, prescribe and access medical information from participating insurance
companies and managed care organizations, as well as from any participating
outpatient service provider, such as a laboratory or pharmacy. Currently we
provide our products to physician users at no charge, and collect transaction
fees from sponsoring payors whenever our products are used to provide services.
From time to time, we will pay honorariums or provide other incentives to
selected physicians to engage their expertise as members of Company-sponsored
advisory panels, provide in-depth product feedback and establish "model office"
operations in selected areas.
The products' relational database technologies provide user physicians with
a permanent, ongoing record of each patient's name, address, insurance or
managed care affiliation, referral status, medical history, personalized notes
and an audit trail of past encounters. Physicians are able to electronically
check patient eligibility, order medical laboratory procedures, receive and
store test results, issue new and renewal drug prescriptions, make medical
referrals, request authorizations, and report financial and encounter
information in a cost-effective, secure and timely manner.
Our principal executive office is located at The Graybar Building, 420
Lexington Ave., Suite 1830 New York, NY 10170, and its telephone number is (212)
697-2509. We also have offices in California, Colorado and Georgia.
Recent Developments
On October 30, 2002, we announced that we had entered into a non-binding
Letter of Intent with PocketScript, LLC, a private company developing and
marketing software products similar to our products. Under the Letter of Intent,
Medix would purchase all of the assets of PocketScript and related companies,
subject to the completion of satisfactory due diligence on the part of both
companies and negotiation and execution of definitive documents by December
20,2002. Upon closing, Medix would issue its convertible preferred stock to
PocketScript, convertible into 12 million shares of common stock, subject to a
downward adjustment if a certain closing value is not realized. In addition,
Medix would issue up to $4 million in additional convertible preferred stock if
certain business enhancement events occur within six months of the closing of
the acquisition. The sale of any stock issued by Medix would be restricted for
periods from 3 to 24 months after closing. Medix was required to pay to
PocketScript $100,000 on or before October 31, 2002. Medix will also enter into
employment or consulting agreements with key PocketScript employees, and will be
required to raise $1 million prior to closing. Finally, PocketScript will obtain
the termination of a right of first refusal held by a third party. There can not
be any assurance that this acquisition will be completed or that these terms
will be reflected in the final agreement.
In May 2002, we announced the formal launch of physician marketing
activities in the state of Georgia. Georgia is our inaugural regional market,
and it provides an important initial testing ground for physician user
distribution and deployment methodologies. The regional operation has
responsibility to secure locally based health plan, pharmacy benefit manager and
lab sponsor agreements to complement national account sponsor sales and optimize
local market density. As of September 30, 2002, the Company has completed
demonstrations of its Cymedix(R)connectivity services to 44 medical practices,
representing 2,000 area physicians. These Cymedix(R)III product demonstrations
are in addition to a current installed base of 5 medical practices, representing
23 practicing physicians as of the end of September, 2002. The Company currently
provides a nominal, short-term honorarium to two of the five installation sites
as compensation for their agreement to provide in-depth usability feedback for
future product releases as well as serve as the initial "model offices."
As noted earlier, the detection of market restrictions that are local to
Georgia has led to a rethinking and recalibration of physician marketing and
distribution initiatives. Specifically, the Company will aggressively implement
and test a variety of complementary pathways to expedite distribution and
deployment of our technologies to physician communities in multiple markets,
including: (i) nationally-oriented brand building; (ii) potential franchising
and outsource arrangements; and (iii) licensing and co-branding opportunities.
On October 15, 2002, we completed private placements of our securities for
$1,490,000, principally raised during August and September. In connection
therewith, we issued 3,725,000 shares of common stock and warrants to purchase
an equal number of shares of common stock at the exercise price of $0.50 per
share.
At a Board of Directors meeting held on September 24, 2002, our previous
President and CEO stepped down and was replaced by Mr. Darryl R. Cohen, who is
fifty years old. Mr. Cohen was elected to the Board of Directors at a Board
meeting held on October 8, 2002. Mr. Cohen directly or indirectly owns
approximately 1 million shares of our common stock and warrants to purchase
approximately 1 million additional shares. An investor in private and public
companies, Mr. Cohen frequently works with the management of the companies in
which he's invested, assisting them in the areas of marketing strategy and
financing efforts. He is also co-owner of a financial services advisory firm,
Omni Financial, providing financial restructuring services for individuals. From
1994 to 1998, Mr. Cohen was President of DCNL Incorporated, formerly the
Sterling Brush Company. DCNL was a privately held beauty supply manufacturer and
distributor he founded in 1988 and sold to Helen of Troy in 1998. From 1986 to
1999, during his tenure as President of DCNL, Mr. Cohen was also co-owner and
president of Basics Beauty Supply Stores. He is a member of the board of
directors of Access Marketing and consults to a major media company in the cable
television market. Cohen holds a BA in Political Science from the University of
California at Berkeley.
At the September 24, 2002 Board meeting, the previous Chairman of the Board
stepped down and Mr. Patrick W. Jeffries was elected Chairman of our Board of
Directors.
In July 2002, Loyola University Health System, a wholly owned subsidiary of
Loyola University Chicago, announced the initial findings of a live, field test
of Medix' Cymedix(R) laboratory technology. Early results indicate that the
median laboratory processing time has been reduced from an average of ten
minutes per transaction to less than one minute, validating expectations for
substantive, long-range productivity savings. Medix and Loyola University
Medical Center (LUMC) have worked together to create lab-focused connectivity
tools for Loyola Medical Laboratory's outreach Clients. Participating physician
practices utilize the Cymedix(R)laboratory technology to select and requisition
laboratory tests; provide bar-coded identification for specimens; orchestrate
patient specimen packing lists; electronically link with LUMC's internal
laboratory system; and report full and partial test results on a real-time, 24/7
basis.
During 2001, net cash used in operating activities was approximately
$5,397,000. During the year, we raised approximately $5,205,000 from the
exercise of options and warrants, and the issuance of common stock, net of
offering expenses, and debt. Since December 31, 2001 to October 31, 2002, we
have used approximately $4,130,000 in our operating activities, and raised
approximately $118,500 from the exercise of options and warrants, $4,290,000
from the issuance of common stock and warrants, net of offering expenses, and
$1,205,000 in short-term debt. We had approximately $448,000 in cash as of
October 31, 2002, with a net working capital deficit of approximately $632,000.
We have been delinquent, from time to time, in the payment of our current
obligations, including payments of withholding and other tax obligations. We
continue in discussions and negotiations with institutional sources regarding
debt and equity financings to fund our operations. There can be no assurance
that additional investments or financings will be available to us as needed.
Failure to obtain such capital on a timely basis could result in lost business
opportunities, the sale of the Cymedix business at a distressed price or our
financial failure. See "Risk Factors."
We entered into a secured convertible loan agreement with WellPoint, dated
February 19, 2002, pursuant to which we borrowed $1,000,000 from WellPoint
Health Networks Inc. The loan was secured by the grant of a security interest in
all Medix's intellectual property, including its patent, copyrights and
trademarks. On October 7, 2002, the loan including all accrued interest, was
converted into 2,405,216 shares of our common stock. Upon the conversion of the
loan, the security interest was terminated.
We executed an Amended and Restated Common Stock Purchase Warrant with
WellPoint Pharmacy Management, dated February 18, 2002, to restructure our
obligations to issue warrants to WellPoint. Under that Warrant, we are obligated
to issue up to 7,000,000 shares of our common stock at exercise prices of $0.30
per share for 3,000,000, $0.50 per share for 3,000,000 shares and $1.75 per
share for 1,000,000 shares, if various performance related vesting requirements
are satisfied by WellPoint. Currently, WellPoint has satisfied certain of these
requirements giving WellPoint the right to purchase 1,850,000 shares of our
common stock at $0.30 per share have been earned by WellPoint. WellPoint's
rights to purchase our shares under the Warrant expire on September 8, 2004. The
Warrant grants to WellPoint certain registration rights to require us to
register with the SEC the shares issued to WellPoint for resale to the public.
In the Warrant, WellPoint has agreed to restrict sales to the public of these
shares during the first year after they have been issued to 200,000 shares per
month and 100,000 shares in any five trading days. The Warrant contains
anti-dilution provisions providing that the number of shares that may be
purchased by WellPoint under the Warrant my be adjusted in certain
circumstances.
USE OF PROCEEDS
The selling shareholders will receive the net proceeds from the sale of
shares. Medix will not receive any of the proceeds from any sale of the shares
by the selling shareholders. However, Medix will receive the proceeds from the
exercise of warrants to purchase the shares to be sold hereunder. If all
warrants covered hereby are exercised, Medix would receive proceeds of
$6,182,121. Any such proceeds will be used as working capital.
SELLING SHAREHOLDERS
The table below sets forth information as of November 15, 2002, with
respect to the selling shareholders, including names, holdings of shares of
common stock prior to the offering of the shares, the number of shares being
offered for each account, and the number and percentage of shares of common
stock to be owned by the selling shareholders immediately following the sale of
the shares, assuming all of the offered shares are sold.
Shares of
Common
Stock Shares of
Beneficially Common Shares of Common
Owned Stock Stock to be
Before the Being Beneficially Owned
Name Offering Offered After the Offering
---- ------------ -------- -------------------------
Number Percentage
------- ----------
Acquisitions Corp. .................... 25,000 25,000 0 0%
American Capital Consultants, Ltd. .... 71,402 71,402 0 0%
Barron, William E ..................... 225,000 125,000 100,000 *
Benscoter, Richard and Elva ........... 125,000 125,000 0 0%
Berrey, Dan and Fran .................. 695,000 695,000 0 0%
Black Hills Investment Corp. .......... 250,000 250,000 0 0%
Blomstrom, John & Virginia ............ 35,000 35,000 0 0%
Blue Water Trading .................... 200,000 200,000 0 0%
Bowman, Paul .......................... 250,000 250,000 0 0%
Brown, Andrew ......................... 548,000 168,000 380,000 *
Brown, Lisa and Michael F ............. 250,000 250,000 0 0%
Brown, Michael S ...................... 775,000 775,000 0 0%
Buelow, Fred .......................... 25,000 25,000 0 0%
California Lawyers Group Profit
Sharing Plan ......................... 375,000 375,000 0 0%
Caylor, Carl .......................... 25,000 25,000 0 0%
Christensen, Don ...................... 50,000 50,000 0 0%
Clark, Nelson S., TTEE, Clark TY
Family Trust .......................... 125,000 125,000 0 0%
Cohen, Darryl ......................... 1,930,370 950,000 980,370 1.4%
Columbus, Charles ..................... 250,000 250,000 0 0%
Colwell, John ......................... 12,950 12,950 0 0%
Deines, Maurice ....................... 500,000 500,000 0 0%
Duda, James R. and Diane M ........... 375,000 375,000 0 0%
Dunne, James & Jack Noyes ............. 125,000 125,000 0 0%
E. A. Finance Limited ................. 250,000 250,000 0 0%
Ellacott, Brian ....................... 400,000 50,000 350,000 *
External Affairs, L.L.C ............... 280,000 280,000 0 0%
Fritz & Miller, P.C ................... 15,035 5,467 9,568 *
Galinski, Joseph ...................... 250,000 250,000 0 0%
Geffre, Irvin and Marjorie ............ 125,000 125,000 0 0%
Grebin, Michael J ..................... 125,000 125,000 0 0%
Havens, Samuel H ...................... 292,500 50,000 242,500 *
Hyman, Rachael and Louis .............. 355,000 100,000 255,000 *
Iasso, Elvira ......................... 125,000 125,000 0 0%
Jeffries, Patrick ..................... 730,000 375,000 355,000 *
Katz, Marc ............................ 125,000 125,000 0 0%
Keller, Norman ........................ 100,000 100,000 0 0%
Krug, William R. and Vicki L .......... 125,000 125,000 0 0%
Lane, John T. and Elizabeth W. 705,000 125,000 580,000 *
Legend Merchant Group, Inc. ........... 22,500 22,500 0 0%
Louie, Van A .......................... 125,000 125,000 0 0%
Lousberg, Dean K ...................... 125,000 125,000 0 0%
Madion, Rex ........................... 50,000 50,000 0 0%
Manley, William & Erin ................ 50,000 50,000 0 0%
Meade, Thomas ......................... 125,000 125,000 0 0%
Mercer, Robert T ...................... 250,000 250,000 0 0%
Minicucci, Patricia ................... 737,500 100,000 637,500 1.0%
Mueller & Company Inc. ................ 35,000 35,000 0 0%
Naccarelli, Giovanni .................. 125,000 125,000 0 0%
Nordgen, Bradley ...................... 30,000 30,000 0 0%
Palermo, Dina ......................... 100,000 100,000 0 0%
Palmersheim, James R .................. 50,000 50,000 0 0%
Paul, James S. Jr ..................... 125,000 125,000 0 0%
Pederson, Jeff ........................ 125,000 125,000 0 0%
Piazza, Scott ......................... 900,000 900,000 0 0%
Platinum Partners, LP ................. 1,000,000 1,000,000 0 0%
PMC Funding Group, Inc. ............... 125,000 125,000 0 0%
Prufeta, John R ....................... 2,453,000 250,000 2,203,000 3.4%
Trust F/B/O Puttick ................... 500,000 500,000 0 0%
Raines, Jeffrey ....................... 500,000 500,000 0 0%
Rajani, Guli R ........................ 30,555 11,111 19,444 *
Rajani, Nicole S ...................... 30,555 11,111 19,444 *
Rajani, Ajay G ........................ 30,555 11,111 19,444 *
RateXchange Corp. ..................... 62,000 62,000 0 0%
Ray, John ............................. 83,000 40,000 43,000 *
Rinefort, W. Dart ..................... 125,000 125,000 0 0%
Rinefort, W.Dart and Dotty J. 1982
Trust ................................. 125,000 125,000 0 0%
RoyCap, Inc. .......................... 1,555,283 1,555,283 0 0%
Saker, Wayne .......................... 250,000 250,000 0 0%
Scapa, Robert B ....................... 100,000 100,000 0 0%
Schrader, Wayne K ..................... 175,000 175,000 0 0%
Sears, William E ...................... 375,000 375,000 0 0%
Shapiro Forman Allen & Miller LLP ..... 30,800 11,200 19,600 *
Smith, Jeffrey ........................ 71,402 71,402 0 0%
Smith, Joseph P ....................... 50,000 50,000 0 0%
Thirwall, David ....................... 100,000 100,000 0 0%
Visnstern, Shimson .................... 500,000 500,000 0 0%
WEC Asset Management, LLC ............. 125,000 125,000 0 0%
Weitzel, Rickie and Nancy ............. 125,000 125,000 0 0%
Wellpoint Health Networks Inc 4,255,216 2,405,216 1,850,000 2.9%
Yanowitz, Gerald ...................... 200,000 200,000 0 0%
Zitzman, John ......................... 25,000 25,000 0 0%
--------- ----------
Total ...................... 27,222,623 19,158,753
-------------
*less than 1%
Relationship Between Medix and the Selling Shareholders
The selling shareholders have purchased their shares from us, or will
acquire the shares of common stock indicated above upon the exercise of
warrants, in private placements. None of the persons listed above are affiliates
or controlled by affiliates of the Company, except the following officer and
Directors who purchased on the same terms as other investors in a private
placement: Darryl Cohen, John Lane, John Prufeta, Patrick Jeffries, Samuel
Havens, Patricia Minicucci, Louis Hyman and Brian Ellacott. We have separate
contractual obligations to file this registration with each of the selling
shareholders.
Up to 50,000 of the shares offered hereby will be issued as a result a
settlement of litigation in Guli R. Rajani v. Medix Resources, Inc. The
settlement involved issuing warrants to the plaintiff giving him the right to
purchase 137,500 shares of our common stock at the exercise price of $0.50 per
share. Mr. Rajani has directed a portion of the warrants he received in the
settlement to his wife and son and to the counsel who represented him in his
litigation against us. 87,500 shares covered by Mr. Rajani's settlement warrants
were registered in an earlier registration statement declared effective by the
SEC.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 125,000,000 shares of common stock, par
value $.001 per share, and 2,500,000 shares of preferred stock. As of November
15, 2002, we had outstanding 71,490,315 shares of common stock, 1 share of 1996
Preferred Stock, 50 shares of 1999 Series B Preferred Stock and 100 shares of
1999 Series C Preferred Stock. As of such date, our common stock was held of
record by approximately 460 persons and beneficially owned by approximately
10,000 persons.
Common Stock
Each share of common stock is entitled to one vote at all meetings of
shareholders. Shareholders are not permitted to cumulate votes in the election
of directors. Currently, the Board of Directors consists of six directors, who
serve for staggered terms of three years, with at least two directors elected at
every annual meeting. All shares of common stock are equal to each other with
respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional common stock. In the event of liquidation,
dissolution or winding up of Medix, holders of the common stock will be entitled
to receive on a pro rata basis all assets of Medix remaining after satisfaction
of all liabilities and preferences of the outstanding preferred stock. The
outstanding shares of common stock and the shares of common stock issuable upon
conversion or exercise of derivative securities are or will be, as the case may
be, duly and validly issued, fully paid and non-assessable.
Transfer Agent and Registrar
We have retained Computershare Trust Company, Inc., 350 Indiana Street,
Suite 800, Golden, Colorado 80401, as Transfer Agent and Registrar, for the our
common stock, at telephone number (303) 262-0600.
PLAN OF DISTRIBUTION
The selling shareholders and any of their pledgees, donees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded. These sales may be at fixed or negotiated prices. The selling
shareholders may use any one or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The selling shareholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a selling
shareholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. The selling shareholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling shareholders.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
Selling shareholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to
certain of the selling shareholders. Otherwise, all discounts, commissions or
fees incurred in connection with the sale of the common stock offered hereby
will be paid by the selling shareholders. The Company has agreed to indemnify
certain selling shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Upon the Company being notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
states the shares may not be sold unless the shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and complied with.
The Company has advised the selling shareholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales of the shares offered hereby.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 109 of the Colorado Business Corporation Act generally provides
that Medix may indemnify its directors, officers, employees and agents against
liabilities in any action, suit or proceeding whether civil, criminal,
administrative or investigative and whether formal or informal (a "Proceeding"),
by reason of being or having been a director, officer, employee, fiduciary or
agent of Medix, if such person acted in good faith and reasonably believed that
his conduct, in his official capacity, was in the best interests of Medix (or,
with respect to employee benefit plans, was in the best interests of the
participants of the plan), and in all other cases that his conduct was at least
not opposed to Medix's best interests. In the case of a criminal proceeding, the
director, officer, employee or agent must have had no reasonable cause to
believe that his conduct was unlawful. Under Colorado Law, Medix may not
indemnify a director, officer, employee or agent in connection with a proceeding
by or in the right of Medix if the director is adjudged liable to Medix, or in a
proceeding in which the directors, officer employee or agent is adjudged liable
for an improper personal benefit.
Our Articles of Incorporation provide that we shall indemnify its
directors, and officers, employees and agents to the extent and in the manner
permitted by the provisions of the laws of the State of Colorado, as amended
from time to time, subject to any permissible expansion or limitation of such
indemnification, as may be set forth in any shareholders' or directors'
resolution or by contract.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or persons controlling Medix pursuant to the
foregoing provisions, Medix has been informed that in the opinion of the
Securities and Exchange Commission (the "Commission"), such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
AVAILABLE INFORMATION
We are a reporting company and file our annual, quarterly and current
reports, proxy material and other information with the SEC. Reports, proxy
statements and other information concerning Medix filed with the Commission may
be inspected at the Public Reference Room maintained by the Commission at its
office, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material
can be obtained from the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The public may obtain
information about the Public reference room in Washington, D.C. by calling the
SEC at 1-800-SEC-0330. Our SEC filings are also available at the SEC's Website
at "http://www.sec.gov".
We have filed a registration statement under the Securities Act, with
respect to the securities offered pursuant to this Prospectus. This Prospectus
does not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
registration statement and the exhibits filed as a part thereof, which may be
found at the locations and Website referred to above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to the documents filed with the SEC that contains that
information. The information incorporated by reference is an important part of
this Prospectus, and it is important that you review it before making your
investment decision. We hereby incorporate by reference the documents listed
below:
(a) a copy of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, filed with the SEC on April 1, 2002;
(b) a copy of our Form 10-K/A, filed with the SEC on April 5, 2002;
(c) a copy of our Form 10-K/A, filed with the SEC on April 15, 2002;
(d) a copy of our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2001, as amended, and as filed with the SEC on May 24, 2002;
(e) a copy of our Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2002, June 30, and September 30, 2002, as filed with the
SEC on May 15, August 20, and November 14, 2002;
(f) a copy of our definitive Proxy Statement for our 2002 Annual Meeting of
Shareholders, filed with the SEC on September 5, 2002; and
(g) copies of the our Forms 8-K, filed with the SEC on January 18, March 4,
and March 25, April 12, May 24, June 4, June 14 (2 Forms 8-K), June 26,
August 5, August 13, September 16, September 27, September 30, October 11,
October 21, and November 1, 2002.
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, subsequent to the date of this Prospectus and prior to the
termination of the offering, shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the respective dates of such
filings. Such documents include, but are not limited to, our Forms 10-K, 10-Q
and 8-K and definitive Proxy Statements filed in the future. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Prospectus, or made herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document, which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon oral or written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, other than the exhibits to such documents (unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to Investor Relations
Department, Medix Resources, Inc., 7100 E. Belleview Avenue, Suite 301,
Greenwood Village, Colorado 80111, telephone (303) 741-2045. Such documents may
also be obtained or reviewed at the SEC's Website referred to above.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for us by
Lyle B. Stewart, P.C. Lyle B. Stewart, P.C. has been granted options to purchase
25,000 shares of Medix common stock at an exercise price of $0.26 per share, and
Mr. Stewart, individually, has been granted options to purchase 100,000 and
75,000 shares of Medix common stock at exercise prices of $3.38 and $0.92 per
share, respectively.
EXPERTS
The consolidated financial statements of Medix as of December 31, 2001, and
for each of the three years in the period ended December 31, 2001 and 2000
appearing in our 2001 Form 10-K have been audited by Ehrhardt Keefe Steiner &
Hottman P.C., independent auditors, as stated in their report appearing therein,
and have been incorporated herein by reference in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.