424b3-080801
Rule 424(b)(3)
Reg. No. 333-63162
PROSPECTUS
MEDIX RESOURCES, INC.
10,450,000 Shares of Common Stock
The shareholders of Medix Resources, Inc. named herein will have the
right to offer and sell up to an aggregate of 10,450,000 shares of our
common stock under this Prospectus. Of these shares, up to 9,500,000 may
be issued in connection with the draw down of funds by Medix under an
equity line of credit, up to 900,000 may be issued as payments for
services rendered, and up to 50,000 may be issued upon exercise of
warrants to purchase our common stock.
Cornell Capital Partners, L.P. and Dutchess Private Equities Fund,
L.P., two of the selling shareholders named herein, who are providers of
the equity line of credit are statutory underwriters under Section 2a(11)
of the Securities Act of 1933, as amended. See "Equity Line of Credit,"
"Selling Shareholders," and "Plan of Distribution."
Medix will not receive directly any of the proceeds from the sale of
these shares by the selling shareholders. However, Medix will receive
the proceeds of draws under the equity line and from the exercise of any
warrants to purchase the shares to be sold hereunder. Medix will pay
the expenses of registration of these shares.
The common stock is traded on the American Stock Exchange under the
symbol "MXR". On August 6, 2001, the closing price of the common stock
was reported as $1.05.
The securities offered hereby involve a high degree of risk. See
"RISK FACTORS" beginning on page 3 for certain risks that should be
considered by prospective purchasers of the securities offered hereby.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the securities or
determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
The date of this Prospectus is August 6, 2001
Supplements to this Prospectus
A copy of each Form 10-Q and Form 8-K that is filed by Medix
Resources, Inc. with the Securities and Exchange Commission after the
date of this Prospectus shall be deemed to be a Supplement to this
Prospectus, and must be physically delivered with this Prospectus to a
prospective purchaser, together with a copy of the company's 2000 Form
10-KSB. Unless otherwise notified, this Prospectus, as amended or
supplemented from time to time, may be used for sales by the persons
named herein until April 30, 2002, at which time the audited financial
statements incorporated herein by reference will become stale pursuant to
Section 10(a)(3) of the Securities Act of 1933, as amended.
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 shareholders or any other person. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such an offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date
hereof or that there has been no change in our affairs since such date.
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
RISK FACTORS
THE COMPANY
EQUITY LINE OF CREDIT
USE OF PROCEEDS
SELLING SHAREHOLDERS
DESCRIPTION OF SECURITIES
PLAN OF DISTRIBUTION
INDEMNIFICATION OF OFFICERS AND DIRECTORS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
LEGAL MATTERS
EXPERTS
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference into this
Prospectus contain forward-looking statements, which mean that they
relate to events or transactions that have not yet occurred, our
expectations or estimates for Medix's future operations, our growth
strategies or business plans or other facts that have not yet occurred.
Such statements can be identified by the use of forward-looking
terminology such as "might," "may," "will," "could," "expect,"
"anticipate," "estimate," "likely," "believe," or "continue" or the
negative thereof or other variations thereon or comparable terminology.
The following 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.
RISK FACTORS
An investment in our common stock:
o has a high degree of risk;
o is highly speculative;
o should only be considered by those persons or entities who can
afford to loose their entire investment.
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating our
business and an investment in our shares. The order in which the
following risk factors are presented does not indicate the relative
magnitude of the risks described.
Our Continuing Losses; Going Concern Exception; Our Need for Additional
Financing
We reported net losses of ($5,415,000), ($4,847,000) and ($5,422,000)
for the years ended December 31, 2000, December 31, 1999 and December 27,
1998, respectively, and a net loss of ($2,259,000) for our 2001 first
quarter ended March 31, 2001. At March 31, 2001, we had an accumulated
deficit of ($25,683,000) and a working capital deficit of ($856,000). Our
independent accountants have included a "going concern" exception in their
audit report on our audited 2000 financial statements. See our Form 10-KSB
for the fiscal year ended December 31, 2000.
We expect to continue to experience loses, in the near term, as we
attempt to develop our Cymedix(R)software products. The current operation
of our business and our ability to continue to develop our Cymedix
software products will depend upon our ability to obtain additional
financing. Currently, we are not receiving any significant revenues from
the sale of our Cymedix software products. We are attempting to meet our
current cash flow needs by raising capital in the private debt and equity
markets and through the exercise of currently outstanding warrants. The
development and marketing of the Cymedix software products require
substantial capital investments. There can be no assurance that
additional investments or financings will be available to us as needed to
support the development of Cymedix products. Failure to obtain such
capital on a timely basis could result in lost business opportunities,
the sale of the Cymedix business at a distressed price or the financial
failure of our company.
Risk of Development Stage Company
Since the sale of our remaining temporary staffing business in early
2000, we principally develop software for Internet-based communications
and information management for medical service providers, through our
wholly-owned subsidiary, Cymedix Lynx Corporation. Our software
products are currently being tested by several different healthcare
providers. However, our Cymedix software business has not yet generated
any significant revenues.
Our company, through its subsidiary Cymedix Lynx Corporation,
has only recently begun its medical software line of business through the
acquisition of a development stage medical software business in 1998.
Our company has little experience in marketing software products,
providing software support services, evaluating demand for products,
financing a software business and dealing with government regulation of
software 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. We believe our structure of multiple offices
serves our customers well, but it does present an additional challenge in
building our corporate culture and operating structure.
Our products are still in the development stage and have not yet
proven their effectiveness or their marketability. As a developer of
software products, we will be required to anticipate and adapt to
evolving industry standards and new technological developments. The
market for our software products is characterized by continued and rapid
technological advances in both hardware and software development,
requiring ongoing expenditures for research and development, and timely
introduction of new products and enhancements to existing products. The
establishment of standards is largely a function of user acceptance.
Therefore, such standards are subject to change. Our future success, if
any, will depend in part upon our ability to enhance existing products,
to respond effectively to technology changes, and to introduce new
products and technologies to meet the evolving needs of our clients in
the healthcare information systems market. The introduction of software
products in that market has been slow due to the large number of small
practitioners who are resistant to change and the costs associated with
change, particularly in a period of rising pressure to reduce costs in
the market. We are currently devoting significant resources toward the
development of products. There can be no assurance that we will
successfully complete the development of these products in a timely
fashion or that our current or future products will satisfy the needs of
the healthcare information systems market. Further, there can be no
assurance that products or technologies developed by others will not
adversely affect our competitive position or render our products or
technologies noncompetitive or obsolete.
Product Liability Risks
Certain of our products provide applications that relate to patient
medical histories and treatment plans. Any failure by our products to
provide accurate, secure and timely information could result in product
liability claims against us by our clients or their affiliates or
patients. We maintain insurance that we believes 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 or business. Even
unsuccessful claims could result in the expenditure of funds in
litigation, as well as diversion of management time and resources.
There is Great Uncertainty in the Healthcare Industry
The healthcare and medical services industry in the United States is
in a period of rapid change and uncertainty. Governmental programs have
been proposed, and some adopted, from time to time, to reform various
aspects of the U.S. healthcare delivery system. Some of these programs
contain proposals to increase government involvement in healthcare, lower
reimbursement rates and otherwise change the operating environment for
our customers. Particularly, the Health Insurance Portability and
Accountability Act of 1996, and the regulations that are being
promulgated thereunder, are causing the healthcare industry to change its
procedures and incur substantial cost in doing so. We cannot predict
with any certainty what impact, if any, these and future healthcare
reforms might have on our business.
Risks of Infringement of Proprietary Technology
Our wholly-owned subsidiary, Cymedix Lynx Corporation, has been
granted certain patent rights, trademarks and copyrights relating to its
software business. These patents and copyrights have been assigned by
our subsidiary to the parent company, Medix. The patent rights and
intellectual property legal issues for software programs, such as the
Cymedix(R)products, are complex and currently evolving. Since patent
applications are secret until patents are issued, in the United States,
or published, in other countries, we cannot be sure that we are the first
to file any patent application. In addition, there can be no assurance
that competitors, many of which have far greater resources than we do,
will not apply for and obtain patents that will interfere with our
ability to develop or market product ideas that we have originated.
Further, the laws of certain foreign countries do not provide the
protection to intellectual property that is provided in the United
States, and may limit our ability to market its products overseas. We
cannot give any assurance that the scope of the rights that we have been
granted are broad enough to fully protect our Cymedix software from
infringement.
Litigation or regulatory proceedings may be necessary to protect our
intellectual property rights, such as the scope of our patent. In fact,
the computer software industry in general is characterized by substantial
litigation. Such litigation and regulatory proceedings are very
expensive and could be a significant drain on our resources and divert
resources from product development. There is no assurance that we will
have the financial resources to defend our patent rights or other
intellectual property from infringement or claims of invalidity.
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. We will use our best efforts to protect such information and
techniques, however, no assurance can be given that such efforts will be
successful. The failure to protect our intellectual property could cause
us to loose substantial revenues and to fail to reach its financial
potential over the long term.
Our Business is Highly Competitive
Medical Information Software. Competition can be expected to emerge
from established healthcare information vendors and established or new
Internet related vendors. The most likely competitors are companies with
a focus on clinical information systems and enterprises with an Internet
commerce or electronic network focus. Many of these competitors will
have access to substantially greater amounts of capital resources than we
have access to, for the financing of technical, manufacturing and
marketing efforts. Frequently, these competitors will have affiliations
with major medical product companies or software developers, who will
assist in the financing of such competitor's product development. We
will seek to raise capital to develop Cymedix products in a timely manner,
however, so long as our operations remain underfunded, as they now are,
we will be at a competitive disadvantage.
Software Development Personnel. The success of the development of
our Cymedix software is dependent to a significant degree on our key
management and technical personnel. We believe that our success will
also depend upon our ability to attract, motivate and retain highly
skilled, managerial, sales and marketing, and technical personnel,
including software programmers and systems architects skilled in the
computer languages in which our Cymedix products operate. Competition
for such personnel in the software and information services industries is
intense. The loss of key personnel, or the inability to hire or retain
qualified personnel, could have a material adverse effect on our results
of operations, financial condition or business.
Securities Law Issues
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 Securities and Exchange Commission or any
state agency in reliance upon exemptions from such registration
requirements. Such exemptions are highly technical in nature and if we
inadvertently failed to comply with the requirements of any of such
exemptive provisions, investors would have the right to rescind their
purchase of our securities or sue for damages. If one or more investors
were to successfully seek such rescission or institute such suit, Medix
could face severe financial demands that could material and adversely
affect our financial position.
Impact of Shares Eligible for Future Sale
As of August 6, 2001, we had 50,955,946 shares of common stock
outstanding. As of that date, approximately 22,132,232 shares were
issuable upon the exercise of outstanding options, warrants or other
rights, and the conversion of preferred stock. Most of these shares will
be immediately saleable upon exercise or conversion under registration
statements we have filed with the U.S. Securities and Exchange Commission
(the "SEC"). The exercise prices of options, warrants or other rights to
acquire common stock presently outstanding range from $0.19 per share to
$4.97 per share. During the respective terms of the outstanding options,
warrants, preferred stock and other outstanding derivative securities,
the holders are given the opportunity to profit from a rise in the market
price of the common stock, and the exercise of any options, warrants or
other rights may dilute the book value per share of the common stock and
put downward pressure on the price of the common stock. The existence of
the options, conversion rights, or any outstanding warrants may adversely
affect the terms on which we may obtain additional equity financing.
Moreover, the holders of such securities are likely to exercise their
rights to acquire common stock at a time when we would otherwise be able
to obtain capital on terms more favorable than could be obtained through
the exercise or conversion of such securities.
Dilution Due to Equity Line of Credit
The resale of the common stock that may be issued by us under the
equity line of credit described herein will substantially increase the
number of our publicly traded shares ("float"). If existing shareholders
perceive that this increased float is not accompanied by a commensurate
increase in value to the Company, then shareholder value--real or
perceived--will be diluted. Such dilution could cause holders of our
shares of common stock to sell, thus depressing the price of our common
stock. Therefore, the very existence of the equity line financing could
depress the market price of our common stock.
Risk of Additional Selling Pressure on Stock Price
The resale of the common stock that will be issued by us under the
equity line of credit described herein could depress the market price of
our common stock. This would occur if such resale took the form of heavy
volume, or volume concentrated in a relatively short period, at levels
greater than the trading activity of our stock could normally support.
Furthermore, the terms of the equity line provide that we will sell shares
of our common stock to the providers of the financing at 91% of the average
of the three lowest of the daily volume-weighted average prices of our
common stock during the 22-trading day period immediately before our
request for the advance. Therefore, since all of the shares that are
issued by us in connection with advances under the equity line financing
will have a "built-in" discount of at least 9% upon issuance, this could
produce an impetus for the providers of the equity line to resell their
shares sooner or in greater quantity than they would otherwise. Such
resale could have the effect of depressing our share price.
Volatility of Our Stock Price
Historically, our common stock has experienced significant price
fluctuations. This has been caused by factors such as:
o negative announcements by our company or others, particularly in the
technology sector;
o regulatory, legislative or other developments affecting our company or
the health care industry generally;
o conversion of our preferred stock and convertible debt into common
stock at conversion rates based on current market prices of our common
stock and exercise of options and warrants at below current market
prices; and
o market conditions specific to technology and internet companies, the
health care industry and general market conditions.
In addition, in recent years the stock market has experienced
significant price and volume fluctuations. These fluctuations, which are
often unrelated to the operating performance of specific companies, have
had a substantial effect on the market price for many health care related
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.
Application of Penny Stock Rules to Our Common Stock
Trading of our common stock may be subject to the penny stock rules
under the Securities Exchange Act of 1934, as amended, unless an
exemption from such rules is available. Broker-dealers making a market
in our common stock will be required to provide disclosure to their
customers regarding the risks associated with our common stock, the
suitability for the customer of an investment in our common stock, the
duties of the broker-dealer to the customer and information regarding bid
and ask prices for our common stock, and the amount and description of
any compensation the broker-dealer would receive in connection with a
transaction in our common stock. The application of these rules will
likely result in fewer market makers making a market of our common stock
and further restrict the liquidity of our common stock.
Absence of Common Stock Dividends
We have not had earnings, but if earnings were available, it is our
general policy to retain any earnings for use in our operation.
Therefore, we do not anticipate paying any cash dividends on our common
stock in the foreseeable future. Any payment of cash dividends on our
common stock in the future will be dependent upon our financial
condition, results of operations, current and anticipated cash
requirements, plans for expansion, as well as other factors that the
Board of Directors deems relevant. We anticipate that our future
financing agreements will prohibit the payment of common stock dividends
without the prior written consent of our lender(s).
THE COMPANY
Medix Resources, Inc., a Colorado corporation, sold its supplemental
staffing business, which operated under the tradenames "National Care
Resources" and "TherAmerica" on February 19, 2000, and now principally
develops software for Internet-based communications and information
management for medical service providers, through its wholly-owned
subsidiary, Cymedix Lynx Corporation.
We acquired Cymedix in January of 1998. Cymedix has developed an
Internet-based communications and information management product, which
we began marketing to medical professionals nationwide. Growth of the
medical information management marketplace is being driven
by the need to share significant amounts of clinical and patient
information between physicians, their
outpatient service providers, hospitals, insurance companies and managed
care organizations. This market is one of the fastest-growing sectors in
healthcare today, commanding a projected two-thirds of health care
capital investments. The Cymedix(R)software contains patented elements
that can be used to develop secure medical communications products that
make use of the Internet. Using the Cymedix software, medical
professionals can order, prescribe and access medical information from
insurance companies and managed care organizations, as well as from any
participating outpatient service provider, such as a laboratory,
radiology center, pharmacy or hospital. We will provide the software at
minimal charges to physicians and clinics, and will collect user fees
whenever these products are used to provide services on the Internet.
The products' relational database technology will provide physicians with
a permanent, ongoing record of each patient's name, address, insurance or
managed care affiliation, referral status, medical history, personalized
notes and an audit trail of past encounters. Physicians will be able to
electronically order medical procedures, receive and store test results,
check patient eligibility, make medical referrals, request
authorizations, and report financial and encounter information in a
cost-effective, secure and timely manner.
On July 5, 2001, we received a written claim on behalf of a former
employee relating to alleged unpaid severance and options that we are
alleged to have wrongfully failed to permit the exercise of. No amount
of damages was claimed in the letter. Based on a preliminary
investigation, we have denied any liability in this matter, and do not
expect any resolution of the matter, if legal action is taken, to have a
material adverse impact on us. On June 15, 2001, we agreed to settle the
matter of Michael J. Ruxin v. Cymedix Lynx Corporation and Medix
Resources, Inc., filed in the District Court of the City and County of
Denver (Case No. 00CV2997). We agreed to pay to the plaintiff $35,000
and issue to him 2-year warrants to purchase 195,000 shares of the
Company's common stock at $.50. The case has been dismissed with
prejudice. On May 2, 2001, we agreed to settle the matter of Guli R.
Rajani v. Medix Resources, Inc., filed in the United States District
Court, Southern District of New York, (00 Civ. 5061). We agreed to pay
to the plaintiff $20,000 and issue to him, over a period of 18 months,
3-year warrants to purchase 137,500 shares of the Company's common stock
at $0.50. The case has been dismissed with prejudice.
Our principal executive office is located at 305 Madison Ave., Suite
2033, New York, NY 10165, and its telephone number is (212) 697-2509.
Our principal administrative office is at 7100 East Belleview Ave.,
Greenwood Village, CO 80111, and its telephone number is (303) 741-2045.
We also have offices in California, Georgia and New Jersey.
EQUITY LINE OF CREDIT
Agreement
We have entered into an Equity Line of Credit Agreement with Cornell
Capital Partners, L.P.
("Cornell"), and Dutchess Private Equities Fund, L.P. ("Dutchess"), dated
as of June 12, 2001. Under the agreement, the two providers have
committed to advance to us funds in an amount of up to $10,000,000, as
requested by us, over a 24-month period in return for common stock issued
by us to the providers. However, the amount that may be advanced at any
time is limited as follows:
o There must be thirteen stock market trading days between any two of
our requests for advances.
o We can only request an advance if the volume weighted average price of
the common stock, as reported by Bloomberg L.P. for the day before our
request, is equal to or greater than the volume weighted average price
as reported by Bloomberg L.P. for the 22 trading days before we make a
request.
o We will not be able to receive an advance amount that is greater than
175% of the average daily volume of our common stock over the 40
trading days prior to our advance request multiplied by the purchase
price (calculated as provided in the next sentence).
The purchase price of our common stock issued in each advance will be
equal to 91% of the three lowest daily volume weighted average prices
during the 22 trading days before we make a request for an advance. Our
agreement with the providers of our equity line financing contains mutual
indemnities against loses, costs and expenses arising out of
misrepresentations, breaches of warranties and agreements or other
actions or inactions by the other party.
Advances will be made as requested by us, with 90% of an advance
coming from Cornell, and 10% coming from Dutchess. We will receive the
amount we have requested as an advance within 10 days of our request,
subject to satisfying standard closing conditions. The issuance of our
shares of common stock to Cornell and Dutchess in connection with the
equity line financing will be exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) thereof. The sale of
such shares by those providers of our equity line financing is being
registered under this Registration Statement. We have agreed not to file
any other registration statements for the public sale of our securities
for ninety days from the effective date of this Registration Statement,
with certain limited exceptions. We have also agreed that our executive
officers and directors will not sell any shares of our common stock
during the ten trading days following any advance request by us.
Registration Rights
We have agreed to maintain an effective registration statement for the
sale of the shares issued to the providers of our equity line financing,
as described above. If, at any time, the number of shares available
under a registration statement is insufficient to cover all securities
issued to the providers, we have agreed to use our best efforts to cause
an amendment or new registration statement containing those shares to be
declared effective. Our agreement with the providers of our equity line
financing contains mutual indemnities against loses, costs and expenses
arising out of the violation of by the other party of state and Federal
securities laws. Insofar as indemnification for liabilities under the
Securities Act of 1933, as amended, may be permitted under such
agreement, we have been informed that in the opinion of the U.S.
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable. Our agreements as to registration rights are only with
the providers of our equity line financing and we have no obligations to
assist or indemnify any other holder of the shares sold by them or to any
underwriter designated by such holders.
Compensation
We are selling our shares to the providers of our equity line
financing at a 9% discount from the market price as described above.
Yorkville Advisors's Management, LLC, an affiliate of
Cornell, will be paid by us 2.31% of each amount advanced to us under the
equity line financing. Dutchess Advisors Limited an affiliate of
Dutchess, will be paid by us 4.69% of each amount advanced to us under
the equity line financing. Furthermore, upon the effective date of this
Registration Statement, we will issue to Yorkville Advisors, 65,347
shares of common, and to Dutchess Advisors, 132,673 shares of common
stock (of which 29,703 shares will be directed to Dutchess). And, on
December 9, 2001, we will issue to Yorkville Advisors and Dutchess
Advisors additional shares of our common stock in an amount equal to
$66,000 and $134,000, respectively, divided by the purchase price, as
described above, for shares advanced under the equity line financing as
if an advance occurred on such date. In addition, we will pay each of
the legal counsel to Cornell and Dutchess an aggregate amount of $15,000
for their services, and pay escrow fees, in connection with this
transaction.
USE OF PROCEEDS
The net proceeds from the sale of shares will be received by the
selling shareholders. Medix will not receive any of the proceeds from
any sale of the shares by the selling shareholders. However, Medix will
receive the proceeds from the advances under the equity line of credit
and the exercise of warrants to purchase the shares to be sold
hereunder. Such proceeds will be used as working capital.
SELLING SHAREHOLDERS
The table below sets forth information as of August 6, 2001, with
respect to the selling shareholders, including names, holdings of shares
of common stock prior to the offering of the shares, the number of shares
being offered for each account, and the number and percentage of shares
of common stock to be owned by the selling shareholders immediately
following the sale of the shares, assuming all of the offered shares are
sold.
Shares of
Common
Stock Shares of Shares of Common
Beneficially Common Stock to be
Owned Stock Beneficially Owned
Before the Being After the Offering
Name Offering Offered Number Percentage
-------------------------- ------------ --------- ------ ----------
Cornell Capital Partners, 8,000,000 8,000,000 0 0%
L.P.
Dutchess Private Equities 1,500,000 1,500,000 0 0%
Fund, L.P.
Dutchess Advisors Limited 600,000 600,000 0 0%
Yorkville Advisors 300,000 300,000 0 0%
Management LLC
Fritz & Miller, P.C. 5,467 5,467 0 0%
Shapiro Forman Allen & 11,200 11,200 0 0%
Miller LLP
Guli R. Rajani 11,111 11,111 0 0%
Nicole S. Rajani 11,111 11,111 0 0%
Ajay G. Rajani 11,111 11,111 0 0%
------ ------
Total 10,450,000 10,450,000
Relationship Between Medix and the Selling Shareholders
The selling shareholders have or will acquire the shares of common
stock indicated above in one of the following ways: (i) upon advancing
funds to the Company under a equity line financing, (ii) in payment of
certain of the Company's fee obligations in connection with the equity
line financing, and (iii) upon the exercise of warrants issued in
settlement of litigation. None of the persons listed above are
affiliates or controlled by affiliates of the Company. We have a
separate contractual obligation to file this registration with each of
the selling shareholders, which was part of the inducement for them to
invest in the Company.
Cornell Capital Partners, L.P. and Dutchess Private Equities Fund,
L.P., who are the providers of the equity line financing, are statutory
underwriters under Section 2a(11) of the Securities Act of 1933, as
amended. The principals of Cornell Capital Partners, L.P. are Yorkville
Advisors Management LLC, its general partner, and Mark Angelo, Joseph
Donohue, Robert Ferrell, Matthew Beckman and Meir Levin. The principals
of Dutchess Private Equities Fund, L.P. are Dutchess Capital Management
LLC, its general partner, and Michael A. Novielli and Douglas H.
Leighton, managing members and principal owners of the general partner.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 100,000,000 shares of common stock,
par value $.001 per share, and 2,500,000 shares of preferred stock. As
of August 6, 2001, we had outstanding 50,955,946 shares of common stock,
1 share of 1996 Preferred Stock, 50 shares of 1999 Series B Preferred
Stock and 375 shares of 1999 Series C Preferred Stock. As of such date,
our common stock was held of record by approximately 390 persons and
beneficially owned by approximately 9,500 persons.
Common Stock
Each share of common stock is entitled to one vote at all meetings of
shareholders. Shareholders are not permitted to cumulate votes in the
election of directors. Currently, the Board of Directors consists of six
directors, who serve for staggered terms of three years, with at least
two directors elected at every annual meeting. All shares of common
stock are equal to each other with respect to liquidation rights and
dividend rights. There are no preemptive rights to purchase any
additional common stock. In the event of liquidation, dissolution or
winding up of Medix, holders of the common stock will be entitled to
receive on a pro rata basis all assets of Medix remaining after
satisfaction of all liabilities and preferences of the outstanding
preferred stock. The outstanding shares of common stock and the shares
of common stock issuable upon conversion or exercise of derivative
securities are or will be, as the case may be, duly and validly issued,
fully paid and non-assessable.
Transfer Agent and Registrar
We have retained Computershare Trust Company, Inc., 12039 W. Alameda
Parkway, Suite Z-2, Lakewood, Colorado 80228, as Transfer Agent and
Registrar for the our common stock, (303) 986-5400.
PLAN OF DISTRIBUTION
The selling shareholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on any stock exchange, market or
trading facility on which the shares are traded. These sales may be at
fixed or negotiated prices. The
selling shareholders may use any one or more of the following methods
when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company
or derivatives of Company securities and may sell or deliver shares in
connection with these trades. The selling shareholders may pledge their
shares to their brokers under the margin provisions of customer
agreements. If a selling shareholder defaults on a margin loan, the
broker may, from time to time, offer and sell the pledged shares. The
selling shareholders have advised the Company that they have not entered
into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their
shares other than ordinary course brokerage arrangements, nor is there an
underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling shareholders.
Broker-dealers engaged by the selling shareholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling shareholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling shareholders do not
expect these commissions and discounts to exceed what is customary in the
types of transactions involved.
Cornell Capital Partners, L.P. and Dutchess Private Equities Fund,
L.P., and their affiliates, Yorkville Advisors Management LLC and
Dutchess Advisors Limited, are each an "underwriter" under Section 2a(11)
of the Securities Act of 1933, in connection with the resale of common
stock under the Equity Line of Credit Agreement. Cornell Capital
Partners, L.P.and Dutchess Private Equities Fund, L.P. will pay us 91% of
the average of the 3 lowest closing bid price of our common stock for
the 22 days immediately preceding the advance date. The discount on the
purchase of the common stock to be received by them will be an
underwriting discount. We retained Yorkville Advisors Management, LLC and
Dutchess Advisors Limited as our consultants in connection with the
equity line of credit financing. See "Equity Line of Credit."
Other selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel
to certain of the selling shareholders. Otherwise, all discounts,
commissions or fees incurred in connection with the sale of the common
stock offered hereby will be paid by the selling shareholders. The
Company has agreed to indemnify certain selling shareholders against
certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Upon the Company being notified by a selling shareholder that any
material arrangement has been entered into with a broker-dealer for the
sale of shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or
dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name
of each such selling shareholder and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the price at
which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
(vi) other facts material to the transaction.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions, if required,
only through registered or licensed brokers or dealers. In addition, in
certain states the shares may not be sold unless the Shares have been
registered or qualified for sale in such state or an exemption from
registration or qualification is available and complied with.
The Company has advised the selling shareholders that the
anti-manipulative provisions of Regulation M promulgated under the
Exchange Act may apply to their sales of the shares offered hereby.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 109 of the Colorado Business Corporation Act generally
provides that Medix may indemnify its directors, officers, employees and
agents against liabilities in any action, suit or proceeding whether
civil, criminal, administrative or investigative and whether formal or
informal (a "Proceeding"), by reason of being or having been a director,
officer, employee, fiduciary or agent of Medix, if such person acted in
good faith and reasonably believed that his conduct, in his official
capacity, was in the best interests of Medix (or, with respect to
employee benefit plans, was in the best interests of the participants of
the plan), and in all other cases that his conduct was at least not
opposed to Medix's best interests. In the case of a criminal proceeding,
the director, officer, employee or agent must have had no reasonable
cause to believe that his conduct was unlawful. Under Colorado Law,
Medix may not indemnify a director, officer, employee or agent in
connection with a proceeding by or in the right of Medix if the director
is adjudged liable to Medix, or in a proceeding in which the directors,
officer employee or agent is adjudged liable for an improper personal
benefit.
Our Articles of Incorporation provide that we shall indemnify its
directors, and officers, employees and agents to the extent and in the
manner permitted by the provisions of the laws of the State of Colorado,
as amended from time to time, subject to any permissible expansion or
limitation of such indemnification, as may be set forth in any
shareholders' or directors' resolution or by contract.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Securities Act"), may be permitted to directors,
officers or persons controlling Medix pursuant to the foregoing
provisions, Medix has been informed that in the opinion of the
Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
AVAILABLE INFORMATION
We are a reporting company and file our annual, quarterly and current
reports, proxy material and other information with the SEC. Reports,
proxy statements and other information concerning Medix filed with the
Commission may be inspected and copied at the Public Reference Room
maintained by the Commission at its office, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at Citicorp Center, 300 West Madison Street, Chicago, Illinois
60661 and Seven World Trade Center, New York, New York 10048. Copies of
such material can be obtained from the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The public may obtain information about the Public
reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
Our SEC filings are also available at the SEC's Website at
"http:\\www.sec.gov".
We have filed a registration statement under the Securities Act, with
respect to the securities offered pursuant to this Prospectus. This
Prospectus does not contain all of the information set forth in the
registration statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further
information, reference is made to the registration statement and the
exhibits filed as a part thereof, which may be found at the locations and
Website referred to above.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we
file with them, which means that we can disclose important information to
you by referring you to the documents filed with the SEC that contains
that information. The information incorporated by reference is an
important part of this Prospectus, and it is important that you review it
before making your investment decision. We hereby incorporate by
reference the documents listed below:
(a) a copy of our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000, filed with the SEC on March 21, 2001;
(b) a copy of our Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2001, filed with the SEC on May 14, 2001;
(c) copies of the our Forms 8-K, filed with the SEC on January 9, January
16, January 17, January 29, February 1, February 20, March 15, March
27, April 5, April 11, April 23, May 24, June 12, June 22, and July
30, 2001.
We are delivering with this Prospectus a copy of the Form 10-KSB and
the Form 10-Q referred to above. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this
Prospectus, or made herein, shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document, which also is or is deemed
to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
We will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon
oral or written request of any such person, a copy of any or all of the
documents incorporated herein by reference, other than the exhibits to
such documents (unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates).
Requests should be directed to Investor Relations Department, Medix
Resources, Inc., 7100 E. Belleview Avenue, Suite 301, Greenwood Village,
Colorado 80111, telephone (303) 741-2045.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for us
by Lyle B. Stewart, P.C. Lyle B. Stewart, P.C. has been granted options
to purchase 25,000 shares of Medix common stock at an exercise price of
$0.26 per share, and Mr. Stewart, individually, has been granted options
to purchase 100,000 and 75,000 shares of Medix common stock at exercise
prices of $3.38 and $0.92 per share, respectively.
EXPERTS
The consolidated financial statements of Medix as of December 31,
2000, and for each of the two years in the period ended December 31, 2000
appearing in our 2000 Form 10-KSB have been audited by Ehrhardt Keefe
Steiner & Hottman P.C., independent auditors, as stated in their report
appearing therein, and have been incorporated herein by reference in
reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.