AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 2004
REGISTRATION NO. 333-114604
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
I-TRAX, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
23-3057155
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(I.R.S. Employer Identification No.)
4 HILLMAN DRIVE, SUITE 130
CHADDS FORD, PENNSYLVANIA 19317
(610) 459-2405
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(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
YURI ROZENFELD, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
I-TRAX, INC.
4 HILLMAN DRIVE, SUITE 130
CHADDS FORD, PENNSYLVANIA 19317
(610) 459-2405 x116
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
JUSTIN P. KLEIN, ESQ.
GERALD J. GUARCINI, ESQ.
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA 19103
(215) 665-8500
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plan, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
__________________________________
The registrant hereby amends the registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
The first prospectus in this registration statement relates to the
resale by certain holders of up to 10,676,094 shares of our common stock from
time to time in any number of possible transactions as set forth in the plan of
distribution in the first prospectus.
The second prospectus in this registration statement relates to the
resale by certain holders of up to 15,850,436 shares of our common stock through
one or more placement agents as set forth in the plan of distribution in the
second prospectus.
2
The information in this prospectus is not complete and may be changed
without notice. We may not issue these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these securities in
any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 2004
PROSPECTUS
I-TRAX, INC.
10,676,094
SHARES OF
COMMON STOCK
This prospectus relates to the offer and sale from time to time of the
following shares held by the selling shareholders:
o up to 88,094 shares of our common stock;
o up to 10,000,000 shares of our common stock issuable upon the
conversion of outstanding Series A Convertible Preferred Stock;
and
o up to 588,000 shares of our common stock issuable upon the
exercise of outstanding options and warrants.
The prices at which selling shareholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is listed on the American Stock Exchange under the
symbol "DMX." On November 8, 2004, the closing price for our common stock was
$2.21.
This prospectus is part of a registration statement, which also
includes a separate prospectus covering the resale of up to an additional
15,850,436 shares of our common stock.
Investing in our common stock involves risks, which are described in
the "Risk Factors" section beginning on page 8 of this prospectus.
________________________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these 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 ________________, 2004
TABLE OF CONTENTS
I-trax, Inc................................................................. 3
Risk Factors................................................................ 8
Statement Regarding Forward-Looking Information............................. 18
Cautionary Note............................................................. 18
Market for Our Common Stock................................................. 19
Use of Proceeds............................................................. 19
Selling Security Holders.................................................... 20
Plan of Distribution........................................................ 25
Available Information....................................................... 26
Incorporation of Certain Documents by Reference............................. 26
Legal Matters............................................................... 27
Experts..................................................................... 27
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I-TRAX, INC.
Overview
I-trax is an integrated health and productivity management company
formed by the merger on March 19, 2004 of I-trax, Inc. and Meridian Occupational
Healthcare Associates, Inc., which does business as CHD Meridian Healthcare.
We offer two categories of services that can be integrated or blended
as necessary or appropriate based on each client's needs. The first category
includes on-site health related services such as occupational health, primary
care, corporate health, and pharmacy, which were historically offered by CHD
Meridian Healthcare. We believe we are the nation's largest provider of on-site
corporate health management services. The second category includes personalized
health management programs, which were historically offered by I-trax.
Our services are designed to allow employers to contract directly for a
wide range of employee healthcare needs. We can deliver these services at or
near the client's work site by opening, staffing and managing a clinic or
pharmacy dedicated to the client and its employees, or remotely by using the
Internet and our state-of-the-art Care Communication Center staffed with trained
nurses and other healthcare professionals who are available 24 hours per day, 7
days per week. Our array of services provides each client with flexibility to
meet its specific pharmacy, primary care, occupational health, corporate health,
wellness, lifestyle management or disease management needs.
We provide services to approximately 150 clients, including automotive
and automotive parts manufacturers, consumer products manufacturers, large
financial institutions, health plans, integrated delivery networks, and third
party administrators. We currently operate approximately 168 on-site facilities
in 32 states. Our client retention rate is high due to strong client
relationships that are supported by the critical nature of our services, the
benefits achieved by employer and employee constituents, and the utilization of
multi-year service contracts.
Our Services
Occupational Health Services
We provide professional staffing and management of on-site health
facilities that address the occupational health, workers' compensation injuries,
and minor illness needs of the employer's workforce. These programs are designed
to operate across the entire array of occupational health regulatory
environments and emphasize work-related injury cost-reduction, treatment,
medical surveillance or testing, disability management, case management,
return-to-work coordination, medical community relations or oversight, on-site
physical therapy and injury prevention, and ergonomic assessment and
intervention. Our health programs improve compliance with treatment protocols
and drug formularies, enhance employee productivity, and allow for greater
employer control of occupational health costs. We currently operate 81
occupational health facilities.
Primary Care Services
We operate employer-sponsored health centers designed to integrate with
the employer's existing healthcare plans. In such arrangements, employers
contract with us directly for primary care health services and in the process
regain control of costs, quality and access. Generally, each of our health
centers services a single employer and offers health management programs
addressing the primary care needs of the employee base, including optometry
services and prevention and disease management programs. Clients may combine our
health centers with a dedicated pharmacy. We also offer customized solutions in
network management and absence management, including non-work related case
management and disability management. Our physicians, nurses, and other staff
are dedicated to the customer's employee population, allowing employees,
retirees, and their dependents to receive cost-effective, high quality,
accessible and convenient care. We currently operate 18 primary care centers.
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Pharmacy Services
We operate employer-sponsored pharmacies that offer prescription
services exclusively to the client's covered population. A client may also
combine our pharmacy with a dedicated primary care center. By leveraging
prescription volume across our client base and procuring pharmaceuticals as a
captive class of trade, we purchase products at considerable savings for our
clients, thus significantly and positively affecting what we understand is one
of our clients' fastest-growing healthcare cost categories. Our pharmacy
services also use sophisticated information technologies. These technologies may
be integrated with each client's existing pharmacy management programs and
plans, and improve employees' prescription fulfillment convenience. We currently
operate 24 pharmacies.
Corporate Health Services
We offer custom designed workplace programs that combine preventative
care, occupational health, medical surveillance and testing, travel medicine and
health education to non-industrial clients that do not experience significant
physical injury rates, but nonetheless maintain large workforces with general
and specialized medical needs. Clients for which we provide corporate health
services include financial service, advertising and consulting firms. We
currently operate 45 corporate healthcare facilities.
Personalized Health Management Programs
Our personalized health management programs are designed to deliver
lifestyle and wellness management, and disease and risk reduction interventions
to a client's entire population, across multiple locations and irrespective of
population size. Using predictive science, sophisticated, proprietary computer
software, clinical expertise, and personal care coordination, we enable our
clients to provide their employees and dependents with a more cohesive and
efficient system of healthcare. We use a unified data platform to allow all
caregivers to share records, thus enabling our clients to provide effective
coordination of care. We believe that by facilitating real-time secure
communication between our client, the patient, the doctor, the care coordinator
and the insurer our health management solutions reduce costs and enable improved
delivery of care.
Predictive Science. Our programs incorporate predictive science to
analyze our client's medical claims and pharmacy and clinical data to predict
future healthcare costs, which of those costs are avoidable, the health
conditions that will drive those costs, and the people within our client's
populations who are at risk for those conditions. Armed with this information,
we tailor our programs to help the client achieve better care, savings and other
desired results.
Technology Solutions. Our technology utilizes a single data
platform--Medicive(R) Medical Enterprise Data System--a proprietary software
architecture developed to collect, store, sort, retrieve and analyze a broad
range of information used in the healthcare industry. Our web accessible
software includes portals for key stakeholders in the care delivery
process--consumers, physicians and care managers--and permit real-time sharing
of information and support the adherence to our health and disease intervention
programs.
Interventions and Clinical Expertise. Our programs include personalized
health and disease interventions for individuals who suffer from, or are at high
risk for, active or chronic disease and tailored programs for individuals who
are at low risk. Depending on the individual's level of risk, our
custom-tailored interventions include self-help programs available through the
web or person-assisted programs administered through our Care Communication
Center. All interventions include lifestyle and risk reduction programs that
follow evidence-based clinical guidelines to optimize health, fitness,
productivity, and quality of life.
Care Communication Center. Our Care Communication Center is staffed
with trained nurses and other healthcare professionals 24 hours per day, 7 days
per week. Through the Center, we effect targeted interventions to achieve the
goals of our programs. The Center helps each member or employee of our client
make informed decisions about his or her health and provides ongoing support for
those with chronic diseases. Our demand management and nurse triage services
incorporate nationally recognized, evidence-based clinical guidelines to
increase compliance by caregivers and consumers with best practices.
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Our Client Contracts
Our client contracts for on-site clinics and pharmacies are typically
for an initial term of three to five years and renew automatically in the
absence of notice to the contrary. Under these contracts, we typically provide
services to our clients' employees, dependents and retirees, although
arrangements vary depending on the contract. We charge these clients for our
services on a "cost plus" basis to provide care to these individuals.
Similar to contracts for on-site clinics and pharmacies, contracts
covering our personalized health management programs are typically for an
initial term of three to five years and renew automatically in the absence of
notice to the contrary. Under these contracts, we typically charge our clients a
per member or per employee per month fee, which increases with a corresponding
increase in the level of service we provide. Basic personalized health
management programs provide inbound telephone access to a nurse or healthcare
professional for triage or health information, 24 hours per day, 7 days per
week, for employees, health plan members and, in many instances, dependents.
Enhanced programs, which we introduced in October 2003, provide inbound and
outbound contacts by telephone, mail and e-mail and electronic health
information and tools. Some clients also engage us to provide to their members,
employees and dependents custom disease management programs to target
individuals with a specific disease or who are at high risk for a specific
disease. We charge additional fees for individuals that elect to enroll in our
disease management programs. Our personalized health management contracts also
allow risk-sharing. These contracts provide for an incentive payment and/or fee
refund if we fail to achieve or exceed, as appropriate, a targeted percentage
reduction in our client's healthcare costs.
Our Strategy
Our business strategy is to improve the health status of employee
populations and manage the claim trend experienced by employers and employees,
self-insured employers and government agencies. These groups often seek programs
that promote health, manage disease and disability, and complement existing
health initiatives and benefits. Self-insured employers and government agencies
invest in such health programs because they reduce later need for critical care
and related costs, increase productivity, reduce absenteeism, improve health
status of both active employees and retirees, and reduce overall costs.
We believe that our programs offer a complete solution to meet this
need. We service each segment of a self-insured employer's population to achieve
the desired clinical and financial outcomes. Our on-site programs reduce
healthcare costs of the populations that use our facilities. Complementing those
services, our personalized health management programs improve the health of each
client's entire population, achieving the same result. We believe that the
combination of our on-site services and personalized health management solutions
responds to a specific and frequent request of large employers for a
comprehensive range of health management services. We also believe that we can
offer our on-site clients the value added benefit of our personalized health
management programs.
Finally, our programs offer our clients multiple services and price
entry points to meet their budget restrictions and specific needs. We believe
that this available menu of services helps shorten our sales cycle and provides
us with an opportunity to build a more comprehensive program as the relationship
grows with each client over time.
Risks Inherent in Our Business
As we pursue the opportunities described in this report, we face
numerous and significant challenges specific to our company and the healthcare
industry in general. Challenges specific to our company include:
o We must integrate I-trax's and CHD Meridian Healthcare's
services, which prior to the merger focused on different
delivery methods within the corporate health management
solutions market. If we are not able to integrate our services
successfully, we will not realize the benefits we anticipated
from the merger.
o The sales cycle for our services is complex, unpredictable and
has generally ranged from 3 to 24 months from initial contact
to contract signing. The time it takes to implement our
services is also
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difficult to predict and has lasted as long as 18 months from
contract execution to the commencement of live operation.
During the sales cycle and the implementation period, we may
expend substantial time, effort and money preparing contract
proposals, negotiating the contract and implementing the
solution without receiving any related revenue.
o We are competing with numerous companies offering services
that are similar to ours. Such competition could reduce the
number of new clients we obtain and could cause us to reduce
our pricing and, consequently, our gross margins.
o Implementation and delivery of our personalized health
management programs is highly dependent on data about
individuals to whom we provide care supplied to us by our
clients, and on our information technology systems that
process such data when we receive it. If we do not receive
timely and accurate data from our clients, or if our
information technology systems do not process such data
accurately, we may not be able to fulfill our client
contracts, which could have a material adverse effect on our
business, results of operations and financial condition.
o Our personalized health management programs are dependent on
efficient deployment, implementation, and scalability of our
software technology. To date, we have implemented our software
technology for only a relatively few covered lives. We must
continue to develop our software technology to provide the
scalability and new functionality necessary to accommodate the
greater number of covered lives we expect as we add new
clients. If we fail to respond to these requirements, our
ability to process new business could be slowed, which
ultimately could have a material adverse effect on our
business, results of operations and financial condition.
o Our revenue depends on the contractual relationships we
establish and maintain with our clients. Some of our contracts
provide for early termination. Other contracts may be
terminated by our clients because of their deteriorating
financial condition. No assurances can be given that the
results of contract restructurings and possible terminations
at or prior to renewal would not have a material negative
impact on our results of operations and financial condition.
Challenges specific to our industry include:
o In recent years, healthcare costs have grown significantly and
as a result the healthcare industry is under significant price
pressure. Although this has increased interest in our services
because they are designed to contain costs, we are nonetheless
subject to this general trend. It is conceivable that new and
potential clients will continue to pressure us to reduce our
prices and if we do, our revenues growth will slow and our
gross margins will decrease.
o We are subject to extensive state and Federal regulation,
which grows more complex each year. As such, compliance
efforts have also increased in complexity. We may need
additional resources to assure compliance, which will increase
our expenses and decrease our gross margins.
Corporate Information
General
Our principal executive offices are located at 4 Hillman Drive, Suite
130, Chadds Ford, Pennsylvania 19317. Our telephone number is (610) 459-2405 and
our fax number is (610) 459-4705. We maintain a website located at
http://www.i-trax.com. Information contained on our website is not part of this
prospectus.
We make available our annual reports on Form 10-KSB, quarterly reports
on Form 10-QSB and current reports on Form 8-K, as well as any amendments to the
forgoing, free of charge on our website as soon as reasonably practicable after
they have been filed with the SEC. For a detailed description of our business,
you should read these reports and the other filings we make with the SEC which
are incorporated by reference in this prospectus.
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Corporate History
I-trax was incorporated in Delaware on September 15, 2000 at the
direction of the Board of Directors of I-trax Health Management Solutions, Inc.,
I-trax's then parent company. On February 5, 2001, I-trax became the holding
company of I-trax Health Management at the closing of a reorganization pursuant
to Section 251(g) of Delaware General Corporation Law. At the effective time of
the reorganization, all of the stockholders of I-trax Health Management became
the stockholders of I-trax and I-trax Health Management became a wholly owned
subsidiary of I-trax. Further, all outstanding shares of I-trax Health
Management were converted into shares of I-trax in a non-taxable transaction.
The holding company structure has allowed us greater flexibility in our
operations and expansion and diversification plans, including in the
acquisitions of Meridian Occupational Healthcare Associates, Inc. and WellComm
Group, Inc.
I-trax acquired WellComm effective February 6, 2002. In the
acquisition, we paid the WellComm stockholders approximately $2,200,000 in cash
and 1,488,000 shares of our common stock. We also issued to each of two senior
officers of WellComm options to acquire 56,000 shares of our common stock at a
nominal exercise price. Because the acquisition was structured as a merger, we
also assume all of WellComm's liabilities, which equaled approximately $775,000.
We funded this acquisition by selling a 6% convertible senior debenture
in the aggregate principal amount of $2,000,000 to Palladin Opportunity Fund
LLC. We also issued Palladin a warrant to purchase up to 307,692 shares of our
common stock. As of March 19, 2004, Palladin has converted all amounts
outstanding under the debenture into common stock and has exercised the warrant
in full at the conversion price and exercise price of $1.75 per share.
We acquired CHD Meridian Healthcare on March 19, 2004. Under the merger
agreement, we delivered to CHD Meridian Healthcare stockholders 10,000,000
shares of I-trax common stock, 400,000 shares of I-trax Series A Convertible
Preferred Stock, each of which is convertible into 10 shares of I-trax common
stock, and paid $25,508,000 in cash. I-trax obtained the cash portion of the
merger consideration by selling 1,000,000 shares of Series A Convertible
Preferred Stock at a purchase price of $25.00 per share for gross proceeds of
$25,000,000, and by borrowing $12,000,000 on a new senior secured debt facility
from a national lender.
In the merger, I-trax assumed all of CHD Meridian Healthcare's
liabilities, which equaled approximately $20,000,000.
Immediately following the closing of the merger, I-trax redeemed from
former CHD Meridian Healthcare stockholders that participated in the merger, pro
rata, an aggregate of 200,000 shares of Series A Convertible Preferred Stock at
their original issue price of $25.00 per share.
Further, under the terms of the merger, if CHD Meridian Healthcare,
continuing its operations following the closing of the merger as a subsidiary of
I-trax, achieves calendar 2004 milestones for earnings before interest, taxes,
depreciation and amortization, or EBITDA, additional shares of common stock will
be payable as follows: If EBITDA equals or exceeds $8,100,000, the number of
such additional shares of common stock payable will be 3,473,280; the number of
such shares increases proportionately up to a maximum of 3,859,200 shares if
EBITDA equals or exceeds $9,000,000. Any escrowed shares that are not released
will be returned to I-trax for cancellation. The escrowed shares are not deemed
outstanding for accounting purposes until released. Based upon CHD Meridian
Healthcare's results of operations as of September 30, 2004, management believes
that CHD Meridian Healthcare will achieve at least the minimum EBITDA target set
forth in the merger agreement.
Finally, under the merger agreement and the related financing
documents, we are required to register for resale the shares of common stock
issued in the merger and issuable upon conversion of shares of Series A
Convertible Preferred Stock issued in the merger and in the related financing.
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RISK FACTORS
You should carefully consider the following risks in evaluating I-trax
and its business. Our business, financial condition and results of operations
could be materially and adversely affected by each of these risks. Such an
adverse effect could cause the market price of our common stock to decline, and
you could lose all or part of your investment.
Risk Related to I-trax
If we are not able to implement our business strategy of deploying our
integrated services effectively to existing and new clients, we will
not be able to grow our revenue.
Although we believe that there is significant demand for the our
services and products in the corporate healthcare market, there are many reasons
why we may be unable to execute our business strategy, including our possible
inability to:
o deploy our integrated services and solutions on a large scale;
o attract a sufficiently large number of self-insured employers
to subscribe for our services and software applications;
o increase awareness of our brand;
o strengthen user loyalty;
o develop and improve our services and solutions;
o continue to develop and upgrade our services and software
solutions; and
o attract, retain and motivate qualified personnel.
Our inability to achieve the above goals will impact our revenue
growth.
Our credit facility contains certain covenants and financial tests that
limit the way we conduct business.
Our senior secured credit facility contains certain covenants and
financial tests that limit the way we conduct business. Financial tests include
a covenant measuring the ratio of our funded indebtedness to earnings before
income, taxes, depreciation and amortization, or EBITDA, the ratio of our funded
indebtedness to capitalization, and our fixed charges coverage ratio. The
consolidated net worth covenant requires us to maintain our stockholders' equity
at 90% of the level as of December 31, 2005. Other covenants restrict our
ability to incur certain debt and complete mergers and dispose of assets.
We were not in compliance with certain financial tests as of June 30,
2004 and amended the credit facility to address non-compliance on August 12,
2004. We subsequently amended the credit facility on October 27, 2004. As of the
date of this prospectus, we are in compliance with call covenants. At November
1, 2004, $10,500,000 was outstanding under the credit facility.
The covenants and financial tests in the credit facility may prevent us
from accessing working capital, competing effectively or taking advantage of new
business opportunities. If we cannot comply with these covenants or meet these
ratios and other tests, it could result in a default under our credit facility,
and unless we are able to negotiate an amendment, forbearance or waiver, we
could be required to repay all amounts then outstanding, which could have a
material adverse effect on our business, results of operations and financial
condition.
Borrowings under our credit facility also are secured by liens on
substantially all of our assets and the assets of our subsidiaries. If we are in
default under one of these credit facilities, the lender could foreclose upon
all
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or substantially all of our assets and the assets of our subsidiaries. We cannot
assure you that we will generate sufficient cash flow to repay our indebtedness,
and we further cannot assure you that, if the need arises, we will be able to
obtain additional financing or to refinance our indebtedness on terms acceptable
to us, if at all. Any such failure to obtain financing could have a material
adverse effect on our business, results of operations and financial condition.
Increasing competition for contracts to establish and manage
employer-dedicated pharmacies and clinics increases the likelihood that
we may lose business to our competitors.
CHD Meridian Healthcare pioneered the field of employer-dedicated
pharmacies and primary care clinics. Although CHD Meridian Healthcare has always
faced competition from other methods by which business enterprises can arrange
and pay for healthcare services for their employees, until recently we rarely
experienced face-to-face bidding for a contract to manage a particular
employer's pharmacy or clinic. We have recently begun to see direct competition
for employer-dedicated pharmacy management contracts, including from Caremark
and Express Scripts. We expect this competition will increase over time. We
believe that we have certain advantages in facing such competition, including
our experience and know-how. However, some of our competitors and potential
competitors, including prescription benefit management companies, with revenues
in the multiple billions of dollars, are substantially bigger than we are. We
believe that the potential market for employer-dedicated pharmacies is large
enough for us to meet our growth plans despite increasing competition, but there
are no assurances that we will in fact be able to do so. Our ability to maintain
existing clients, expand services to existing clients, add new clients so as to
meet our growth objectives, and maintain attractive pricing for our services,
will depend on the interplay among overall growth in the use of
employer-dedicated facilities, entry of new competitors into our business, and
our success or failure in maintaining our market position as against these new
entrants.
In addition to this increasing head-to-head competition for contracts
to establish and manage employer-dedicated facilities, we expect to continue to
face competition for large employers' healthcare budget from other kinds of
enterprises, including pharmacy benefit managers, health insurers, managed
health care plans, and retail pharmacy chains.
Loss of advantageous pharmaceutical pricing could adversely affect our
income and the value we provide to our clients.
We receive favorable pricing from pharmaceutical manufacturers as a
result of our class of trade designation, which means that we only sell
pharmaceutical products to our clients' employees, dependents and retirees. We
also receive rebates from pharmaceutical manufacturers for driving market share
to preferred products. The benefit of favorable pricing is generally passed on
to our clients under the terms of client contracts. In the last few years,
retail pharmacies have brought legal cases against pharmaceutical manufacturers
challenging class of trade designations as unlawful price discrimination under
the Robinson-Patman Act. Although these challenges have generally failed, there
remains a possibility that we could lose the benefit of this favorable pricing,
either due to a legal challenge or to a change in policies of the pharmaceutical
manufacturers. Such a loss would diminish the value that we can provide to our
clients and, therefore, would make our services less attractive. We also receive
volume performance incentives from our pharmaceutical wholesaler which directly
affect our revenue and the loss of which could adversely affect our income.
Our business involves exposure to professional liability claims, and a
failure to manage effectively our professional liability risks could
expose us to unexpected expenses, which would result in losses.
Under the terms of our contracts to manage employer sponsored clinics
or pharmacies, we must procure professional liability insurance covering the
operations of that clinic or pharmacy. We also typically agree to indemnify our
clients against vicarious professional liability claims arising out of acts or
omissions of healthcare providers working at the clinics and pharmacies we
manage. Further, under the terms of our services agreements with affiliated
professional corporations, we are contractually obligated to procure malpractice
insurance on behalf of the professional corporations and their employed
physicians and typically absorb such claims as are subject to the policy
self-insured retention limit (which is explained below) or above the policy
limit. Finally, there also exists the possibility of vicarious professional
liability claims being made directly against us. As a result of these
contractual arrangements, we routinely incur significant expenses arising out of
professional liability claims. If we fail to
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manage the professional liability claims and associated risk effectively, we may
sustain losses beyond our historic trend.
Certain of our past professional liability insurance policy years were
insured by two insurance companies that are now either insolvent or under
regulatory supervision. As a result, we are effectively partially uninsured for
those periods. We have established reserves in connection with the six pending
claims from such policy years. Although we believe such reserves are reasonable
based on our historic loss experience, there is no assurance that these reserves
will be sufficient to pay all judgments or settlements. In addition, our current
professional liability insurance provides for self-insured retention of
$500,000. A self-insured retention is the amount that we have agreed to assume
responsibility for under our insurance policy as if we are the insurer subject
to the terms of the policy and related regulatory scheme. This means that we
are, effectively, partially uninsured against a variety of claims that may arise
from other years. We maintain a layer of excess insurance that begins with
losses in excess of $1,000,000 per claim, including for the years in which our
primary insurer is insolvent. We have reserved for projected future professional
liability expenses based on our operations to date. These reserves, however,
could prove inadequate, the size of our ultimate uninsured liability could
exceed our established reserves and we will sustain losses.
Our professional liability insurance policies are written on a
"claims-made" basis, meaning that they cover only claims made during the policy
period, and not events that occur during the policy period but result in a claim
after the expiration of the policy. With this insurance strategy, we must renew
or replace coverage each year in order to have coverage for prior years'
operations. Availability and cost of such coverage are subject to market
conditions, which can fluctuate significantly.
We have established a subsidiary insurance company, which subjects us
to additional regulatory requirements and once operating, will subject
us to the risks associated with the insurance business.
We have established as a wholly owned subsidiary insurance company and
began operating it in the second quarter of 2004 to insure our professional
liability exposure. We believe this approach will enhance our ability to manage
malpractice exposure and stabilize insurance costs. Operating an insurance
subsidiary, however, represents additional risk to our operations, including a
potential perception among our existing and potential clients that we are not
adequately insured. We have hired a manager and have engaged an actuarial
consulting firm for the insurance subsidiary. When we commence its operations,
we will be subject to the risks associated with any insurance business, which
include investment risk relating to the performance of our invested assets set
aside as reserves for future claims, the uncertainty of making actuarial
estimates of projected future professional liability losses, and loss adjustment
expenses. Failure to make an adequate return on our investments, to maintain the
principal of invested funds, or to estimate future losses and loss adjustment
expenses accurately, could cause us to sustain losses. Also, maintaining the
insurance subsidiary has exposed us to substantial additional regulatory
requirements, with attendant risks if we fail to comply with applicable
regulations.
We may be unable to integrate successfully our operations and realize
the full cost savings we anticipate from the merger.
The merger of CHD Meridian Healthcare and I-trax involves the
integration of two companies that have previously operated independently and
focused on different delivery methods within the corporate health management
solutions market. The difficulties of combining the merged companies' operations
include:
o integrating complementary businesses under centralized
management efficiently;
o coordinating geographically separated organizations;
o integrating personnel with diverse business backgrounds; and
o combining different corporate cultures.
The process of integrating operations could cause an interruption of,
or loss of momentum in, the activities of I-trax or CHD Meridian Healthcare's
businesses or the loss of key personnel. The diversion of management's
-10-
attention and any delays or difficulties encountered in connection with the
integration of the merged companies' operations could have an adverse effect on
the business, results of operations or financial condition of the merged
companies.
Among the factors considered by the CHD Meridian Healthcare and the
I-trax boards of directors in connection with their respective approvals of the
merger were the opportunities for reduction of operating costs and improvements
in operating efficiencies and other financial synergies that could result from
the merger. We cannot give any assurance that these savings will be realized, or
if realized, will be realized within the time periods contemplated by
management.
If our clients do not provide us accurate data, or if we do not process
such data accurately, we may not be able to fulfill our client
contracts.
Implementation and delivery of our personalized health management
programs is highly dependent on data about individuals to whom we provide care
supplied to us by our clients, and on our information technology systems that
process such data when we receive it. If we do not receive timely and accurate
data from our clients, or if our information technology systems do not process
such data accurately, we may not be able to fulfill our client contracts, which
could have a material adverse effect on our business, results of operations and
financial condition.
If we lose key employees or fail to recruit and retain other skilled
employees, we may not be able to continue our growth.
Our business greatly depends on, among others, Frank A. Martin,
chairman, chief executive officer and director, Haywood D. Cochrane, Jr., vice
chairman and director, and Charles D. (Chip) Phillips, executive vice president
and chief operating officer. If we cannot retain any one of these individuals,
we will loose employees with considerable knowledge of our business, which could
significantly reduce our ability to compete and succeed in the future.
We maintain employment agreements with Messrs. Martin and Cochrane. Mr.
Martin's employment agreement expires in December 2004. Mr. Cochrane's
agreements expire in January 2005. Each employment agreement may be terminated
by us with or without cause and by the applicable executive with or without good
reason. We maintain a $5,000,000 key-man life insurance policy on Mr. Martin.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. As we secure new contracts and implement our
services and products, we will need to hire additional personnel in all
operational areas. We may be unable, however, to attract, assimilate or retain
such highly qualified personnel. Although we have not experienced such
difficulties in the recent past, we may do so in the future, especially if the
labor markets continue to tighten. If we cannot attract new personnel or retain
and motivate current personnel, the service level we provide to our clients may
suffer, which may cause us to loose clients and revenue.
Our sales cycle is long and complex, which may slow our growth.
The corporate health management business is growing rapidly and has
many entrants. Further, although each entrant may define its service as
corporate health management, the details of the services among the entrants are
quite different. Because the services offered are complex, require clients to
incur significant upfront costs and there are significant variations in the
offered services by many vendors, potential clients take a long time to evaluate
and purchase such services, lengthening our sales cycle. Further, the sales and
implementation process for our services and software applications is lengthy,
involves a significant technical evaluation and requires our clients to commit a
great deal of time and money. Finally, the sale and implementation of our
services are subject to delays due to our clients' internal budgets and
procedures for approving large capital expenditures and deploying new services
and software applications within their organizations. The sales cycle for our
solutions, therefore, is unpredictable and has generally ranged from 3 to 24
months from initial contact to contract signing. The time it takes to implement
our services is also difficult to predict and has lasted as long as 18 months
from contract execution to the commencement of live operation. During the sales
cycle and the implementation period, we may expend substantial time, effort and
money preparing contract proposals, negotiating the contract and implementing
the solution without receiving any related revenue.
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Deterioration of the financial health of our clients, many of which are
large U.S. manufacturing enterprises, may impair our business volume
and collections.
An adverse trend in one or more U.S. manufacturing industries could
lead to plant closings or layoffs that could eliminate or reduce the need for
some of our employer-dedicated healthcare facilities. Also, if our client
becomes insolvent, we may not be able to recover outstanding accounts receivable
owed by that client, and may suffer premature contract termination.
Our professional liability insurance is written on a "claims-made"
basis. This means that we are protected from malpractice claims only if the
company that insured us at the time of the alleged "occurrence" is the same
company at the time the claim is filed in court. If it is not, we will not have
coverage. To continue coverage in such circumstances, we must obtain "tail"
insurance coverage or continue to purchase insurance written on a "claims made"
basis. We typically charge our clients for tail insurance coverage when the
contract terminates. If a client is insolvent when the contract terminates,
however, we may not be able to recoup the cost of tail insurance coverage, or
other costs related to that facility's shutdown. We already experienced this in
the case of Bethlehem Steel and National Steel, two clients for which we managed
several facilities when these clients became debtors in Federal bankruptcy
proceedings. This resulted in difficulty in collecting some amounts due to us,
and generated claims against us of approximately $920,000 in the aggregate for
repayment of allegedly preferential transfers previously received from the
client. We have settled approximately half of such claims for significantly less
than originally demanded. Nonetheless, because of the risks associated with
client insolvency, and the concentration of CHD Meridian Healthcare's client
base, our business is to some extent dependent on the continued health of U.S.
manufacturing industries.
We are dependent on software technologies and as such subject to
frequent change and risks associated with Internet viruses and outages,
which could destroy the information we maintain or prevent our clients
from accessing important information.
Our web-based software applications that form the backbone of our
personalized health management programs depend on the continuous, reliable and
secure operation of Internet servers and related hardware and software. Numerous
viruses and outages on the Internet could cause outages of our applications from
time to time. To the extent that our services are interrupted, our users will be
inconvenienced and our reputation may be diminished. If access to our system
becomes unavailable at a critical time, users could allege we are liable, which
could depress our stock price, cause significant negative publicity and possibly
lead to litigation. Although our computer and communications hardware is
protected by physical and software safeguards, it is still vulnerable to fire,
storm, flood, power loss, telecommunications failures, physical or software
break-ins and similar events. We do not have 100% redundancy for all of our
computer and telecommunications facilities. A catastrophic event could have a
significant negative effect on our business, results of operations, and
financial condition.
We also depend on third parties to provide certain of our clients with
Internet and online services necessary for access to our servers. It is possible
that our clients will experience difficulties with Internet and other online
services due to system failures, including failures unrelated to our systems.
Any sustained disruption in Internet access provided by third parties could have
a material adverse effect on our business, results of operations and financial
condition.
Finally, we retain confidential healthcare information on our servers.
It is, therefore, important that our facilities and infrastructure remain secure
and are perceived by clients to be secure. Although we operate our software
applications from a secure facility managed by a reputable third party, our
infrastructure may be vulnerable to physical or virtual break-ins, computer
viruses, programming errors or similar disruptive problems. A material security
breach could damage our reputation or result in liability to us.
We are dependent on our ability to deploy and implement our software
technologies efficiently.
Our personalized health management programs are dependent on efficient
deployment, implementation, and scalability of our software technology. To date,
we have implemented our software technology for relatively few clients. We must
continue to develop our software technology to provide the scalability and new
functionality
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necessary to accommodate the greater number of clients we expect. If we fail to
respond to these requirements, our ability to process new business could be
slowed, which ultimately could have a material adverse effect on our business,
results of operations and financial condition. We are addressing these
requirements by adding software development personnel, and expect to spend in
2005 approximately $500,000 in excess of our 2004 software development budget.
We may be sued and incur losses if we provide inaccurate health
information on our website or inadvertently disclose confidential
health information to unauthorized users.
Because users of our website will access health content and services
relating to a medical condition they may have or may distribute our content to
others, third parties may sue us for defamation, negligence, copyright or
trademark infringement, personal injury or other matters. We could also become
liable if confidential information is disclosed inappropriately. These types of
claims have been brought, sometimes successfully, against online services in the
past. Others could also sue us for the content and services that will be
accessible from our website through links to other websites or through content
and materials that may be posted by our users in chat rooms or bulletin boards.
Any such liability will have a material adverse effect on our reputation and our
business, results of operations or financial position.
We may be unable to compete successfully against companies offering
other disease management products, which will impair our revenue
growth.
Many healthcare companies are offering disease management services and
healthcare focused software solutions. Further, a vast number of Internet sites
offer healthcare content, products and services. In addition, traditional
healthcare providers compete for consumers' attention both through traditional
means as well as through new Internet initiatives. Although we believe our
technology-enabled service solutions are unique and better than our
competitors', we compete for customers with numerous other businesses.
We believe our competitors include the following:
o Disease management and care enhancement companies, such as
American Healthways, LifeMasters, Matria Healthcare,
CorSolutions, SHPS Healthcare Services, and Health Dialog.
o Wellness companies, such as StayWell, HealthMedia, Harris
Health Trends, and Impact Health.
o On-site healthcare providers, such as Comprehensive Health
Services, MedCor and Whole Health Management.
o Pharmacy benefit management companies, such as Caremark and
Express Scripts.
o Regional occupational health clinics and providers.
Many of these potential competitors are likely to enjoy substantial
competitive advantages compared to us, including:
o greater name recognition and larger marketing budgets and
resources;
o larger customer and user bases;
o larger production and technical staffs;
o substantially greater financial, technical and other
resources; and
o a wider array of online products and services.
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To be competitive, we must continue to enhance our products and
services as well as our sales and marketing channels. If we do not, we will not
be able to grow our revenue.
If other companies develop intellectual property identical or similar
to ours, we will loose what we believe to be our competitive advantage.
Our intellectual property is important to our business. We rely on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property. Our
efforts to protect our intellectual property may not be adequate. Our
competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of some
foreign countries do not protect proprietary rights as well as the laws of the
United States do, and the global nature of the Internet makes it difficult to
control the ultimate destination of our products and services. In the future,
litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any such
litigation would probably be time-consuming and costly. We could be subject to
intellectual property infringement claims as the number of our competitors grows
and the content and functionality of software applications and services overlap
with competitive offerings. Defending against these claims, even if not
meritorious, could divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
could be required to pay a substantial damage award and forced to develop
noninfringing technology, obtain a license or cease selling the applications
that contain the infringing technology. We may be unable to develop
noninfringing technology or obtain a license on commercially reasonable terms,
or at all. We also intend to rely on a variety of technologies that we will
license from third parties, including any database and Internet server software,
which will be used to operate our applications. These third-party licenses may
not be available to us on commercially reasonable terms. The loss of or
inability to obtain and maintain any of these licenses could delay the
introduction of enhancements to our software applications, interactive tools and
other features until equivalent technology could be licensed or developed. Any
such delays could materially and adversely affect our business, results of
operations and financial condition.
The loss of a major client will significantly reduce our revenues.
For the nine months ended September 30, 2004, we had one client,
Goodyear, which accounted for 12% of our revenue. We anticipate that our results
of operations in any given period will continue to be influenced to a certain
extent by a relatively small number of clients. Accordingly, if we were to lose
the business of such a client, our results of operations could be materially and
adversely affected.
Risk Related to Our Industry
The healthcare industry is subject to general cost pressures that could
reduce our revenue and gross margins.
The healthcare industry is currently under pressure by governmental and
private-sector revenue sources to cut spiraling costs. These pressures will
continue and possibly intensify. Although we believe that our services and
software applications assist public health agencies, hospitals, health plans and
self-insured employers to control the high costs associated with treating
patients, the pressures to reduce costs immediately may hinder our ability (or
increase the length of time we require) to obtain new contracts. In addition,
the focus on cost reduction may pressure our customers to restructure contracts
and reduce our fees.
We are affected by changes in the laws governing health plan, hospital
and public health agency reimbursement under governmental programs such as
Medicare and Medicaid. There are periodic legislative and regulatory initiatives
to reduce the funding of the Medicare and Medicaid programs in an effort to
curtail or reduce overall Federal healthcare spending. Federal legislation has
and may continue to significantly reduce Medicare and Medicaid reimbursements to
most hospitals. These reimbursement changes are negatively affecting hospital
revenues and operations. Such legislative initiatives or government regulations
could reduce demand for our services, our revenue and gross margins.
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We are subject to judicial and statutory prohibitions on the corporate
practice of medicine, and failure to comply with these prohibitions
will expose us to heightened scrutiny by regulatory agencies, fines,
litigation and possibly loss of revenue.
There are judicial and statutory prohibitions on the corporate practice
of medicine, which vary from state to state. The corporate practice of medicine
doctrine prohibits a corporation, other than a professional corporation, from
practicing medicine or employing physicians. Some states also prohibit a
non-physician from splitting or sharing fees charged by a physician for medical
services. The services we provide include establishing and managing medical
clinics. Most physician services at clinics we manage are provided by physicians
who are employees of professional corporations with which we contract to provide
non-professional services such as purchasing equipment and supplies, patient
scheduling, billing, collection, accounting, and computer services. The
professional corporations control hiring and supervise physicians and all
medical functions. We have option agreements with the physician-owners of these
affiliated professional corporations that entitle us to require the
physician-owners to sell the stock of the professional corporations to any
licensed physician we designate. This structure is intended to permit
consolidation of the professional corporations' financial statements with ours,
while maintaining sufficient separation to comply with the corporate practice of
medicine doctrine and with fee-splitting and fee-sharing prohibitions. There
remains, however, potential exposure to claims that this structure violates the
corporate practice of medicine doctrine or fee-splitting or fee-sharing
prohibitions, even though we do not believe that it does. If such a claim is
successfully asserted against us in any jurisdiction, we could be subject to
civil and criminal penalties, or could be required to restructure our
contractual arrangements with clients. Any restructuring of contractual
arrangements could result in lower revenues, increased expenses and reduced
influence over the business decisions of those operations. Alternatively, some
existing CHD Meridian Healthcare contracts could be found to be illegal and
unenforceable, which could result in their termination and an associated loss of
revenue, or inability to enforce valuable provisions of those contracts.
We have custody of confidential patient records and if we fail to
comply with regulations applicable to maintaining such records we may
be fined or sued.
Our personnel who staff our on-site pharmacies and clinics have custody
of confidential patient records. Also, the computer servers we use to store our
software applications and deliver our technology services also contain
confidential health risk assessments completed by employees, patients and
beneficiaries of our clients. In our capacity as a covered entity or as a
business associate of a covered entity, we and the records we hold are subject
to a rule entitled Privacy of Individually Identifiable Health Information, or
Privacy Rule, promulgated by the U.S. Department of Health and Human Services
under the Health Insurance Portability and Accountability Act of 1996, or HIPAA,
and also to any state laws that may have more stringent privacy requirements. We
attempt to protect the privacy and security of confidential patient information
in accordance with applicable law, but could face claims of violation of the
Privacy Rule, invasion of privacy or similar claims, if our patient records or
computer servers were compromised, or if our interpretation of the applicable
privacy requirements, many of which are complex, were incorrect or allegedly
incorrect, or if we failed to maintain a sufficiently effective compliance
program.
Furthermore, while we believe that the Privacy Rule protects our
ability to obtain patient identifiable medical information for disease
management purposes from certain of our clients, state legislation or
regulations will preempt Federal legislation if state legislation or regulations
are more restrictive. Accordingly, new Federal or state legislation or
regulations restricting the availability of this information for disease
management purposes could prevent us from performing services for our existing
clients, termination of our disease management contracts and loss of revenue.
We are subject to fraud and abuse statutes because we bill the Medicare
and Medicaid programs to recover amounts that offset the healthcare
costs of our clients and if we violate such statutes, we will be
subject to civil and criminal penalties.
In recent years, various government entities have actively investigated
potential violations of fraud and abuse statutes and regulations by healthcare
providers and by pharmaceutical manufacturers. The fraud and abuse provisions of
the Social Security Act provide civil and criminal penalties and potential
exclusion from the Medicare and Medicaid programs for persons or businesses who
offer, pay, solicit or receive remuneration in order to induce referrals of
patients covered by Federal healthcare programs (which include Medicare,
Medicaid, TriCare and other
-15-
Federally funded health programs). Although our services and those of our
affiliated professional corporations are generally paid for by employer clients,
we do bill the Medicare and Medicaid programs, and private insurance companies,
as agent of our affiliated professional corporations, to recover reimbursable
amounts that offset the healthcare costs borne by our clients. We are therefore
subject to various regulations under the Medicare and Medicaid programs,
including fraud and abuse prohibitions. We believe that we are compliant with
these requirements, but could face claims of non-compliance if our
interpretations of the applicable requirements, many of which are complex, were
incorrect or allegedly incorrect, or if we fail to maintain a sufficiently
effective compliance program.
The professionals that staff our affiliated professional corporations
as well as those we employ are subject to state and Federal licensure
requirements and if we fail to comply with such licensure requirements,
we may be scrutinized by regulatory agencies and fined.
The doctors, nurses and other healthcare professionals that staff our
affiliated professional corporations, the nurses that staff our care
communication centers, and our on-site pharmacies and clinics, are subject to
individual licensing requirements. All of our healthcare professionals and
facilities that are subject to licensing requirements are licensed in the state
in which they are physically present. Multiple state licensing requirements for
healthcare professionals who provide services telephonically over state lines
may require us to license some of our healthcare professionals in more than one
state. We continually monitor the developments in telemedicine. There is no
assurance, however, that new judicial decisions or Federal or state legislation
or regulations would not increase the requirement for multi-state licensing of
all central operating unit call center health professionals, which would
significantly increase our administrative costs. Further, in the event a state
regulatory agency alleges that we do not comply with relevant licensing
requirements, we may be subject to fines and administrative action.
The recently adopted Medicare prescription drug benefit legislation
could reduce the demand for the prescription drug benefits we provide.
In December 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement and Modernization Act of 2003. This law provides
Medicare beneficiaries with insurance coverage that offers access to
prescription medicines. The prescription drug benefit, which will be called
Medicare Part D, begins January 1, 2006. In the interim, a national prescription
drug discount card for Medicare-eligible seniors will be instituted in April
2004. Under the new law, drug benefits will be provided through risk-bearing
private plans contracting with the government (including plans offering only the
Medicare Part D coverage as well as integrated plans offering all Medicare
benefits). There will be an annual open period during which Medicare
beneficiaries will choose their drug plan from among those available in their
area of residence. In any areas where there are fewer than two private plan
choices, the government will make a drug plan available directly.
We do not know how this law will affect our business. Subsidies for
employers providing retiree drug benefits will decrease the costs to those
employers of providing such benefits, and therefore may increase the number of
employers willing to provide retiree drug benefits, which would positively
affect our business. On the other hand, employers that now offer prescription
drug benefits may decide no longer to do so, on the basis that their retirees
now will be able to obtain such benefits on their own through Medicare. In that
case, such employers would have less need for employer-dedicated pharmacies of
the kinds that we establish and manage and reduce our revenue.
Investment Risks
The price of our common stock is volatile and investors may loose money
if they invest in our stock.
Our stock price has been and we believe will continue to be volatile.
For example, from November 1, 2002 through November 8, 2004, the per share price
of our stock has fluctuated from a high of $5.70 to a low of $1.37. The stock's
volatility may be influenced by the market's perceptions of the healthcare
sector in general, or other companies believed to be similar to us or by the
market's perception of our operations and future prospects. Many of these
perceptions are beyond our control. In addition, our stock is not heavily traded
and therefore the ability to achieve relatively quick liquidity without a
negative impact on our stock price is limited.
-16-
Some of our outstanding shares are restricted from immediate resale but
may be sold into the market in the immediate future, which would cause
the market price of our common stock to drop significantly, even if our
business is doing well.
As of November 8, 2004, 28,655,871 shares of our common stock were
issued and outstanding. Of this number, approximately 14,000,000 shares were
issued in the CHD Meridian Healthcare merger as "restricted securities."
Further, an additional 12,000,000 shares of our common stock, which are not
reflected as issued and outstanding, are issuable upon conversion of our
outstanding shares of Series A Convertible Preferred Stock. Of this latter
amount, 2,000,000 shares are issuable upon conversion of Series A Convertible
Preferred Stock issued in the CHD Meridian Healthcare merger and 10,000,000
shares are issuable upon conversion of Series A Convertible Preferred Stock sold
to third party investors to fund a portion of the cash I-trax needed to acquire
CHD Meridian Healthcare. This prospectus covers the resale of 10,000,000 of the
12,000,000 shares of our common stock issuable upon conversion of our
outstanding shares of Series A Convertible Preferred Stock. A separate
prospectus covers the resale of the approximately 14,000,000 shares of our
common stock and approximately 2,000,000 shares of our common stock issuable
upon conversion of Series A Convertible Preferred Stock issued or issuable in
the CHD Meridian Healthcare merger. The two prospectuses cover an aggregate of
approximately 26,000,000 shares of our common stock. If the selling shareholders
under these prospectuses sell these shares at the same time, the market price of
our common stock would most likely decline, possibly significantly.
Shares reserved for future issuance upon the conversion of outstanding
shares of Series A Convertible Preferred Stock and upon the exercise of
issued options and warrants may cause dilution.
As of November 8, 2004, approximately 12,000,000 shares of our common
stock were reserved for issuance upon conversion of outstanding shares of Series
A Convertible Preferred Stock and 7,010,561 shares of our common stock were
reserved for issuance upon the exercise of our outstanding warrants and options.
In addition, outstanding shares of our Series A Convertible Preferred Stock
accrue dividend at the rate of 8% per year, which may be payable in common stock
when shares of our Series A Convertible Preferred Stock are converted. Our
stockholders, therefore, could experience dilution of their investment upon
conversion or exercise, as applicable, of these securities.
Provisions of our certificate of incorporation could impede a takeover
of our company, even though a takeover may benefit our stockholders, or
delay or prevent a change in management.
Our board of directors has the authority, without further action by the
stockholders, to issue from time to time, shares of preferred stock in one or
more classes or series, and to fix the rights and preferences of such preferred
stock, subject, however, to the limitations contained in the certificate of
designations filed with respect to our Series A convertible preferred stock. We
are subject to provisions of Delaware corporate law which, subject to certain
exceptions, prohibit us from engaging in any "business combination" with a
person who, together with affiliates and associates, owns 15% or more of our
common stock (referred to as an interested stockholder) for a period of three
years following the date that such person became an interested stockholder,
unless the business combination is approved in a prescribed manner.
Additionally, bylaws establish an advance notice procedure for stockholder
proposals and for nominating candidates for election as directors. These
provisions of Delaware law and of our certificate of incorporation and bylaws
may have the effect of delaying, deterring or preventing a change in our
existing management or control, may discourage bids for our common stock at a
premium over market price and may adversely affect the market price, and the
voting and other rights of the holders of our common stock.
-17-
STATEMENT REGARDING FORWARD LOOKING INFORMATION
This prospectus and our filings with the Securities and Exchange
Commission, or SEC, incorporated by reference in this prospectus include
forward-looking statements. All statements, other than statements of historical
facts, included in this prospectus and our filings with the SEC incorporated by
reference in this prospectus regarding our strategy, future operations,
financial position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. The words
"anticipates," "believes," "estimates," "expects," "intends," "may," "plans,"
"projects," "will," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. We cannot guarantee that we actually will achieve the
plans, intentions or expectations disclosed in our forward-looking statements
and you should not place undue reliance on our forward-looking statements.
Actual results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make. We have
included important factors in the cautionary statements included or incorporated
in this prospectus, particularly under the heading "Risk Factors" beginning on
page 8 above, that we believe could cause actual results or events to differ
materially from the forward-looking statements we make. Our forward-looking
statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments we may make.
CAUTIONARY NOTE
You should rely only on the information contained and incorporated by
reference in this prospectus. No one has been authorized to provide you with
different information. This prospectus is not an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained and incorporated by reference in this prospectus or in any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
-18-
MARKET FOR OUR COMMON STOCK
Our common stock trades on the American Stock Exchange under the symbol
"DMX." Prior to January 15, 2003, our common stock was quoted on the
Over-the-Counter Bulletin Board under the symbol "IMTX" and "ITRX." The
following table sets forth the high and low closing prices for our common stock
for the periods indicated. All closing prices have been adjusted to reflect a
1-for-5 reverse stock split effected as of close of business on January 3, 2003.
High Low
---- ---
2004
Fourth Quarter (through November 8) $ 2.750 $ 1.880
Third Quarter $ 4.290 $ 2.600
Second Quarter $ 5.600 $ 3.290
First Quarter 5.700 3.910
2003
Fourth Quarter 4.490 2.600
Third Quarter 3.790 2.600
Second Quarter 3.000 1.510
First Quarter 5.000 1.370
2002
Fourth Quarter 4.300 2.500
Third Quarter 5.100 2.750
As of November 8, 2004, there were approximately 419 registered holders
of our common stock and approximately 70 registered holders of our Series A
Convertible Preferred Stock. On November8, 2004, the last reported sales price
of our common stock was $2.21.
Dividend Policy
We have never paid or declared any cash dividends on our common stock
and do not anticipate paying cash dividends on our common stock in the
foreseeable future.
Our Series A Convertible Preferred Stock accrues dividends on the
original issue price at the rate of 8% per annum. The dividends are payable upon
conversion of Series A Convertible Preferred Stock into common stock in
additional shares of common stock or, subject to the consent of our senior
secured lender, in cash.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock offered under this prospectus. However, we may receive proceeds
from the exercise of the warrants and options by the selling shareholders, which
proceeds we will use for general corporate purposes.
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SELLING SECURITY HOLDERS
We are registering for offer and sale by the applicable holders:
o up to 88,094 shares of our common stock;
o up to 10,000,000 shares of our common stock issuable upon the
conversion of outstanding Series A Convertible Preferred
Stock; and
o up to 588,000 shares of our common stock issuable upon the
exercise of outstanding options and warrants.
Based on information provided to us by the selling shareholders, the
following table sets forth ownership information regarding the shares held by
the selling shareholders.
Number of Common Stock Owned After
Shares of Number of Offering
Common Stock Shares of
Owned Before Common Stock Number of
Name of Selling Shareholder Offering (1) Offered Shares Percentage
------------------------------------------------- ---------------- ----------------- -------------- ----------------
ACT Capital Partners, LP 120,000 120,000 -- --
Atlas Capital Master Fund, Ltd. 1,195,200 1,195,200 -- --
Atlas Capital (Q.P.) L.P. 404,800 404,800 -- --
Bellfield Capital Partners 80,000 80,000 -- --
Franz J. Berlacher, MD Rev Trust dtd 6/8/94, --
Franz J. Berlacher Trustee 20,000 20,000 --
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Gregory
J. Berlacher 17,000 17,000 -- --
Cabernet Partners, LP 200,000 200,000 -- --
Chardonnay Partners, LP 40,000 40,000 -- --
Amir L. Ecker 33,000 33,000 -- --
EDJ Limited 120,000 120,000 -- --
Eller Financial Corp 50,000 40,000 10,000 *
Europa International, Inc. 150,000 150,000 -- --
H&Q Healthcare Investors 1,600,000 1,600,000 -- --
Heart Specialist of NOW Profit Sharing
Plan/401k Trust FBO Franz J. Berlacher MD 40,000 40,000 -- --
Incline Capital, LP 80,000 80,000 -- --
Insignia Partners, LP 400,000 400,000 -- --
Clifford J. and Phyllis D. Kalista JTWROS 100,000 100,000 -- --
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Clifford
Kalista 80,000 80,000 -- --
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Phyllis
Kalista 20,000 20,000 -- --
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Jill S.
Meyer 4,000 4,000 -- --
Northwood Capital Partners 200,000 200,000 -- --
The Pinnacle Fund, L.P. 1,840,000 1,840,000 -- --
Porter Partners, LP 520,000 520,000 -- --
Precept Capital Master Fund, G.P. 40,000 40,000 -- --
RTCL Partners 10,000 10,000 -- --
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Sandor Capital Master Fund, L.P. 80,000 80,000 -- --
Dr. Richard N. Stein, Richard Stein MD Stanley
Stein MD Trustees, MDS KEOGH 11,000 6,000 5,000 *
Southwell Partners, L.P. 1,704,500 1,600,000 104,500 *
Peter G. Stanley and Susan H. Stanley JTWROS 20,000 20,000 -- --
UVE Partners LLC 200,000 200,000 -- --
Richard C. Walling Jr. 20,000 20,000 -- --
Michael H. Weiss 40,000 40,000 -- --
Westpark Capital, L.P. 320,000 320,000 -- --
BPC Group LLC 20,000 20,000 -- --
Palladin Opportunity Fund LLC 190,000 190,000 -- --
Frank M & Deborah F. Correll, JT TEN 20,000 20,000 -- --
Edmund M. Deeter, III 20,000 20,000 -- --
James J. Dotzman 20,000 20,000 -- --
Gordon Gregoretti 6,000 6,000 -- --
Michael R. Hamblett 45,000 45,000 -- --
Steven C. & Janet Z. Handleman 4,000 4,000 -- --
Kenneth M. & Astrid K. Jingozian, JTWROS 8,000 8,000 -- --
Michael Lauria 10,000 10,000 -- --
W. Tyson Perry III 8,000 8,000 -- --
J. Michael Pruitt 20,000 20,000 -- --
Anthony J. Spatacco, Jr. 26,500 24,500 2,000 *
Anthony J. Spatacco, Sr. 8,000 8,000 -- --
Richard Tomasetti 6,000 4,000 2,000 *
Warren S. & Patricia Wallace 10,000 10,000 -- --
Estate of Carol Rehtmeyer 181,547 94,094 87,453 *
Starboard Capital Markets, LLC 2,500 2,500 -- --
VFT Special Ventures, LTD. 482,000 482,000 -- --
ROI Group Associates, Inc. 40,000 40,000 -- --
(1) The actual number of shares of common stock offered in this prospectus
and included in the registration statement of which this prospectus is
a part includes such additional number of shares of common stock as may
be issued or issuable by reason of any stock split, stock dividend or
similar transaction involving the common stock, in accordance with Rule
416 under the Securities Act of 1933, as amended, or Securities Act.
* Less than 1%.
Material Relationships and Transactions
An aggregate of 10,000,000 shares of common stock offered for resale
under this prospectus are issuable upon conversion of Series A Convertible
Preferred Stock. I-trax sold 1,000,000 shares of Series A Convertible Preferred
Stock at a price of $25.00 per share to fund a portion of the cash I-trax needed
to acquire CHD Meridian Healthcare. We refer to this transaction as the Merger
Financing. Each share of Series A Convertible Preferred Stock is convertible
into 10 shares of common stock at the conversion price of $2.50 per share.
Series A Convertible Preferred Stock also accrues dividends on the original
issue price at the rate of 8% per annum. The dividends are payable upon
conversion of the Series A Convertible Preferred Stock into common stock in
additional shares of common stock or, subject to the consent of our senior
secured lender, in cash. We are registering for resale the shares of common
stock issuable upon conversion of the Series A Convertible Preferred Stock
issued in the Merger Financing in a registration statement of which this
prospectus is part because we are required to do so by the Merger Financing
transaction documents.
An aggregate of 482,000 shares of common stock offered for resale under
this prospectus by VFT Special Ventures, LTD are issuable upon exercise of
warrants. I-trax issued the warrants to VFT Special Ventures pursuant to the
terms of a placement agent agreement dated November 19, 2003 between Emerging
Growth Equities, Ltd., a
-21-
registered broker-dealer and an affiliate of VFT Special Ventures, and I-trax.
Under the terms of the agreement, Emerging Growth Equities served as one of two
placement agents of the Series A Convertible Preferred Stock sold in the Merger
Financing. The warrants are exercisable at $2.50 per share for a period of five
years.
An aggregate of 10,000 shares of common stock offered for resale under
this prospectus by Starboard Capital Markets, LLC (2,500 shares), Michael R.
Hamblett (5,000 shares) and Anthony J. Spatacco, Jr. (2,500 shares) are issuable
upon exercise of warrants. I-trax issued the warrants to Starboard Capital
Markets, a registered broker-dealer, and Messrs. Hamblett and Spatacco, Jr., two
of its employees, as consideration for services rendered by Starboard Capital
Markets pursuant to the terms of a placement agent agreement dated December 1,
2003 between Starboard Capital Markets and I-trax. Under the terms of the
agreement, Starboard Capital Markets underwrote the placement of the Series A
Convertible Preferred Stock sold in the Merger Financing by serving as one of
two placement agents. The warrants are exercisable at $2.50 per share for a
period of five years.
Of the 190,000 shares of common stock offered for resale under this
prospectus by Palladin Opportunity Fund LLC, or Palladin, 50,000 shares were
issued to Palladin upon Palladin's exercise on December 31, 2003 of warrants at
an exercise price of $1.75 per share. I-trax issued the warrants to Palladin in
consideration for extending the maturity date under a 6% convertible senior
debenture from February 3, 2004 to February 3, 2005. The debenture had since
been converted into common stock in full. The remaining 140,000 shares of common
stock offered for resale under this prospectus by Palladin are issuable upon
conversion of Series A Convertible Preferred Stock.
The 94,094 shares of common stock offered for resale under this
prospectus by the Estate of Carol Rehtmeyer are comprised of 38,094 share of
common stock and 56,000 shares of common stock issuable upon the exercise of
stock options. Carol Rehtmeyer acquired the common stock in a private placement
closed by I-trax on June 30, 2003 and the stock options in connection the
acquisition by I-trax of WellComm Group, Inc. on February 6, 2002. The stock
options are exercisable at $.005 per share.
The 40,000 shares of common stock offered for resale under this
prospectus by ROI Group Associates, Inc. are issuable upon exercise of warrants.
I-trax issued the warrants to ROI Group on December 11, 2003 as consideration
for investor relations services rendered by ROI Group to I-trax under an
agreement effective as of November 16, 2002. The warrants are exercisable at
$1.76 per share for a period of five years.
Broker-Dealer and Other Affiliations
Starboard Capital Markets, a registered broker-dealer, is a selling
shareholder. Starboard Capital Markets acquired the shares offered for resale
under this prospectus pursuant to the terms of a placement agent agreement dated
December 1, 2003 between Starboard Capital Markets and I-trax. Under the terms
of the agreement, Starboard Capital Markets served as the placement agent of the
Series A Convertible Preferred Stock sold in the Merger Financing.
Each of Amir L. Ecker and Act Capital Partners, LP is a selling
shareholder. Each of Mr. Ecker and Carol G. Frankenfield is a general partner of
Act Capital and employed by a registered broker-dealer. Each of Mr. Ecker and
Act Capital acquired the shares offered for resale under this prospectus in the
Merger Financing and for resale in his or its ordinary course of business.
Neither Mr. Ecker nor Act Capital has agreements, arrangements or understandings
with any other persons, either directly or indirectly, to distribute I-trax
securities.
Phyllis D. Kalista and Clifford J. Kalista are selling shareholders.
Mr. and Ms. Kalista also exercise voting and dispositive power with respect to
the shares of common stock offered for resale under this prospectus by Emerging
Growth Equities 401K Pft Shr Plan dtd 9/1/99 Berlacher Spangler TTEES FBO
Clifford Kalista and Emerging Growth Equities 401K Pft Shr Plan dtd 9/1/99
Berlacher Spangler TTEES FBO Phyllis Kalista, respectively. Each of Mr. and Ms.
Kalista is employed by Emerging Growth Equities, a registered broker-dealer, and
acquired the shares offered for resale under this prospectus individually and
through the identified entities in the Merger Financing for resale in his, her
or the applicable entity's ordinary course of business. Neither Mr. nor Ms.
Kalista has agreements, arrangements or understandings with any other persons,
either directly or indirectly, to distribute I-trax securities.
-22-
Peter G. Stanley is a selling shareholder and is an employee of
Emerging Growth Equities, a registered broker-dealer. Mr. Stanley acquired the
shares offered for resale under this prospectus in the Merger Financing and for
resale in his ordinary course of business. Mr. Stanley does not have agreements,
arrangements or understandings with any other persons, either directly or
indirectly, to distribute I-trax securities.
Each of Northwood Capital Partners, LP, Cabernet Partners, LP,
Chardonnay Partners, LP, and Insignia Partners, LP is a selling shareholder.
Robert A. Berlacher exercises voting and dispositive power with respect to the
shares of common stock offered by these entities for resale under this
prospectus. Mr. R. Berlacher is an affiliate of Emerging Growth Equities, a
registered broker-dealer. Each of these entities acquired the shares offered for
resale under this prospectus in the Merger Financing and for resale in its
ordinary course of business. Mr. R. Berlacher does not have agreements,
arrangements or understandings with any other persons, either directly or
indirectly, to distribute I-trax securities.
Emerging Growth Equities 401K Pft Shr Plan dtd 9/1/99 Berlacher
Spangler TTEES FBO Gregory J. Berlacher is a selling shareholder. Gregory J.
Berlacher exercises voting and dispositive power with respect to the shares of
common stock offered by this entity for resale under this prospectus. Mr. G.
Berlacher is an affiliate of Emerging Growth Equities, a registered
broker-dealer. The entity acquired the shares offered for resale under this
prospectus in the Merger Financing and for resale in its ordinary course of
business. Mr. G. Berlacher does not have agreements, arrangements or
understandings with any other persons, either directly or indirectly, to
distribute I-trax securities.
Emerging Growth Equities 401K Pft Shr Plan dtd 9/1/99 Berlacher
Spangler TTEES FBO Jill S. Meyer is a selling shareholder. Jill S. Meyer
exercises voting and dispositive power with respect to the shares of common
stock offered by this entity for resale under this prospectus. Ms. Meyer is an
employee of Emerging Growth Equities, a registered broker-dealer. The entity
acquired the shares offered for resale under this prospectus in the Merger
Financing and for resale in its ordinary course of business. Ms. Meyer does not
have agreements, arrangements or understandings with any other persons, either
directly or indirectly, to distribute I-trax securities.
Sandor Capital Master Fund, L.P. is a selling shareholder. John S.
Lemak is a general partner of Sandor Capital and as such exercises voting and
dispositive power with respect to the shares of common stock offered by Sandor
Capital for resale under this prospectus. Mr. Lemak is also an affiliate of a
registered broker-dealer. Sandor Capital acquired the shares to be offered for
resale under this prospectus in the Merger Financing and for resale in its
ordinary course of business. Neither Mr. Lemak nor Sandor Capital has
agreements, arrangements or understandings with any other persons, either
directly or indirectly, to distribute I-trax securities.
BPC Group, LLC is a selling shareholder and is an affiliate Bryant Park
Capital, Inc., a registered broker-dealer. Bryant Park Capital, Inc. also
provided to I-trax merger advisory services and a fairness opinion in connection
with I-trax's acquisition of CHD Meridian Healthcare. BPC Group acquired the
shares to be offered for resale under this prospectus in the Merger Financing
and for resale in its ordinary course of business. BPC Group does not have
agreements, arrangements or understandings with any other persons, either
directly or indirectly, to distribute I-trax securities.
The managing member of Palladin, a selling shareholder, is an affiliate
of a registered broker-dealer. Palladin acquired the shares of common stock
offered for resale in this prospectus in its ordinary course of business.
Palladin has no agreements, arrangements or understandings with any other
persons, either directly or indirectly, to distribute I-trax securities.
Each of James J. Dotzman, W. Tyson Perry III, Janet Z. Handleman,
Michael R. Hamblett, Edmund M. Deeter III, and Anthony J. Spatacco, Jr. is a
selling shareholder and is an affiliate or employee of Starboard Capital
Markets, a registered broker-dealer. Each of these individuals acquired the
shares offered for resale under this prospectus in the Merger Financing and for
resale in his or her ordinary course of business. None of these individuals have
agreements, arrangements or understandings with any other persons, either
directly or indirectly, to distribute I-trax securities.
-23-
Voting and Dispositive Power
The following individuals have voting and dispositive power with
respect to the shares of common stock offered under this prospectus for resale
by entities:
Individual or Individuals Who Exercise Voting and
Name of Selling Shareholder Dispositive Power
---------------------------------------------------- --------------------------------------------------------
ACT Capital Partners, LP Amir L. Ecker and Carol G. Frankenfield
Atlas Capital Master Fund, Ltd. Robert Alpert
Atlas Capital (Q.P.) L.P. Robert Alpert
Bellfield Capital Partners David Brigante
Franz J. Berlacher, MD Rev Trust dtd 6/8/94,
Franz J. Berlacher Trustee Franz J. Berlacher
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO
Gregory J. Berlacher Gregory J. Berlacher
Cabernet Partners, LP Robert A. Berlacher
Chardonnay Partners, LP Robert A. Berlacher
EDJ Limited Jeffrey H. Porter
Eller Financial Corp Marc W. Eller
Europa International, Inc. Fred Knoll
H&Q Healthcare Investors Kim Carroll
Heart Specialist of NOW Profit Sharing Plan/401k
Trust FBO Franz J. Berlacher MD Franz J. Berlacher
Incline Capital, LP Mark Hood
Insignia Partners, LP Robert A. Berlacher and Bruce E. Terker
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO
Clifford Kalista Clifford J. Kalista
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Phyllis
Kalista Phyllis D. Kalista
Emerging Growth Equities 401K Pft Shr Plan dtd
9/1/99 Berlacher Spangler TTEES FBO Jill S.
Meyer Jill S. Meyer
Northwood Capital Partners Robert A. Berlacher
The Pinnacle Fund, L.P. Barry M. Kitt
Porter Partners, LP Jeffrey H. Porter
Precept Capital Master Fund, G.P. D. Blair Baker
RTCL Partners Richard C. Walling
Sandor Capital Master Fund, L.P. John S. Lemak
Dr. Richard N. Stein, Richard Stein MD Stanley
Stein MD Trustees, MDS' KEOGH Richard N. Stein
Southwell Partners, L.P. Wilson S. Jaeggli
UVE Partners LLC Gary M. Simon and Kent M. Klineman
Westpark Capital, L.P. Patrick J. Brosnahan
BPC Group LLC Joel Magerman
Palladin Opportunity Fund LLC Jeffrey Devers
Estate of Carol Rehtmeyer Joshua Rehtmeyer and John Rehtmeyer
Starboard Capital Markets, LLC James J. Dotzman
VFT Special Ventures, LTD. Gregory J. Berlacher
ROI Group Associates, Inc. Robert J. Giordano
-24-
PLAN OF DISTRIBUTION
The shares being offered by the selling shareholders or their
respective pledgees, donees, transferees or other successors in interest, will
be sold from time to time in one or more transactions, which may involve block
transactions:
o on the American Stock Exchange or on such other market on
which the common stock may from time to time be trading;
o in privately-negotiated transactions;
o through broker-dealers, who may act as agents or principals;
o through one or more underwriters on a firm commitment or best
efforts basis;
o through the writing of options on the shares;
o to cover short sales and other hedging transactions made after
the date that the registration statement of which this
prospectus is a part was declared effective by the SEC; or
o any combination thereof.
The sale price to the public may be:
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o at negotiated prices; or
o such other price as the selling shareholders determine from
time to time.
The shares may also be sold pursuant to Rule 144, under the Securities
Act, as permitted by that rule. The selling shareholders shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of shares
if they deem the purchase price to be unsatisfactory at any particular time.
The selling shareholders or their respective pledgees, donees,
transferees or other successors in interest may also sell the shares directly to
market makers acting as principals or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may be compensated with
discounts, concessions or commissions from the selling shareholders or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both. The compensation as to a particular
broker-dealer might be greater than customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. The selling shareholders may sell shares of common stock in
block transactions to market makers or other purchasers at a price per share,
which may be below the then market price.
The selling shareholders cannot assure that all or any of the shares
offered in this prospectus will be issued to, or sold by, the selling
shareholders.
Because the selling shareholders and any brokers, dealers or agents,
upon effecting the sale of any of the shares offered in this prospectus, may be
deemed "underwriters" as that term is defined under the Securities Act or the
Securities Exchange Act of 1934, or Exchange Act, or the rules and regulations
under such acts, the selling shareholders will be subject to the prospectus
delivery requirements of the Securities Act. Any commissions received by them
and any profit on the resale of shares may be deemed to be underwriting
compensation.
-25-
The selling shareholders, alternatively, may sell all or any part of
the shares offered in this prospectus through an underwriter. No selling
stockholder has entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into. If a selling
shareholder enters into such an agreement or agreements, the relevant details
will be set forth in a supplement or revisions to this prospectus.
The shares will be sold through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The selling shareholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations under the Exchange Act,
including, without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of purchases and sales of any of the
shares by, the selling shareholders or any other such person. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling shareholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
shareholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
AVAILABLE INFORMATION
We file reports, proxy statements and other information with the SEC
(File No. 0-30275). Copies of these reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding our company. The address of this website is
http://www.sec.gov.
We have filed a registration statement on Form S-3 under the Securities
Act with the SEC with respect to the shares of our common stock covered by this
prospectus. This document constitutes the prospectus of I-trax filed as part of
that registration statement. This document does not contain all of the
information set forth in the registration statement because some parts of the
registration statement are omitted as provided by the rules and regulations of
the SEC. You may inspect and copy the registration statement at any of the
addresses listed above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents we have filed with the SEC (File No. 0-30275)
pursuant to the Exchange Act are incorporated herein by reference:
o our Annual Report on Form 10-KSB for the year ended December
31, 2003, filed on April 8, 2004, as amended by Form 10-KSB/A
filed on June 2, 2004 and by Form 10-KSB/A filed on August 11,
2004;
o our Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2004, filed on May 14, 2004, as amended by Form
10-QSB/A filed on August 11, 2004 and by Form 10-QSB/A filed
on November 10, 2004, and our Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2004 filed on August 18, 2004,
as amended by Form 10-QSB/A filed on November 10, 2004;
-26-
o our Current Reports on Form 8-K filed on October 29, 2004 and
Current Report on Form 8-K filed on March 30, 2004, as amended
by Form 8-K/A filed on June 2, 2004, by Form 8-K/A filed on
August 11, 2004 and by Form 8-K/A filed on November 10, 2004;
o the description of our common stock, $0.001 par value per
share, and associated rights, contained in our registration
statement on Form 8-A, filed on January 14, 2003, including
any amendment or report filed for the purpose of updating this
description; and
o all reports and other 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.
Any statement contained in a document incorporated by reference in this
prospectus will be deemed to be incorporated by reference in this prospectus and
to be part of this prospectus from the date of filing of the document. Any
statement modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus. We will provide upon
written or oral request without charge to each person to whom this prospectus is
delivered a copy of any or all of the documents which are incorporated in this
prospectus by reference (other than exhibits to those documents unless those
exhibits are specifically incorporated by reference into the documents that this
prospectus incorporates). Written requests for copies should be directed to
I-trax, Inc., Investor Relations, 4 Hillman Drive, Suite 130, Chadds Ford,
Pennsylvania 19317. Our telephone number is (610) 459-2405.
LEGAL MATTERS
The validity of the shares of our common stock offered by this
prospectus will be passed upon for us by our Vice President, General Counsel and
Secretary.
EXPERTS
The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-KSB/A of I-trax, Inc. for the year ended
December 31, 2003 and for each of the two years in the period then ended have
been so incorporated in reliance on the reports of Goldstein Golub Kessler LLP,
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of CHD Meridian Healthcare at December 31,
2003 and 2002, and for each of the three years in the period ended December 31,
2003, incorporated in this prospectus by reference to the Current Report on Form
8-K/A of I-trax, Inc. filed on November 10, 2004 have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
-27-
The information in this prospectus is not complete and may be changed
without notice. We may not issue these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these securities in
any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 2004
PROSPECTUS
I-TRAX, INC.
15,850,436
SHARES OF
COMMON STOCK
This prospectus relates to the offer and sale from time to time of the
following shares held by the selling shareholders:
o up to 13,851,550 shares of our common stock; and
o up to 1,998,886 shares of our common stock issuable upon the
conversion of outstanding Series A Convertible Preferred
Stock.
The shares covered by this prospectus will be offered for resale
through one or more registered broker-dealers.
The prices at which selling shareholders may sell the shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. We will not receive any of the proceeds from the sale of the
shares.
Our common stock is listed on the American Stock Exchange under the
symbol "DMX." On November 8, 2004, the closing price for our common stock was
$2.21.
This prospectus is part of a registration statement, which also
includes a separate prospectus covering the resale of up to an additional
10,676,094 shares of our common stock.
Investing in our common stock involves risks, which are described in
the "Risk Factors" section beginning on page 8 of this prospectus.
________________________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these 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 ________________, 2004
TABLE OF CONTENTS
I-trax, Inc................................................................ 3
Risk Factors............................................................... 8
Statement Regarding Forward-Looking Information............................ 18
Cautionary Note............................................................ 18
Market for Our Common Stock................................................ 19
Use of Proceeds............................................................ 19
Selling Security Holders................................................... 20
Plan of Distribution....................................................... 23
Available Information...................................................... 25
Incorporation of Certain Documents by Reference............................ 25
Legal Matters.............................................................. 26
Experts.................................................................... 26
-2-
I-TRAX, INC.
Overview
I-trax is an integrated health and productivity management company
formed by the merger on March 19, 2004 of I-trax, Inc. and Meridian Occupational
Healthcare Associates, Inc., which does business as CHD Meridian Healthcare.
We offer two categories of services that can be integrated or blended
as necessary or appropriate based on each client's needs. The first category
includes on-site health related services such as occupational health, primary
care, corporate health, and pharmacy, which were historically offered by CHD
Meridian Healthcare. We believe we are the nation's largest provider of on-site
corporate health management services. The second category includes personalized
health management programs, which were historically offered by I-trax.
Our services are designed to allow employers to contract directly for a
wide range of employee healthcare needs. We can deliver these services at or
near the client's work site by opening, staffing and managing a clinic or
pharmacy dedicated to the client and its employees, or remotely by using the
Internet and our state-of-the-art Care Communication Center staffed with trained
nurses and other healthcare professionals who are available 24 hours per day, 7
days per week. Our array of services provides each client with flexibility to
meet its specific pharmacy, primary care, occupational health, corporate health,
wellness, lifestyle management or disease management needs.
We provide services to approximately 150 clients, including automotive
and automotive parts manufacturers, consumer products manufacturers, large
financial institutions, health plans, integrated delivery networks, and third
party administrators. We currently operate approximately 168 on-site facilities
in 32 states. Our client retention rate is high due to strong client
relationships that are supported by the critical nature of our services, the
benefits achieved by employer and employee constituents, and the utilization of
multi-year service contracts.
Our Services
Occupational Health Services
We provide professional staffing and management of on-site health
facilities that address the occupational health, workers' compensation injuries,
and minor illness needs of the employer's workforce. These programs are designed
to operate across the entire array of occupational health regulatory
environments and emphasize work-related injury cost-reduction, treatment,
medical surveillance or testing, disability management, case management,
return-to-work coordination, medical community relations or oversight, on-site
physical therapy and injury prevention, and ergonomic assessment and
intervention. Our health programs improve compliance with treatment protocols
and drug formularies, enhance employee productivity, and allow for greater
employer control of occupational health costs. We currently operate 81
occupational health facilities.
Primary Care Services
We operate employer-sponsored health centers designed to integrate with
the employer's existing healthcare plans. In such arrangements, employers
contract with us directly for primary care health services and in the process
regain control of costs, quality and access. Generally, each of our health
centers services a single employer and offers health management programs
addressing the primary care needs of the employee base, including optometry
services and prevention and disease management programs. Clients may combine our
health centers with a dedicated pharmacy. We also offer customized solutions in
network management and absence management, including non-work related case
management and disability management. Our physicians, nurses, and other staff
are dedicated to the customer's employee population, allowing employees,
retirees, and their dependents to receive cost-effective, high quality,
accessible and convenient care. We currently operate 18 primary care centers.
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Pharmacy Services
We operate employer-sponsored pharmacies that offer prescription
services exclusively to the client's covered population. A client may also
combine our pharmacy with a dedicated primary care center. By leveraging
prescription volume across our client base and procuring pharmaceuticals as a
captive class of trade, we purchase products at considerable savings for our
clients, thus significantly and positively affecting what we understand is one
of our clients' fastest-growing healthcare cost categories. Our pharmacy
services also use sophisticated information technologies. These technologies may
be integrated with each client's existing pharmacy management programs and
plans, and improve employees' prescription fulfillment convenience. We currently
operate 24 pharmacies.
Corporate Health Services
We offer custom designed workplace programs that combine preventative
care, occupational health, medical surveillance and testing, travel medicine and
health education to non-industrial clients that do not experience significant
physical injury rates, but nonetheless maintain large workforces with general
and specialized medical needs. Clients for which we provide corporate health
services include financial service, advertising and consulting firms. We
currently operate 45 corporate healthcare facilities.
Personalized Health Management Programs
Our personalized health management programs are designed to deliver
lifestyle and wellness management, and disease and risk reduction interventions
to a client's entire population, across multiple locations and irrespective of
population size. Using predictive science, sophisticated, proprietary computer
software, clinical expertise, and personal care coordination, we enable our
clients to provide their employees and dependents with a more cohesive and
efficient system of healthcare. We use a unified data platform to allow all
caregivers to share records, thus enabling our clients to provide effective
coordination of care. We believe that by facilitating real-time secure
communication between our client, the patient, the doctor, the care coordinator
and the insurer our health management solutions reduce costs and enable improved
delivery of care.
Predictive Science. Our programs incorporate predictive science to
analyze our client's medical claims and pharmacy and clinical data to predict
future healthcare costs, which of those costs are avoidable, the health
conditions that will drive those costs, and the people within our client's
populations who are at risk for those conditions. Armed with this information,
we tailor our programs to help the client achieve better care, savings and other
desired results.
Technology Solutions. Our technology utilizes a single data
platform--Medicive(R) Medical Enterprise Data System--a proprietary software
architecture developed to collect, store, sort, retrieve and analyze a broad
range of information used in the healthcare industry. Our web accessible
software includes portals for key stakeholders in the care delivery
process--consumers, physicians and care managers--and permit real-time sharing
of information and support the adherence to our health and disease intervention
programs.
Interventions and Clinical Expertise. Our programs include personalized
health and disease interventions for individuals who suffer from, or are at high
risk for, active or chronic disease and tailored programs for individuals who
are at low risk. Depending on the individual's level of risk, our
custom-tailored interventions include self-help programs available through the
web or person-assisted programs administered through our Care Communication
Center. All interventions include lifestyle and risk reduction programs that
follow evidence-based clinical guidelines to optimize health, fitness,
productivity, and quality of life.
Care Communication Center. Our Care Communication Center is staffed
with trained nurses and other healthcare professionals 24 hours per day, 7 days
per week. Through the Center, we effect targeted interventions to achieve the
goals of our programs. The Center helps each member or employee of our client
make informed decisions about his or her health and provides ongoing support for
those with chronic diseases. Our demand management and nurse triage services
incorporate nationally recognized, evidence-based clinical guidelines to
increase compliance by caregivers and consumers with best practices.
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Our Client Contracts
Our client contracts for on-site clinics and pharmacies are typically
for an initial term of three to five years and renew automatically in the
absence of notice to the contrary. Under these contracts, we typically provide
services to our clients' employees, dependents and retirees, although
arrangements vary depending on the contract. We charge these clients for our
services on a "cost plus" basis to provide care to these individuals.
Similar to contracts for on-site clinics and pharmacies, contracts
covering our personalized health management programs are typically for an
initial term of three to five years and renew automatically in the absence of
notice to the contrary. Under these contracts, we typically charge our clients a
per member or per employee per month fee, which increases with a corresponding
increase in the level of service we provide. Basic personalized health
management programs provide inbound telephone access to a nurse or healthcare
professional for triage or health information, 24 hours per day, 7 days per
week, for employees, health plan members and, in many instances, dependents.
Enhanced programs, which we introduced in October 2003, provide inbound and
outbound contacts by telephone, mail and e-mail and electronic health
information and tools. Some clients also engage us to provide to their members,
employees and dependents custom disease management programs to target
individuals with a specific disease or who are at high risk for a specific
disease. We charge additional fees for individuals that elect to enroll in our
disease management programs. Our personalized health management contracts also
allow risk-sharing. These contracts provide for an incentive payment and/or fee
refund if we fail to achieve or exceed, as appropriate, a targeted percentage
reduction in our client's healthcare costs.
Our Strategy
Our business strategy is to improve the health status of employee
populations and manage the claim trend experienced by employers and employees,
self-insured employers and government agencies. These groups often seek programs
that promote health, manage disease and disability, and complement existing
health initiatives and benefits. Self-insured employers and government agencies
invest in such health programs because they reduce later need for critical care
and related costs, increase productivity, reduce absenteeism, improve health
status of both active employees and retirees, and reduce overall costs.
We believe that our programs offer a complete solution to meet this
need. We service each segment of a self-insured employer's population to achieve
the desired clinical and financial outcomes. Our on-site programs reduce
healthcare costs of the populations that use our facilities. Complementing those
services, our personalized health management programs improve the health of each
client's entire population, achieving the same result. We believe that the
combination of our on-site services and personalized health management solutions
responds to a specific and frequent request of large employers for a
comprehensive range of health management services. We also believe that we can
offer our on-site clients the value added benefit of our personalized health
management programs.
Finally, our programs offer our clients multiple services and price
entry points to meet their budget restrictions and specific needs. We believe
that this available menu of services helps shorten our sales cycle and provides
us with an opportunity to build a more comprehensive program as the relationship
grows with each client over time.
Risks Inherent in Our Business
As we pursue the opportunities described in this report, we face
numerous and significant challenges specific to our company and the healthcare
industry in general. Challenges specific to our company include:
o We must integrate I-trax's and CHD Meridian Healthcare's
services, which prior to the merger focused on different
delivery methods within the corporate health management
solutions market. If we are not able to integrate our services
successfully, we will not realize the benefits we anticipated
from the merger.
o The sales cycle for our services is complex, unpredictable and
has generally ranged from 3 to 24 months from initial contact
to contract signing. The time it takes to implement our
services is also
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difficult to predict and has lasted as long as 18 months from
contract execution to the commencement of live operation.
During the sales cycle and the implementation period, we may
expend substantial time, effort and money preparing contract
proposals, negotiating the contract and implementing the
solution without receiving any related revenue.
o We are competing with numerous companies offering services
that are similar to ours. Such competition could reduce the
number of new clients we obtain and could cause us to reduce
our pricing and, consequently, our gross margins.
o Implementation and delivery of our personalized health
management programs is highly dependent on data about
individuals to whom we provide care supplied to us by our
clients, and on our information technology systems that
process such data when we receive it. If we do not receive
timely and accurate data from our clients, or if our
information technology systems do not process such data
accurately, we may not be able to fulfill our client
contracts, which could have a material adverse effect on our
business, results of operations and financial condition.
o Our personalized health management programs are dependent on
efficient deployment, implementation, and scalability of our
software technology. To date, we have implemented our software
technology for only a relatively few covered lives. We must
continue to develop our software technology to provide the
scalability and new functionality necessary to accommodate the
greater number of covered lives we expect as we add new
clients. If we fail to respond to these requirements, our
ability to process new business could be slowed, which
ultimately could have a material adverse effect on our
business, results of operations and financial condition.
o Our revenue depends on the contractual relationships we
establish and maintain with our clients. Some of our contracts
provide for early termination. Other contracts may be
terminated by our clients because of their deteriorating
financial condition. No assurances can be given that the
results of contract restructurings and possible terminations
at or prior to renewal would not have a material negative
impact on our results of operations and financial condition.
Challenges specific to our industry include:
o In recent years, healthcare costs have grown significantly and
as a result the healthcare industry is under significant price
pressure. Although this has increased interest in our services
because they are designed to contain costs, we are nonetheless
subject to this general trend. It is conceivable that new and
potential clients will continue to pressure us to reduce our
prices and if we do, our revenues growth will slow and our
gross margins will decrease.
o We are subject to extensive state and Federal regulation,
which grows more complex each year. As such, compliance
efforts have also increased in complexity. We may need
additional resources to assure compliance, which will increase
our expenses and decrease our gross margins.
Corporate Information
General
Our principal executive offices are located at 4 Hillman Drive, Suite
130, Chadds Ford, Pennsylvania 19317. Our telephone number is (610) 459-2405 and
our fax number is (610) 459-4705. We maintain a website located at
http://www.i-trax.com. Information contained on our website is not part of this
prospectus.
We make available our annual reports on Form 10-KSB, quarterly reports
on Form 10-QSB and current reports on Form 8-K, as well as any amendments to the
forgoing, free of charge on our website as soon as reasonably practicable after
they have been filed with the SEC. For a detailed description of our business,
you should read these reports and the other filings we make with the SEC which
are incorporated by reference in this prospectus.
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Corporate History
I-trax was incorporated in Delaware on September 15, 2000 at the
direction of the Board of Directors of I-trax Health Management Solutions, Inc.,
I-trax's then parent company. On February 5, 2001, I-trax became the holding
company of I-trax Health Management at the closing of a reorganization pursuant
to Section 251(g) of Delaware General Corporation Law. At the effective time of
the reorganization, all of the stockholders of I-trax Health Management became
the stockholders of I-trax and I-trax Health Management became a wholly owned
subsidiary of I-trax. Further, all outstanding shares of I-trax Health
Management were converted into shares of I-trax in a non-taxable transaction.
The holding company structure has allowed us greater flexibility in our
operations and expansion and diversification plans, including in the
acquisitions of Meridian Occupational Healthcare Associates, Inc. and WellComm
Group, Inc.
I-trax acquired WellComm effective February 6, 2002. In the
acquisition, we paid the WellComm stockholders approximately $2,200,000 in cash
and 1,488,000 shares of our common stock. We also issued to each of two senior
officers of WellComm options to acquire 56,000 shares of our common stock at a
nominal exercise price. Because the acquisition was structured as a merger, we
also assume all of WellComm's liabilities, which equaled approximately $775,000.
We funded this acquisition by selling a 6% convertible senior debenture
in the aggregate principal amount of $2,000,000 to Palladin Opportunity Fund
LLC. We also issued Palladin a warrant to purchase up to 307,692 shares of our
common stock. As of March 19, 2004, Palladin has converted all amounts
outstanding under the debenture into common stock and has exercised the warrant
in full at the conversion price and exercise price of $1.75 per share.
We acquired CHD Meridian Healthcare on March 19, 2004. Under the merger
agreement, we delivered to CHD Meridian Healthcare stockholders 10,000,000
shares of I-trax common stock, 400,000 shares of I-trax Series A Convertible
Preferred Stock, each of which is convertible into 10 shares of I-trax common
stock, and paid $25,508,000 in cash. I-trax obtained the cash portion of the
merger consideration by selling 1,000,000 shares of Series A Convertible
Preferred Stock at a purchase price of $25.00 per share for gross proceeds of
$25,000,000, and by borrowing $12,000,000 on a new senior secured debt facility
from a national lender.
In the merger, I-trax assumed all of CHD Meridian Healthcare's
liabilities, which equaled approximately $20,000,000.
Immediately following the closing of the merger, I-trax redeemed from
former CHD Meridian Healthcare stockholders that participated in the merger, pro
rata, an aggregate of 200,000 shares of Series A Convertible Preferred Stock at
their original issue price of $25.00 per share.
Further, under the terms of the merger, if CHD Meridian Healthcare,
continuing its operations following the closing of the merger as a subsidiary of
I-trax, achieves calendar 2004 milestones for earnings before interest, taxes,
depreciation and amortization, or EBITDA, additional shares of common stock will
be payable as follows: If EBITDA equals or exceeds $8,100,000, the number of
such additional shares of common stock payable will be 3,473,280; the number of
such shares increases proportionately up to a maximum of 3,859,200 shares if
EBITDA equals or exceeds $9,000,000. Any escrowed shares that are not released
will be returned to I-trax for cancellation. The escrowed shares are not deemed
outstanding for accounting purposes until released. Based upon CHD Meridian
Healthcare's results of operations as of September 30, 2004, management believes
that CHD Meridian Healthcare will achieve at least the minimum EBITDA target set
forth in the merger agreement.
Finally, under the merger agreement and the related financing
documents, we are required to register for resale the shares of common stock
issued in the merger and issuable upon conversion of shares of Series A
Convertible Preferred Stock issued in the merger and in the related financing.
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RISK FACTORS
You should carefully consider the following risks in evaluating I-trax
and its business. Our business, financial condition and results of operations
could be materially and adversely affected by each of these risks. Such an
adverse effect could cause the market price of our common stock to decline, and
you could lose all or part of your investment.
Risk Related to I-trax
If we are not able to implement our business strategy of deploying our
integrated services effectively to existing and new clients, we will
not be able to grow our revenue.
Although we believe that there is significant demand for the our
services and products in the corporate healthcare market, there are many reasons
why we may be unable to execute our business strategy, including our possible
inability to:
o deploy our integrated services and solutions on a large scale;
o attract a sufficiently large number of self-insured employers
to subscribe for our services and software applications;
o increase awareness of our brand;
o strengthen user loyalty;
o develop and improve our services and solutions;
o continue to develop and upgrade our services and software
solutions; and
o attract, retain and motivate qualified personnel.
Our inability to achieve the above goals will impact our revenue
growth.
Our credit facility contains certain covenants and financial tests that
limit the way we conduct business.
Our senior secured credit facility contains certain covenants and
financial tests that limit the way we conduct business. Financial tests include
a covenant measuring the ratio of our funded indebtedness to earnings before
income, taxes, depreciation and amortization, or EBITDA, the ratio of our funded
indebtedness to capitalization, and our fixed charges coverage ratio. The
consolidated net worth covenant requires us to maintain our stockholders' equity
at 90% of the level as of December 31, 2005. Other covenants restrict our
ability to incur certain debt and complete mergers and dispose of assets.
We were not in compliance with certain financial tests as of June 30,
2004 and amended the credit facility to address non-compliance on August 12,
2004. We subsequently amended the credit facility on October 27, 2004. As of the
date of this prospectus, we are in compliance with all covenants. At November
1, 2004, $10,500,000 was outstanding under the credit facility.
The covenants and financial tests in the credit facility may prevent us
from accessing working capital, competing effectively or taking advantage of new
business opportunities. If we cannot comply with these covenants or meet these
ratios and other tests, it could result in a default under our credit facility,
and unless we are able to negotiate an amendment, forbearance or waiver, we
could be required to repay all amounts then outstanding, which could have a
material adverse effect on our business, results of operations and financial
condition.
Borrowings under our credit facility also are secured by liens on
substantially all of our assets and the assets of our subsidiaries. If we are in
default under one of these credit facilities, the lender could foreclose upon
all
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or substantially all of our assets and the assets of our subsidiaries. We cannot
assure you that we will generate sufficient cash flow to repay our indebtedness,
and we further cannot assure you that, if the need arises, we will be able to
obtain additional financing or to refinance our indebtedness on terms acceptable
to us, if at all. Any such failure to obtain financing could have a material
adverse effect on our business, results of operations and financial condition.
Increasing competition for contracts to establish and manage
employer-dedicated pharmacies and clinics increases the likelihood that
we may lose business to our competitors.
CHD Meridian Healthcare pioneered the field of employer-dedicated
pharmacies and primary care clinics. Although CHD Meridian Healthcare has always
faced competition from other methods by which business enterprises can arrange
and pay for healthcare services for their employees, until recently we rarely
experienced face-to-face bidding for a contract to manage a particular
employer's pharmacy or clinic. We have recently begun to see direct competition
for employer-dedicated pharmacy management contracts, including from Caremark
and Express Scripts. We expect this competition will increase over time. We
believe that we have certain advantages in facing such competition, including
our experience and know-how. However, some of our competitors and potential
competitors, including prescription benefit management companies, with revenues
in the multiple billions of dollars, are substantially bigger than we are. We
believe that the potential market for employer-dedicated pharmacies is large
enough for us to meet our growth plans despite increasing competition, but there
are no assurances that we will in fact be able to do so. Our ability to maintain
existing clients, expand services to existing clients, add new clients so as to
meet our growth objectives, and maintain attractive pricing for our services,
will depend on the interplay among overall growth in the use of
employer-dedicated facilities, entry of new competitors into our business, and
our success or failure in maintaining our market position as against these new
entrants.
In addition to this increasing head-to-head competition for contracts
to establish and manage employer-dedicated facilities, we expect to continue to
face competition for large employers' healthcare budget from other kinds of
enterprises, including pharmacy benefit managers, health insurers, managed
health care plans, and retail pharmacy chains.
Loss of advantageous pharmaceutical pricing could adversely affect our
income and the value we provide to our clients.
We receive favorable pricing from pharmaceutical manufacturers as a
result of our class of trade designation, which means that we only sell
pharmaceutical products to our clients' employees, dependents and retirees. We
also receive rebates from pharmaceutical manufacturers for driving market share
to preferred products. The benefit of favorable pricing is generally passed on
to our clients under the terms of client contracts. In the last few years,
retail pharmacies have brought legal cases against pharmaceutical manufacturers
challenging class of trade designations as unlawful price discrimination under
the Robinson-Patman Act. Although these challenges have generally failed, there
remains a possibility that we could lose the benefit of this favorable pricing,
either due to a legal challenge or to a change in policies of the pharmaceutical
manufacturers. Such a loss would diminish the value that we can provide to our
clients and, therefore, would make our services less attractive. We also receive
volume performance incentives from our pharmaceutical wholesaler which directly
affect our revenue and the loss of which could adversely affect our income.
Our business involves exposure to professional liability claims, and a
failure to manage effectively our professional liability risks could
expose us to unexpected expenses, which would result in losses.
Under the terms of our contracts to manage employer sponsored clinics
or pharmacies, we must procure professional liability insurance covering the
operations of that clinic or pharmacy. We also typically agree to indemnify our
clients against vicarious professional liability claims arising out of acts or
omissions of healthcare providers working at the clinics and pharmacies we
manage. Further, under the terms of our services agreements with affiliated
professional corporations, we are contractually obligated to procure malpractice
insurance on behalf of the professional corporations and their employed
physicians and typically absorb such claims as are subject to the policy
self-insured retention limit (which is explained below) or above the policy
limit. Finally, there also exists the possibility of vicarious professional
liability claims being made directly against us. As a result of these
contractual arrangements, we routinely incur significant expenses arising out of
professional liability claims. If we fail to
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manage the professional liability claims and associated risk effectively, we may
sustain losses beyond our historic trend.
Certain of our past professional liability insurance policy years were
insured by two insurance companies that are now either insolvent or under
regulatory supervision. As a result, we are effectively partially uninsured for
those periods. We have established reserves in connection with the six pending
claims from such policy years. Although we believe such reserves are reasonable
based on our historic loss experience, there is no assurance that these reserves
will be sufficient to pay all judgments or settlements. In addition, our current
professional liability insurance provides for self-insured retention of
$500,000. A self-insured retention is the amount that we have agreed to assume
responsibility for under our insurance policy as if we are the insurer subject
to the terms of the policy and related regulatory scheme. This means that we
are, effectively, partially uninsured against a variety of claims that may arise
from other years. We maintain a layer of excess insurance that begins with
losses in excess of $1,000,000 per claim, including for the years in which our
primary insurer is insolvent. We have reserved for projected future professional
liability expenses based on our operations to date. These reserves, however,
could prove inadequate, the size of our ultimate uninsured liability could
exceed our established reserves and we will sustain losses.
Our professional liability insurance policies are written on a
"claims-made" basis, meaning that they cover only claims made during the policy
period, and not events that occur during the policy period but result in a claim
after the expiration of the policy. With this insurance strategy, we must renew
or replace coverage each year in order to have coverage for prior years'
operations. Availability and cost of such coverage are subject to market
conditions, which can fluctuate significantly.
We have established a subsidiary insurance company, which subjects us
to additional regulatory requirements and once operating, will subject
us to the risks associated with the insurance business.
We have established as a wholly owned subsidiary insurance company and
began operating it in the second quarter of 2004 to insure our professional
liability exposure. We believe this approach will enhance our ability to manage
malpractice exposure and stabilize insurance costs. Operating an insurance
subsidiary, however, represents additional risk to our operations, including a
potential perception among our existing and potential clients that we are not
adequately insured. We have hired a manager and have engaged an actuarial
consulting firm for the insurance subsidiary. When we commence its operations,
we will be subject to the risks associated with any insurance business, which
include investment risk relating to the performance of our invested assets set
aside as reserves for future claims, the uncertainty of making actuarial
estimates of projected future professional liability losses, and loss adjustment
expenses. Failure to make an adequate return on our investments, to maintain the
principal of invested funds, or to estimate future losses and loss adjustment
expenses accurately, could cause us to sustain losses. Also, maintaining the
insurance subsidiary has exposed us to substantial additional regulatory
requirements, with attendant risks if we fail to comply with applicable
regulations.
We may be unable to integrate successfully our operations and realize
the full cost savings we anticipate from the merger.
The merger of CHD Meridian Healthcare and I-trax involves the
integration of two companies that have previously operated independently and
focused on different delivery methods within the corporate health management
solutions market. The difficulties of combining the merged companies' operations
include:
o integrating complementary businesses under centralized
management efficiently;
o coordinating geographically separated organizations;
o integrating personnel with diverse business backgrounds; and
o combining different corporate cultures.
The process of integrating operations could cause an interruption of,
or loss of momentum in, the activities of I-trax or CHD Meridian Healthcare's
businesses or the loss of key personnel. The diversion of management's
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attention and any delays or difficulties encountered in connection with the
integration of the merged companies' operations could have an adverse effect on
the business, results of operations or financial condition of the merged
companies.
Among the factors considered by the CHD Meridian Healthcare and the
I-trax boards of directors in connection with their respective approvals of the
merger were the opportunities for reduction of operating costs and improvements
in operating efficiencies and other financial synergies that could result from
the merger. We cannot give any assurance that these savings will be realized, or
if realized, will be realized within the time periods contemplated by
management.
If our clients do not provide us accurate data, or if we do not process
such data accurately, we may not be able to fulfill our client
contracts.
Implementation and delivery of our personalized health management
programs is highly dependent on data about individuals to whom we provide care
supplied to us by our clients, and on our information technology systems that
process such data when we receive it. If we do not receive timely and accurate
data from our clients, or if our information technology systems do not process
such data accurately, we may not be able to fulfill our client contracts, which
could have a material adverse effect on our business, results of operations and
financial condition.
If we lose key employees or fail to recruit and retain other skilled
employees, we may not be able to continue our growth.
Our business greatly depends on, among others, Frank A. Martin,
chairman, chief executive officer and director, Haywood D. Cochrane, Jr., vice
chairman and director, and Charles D. (Chip) Phillips, executive vice president
and chief operating officer. If we cannot retain any one of these individuals,
we will loose employees with considerable knowledge of our business, which could
significantly reduce our ability to compete and succeed in the future.
We maintain employment agreements with Messrs. Martin and Cochrane. Mr.
Martin's employment agreement expires in December 2004. Mr. Cochrane's
agreements expire in January 2005. Each employment agreement may be terminated
by us with or without cause and by the applicable executive with or without good
reason. We maintain a $5,000,000 key-man life insurance policy on Mr. Martin.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. As we secure new contracts and implement our
services and products, we will need to hire additional personnel in all
operational areas. We may be unable, however, to attract, assimilate or retain
such highly qualified personnel. Although we have not experienced such
difficulties in the recent past, we may do so in the future, especially if the
labor markets continue to tighten. If we cannot attract new personnel or retain
and motivate current personnel, the service level we provide to our clients may
suffer, which may cause us to loose clients and revenue.
Our sales cycle is long and complex, which may slow our growth.
The corporate health management business is growing rapidly and has
many entrants. Further, although each entrant may define its service as
corporate health management, the details of the services among the entrants are
quite different. Because the services offered are complex, require clients to
incur significant upfront costs and there are significant variations in the
offered services by many vendors, potential clients take a long time to evaluate
and purchase such services, lengthening our sales cycle. Further, the sales and
implementation process for our services and software applications is lengthy,
involves a significant technical evaluation and requires our clients to commit a
great deal of time and money. Finally, the sale and implementation of our
services are subject to delays due to our clients' internal budgets and
procedures for approving large capital expenditures and deploying new services
and software applications within their organizations. The sales cycle for our
solutions, therefore, is unpredictable and has generally ranged from 3 to 24
months from initial contact to contract signing. The time it takes to implement
our services is also difficult to predict and has lasted as long as 18 months
from contract execution to the commencement of live operation. During the sales
cycle and the implementation period, we may expend substantial time, effort and
money preparing contract proposals, negotiating the contract and implementing
the solution without receiving any related revenue.
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Deterioration of the financial health of our clients, many of which are
large U.S. manufacturing enterprises, may impair our business volume
and collections.
An adverse trend in one or more U.S. manufacturing industries could
lead to plant closings or layoffs that could eliminate or reduce the need for
some of our employer-dedicated healthcare facilities. Also, if our client
becomes insolvent, we may not be able to recover outstanding accounts receivable
owed by that client, and may suffer premature contract termination.
Our professional liability insurance is written on a "claims-made"
basis. This means that we are protected from malpractice claims only if the
company that insured us at the time of the alleged "occurrence" is the same
company at the time the claim is filed in court. If it is not, we will not have
coverage. To continue coverage in such circumstances, we must obtain "tail"
insurance coverage or continue to purchase insurance written on a "claims made"
basis. We typically charge our clients for tail insurance coverage when the
contract terminates. If a client is insolvent when the contract terminates,
however, we may not be able to recoup the cost of tail insurance coverage, or
other costs related to that facility's shutdown. We already experienced this in
the case of Bethlehem Steel and National Steel, two clients for which we managed
several facilities when these clients became debtors in Federal bankruptcy
proceedings. This resulted in difficulty in collecting some amounts due to us,
and generated claims against us of approximately $920,000 in the aggregate for
repayment of allegedly preferential transfers previously received from the
client. We have settled approximately half of such claims for significantly less
than originally demanded. Nonetheless, because of the risks associated with
client insolvency, and the concentration of CHD Meridian Healthcare's client
base, our business is to some extent dependent on the continued health of U.S.
manufacturing industries.
We are dependent on software technologies and as such subject to
frequent change and risks associated with Internet viruses and outages,
which could destroy the information we maintain or prevent our clients
from accessing important information.
Our web-based software applications that form the backbone of our
personalized health management programs depend on the continuous, reliable and
secure operation of Internet servers and related hardware and software. Numerous
viruses and outages on the Internet could cause outages of our applications from
time to time. To the extent that our services are interrupted, our users will be
inconvenienced and our reputation may be diminished. If access to our system
becomes unavailable at a critical time, users could allege we are liable, which
could depress our stock price, cause significant negative publicity and possibly
lead to litigation. Although our computer and communications hardware is
protected by physical and software safeguards, it is still vulnerable to fire,
storm, flood, power loss, telecommunications failures, physical or software
break-ins and similar events. We do not have 100% redundancy for all of our
computer and telecommunications facilities. A catastrophic event could have a
significant negative effect on our business, results of operations, and
financial condition.
We also depend on third parties to provide certain of our clients with
Internet and online services necessary for access to our servers. It is possible
that our clients will experience difficulties with Internet and other online
services due to system failures, including failures unrelated to our systems.
Any sustained disruption in Internet access provided by third parties could have
a material adverse effect on our business, results of operations and financial
condition.
Finally, we retain confidential healthcare information on our servers.
It is, therefore, important that our facilities and infrastructure remain secure
and are perceived by clients to be secure. Although we operate our software
applications from a secure facility managed by a reputable third party, our
infrastructure may be vulnerable to physical or virtual break-ins, computer
viruses, programming errors or similar disruptive problems. A material security
breach could damage our reputation or result in liability to us.
We are dependent on our ability to deploy and implement our software
technologies efficiently.
Our personalized health management programs are dependent on efficient
deployment, implementation, and scalability of our software technology. To date,
we have implemented our software technology for relatively few clients. We must
continue to develop our software technology to provide the scalability and new
functionality
-12-
necessary to accommodate the greater number of clients we expect. If we fail to
respond to these requirements, our ability to process new business could be
slowed, which ultimately could have a material adverse effect on our business,
results of operations and financial condition. We are addressing these
requirements by adding software development personnel, and expect to spend in
2005 approximately $500,000 in excess of our 2004 software development budget.
We may be sued and incur losses if we provide inaccurate health
information on our website or inadvertently disclose confidential
health information to unauthorized users.
Because users of our website will access health content and services
relating to a medical condition they may have or may distribute our content to
others, third parties may sue us for defamation, negligence, copyright or
trademark infringement, personal injury or other matters. We could also become
liable if confidential information is disclosed inappropriately. These types of
claims have been brought, sometimes successfully, against online services in the
past. Others could also sue us for the content and services that will be
accessible from our website through links to other websites or through content
and materials that may be posted by our users in chat rooms or bulletin boards.
Any such liability will have a material adverse effect on our reputation and our
business, results of operations or financial position.
We may be unable to compete successfully against companies offering
other disease management products, which will impair our revenue
growth.
Many healthcare companies are offering disease management services and
healthcare focused software solutions. Further, a vast number of Internet sites
offer healthcare content, products and services. In addition, traditional
healthcare providers compete for consumers' attention both through traditional
means as well as through new Internet initiatives. Although we believe our
technology-enabled service solutions are unique and better than our
competitors', we compete for customers with numerous other businesses.
We believe our competitors include the following:
o Disease management and care enhancement companies, such as
American Healthways, LifeMasters, Matria Healthcare,
CorSolutions, SHPS Healthcare Services, and Health Dialog.
o Wellness companies, such as StayWell, HealthMedia, Harris
Health Trends, and Impact Health.
o On-site healthcare providers, such as Comprehensive Health
Services, MedCor and Whole Health Management.
o Pharmacy benefit management companies, such as Caremark and
Express Scripts.
o Regional occupational health clinics and providers.
Many of these potential competitors are likely to enjoy substantial
competitive advantages compared to us, including:
o greater name recognition and larger marketing budgets and
resources;
o larger customer and user bases;
o larger production and technical staffs;
o substantially greater financial, technical and other
resources; and
o a wider array of online products and services.
-13-
To be competitive, we must continue to enhance our products and
services as well as our sales and marketing channels. If we do not, we will not
be able to grow our revenue.
If other companies develop intellectual property identical or similar
to ours, we will loose what we believe to be our competitive advantage.
Our intellectual property is important to our business. We rely on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property. Our
efforts to protect our intellectual property may not be adequate. Our
competitors may independently develop similar technology or duplicate our
products or services. Unauthorized parties may infringe upon or misappropriate
our products, services or proprietary information. In addition, the laws of some
foreign countries do not protect proprietary rights as well as the laws of the
United States do, and the global nature of the Internet makes it difficult to
control the ultimate destination of our products and services. In the future,
litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any such
litigation would probably be time-consuming and costly. We could be subject to
intellectual property infringement claims as the number of our competitors grows
and the content and functionality of software applications and services overlap
with competitive offerings. Defending against these claims, even if not
meritorious, could divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
could be required to pay a substantial damage award and forced to develop
noninfringing technology, obtain a license or cease selling the applications
that contain the infringing technology. We may be unable to develop
noninfringing technology or obtain a license on commercially reasonable terms,
or at all. We also intend to rely on a variety of technologies that we will
license from third parties, including any database and Internet server software,
which will be used to operate our applications. These third-party licenses may
not be available to us on commercially reasonable terms. The loss of or
inability to obtain and maintain any of these licenses could delay the
introduction of enhancements to our software applications, interactive tools and
other features until equivalent technology could be licensed or developed. Any
such delays could materially and adversely affect our business, results of
operations and financial condition.
The loss of a major client will significantly reduce our revenues.
For the nine months ended September 30, 2004, we had one client,
Goodyear, which accounted for 12% of our revenue. We anticipate that our results
of operations in any given period will continue to be influenced to a certain
extent by a relatively small number of clients. Accordingly, if we were to lose
the business of such a client, our results of operations could be materially and
adversely affected.
Risk Related to Our Industry
The healthcare industry is subject to general cost pressures that could
reduce our revenue and gross margins.
The healthcare industry is currently under pressure by governmental and
private-sector revenue sources to cut spiraling costs. These pressures will
continue and possibly intensify. Although we believe that our services and
software applications assist public health agencies, hospitals, health plans and
self-insured employers to control the high costs associated with treating
patients, the pressures to reduce costs immediately may hinder our ability (or
increase the length of time we require) to obtain new contracts. In addition,
the focus on cost reduction may pressure our customers to restructure contracts
and reduce our fees.
We are affected by changes in the laws governing health plan, hospital
and public health agency reimbursement under governmental programs such as
Medicare and Medicaid. There are periodic legislative and regulatory initiatives
to reduce the funding of the Medicare and Medicaid programs in an effort to
curtail or reduce overall Federal healthcare spending. Federal legislation has
and may continue to significantly reduce Medicare and Medicaid reimbursements to
most hospitals. These reimbursement changes are negatively affecting hospital
revenues and operations. Such legislative initiatives or government regulations
could reduce demand for our services, our revenue and gross margins.
-14-
We are subject to judicial and statutory prohibitions on the corporate
practice of medicine, and failure to comply with these prohibitions
will expose us to heightened scrutiny by regulatory agencies, fines,
litigation and possibly loss of revenue.
There are judicial and statutory prohibitions on the corporate practice
of medicine, which vary from state to state. The corporate practice of medicine
doctrine prohibits a corporation, other than a professional corporation, from
practicing medicine or employing physicians. Some states also prohibit a
non-physician from splitting or sharing fees charged by a physician for medical
services. The services we provide include establishing and managing medical
clinics. Most physician services at clinics we manage are provided by physicians
who are employees of professional corporations with which we contract to provide
non-professional services such as purchasing equipment and supplies, patient
scheduling, billing, collection, accounting, and computer services. The
professional corporations control hiring and supervise physicians and all
medical functions. We have option agreements with the physician-owners of these
affiliated professional corporations that entitle us to require the
physician-owners to sell the stock of the professional corporations to any
licensed physician we designate. This structure is intended to permit
consolidation of the professional corporations' financial statements with ours,
while maintaining sufficient separation to comply with the corporate practice of
medicine doctrine and with fee-splitting and fee-sharing prohibitions. There
remains, however, potential exposure to claims that this structure violates the
corporate practice of medicine doctrine or fee-splitting or fee-sharing
prohibitions, even though we do not believe that it does. If such a claim is
successfully asserted against us in any jurisdiction, we could be subject to
civil and criminal penalties, or could be required to restructure our
contractual arrangements with clients. Any restructuring of contractual
arrangements could result in lower revenues, increased expenses and reduced
influence over the business decisions of those operations. Alternatively, some
existing CHD Meridian Healthcare contracts could be found to be illegal and
unenforceable, which could result in their termination and an associated loss of
revenue, or inability to enforce valuable provisions of those contracts.
We have custody of confidential patient records and if we fail to
comply with regulations applicable to maintaining such records we may
be fined or sued.
Our personnel who staff our on-site pharmacies and clinics have custody
of confidential patient records. Also, the computer servers we use to store our
software applications and deliver our technology services also contain
confidential health risk assessments completed by employees, patients and
beneficiaries of our clients. In our capacity as a covered entity or as a
business associate of a covered entity, we and the records we hold are subject
to a rule entitled Privacy of Individually Identifiable Health Information, or
Privacy Rule, promulgated by the U.S. Department of Health and Human Services
under the Health Insurance Portability and Accountability Act of 1996, or HIPAA,
and also to any state laws that may have more stringent privacy requirements. We
attempt to protect the privacy and security of confidential patient information
in accordance with applicable law, but could face claims of violation of the
Privacy Rule, invasion of privacy or similar claims, if our patient records or
computer servers were compromised, or if our interpretation of the applicable
privacy requirements, many of which are complex, were incorrect or allegedly
incorrect, or if we failed to maintain a sufficiently effective compliance
program.
Furthermore, while we believe that the Privacy Rule protects our
ability to obtain patient identifiable medical information for disease
management purposes from certain of our clients, state legislation or
regulations will preempt Federal legislation if state legislation or regulations
are more restrictive. Accordingly, new Federal or state legislation or
regulations restricting the availability of this information for disease
management purposes could prevent us from performing services for our existing
clients, termination of our disease management contracts and loss of revenue.
We are subject to fraud and abuse statutes because we bill the Medicare
and Medicaid programs to recover amounts that offset the healthcare
costs of our clients and if we violate such statutes, we will be
subject to civil and criminal penalties.
In recent years, various government entities have actively investigated
potential violations of fraud and abuse statutes and regulations by healthcare
providers and by pharmaceutical manufacturers. The fraud and abuse provisions of
the Social Security Act provide civil and criminal penalties and potential
exclusion from the Medicare and Medicaid programs for persons or businesses who
offer, pay, solicit or receive remuneration in order to induce referrals of
patients covered by Federal healthcare programs (which include Medicare,
Medicaid, TriCare and other
-15-
Federally funded health programs). Although our services and those of our
affiliated professional corporations are generally paid for by employer clients,
we do bill the Medicare and Medicaid programs, and private insurance companies,
as agent of our affiliated professional corporations, to recover reimbursable
amounts that offset the healthcare costs borne by our clients. We are therefore
subject to various regulations under the Medicare and Medicaid programs,
including fraud and abuse prohibitions. We believe that we are compliant with
these requirements, but could face claims of non-compliance if our
interpretations of the applicable requirements, many of which are complex, were
incorrect or allegedly incorrect, or if we fail to maintain a sufficiently
effective compliance program.
The professionals that staff our affiliated professional corporations
as well as those we employ are subject to state and Federal licensure
requirements and if we fail to comply with such licensure requirements,
we may be scrutinized by regulatory agencies and fined.
The doctors, nurses and other healthcare professionals that staff our
affiliated professional corporations, the nurses that staff our care
communication centers, and our on-site pharmacies and clinics, are subject to
individual licensing requirements. All of our healthcare professionals and
facilities that are subject to licensing requirements are licensed in the state
in which they are physically present. Multiple state licensing requirements for
healthcare professionals who provide services telephonically over state lines
may require us to license some of our healthcare professionals in more than one
state. We continually monitor the developments in telemedicine. There is no
assurance, however, that new judicial decisions or Federal or state legislation
or regulations would not increase the requirement for multi-state licensing of
all central operating unit call center health professionals, which would
significantly increase our administrative costs. Further, in the event a state
regulatory agency alleges that we do not comply with relevant licensing
requirements, we may be subject to fines and administrative action.
The recently adopted Medicare prescription drug benefit legislation
could reduce the demand for the prescription drug benefits we provide.
In December 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement and Modernization Act of 2003. This law provides
Medicare beneficiaries with insurance coverage that offers access to
prescription medicines. The prescription drug benefit, which will be called
Medicare Part D, begins January 1, 2006. In the interim, a national prescription
drug discount card for Medicare-eligible seniors will be instituted in April
2004. Under the new law, drug benefits will be provided through risk-bearing
private plans contracting with the government (including plans offering only the
Medicare Part D coverage as well as integrated plans offering all Medicare
benefits). There will be an annual open period during which Medicare
beneficiaries will choose their drug plan from among those available in their
area of residence. In any areas where there are fewer than two private plan
choices, the government will make a drug plan available directly.
We do not know how this law will affect our business. Subsidies for
employers providing retiree drug benefits will decrease the costs to those
employers of providing such benefits, and therefore may increase the number of
employers willing to provide retiree drug benefits, which would positively
affect our business. On the other hand, employers that now offer prescription
drug benefits may decide no longer to do so, on the basis that their retirees
now will be able to obtain such benefits on their own through Medicare. In that
case, such employers would have less need for employer-dedicated pharmacies of
the kinds that we establish and manage and reduce our revenue.
Investment Risks
The price of our common stock is volatile and investors may loose money
if they invest in our stock.
Our stock price has been and we believe will continue to be volatile.
For example, from November 1, 2002 through November 8, 2004, the per share price
of our stock has fluctuated from a high of $5.70 to a low of $1.37. The stock's
volatility may be influenced by the market's perceptions of the healthcare
sector in general, or other companies believed to be similar to us or by the
market's perception of our operations and future prospects. Many of these
perceptions are beyond our control. In addition, our stock is not heavily traded
and therefore the ability to achieve relatively quick liquidity without a
negative impact on our stock price is limited.
-16-
Some of our outstanding shares are restricted from immediate resale but
may be sold into the market in the immediate future, which would cause
the market price of our common stock to drop significantly, even if our
business is doing well.
As of November 8, 2004, 28,655,871 shares of our common stock were
issued and outstanding. Of this number, approximately 14,000,000 shares were
issued in the CHD Meridian Healthcare merger as "restricted securities."
Further, an additional 12,000,000 shares of our common stock, which are not
reflected as issued and outstanding, are issuable upon conversion of our
outstanding shares of Series A Convertible Preferred Stock. Of this latter
amount, 2,000,000 shares are issuable upon conversion of Series A Convertible
Preferred Stock issued in the CHD Meridian Healthcare merger and 10,000,000
shares are issuable upon conversion of Series A Convertible Preferred Stock sold
to third party investors to fund a portion of the cash I-trax needed to acquire
CHD Meridian Healthcare. This prospectus covers the resale of approximately
14,000,000 shares of our common stock and approximately 2,000,000 of the
12,000,000 shares of our common stock issuable upon conversion of our
outstanding shares of Series A Convertible Preferred Stock issued or issuable in
the CHD Meridian Healthcare merger. A separate prospectus covers the resale of
the approximately 10,000,000 shares of our common stock issuable upon conversion
of Series A Convertible Preferred Stock issued in the related financing. The two
prospectuses cover an aggregate of approximately 26,000,000 shares of our common
stock. If the selling shareholders under these prospectuses sell these shares at
the same time, the market price of our common stock would most likely decline,
possibly significantly.
Shares reserved for future issuance upon the conversion of outstanding
shares of Series A Convertible Preferred Stock and upon the exercise of
issued options and warrants may cause dilution.
As of November 8, 2004, approximately 12,000,000 shares of our common
stock were reserved for issuance upon conversion of outstanding shares of Series
A Convertible Preferred Stock and 7,010,561 shares of our common stock were
reserved for issuance upon the exercise of our outstanding warrants and options.
In addition, outstanding shares of our Series A Convertible Preferred Stock
accrue dividend at the rate of 8% per year, which may be payable in common stock
when shares of our Series A Convertible Preferred Stock are converted. Our
stockholders, therefore, could experience dilution of their investment upon
conversion or exercise, as applicable, of these securities.
Provisions of our certificate of incorporation could impede a takeover
of our company, even though a takeover may benefit our stockholders, or
delay or prevent a change in management.
Our board of directors has the authority, without further action by the
stockholders, to issue from time to time, shares of preferred stock in one or
more classes or series, and to fix the rights and preferences of such preferred
stock, subject, however, to the limitations contained in the certificate of
designations filed with respect to our Series A convertible preferred stock. We
are subject to provisions of Delaware corporate law which, subject to certain
exceptions, prohibit us from engaging in any "business combination" with a
person who, together with affiliates and associates, owns 15% or more of our
common stock (referred to as an interested stockholder) for a period of three
years following the date that such person became an interested stockholder,
unless the business combination is approved in a prescribed manner.
Additionally, bylaws establish an advance notice procedure for stockholder
proposals and for nominating candidates for election as directors. These
provisions of Delaware law and of our certificate of incorporation and bylaws
may have the effect of delaying, deterring or preventing a change in our
existing management or control, may discourage bids for our common stock at a
premium over market price and may adversely affect the market price, and the
voting and other rights of the holders of our common stock.
-17-
STATEMENT REGARDING FORWARD LOOKING INFORMATION
This prospectus and our filings with the Securities and Exchange
Commission, or SEC, incorporated by reference in this prospectus include
forward-looking statements. All statements, other than statements of historical
facts, included in this prospectus and our filings with the SEC incorporated by
reference in this prospectus regarding our strategy, future operations,
financial position, future revenues, projected costs, prospects, plans and
objectives of management are forward-looking statements. The words
"anticipates," "believes," "estimates," "expects," "intends," "may," "plans,"
"projects," "will," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. We cannot guarantee that we actually will achieve the
plans, intentions or expectations disclosed in our forward-looking statements
and you should not place undue reliance on our forward-looking statements.
Actual results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make. We have
included important factors in the cautionary statements included or incorporated
in this prospectus, particularly under the heading "Risk Factors" beginning on
page 8 above, that we believe could cause actual results or events to differ
materially from the forward-looking statements we make. Our forward-looking
statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments we may make.
CAUTIONARY NOTE
You should rely only on the information contained and incorporated by
reference in this prospectus. No one has been authorized to provide you with
different information. This prospectus is not an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information contained and incorporated by reference in this prospectus or in any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
-18-
MARKET FOR OUR COMMON STOCK
Our common stock trades on the American Stock Exchange under the symbol
"DMX." Prior to January 15, 2003, our common stock was quoted on the
Over-the-Counter Bulletin Board under the symbol "IMTX" and "ITRX." The
following table sets forth the high and low closing prices for our common stock
for the periods indicated. All closing prices have been adjusted to reflect a
1-for-5 reverse stock split effected as of close of business on January 3, 2003.
High Low
---- ---
2004
Fourth Quarter (through November 8) $ 2.750 $ 1.880
Third Quarter $ 4.290 $ 2.600
Second Quarter $ 5.600 $ 3.290
First Quarter 5.700 3.910
2003
Fourth Quarter 4.490 2.600
Third Quarter 3.790 2.600
Second Quarter 3.000 1.510
First Quarter 5.000 1.370
2002
Fourth Quarter 4.300 2.500
Third Quarter 5.100 2.750
As of November 8, 2004, there were approximately 419 registered holders
of our common stock and approximately 70 registered holders of our Series A
Convertible Preferred Stock. On November8, 2004, the last reported sales price
of our common stock was $2.21.
Dividend Policy
We have never paid or declared any cash dividends on our common stock
and do not anticipate paying cash dividends on our common stock in the
foreseeable future.
Our Series A Convertible Preferred Stock accrues dividends on the
original issue price at the rate of 8% per annum. The dividends are payable upon
conversion of Series A Convertible Preferred Stock into common stock in
additional shares of common stock or, subject to the consent of our senior
secured lender, in cash.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock offered under this prospectus.
-19-
SELLING SECURITY HOLDERS
We are registering for offer and sale by the applicable holders:
o up to 13,851,550 shares of our common stock; and
o up to 1,998,886 shares of our common stock issuable upon the
conversion of outstanding Series A Convertible Preferred
Stock.
Based on information provided to us by the selling shareholders, the
following table sets forth ownership regarding the shares held by the selling
shareholders.
Number of Shares of Common
Stock Owned Before Offering Number of Shares Common Common Stock Owned After
(1) Stock Offered Offering
Common Stock Common Stock
underlying underlying
preferred Common preferred Number of
Name of Selling Shareholder Common Stock stock Stock stock Shares Percentage
-------------------------------------------- --------------- --------------- ------------ --------------- -------------- -----------
Warburg, Pincus Ventures L.P. 4,148,461 623,595 4,148,461 623,595 -- --
Centre Reinsurance Limited 2,329,174 336,119 2,329,174 336,119 -- --
CHD Investors LLC 1,544,646 232,190 1,544,646 232,190 -- --
Michael J. Hardies 1,472,369 221,326 1,472,369 221,326 -- --
Susan M. Mathews 1,470,995 213,591 1,470,995 213,591 -- --
Finn Iverson Mathews, Colin Mathews
Custodian 2,277 -- 2,277 -- -- --
Beck Andrew Mathews, Colin Mathews
Custodian 2,277 -- 2,277 -- -- --
Nora Keller Mathews, Brendan Mathews
Custodian 2,277 -- 2,277 -- -- --
Quinn Annaley Mathews, Devin Mathews
Custodian 2,277 -- 2,277 -- -- --
Franklin Capital Associates III L.P. 925,567 139,131 925,567 139,131 -- --
Pacific Venture Group, L.P. 651,209 93,974 651,209 93,974 -- --
Bessemer Venture Partners MOHA 431,958 64,931 431,958 64,931 -- --
Charles D. Phillips 376,389 16,837 376,389 16,837 -- --
Coleman Swenson Hoffman Booth IV L.P. 219,324 32,968 219,324 32,968 -- --
Haywood D. Cochrane, Jr. 154,109 6,893 154,109 6,893 -- --
PVG Associates, L.P. 30,526 4,405 30,526 4,405 -- --
Stryker Warren Jr. 29,858 4,338 28,858 4,338 1,000 *
John H. Austin 16,351 2,359 16,351 2,359 -- --
CGJR Health Care Services Private
Equities, L.P. 16,265 2,445 16,265 2,445 -- --
Craig Macnab 12,857 1,855 12,857 1,855 -- --
Jim Baker 4,088 589 4,088 589 -- --
Perry W. Moskovitz 4,088 589 4,088 589 -- --
Stuart Smith 2,967 428 2,967 428 -- --
Donald I.N. McKenzie 2,241 323 2,241 323 -- --
(1) The actual number of shares of common stock offered in this prospectus
and included in the registration statement of which this prospectus is
a part includes such additional number of shares of common stock as may
be issued or issuable by reason of any stock split, stock dividend or
similar transaction involving the common stock, in accordance with Rule
416 under the Securities Act of 1933, as amended, or Securities Act.
-20-
* Less than 1%.
Material Relationships and Transactions
The 13,851,550 shares of common stock offered for resale under this
prospectus were issued as part of an aggregate of 13,859,200 shares issued in
connection with I-trax's acquisition of CHD Meridian Healthcare. Of this amount,
10,000,000 shares of common stock were issued to the selling shareholders and
3,859,200 were issued to an escrow agent for the benefit of the selling
shareholders.
An aggregate of 1,998,886 shares of common stock offered for resale
under this prospectus are issuable upon conversion of Series A Convertible
Preferred Stock. I-trax issued 200,000 shares of Series A Convertible Preferred
Stock to the former stockholders of CHD Meridian Healthcare in connection with
I-trax's acquisition of CHD Meridian Healthcare. Each share of Series A
Convertible Preferred Stock is convertible into 10 shares of common stock at the
conversion price of $2.50 per share. Series A Convertible Preferred Stock also
accrues dividends on the original issue price of $25 per share at the rate of 8%
per annum. The dividends are payable upon conversion of the Series A Convertible
Preferred Stock into common stock in additional shares of common stock or,
subject to the consent of our senior secured lender, in cash.
We are registering for resale the shares of common stock and the shares
of common stock issuable upon conversion of the Series A Convertible Preferred
Stock offered for resale under this prospectus because we are required to do so
by the merger agreement between I-trax and CHD Meridian Healthcare.
Haywood D. Cochrane, Jr. is a director and vice chairman of I-trax, and
prior to the acquisition of CHD Meridian Healthcare by I-trax served as chief
executive officer of CHD Meridian Healthcare.
Charles D. ("Chip") Phillips is executive vice president and chief
operating officer of I-trax, and prior to the acquisition of CHD Meridian
Healthcare by I-trax served as a director and chief operating officer of CHD
Meridian Healthcare.
Michael J. Hardies, M.D., is a senior vice president and chief medical
officer - emeritus of I-trax and prior to the acquisition of CHD Meridian
Healthcare by I-trax served as chairman and chief medical officer of CHD
Meridian Healthcare.
Eileen Sweeney, a former officer and director of certain entities
affiliated with Centre Reinsurance Limited, served as a director of CHD Meridian
Healthcare prior to its acquisition by I-trax.
W. David Swenson, an affiliate of Franklin Capital Associates III L.P.
and Coleman Swenson Hoffman Booth IV L.P., served as a director of CHD Meridian
Healthcare prior to its acquisition by I-trax.
Joel Ackerman, a representative of Warburg, Pincus Ventures L.P.,
served as a director of CHD Meridian Healthcare prior to its acquisition by
I-trax.
Brad Cooper, a representative of CHD Investors, LLC, served as a
director of CHD Meridian Healthcare prior to its acquisition by I-trax.
-21-
Voting and Dispositive Power
The following individuals have voting and dispositive power with
respect to the shares of I-trax common stock offered under this prospectus for
resale by entities:
Individual or Individuals Who Exercise Voting and
Name of Selling Shareholder Dispositive Power
------------------------------------------------------ --------------------------------------------------------
Warburg, Pincus Ventures L.P. Warburg, Pincus and Co., the general partner, and
Warburg Pincus LLC, manager
Centre Reinsurance Limited Philip Thorne, Stephen Williams or Emma Lopez
CHD Investors LLC The ultimate corporate general partner has such voting
and dispositive power.
Franklin Capital Associates III L.P. W. David Swenson
Pacific Venture Group, L.P. and PVG Associates, L.P. Layton R. Crouch, or any other active managing member
of PVG Equity Partners, LLC, general partner of
Pacific Venture Group, L.P. and PVG Associates, L.P.
Bessemer Venture Partners MOHA Bessemer Venture Partners III L.P., a Delaware limited
partnership, serves as the Managing Partner of
Bessemer Venture Partners MOHA and has exclusive
voting and dispositive power over the securities held
by Bessemer Venture Partners MOHA. As a result,
William T. Burgin, Rober H. Buescher, G. Felda
Hardymon, Christopher F.O. Gabrieli and David J.
Cowan, who are the managing members of Deer III & Co.
LLC, the general partner of Bessemer Venture Partners
III L.P., share voting and dispositive power over the
shares of I-trax common stock offered under this
prospectus by Bessemer Venture Partners MOHA. These
individuals disclaim beneficial ownership of the
shares held by Bessemer Venture Partners MOHA and
covered by the registration statement of which this
prospectus is a part except to the extent of their
pecuniary interest in such shares.
Coleman Swenson Hoffman Booth IV L.P. W. David Swenson
CGJR Health Care Services Private Equities, L.P. Christopher Grant, Jr., president of CGJR Capital
Management, Inc., the general partner of CGJR Health
Care Series Private Equities, L.P.
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PLAN OF DISTRIBUTION
Subject to certain limitations on sales or other transfers agreed to by
us and certain of the selling shareholders that are described below, the shares
being offered by the selling shareholders or their respective pledgees, donees,
transferees or other successors in interest, may be sold from time to time in
one or more transactions, which may involve block transactions:
o on the American Stock Exchange or on such other market on
which the common stock may from time to time be trading;
o in privately-negotiated transactions;
o through broker-dealers, who may act as agents or principals;
o through one or more underwriters on a firm commitment or best
efforts basis;
o through the writing of options on the shares;
o to cover short sales and other hedging transactions made after
the date that the registration statement of which this
prospectus is a part was declared effective by the SEC; or
o any combination thereof.
The sale price to the public may be:
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o at negotiated prices; or
o such other price as the selling shareholders determine from
time to time.
The shares may also be sold pursuant to Rule 144 under the Securities
Act, as permitted by that rule. The selling shareholders shall have the sole and
absolute discretion not to accept any purchase offer or make any sale of shares
if they deem the purchase price to be unsatisfactory at any particular time.
The selling shareholders or their respective pledgees, donees,
transferees or other successors in interest may also sell the shares directly to
market makers acting as principals or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may be compensated with
discounts, concessions or commissions from the selling shareholders or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both. The compensation as to a particular
broker-dealer might be greater than customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. The selling shareholders may sell shares of common stock in
block transactions to market makers or other purchasers at a price per share,
which may be below the then market price.
The selling shareholders cannot assure that all or any of the shares
offered in this prospectus will be issued to, or sold by, the selling
shareholders.
Haywood D. Cochrane, Jr. and Charles D. Phillips have agreed that
during the period beginning on the date of this prospectus and ending 90 days
after such date, they will not, without the prior written consent of the
majority of our independent directors, directly or indirectly, sell, offer to
sell, contract to sell, loan, pledge, grant any option for sale or purchase of,
agree to sell or otherwise dispose of, any shares of our common stock, or any
securities convertible into or exercisable for our
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common stock, they beneficially own or may acquire, or with respect to which the
they now have or may acquire the power of disposition.
Subject to the exceptions described in the following paragraph,
Warburg, Pincus Ventures L.P., Centre Reinsurance Limited, CHD Investors LLC,
Michael J. Hardies, Susan M. Mathews, Franklin Capital Associates III L.P.,
Pacific Venture Group, L.P., Bessemer Venture Partners MOHA, Coleman Swenson
Hoffman Booth IV L.P. and PVG Associates, L.P. have agreed that during the
period prior to December 1, 2004, they will not, directly or indirectly, issue,
sell, offer or agree to sell, grant any option for the sale of, pledge, make any
short sale or maintain any short position, establish or maintain a "put
equivalent position" (within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, or Exchange Act), enter into any swap, derivative
transaction or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the shares of common stock
(whether any such transaction is to be settled by delivery of shares of common
stock, other securities, cash or other consideration), or otherwise dispose of,
any shares of common stock (or any securities convertible into, exercisable for
or exchangeable for shares of common stock) or interest therein of us or of any
of our subsidiaries.
Warburg, Pincus Ventures L.P., Centre Reinsurance Limited, CHD
Investors LLC, Michael J. Hardies, Susan M. Mathews, Franklin Capital Associates
III L.P., Pacific Venture Group, L.P., Bessemer Venture Partners MOHA, Coleman
Swenson Hoffman Booth IV L.P. and PVG Associates, L.P. have also agreed that at
any time before December 1, 2004 they may only sell or otherwise transfer any
shares of common stock offered under this prospectus with our prior written
consent or through one or more underwriters or placement agents identified by
us. In turn, we have agreed with these selling shareholders that to the extent
we grant our written consent permitting any of them to sell or otherwise
transfer any shares of common stock offered under this prospectus, we will do so
for all of them to the same extent. We have also agreed with these selling
shareholders that, during this period, we will use our reasonable commercial
efforts to identify one or more underwriters or placement agents to place up to
25% of the shares offered by them under this prospectus. Once one or more
underwriters or placement agents are identified, these selling shareholders may
enter into an agreement or agreements with any such underwriters or placement
agents. The relevant details of such agreement or agreements will be set forth
in a supplement or revisions to this prospectus.
Subject to the limitations and arrangements described above, any
selling shareholder may, at any time, sell all or any part of the shares offered
in this prospectus through an underwriter. No selling stockholder has entered
into any agreement with a prospective underwriter and there is no assurance that
any such agreement will be entered into. If a selling shareholder enters into
such an agreement or agreements, the relevant details will be set forth in a
supplement or revisions to this prospectus.
Because the selling shareholders and any brokers, dealers or agents,
upon effecting the sale of any of the shares offered in this prospectus, may
potentially be deemed "underwriters" as that term is defined under the
Securities Act, the Exchange Act, or the rules and regulations under such acts,
the selling shareholders will be subject to the prospectus delivery requirements
of the Securities Act. Any commissions received by them and any profit on the
resale of shares may be deemed to be underwriting compensation.
The shares will be sold through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The selling shareholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations under the Exchange Act,
including, without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of purchases and sales of any of the
shares by, the selling shareholders or any other such person. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the shares.
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We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling shareholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
shareholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
AVAILABLE INFORMATION
We file reports, proxy statements and other information with the SEC
(File No. 0-30275). Copies of these reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding our company. The address of this website is
http://www.sec.gov.
We have filed a registration statement on Form S-3 under the Securities
Act with the SEC with respect to the shares of our common stock covered by this
prospectus. This document constitutes the prospectus of I-trax filed as part of
that registration statement. This document does not contain all of the
information set forth in the registration statement because some parts of the
registration statement are omitted as provided by the rules and regulations of
the SEC. You may inspect and copy the registration statement at any of the
addresses listed above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents we have filed with the SEC (File No. 0-30275)
pursuant to the Exchange Act are incorporated herein by reference:
o our Annual Report on Form 10-KSB for the year ended December
31, 2003, filed on April 8, 2004, as amended by Form 10-KSB/A
filed on June 2, 2004 and by Form 10-KSB/A filed on August 11,
2004;
o our Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2004, filed on May 14, 2004, as amended by Form
10-QSB/A filed on August 11, 2004 and by Form 10-QSB/A filed
on November 10, 2004, and our Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2004 filed on August 18, 2004,
as amended by Form 10-QSB/A filed on November 10, 2004;
o our Current Reports on Form 8-K filed on October 29, 2004 and
Current Report on Form 8-K filed on March 30, 2004, as amended
by Form 8-K/A filed on June 2, 2004, by Form 8-K/A filed on
August 11, 2004 and by Form 8-K/A filed on November 10, 2004;
o the description of our common stock, $0.001 par value per
share, and associated rights, contained in our registration
statement on Form 8-A, filed on January 14, 2003, including
any amendment or report filed for the purpose of updating this
description; and
o all reports and other 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.
Any statement contained in a document incorporated by reference in this
prospectus will be deemed to be incorporated by reference in this prospectus and
to be part of this prospectus from the date of filing of the document. Any
statement modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus. We will provide upon
written or oral request without charge to each person to whom this prospectus is
delivered a copy of any or all of the documents which are incorporated in this
prospectus by reference (other than exhibits to those documents unless those
exhibits are specifically incorporated by reference into the documents that this
prospectus incorporates). Written requests for copies should be directed to
I-trax, Inc., Investor Relations, 4 Hillman Drive, Suite 130, Chadds Ford,
Pennsylvania 19317. Our telephone number is (610) 459-2405.
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LEGAL MATTERS
The validity of the shares of our common stock offered by this
prospectus will be passed upon for us by our Vice President, General Counsel and
Secretary.
EXPERTS
The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-KSB/A of I-trax, Inc. for the year ended
December 31, 2003 and for each of the two years in the period then ended have
been so incorporated in reliance on the reports of Goldstein Golub Kessler LLP,
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of CHD Meridian Healthcare at December 31,
2003 and 2002, and for each of the three years in the period ended December 31,
2003, incorporated in this prospectus by reference to the Current Report on Form
8-K/A of I-trax, Inc. filed on November 10, 2004 have been audited by Ernst &
Young LLP, independent registered public accounting firm, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by I-trax
in connection with the sale of the securities being registered. All amounts are
estimates except the SEC registration fee:
SEC registration fee $ 17,141
Printing and engraving expenses 15,000
Accounting fees and expenses 18,000
Attorneys' fees and expenses 18,000
Transfer agent's fees and expenses 2,000
Miscellaneous 859
Total: $ 71,000
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or enterprise, against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no cause to believe his conduct was unlawful.
Section 145(b) of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine that, despite
such adjudication of liability, such person is fairly and reasonably entitled to
be indemnified for such expenses which the court shall deem proper.
Section 145 of the Delaware General Corporation Law further provides
that to the extent a director or officer of a Delaware corporation has been
successful in the defense of any action, suit or proceeding referred to in
subsections (a) or (b) of Section 145 or in the defense of any claim, issue or
matter therein, he shall be indemnified against any expenses actually and
reasonably incurred by him in connection therewith; that the indemnification
provided for by Section 145 shall not be deemed exclusive of any rights to which
the indemnified party may be entitled and the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.
Section 102(b)(7) of the Delaware General Corporation Law permits a
Delaware corporation to include a provision in its Certificate of Incorporation,
and I-trax's Certificate of Incorporation contains such a provision, to the
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effect that, subject to certain exceptions, a director of a Delaware corporation
is not personally liable to the corporation or its stockholders for monetary
damages for a breach of his fiduciary duty as a director.
I-trax's By-laws also provide that I-trax shall indemnify its directors and
officers and, to the extent permitted by the Board of Directors, I-trax's
employees and agents, to the full extent permitted by and in the manner
permissible under the laws of the State of Delaware. In addition, I-trax's
By-laws permit the Board of Directors to authorize the Company to purchase and
maintain insurance against any liability asserted against any of the Company's
directors, officers, employees or agents arising out of their capacity as such.
ITEM 16. EXHIBITS
NUMBER EXHIBIT TITLE
------ -------------
4.1 Certificate of Designations, Preferences and Rights
of the Series A Convertible Preferred Stock of
I-trax, Inc. filed on March 19, 2004. (Incorporated
by reference to Exhibit 4.2 to I-trax, Inc.'s Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 2003, filed on April 8, 2004.)
4.2 Form of warrant certificate of I-trax, Inc. issued as
of March 19, 2004 to placement agents of Series A
Convertible Preferred Stock. (Incorporated by
reference to Exhibit 4.7 to I-trax, Inc.'s Annual
Report on Form 10-KSB for the fiscal year ended
December 31, 2003, filed on April 8, 2004.)
4.3* Form of Subscription Agreement and amendment between
I-trax, Inc. and each subscriber of Series A
Convertible Preferred Stock.
5* Opinion of Vice President, General Counsel and
Secretary.
23.1* Consent of Vice President, General Counsel and
Secretary. (Included in Exhibit 5.)
23.2** Consent of Goldstein Golub Kessler LLP.
23.3** Consent of Ernst & Young LLP.
24 Power of Attorney. (Included in signature page.)
_____________________________
* Previously filed.
** Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission
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such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing of this Amendment No. 3 to Registration Statement
on Form S-3 and has duly caused this registration statement to be singed on its
behalf by the undersigned, thereunto duly authorized in the City of Chadds
Fords, Commonwealth of Pennsylvania on November 10, 2004.
I-TRAX, INC.
By: /s/ Frank A. Martin
--------------------------------------------------------
Frank A. Martin, Chairman and
Chief Executive Officer
By: /s/ David R. Bock
--------------------------------------------------------
David R. Bock, Chief Financial Officer
(Principal Financial and Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to Registration Statement on Form S-3 was signed by the
following persons in the capacities and on the dates stated.
Signature Title Date
----------------------------- --------------------------------- ---------------------
/s/ Frank A. Martin Chairman, Chief Executive Officer November 10, 2004
-----------------------------
Frank A. Martin and Director
* Vice-Chairman, Director November 10, 2004
-----------------------------
Haywood D. Cochrane, Jr.
* Director November 10, 2004
-----------------------------
Philip D. Green
* Director November 10, 2004
-----------------------------
Dr. Michael M.E. Johns
* Director November 10, 2004
-----------------------------
Dr. Arthur N. Leibowitz
Director November ___, 2004
-----------------------------
Gail F. Lieberman
Director November ___, 2004
-----------------------------
Dr. David Nash
* Director November 10, 2004
-----------------------------
R. Dixon Thayer
*By: Frank A. Martin, Attorney in Fact.
----------------
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