As filed with the Securities and Exchange Commission on August 20, 2004
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RAMP CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 84-1123311
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
33 Maiden Lane
New York, New York 10038
(212) 440-1500
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(Address, including zip code, and telephone number, Including
area code, of registrant's principal executive offices)
Mitchell Cohen
33 Maiden Lane
New York, New York 10038
(212) 440-1500
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(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
Copy to:
Martin Eric Weisberg, Esq.
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 704-6000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities on this Form are being offered pursuant to
dividend or interest reinvestment plans, 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. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class Amount to be Offering Price Aggregate Registration
of Securities to be Registered Registered(1) Per Share Offering Price Fee(8)
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 32,341,046(2) $0.11 (3) $3,557,515.06 $ 450.74
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 20,400,000(2)(4) $0.30 (6) $6,120,000.00 $ 775.40
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 14,000,000(2)(5) $0.11 (7) $1,540,000.00 $ 195.12
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 14,000,000(2)(5) $0.15 (7) $2,100,000.00 $ 266.07
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 2,000,000(2)(5) $0.18 (7) $ 360,000.00 $ 45.61
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 14,000,000(2)(5) $0.35 (7) $4,900,000.00 $ 620.83
------------------------------------------------ ------------------- ------------------- ------------------ --------------
Common Stock, $.001 par value per share... 14,000,000(2)(5) $0.40 (7) $5,600,000.00 $ 709.52
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Total Registration Fee.................................................................................. $3,063.29
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(1) Represents the shares of common stock being registered for resale by
the selling stockholders, the number of shares of common stock issuable
upon the conversion of promissory notes and the number of shares of
common stock issuable upon the exercise of warrants to purchase shares
of our common stock by the selling stockholders.
(2) Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), the shares of common stock offered hereby also
include such presently indeterminate number of shares of common stock
as shall be issued by us to the selling stockholders upon adjustment
under anti-dilution provisions covering the additional issuance of
shares by Ramp resulting from stock splits, stock dividends or similar
transactions.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act; based on the average of
the high ($0.12) and low ($0.10) prices as reported on the American
Stock Exchange on August 16, 2004.
(4) Represents the number of shares of our common stock issuable upon the
conversion of promissory notes.
(5) Represents the number of shares of common stock issuable upon the
exercise of warrants to purchase shares of our common stock.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(i) of the Securities Act, based on the offering
price of the convertible securities.
(7) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act, based on the higher of
(a) the exercise price of the warrants or (b) the offering price of
securities of the same class included in this Registration Statement.
(8) Calculated pursuant to Section 6(b) of the Securities Act based upon
Proposed Maximum Aggregate Offering Price multiplied by .0001267.
The Registrant hereby amends this 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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
The information in this prospectus is not complete and may be changed.
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in or incorporated by reference in
this prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by us, the selling stockholders or
any other person. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer in such
jurisdiction. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in our affairs since such date.
Subject to completion, dated August 20, 2004
PROSPECTUS
RAMP CORPORATION
110,741,046 Shares of Common Stock
This prospectus relates to the sale by the selling stockholders
identified in this prospectus of up to an aggregate of 110,741,046 shares of our
common stock, including:
o 32,341,046 shares of our common stock;
o 20,400,000 shares issuable upon the conversion of promissory
notes with an initial conversion price of $0.30 cents per
share;
o 14,000,000 shares issuable upon the exercise of warrants with
an exercise price of $0.11 cents per share;
o 14,000,000 shares issuable upon the exercise of warrants with
an exercise price of $0.15 cents per share;
o 2,000,000 shares issuable upon the exercise of warrants with
an exercise price of $0.18 cents per share.
o 14,000,000 shares issuable upon the exercise of warrants with
an exercise price of $0.35 cents per share; and
o 14,000,000 shares issuable upon the exercise of warrants with
an exercise price of $0.40 cents per share.
The conversion price of the promissory notes and the exercise price of
the warrants are subject to adjustment under certain circumstances. Please see
the sections of this prospectus titled "Description of the Transactions", "Plan
of Distribution" and "Description of Our Securities" for more information about
the terms and conditions of our common stock, promissory notes and warrants.
We will not receive any of the proceeds from the sale of these shares
by the selling stockholders. However, we will receive the proceeds from any
exercise of warrants to purchase shares to be sold hereunder. See "Use of
Proceeds".
We have agreed to pay the expenses in connection with the registration
of these shares.
Our common stock is traded on the American Stock Exchange under the
symbol "RCO". On August 17, 2004, the closing price of our common stock was
reported as $0.11 cents per share.
Investing in our securities involves a high degree of risk. See "Risk
Factors" beginning on page 4 of this prospectus for certain risks that should be
considered by prospective purchasers of the securities offered hereby.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of 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 August __, 2004.
2
TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY.............................................................4
RECENT DEVELOPMENTS............................................................6
RISK FACTORS...................................................................7
FORWARD-LOOKING STATEMENTS....................................................16
USE OF PROCEEDS...............................................................16
DESCRIPTION OF THE TRANSACTIONS...............................................16
SELLING STOCKHOLDERS..........................................................19
DESCRIPTION OF SECURITIES.....................................................23
PLAN OF DISTRIBUTION..........................................................24
INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................26
WHERE YOU CAN FIND MORE INFORMATION ABOUT US..................................26
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................27
LEGAL MATTERS.................................................................27
EXPERTS.......................................................................28
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PROSPECTUS SUMMARY
The following summary highlights aspects of the offering and the
information incorporated by reference in this prospectus. This prospectus does
not contain all of the information that you should consider before making an
investment decision. You should read this entire prospectus carefully, including
the "Risk Factors" section and the financial statements, related notes and the
other more detailed information appearing elsewhere or incorporated by reference
in this prospectus. Unless otherwise indicated, "we", "us", "our" and similar
terms, as well as references to the "Company" and "Ramp", refer to Ramp
Corporation and its subsidiaries HealthRamp, LifeRamp and its newly acquired
division, Frontline, and not to the selling security holders. All industry
statistics incorporated by reference in this prospectus were obtained from data
prepared or provided by recognized industry sources.
Ramp Corporation
Ramp Corporation (formerly known as Medix Resources, Inc.), through its
wholly-owned HealthRamp subsidiary, provides Internet based communication, data
integration, and transaction processing designed to provide access to safer and
better healthcare. Ramp's products enable communication of high value-added
healthcare information among physician offices, hospitals, health management
organizations, and health insurance companies. In 2002, we organized a
wholly-owned subsidiary, PS Purchase Corp., in Delaware, and in 2003 changed its
name to HealthRamp, Inc. ("HealthRamp") to continue this healthcare technology
business. In 2003, we acquired the businesses and assets of Frontline Physicians
Exchange and Frontline Communications ("Frontline") used in or necessary for the
conduct of its 24-hour telephone answering and messaging services to physicians
and other medically-related businesses and virtual office services to
non-medical businesses and professionals, and the business and assets of
ePhysician, Inc., whose technology has been integrated with those of our
previously developed Cymedix suite of technologies, resulting in the
CarePoint(TM) Suite (the "CarePoint Suite") that we are currently marketing to
physicians and other healthcare professionals. In 2003 we also formed a
wholly-owned subsidiary, LifeRamp Family Financial, Inc. ("LifeRamp"), in Utah
that has not yet commenced business operations. LifeRamp's business purpose is
the making of non-recourse loans to terminally ill cancer patients secured by
their life insurance policies. In July 2004, we decided to indefinitely delay
the commencement of business operations of LifeRamp while we explore financing
and other possible alternatives. There can be no assurance that we will secure
financing on favorable terms necessary to fund LifeRamp's proposed business
model, that the necessary regulatory approvals will be obtained or that the
business, if commenced, will be cash flow positive or profitable.
We have limited revenues from current operations and are funding the
development and deployment of our products through the sales of our securities.
See "Risk Factors".
Because of our significant recurring losses, and the lack of certain
sources of capital to fund our operations, our independent accountants included
a "going concern" uncertainty in their audit reports on our audited financial
statements for the years ended December 31, 2003, 2002 and 2001. The "going
concern" uncertainty signifies that substantial doubt exists about our ability
to continue our business. For a complete description of risks regarding our
business and operations, we refer you to the section of this prospectus entitled
"Risk Factors".
Our principal executive office is located at 33 Maiden Lane, New York,
New York 10038, and our telephone number is (212) 440-1500.
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The Offering
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Common stock offered by selling stockholders 110,741,046
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Use of Proceeds We will not receive any
proceeds from the sale of
shares in this offering. We may
receive up to $14,500,000 upon
exercise of the warrants.
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American Stock Exchange Symbol RCO
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5
RECENT DEVELOPMENTS
On May 27, 2004, we adopted a stockholder rights agreement that can be
triggered if any person or group acquires 20% or more of our common stock. On
June 1, 2004, we registered under Section 12(b) of the Securities Exchange Act
of 1934 the class of preferred share purchase rights issued under the
stockholder rights agreement.
On April 22, 2004, we entered into a letter of intent to acquire
substantially all of the electronic medical record software business operated by
Berdy Medical Systems, Inc. Such letter of intent is subject to the satisfaction
of customary closing conditions including the negotiation and execution of a
definitive purchase agreement. We anticipate that the acquisition will be
completed in the third quarter of 2004, however, no assurance can be given that
such transaction will be consummated.
On June 1, 2004, we entered into an employment agreement with Andrew
Brown, our Chairman of the Board, President and Chief Executive Officer. During
the employment period, which will end on June 30, 2006, Mr. Brown will be paid a
base salary at an annual rate of $240,000 per year; provided that, during the
six-month period ending November 30, 2004, Mr. Brown will be paid a base salary
at the rate of $120,000 per year and receive a retention bonus of three times
the amount of his reduction in pay payable in the form of shares of our common
stock, but only if he either remains employed as our Chief Executive Officer on
November 30, 2004, is terminated before that date without "cause" or resigns
before that date for "good reason". The employment agreement also provides for
the payment of performance-based bonuses tied to the growth of our gross
revenues, the grant of up to 6,000,000 options under our 2004 Plan, with an
exercise price of $0.18 per share, and the issuance to Mr. Brown of a warrant
whereby he will be entitled to purchase up to one-nineteenth of the outstanding
shares, at an exercise price to be determined. The employment agreement also
provides that in the event that Mr. Brown's employment is terminated for good
reason within six months or his employment is terminated within one year without
cause after any person or group acquires more than 25% of the combined voting
power of our then outstanding common stock, all of Mr. Brown's options will
become fully vested and immediately exercisable and Mr. Brown will be paid an
amount equal to twice his annual base salary and twice his bonus compensation
received during the twelve months immediately preceding the date of termination
of Mr. Brown's employment; provided that if the change in control resulted from
the sale of Ramp for less than $31 million, the payments to Mr. Brown will be in
amounts as described above in this paragraph as if the word "twice" had been
deleted.
In June 2004, we entered into amendments of our employment agreements
with Louis Hyman, our Chief Technology Officer, and Mitchell M. Cohen, our Chief
Financial Officer, which provide that in the event that Mr. Hyman's or Mr.
Cohen's employment is terminated within one year without cause after any person
or group acquires more than 25% of the combined voting power of our then
outstanding common stock, all of their options will become fully vested and
immediately exercisable and each will be paid an amount equal to twice his
annual base salary and twice his bonus compensation received during the twelve
months immediately preceding the date of termination of his employment; provided
that if the change in control resulted from the sale of Ramp for less than $31
million, the payments to Mr. Hyman and/or Mr. Cohen will be in amounts as
described above in this paragraph as if the word "twice" had been deleted.
In June 2004, we implemented a reduction work force and salary
reduction program, pursuant to which 41 employees were terminated and some of
the remaining employees agreed to accept, during the six-month period ending
November 30, 2004, in lieu of a portion of their base salaries, a retention
6
bonus equal to an individually negotiated multiple of the amount of their
reduction in pay in the form of shares of our common stock, payable only if they
remained employed with us on November 30, 2004. The net realization of savings
and cash outflows resulting from the reduction in force and changes in
compensation is expected to be evident beginning in the third quarter of 2004.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and other information in
this prospectus before investing in our common stock. The trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.
We have incurred and reported significant recurring net losses which
endanger our viability as a going-concern and caused our accountants to issue a
"going concern" qualification in their annual audit report. We have reported net
losses applicable to our common stockholders of ($31,321,000), ($9,014,000) and
($10,636,000) for the years ended December 31, 2003, 2002, and 2001,
respectively, and ($15,955,000) for the six months ended June 30, 2004. At June
30, 2004, we had an accumulated deficit of ($87,482,000). These losses and
negative operating cash flows have caused our independent accountants to include
a "going concern" uncertainty in their reports in connection with their audits
of our financial statements for the years ended December 31, 2003, 2002 and
2001.
Our independent accountants have advised our management and our Audit
Committee that there were material weaknesses in our internal controls and
procedures during fiscal year 2003, which management believes have continued
through the fiscal period ended June 30, 2004. Although progress was made in
both the first and second quarters, management believes that if these material
weaknesses are not corrected, a potential misapplication of GAAP or potential
accounting error in our consolidated financial statements could occur. Enhancing
our internal controls to correct the material weaknesses has and will result in
increased costs to us.
Based upon management's review of our internal controls and procedures,
our management, including our current Chief Executive Officer and current Chief
Financial Officer, has determined that we had inadequate controls and procedures
constituting material weaknesses as of December 31, 2003 which persisted during
the first and second quarters of fiscal year 2004. These inadequate controls and
procedures included:
o Inadequate accounting staffing and records to identify and
record all accounting entries.
o Lack of management review of our bank reconciliations, timely
review of expense reports, and timely review of agreements
governing complex financing transactions, employee and
non-employee stock based compensation arrangements and other
transactions having accounting ramifications.
o Failure to perform an adequate internal review of financial
information in periodic reports to ensure accuracy and
completeness.
o Inadequate segregation of duties consistent with our internal
control objectives.
o Ineffective utilization of existing administrative personnel
to perform ministerial accounting functions, which would allow
our accounting department the opportunity to perform
bookkeeping, record keeping and other accounting functions
effectively.
o Lack of management review of entries to the general ledger.
7
Our management has implemented and continues to implement potential
enhancements to our internal controls and procedures that it believes will
remedy the inadequacies in our internal controls and procedures.
The following sets forth the steps we have taken through the fiscal
period ended June 30, 2004.
o In November, 2003, we hired a permanent Chief Financial
Officer with public company reporting experience.
o In December, 2003, we hired a staff accountant responsible
for, among other things, recording accounts payable. The
individual assists the Chief Financial Officer to identify,
report and record transactions in a timely manner and provides
additional segregation of duties consistent with our internal
control objectives.
o Management reassigned certain tasks among the expanded
accounting department, as well as existing administrative
personnel to perform ministerial accounting functions, to
improve and better accomplish the bookkeeping, record keeping
and other accounting functions.
o We commenced a search for a new position of Vice President of
Finance, which position was filled on August 2, 2004. The new
Vice President of Finance will be wholly dedicated to areas of
internal control, financial accounting and reporting.
o The review and sign off on all monthly bank reconciliations by
the Chief Financial Officer has been instituted.
o The review of all underlying agreements, contracts and
financing arrangements prior to their execution for accounting
ramifications has already been undertaken by the Chief
Financial Officer to the extent possible.
o We strengthened certain controls over cash disbursements
including adopting a policy that requires dual signatures of
two senior officers, at least one of whom is not involved in
the transaction, on disbursements in excess of $10,000.
o We implemented a policy requiring attendance by outside
counsel at all Board and Audit Committee meetings, including
the timely preparation of minutes of such meetings and reports
to management to discuss our implementation of any plans to
address conditions constituting the material weaknesses in its
internal controls.
We have implemented and intend on implementing the following plans to
enhance our internal controls in the fiscal quarter ending September 30, 2004.
o As the new Vice President of Finance (hired on August 2, 2004)
transitions into his responsibilities and gains a full
understanding of our business, it is anticipated that this
additional resource will allow further redistribution of
responsibilities among the expanded accounting department and,
more specifically, provide the Chief Financial Officer with
the necessary time to perform oversight and supervisory
functions in future periods. This includes timely review of
all underlying agreements, contracts and financing
arrangements, expense reports, entries to the general ledger
and periodic filings with the Securities and Exchange
Commission.
o Our implementation of formal mechanized month end, quarter end
and year end closing and consolidation processes.
o In July 2004 we appointed two (2) additional independent
directors to serve on our Audit Committee.
While we believe that the remedial actions that have been or will be
taken will result in correcting the conditions constituting the material
weaknesses in our internal controls as soon as practicable, the exact timing of
when the conditions will be corrected is dependent upon future events which may
8
or may not occur. We are making every effort to correct the conditions
expediently and expect to correct the conditions, thereby eliminating the
material weaknesses no later than the fourth quarter of fiscal year 2004. It is
estimated that the cost to implement the actions set forth above will be
approximately $300,000 for our fiscal year ended December 31, 2004 and
approximately $200,000 for each fiscal year thereafter. In addition, substantial
additional costs may be necessary to implement the provisions of Section 404 of
the Sarbanes-Oxley Act of 2002 as relates to our documentation and testing of
the effectiveness of internal controls in 2005.
We rely on investments and financings to provide working capital. While
we believe that we can continue to sell our securities to raise the cash needed
to continue operating until cash flow from operations can support our business,
there can be no assurance that this will occur. There can be no assurance that
additional investments in our securities or other debt or equity financings will
be available to us on favorable terms, or at all, to adequately support the
development and deployment of our technology. Moreover, failure to obtain such
capital on a timely basis could result in lost business opportunities.
The success of the development, distribution and deployment of our
technology is dependent to a significant degree on our key management and
technical personnel. We believe that our success will also depend upon our
ability to attract, motivate and retain highly skilled, managerial, sales and
marketing, and technical personnel, including software programmers and systems
architects skilled in the computer languages in which our technology operates.
Competition for such personnel in the software and information services
industries is intense. The loss of key personnel, or the inability to hire or
retain qualified personnel, could have a material adverse effect on our results
of operations, financial condition and/or business.
We expect to continue to experience losses until such time as our
technology can be successfully deployed and produce revenues. The continuing
development, marketing and deployment of our technology will depend upon our
ability to obtain additional financing. Our technology has generated limited
recurring revenues to date. We are funding our operations now through the sale
of our securities. We are currently exploring the feasibility of using LifeRamp
to commence a new business, making non-recourse loans to terminally ill cancer
patients secured by their life insurance policies. There can be no assurance
that we will secure financing on favorable terms necessary to fund that proposed
business model, that the necessary regulatory approvals will be obtained or that
the business, if commenced, will be cash flow positive or profitable. During
2003 and for the first three months of 2004, we invested approximately $1.1
million and $0.9 million in LifeRamp, respectively. In July 2004, we decided to
indefinitely delay the commencement of business operations of LifeRamp while we
explore financing and other possible alternatives. There can be no assurance
that we will secure financing on favorable terms necessary to fund LifeRamp's
proposed business model, that the necessary regulatory approvals will be
obtained or that the business, if commenced, will be cash flow positive or
profitable.
We may not be able to retain our listing on the American Stock
Exchange. The American Stock Exchange has not notified us of any listing
concerns. However, should our common stock trade at a low price for a
substantial period of time or should the American Stock Exchange consider our
circumstances for continued listing in a negative light, we may not be able to
retain our listing. The American Stock Exchange has certain listing requirements
in order for us to continue to have our common stock traded on this exchange.
Although the American Stock Exchange does not identify a specific minimum price
per share that our stock must trade above or any other rigid standards
compelling delisting, we may risk delisting if our common stock trades at a low
price per share for a substantial period of time or if it fails to meet the
financial condition, result of operations, market capitalization or other
9
financial or non-financial standards considered by the American Stock Exchange.
Trading in our common stock after a delisting, if any, would likely be conducted
in the over-the-counter markets in the so-called "pink sheets" or on the
National Association of Securities Dealers' Electronic Bulletin Board. As a
consequence of a delisting our shareholders would find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, our
common stock, and our common stock would become substantially less attractive as
collateral for margin and purpose loans, for investment by financial
institutions under their internal policies or state investment laws or as
consideration in future capital raising transactions.
Although we have had operations since 1988, because of our move away
from temporary healthcare staffing to provide healthcare connectivity solutions
at the point of care, we have a relatively short operating history in the
healthcare connectivity solutions business and limited financial data to
evaluate our business and prospects. In addition, our business model is likely
to continue to evolve as we attempt to develop our product offerings and enter
new markets. As a result, our potential for future profitability must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies that are attempting to move into new markets
and continuing to innovate with new and unproven technologies. We are still in
the process of gaining experience in marketing physician connectivity products,
providing support services, evaluating demand for products, financing a
technology business and dealing with government regulation of health information
technology products. While we are putting together a team of experienced
executives, they have come from different backgrounds and may require some time
to develop an efficient operating structure and corporate culture for our
company. Furthermore, our executive management and Board of Directors have been
subject to change as executives have left or been terminated and others have
been hired to take their places and directors have left and others have been
elected or appointed to take their places. Such changes can cause disruption and
distraction.
Although we have focused our business on healthcare connectivity, we
may decide to explore new business models before our core business generates
cash flow, if at all. Until feasibility is proven for any such new business
models, such as those of our LifeRamp subsidiary described above, some of our
scarce resources may be allocated to endeavors which may never be
commercialized.
The success of our products and services in generating revenue may be
subject to the quality and completeness of the data that is generated and stored
by the physician or other healthcare professionals and entered into our
interconnectivity systems, including the failure to input appropriate or
accurate information. Failure or unwillingness by the healthcare professional to
accommodate the required information may result in our not being paid for our
services.
As a developer of connectivity technology products, we will be required
to anticipate and adapt to evolving industry standards and regulations and new
technological developments. The market for our technology is characterized by
continued and rapid technological advances in both hardware and software
development, requiring ongoing expenditures for research and development, and
timely introduction of new products and enhancements to existing products. Our
future success, if any, will depend in part upon our ability to enhance existing
products, to respond effectively to technology changes and changes in applicable
regulations, and to introduce new products and technologies that are functional
and meet the evolving needs of our clients and users in the healthcare
information systems market.
We rely on a combination of internal development, strategic
relationships, licensing and acquisitions to develop our products and services.
The cost of developing new healthcare information services and technology
solutions is inherently difficult to estimate. Our development of proposed
10
products and services may take longer than originally expected, require more
testing than originally anticipated and require the acquisition of additional
personnel and other resources. In addition, there can be no assurance that the
products or services we develop or license will be able to compete with the
alternatives available to our customers.
New or newly integrated products and services will not become
profitable unless they achieve sufficient levels of market acceptance. There can
be no assurance that healthcare providers will accept from us new products and
services, or products and services that result from integrating existing and/or
acquired products and services, including the products and services we are
developing to integrate our services into the physician's office or other
medical facility, such as our handheld solution. In addition, there can be no
assurance that any pricing strategy that we implement for any such products and
services will be economically viable or acceptable to the target markets.
Failure to achieve broad penetration in target markets with respect to new or
newly integrated products and services could have a material adverse effect on
our business prospects. The market for our connectivity products and services in
the healthcare information systems may be slow to develop due to the large
number of practitioners who are resistant to change, as well as the financial
investment and workflow interruptions associated with change, particularly in a
period of rising pressure to reduce costs in the marketplace.
Achieving market acceptance of new or newly integrated products and
services is likely to require significant efforts and expenditures. Achieving
market acceptance for new or newly integrated products and services is likely to
require substantial marketing efforts and expenditure of significant funds to
create awareness and demand by participants in the healthcare industry. In
addition, deployment of new or newly integrated products and services may
require the use of additional resources for training our existing sales force
and customer service personnel and for hiring and training additional
salespersons and customer service personnel. There can be no assurance that the
revenue opportunities from new or newly integrated products and services will
justify amounts spent for their development, marketing and roll-out.
We could be subject to breach of warranty claims if our software
products, information technology systems or transmission systems contain errors,
experience failures or do not meet customer expectations. We could face breach
of warranty or other claims or additional development costs if the software and
systems we sell or license to customers or use to provide services contain
undetected errors, experience failures, do not perform in accordance with their
documentation, or do not meet the expectations that our customers have for them.
Undetected errors in the software and systems we provide or those we use to
provide services could cause serious problems for which our customers may seek
compensation from us. We attempt to limit, by contract, our liability for
damages arising from negligence, errors or mistakes. However, contractual
limitations on liability may not be enforceable in certain circumstances or may
otherwise not provide sufficient protection to us from liability for damages.
If our systems or the Internet experience security breaches or are
otherwise perceived to be insecure, our business could suffer. A security breach
could damage our reputation or result in liability. We retain and transmit
confidential information, including patient health information. Despite the
implementation of security measures, our infrastructure or other systems that we
interface with, including the Internet, may be vulnerable to physical break-ins,
hackers, improper employee or contractor access, computer viruses, programming
errors, attacks by third parties or similar disruptive problems. Any compromise
of our security, whether as a result of our own systems or systems that they
interface with, could reduce demand for our services.
Our products provide applications that relate to patient medication
histories and treatment plans. Any failure by our products to provide and
maintain accurate, secure and timely information could result in product
11
liability claims against us by our clients or their affiliates or patients. We
maintain insurance that we believe currently is adequate to protect against
claims associated with the use of our products, but there can be no assurance
that our insurance coverage would adequately cover any claim asserted against
us. A successful claim brought against us in excess of our insurance coverage
could have a material adverse effect on our results of operations, financial
condition and/or business. Even unsuccessful claims could result in the
expenditure of funds in litigation, as well as diversion of management time and
resources. Certain of our products are subject to compliance with HIPAA. Failure
to comply with HIPAA may have a material adverse effect on our business.
Government regulation of healthcare and healthcare information
technology, are in a period of ongoing change and uncertainty and creates risks
and challenges with respect to our compliance efforts and our business
strategies. The healthcare industry is highly regulated and is subject to
changing political, regulatory and other influences. Federal and state
legislatures and agencies periodically consider programs to reform or revise the
United States healthcare system. These programs may contain proposals to
increase governmental involvement in healthcare or otherwise change the
environment in which healthcare industry participants operate. Particularly,
compliance with HIPAA and related regulations are causing the healthcare
industry to incur substantial cost to change its procedures. Healthcare industry
participants may respond by reducing their investments or postponing investment
decisions, including investments in our products and services. Although we
expect these regulations to have the beneficial effect of spurring adoption of
our software products, we cannot predict with any certainty what impact, if any,
these and future healthcare reforms might have on our business. Existing laws
and regulations also could create liability, cause us to incur additional cost
or restrict our operations. The effect of HIPAA on our business is difficult to
predict and there can be no assurance that we will adequately address the
business risks created by the HIPAA. We may incur significant expenses relating
to compliance with HIPAA. Furthermore, we are unable to predict what changes to
HIPAA, or the regulations issued pursuant to HIPAA, might be made in the future
or how those changes could affect our business or the costs of compliance with
HIPAA.
Government regulation of the Internet could adversely affect our
business. The Internet and its associated technologies are subject to government
regulation. Our failure to accurately anticipate the application of applicable
laws and regulations, or any other failure to comply, could create liability for
us, result in adverse publicity, or negatively affect our business. In addition,
new laws and regulations may be adopted with respect to the Internet or other
online services covering user privacy, patient confidentiality, consumer
protection and other services. We cannot predict whether these laws or
regulations will change or how such changes will affect our business. Government
regulation of the Internet could limit the effectiveness of the Internet for the
methods of healthcare e-commerce that we are providing or developing or even
prohibit the sale of particular products and services.
Our Internet-based services are dependent on the development and
maintenance of the Internet infrastructure and data storage facilities
maintained by third parties. Our ability to deliver our Internet-based products
and services is dependent on the development and maintenance of the
infrastructure of the Internet and the maintenance of data storage facilities by
third parties. This includes maintenance of a reliable network backbone and data
storage facilities with the necessary speed, data capacity and security, as well
as timely development of complementary products such as high-speed modems, for
providing reliable Internet access and services. If the Internet continues to
experience increased usage, the Internet infrastructure may be unable to support
the demands placed on it. In addition, the performance of the Internet may be
harmed by increased usage. The Internet has experienced a variety of outages and
other delays as a result of damages to portions of its infrastructure, and it
12
could face outages and delays in the future. These outages and delays could
reduce the level of Internet usage as well as the availability of the Internet
to us for delivery of our Internet-based products and services.
Some of our products and services will not be widely adopted until
broadband connectivity is more generally available. Some of our products and
services and planned services require a continuous broadband connection between
the physician's office or other healthcare provider facilities and the Internet.
The availability of broadband connectivity varies widely from location to
location and even within a single geographic area. The future availability of
broadband connections is unpredictable and is not within our control. While we
expect that many physician's offices and other healthcare provider facilities
will remain without ready access to broadband connectivity for some period of
time, we cannot predict how long that will be. Accordingly, the lack of these
broadband connections will continue to place limitations on the number of sites
that are able to utilize our Internet-based products and services and the
revenue we can expect to generate form those products and services.
Compliance with legal and regulatory requirements will be critical to
LifeRamp's operations, if any. If we, directly or indirectly through our
subsidiaries, erroneously disclose information that could be confidential and/or
protected health information, we could be subject to legal action by the
individuals involved, and could possibly be subject to criminal sanctions. In
addition, if LifeRamp is launched and fails to comply with applicable insurance
and consumer lending laws, states could bring actions to enforce statutory
requirements, which could limit its business practices in such states,
including, without limitation, limiting or eliminating its ability to charge or
collect interest on its loans or related fees, or limit or eliminate its ability
to secure its loans with its borrowers' life insurance policies. Any such
actions if commenced, would have a material and adverse impact on LifeRamp's
business, operations and financial condition.
We have been granted certain patent rights, trademarks and copyrights
relating to our software. However, patent and intellectual property legal issues
for software programs, such as the our products, are complex and currently
evolving. Since patent applications are secret until patents are issued in the
United States, or published in other countries, we cannot be sure that we are
first to file any patent application. In addition, there can be no assurance
that competitors, many of which have far greater resources than we do, will not
apply for and obtain patents that will interfere with our ability to develop or
market product ideas that we have originated. Furthermore, the laws of certain
foreign countries do not provide the protection to intellectual property that is
provided in the United States, and may limit our ability to market our products
overseas. We cannot give any assurance that the scope of the rights we have are
broad enough to fully protect our technology from infringement.
Litigation or regulatory proceedings may be necessary to protect our
intellectual property rights, such as the scope of our patent. Such litigation
and regulatory proceedings are very expensive and could be a significant drain
on our resources and divert resources from product development. There is no
assurance that we will have the financial resources to defend our patent rights
or other intellectual property from infringement or claims of invalidity. We
have been notified by a party that it believes our pharmacy product may infringe
on patents that it holds. We have retained patent counsel who has made a
preliminary investigation and determined that our product does not infringe on
the identified patents. At this time no legal action has been instituted.
We also rely upon unpatented proprietary technology and no assurance
can be given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to or disclose
our proprietary technology or that we can meaningfully protect our rights in
such unpatented proprietary technology. No assurance can be given that efforts
to protect such information and techniques will be successful. The failure to
13
protect our intellectual property could have a material adverse effect on our
operating results, financial position and business.
As of August 11, 2004, we had 200,691,217 outstanding shares of common
stock and 58,205,107 shares of common stock reserved for issuance upon the
exercise of options, warrants, and shares of our convertible preferred stock and
convertible debentures and notes outstanding on such date. Most of these shares
will be immediately saleable upon exercise or conversion under registration
statements we have filed with the SEC. The exercise prices of options, warrants
or other rights to acquire common stock presently outstanding range from $0.01
per share to $4.97 per share. During the respective terms of the outstanding
options, warrants, preferred stock and other outstanding derivative securities,
the holders are given the opportunity to profit from a rise in the market price
of our common stock, and the exercise of any options, warrants or other rights
may dilute the book value per share of our common stock and put downward
pressure on the price of our common stock. The existence of the options,
conversion rights, or any outstanding warrants may adversely affect the terms on
which we may obtain additional equity financing. Moreover, the holders of such
securities are likely to exercise their rights to acquire common stock at a time
when we would otherwise be able to obtain capital on terms more favorable than
could be obtained through the exercise or conversion of such securities.
We have raised substantial amounts of capital in private placements
from time to time. The securities offered in such private placements were not
registered with the SEC or any state agency in reliance upon exemptions from
such registration requirements. Such exemptions are highly technical in nature
and if we inadvertently failed to comply with the requirements of any of such
exemptive provisions, investors would have the right to rescind their purchase
of our securities or sue for damages. If one or more investors were to
successfully seek such rescission or prevail in any such suit, we could face
severe financial demands that could materially and adversely affect our
financial position. Financings that may be available to us under current market
conditions frequently involve sales at prices below the prices at which our
common stock currently trades on the American Stock Exchange, as well as the
issuance of warrants or convertible securities at a discount to market price.
Investors in our securities may suffer dilution. The issuance of shares
of common stock, or shares of common stock underlying warrants, options or
preferred stock or convertible notes will dilute the equity interest of existing
stockholders and could have a significant adverse effect on the market price of
our common stock. The sale of common stock acquired at a discount could have a
negative impact on the market price of our common stock and could increase the
volatility in the market price of our common stock. In addition, we may seek
additional financing which may result in the issuance of additional shares of
our common stock and/or rights to acquire additional shares of our common stock.
The issuance of our common stock in connection with such financing may result in
substantial dilution to the existing holders of our common stock. Those
additional issuances of common stock would result in a reduction of your
percentage interest in our company.
Historically, our common stock has experienced significant price
fluctuations. One or more of the following factors influence these fluctuations:
o unfavorable announcements or press releases relating to the
technology sector;
o regulatory, legislative or other developments affecting us or the
healthcare industry generally;
14
o conversion of our preferred stock and convertible debt into common
stock at conversion rates based on then current market prices or
discounts to market prices of our common stock and exercise of options
and warrants at below current market prices;
o sales by those financing our company through convertible securities
the underlying common stock of which have been registered with the SEC
and may be sold into the public market immediately upon conversion; and
o market conditions specific to technology and internet companies, the
healthcare industry and general market conditions.
In addition, in recent years the stock market has experienced
significant price and volume fluctuations. These fluctuations, which are often
unrelated to the operating performance of specific companies, have had a
substantial effect on the market price for many healthcare related technology
companies. Factors such as those cited above, as well as other factors that may
be unrelated to our operating performance, may adversely affect the price of our
common stock.
We have not had earnings, but if earnings were available, it is our
general policy to retain any earnings for use in our operations. Therefore, we
do not anticipate paying any cash dividends on our common stock in the
foreseeable future despite the recent reduction of the federal income tax rate
on dividends. Any payment of cash dividends on our common stock in the future
will be dependent upon our financial condition, results of operations, current
and anticipated cash requirements, preferred rights of holders of preferred
stock, plans for expansion, as well as other factors that our Board of Directors
deems relevant. We anticipate that our future financing agreements may prohibit
the payment of common stock dividends without the prior written consent of those
investors.
We may have to lower prices or spend more money to compete effectively
against companies with greater resources than us, which could result in lower
revenues. The eventual success of our products in the marketplace will depend on
many factors, including product performance, price, ease of use, support of
industry standards, competing technologies and customer support and service.
Given these factors we cannot assure you that we will be able to compete
successfully. For example, if our competitors offer lower prices, we could be
forced to lower prices which could result in reduced or negative margins and a
decrease in revenues. If we do not lower prices we could lose sales and market
share. In either case, if we are unable to compete against our main competitors,
which include established companies with significant financial resources, we
would not be able to generate sufficient revenues to grow our company or reverse
our history of operating losses. In addition, we may have to increase expenses
to effectively compete for market share, including funds to expand our
infrastructure, which is a capital and time intensive process. Further, if other
companies choose to aggressively compete against us, we may have to increase
expenses on advertising, promotion, trade shows, product development, marketing
and overhead expenses, hiring and retaining personnel, and developing new
technologies. These lower prices and higher expenses would adversely affect our
operations and cash flows.
As with any business, growth in absolute amounts of selling, general
and administrative expenses or the occurrence of extraordinary events could
cause actual results to vary materially and adversely from the results
contemplated by the forward-looking statements. Budgeting and other management
decisions are subjective in many respects and thus susceptible to incorrect
decisions and periodic revisions based on actual experience and business
developments, the impact of which may cause us to alter our marketing, capital
15
expenditures or other budgets, which may, in turn, affect our results of
operations. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond our control. Although we believe the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate, and therefore, there can be no assurance
that the results contemplated in the forward-looking statements will be
realized.
In light of the significant uncertainties inherent in the
forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by us or any other person that our
objectives or plans for the Company will be achieved.
FORWARD-LOOKING STATEMENTS
Certain information contained in this prospectus and the documents
incorporated by reference into this prospectus include forward-looking
statements (as defined in Section 27A of the Securities Act and Section 21E of
the Securities Exchange Act), which mean that they relate to events or
transactions that have not yet occurred, our expectations or estimates for our
future operations, our growth strategies or business plans or other facts that
have not yet occurred. Such statements can be identified by the use of
forward-looking terminology such as "might," "may," "will," "could," "expect,"
"anticipate," "estimate," "likely," "believe," or "continue" or the negative
thereof or other variations thereon or comparable terminology. The above risk
factors contain discussions of important factors that should be considered by
prospective investors for their potential impact on forward-looking statements
included in this prospectus and in the documents incorporated by reference into
this prospectus. These important factors, among others, may cause actual results
to differ materially and adversely from the results expressed or implied by the
forward-looking statements.
USE OF PROCEEDS
The selling security holders will receive the net proceeds from the
sale of shares. We will not receive any of the proceeds from any sale of the
shares by the selling security holders. However, we will receive the proceeds
from the cash exercise of warrants to purchase certain of the shares offered
hereunder. If all warrants covered hereby are exercised for cash in accordance
with their terms, we would receive gross proceeds of $14,500,000. Any such gross
proceeds will be used for working capital purposes.
DESCRIPTION OF THE TRANSACTIONS
On July 14, 2004, we entered into a Note and Warrant Purchase Agreement
(the "Note Purchase Agreement") with Cottonwood Ltd. and Willow Bend Management
Ltd., each an accredited investor. Under the terms of the Note Purchase
Agreement, we issued a convertible promissory note in the aggregate principal
amount of $2,100,000 to each of Cottonwood Ltd. and Willow Bend Management Ltd.
Each promissory note is convertible into shares of our common stock at an
initial conversion price of $0.30 cents per share, or 7,000,000 shares of common
stock. In addition, we issued to each of Cottonwood Ltd. and Willow Bend
Management Ltd. warrants exercisable into 4,683,823 shares of common stock at an
exercise price of $0.11 cents per share, warrants exercisable into 4,683,823
shares of common stock at an exercise price of $0.15 cents per share, warrants
exercisable into 4,683,823 shares of common stock at an exercise price of $0.35
cents per share and warrants exercisable into 4,683,823 shares of common stock
at an exercise price of $0.40 cents per share. The warrants have a term of one
year.
16
Pursuant to the Registration Rights Agreement, dated concurrently with
the Note Purchase Agreement (the "Registration Rights Agreement"), we have
agreed to register the shares of common stock underlying the convertible
promissory notes and warrants with the SEC on a registration statement (of which
this prospectus forms a part) and to pay to Cottonwood Ltd. and Willow Bend
Management Ltd. liquidated damages if the Registration Statement is not filed on
or before August 13, 2004 and/or is not declared effective within 90 days
following the date the Registration Statement (of which this prospectus forms a
part) is filed with the SEC, an amount, at the option of the Company, in cash or
shares of common stock registered with the SEC equal to: (i) one percent (1.0%)
of the initial investment amount for each calendar month or portion thereof of
delayed effectiveness, up to two calendar months, and (ii) two percent (2.0%) of
the initial investment amount for each calendar month or portion thereof
thereafter until effectiveness, less any amount of convertible promissory note
that has been converted or redeemed.
Redwood Capital Partners, Inc. agreed to perform financial advisory
services for us. In connection with such services, as a portion of compensation
owed to Redwood and in addition to payment in cash of $320,000 from us to
Redwood, we agreed to issue to Redwood warrants exercisable into 350,000 shares
of our common stock exercisable at $0.11 cents per share, warrants exercisable
into 350,000 shares of our common stock exercisable at $0.15 cents per share,
warrants exercisable into 350,000 shares of our common stock exercisable at
$0.35 cents per share and warrants exercisable into 350,000 shares of our common
stock exercisable at $0.40 cents per share. The warrants have a term of one
year. In connection with the issuance of warrants, we agreed to register the
shares underlying the warrants with the SEC on a registration statement (of
which this prospectus forms a part).
On July 14, 2004 we entered into a Letter Agreement (the "Letter
Agreement") with Hilltop Services, Ltd. in connection with the anti-dilution
provisions contained in that certain Common Stock and Warrant Purchase
Agreement, dated March 4, 2004, between Hilltop Services, Ltd. and the Company.
Under the terms of the Letter Agreement and in consideration for the waiver by
Hilltop of its anti-dilution rights, we issued to Hilltop Services, Ltd. an
additional 24,130,435 shares of our common stock (of which an aggregate of
13,260,870 are being registered on a registration statement of which this
prospectus forms a part), a convertible promissory note in the aggregate
principal amount of $1,920,000 convertible into shares of our common stock at a
conversion price of $0.30 cents per share, or 6,400,000 shares of common stock,
and warrants exercisable into 4,282,354 shares of common stock at an exercise
price of $0.11 cents per share, warrants exercisable into 4,282,354 shares of
common stock at an exercise price of $0.15 cents per share, warrants exercisable
into 4,282,354 shares of common stock at an exercise price of $0.35 cents per
share and warrants exercisable into 4,282,354 shares of common stock at an
exercise price of $0.40 cents per share. The warrants have a term of one year.
Pursuant to the Registration Rights Agreement we agreed to register the shares
of common stock as well as the shares of common stock underlying the convertible
promissory note and warrants on a registration statement (of which this
prospectus is a part).
In connection with the anti-dilution provisions contained in the
agreements applicable to each person, Messrs. Richard Rosenblum and David
Stefansky each received 860,158 shares of our common stock (of which an
aggregate of 656,680 are being registered on a registration statement of which
this prospectus forms a part). We agreed to register the shares of common stock
on a registration statement (of which this prospectus is a part).
Messrs. Rosenblum and Stefanksy each received 500,000 shares of our
common stock and warrants exercisable into 1,000,000 shares of common stock at
an exercise price of $0.18 cents per share as compensation for financial
advisory services performed for us. The warrants have a term of five years. We
17
agreed to register the shares of common stock as well as the shares of common
stock underlying the warrants on a registration statement (of which this
prospectus is a part).
Pursuant to that certain Fee Payment Agreement, dated August 20, 2004
(the "Fee Payment Agreement"), Martin Eric Weisberg, Esq., an accredited
investor and a partner at the law firm of Jenkens & Gilchrist Parker Chapin LLP,
was issued 4,000,000 shares of our common stock as payment for legal services
previously rendered and to be rendered to us in connection with representation
on our general corporate and securities matters, including the sale of the notes
and warrants pursuant to the Note Purchase Agreement. We agreed to register the
shares of common stock on a registration statement (of which this prospectus is
a part).
Each of Advantage Technologies, Inc., Conceptual Litho Reproductions,
Ellis Advertising, Mathe, Inc., Soffront Software Inc., Something Digital.Com
L.L.C., PowerTest, Inc. and Kate McGowan Consulting are accredited investors and
vendors that provide products or services to us in connection with vendor
agreements between each vendor and us. Under the terms of an agreement for
payment of account (the "Payment of Account Agreement") between each vendor and
us, in lieu of cash compensation we agreed to issue an aggregate of 8,763,117
shares of our common stock to such vendors as compensation for delivery of
certain products or services to us. The shares of common stock were issued at
approximately $0.10 cents per share based upon the average of the closing bid
price of our common stock for the week prior to the date of such agreement. We
agreed to register the shares of common stock on a registration statement (of
which this prospectus is a part).
Each of Stride & Associates, Mr. Colin Parlett and Lagniappe Resources,
Inc. is a vendor that provides products or services to us in connection with
vendor agreements between each vendor and us. Under the terms of a settlement
agreement (the "Settlement Agreement") between each vendor and us, in lieu of
cash compensation we agreed to issue an aggregate of 1,225,000 shares of our
common stock to such vendors as compensation for delivery of certain products or
services to us. The shares of common stock were issued at approximately $0.10
cents per share, representing an approximate 10% discount to the closing market
price of our common stock on the date of such agreement. We agreed to register
the shares of common stock on a registration statement (of which this prospectus
is a part).
Each of Phoenix PMT LLC, Search Net Corporation, Mr. Ron Munkittrick,
Mr. Xavier Hansen and Mr. Gennady Shpits provides consulting services to us in
connection with consulting arrangements between each consultant and us. Under
the terms of a retention bonus program (the "Retention Bonus Program") between
each consultant and us, in lieu of cash compensation we agreed to issue an
aggregate of 344,395 shares of our common stock to such consultants as
compensation for performance of certain consulting services to us. The shares of
common stock were issued at approximately $0.10 cents per share, representing an
approximate 10% discount to the lesser of: (i) the closing market price of our
common stock on the due date of such payment and (ii) the average closing price
of the common stock for the five days preceding such payment date. We agreed to
register the shares of common stock on a registration statement (of which this
prospectus is a part).
Pursuant to that certain Settlement Agreement and Mutual Release, dated
August 19, 2004 (the "Locke Lidell Agreement"), the law firm of Locke Liddell &
Sapp LLP, was issued 755,045 shares of our common stock as payment for
$77,467.63 owed for legal services previously rendered to us in connection with
representation of LifeRamp on our general corporate matters. We agreed to
register the shares of common stock on a registration statement (of which this
prospectus is a part).
18
On or about July 16, 2004, Clinton Group, Inc., as plaintiff and sub
sub-landlord, filed a summons and complaint against us, as defendant, with the
Supreme Court of the State of New York, County of New York (Index No. 110371)
alleging, among other things, breach of an alleged sublease agreement by us for
non-payment of the security deposit and one month's rent for the premises
located at 55 Water Street, New York, New York. In the summons and complaint,
Clinton sought repossession of the premises, damages for non-payment of rent in
the sum of $128,629.16, additional damages under the sublease through the date
of trial for the remainder of the term of the Sublease, plus interest and
attorneys fees. On August 20, 2004, we entered into a Settlement Agreement and
Release with Clinton (the "Clinton Settlement Agreement") pursuant to which, in
full settlement of, and release from, any and all claims against us by Clinton
relating to the alleged sublease, we agreed to pay to Clinton, an accredited
investor, (i) the amount of $75,000 in cash, (ii) the amount of $150,000 due
upon the earlier of the one year anniversary of our agreement or upon our
raising an aggregate of $5,000,000 in gross proceeds from third party investors,
and (iii) issue to Clinton 1,150,000 shares of our common stock. We agreed to
register the shares of common stock on a registration statement (of which this
prospectus is a part).
Pursuant to that certain Settlement Agreement and Mutual Release, dated
August 19, 2004 (the "Buckley Kolar Settlement Agreement"), the law firm of
Buckley Kolar LLP, was issued 529,259 shares of our common stock as payment for
$54,302.01 owed for legal services previously rendered to us in connection with
representation of LifeRamp on our general corporate matters. We agreed to
register the shares of common stock on a registration statement (of which this
prospectus is a part).
Reference is made to the Note Purchase Agreement, the Registration
Rights Agreement, the Letter Agreement, the Fee Payment Agreement, the Payment
of Account Agreement, the Settlement Agreement, the Retention Bonus Program, the
Locke Lidell Agreement, the Clinton Settlement Agreement and the Buckley Kolar
Settlement Agreement that are filed as exhibits to the Registration Statement
(of which this prospectus forms a part) for more complete descriptions of the
provisions that are summarized under this caption.
SELLING STOCKHOLDERS
The following table sets forth the shares beneficially owned, as of
August 20, 2004, by the selling stockholders prior to the offering contemplated
by this prospectus, the number of shares each selling stockholder is offering by
this prospectus and the number of shares which each would own beneficially if
all such offered shares are sold. The selling stockholders acquired their
beneficial interests in the shares being offered hereby in transactions
described under the heading "Description of the Transactions." Except as
expressly set forth below, none of the selling stockholders is a registered
broker-dealer or an affiliate of a registered broker-dealer. Each of the selling
stockholders has acquired his, her or its shares solely for investment and not
with a view to or for resale or distribution of such securities.
Beneficial ownership is determined in accordance with SEC rules and
includes voting or investment power with respect to the securities. However,
each of the selling stockholders is subject to certain limitations on the
exercise of their warrants or conversion of their promissory notes, if any. The
most significant of these limitations is that such selling stockholder may not
exercise its warrants or convert its promissory notes, if such exercise or
conversion would cause such holder's beneficial ownership of our common stock
(excluding shares underlying any of their unexercised warrants or unconverted
promissory notes) to exceed 4.99% of the outstanding shares of common stock.
19
Number of Percentage of
Shares of Common Stock
Shares of Common Common Stock Owned After
Stock Owned Prior Shares of Common Owned After
Name and Addresses to Offering Stock to be Sold the Offering the Offering
------------------ ----------------- ---------------- ------------ ------------
Hilltop Services, Ltd. (1) 36,790,286 36,790,286 (2) 0 0
Cottonwood Ltd. (3) 25,735,292 25,735,292 (4) 0 0
Willow Bend Management Ltd. (5) 25,735,292 25,735,292 (6) 0 0
Martin Eric Weisberg, Esq. (7) 4,000,000 4,000,000 0 0
Redwood Capital Partners, Inc. (8) 1,400,000 1,400,000 (9) 0 0
Richard Rosenblum (10) 2,156,680 2,156,680 (11) 0 0
David Stefansky (12) 2,156,680 2,156,680 (13) 0 0
Advantage Technologies, Inc. (14) 101,890 101,890 0 0
Conceptual Litho Reproductions (15) 959,846 959,846 0 0
Ellis Advertising (16) 2,300,000 2,300,000 0 0
Mathe, Inc. (17) 3,000,000 3,000,000 0 0
Soffront Software Inc. (18) 954,000 954,000 0 0
Something Digital.Com L.L.C. (19) 750,000 750,000 0 0
Stride & Associates (20) 840,000 840,000 0 0
PowerTest, Inc. (21) 576,608 576,608 0 0
Kate McGowan Consulting (22) 120,773 120,773 0 0
Buckley Kolar LLP (23) 529,259 529,259 0 0
Locke Liddell & Sapp LLP (24) 755,045 755,045 0 0
Colin Parlett (25) 320,000 320,000 0 0
Lagniappe Resources, Inc. (26) 65,000 65,000 0 0
Phoenix PMT LLC (27) 53,082 53,082 0 0
Search Net Corporation (28) 85,283 85,283 0 0
20
Ron Munkittrick (29) 150,260 150,260 0 0
Xavier Hansen (30) 29,291 29,291 0 0
Gennady Shpits (31) 26,479 26,479 0 0
Clinton Group, Inc. (32) 1,150,000 1,150,000 0 0
----------
* Less than 1%
(1) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Ms.
Mary Lowenthal. The address of the selling stockholder is Mevot David
8, Ramat Gan, Israel.
(2) Includes 17,129,416 shares issuable upon exercise of warrants to
purchase shares of common stock and 6,400,000 shares of our common
stock issuable upon conversion of promissory notes.
(3) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Neil Smollett. The address of the selling stockholder is Moshav
Bitzaron, Israel.
(4) Includes 18,735,292 shares issuable upon exercise of warrants to
purchase shares of common stock and 7,000,000 shares of our common
stock issuable upon conversion of promissory notes.
(5) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Michael Raviv. The address of the selling stockholder is 2 Nevim
Street, Ramat Hasharon, Israel.
(6) Includes 18,735,292 shares issuable upon exercise of warrants to
purchase shares of common stock and 7,000,000 shares of our common
stock issuable upon conversion of promissory notes.
(7) The selling stockholder is a partner at the law firm of Jenkens &
Gilchrist Parker Chapin LLP. The address of the selling stockholder is
c/o Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405
Lexington Avenue, New York, New York 10174.
(8) The selling stockholder advised us that the natural persons having
voting or dispositive power over such shares of common stock are
Messrs. Richard Rosenblum and David Stefansky. The address of the
selling stockholder is 19 Horizon Drive, Wayne, New Jersey 07470.
(9) Represents shares issuable upon exercise of warrants to purchase share
of common stock.
(10) The address of the selling stockholder is 19 Horizon Drive, Wayne, New
Jersey 07470.
(11) Includes 1,000,000 shares issuable upon exercise of warrants to
purchase share of common stock.
(12) The address of the selling stockholder is 2317 Avenue K, Brooklyn, New
York 11210.
(13) Includes 1,000,000 shares issuable upon exercise of warrants to
purchase share of common stock.
(14) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Barry Malter. The address of the selling stockholder is 30 Miller
Circle, Armonk, New York 10504.
(15) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Eric Bernstein. The address of the selling stockholder is 420 West 25th
Street, New York, New York 10001.
21
(16) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr. Ron
Ellis. The address of the selling stockholder is 6100 Wilshire
Boulevard, Suite 310, Los Angeles, California 90048.
(17) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Mark Hicks. The address of the selling stockholder is 1259 Route 46,
Bldg. 1, Parsippany, New Jersey 07054.
(18) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
James Boger. The address of the selling stockholder is 45437 Warm
Spring Blvd., Freemont, Illinois 94539.
(19) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Jonathan P. Klonsky. The address of the selling stockholder is 60 East
42nd Street, Suite 1630, New York, New York 10165.
(20) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Ms.
Jane Woodworth, as attorney for Stride & Associates. The address of the
selling stockholder is 76 Fiske Hill Road, Sturbridge, Massachusetts
01566.
(21) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Thomas R. Lynch. The address of the selling stockholder is 145 Natoma
Street, 3rd Floor, San Francisco, California 94105.
(22) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Ms.
Catherine McGowan. The address of the selling stockholder is 70
Chestnut Avenue, Clarendon Hills, Illinois 60514.
(23) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Jeremiah Buckley. The address of the selling stockholder is Buckley
Kolar LLP, 1250 24th Street, N.W., Suite 700, Washington, D.C. 20037.
(24) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
David Taylor. The address of the selling stockholder is Locke Liddell &
Sapp LLP, 3400 JP Morgan Chase Tower, 600 Travis, Houston, Texas 77002.
(25) The address of the selling stockholder is 406 Feather Rock Drive,
Rockville, Maryland 20850.
(26) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Ms.
Geri Hand. The address of the selling stockholder is 1640 Mount
McKinley Drive, Grayson, Georgia 30017-2980.
(27) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
John Tsemberides. The address of the selling stockholder is 25-40 Shore
Boulevard, #7A, Astoria, New York 11102.
(28) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
Marco Trezza. The address of the selling stockholder is 106 West 80th
Street, 1R, New York, New York 10024-6333.
(29) The address of the selling stockholder is 760 Warren Street, Westfield,
New Jersey 07090.
(30) The address of the selling stockholder is 873 Davidson Road,
Piscataway, New Jersey 08854.
(31) The address of the selling stockholder is 40 Donna Court, #11, Staten
Island, New York 10314.
22
(32) The selling stockholder advised us that the natural person having
voting or dispositive power over such shares of common stock is Mr.
John Hall. The address of the selling stockholder is 9 West 57th
Street, New York, New York 10019.
Relationship Between Ramp and the Selling Stockholders
Except as disclosed in this prospectus, none of the selling
stockholders are affiliates or controlled by our affiliates. Except as disclosed
in this prospectus, none of the selling stockholders are now or were at any time
in the past an officer or director of ours or of any of our predecessors or
affiliates. We have separate contractual obligations to file this registration
statement (of which this prospectus forms a part) with each of the selling
stockholders.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 400,000,000 shares of common stock,
par value $.001 per share, and 2,500,000 shares of preferred stock, par value
$1.00 per share. As of August 11, 2004, we had outstanding 200,691,217 shares of
common stock and 1 share of 1996 Preferred Stock. As of such date, our common
stock was held of record by approximately 460 persons and beneficially owned by
approximately 10,000 persons.
Common Stock
Each share of common stock is entitled to one vote at all meetings of
stockholders. Stockholders are not permitted to accumulate votes in the election
of directors. Currently, the Board of Directors consists of five directors, who
serve for staggered terms of three years, with at least two directors elected at
every annual meeting. All shares of common stock are equal to each other with
respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional shares of common stock. In the event of our
liquidation, dissolution or winding up, holders of the common stock will be
entitled to receive on a pro rata basis all of our assets remaining after
satisfaction of all liabilities and preferences of the outstanding preferred
stock.
Preferred Stock
We are authorized to issue up to 2,500,000 shares of preferred stock.
Our preferred stock may be issued in one or more series, the terms of which may
be determined at the time of issuance by our Board of Directors, without further
action by stockholders and may include voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and
liquidation, conversion, redemption rights and sinking fund provisions. The
issuance of preferred stock could reduce the rights, including voting rights, of
the holders of common stock, and, therefore, reduce the value of our common
stock. In particular, specific rights granted to future holders of preferred
stock could be used to restrict our ability to merge with or sell our assets to
a third party, thereby preserving control of Ramp Corporation by existing
management.
Convertible Promissory Notes
On July 14, 2004, we issued promissory notes to each of Cottonwood
Ltd., Willow Bend Management Ltd. and Hilltop Services, Ltd. in the aggregate
principal amount of $6,120,000. The Cottonwood and Willow Bend promissory notes
were issued in connection with the Note Purchase Agreement. The Hilltop
promissory note was issued in connection with the Letter Agreement. The
promissory notes mature on the earliest of January 14, 2005 or the acceleration
23
of the obligations as contemplated by the promissory notes (the "Maturity
Date"). The promissory notes bear interest at the rate of six percent (6.0%) per
annum. Interest is payable on the Maturity Date in cash or shares of our common
stocks in accordance with the terms of the promissory notes.
The promissory notes are convertible, at the option of the holder and
us, into shares of our common stock at a fixed conversion price of $0.30 per
share, on the terms and conditions and subject to adjustment as provided in the
notes.
If, on any day following the forty-five day anniversary of July 14,
2004, the average closing sale price of our common stock for the ten trading
days immediately prior to such date is less than $0.15 cents per share, then the
indebtedness represented by each promissory note shall be automatically, and
without further action by the holder or us, secured by a first priority lien
against all of our assets and property, including any and all of our
intellectual property, software code, trademarks and trade names.
The terms of the promissory notes prohibit conversion of the notes to
the extent that conversion of the notes would result in any holder beneficially
owning in excess of 4.99% of our outstanding shares of common stock. A holder
may waive the 4.99% limitation upon 65 days prior written notice to us.
Reference is made to the promissory notes and the Note Purchase
Agreement that are filed as exhibits to the Registration Statement (of which
this prospectus forms a part) for a more complete description of the terms and
conditions of the agreements with the holders of our promissory notes including
restrictive covenants relating to the incurrence of liens or encumbrances on
assets, cash expenditures, a board designee, and consent to subsequent
financings.
Transfer Agent and Registrar
We have retained Computershare Trust Company, Inc., 350 Indiana Street,
Suite 800, Golden, Colorado 80401, as Transfer Agent and Registrar, for our
common stock. Computershare Trust Company's telephone number is (303) 262-0600.
PLAN OF DISTRIBUTION
The selling security holders and any of their pledgees, donees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded. These sales may be at fixed or negotiated
prices. The selling security holders may use any one or more of the following
methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
24
o short sales, but, if at all, only after the effectiveness of
the Registration Statement and the approval for listing by the
American Stock Exchange of the shares of common stock offered
hereby;
o broker-dealers may agree with the selling security holders to
sell a specified number of such shares at a stipulated price
per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling security holders may also sell shares under Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), if available,
rather than under this prospectus.
The selling security holders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
The selling security holders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares. We believe that the selling security holders have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares other than ordinary course
brokerage arrangements, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of shares by the selling security
holders.
Broker-dealers engaged by the selling security holders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling security holders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The selling security holders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
Selling security holders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. If the selling security
holders are deemed to be underwriters, the selling security holders may be
subject to certain statutory and regulatory liabilities, including liabilities
imposed pursuant to Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
We are required to pay all fees and expenses incident to the
registration of the shares. Otherwise, all discounts, commissions or fees
incurred in connection with the sale of the common stock offered hereby will be
paid by the selling security holders.
Upon our being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
25
states the shares may not be sold unless the shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and complied with.
We advised the selling security holders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales of the shares offered hereby.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the registrant, 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 (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person 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 enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person 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 reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification will be made in
respect of any claim, issue or matter as to which such person will have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Our Certificate of Incorporation and Bylaws provide that we shall
indemnify our directors, and officers, employees and agents to the extent and in
the manner permitted by the provisions of the laws of the State of Delaware, as
amended from time to time, subject to any permissible expansion or limitation of
such indemnification, as may be set forth in any stockholders' or directors'
resolution or by contract.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Ramp pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file reports, proxy statements, information statements and other
information with the SEC. You may read and copy this information, for a copying
fee, at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services, from the American Stock Exchange and at
the web site maintained by the SEC at http://www.sec.gov.
26
We have filed the Registration Statement under the Securities Act, with
respect to the securities offered pursuant to this prospectus. This prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement and the exhibits filed as a part thereof, which may be
found at the locations and website referred to above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission (the "SEC") allows us to
"incorporate by reference" into this prospectus the information we file with the
SEC, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is an important
part of this prospectus. We incorporate by reference the following documents we
filed with the SEC:
o Our Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2004, filed on August 16, 2004;
o Our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2004, filed on May 17, 2004;
o Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2003, filed on April 14, 2004;
o Our Current Report on Form 8-K, filed on August 11, 2004;
o Our Current Report on Form 8-K, filed on July 20, 2004;
o Our Current Report on Form 8-K, filed on June 9, 2004;
o Our Current Report on Form 8-K/A, filed on January 26, 2004;
o Our Definitive Proxy Statement to Shareholders, dated April 4,
2003; and
o Our Definitive Proxy Statement to Shareholders, dated November
6, 2003.
We are also incorporating by reference additional documents that we may
file with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act prior to the termination of this offering.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the Commission
or us. Documents incorporated by reference are available from us without charge,
except exhibits, unless we have specifically incorporated by reference an
exhibit into a document that this prospectus incorporates. Stockholders may
obtain documents incorporated by reference into this prospectus by requesting
them in writing or by telephone from:
Ramp Corporation
Investor Relations
33 Maiden Lane
New York, New York 10038
(212) 440-1500
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for us by Jenkens & Gilchrist Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174.
27
EXPERTS
Our consolidated financial statements as of and for the year ended
December 31, 2003 appearing in our 2003 Form 10-K have been audited by BDO
Seidman, LLP, an independent registered public accounting firm, as stated in
their report appearing therein which contained an explanatory paragraph
indicating that substantial doubt exists as to the Company's ability to continue
as a going concern, and have been incorporated herein by reference in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
Our consolidated financial statements as of December 31, 2002, and for
each of the two years in the period ended December 31, 2002 appearing in our
2003 Form 10-K have been audited by Ehrhardt Keefe Steiner & Hottman PC, an
independent registered public accounting firm, as stated in their report
appearing therein, and have been incorporated herein by reference in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of The Duncan Group, Inc. (d/b/a Frontline
Physicians Exchange) as of and for the years ended December 31, 2002 and 2001,
appearing in our current report on Form 8-K/A, filed on January 26, 2004, and in
our current report on Form 8-K, filed on June 9, 2004, were audited by BDO
Seidman, LLP, an independent registered public accounting firm, as stated in
their report appearing therein, and have been incorporated herein by reference
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
28
=============================================================== ===================================================
We have not authorized any dealer, salesperson or any
other person to give any information or to represent anything
other than those contained in this prospectus in connection
with the offer contained herein, and, if given or made, you
should not rely upon such information or representations as
having been authorized by Ramp Corporation. This prospectus 110,741,046
does not constitute an offer of any securities other than SHARES OF COMMON STOCK
those to which it relates or an offer to sell, or a
solicitation of an offer to buy, those to which it relates in
any state to any person to whom it is not lawful to make such
offer in such state. The delivery of this prospectus at any
time does not imply that the information herein is correct as
of any time after the date of this prospectus.
RAMP CORPORATION
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY 4
RECENT DEVELOPMENTS 6
RISK FACTORS 7
FORWARD-LOOKING STATEMENTS 16
USE OF PROCEEDS 16
DESCRIPTION OF THE TRANSACTIONS 16
SELLING STOCKHOLDERS 19
DESCRIPTION OF SECURITIES 23
PLAN OF DISTRIBUTION 24
INDEMNIFICATION OF OFFICERS AND DIRECTORS 26
WHERE YOU CAN FIND MORE INFORMATION ABOUT US 26 ____________
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 27
LEGAL MATTERS 27 PROSPECTUS
EXPERTS 28 ____________
August __ , 2004
=============================================================== ===================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares being
registered hereby.
Securities and Exchange Commission registration fee. $ 3,063.29
Printing and engraving expenses. 1,000.00
Legal fees and expenses. 20,000.00
Accounting fees and expenses. 20,000.00
Transfer Agent and Trustee fees and expenses. 1,000.00
Miscellaneous. 20,000.00
---------
Total. $ 65,063.29
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the registrant, 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 (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person 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 enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person 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 reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification will be made in
respect of any claim, issue or matter as to which such person will have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Our Certificate of Incorporation and Bylaws provide that we shall
indemnify our directors, and officers, employees and agents to the extent and in
the manner permitted by the provisions of the laws of the State of Delaware, as
amended from time to time, subject to any permissible expansion or limitation of
such indemnification, as may be set forth in any stockholders' or directors'
resolution or by contract.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Ramp pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
II-1
Item 16. Exhibits.
Exhibit Number Description
-------------- -----------
4.1 Note and Warrant Purchase Agreement, dated as of July 14, 2004,
relating to the sale of convertible promissory notes by and between the
Company, Cottonwood Ltd. and Willow Bend Management Ltd.
4.2 Convertible Promissory Note dated July 14, 2004 issued to Cottonwood
Ltd. in the aggregate principal amount of $2,100,000.
4.3 Convertible Promissory Note dated July 14, 2004 issued to Willow Bend
Management Ltd. in the aggregate principal amount of $2,100,000.
4.4 Convertible Promissory Note dated July 14, 2004 issued to Hilltop
Services, Ltd. in the aggregate principal amount of $1,920,000.
4.5 Warrant dated July 14, 2004 issued to each of Cottonwood Ltd. and
Willow Bend Management Ltd. at an exercise price of $0.11 cents.
4.6 Warrant dated July 14, 2004 issued to each of Cottonwood Ltd. and
Willow Bend Management Ltd. at an exercise price of $0.15 cents.
4.7 Warrant dated July 14, 2004 issued to each of Cottonwood Ltd. and
Willow Bend Management Ltd. at an exercise price of $0.35 cents.
4.8 Warrant dated July 14, 2004 issued to each of Cottonwood Ltd. and
Willow Bend Management Ltd. at an exercise price of $0.40 cents.
4.9 Warrant dated July 14, 2004 issued to Hilltop Services, Ltd. at an
exercise price of $0.11 cents.
4.10 Warrant dated July 14, 2004 issued to Hilltop Services, Ltd. at an
exercise price of $0.15 cents.
4.11 Warrant dated July 14, 2004 issued to Hilltop Services, Ltd. at an
exercise price of $0.35 cents.
4.12 Warrant dated July 14, 2004 issued to Hilltop Services, Ltd. at an
exercise price of $0.40 cents.
4.13 Warrant dated July 14, 2004 issued to Redwood Capital Partners, Inc. at
an exercise price of $0.11 cents.
4.14 Warrant dated July 14, 2004 issued to Redwood Capital Partners, Inc. at
an exercise price of $0.15 cents.
4.15 Warrant dated July 14, 2004 issued to Redwood Capital Partners, Inc. at
an exercise price of $0.35 cents.
4.16 Warrant dated July 14, 2004 issued to Redwood Capital Partners, Inc. at
an exercise price of $0.40 cents.
4.17 Warrants dated August 18, 2004 issued to Mr. Richard Rosenblum at an
exercise price of $0.18 cents.
II-2
4.18 Warrants dated August 18, 2004 issued to Mr. David Stefansky at an
exercise price of $0.18 cents.
4.19 Letter Agreement, dated as of July 14, 2004, by and between the Company
and Hilltop Services, Ltd.
4.20 Fee Payment Agreement, dated as of August 20, 2004, by and between the
Company and Jenkens & Gilchrist Parker Chapin LLP.
4.21 Retention Bonus Program Agreement by and between the Company and each
of Phoenix PMT LLC, Search Net Corporation, Mr. Ron Munkittrick, Mr.
Xavier Hansen and Mr. Gennady Shpits.
4.22 Agreement for Payment of Account by and between the Company and each of
Advantage Technologies, Inc., Conceptual Litho Reproductions, Ellis
Advertising, Mathe, Inc., Soffront Software Inc., Something Digital.Com
L.L.C., PowerTest, Inc. and Kate McGowan Consulting.
4.23 Registration Rights Agreement, dated as of July 14, 2004, by and
between the Company, Cottonwood Ltd. and Willow Bend Management Ltd.
4.24 Settlement Agreement by and between the Company and each of Stride &
Associates, Mr. Colin Parlett and Lagniappe Resources, Inc.
4.25 Settlement Agreement and Release, dated as of August 20, 2004, by and
between the Company and Clinton Group, Inc.
4.26 Settlement Agreement and Mutual Release, dated as of August 19, 2004,
by and among the Company, LifeRamp Family Financial, Inc. and Locke
Liddell & Sapp LLP.
4.27 Settlement Agreement and Mutual Release, dated as of August 19, 2004,
by and among the Company, LifeRamp Family Financial, Inc. and Buckley
Kolar LLP.
5.1 Opinion of Jenkens & Gilchrist Parker Chapin LLP.
23.1 Consent of Ehrhardt Keefe Steiner & Hottman PC.
23.2 Consent of BDO Seidman, LLP.
23.3 Consent of Jenkens & Gilchrist Parker Chapin LLP (included in Exhibit
5.1).
24.1 Power of Attorney (included on signature page).
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Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective Registration Statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the
information required to be included in a post-effective amendment by
such clauses is contained in periodic reports filed with or furnished
to the Securities and Exchange Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described under Item 15 above, or otherwise, the
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Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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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 for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on August 20, 2004.
RAMP CORPORATION
By: /s/ Andrew Brown
-----------------------
Andrew Brown
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below in so signing also makes, constitutes and appoints Andrew Brown
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place,
and stead, in any and all capacities, to sign and file Registration Statement(s)
and any and all pre- or post-effective amendments to such Registration
Statement(s), with all exhibits thereto and hereto, and other documents with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Signature Title Date
---------- ------ ----
/s/ Andrew Brown Chairman, Chief Executive Officer, President and Director August 20, 2004
----------------
Andrew Brown (Principal Executive Officer)
/s/ Mitchell Cohen Chief Financial Officer, Executive Vice President and August 20, 2004
------------------
Mitchell Cohen Secretary (Principal Financial and Accounting Officer)
/s/ Steven A. Berger Director August 20, 2004
--------------------
Steven A. Berger
/s/ Steve Shorr Director August 20, 2004
---------------
Steve Shorr
/s/ Tony Soich Director August 20, 2004
--------------
Tony Soich
/s/ Jeffrey A. Stahl Director August 20, 2004
--------------------
Jeffrey A. Stahl
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