Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer — Form SB-2 Filing Table of Contents
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SB-2/A — Pre-Effective Amendment to Registration of Securities by a Small-Business Issuer
Approximate
Date of Proposed Sale to the Public:From
time to time after the effective date of this Registration
Statement
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, 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, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
o
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.
o
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box.
o
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of Securities To Be Registered
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 hereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to such Section
8(a),
may determine.
(1)
In
accordance with Rule 416(a), the Registrant is also registering
hereunder
an indeterminate number of additional shares of common stock that
shall be
issuable pursuant to Rule 416 to prevent dilution resulting from
stock
splits, stock dividends or similar transactions.
(2)
Estimated
pursuant to Rule 457(c) of the Securities Act of 1933 solely for
the
purpose of computing the amount of the registration fee based on
the
average of the bid and ask prices reported in the Pink Sheets on
June 29,2005.
(3)
Represents
shares of the Registrant's common stock being registered for resale
that
have been or may be acquired upon the exercise of warrants issued
to
certain of the selling security holders named in the
prospectus.
(4)
Amount
previously paid.
PROSPECTUS
- SUBJECT TO COMPLETION
The
information in this prospectus is not complete and may be amended or
supplemented from time to time to update the disclosures set forth in this
prospectus. The selling security holders may not sell these securities until
the
registration statement filed with the Securities and Exchange Commission
is
effective. This prospectus is not an offer to sell these securities in any
state
where the offer or sale is not permitted.
22,615,007
Shares
BERMAN
CENTER, INC.
COMMON
STOCK
This
prospectus relates to 22,615,007 shares of common stock of Berman Center,
Inc.
that may be sold from time to time by the selling security holders listed
in
this prospectus in the section entitled “Selling Security Holders.” We will not
receive any proceeds from the sales by the selling security holders, except
for
funds received from the exercise of warrants held by certain of the selling
security holders, if and when exercised. The selling security holders named
in
this prospectus may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not soliciting offers
to buy
these securities in any state where the offer or sale is not
permitted.
For
a
description of the plan of distribution of the common stock, please see “Plan of
Distribution” on page 16 of this prospectus.
Our
common stock is quoted on the Electronic Quotation Services (the “Pink Sheets”)
under the symbol “BRMC.” On October7, 2005,
the closing bid price for our common stock in the Pink Sheets was $2.00 per
share.
INVESTMENT
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING
ON PAGE 6 OF THIS PROSPECTUS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date
of this prospectus is ___________, 2005.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
3
PROSPECTUS
SUMMARY
3
RISK
FACTORS
6
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
14
USE
OF PROCEEDS
15
DILUTION
15
SELLING
SECURITY HOLDERS
15
PLAN
OF DISTRIBUTION
17
BUSINESS
19
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
30
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
31
DIRECTORS,
EXECUTIVE OFFICERS AND CONTROL PERSONS
37
EXECUTIVE
COMPENSATION
41
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
42
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
43
DESCRIPTION
OF CAPITAL STOCK
43
SHARES
ELIGIBLE FOR FUTURE SALE
47
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
48
LEGAL
MATTERS
49
EXPERTS
49
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
49
ADDITIONAL
INFORMATION
50
BERMAN
CENTER, INC. INDEX TO FINANCIAL STATEMENTS
F-1
LB
CENTER, INC. INDEX TO FINANCIAL STATEMENTS
F-20
2
ABOUT
THIS PROSPECTUS
Please
read this prospectus carefully. It generally describes our business, financial
condition and results of operations and the securities that are being offered
by
the selling security holders named in this prospectus. We have prepared this
prospectus so that you will have the information necessary to make an informed
investment decision.
You
should rely only on the information contained in this prospectus. We have
not
authorized anyone to provide you with information different from that contained
in this prospectus. You must not rely on any unauthorized information or
representation. The selling security holders are offering to sell shares
of our
common stock and seeking offers to buy shares of our common stock only under
circumstances and in jurisdictions where offers and sales are permitted.
The
information contained in this prospectus is accurate only as of the date
on the
front of the document, regardless of the time the prospectus is delivered
or any
common stock is sold.
PROSPECTUS
SUMMARY
This
summary highlights some information from this prospectus, and it may not
contain
all of the information that is important to you. You should read the following
summary together with the more detailed information regarding our company
and
the common stock being sold in this offering, including “Risk Factors” and our
financial statements and related notes, included elsewhere in this prospectus.
Unless the context otherwise requires, the terms the "Company,""we,""us"
and
“our” refer to Berman Center, Inc., a Delaware corporation.
The
Company
We
are a
multimedia enterprise specializing in women's health, active across the domains
of radio, television, and print media, including books, magazines and
newspapers. Dr. Laura Berman, our President, is a premier name in women's
sexual
health, a leading researcher in the field and has created a multi-faceted
platform for reaching out to consumers in a variety of settings, including
the
entertainment medium, product sales, medical and therapeutic services and
online
subscription services. Dr. Berman, who is not a physician, earned her Master's
in Clinical Social Work and Doctorate in Health Education and Therapy
(specializing in human sexuality) at New York University.
Our
principal source of revenue is from the clinical services that we provide
out of
our downtown Chicago clinic, comprising approximately 10,000 square feet.
Our
clinical staff works to improve every patient's quality of life, health and
relationships. Clinical services include talk therapy performed by licensed
clinical social workers, medicine, as practiced by physicians and nurse
practitioners, phlebotomy and serum and saliva testing services, nutritional
counseling and yoga classes. Clinical services accounted for 60% of our revenue
for the year ended December 31, 2004 and 83% of our revenue for the first
six
months of 2005. Our
clinical staff includes one phlebotomist/ physician’s assistant, two nurse
practitioners and four talk therapists, all of whom work for us. We also
offer
medical services to our patients through a physician, Dr. Brian Locker, who
practices at our offices. Dr. Locker acts as our Chief of Staff and is
compensated through his own medical company, FSM Associates, LLC. Dr. Locker
supervises the nurse practitioners, each of whom has the right to prescribe
medications in the state of Illinois including but not limited to vasodilators,
hormones, SSRI’s, SNRI’s and other medications.
We
operate a full-scale hormonal management clinic, counseling center and sexual
function testing center. Our
hormone management clinic is a facility that can treat the large variety
of
female hormone deficiency cases including menopausal symptom relief and sexual
function improvement as well as nutrition and fitness. Our sexual function
testing center is a facility that measures hormone levels, nerve function
and
other sensory impairment issues, blood flow abnormalities in the genital
region,
and signs of emotional difficulty, relationships discord and past trauma
and
abuse.
We
generate additional revenue from a continuing medical education course that
we
hold at various locations, including the Fairmont Hotel in Chicago, Illinois.
The medical education courses accounted for 25% of our revenue in 2004. We
are
scheduled to offer medical education courses in the future, including courses
in
Chicago at the Renaissance Hotel; in Marina del Rey, California at the Ritz
Carlton; in New York City at the Marriot Marques Hotel. We also generate
revenue
through research funding, which accounted for 15% of our revenue in 2004.
For
example, we received a $60,000 grant for a research project funded by
Drugstore.com and a $100,000 project funded by CB Fleet, both completed in
2004.
Obtaining funding for future research projects is an ongoing goal of our
management. Currently, no projects have been secured for 2005 or 2006. In
addition, radio advertising for the Dr. Laura Berman radio show, which we
produce, generated $50,000 in 2005, which accounted for 17% of revenue for
the
first six months of 2005.
We
have
recently entered into the television production business. We, in conjunction
with the Gantz Brothers’ View Film Productions, produced a pilot financed by
ShowTime Networks, Inc. ShowTime picked up the series in September 2005 and
intends to turn it into nine episodes projected to premier in June of 2006.
We
are entitled to receive a production fee equal to 10% of the production
budget of each episode, which fee equates to $375,000 per episode. The show,
which is expected to be entitled Sexual Healing, will track three couples’
progress through intensive couples therapy at the Berman Center over a one-week
period. The main set of the show will be our offices with additional footage
taped in and around the city of Chicago as couples go on therapeutic dates
arranged by Dr. Berman. It is expected that our clinical services and their
impact on patients will be an important feature of each week’s plot
line.
We
also
receive revenue from books authored by Dr. Berman. Dr. Berman is a co-author
of
two published books—For Women Only (published by Henry Holtz) and Secrets of the
Sexually Satisfied Woman (published by Hyperion). Her residual rights and
her
ongoing rights in future books are pledged to the Berman Center as part of
her
employment agreement with us. Her next book, entitled The Passion Prescription,
is scheduled to be released by Hyperion in January 2006 and is a do-it-yourself
guide to sexual wellness. A final advanced payment $71,000 will be received
in
January 2006 in conjunction with the book’s release. Revenue from future book
and media projects of Dr. Berman is also pledged to us as part of her employment
agreement.
We
are
also in contract negotiations with a publisher of self-help experts to develop,
market and distribute a free and subscription-based website and online
newsletters based upon Dr. Berman’s new book, The Passion Prescription. It is
anticipated that the website will be named after her next book, and that
the
negotiations will be completed in October 2005. In addition to any subscription
revenue from the site, the website will sell Dr. Berman’s product line from
California Exotics Novelties, LLC and any other products or media that will
be
produced in the future. We also have plans to create a sexual health DVD
series
entitled The Endless Passion series, which is in the concept phase. We are
currently in negotiations with different production and distribution groups
regarding the DVD series and production is anticipated to begin in November
2005, assuming negotiations with the potential production and distribution
partner are successfully completed on time. We have also created a line of
Kegal
exercises and sexual aids in partnership with California Exotics Novelties,
LLC.
Dr. Berman and our management team designed the products and California Exotics
is distributing and managing the products. We are entitled to an 8% share
of the
revenue of the product line paid to California Exotics.
Corporate
Information
We
are
incorporated in the State of Delaware. Our principal executive offices are
located at 211 East Ontario, Suite 800, Chicago, Illinois60611 and our
telephone number is (312) 255-8088. Our shares of common stock are quoted
in the
Pink Sheets under the symbol "BRMC."
Company
History
We
were
incorporated in October 1989 under the laws of the State of Georgia under
the
name William E. York, Inc. for the purpose of acquiring Bio-Dyne Corporation,
a
Georgia corporation formed in 1986 ("Bio-Dyne") and ECBB Body Building, Ltd.,
a
New York corporation formed in 1979 ("ECBB"), which collectively manufactured,
marketed and distributed multi-station home gyms, exercise machines, weight
benches and specialty free weight equipment.
In
November 1989, we acquired all of the issued and outstanding shares of capital
stock of Bio-Dyne and ECBB. Following the closing of the transaction, Bio-Dyne
was formally dissolved and a Certificate of Dissolution of ECBB was filed
with
the Department of State of New York. Thereafter, we used the trade name Bio-Dyne
and in January 1991, changed our name from William E. York, Inc. to Bio-Dyne
Corporation. We ceased active operations after the filing of bankruptcy in
December 1997. On January 18, 2005, we changed our name to No Good TV, Inc.
and
our shares were subsequently quoted in the Pink Sheets under the symbol “NTVN.”
In May 2005, we changed our name to LB Center, Inc.
3
On
June3, 2005, we entered into an Agreement and Plan of Merger with Berman Health
and
Media, Inc. (“BHM”) (f/k/a The Berman Center, Inc.), a privately held Delaware
corporation, pursuant to which the stockholders of BHM acquired approximately
87% of our issued and outstanding common stock through a merger transaction
(the
"Merger"), with our existing stockholders continuing to own the remaining
13% of
our issued and outstanding common stock after the Merger. The Merger was
consummated through the merger of our wholly owned subsidiary, LBC MergerSub,
Inc., a Nevada corporation, with and into BHM, with BHM being the surviving
corporation. The Merger was intended to be a "tax-free" reorganization pursuant
to the provisions of Section 368(a) of the Internal Revenue Code of 1986,
as
amended. As a result of the Merger, BHM became a wholly owned subsidiary
of the
Company. Immediately after the Merger, we reincorporated from the State of
Georgia to the State of Delaware and changed our name from LB Center, Inc.
to
Berman Center, Inc.
BHM
was
formed on January 16, 2003 and operated as a privately held Delaware limited
liability company under the name Berman Center LLC until June 2, 2005, when
it
reorganized into corporate form under the name “The Berman Center, Inc.” in
accordance with the provisions of the Delaware Limited Liability Company
Act. On
June 20, 2005, we changed the name of The Berman Center, Inc. to Berman Health
and Media, Inc.
The
members of our Board of Directors immediately after the Merger consisted
of
Samuel P. Chapman, Laura A.C. Berman, Allan Charles, Alger Chapman, Stuart
Cornew, Jan Fawcett, Robert Goodmen and Michael Romano. On August 25, 2005,
Mitchell Mondry, Robert Peele and Howard Zuker were each appointed to serve
on
our Board of Directors. Howard Zuker was selected by purchasers of a majority
of
the units of common stock and warrants pursuant to the private placement
agreement for the private placement occurring in June 2005, as described
below.
Samuel P. Chapman is our Chairman and Chief Executive Officer and Laura A.C.
Berman is our President.
In
June
2005, BHM offered for sale (the "Offering") through Hunter World Markets,
Inc.
on a “best efforts” basis units of its common stock and warrants (the “Units”),
each consisting of (i) two shares of its common stock, (ii) one three-year
warrant exercisable into one share of its common stock at an exercise price
of
$1.05 and (iii) one three year warrant exercisable into one share of its
common
stock at an exercise price of $1.575. The price per Unit was $1.05. On June16,2005, 2,952,381 Units were sold to certain of the selling security holders.
The
Offering closed in June 2005. All of the shares of common stock and shares
underlying warrants sold by BHM in the Offering and exchanged for securities
in
our company pursuant to the Merger are being registered for resale in this
registration statement.
Our
shares of our common stock are quoted under the symbol “BRMC” in the Pink
Sheets.
The
Offering
Common
stock offered by selling security holders
22,615,007
shares(1)
Common
stock outstanding
31,795,415
shares (2)
Use
of proceeds
We
will not receive any proceeds from the sale of the common stock,
except
for funds from the exercise of warrants by certain of the selling
security
holders, if and when exercised.
Risk
factors
See
the “Risk Factors” section and other information included in this
prospectus for a discussion of factors you should carefully consider
before deciding to invest in shares of our common
stock.
Pink
Sheets Symbol
“BRMC”
(1)
Represents 12,023,922 shares of our outstanding common stock and 10,591,085
shares of our common stock issuable upon exercise of outstanding warrants
that
were issued to the selling security holders.
(2)
The
number of shares of our common stock outstanding as of September 30, 2005
excludes 10,591,085 shares of our common stock issuable upon exercise of
outstanding warrants and 314,230 shares of our common stock issuable upon
exercise of outstanding stock options.
4
Summary
Financial Information
The
following summary financial information of Berman Center, Inc. has been derived
from the financial statements that are included elsewhere in this prospectus.
You should read this information in conjunction with “Management's Discussion
and Analysis of Financial Condition and Results of Operations” and the financial
statements and the related notes thereto included elsewhere in this
prospectus.
This
prospectus is part of a registration statement on Form SB-2 we filed with
the
Securities and Exchange Commission. You should rely only on the information
provided in this prospectus and the registration statement. You should not
assume that the information in this prospectus is accurate as of any date
other
than the date on the front of this document.
RISK
FACTORS
Any
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and all of the information
contained in this prospectus before deciding whether to purchase our common
stock. Our business, financial condition or results of operations could be
materially adversely affected by these risks if any of them actually occur.
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. Some of these factors have affected
our financial condition and operating results in the past or are currently
affecting us. This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks faced by us described below and elsewhere in
this
prospectus. With respect to this discussion, the terms “Berman Center,”“Company”, "we,""us," and "our" refer to the registrant, Berman Center, Inc.,
and our wholly owned subsidiary, Berman Health and Media, Inc.
We
have a history of losses and we anticipate that our expenses will dramatically
increase as we execute our business plan. Thus, we will likely experience
continued losses in the near future, may not be able to continue as a going
concern, and may not ever achieve or maintain
profitability.
We
have
incurred significant losses since our inception on January 16, 2003. As of
June30, 2005, we had an accumulated deficit of approximately $3,421,653. In
addition, our losses for the last two years ended December 31, 2004 and 2003
were $1,919,829 and $323,816, respectively, and our loss for the six months
ended June 30, 2005 was $1,178,008. In addition, we anticipate that our expenses
will dramatically increase as we increase our marketing expenditures and
expand
our clinic operations, which will include the hiring of additional employees
and
rental of new office space. If our revenues grow more slowly than anticipated
or
if our operating expenses exceed expectations, we will continue to operate
at a
loss, may not be able to continue as a going concern and may not be able
to
achieve or consistently maintain profitability.
We
intend
to seek additional financing in the future to fund our operations. Failure
to
secure additional financing in a timely manner and on favorable terms if
and
when needed in the future could have a material adverse effect on our financial
performance, results of operations and stock price and require us to implement
cost reduction initiatives and curtail operations. In addition, our independent
registered public accounting firm has added an explanatory paragraph to their
audit opinion issued in connection with the financial statements for the
year
ended December 31, 2004 relative to our ability to continue as a going concern.
Our ability to obtain additional funding in year 2005 and thereafter will
determine our ability to continue as a going concern. Our financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Our
historical financial information does not reflect our current primary business
strategy for achieving revenue growth.
We
began
our current operations in the female sexual health business in January 2003,
but
we did not open our clinic business until February 16, 2004. Historically
we
have derived the substantial majority of our revenues from clinic patients.
In
fiscal year 2003, our clinic business was not yet opened, and 100% of our
revenue was derived from grant revenue for research. In fiscal year 2004,
59.6%
of our revenue was derived from clinic patients, 25.0% from conferences and
seminars hosted by us, and 15.4% from grant revenue for research and studies.
As
of the six months ended June 30, 2005, 83.2% of our revenue from the date
of our
inception was derived from clinic patients and 16.8% came from media activities.
We anticipate that media and product revenue from licensing our products
and
services that we plan to develop will constitute an increasing portion of
our
revenues. For example, ShowTime has decided to pick up our television series
and
turn it into nine episodes projected to premier in June of 2006. We are entitled
to a 10% payment of the production budgets, which is $375,000 per episode.
Because our media and product revenue is expected to constitute a larger
portion
of our revenues going forward, historical financial information should not
be
construed as the basis from which to judge our future operations.
6
We
are dependent upon one person, Dr. Laura Berman, for achieving revenue growth.
The loss of services of Dr. Berman would result in significant financial
loss
for us.
We
are
uniquely dependent on one individual, Dr. Laura Berman, for our reputation
and
branding. Dr. Berman's talents, efforts, personality and leadership have
been,
and continue to be critical to our success. The diminution or loss of services
of Dr. Berman, and any negative market or industry perception arising from
that
diminution or loss, could have a material adverse effect on our business
and the
various business lines functioning at our company. We have an exclusive,
royalty-free license from Dr. Berman with respect to her name, likeness,
image
and voice for use in our business. If we were to terminate Dr. Berman's
employment without cause or if Dr. Berman were to terminate her employment
for
good reason, the license would cease to be exclusive. In addition, under
this
circumstance, Dr. Berman could compete against us and we would have to pay
Dr.
Berman royalties on revenues relating to her name. If Dr. Berman were to
compete
with us or if we were to lose our right to use this intellectual property,
our
business would be materially adversely affected.
In
addition, our business would be adversely affected if Dr. Berman's public
image
or reputation were tarnished. Dr. Berman, as well as her name, her image
and the
intellectual property rights relating to these, are integral to our marketing
efforts and form a significant portion of our brand name. Our success and
the
value of our brand depend in large part on the reputation of Dr. Berman.
Moreover, the death of Dr. Berman would have a materially adverse effect
on our
ability to effectively continue our business. To provide some protection
for us
in such an event, we have purchased two separate key person life insurance
policies covering Dr. Berman for an aggregate of $5,000,000 of key person
life
insurance coverage. However, in the event of Dr. Berman’s death, the key person
life insurance policy would not resolve the significant difficulties that
we
would encounter, and our continued financial performance and results of
operations would suffer in such an event.
The
market for clinical sexual function products and services for women is at
an
early stage and if market demand does not develop, we may not achieve or
sustain
revenue growth.
The
market for clinical sexual function products and services for women is at
an
early stage. Our
clinical staff works to improve our patient's quality of life, health and
relationships. Our clinical services include talk therapy performed by licensed
clinical social workers, medicine, as practiced by physicians and nurse
practitioners, phlebotomy and serum and saliva testing services, nutritional
counseling and yoga classes. In addition to clinical services, we also provide
or intend to provide medical education courses, books, consumer products,
DVDs,
and novelties related to female sexual health. The
latest population research indicates that significant percentage of women
have
sexual function complaints, yet the medical community generally may not be
able
to cope with these issues. Our market research indicates that only two other
clinics provide both psychological services and medical treatment for female
sexual function complaints. A potential lack of known options creates both
a
business opportunity and a risk for our company. The lack of competition
is a
business opportunity that results from being in a new market. However, the
fact
that consumers are not accustomed to consuming our services and insurance
companies are not accustomed to reimbursing clients for such services
may
hamper our future growth. We
cannot
accurately predict the growth of the markets for these services, and if we
are
unable to develop demand for our products and services, we may not achieve
or
sustain revenue growth, which will have a material adverse affect on the
price
of our securities.
Even
if
our products and services are ultimately adopted, widespread adoption may
take a
long time to occur. The timing and amount of royalties and product sales
that we
receive will depend on whether the products and services achieve widespread
adoption, and, if so, how rapidly that adoption occurs. We expect to pursue
extensive marketing efforts to promote the sale of our services and products.
If
our marketing efforts fail, and we are unable to increase sales of our products
and services, our business, financial condition and results of operations
may be
adversely affected.
If
we fail to protect and enforce our intellectual property rights or if licensors
who license intellectual property rights to us fail to protect and enforce
such
licensors' intellectual property rights, our ability to license our technologies
and to generate revenues would be impaired.
Our
business depends in part on generating revenues by licensing our intellectual
property and by selling products and services that incorporate our intellectual
property rights. If our licensees or we fail to protect our intellectual
property rights or our right to use our intellectual property is materially
impaired, then our ability to generate revenues by licensing our intellectual
property would be impaired. We
have
taken steps to protect our intellectual property rights. For example, we
reserve
all rights related to preliminary outlines and final outlines for television
series. These outlines are original works and must be protected with proper
confidentiality procedures when presented to different television networks
to
avoid having the idea or concept used without proper compensation. In presenting
outlines for our televisions series, we must ensure that the intellectual
property contained in the outlines are original and do not infringe upon
any
other party’s intellectual property rights. If we infringe upon another party’s
intellectual property rights in the creation and production of television
shows,
DVD material or other media products, we may be subject to costly litigation
and
lose the ability to profit from our media products, and, as a result, our
results of operation may be negatively impacted.
We
have
obtained copyrights for Dr. Berman’s published books and we intend to apply for
trademark for the terms "Berman Center, Treating the Whole Women" and our
company’s logo. Domain
names for the online business that we intend to conduct in the future have
been
reserved and we must continue to renew the domain names on an ongoing basis.
If
we fail to reserve or renew domain names used in our business, we may lose
valuable domain names and may not be able to conduct our online business
effectively. As a result, our ability to generate revenues may be negatively
affected. In addition, we review the content of our books and other
media
in an attempt to guard against inadvertent infringement upon any
intellectual property rights not owned by Dr. Berman or us. However, if we
infringe upon the material copyrighted by another party, we may become subject
to claims of copyright infringement, which may damage our reputation and
possibly lead to litigation or some other type of loss.
We
might be unable to recruit or retain necessary personnel, which could slow
the
development and deployment of our products and services.
Our
future success and ability to sustain our revenue growth depend upon the
continued service of our executive officers, and other key personnel and
upon
hiring additional key personnel and staff for the clinic. For example,
individuals that are qualified to work as nurse practitioners in the female
clinical
sexual function products and services industry
is limited and as a result competition may be high in recruiting such personnel.
In addition, we may experience difficulties in recruiting and obtaining
qualified personnel in light of our past layoffs. For example, beginning
in the
third quarter of 2004, our staff was reduced by nine employees through layoffs
and attrition. Potential recruits may be discouraged by the fear of future
layoffs and opt not to consider or accept employment with our company. If
we are
unable to recruit and sustain necessary personnel, the development and
deployment of our products and services would be hindered, and, as a result,
our
results of operation would be materially affected. We also are in the process
of
opening a new clinic in Naperville, a suburb of Chicago, Illinois. In connection
with the new clinic office, we must recruit additional nurse practitioners
and
other employees, and if we are unable to recruit and sustain necessary
personnel, the new clinic will not be able to operate effectively.
Any
future periods of rapid growth may place significant strains on our managerial,
financial and other resources. For instance, we are in the process of opening
a
new clinical office in Naperville, and we expect to experience growth as
a
result of the new office. We have also increased our amount of marketing
expenditures in an effort to grow our business. The rate of any future
expansion, in combination with our diverse products and services, may demand
an
unusually high level of managerial effectiveness in anticipating, planning,
coordinating and meeting our operational needs as well as the needs of our
licensees.
We
may become involved in costly and time-consuming litigation over misused
or
misinterpreted advice.
A
portion
of our media focuses on giving advice in the therapeutic and medical realms.
In
delivering such advice, there is risk it will be improperly followed or
improperly blamed for damage that a listener, viewer or reader may have
suffered, and consequently we could be subject to lawsuits on that basis.
The
negative publicity resulting from filing of any such lawsuit could adversely
affect our marketing efforts. In addition, it is possible that our financial
resources would be insufficient to satisfy the alleged claims in any lawsuit,
and we could incur substantial expenses defending such a lawsuit. We do not
currently carry a separate insurance policy for media liability
coverage.
We
may not carry a sufficient level of insurance to cover expenses and awards
related to the malpractice claims and litigation, and if the claims or
litigation relate to a period for which we carried no malpractice insurance,
we
would be solely responsible to pay for expenses and any award against us,
which
could have a negative effect on our business operations.
We
may
not currently carry a sufficient level of insurance coverage for professional
liability and malpractice claims, and there is a period for which we carried
no
malpractice insurance. From the opening of our clinic in February 2004
to
February 12, 2005, we carried professional liability and malpractice insurance
with limits of $1,000,000 for each occurrence and $10,000,000 in the aggregate.
In addition, since the opening of the clinic, all of our clinicians obtained
individual malpractice insurance coverage for themselves through their
respective associations for which we reimbursed them. However, our malpractice
insurance coverage expired on February 12, 2005 and we did not purchase
new
malpractice insurance coverage again until July 18, 2005, with coverage
limits
of $1,000,000 for each occurrence and $3,000,000 in the aggregate. In addition,
our new malpractice insurance policy does not provide retroactive coverage
for
any claims arising out of facts occurring prior to July 18, 2005. As a
result,
although there is no gap in malpractice coverage for our individual clinicians,
there is a period of approximately five months where we were not covered
by
professional liability and malpractice insurance at an entity level.
If
we
become subject to claims alleging the occurrence of malpractice during
the
five-month period we were not covered with malpractice insurance, we will
be
solely responsible to pay any related legal fees and damages as a result
of the
claim, without the benefit of insurance. Also, if we become subject to
the
claims that are covered by our malpractice insurance, and the costs and
damages
exceed the limits of $3,000,000 in aggregate and $1,000,000 for each occurrence,
we would be responsible to pay for the excess. In either situation, we
would
incur significant expenses and losses, our reputation would become damaged
and
our management may become distracted from the operation of our business
and our
results of operations may suffer.
We
may become involved in costly and time-consuming litigation related to the
hormone therapy services that we provide, and there may be a real or perceived
link between hormone therapy and other illness, which could result in potential
liability for us, our clinic and our practitioners and may reduce our results
of
operations.
We
provide bio-identical hormone therapy, which has associated risks that expose
us
to litigation claims. Hormone
therapy consists of a combination of one or more of the following substances:
testosterone, estrogen, progesterone and DHEA. It is prescribed for relief
of
menopausal symptoms and sexual function complaints such as, hot flashes,
moodiness, vaginal dryness, low libido, sleeplessness, and vaginal pain.
The
risks of hormone therapy are not fully known, but the
recent cessation of the Women's Health Initiative launched by the National
Institute of Health in the United States is evidence that hormone therapy
has
associated risks. The
Women’s Health Initiative was a study by the National Institute of Health to
determine the effectiveness of hormone therapy. The study was stopped due
to an
increase in side effects reported by the participants, including an increased
risk of stroke, coronary artery disease, breast cancer and bloodclots. Experts
disagree over the efficacy of the data; however, the study was stopped to
prevent further harm to the participants. We
require a normal PAP smear and a normal mammogram before prescribing any
hormones. While
full-information and medical disclaimers are signed by all patients of our
clinic, we may still be subject to litigation and liable for harm caused
by our
hormone treatment. Full
information and medical disclaimers are forms that advise patients of the
risks
of various treatments they may receive at the clinic, including hormone therapy,
and medical disclaimer are forms that we use to ask patients to disclaim
any
liability directed at us. The full information and medical disclaimers are
contractual in nature and do not prevent a patient alleging to have been
injured
from our hormone therapy from filing a lawsuit against us. If we become the
subject of litigation, it may be time-consuming and costly, and the hormone
therapy portion of our clinical business may suffer as a result of bad publicity
related to the filing of the lawsuit, whether successful or not. As a result,
our results of operation would suffer. In addition, hormone
therapy may have a link to other illnesses, or be perceived to have a link
to
other illnesses, which would generate potential liability for our clinic,
our
practitioners and us. As a result, the demand for our hormone treatment services
and our reputation could suffer a material and adverse effect by any real
or
perceived link between the treatments and other illnesses. Moreover, we could
be
subject to time-consuming and costly litigation as a result of providing
our
hormone treatment services to patients. As a result, we could suffer significant
expenses related to defending such litigation and our results of operations
would suffer.
8
We
may become involved in costly and time-consuming litigation over clinical
trials
conducted at our offices.
We
conduct clinical trials at our offices that involve experimentation on human
subjects. In the past, we have conducted clinical trials relating to research
on
a genital self-image study and a study conducted on vibrators. We are not
currently conducting any clinical trials and have no definitive arrangements
to
conduct clinical trials at this time. However, we expect and intend that
we will
be involved in clinical trials again in the future. Before we conduct our
clinical trials, we obtain independent review board (IRB) approvals before
any
clinical trial testing is done. IRB
refers to the review board of Essex Institutional Review Board Inc., an
independent organization located in Lebanon, New Jersey. Institutional Review
Board determines whether research proposals meet the review board’s requirements
for safety and ethical standards for conducting clinical research on human
subjects. Use
of a
centralized IRB to review and approve all research ensures its legitimacy
and
provides outside supervision of adherence to ethical guidelines. However,
despite review from the IRB, we may encounter unforeseen results and effects
during and after our clinical trials. If participants in our clinical trials
are
injured or suffer harm during or as a result of our trials, we may become
subject to costly and time-consuming litigation, although we have not been
the
subject to such claims in the past. If we become subject of such litigation,
our
results of operations may suffer.
Product
liability claims could expose us to losses and could be time-consuming and
costly to defend.
We
are
exposed to claims that our products, in particular for the Berman Center
Intimate Accessories Collection, have flaws or other defects that have caused
personal or other injury, although we have not experienced any product liability
claims to date. Berman
Center Intimate Accessories Collection is our new line of products that went
on
sale in the beginning of September 2005. The Collection is a line of 12 Kegal
exercises and sexual aid devices designed by Dr. Berman and manufactured
and
distributed by California Exotics Novelties, LLC in Chino, California. Twelve
more products are scheduled for release in 2006 and again each year for three
more years.Pursuant
to our agreement, California Exotics, as licensee, must maintain product
liability insurance in an amount not less than $3,000,000; and, the insurance
policy names our company, officers, directors, agents, and employees as insured
parties at the sole expense of California Exotics. We do not carry insurance
coverage for product liability claims. Although we seek to limit our exposure
to
product liability claims by California Exotic’s liability insurance, if products
sold by us or by our licensees cause personal injury, financial loss or other
injury to our or our licensees' customers, the customers, or our licensees,
may
seek damages or other recovery from us. These claims would be time-consuming
and
expensive to defend, distract management and could result in substantial
damages
against us. If product liability claims against us are successful and exceed
the
insurance coverage provided by the policy purchased by California Exotics,
or if
coverage is denied by the insurance provider, we would be exposed to losses
resulting from paying any uncovered claims. In addition, the assertion of
these
claims, even if unsuccessful, could damage our reputation or that of our
licensees or their products, and, as a result, could damage our reputation
and
the market for our products and services and harm our business, financial
condition and results of operations.
We
may become involved in costly and time-consuming litigation over medical
malpractice or violation of federal or state health care
laws.
Because
of its involvement in Medicare and Medicaid, the Federal Government regulates
much of the medical field. The services offered at our clinic are not rendered
to Medicare or Medicaid beneficiaries or are non-covered services. Our
physicians do not bill or collect from Medicare and Medicaid for services
rendered to our patients and should therefore not fall within the
Medicare/Medicaid Anti-Kickback Amendments to the Social Security Act (the
“Anti-kickback Statute”) or be subject to their penalties. However, our
physicians are regulated by a series of federal and state laws, including
the
Anti-kickback Statute and the federal law commonly referred to as the “Stark
Law”, regarding referrals of patients to entities with which the physician
has a
financial relationship. The Stark Law prohibits physicians from making
referrals
for a "designated health service," payable by Medicare or Medicaid, to
any
entity with which the physician has a financial relationship, unless an
exception applies. A financial relationship means either an ownership interest
or a compensation arrangement. The Stark Law is broadly worded and wide-ranging.
For example, a physician's own practice or group practice may be an entity
to
which referrals for designated health services are restricted unless certain
criteria are met. Penalties for violating the Stark Law include denial
of
payment for the service and civil monetary penalties. An intentional violation
of the Stark Law may be considered a false claim and subject the physician
to
further criminal and civil liability under the federal False Claims Act.
State
laws that regulate physicians’ practices may also restrict the types of
relationships between physicians and non-physicians. A more detailed description
of regulations set forth by the Illinois Professional Standards Board can
be
found below. These laws are generally intended to preserve the independent
practice of medicine and prevent non-physicians from influencing the independent
medical judgment of physicians in the care and treatment of
patients.
9
We
seek
to structure our arrangements with physicians to be in compliance with the
Stark
Law, the Anti-kickback Statute, and similar state laws. We seek to keep current
on developments concerning their application by various means, including
consultation with legal counsel, when necessary. However, we are unable to
predict how these laws will be applied in the future, and the arrangements
into
which we enter may become subject to scrutiny. In
order to comply with the Stark Law, the Anti-kickback Statute and other federal
and state health care laws, we have entered into independent contractor
agreements in the past where the physicians providing medical services to
our
patients practice inside of our clinic but conduct their practice through
a
separate professional service entity. The physicians practice inside separate
companies known as Limited Liability Companies, or LLCs, which have entered
into
management and lease agreements with us. The LLCs employ or engage the
physicians that provide medical services to our patients. We bill
our
patients the charges for medical services provided by the LLC’s physicians, if
any, and the services provided by our clinicians such as intake, therapy,
nutrition and yoga for their office visit to our clinic. We are responsible
for
paying the LLC for the medical services that were provided to our patients.
We
currently have one arrangement with a physician, Dr. Brian Locker, who provides
medical services to our patients through a separate entity, FSM Associates,
LLC.
This arrangement is intended to comply with the Stark Law; Anti-kickback
Statute, and other state laws, to the extent that they may be deemed to apply.
However, if our arrangements are deemed to violate any of such laws, we may
become subject to administrative proceedings, litigation and/or fines and
penalties, which could have a material impact on our business and results
of
operations. Referrals
and claims that violate the Stark Law are each punishable by a $15,000 civil
money penalty, any claim paid as the result of an improper referral is an
overpayment, and circumvention schemes are punishable by a $100,000 civil
money
penalty. Though we are not directly engaged in the practice of medicine,
we may
be named in any potential malpractice suits, as well.
The
Illinois Professional Standards Board requires arms-length relationships
between
physicians, practices and corporations, and there is a risk that the
relationships between our physicians and us will be deemed improper by the
Standards Board, resulting in penalties and fines.
We
are
subject to regulations set forth by the Illinois Professional Standards Board
that require us to maintain an appropriate arms-length relationship with
physicians that provide medical services to our patients through LLCs. Our
company is not licensed to practice medicine, but may be subject to review
by
the licensing boards in the state of Illinois. We have made arrangements
where
the physicians practice inside of our clinic but conduct their own practice
through separate companies. We have entered into management and lease
agreements with the LLCs through which the physicians provide medical services
to our patients. We
bill
our patients directly for charges for medical services provided by the
physician, if any, and services provided by our clinicians and employees.
The
LLCs bill us for the medical services that were provided by its physicians
to
the patient. Although we believe our relationship with the LLCs and physicians
is in compliance with the regulations set forth by the Illinois Professional
Standards Board, there
is a
risk that our relationships will be viewed as improperly maintained and that
we
or the physicians will be found to be in violation of the regulations. If
we are
found to be in violation of the regulations, we could incur penalties or
fines
and be forced to restructure the operation of the medical portion of our
business, each of which, individually and in the aggregate, could be costly
and
have a material effect on our business and results of operation.
Our
company and our officers, directors and employees have limited experience
in
marketing, licensing and selling the products and services offered by our
clinic, have no experience in the online personals industry and may not be
able
to operate the business effectively.
Our
company and our officers, directors and employees have limited experience
in
marketing, licensing and selling the products and services offered by our
clinic, in operating and managing the clinic and in developing products and
services related to female sexual health. In addition, we intend to enter
into
the online personals industry, which is a substantial departure from our
current
business of offering product development and services related to female sexual
health. Our company and our officers, directors and employees have no experience
in developing, producing, pricing, marketing, selling or distributing online
personals products and services and we will rely on our ability to employ
persons that have such experience to carry out our business strategy with
respect to developing an online personals site and the other areas of our
business. Because of our inexperience in these areas, we may not be effective
in
achieving success that may otherwise be attainable by more experience, and,
as a
result, we may not be able to operate our business effectively and our results
of operation would suffer.
10
Higher
insurance costs may impact our future financial position and results of
operations.
We
may
experience an increase in insurance costs as a result of higher claims rates
against providers in the health products and services industry, which we
expect
will increase our premiums for insurance policies. Although we have not
experienced any claims, our insurance premiums may increase as a result of
an
overall increase in insurance costs in the health products and services
industry, even if the increase in our premiums does not properly reflect
the
risks related to our products and services. For example, although we provide
medical services to our patients through physicians that conduct their practice
inside of our clinic but through their own entity that is separate from us,
we
believe that insurance providers may charge us higher insurance fees insurance
costs as if the physicians were employed directly by us. Moreover, although
we
believe that our services are not as invasive and risky as other providers
in
the health products and services industry, insurers may not agree and insist
on
higher premiums. If our insurance costs increase, or if insurance is not
available on acceptable terms, or at all, our financial position and results
of
operation would suffer.
If
we and our production companies are not able to obtain and maintain a sufficient
audience for our television show, and if adverse trends develop in the
television production business generally, our television production business
could fail.
We
have
recently entered into the television production business, which is subject
to a
number of uncertainties. We, in conjunction with the Gantz Brothers’ View Film
Productions, produced a pilot financed by ShowTime Networks Inc., which has
decided to pick up the series and turn it into nine episodes projected to
premier in June of 2006. The show is expected to be entitled “Sexual Healing,”
and each episode tracks three couples’ progress through intensive couples
therapy at the Berman Center over a one-week period. We are entitled to a
10%
payment of the production budgets, which is $375,000 per episode. However,
television production is a speculative business because revenues and income
derived from television depend primarily on the continued acceptance of that
programming from the public, which is difficult to predict. Factors that
affect
our television production revenues and income, many of which are out of our
control, include but are not limited to:
·
promotion
of our programming,
·
the
content and quality of our programming,
·
the
strength of stations on which our programming is broadcast,
·
the
quality and acceptance of competing television programming
and other
sources of
entertainment,
·
a
general decline in broadcast television viewers,
·
pricing
pressure in the television advertising
industry,
·
general
economic conditions,
and
·
availability
of other forms of entertainment and leisure time activities.
If
the
television production portion of our business, including our Showtime series,
fails to secure a sufficient audience, our programming could be canceled
and the
revenues we generate and anticipate generating from television programming
would
decline.
Moreover,
we must work with production companies to produce our television shows, and
if a
significant disagreement arises between our production companies and us
regarding the direction and content of our television shows, the production
of
the shows may be delayed and the quality of our products may be negatively
affected. As a result, the amount of revenue, if any, from our television
production may decrease, and our results of operation would suffer. There
is
also no guarantee that the television production portion of our business
will be
able to continue in the long-term. For example, although Showtime Networks
has
an option to pick up our “Sexual Healing” television series for subsequent
telecast years, there is no guarantee that Showtime, or any other station,
will
elect to continue with the series. If we are unable to secure a broadcast
station to elect to continue with our television series, revenue from our
television production portion of our business will significantly decline,
and
our results of operation will suffer.
Our
future capital needs are uncertain. We will need to raise additional funds
in
the future and these funds may not be available on acceptable terms or at
all.
We
conducted a private placement of equity in June 2005 for gross proceeds of
$3.1
million and approximately $2.3 million in net proceeds. As
a
result of this private placement, we currently have sufficient funds on hand
to
fund our operations until approximately April 2006. We
expect
to expend approximately $500,000 in annual salaries for additions to staff
in
order to expand our clinic’s operation, including the opening of a new clinical
office in Naperville, a suburb of Chicago, Illinois, and we intend to spend
approximately $28,000 for equipment and supplies for the new clinic office.
We
anticipate raising additional funds through public or private financing,
strategic relationships or other arrangements in the near future to carry
out
our business strategy. We cannot be certain that any financing will be available
on acceptable terms, or at all, and our failure to raise capital when needed
could limit our ability to continue as a going concern and expand our business.
In addition, our independent registered public accounting firm has added
an
explanatory paragraph to their audit opinion issued in connection with the
financial statements for the year ended December 31, 2004 relative to our
ability to continue as a going concern. Our ability to obtain additional
funding
in year 2005 and thereafter will determine our ability to continue as a going
concern. Furthermore, additional equity financing may be dilutive to the
holders
of our common stock, and debt financing, if available, may involve restrictive
covenants, and strategic relationships, if necessary to raise additional
funds,
may require that we relinquish valuable rights.
Our
executive officers, directors and major stockholders have significant control
over us, which may lead to conflicts with other stockholders over corporate
governance matters.
Our
current directors, officers and more than 10% stockholders, as a group, own
approximately 75% of our outstanding common stock prior to the exercise of
any
outstanding warrants and stock options. In
addition, our Chief Executive Officer and Chairman of the Board, Samuel P.
Chapman, is the husband of our President, Dr. Laura A. Berman, and the son
of a
member of our Board of Directors, Alger Chapman. Acting
together, our current directors, officers and more than 10% stockholders
would
be able to significantly influence all matters that our stockholders vote
upon,
including the election of directors, approvals of acquisitions and financing
and
other transactions.
11
If
we fail to maintain effective internal controls over financial
reporting, or
we fail to comply in a timely manner with Section 404 of the
Sarbanes-Oxley Act of 2002, the price of our common stock may be
adversely affected.
We
are
required to establish and maintain appropriate internal controls over financial
reporting. Failure to establish those controls, or any failure of those controls
once established, could adversely impact our disclosures regarding our business,
financial condition or results of operations. Our management has reviewed
the
adequacy of the our internal controls over financial reporting, and management
believes that our internal controls provide reasonable assurance that the
financial statements are accurate, prepared in accordance with generally
accepted accounting principles and that the our assets are adequately
safeguarded. Our independent auditors have not yet conducted a review of
the our
internal controls over financial reporting, however, there will be such a
review
during fiscal year 2007 when the independent auditors review our compliance
with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002. Rules adopted by the SEC pursuant to Section 404 require annual
assessment of a company's internal control over financial reporting, and
attestation of its assessment by the company's independent registered public
accountants. The standards that must be met for management to assess the
internal control over financial reporting as effective are new and complex
and
require significant documentation, testing and possible remediation to meet
the
detailed standards. Management's assessment of internal controls over financial
reporting at any time may identify weaknesses and conditions that need to
be
addressed in our internal controls over financial reporting or other matters
that may raise concerns for you. Any actual or perceived weaknesses and
conditions that need to be addressed in our internal controls over financial
reporting, disclosure of management's assessment of our internal controls
over
financial reporting or disclosure of our public accounting firm's attestation
to
or report on management's assessment of our internal controls over financial
reporting may have an adverse impact on the price of our common stock. For
example, if we are unable to adequately maintain or improve our internal
controls over financial reporting, we may report that our internal controls
are
ineffective and our external auditors will not be able to issue an unqualified
opinion on the effectiveness of our internal controls. Ineffective internal
controls over financial reporting could also cause investors to lose confidence
in our reported financial information, which would likely have a negative
effect
on the trading price of our securities or could affect our ability to access
the
capital markets and which could result in regulatory proceedings against
us by,
among others, the Securities Exchange Commission.
We
may not be able to achieve the benefits we expect to result from the
merger.
In
June
2005, we executed an Agreement and Plan of Merger with Berman Health and
Media,
Inc., a privately held Delaware corporation (“BHM”), pursuant to which the
stockholders of BHM acquired approximately 87% of our issued and outstanding
common stock through a merger transaction, with our existing stockholders
continuing to own the remaining 13% of our issued and outstanding common
stock
after the merger. The merger was consummated through the merger of our wholly
owned subsidiary, LBC MergerSub, Inc., a Nevada corporation, with and into
BHM,
with BHM being the surviving corporation. The merger was intended to be a
"tax-free" reorganization pursuant to the provisions of Section 368(a) of
the
Internal Revenue Code of 1986, as amended. As a result of the merger, BHM
became
a wholly owned subsidiary of the Company.
We
consummated the merger for various reasons, including:
·
the
increased market liquidity expected to result from exchanging
stock in a
private company for publicly traded securities;
·
the
ability to use registered securities to make acquisition
of assets or
businesses;
·
increased
visibility in the financial community;
·
enhanced
access to the capital markets;
·
improved
transparency of operations; and
·
perceived
credibility and enhanced corporate image of being a publicly
traded
company.
There
can
be no assurance that any of the anticipated benefits of the merger will be
realized. In addition, the attention and effort devoted to achieving the
benefits of the merger and attending to the obligations of being a public
company, such as reporting requirements and securities regulations, could
significantly divert management's attention from other important issues,
which
could materially and adversely affect our operating results or stock price
in
the future.
We
have not voluntarily implemented various corporate governance measures, in
the
absence of which, stockholders may have more limited protections against
interested director transactions, conflicts of interest and similar
matters.
Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted
in
the adoption of various corporate governance measures designed to promote
the
integrity of the corporate management and the securities markets. Some of
these
measures have been adopted in response to legal requirements. Others have
been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or The Nasdaq Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges and Nasdaq are those that
address board of directors' independence, audit committee oversight, and
the
adoption of a code of ethics. We have not yet adopted any of these corporate
governance measures and, since our securities are not yet listed on a national
securities exchange or Nasdaq, we are not required to implement all of these
governance measures. Although we have independent directors on our Board
of
Directors, we have not formed an audit committee. We intend to adopt a code
of
ethics in the future. It is possible that if we were to adopt some or all
of
these corporate governance measures, stockholders would benefit from somewhat
greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to
our
senior officers and recommendations for director nominees may be made by
a
majority of directors who have an interest in the outcome of the matters
being
decided. Moreover, Samuel Chapman, the Chairman of our Board of Directors
and
Chief Executive Officer, is the son of Alger Chapman, a member of our Board
of
Directors. Samuel Chapman is also the husband of Dr. Laura Berman, our
President, and Samuel Chapman and Alger Chapman are involved in such matters
related to compensation of executive officers. As a result, there is a conflict
of interest that may arise with respect to actions taken by the board in
relation to our executive officers, and prospective investors should bear
in
mind our current lack of corporate governance measures in formulating their
investment decisions.
12
There
is no assurance of an established public trading market for our
securities
Although
our common stock is quoted in the Pink Sheets, a regular trading market for
the
securities may not be sustained in the future. Quotes for stocks listed in
the
Pink Sheets are not listed in the financial sections of newspapers and
newspapers generally have very little coverage of stocks quoted solely in
the
Pink Sheets. Accordingly, prices for and coverage of securities quoted solely
in
the Pink Sheets may be difficult to obtain. In addition, stock quoted solely
in
the Pink Sheets tend to have a limited number of market makers and a larger
spread between the bid and ask prices than those listed on the NYSE, AMEX
or
NASQAQ exchanges. All of these factors may cause holders of our common stock
to
be unable to resell their securities at or near their original offering price
or
at any price. Market prices for our common stock will be influenced by a
number
of factors, including:
·
changes
in interest
rates;
·
competitive
developments, including announcements by competitors
of new products or
services or significant contracts, acquisitions, strategic
partnerships,
joint ventures or capital
commitments;
·
variations
in quarterly operating
results;
·
changes
in financial estimates by securities
analysts;
·
the
depth and liquidity of the market for our common
stock;
·
investor
perceptions of the Company after
the merger with Berman Health
and Media,
Inc. and the women's sexual health
industry generally;
and
·
general
economic and other national
conditions.
Provisions
in our certificate of incorporation and bylaws or Delaware
law might discourage,
delay or prevent a change of control of our company or changes
in our management
and, therefore, depress the trading price of our common
stock.
Some
of
the provisions of our Certificate of Incorporation and Bylaws could make it
more
difficult for a third party to acquire us, even if doing so might be beneficial
to our stockholders by providing them with the opportunity to sell their shares
possibly at a premium over the then market price.
For
example, our Certificate of Incorporation authorizes our Board of Directors
to
issue up to 50,000,000 shares of preferred stock. The 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 the
stockholders. These terms may include voting rights including the right to
vote
as a series on particular matters, preferences as to dividends and liquidation,
conversion rights, redemption rights and sinking fund provisions. No shares
of
preferred stock will be outstanding upon the closing of this offering and we
have no present plans for the issuance of any preferred stock. The issuance
of
any preferred stock, however, could diminish the rights of holders of our common
stock, and therefore could reduce the value of our common stock. In addition,
specific rights granted to future holders of preferred stock could be used
to
restrict our ability to merge with, or sell assets to, a third party. The
ability of our Board of Directors to issue preferred stock could make it more
difficult, delay, discourage, prevent or make it more costly to acquire or
effect a change in control, thereby preserving the current stockholders’
control.
In
addition, we are also subject to Section 203 of the Delaware General Corporation
Law that, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder. The preceding provisions of our Certificate of
Incorporation and Bylaws, as well as Section 203 of the Delaware General
Corporation Law, could discourage potential acquisition proposals, delay or
prevent a change of control and prevent changes in our management, even if
such
things would be in the best interests of our stockholders.
Shares
eligible for future sale may adversely affect the market price of our common
stock, as the future sale of a substantial amount of our stock in the public
marketplace could reduce the price of our common stock.
Substantial
sales of our common stock in the public market, or the perception that such
sales could occur, could result in the drop in the market price of our
securities and make it more difficult for us to complete future equity
financings on acceptable terms, if at all, by introducing a large number of
sellers to the market. From time to time, certain of our stockholders may be
eligible to sell all or some of their shares of common stock by means of
ordinary brokerage transactions in the open market pursuant to Rule 144,
promulgated under the Securities Act of 1933, as amended (“Rule 144”), subject
to certain limitations. In general, pursuant to Rule 144, a stockholder (or
stockholders whose shares are aggregated) who has satisfied a one-year holding
period may, under certain circumstances, sell within any three-month period
a
number of securities which does not exceed the greater of 1% of the then
outstanding shares of common stock or the average weekly trading volume of
the
class during the four calendar weeks prior to such sale. As of September 30,2005, 1% of our issued and outstanding shares of common stock was 317,954
shares. Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitations, by a non-affiliate of our company that
has
satisfied a two-year holding period.
In
addition, Berman Health and Media, Inc. recently completed a private placement,
whereby they granted the investors in the private placement certain registration
rights with respect to the shares of common stock underlying their securities.
Those securities were exchanged for securities in our company pursuant to a
reverse merger in June 2005 and are included in the securities being offered
in
this prospectus. Hunter World Markets, Inc. may also, in its sole discretion,
permit certain of our current stockholders who are subject to contractual
lock-up agreements to sell shares prior to the expiration of their lock-up
agreements, which expire one year from the filing of this registration
statement. Upon the expiration of the lock up agreement, which will be on July5, 2006, holders of an aggregate of 19,730,504 shares would be eligible to
sell
their shares pursuant to Rule 144, subject to volume and manner of sales
limitations as set forth in Rule 144.
We
cannot
estimate the number of shares of common stock that may actually be resold in
the
public market because this will depend on the market price for our common stock,
the individual circumstances of the sellers and other factors. Any substantial
sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus
may have an adverse effect on the market price of our securities.
13
Our
common stock is considered a “penny stock,” and is subject to additional sale
and trading regulations that may make it move difficult to
sell.
Our
common stock is considered to be a “penny stock” since it does not qualify for
one of the exemptions from the definition of “penny stock” under Section 3a51-1
of the Securities Exchange Act for 1934 as amended (the “Exchange Act”). Our
common stock is a “penny stock” because it meets one or more of the following
conditions (i) the stock trades at a price less than $5.00 per share; (ii)
it is
NOT traded on a “recognized” national exchange; (iii) it is NOT quoted on the
Nasdaq Stock Market, or even if so, has a price less than $5.00 per share;
or
(iv) is issued by a company that has been in business less than three years
with
net tangible assets less than $5 million.
The
principal result or effect of being designated a “penny stock” is that
securities broker-dealers participating in sales of our common stock will be
subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9
promulgated under the Exchange Act. For example, Rule 15g-2 requires
broker-dealers dealing in penny stocks to provide potential investors with
a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document at least two business days before
effecting any transaction in a penny stock for the investor’s account. Moreover,
Rule 15g-9 requires broker-dealers in penny stocks to approve the account of
any
investor for transactions in such stocks before selling any penny stock to
that
investor. This procedure requires the broker-dealer to (i) obtain from the
investor information concerning his or her financial situation, investment
experience and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the investor
and
that the investor has sufficient knowledge and experience as to be reasonably
capable of evaluating the risks of penny stock transactions; (iii) provide
the
investor with a written statement setting forth the basis on which the
broker-dealer made the determination in (ii) above; and (iv) receive a signed
and dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult and time consuming for holders of our common stock to resell their
shares to third parties or to otherwise dispose of them in the market or
otherwise.
We
have never paid any dividend and we do not intend to pay dividends in the
foreseeable future.
To
date,
we have not declared or paid any cash dividends on our shares of common stock
and currently intend to retain any future earnings for funding growth. We do
not
anticipate paying any dividends in the foreseeable future. As a result, you
should not rely on an investment in our securities if you require dividend
income. Capital appreciation, if any, of our shares may be your sole source
of
gain for the foreseeable future.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains certain forward-looking statements within the meaning of
the
Private Securities Litigation Reform Act of 1995, including the plans and
objectives of management for the business, operations, and economic performance
of Berman Center, Inc. (the "Company""we" and "us"). These forward-looking
statements generally can be identified by the context of the statements or
the
use of words such as the “Company” or its management "believes,""anticipates,""intends,""expects,""plans" or words of similar meaning. Similarly, statements
that describe our future operating performance, financial results, plans,
objectives, strategies, or goals are forward-looking statements. Although
management believes that the assumptions underlying the forward-looking
statements are reasonable, these assumptions and the forward-looking statements
are subject to various factors, risks and uncertainties, many of which are
beyond our control. Accordingly, actual results could differ materially from
those contemplated by the forward-looking statements.
These
risks and uncertainties include, without limitation, those described under
“Risk
Factors” and those detailed from time to time in our filings with the SEC, and
include, among others, the following:
14
·
Our
history of losses and expected increase in
expenses;
·
Our
dependence upon Dr. Laura
Berman;
·
The
market for female sexual health products and services which is
at an early
stage;
·
Our
ability to recruit and retain qualified
personnel;
·
Our
exposure to product liability
claims;
·
Our
exposure to litigation over malpractice or violation of Stark
Laws;
·
The
limited experience of our officers, directors and employees in
marketing,
licensing and selling our products and
services;
·
The
uncertainty of an established public trading market for our securities;
and
·
The
other factors referenced in this prospectus, including, without
limitation, under the sections entitled “Risk Factors,”“Management's Discussion and Analysis of Financial Condition and
Results
of Operations,” and
“Business.”
The
assumptions used for purposes of the forward-looking statements specified in
the
following information represent estimates of future events and are subject
to
uncertainty as to possible changes in economic, legislative, industry, and
other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from
and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed
on
the achievability of those forward-looking statements. We cannot guarantee
that
any of the assumptions relating to the forward-looking statements specified
in
the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares of common stock by the
selling security holders, except for funds received from the exercise of
warrants held by certain of the selling security holders, if and when exercised.
We plan to use the net proceeds received from the exercise of any warrants
for
working capital and general corporate purposes. The actual allocation of
proceeds realized from the exercise of these securities will depend upon the
amount and timing of such exercises, our operating revenues and cash position
at
such time and our working capital requirements. There can be no assurances
that
any of the outstanding warrants will be exercised.
The
net
proceeds from our recent private placement transaction in June 2005 was $2.3
million. We have and intend to use the net proceeds from the private placement
for expenses related to the private placement and reverse merger, working
capital and general corporate purposes. We intend to use approximately $500,000
in annual salaries for additions to our staff in order to expand our clinic’s
operation. We have hired eight new employees with annual salaries of
approximately $385,000. We also intend to use approximately $28,000 to provide
equipment and supplies for our new clinical office in Naperville, a suburb
of
Chicago, Illinois, and we have spent approximately $23,000 for such purpose.
In
addition, we intend to use a portion of the net proceeds to advertise our
services more aggressively than we have in the past. We are still determining
the appropriate amount to expend on advertising and have spent approximately
$51,000 to date for such advertising. In addition, we intend to use the net
proceeds from the private placement to pay for ongoing legal and audit services
and other fees related to our public filings with the Securities and Exchange
Commission.
DILUTION
Since
this offering is being made solely by the selling security holders and none
of
the proceeds will be paid to us (except for funds received from the exercise
of
warrants held by certain of the selling security holders, if and when
exercised), our net tangible book value per share will not be affected by this
offering.
SELLING
SECURITY HOLDERS
This
prospectus relates to the resale from time to time of up to a total of
22,615,007 shares of common stock by the selling security holders, comprising
of
12,023,922 shares of our outstanding common stock and 10,591,085 shares of
our
common stock issuable upon exercise of outstanding warrants that were issued
to
selling security holders.
15
The
following table provides as of September 30, 2005, information regarding the
beneficial ownership of our common stock held by each of the selling security
holders, including:
·
The
name of each selling security
holder;
·
The
number of shares owned by each selling security holder prior
to this
offering;
·
The
total number of shares that are to be offered for each selling
security
holder;
·
The
total number of shares that will be owned by each selling security
holder
upon completion of the offering;
and
·
The
percentage of common stock to be owned by each selling security
holder
after the offering is
complete.
In
June
2005, Berman Health and Media, Inc. (“BHM”) offered for sale (the “Offering”)
through Hunter World Markets, Inc. on a “best efforts” basis units of its common
stock and warrants (the “Units”), each consisting of (i) two shares of its
common stock, (ii) one three-year warrant exercisable into one share of its
common stock at an exercise price of $1.05 and (iii) one three year warrant
exercisable into one share of its common stock at an exercise price of $1.575.
The price per Unit was $1.05. On June 16, 2005, 2,952,381 Units were sold to
certain of the selling security holders. The Offering closed in June 2005.
All
of the shares of common stock and shares underlying warrants sold by BHM in
the
Offering and exchanged for securities in our company pursuant to a reverse
merger in June 2005 are being registered for resale in this registration
statement.
Name
of Selling Security
holder
Shares
of
Common
Stock
Owned
Prior
to
Offering
Shares
of
Common
Stock
to be
Offered
For
Sale
Hereby
Shares
of
Common
Stock
Owned
After
the
Offering(1)
Percentage
of
Common
Stock
Owned
After
the
Offering(1)
European
Catalyst Fund
4,388,572
(2)
4,388,572
0
0
%
Absolute
Return Europe Fund
4,388,569
(3)
4,388,569
0
0
Christopher
Baker
585,143
(4)
585,143
0
0
Corporate
Advisors Group
5,388,572
(5)
5,388,572
0
0
Peter
Ondrousek
4,788,570
(6)
4,788,570
0
0
Loman
International SA
503,600
(7)
503,600
0
0
IKZA
Holding Corp.
76,800
(8)
76,800
0
0
Hunter
World Markets, Inc.
1,475,181
(9)
1,475,181
0
0
Todd
Ficeto
1,000,000
(10)
1,000,000
0
0
Hunter
Ficeto
10,000
(11)
10,000
0
0
Natalia
Ficeto
10,000
(12)
10,000
0
0
(1)
Represents
the amount of shares that will be held by the selling stockholders
after
completion of this offering based on the assumption that all shares
registered for sale hereby will be sold. However, the selling stockholders
may offer all, some or none of the shares pursuant to this prospectus,
and
to our knowledge there are currently no agreements, arrangements
or
understanding with respect to the sale of any of the shares that
may be
held by the selling stockholders after completion of this
offering.
(2)
Darius
Parsi has voting and investment powers for the shares held by European
Catalyst Fund. Mr. Parsi disclaims beneficial ownership of the
shares held
by European Catalyst Fund except to the extent of his proportionate
pecuniary interest therein.
(3)
Florian
Homm has voting and investment powers for the shares held
by Absolute
Return Europe Fund. Mr. Homm disclaims beneficial ownership of
the shares
held by Absolute Return Europe Fund except to the extent of his
proportionate pecuniary interest therein.
(4)
Includes
292,571 shares of common stock issuable upon exercise of warrants
that are
currently exercisable.
(5)
Includes
4,388,572 shares of common stock issuable upon exercise of warrants
that
are currently exercisable. Raj Nair has voting and
investment
powers for the shares held by Corporate Advisors Group. Mr. Nair
disclaims beneficial ownership of the shares held by Corporate
Advisors
Group except to the extent of his proportionate pecuniary interest
therein.
(6)
Includes
4,388,570 shares of common stock issuable upon exercise of warrants
that
are currently exercisable.
(7)
Adam
Kravitz has voting and investment powers for the shares held by
Loman
International SA. Mr. Kravitz disclaims beneficial ownership of
the shares
held by Loman International SA except to the extent of his proportionate
pecuniary interest therein.
(8)
Includes
76,804 shares of common stock issuable upon exercise of warrants
that are
currently exercisable. Adam Kravitz has voting and investment powers
for
the shares held by IKZA Holding Corp. Mr. Kravitz disclaims beneficial
ownership of the shares held by IKZA Holding Corp. except to the
extent of
his proportionate pecuniary interest
therein.
(9)
Includes
warrants currently exercisable to purchase 1,290,971 shares of
common
stock that are currently exercisable. Todd M. Ficeto is President,
Chief
Executive Officer, and control person of Hunter World Markets,
Inc. and
has voting and investment power over the shares held by Hunter
World
Markets, Inc. Mr. Ficeto disclaims beneficial ownership of the
shares held
by Hunter World Markets, Inc. except to the extent of his pecuniary
interest therein. Hunter World Markets, Inc. is a registered broker
dealer
and may be deemed to be an
underwriter.
(10)
Todd
M. Ficeto is President, Chief Executive Officer, and control person
of
Hunter World Markets, Inc. and has voting and investment power
over the
shares held by Hunter World Markets, Inc. Mr. Ficeto disclaims
beneficial
ownership of the shares held by Hunter World Markets, Inc. except
to the
extent of his pecuniary interest therein. Hunter World Markets,
Inc. is a
registered broker dealer and as such Todd M. Ficeto may be deemed
to be an
underwriter.
(11)
Todd
M. Ficeto is the father of Hunter Ficeto and may be considered
control
person of shares held by Hunter Ficeto.
(12)
Todd
M. Ficeto is the father of Natalia Ficeto and may be considered
control
person of shares held by Natalia Ficeto.
The
term
“selling security holders” also includes any transferees, pledges, donees, or
other successors in interest to the selling security holders named in the table
above. To our knowledge, subject to applicable community property laws, each
person named in the table has sole voting and investment power with respect
to
the shares of common stock set forth opposite such person's name.
16
We
may
amend or supplement this prospectus from time to time to update the disclosure
set forth in this prospectus. All of the securities owned by the selling
security holders may be offered hereby. Because the selling security holders
may
sell some or all of the securities owned by them, and because there are no
agreements or understandings with respect to the sale of any of the common
stock, no accurate estimate can be given as to the number of shares of common
stock or the percentage of common stock owned after this offering. If all of
the
shares of common stock are sold, the selling shareholders will not own any
securities after this offering.
Hunter
World Markets, Inc. (“HWM”), our former controlling stockholder and a selling
security holder, served as the placement agent in connection with Berman Health
and Media, Inc.'s closing of a private placement of $3,100,000 on June 16,2005.
We have assumed certain warrants issued in that closing. In addition, Todd
Ficeto is the President of HWM, and was our chief executive officer and sole
director prior to the merger with Berman Health and Media, Inc. In addition,
HWM
was one of three lenders that provided bridge financing to BHM in connection
with the private placement and merger in June 2005. The bridge loan was in
an
aggregate amount of $400,000, and HWM provided $250,000 of that amount. HWM
received a 10% flat interest fee in connection with the loan and warrants to
purchase 250,000 shares of BHM, which we assumed and were converted into
warrants to purchase 384,000 shares of our common stock pursuant to the merger.
In connection with the same bridge loan, Loman International SA provided
$100,000 of the bridge loan and IKZA Holding Corp. provided $50,000 of the
bridge loan. Loman International SA and IKZA Holding Corp. received a 10% flat
interest fee in connection with the loan and warrants to purchase 100,000 and
50,000 shares of common stock, respectively, of BHM. We assumed the warrants
and
they were converted into warrants to purchase 153,600 and 76,800 shares of
our
common stock, respectively, pursuant to the merger. These shares of our common
stock issuable upon exercise of the warrants held
by
HWM, Loman International SA and IKZA Holding Corp. are being registered under
this prospectus.
We
will
not receive any of the proceeds from the sale of the shares by the selling
security holders, except for funds received upon exercise of the warrants.
We
have agreed to bear expenses incurred by the selling security holders that
relate to the registration of the shares being offered and sold by the selling
security holders, including the Securities and Exchange Commission registration
fee and legal, accounting, printing and other expenses of this
offering.
PLAN
OF DISTRIBUTION
The
selling security holders have not informed us of how they plan to sell their
shares. The selling security holders, and any of their pledgees, assignees
and
successors-in-interest, may, from time to time, sell any or all of their shares
of our common stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. 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:
·
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
·
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;
·
purchases
by a broker-dealer as principal and resale by the broker-dealer
for its
account;
·
an
exchange distribution in accordance with the rules of the applicable
exchange;
·
privately
negotiated
transactions;
·
settlement
of short sales entered into after the date of this
prospectus;
·
broker-dealers
may agree with the selling security holders to sell a specified
number of
such shares at a stipulated price per
share;
·
a
combination of any such methods of
sale;
·
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
·
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.
Broker-dealers
engaged by the selling security holders may arrange for other broker-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. Each
selling security holder does not expect these commissions and discounts relating
to its sales of shares to exceed what is customary in the types of transactions
involved.
17
In
connection with the sale of our common stock or interests therein, the selling
security holders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
security holders may, after the date of this prospectus, also sell shares of
our
common stock short and deliver these securities to close out their short
positions, or loan or pledge the common stock to broker-dealers that in turn
may
sell these securities. The selling security holders may also enter into option
or other transactions with broker-dealers or other financial institutions or
the
creation of one or more derivative securities which require the delivery to
such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution
may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
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. Each selling security holder has informed
us
that it does not have any agreement or understanding, directly or indirectly,
with any person to distribute our common stock.
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares. We have agreed to indemnify certain of the selling
security holders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
Because
selling security holders may be deemed to be “underwriters” within the meaning
of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by
this
prospectus which qualify for sale pursuant to Rule 144 under the Securities
Act
may be sold under Rule 144 rather than under this prospectus. Each selling
security holder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the selling
security holders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the selling security holders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities
Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”), any person engaged in the distribution of the
resale shares may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the
commencement of the distribution. In addition, the selling security holders
will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing
of
purchases and sales of shares of our common stock by the selling security
holders or any other person. We will make copies of this prospectus available
to
the selling security holders and have informed them of the need to deliver
a
copy of this prospectus to each purchaser at or prior to the time of the
sale.
18
BUSINESS
Business
Overview
We
are a
multimedia enterprise specializing in women's health, active across the domains
of radio, television, and print media, including books, magazines and
newspapers. Dr. Laura Berman is a premier name in women's sexual health, a
leading researcher in the field and has created a multi-faceted platform for
reaching out to consumers in a variety of settings, including the entertainment
medium, product sales, medical and therapeutic services and online subscription
services. Dr. Berman, who is not a physician, earned her Master's in Clinical
Social Work and Doctorate in Health Education and Therapy (specializing in
human
sexuality) at New York University.
Our
principal source of revenue is from the clinical services that we provide out
of
our downtown Chicago clinic, comprising approximately 10,000 square feet. Our
clinical staff works to improve every patient's quality of life, health and
relationships. Clinical services include talk therapy performed by licensed
clinical social workers, medicine, as practiced by physicians and nurse
practitioners, phlebotomy and serum and saliva testing services, nutritional
counseling and yoga classes. Clinical services accounted for 60% of our revenue
for the year ended December 31, 2004 and 83% of our revenue for the first six
months of 2005. Our
clinical staff includes one phlebotomist/ physician’s assistant, two nurse
practitioners and four talk therapists, all of whom work for us. We also offer
medical services to our patients through a physician, Dr. Brian Locker, who
practices at our offices. Dr. Locker acts as our Chief of Staff and is
compensated through his own medical company, FSM Associates, LLC. Dr. Locker
supervises the nurse practitioners, each of whom has the right to prescribe
medications in the state of Illinois including but not limited to vasodilators,
hormones, SSRI’s, SNRI’s and other medications.
We
operate a full-scale hormonal management clinic, counseling center and sexual
function testing center. Our
hormone management clinic is a facility that can treat the large variety of
female hormone deficiency cases including menopausal symptom relief and sexual
function improvement as well as nutrition and fitness. Our sexual function
testing center is a facility that measures hormone levels, nerve function and
other sensory impairment issues, blood flow abnormalities in the genital region,
and signs of emotional difficulty, relationships discord and past trauma and
abuse.
We
generate additional revenue from a continuing medical education course that
we
hold at various locations, including the Fairmont Hotel in Chicago, Illinois.
The medical education courses accounted for 25% of our revenue in 2004. We
are
scheduled to offer medical education courses in the future, including courses
in
Chicago at the Renaissance Hotel; in Marina del Rey, California at the Ritz
Carlton; in New York City at the Marriot Marques Hotel. We also generate revenue
through research funding, which accounted for 15% of our revenue in 2004. For
example, we received a $60,000 grant for a research project funded by
Drugstore.com and a $100,000 project funded by CB Fleet, both completed in
2004.
Obtaining funding for future research projects is an ongoing goal of our
management. Currently, no projects have been secured for 2005 or 2006. In
addition, radio advertising for the Dr. Laura Berman radio show, which we
produce, generated $50,000 in 2005, which accounted for 17% of revenue for
the
first six months of 2005.
We
have
recently entered into the television production business. We, in conjunction
with the Gantz Brothers’ View Film Productions, produced a pilot financed by
ShowTime Networks, Inc. ShowTime picked up the series in September 2005 and
intends to turn it into nine episodes projected to premier in June of 2006.
We
are entitled to receive a production fee equal to 10% of the production budget
of each episode, which fee equates to $375,000 per episode. The show, which
is
expected to be entitled Sexual Healing, will track three couples’ progress
through intensive couples therapy at the Berman Center over a one-week period.
The main set of the show will be our offices with additional footage taped
in
and around the city of Chicago as couples go on therapeutic dates arranged
by
Dr. Berman. It is expected that our clinical services and their impact on
patients will be an important feature of each week’s plot line.
We
also
receive revenue from books authored by Dr. Berman. Dr. Berman is a co-author
of
two published books—For Women Only (published by Henry Holtz) and Secrets of the
Sexually Satisfied Woman (published by Hyperion). Her residual rights and her
ongoing rights in future books are pledged to the Berman Center as part of
her
employment agreement with us. Her next book, entitled The Passion Prescription,
is scheduled to be released by Hyperion in January 2006 and is a do-it-yourself
guide to sexual wellness. A final advanced payment $71,000 will be received
in
January 2006 in conjunction with the book’s release. Revenue from future book
and media projects of Dr. Berman is also pledged to us as part of her employment
agreement.
19
We
are
also in contract negotiations with a publisher of self-help experts to develop,
market and distribute a free and subscription-based website and online
newsletters based upon Dr. Berman’s new book, The Passion Prescription. It is
anticipated that the website will be named after her next book, and that the
negotiations will be completed in October 2005. In addition to any subscription
revenue from the site, the website will sell Dr. Berman’s product line from
California Exotics Novelties, LLC and any other products or media that will
be
produced in the future. We also have plans to create a sexual health DVD series
entitled The Endless Passion series, which is in the concept phase. We are
currently in negotiations with different production and distribution groups
regarding the DVD series and production is anticipated to begin in November
2005, assuming negotiations with the potential production and distribution
partner are successfully completed on time. We have also created a line of
Kegal
exercises and sexual aids in partnership with California Exotics Novelties,
LLC.
Dr. Berman and our management team designed the products and California Exotics
is distributing and managing the products. We are entitled to an 8% share of
the
revenue of the product line paid to California Exotics.
The
following table sets forth our revenue by each of our activities:
Clinic
Revenue
represents revenue from services related to clinic patients. The services are
primarily for bio-hormone replacement therapy and treatments for female sexual
dysfunction. Specific problems of female sexual dysfunction may include couples
conflicts, loss of intimacy, low libido, difficulty reaching orgasm, dryness,
low sensation, and even pain. The clinic also provides services for talk
therapy, yoga and nutrition.
Conferences
Revenue
primarily represents registration fees paid by attendees and to a lesser extent
revenue from fees paid by sponsors who have an exhibit at the conference hall.
Research
Revenue
represents unrestricted educational grant from a sponsor to perform research
and
report the findings and provide insights from the findings.
Radio
/ Media Revenue
represents advertising revenue earned from sponsors who advertise on
the
Dr. Laura Berman Radio Show.
Our
Clinic
We
intend
to capitalize on a market opportunity by helping women genuinely improve their
lives and enhance their relationships. Specific problems of female sexual
dysfunction may include couples conflicts, loss of intimacy, low libido,
difficulty reaching orgasm, dryness, low sensation, and even pain. Our treatment
for female sexual dysfunction employs a holistic approach. Our clinic offers
a
full line of services to women with sexual dysfunction, addressing the physical,
psychological and relationship challenges that they may face. Recent technology
measures sexual response, genital blood flow and pelvic floor health. A
psychosexual evaluation assesses emotional health, relationship quality and
patient history. Based on each woman's needs, individualized treatment plans
may
include: medical intervention (e.g., hormone therapy, topical creams, Viagra),
individual or couples therapy, and educational recommendations.
In
keeping with a holistic philosophy, our Menopause Program consists of four
components of menopause management: bio-identical hormone therapy, nutrition,
talk therapy and fitness. Yoga and Pilates promote pelvic floor fitness and
teach stress management. In addition to medical and physical interventions,
a
psychosexual evaluation assesses current symptoms, relationship quality and
patient history, with individual or couples therapy prescribed as needed to
complement medical treatment.
We
offer
bio-identical hormone therapy as an alternative to traditional hormone therapy.
Traditional hormone therapy is derived from equine estrogen obtained on horse
farms from pregnant mares. Equine estrogen exists in ten different types whereas
the human body only has three types of estrogen, which are estreiol, estrodiol,
and estrone. Bio-identical hormones are synthesized from yams and soy producing
the three types of estrogen only that are available in the human body. In
contrast, the medication used in traditional hormone therapy contains up to
seven strands of estrogen not natural to the human body. Bio-identical hormones
are identical to the body's own chemistry. We attempt to give the lowest level
of bio-identical hormones to patients required to relieve symptoms. Because
the
hormones are delivered in a compounded cream, there are limitless variations
in
the dosage that can be delivered versus a standard pill or patch, and it is
the
practice of doctors and nurse practitioners at the Berman Center to deliver
the
lowest level of hormones required to alleviate symptoms. We
do not
require FDA approval to provide bio-identical
hormone
therapy and we have not sought nor obtain such approval. The
use
of bio-identical hormone therapy is a natural treatment for menopausal
complications, including hot flashes, sleep loss, female sexual dysfunction,
mood swings, depression and night sweats.
We
do not
accept insurance, as the majority of the services provided are not covered
by
third party reimbursement. Our practitioners do not accept Medicare or Medicaid
for the services rendered at the clinic, thereby avoiding a wide variety of
legal and financial risks. Collection of fees for services occurs at the time
of
visit.
20
Omnimedia
Platform
Dr.
Berman has a media platform in television, radio and print, including
newspapers, magazines and books. Pursuant to our employment agreement with
Dr.
Berman, all media revenue, with the exception of honorariums and speaking
engagements, are pledged to us. Our employment agreement with Dr. Berman was
entered into on June 16, 2005 and has a term of three years unless terminated
earlier in accordance with the agreement. We believe Dr. Berman’s access to
multiple channels for public awareness represents a substantial market
opportunity. We believe that book publishing and radio syndication opportunities
represent promising alternative revenue sources, and more importantly contribute
to patient awareness and marketing. We believe that online personals, home
videos and product and literature sales represent other promising revenue
streams. We expect our healthcare delivery to be both supplemented and supported
by all other lines of business.
We
believe our coordinated media strategy, including television, radio, print
media, research, and authorship continues to bring existence of the clinic
to
the attention of many of women. Clinical trials and the latest research are
conducted at the clinic in a for-profit setting. Dr. Berman has conducted
studies and research with the assistance from various companies that manufacture
drugs, including a genital self-image study for Summer’s Eve in 2004 and a
sexual satisfaction study for Proctor & Gamble in 2003. Both drug
manufacturing and consumer products companies have engaged our company and
Dr.
Berman in the past in an effort to develop research in the arena of female
sexual health.
Books
and Publishing
Dr.
Berman is a best-selling author. Her first book, For Women Only: A Revolutionary
Guide to Reclaiming Your Sex Life achieved a top ranking on the New York Times
Best Seller's List when it was released in 2001, and is now available in
paperback. Her second book, Secrets of the Sexually Satisfied Woman, was just
promoted in a nationwide multimedia tour. A third book, Passion Prescription,
has been completed and is slated for release in January 2006.
All
revenues, including future advances and back-end profits, on any books written
in conjunction with Dr. Berman will become our property as part of Dr. Berman's
employment contract with our company. A variety of other books are planned,
with
each book targeting a different facet of female health and relationships. In
addition to being a source of revenue, we believe that Dr. Berman’s books will
serve as a substantial marketing vehicle for Dr. Berman and our company, in
addition to enhancing the clinic's medical reputation.
Newspaper
and Magazine Columns
Dr.
Berman currently writes columns that are published in the Chicago Sun-Times,
USA
Today and Ladies Home Journal. We believe the columns provide consistent,
credible and free branding across its targeted consumer base. Dr. Berman's
weekly Chicago Sun-Times column, “The Language of Love,” takes an entertaining,
light-hearted approach to relationships and sex. The 500-word column is meant
to
be insightful, but accessible for the Monday-morning commuter to read. The
column is also featured online at the Chicago Sun-Times website
(www.suntimes.com), with an archive of columns from the previous six weeks.
A
monthly Ladies Home Journal column presents Dr. Berman's answers to real women's
questions. The advice format delivers useful information that a woman can relate
to for herself or her relationship. USA Today is the nation's largest circulated
newspaper. Dr. Berman contributes to the publication's opinion page, “The
Forum,” with opinion pieces that engage Dr. Berman in timely discussions of
sexual health controversies. All revenue generated by Dr. Berman’s newspaper and
magazine columns go to our company pursuant to our employment agreement with
Dr.
Berman.
Reality
Shows
We,
in
conjunction with the Gantz Brothers’ View Film Productions, produced a pilot
financed by ShowTime Networks Inc. ShowTime picked up the series in September
2005 and intends to turn it into nine episodes projected to premier in June
of
2006. We are entitled to a 10% payment of the production budgets, which is
$375,000 per episode. The show, which is expected to be entitled Sexual Healing,
will track three couples’ progress through intensive couples therapy at the
Berman Center over a one-week period. The main set of the show will be our
offices with additional footage taped in and around the city of Chicago as
couples go on therapeutic dates arranged by Dr. Berman. It is expected that
our
clinical services and their impact on patients will be an important feature
of
each week’s plot line.
21
Radio
Dr.
Berman hosts a weekly syndicated radio show that currently airs across the
United States. Through a call-in format, The Dr. Laura Berman Show explores
women's sexual health and relationship issues, with caller-selected topics.
The
two-hour show features Dr. Berman speaking one-on-one with women about topical
concerns and questions, as well as celebrity guest experts who specialize in
the
field. Dr. Berman's radio show began in the third quarter of 2004 in Chicago,
the nation's third largest market on WCKG-FM. The show has since expanded to
seven markets including the largest satellite radio network. The show is
currently produced and distributed by UBC Radio Network Inc. in Chicago,
Illinois, which also houses the recording studio. We had a one-year contract
with UBC Radio pursuant to which UBC Radio would receive monthly payments and
a
percentage of net revenue generated by Dr. Berman’s show. The agreement expired
in March 2005, but UBC continues to produce Dr. Berman’s show. All revenue
generated by Dr. Berman’s radio show goes to our company pursuant to our
employment agreement with Dr. Berman.
Internet
Initiatives
An
online
subscription service for sexual health information is being planned to coincide
in timing and in content with Dr. Berman’s next book, The Passion Prescription
to be released in January 2006. The www.drlauraberman.com
URL is
planned for the site which has yet to be named but may carry the name of the
book. We are in negotiations with a publisher of self-help experts for the
marketing and development of the site. We expect to create most of the content
on the subscription site, which will include our intellectual property
and
be used to sell our products and services relevant to female sexual
health. We are also collaborating with the publisher on a free electronic
newsletter to test the market.
An
online personals is also part of our long term internet strategy. We
plan
to locate and collaborate with another company already in the online personals
industry and intend to enter into a co-branded or private label agreement
relating to an online personals site before the end of the year. We have not
currently selected a partner.
Instructional
DVDs
We
intend
to produce a new series of DVDs hosted by Dr. Berman, entitled The Endless
Passion Series, which we believe will help women and couples deal with issues
of
intimacy and sexuality throughout their lifetime. From medical and therapeutic
advice to usable tips for the bedroom, viewers will receive practical
information in an easy-to-use format. We expect the hallmarks of the series
to
include:
22
·
Situations
featuring real women and couples sharing important
issues;
·
Storylines
men and women can identify with, presented at an exciting
pace;
·
Usable,
practical advice from Dr. Berman;
and
·
Medical
and anatomical information displayed using state-of-the-art
technology and
graphics.
Key
Business Relationships
Key
business relationships involved in our company and Dr. Berman's media career
include her book agency International Creative Management (ICM) and her talent
agency United Talent Agency (UTA). In addition, Northwestern Memorial Hospital
and Meeting Achievements produce our continuing medical education courses.
Dr.
Berman has a representation agreement with ICM whereby ICM is entitled to 15%
of
all publishing revenue secured by ICM. Dr. Berman does not have a written
agreement with UTA, but UTA generally receives 10% of Dr. Berman’s entertainment
income from work secured by UTA. We generally enter into agreements with Meeting
Achievements for each of the continuing education courses that we hold. Meeting
Achievements generally receives a fee per continuing medical education
conference that we hold in addition to 10% of hotel occupancy rates paid by
conference attendees to hotels, which are paid to Meeting Achievements by the
hotels.
Corporate
Relationships
Corporate
interests fund our research studies, underwrite publishing projects and pay
for
satellite media tours to announce research, thereby getting our name in the
press. A corporate interest is another corporation which has provided financial
support to our research efforts or financed one or more media projects,
including advertisers. We believe corporate interests seek to advertise across
the Dr. Laura Berman media platform to tap into her clientele and fan-base
to
sell their products and services. In the past, we have been able to turn
corporate funded research into books and other publications, enhancing our
reputation in the areas of menopause management and female sexual medicine.
Dr.
Berman has developed relationships with several major drug companies and a
variety of consumer product companies, including Bayer, Johnson & Johnson,
Vivus, Quality Life Pharmaceutical, Pharmacia, Next Med, Eli Lily, Pfizer,
Dechuttes Medical, Nastech, Inspire Pharmaceutical, Proctor & Gamble, C.B.
Fleet, Summer's Eve, Drugstore.com, and Seasonale. These relationships include
corporate funding for research and studies conducted by Dr. Berman and our
company. For example, in fiscal year 2003, we received $75,000 from Proctor
& Gamble to support the Sexual Satisfaction Research Survey. In fiscal year
2004, we received $100,000 from Summer’s Eve (C.B. Fleet) to support research on
the genital self-image study, $60,000 from Summer’s Eve to support a study
conducted on vibrators, $11,085 from Proctor & Gamble for participating in
the study of the testosterone patch and $2,600 from Meredith Corporation for
Dr.
Berman’s question-and-answer column in Lady’s Home Journal. In fiscal 2005, we
received $50,000 from Summer’s Eve as advertising/ media revenue supporting Dr.
Berman radio show and $1,200 from Meredith Corporation for Dr. Berman’s
question-and-answer column in Lady’s Home Journal. Obtaining funding for future
research projects is an ongoing goal of our management. No current projects
have
been secured for 2005.
The
Clinic Process
Dr.
Laura
Berman, who is not a physician, has been working as a sex educator and therapist
for over fifteen years. After obtaining her Master's in Clinical Social Work
and
Doctorate in Health Education and Therapy (specializing in human sexuality)
at
New York University, she went on to complete a training fellowship in Sexual
Therapy with the Department of Psychiatry at New York University Medical
Center. Dr. Berman is currently an Assistant Clinical Professor of OBGYN
and Psychiatry in the Feinberg School of Medicine at Northwestern University.
During many years in full-time academic medicine and research, Dr. Berman had
a
range of unique opportunities to explore and develop a multi-disciplinary plan
for treating sexual dysfunction in women. Our clinical model is a culmination
of
the past five years of Dr. Berman's work and is an expression of what she has
learned and believes is the ideal method of treating female sexual dysfunction.
An initial examination of each new patient delivers a complete diagnosis from
up
to five different clinicians utilizing therapeutic techniques and the latest
medical devices. Our clinic is housed in a beautiful, spa-like environment
and
is designed to be comfortable and inviting.
For
each
patient visiting the clinic, we attempt to provide an experience that differs
from a typical doctor's visit. Upon entering the clinic, the patient is directed
to the waiting room or our resource library, whichever she prefers. Our resource
library consists of computer resources, books and videos, handpicked by Dr.
Berman, on all aspects of women’s emotional, relationship and sexual health.
While in the waiting room or resource library, our patients completes
questionnaires, which are sent home to each patient prior to her visit. The
questionnaires cover demographics, but are also part of the assessment for
psychological factors impacting on sexual function—a depression inventory, a
general stress scale, a sexual function scale, a relationship satisfaction
scale, a body-image scale, and a genital self-image scale. The therapist reviews
the questionnaires before interviewing the patient and is able to focus on
and
explore any possible issues during the evaluation.
Psychosexual
Evaluation
Every
new
patient who comes to the clinic undergoes a Psychosexual Evaluation with a
trained sex therapist. A psychosexual evaluation includes the completion of
a
detailed questionnaire, review and analysis of the questionnaire by a sex
therapist, a discussion between the patient (and often the patient’s partner)
and the therapist, followed by an evaluation by the therapist. First, upon
reviewing the patient's questionnaires, the therapist meets with the patient
to
get a sense of the scope and duration of the problems the patient has been
having, how symptoms started, how she is managing the symptoms individually
and
how her relationships have been impacted. The therapist elicits information
from
the patient regarding her sexual history, which includes the patient's sexual
development, sexual message received while growing up and history of any abuse
or trauma. The goal of the evaluation is to help engage the patient in the
process, by reviewing the goals of the treatment, what is entailed in the
medical evaluation and testing, and plans for moving forward.
Whenever
possible, women are encouraged to bring their partners to the initial
evaluation. The participation of the partner is intended to get a sense of
the
couple's dynamics and the impact of the sexual issues on the relationship,
and
to educate the partner about the patient's symptoms, and validate the impact
the
sexual dysfunction is having on him and the relationship.
23
When
the
evaluation is finished, the therapist has gained a sense of what the goals
of
psychosexual treatment should be (e.g., individual therapy, couples therapy,
group therapy, supportive therapy or some combination thereof) and reviews
them
with the patient. While the patient is preparing for the next step of her
evaluation, the medical exam, the therapist confers with the medical
professional and patient concierge about the salient psychosexual issues and
what her treatment goals are for the patient and her partner. Our
patient concierge has the duties of welcoming patients, coordinating the
patient’s schedule among clinicians, explaining test results to the patient,
providing information regarding on-going treatment plans and performing other
administrative tasks related to the patients’ evaluations.
Medical
Evaluation
Every
new
patient receives a medical evaluation to rule out physiological causes for
her
sexual function complaints. After the psychosexual history is completed,
patients meet with the medical practitioners, which include physicians and
nurse
practitioners, for a medical and surgical history, which considers past
surgeries, pelvic injuries, medical conditions, and medications which may be
negatively impacting on the patient's sexual function. A simple physical is
performed including heart, lungs, ENT, breast exam, thyroid, and a brief genital
exam to check for vulovaginal health, prolapse and evaluate Kegel muscle
strength. Blood pressure is taken and the patient's blood is drawn for a
homopanal panel, which measures thyroid function, free and total Testosterone,
and lipids, SHBG, ALT (i.e., liver function), which are the primary hormonal
components of sexual function in women.
For
female sexual dysfunction patients, there are two additional testing instruments
designed to assess the physical sexual response. Women who come to the clinic
for menopause management do not undergo these exams. The first is a blood flow
measurement, using a Duplex Doppler Ultrasound (or laser sonogram), to measure
blood flow to the genitals and surrounding tissue. The findings enable the
medical practitioner to identify any occlusions that may be blocking the blood
flow to the genital area and to determine if overall blood flow is adequate
for
baseline sexual function. The second test determines sensory thresholds to
identify any nerve sensory impairment in the genital area, with a specialized
device designed for this purpose. The medical practitioner is able to
immediately review the results with the patient. While the patient is changing,
the medical practitioner briefs the patient concierge on her findings and
recommendations, with the exception of hormone recommendations which await
test
results.
Menopause
management patients are administered a second measure of hormone levels, known
as a saliva test. While some physicians routinely perform blood tests only,
saliva testing may be more precise since it offers a measure of bioavailable
hormone levels, or the hormones that are not bound up in a woman's cells and
therefore available for her body to use. Sexual function, in particular, depends
on this. Patients are sent home with a saliva-test kit, which they are
instructed to complete during the appropriate time in their cycle. The results
are used in conjunction with blood test results to determine the best
bio-identical hormone regimen, customized to the patient's individual needs.
Women complete a second at-home saliva test six to eight weeks after beginning
their prescribed hormone regimen to reassess levels. A follow-up visit with
the
nurse practitioner, either at the Berman Center or over the phone, checks in
with the patient about hormone levels and any other symptom changes, modifying
the prescription if necessary.
Once
a
patient has completed her psychosexual and medical evaluations, she meets with
the patient concierge who discusses the current prescribed treatment plan.
Treatment plans typically include ongoing individual, couples or group therapy
as well as medical intervention, including medications, yoga and physical
therapy. The patient concierge also provides tailored educational and sexual
device/lubricant recommendations, depending on the woman's needs. If necessary,
referrals are made for ongoing gynecological care, gynecological surgery,
urologic ongoing care, and male sexual function evaluations. The patient is
given the opportunity to have all of her questions answered and leaves with
an
individualized plan for addressing her sexual concerns.
24
The
Treatments
Medical
Treatment
Medications:
Depending
on the diagnosis, medications that may be used to treat women include
bio-identical hormones, vasodilators (like Viagra and others which enhance
blood
flow and therefore lubrication and sensation in women), Selective Serotonin
Reuptake Inhibitors, or SSRIs, Selective Norepinepherin Reuptake Inhibitors,
or
SNRIs, sensation enhancing creams and gels, and lubricants. SSRIs and SNRIs
are
both anti-depressant medications.
Fitness:
Assessment
and exercises for pelvic floor strength, as well as relaxation and stress
management techniques. Our fitness expert will lead a series of classes focused
on relaxation and flexibility, weight training for muscle maintenance, and
exercises for pelvic floor restoration and strengthening.
Nutrition:
Review
of
overall exercise regimen and brief food diary, tailored, gradual diet
recommendations that hit key health points.
Psychological
Treatment:
If
it is
determined during the evaluation that the patient is suffering from an emotional
issue (e.g., depression, anxiety, phobias) or has a history of sexual, emotional
or physical abuse or trauma, she will undergo individual therapy on an ongoing
basis with a trained psychotherapist. This may include general individual
therapy, sex therapy or some combination of the two. General therapy is used
when the patient is struggling with depression or anxiety or when a past history
or trauma issue outside the relationship needs to be addressed. Sex therapy
is
used in combination with general therapy in cases of sexual abuse or trauma,
and
alone in cases of women who need education, guidance, or resolution of
inhibitions that negatively impact on their sexual function. Sex therapy is
all
talk therapy, but behavioral in nature in that the emotional resistance to
sexual activity is addressed and the patient is given homework assignments
specific to her sexual complaints and psychological issues. The duration of
therapy can range from several months to several years, depending on the nature
of the issues being treated. Individual therapy will often be combined with
couples therapy.
Couples
Therapy:
If
it is
determined during the evaluation that there are some couples issues contributing
to the sexual function complaint (e.g., hostility, lack of communication, an
emotional division as a result of struggling with medically induced sexual
problems), the patient will undergo couples therapy with her partner. This
may
include general couples therapy, couples sex therapy, or some combination of
the
two. General couples therapy would address communication styles, conflict
resolution, or crisis intervention where the couple is about to separate or
is
going through a crisis like an affair or serious illness. Couples sex therapy
is
typically combined with general couples therapy and consists of talk therapy
where education and guidance are provided. Resistances to sexual activity are
addressed and homework is given to the couple to enhance sexual receptivity,
openness, communication and response. The duration of therapy can range from
several months to several years, depending on the nature and magnitude of the
issues being treated.
Group
Therapies and Programs:
Group
therapies are very effective treatment and allow for billing up to twelve
patients while utilizing just one therapist. In addition to four private talk
therapy rooms, the clinic has two large group therapy rooms, a yoga room and
a
conference room, all of which can accommodate large patient groups in therapy.
Group therapy models may build a sense of community with our patients and result
in increased profit for the Berman. Studies on the effectiveness of group
therapy have demonstrated a positive effect on women's ability to cope with
a
medical condition, knowledge about that condition, stress levels associated
with
that condition, family functioning, quality of life, emotional growth, and
even
longevity.
25
Research
and Clinical Trials
Our
clinic strives to be a research center and think-tank for advancing the science
of female sexuality and sexual dysfunction. Dr. Berman was one of the lead
principle investigators in the first multi-center clinical trial, which found
Viagra to be effective in women with arousal disorder. She consulted with Pfizer
to design the protocol, and also spearheaded the team to train the sex
therapists to carry out the eligibility screening at over twenty different
sites. The findings of the study, published in the Journal of Sex and Marital
Therapy, reported a statistically significant improvement in arousal,
lubrication, sexual satisfaction and ease and facility for reaching orgasm
with
Viagra as compared to placebo. Ongoing clinical and scientific research projects
continue to be carried out at the clinic, many of which will be sponsored by
different companies, with whom Dr. Berman consults or has
relationships.
We
generate revenue and brand equity by conducting selective research studies.
We
believe that the studies add credence to Dr. Berman's professional reputation
within the medical community and generate substantial media exposure.
Interesting findings from the studies are often tapped for television and radio
appearances, as well as assorted newspaper and magazine features, with credit
to
Dr. Berman and/or our company.
It
should
be noted that our areas of research are driven by our view of patient needs
and
our research is conducted through scientific methods. We do not permit the
commercial aspect of the financing and promotion of the research to compromise
the integrity or accuracy of the results of our studies. All
funding for research is received in the form of an unrestricted educational
grant, the terms of which are intended to detach the payment for financing
the
research from the research’s outcome. For example, both Drug Store.com and CB
Fleet have financed research at the Berman Center in the past, and neither
company was given control over the questions that were asked nor were they
party
to asking any of the questions or the reporting of the results. Nevertheless,
the
appearance of conflicts of interests may arise due to commercial relationships
existing between us and those entities which finance our research, continuing
medical education courses or which may become or have products which become
the
topic of some of Dr. Berman’s editorial content through radio, newspapers,
magazines or television. With respect to Dr. Berman’s radio show, the disclosure
of any commercial relationships and their nature is made on the air during
her
radio show and are regulated by the Federal Communication Commission. In
addition, all research carried out at the clinic, both clinical trials and
general research, is approved by a centralized institutional review board (IRB)
office for the protection of human subjects. The
term
“centralized institutional review board” refers to the review board of Essex
Institutional Review Board Inc., an independent organization located in Lebanon,
New Jersey. The Institutional Review Board determines whether research proposals
meet the review board’s requirements for safety and ethical standards for
conducting clinical research on human subjects. Use
of a
centralized IRB to review and approve all research ensures its legitimacy and
provides outside supervision of adherence to ethical guidelines.
Continuing
Medical Education Courses
In
September 2004, we hosted “Women's Sexual Health State-of-the-Art Series”
through Northwestern Memorial Hospital's Continuing Medical Education Office.
This meeting was targeted to a national group of health care professionals
(e.g., nurses, therapists, physicians) who were interested in, or currently
treating female sexual function complaints. The course emphasized cutting-edge
information on the evaluation, diagnosis, and treatment of female sexual
function complaints, including pelvic pain, perimenopause and menopause, sexual
challenges of special populations of women, and couples issues. The two-day
multi-disciplinary course will be held annually in Chicago. We have expanded
the
series to include meetings in Los Angeles in April of 2006 and in New York
City
in June of 2006.
We
believe that we benefit greatly from our role as host of this educational series
on many levels. First, it heightens exposure of the clinic among other
professionals in the field. Secondly, we believe it promotes the professional
reputation of the clinic in the medical community by acting as a voice of
authority in the science and research of female sexual dysfunction.
We
expect
that our clinical staff will continue to grow its professional reputation by
attending major meetings in the field to present our research and network with
other professionals. These include the American Association of Sex Educators
and
Therapists (AASECT), the Society for the Scientific Study of Sexuality (SSSS),
the American Psychological Association (APA), the International Society for
the
Study of Women's Sexual Health (ISSWSH), the American Urologic Association
(AUA), and the American College of Obstetrics and Gynecologists
(ACOG).
Growth
Strategies
With
respect to growth inside an individual market or city, we plan to move beyond
one large downtown center and open satellite centers in various cities and
suburbs. The satellite centers would be wholly owned and managed by the existing
team. The plan is to have talk therapy and physical therapy comprise the bulk
of
the revenue at the satellites. We are in the process of opening our first
satellite in Naperville, a western suburb of Chicago, Illinois. Other major
cities are also under consideration for satellite locations such as New York
and
San Francisco. International locations in Europe and Asia will be considered
for
years three and four of the roll-out strategy.
26
Competition
Illinois
1.
Loyola
University Sexual Dysfunction Center, Chicago, IL
This
program is organized under the direction of Loyola's Department of Psychiatry
and Behavioral Neurosciences and is directed by Dr. Domeena Renshaw, a sex
therapist. Married couples and individuals with sexual problems are provided
seven weeks of counseling, while single patients may receive individual therapy
or instead attend a six week all female or all male counseling group. Patients
are typically seen by a group of trainees who are under supervision by Dr.
Renshaw and her staff. We do not believe the short term therapy model allows
for
treating couples or individuals with significant emotional or relationship
issues.
2.
The
Family Institute, Northwestern University, Evanston, IL
The
Midwest's largest center devoted to couples and family therapy, the professional
staff is comprised of approximately 30 therapists plus support staff.
Approximately Thirteen of those therapists specialize in couples therapy, one,
Bill Pinsoff, the president of the Institute, has a specialty in sex therapy.
The rest of the staff specializes in anxiety disorders, family relationships,
adolescents, eating disorders, etc. The center reports that they see more than
2,400 families, couples or individuals each year. While this program is well
established and offers comprehensive psychological services, they only report
one therapist who has a clinical interest in sex therapy.
3.
Other
Sex Therapists in the Chicago area (sex therapy only)
Richard
Carroll, PhD, Northwestern Memorial Hospital, Department of
Psychiatry
Shirley
Barron, PhD, University of Chicago Hospital, Department of
Psychiatry
Karen
Donhey, PhD, private practice, Chicago
Other
States
1.
Institute for Sexual Medicine, Boston Medical Center, Boston, MA
Perhaps
the largest facility in the field today, the Institute for Sexual Medicine
is a
combination research and treatment facility. A five million dollar grant from
Bayer Corporation to fund basic science primarily in the realm of erectile
dysfunction helped to create the laboratory for sexual medicine research at
the
Institute. Located within the Boston Medical Center, the institute is currently
staffed with approximately thirteen employees including two doctors, one sex
therapist, one nurse, one ultrasound tech, two secretaries and one center
coordinator; the lab is staffed with one director, one assistant director,
two
technicians and one administrator. The Institute is run by Dr. Irwin Goldstein,
a former colleague of Dr. Berman's. Dr. Berman founded the Women's Sexual Health
Clinic at Boston Medical Center, in 1998, which was folded into the Institute
after her departure. The Institute has had successes in the realm of male sexual
dysfunction. The program is designed to service male sexual problems primarily.
2.
The
Sexual Medicine Program, Department of Urology, Well Medical College of Cornell
University, New York Presbyterian Hospital, New York, NY
This
program is headed by Dr. John Mulhall, an urologist. The program has been
primarily focused on male sexual dysfunction, since that is Dr. Mulhall's area
of expertise. He also runs the Sexual Medicine Research Laboratory, which
carries out basic science research, primarily focused in male sexual
dysfunction. Beyond two support staff (including a clinical trial coordinator
and a practice manager), Dr. Michael Perelman is the sex therapist affiliated
with the Sexual Medicine Program. He is reported to be the Co-Director of the
Human Sexuality Program, Payne Whitney Clinic of the New York Presbyterian
Hospital.
3.
New
York Institute of Human Sexuality, Columbia University, Department of Urology,
New York, NY
The
institute includes two Centers: the New York Center for Men's Sexual Health
and
the New York Center for Women's Sexual Health. The Women's Sexual Health program
is run by Dr. Ridwan Shapsigh, a male urologist and Dr. Hilda Hutcherson, a
female OBGYN. They consult with a team of sex therapists to whom they refer
patients. While there is no sex therapist on staff, they do employ a director
of
research, nurse, clinical research coordinator and medical assistant. The
primary ongoing medical evaluation and treatment they do is hormonal
management.
4.
Department of Psychiatry and Behavioral Sciences Reproductive and Sexual
Medicine Clinic, University of Washington School of Medicine, Seattle,
WA
This
program is run by Dr. Julia Heiman, a sex therapist, and a team of trainees.
She
refers patients to outside medical experts when needed. The clinic is mostly
focused on training researchers and therapists in treating different kinds
of
individual and couples sexual challenges. They see both male and female
patients. While they collaborate with other medical departments, we do not
believe the program provides ongoing medical evaluation or
treatment.
27
5.
Center
for Sexual and Marital Health, Robert Wood Johnson University Medical Group,
Piscataway, NJ
This
program is run by Dr. Sandra Leiblum, a sex therapist. She provides ongoing
couples and individual treatment for men and women. Patients may be seen in
a
variety of treatment formats, including individual, couple, and group sessions.
Workshop programs are offered at times to enhance and extend individual therapy.
Referrals are made to medical professionals for medical evaluation and treatment
when deemed necessary. This program is primarily focused on training for
therapists and researchers.
6.
Masters and Johnson Institute, St. Louis, MO
This
program was started in the 1950's and is presently directed by Dr. Mark
Schwartz, a sex therapist. He and four other therapists focus their treatment
on
couples counseling, eating disorders, sexual compulsion and recovering from
sexual trauma.
7.
Program in Human Sexuality, Department of Family Practice and Community Health,
University of Minnesota Medical School, Minneapolis, MN
This
program, directed by Dr. Eli Coleman, sex therapist, is run by a team sex
therapy supervisors and trainees under his supervision. The program is focused
on post-doctoral training and provides ongoing sex therapy for a range of male
and female disorders from cross-dressing to HIV.
8.
Kinsey
Institute Sexual Health Clinic, Indiana University Health Center, Bloomington,
IN
This
program is run by Dr. John Bancroft, a sex therapist. The institute provides
sex
therapy to individuals and couples. Some medical evaluation and treatment is
carried out on male patients with erectile dysfunction, but we do not believe
it
is available for female patients.
9.
Connecticut Surgical Group, Hartford, CT
This
program is run by nurse practitioner, Jill Siskind. The only other reported
employee is a female ultrasound technician. Ms. Siskind also refers to a
consulting sex therapist when needed. The program is folded into a general
Urology Clinic with no dedicated space for sexual health services. Ms. Siskind
does offer medical/psychological evaluations for women with sexual problems
and
some ongoing medical treatment.
Legal
Environment and Our Relationship with Physicians
Because
of its involvement in Medicare and Medicaid, the Federal Government regulates
much of the medical field. Our physicians do not accept Medicare and Medicaid
for services rendered at the clinic and should therefore not fall within
the
Anti-Kickback Statute or be subject to its penalties. However, our physicians
are required under a series of federal and state laws to function in a regulated
fashion regarding referrals to entities with which they have a financial
relationship, and to provide medical services in and on behalf of entities
that
maintain the independence of their professional medical judgment in the care
and
treatment of patients.
We
structure our arrangements with physicians to be in compliance with these
federal and state health care. We do not directly employ any physicians.
We have
entered into agreements in the past where the physicians practice within
our
clinic but conduct their practice independently through a separate professional
service entity. The physicians practice in separate companies known as Limited
Liability Companies, or LLCs. We have entered into management and lease
agreements with the LLCs relating to the physician providing medical services
to
our patients. We bill our patients directly for charges for medical services
provided by the physician, if any, and services provided by the our clinicians
such as intake, therapy, nutrition and yoga for their office visit to our
clinic. The LLCs bill us for the medical services they rendered to our mutual
patients. Dr. Brian Locker, who practices at our offices, currently provides
medical services to our patients. Dr. Locker serves as Chief of Staff and
is
compensated by his own medical company, FSM Associates, LLC. Dr. Locker
supervises our nurse practitioners, each of whom has the right to prescribe
medications in the State of Illinois. We do not currently have a written
agreement with Dr. Locker or FSM Associates, LLC, but we anticipate entering
into such an agreement to memorialize our relationship. We bill the patients
for
Dr. Locker’s services and his LLC bills us for his services. Because neither our
services nor the services of the independent physicians are billed to the
Medicare or Medicaid programs and the services rendered are generally not
covered by the Stark Law, we believe we are able to function in compliance
with
applicable federal and state health care laws and regulations.
However,
in the event of a change in federal or state law or regulation, or in the
event
of a new interepretation or guidance of an applicable federal or state health
care law or regulation, we intend to restructure as necessary to maintain
compliance in a manner consistent with our overall business model.
28
Technology
Technology
plays a significant role in the operations and finances of the business. We
have
created an internet presence, including a website complete with on-line
scheduling capabilities, credit card payment abilities and important health
information for women. A patient is able to log onto our website
(www.bermancenter.com) and schedule her appointment on-the-spot. We believe
it
is important for a patient to be able to schedule in privacy and not have to
speak to anyone if she chooses. At the moment, only initial assessments and
Bio
Identical HT appointments can be scheduled on-line. Please note that the
references to our websites in this prospectus are textual references only.
We do
not incorporate the information on our website into this prospectus, and you
should not consider any information on, or that can be accessed through, our
Web
site as part of this prospectus.
The
clinic is equipped with a practice-management software package that has full
capabilities for patient scheduling, patient registration and physician
documentation, along with statistical data for clinical research. Other
technology features include on-line scheduling via our website, a complete
network and audio and visual components for training and therapeutic sessions.
Scanning of doctors' written notes incorporates the notes into the electronic
files.
Access
to
computers is a key component of the clinic. Every group room and the yoga room
is equipped with a drop-down screen connected to our computer network so that
presentations and videos can be shown as part of the group sessions or for
other
kinds of presentations. Each exam and treatment room has a computer in it,
networked to our system, so that specialists can have easy access to patient
files, notes and scheduling. A computer is also housed in our Resource Library
so that patients can have access to the internet and utilize the computer for
research purposes.
While
the
group rooms and yoga room all have their own stereo systems, the common areas
and hallways are equipped with speakers so that soothing music can be heard
throughout the center from a central stereo.
Dr.
Berman's current and past media projects including books, television, and radio
are all owned by us through a multi year employment agreement with Dr. Berman.
Under the employment agreement, Dr. Berman has agreed to contribute the proceeds
from all intellectual property to us, other than proceeds derived from
honorarium fees and speaking engagements.
Berman
Center Intimate Accessories Line products manufactured by California Exotics
have not been patented nor are they patentable in management's
opinion.
Employees
and Labor Relations
At
June30, 2005, we had nine full-time employees and two part-time employees.
Our
full-time employees included our Chief Executive Officer, President, Chief
Financial Officer and Vice President/Corporate Secretary. Employees
in our
clinical services include a nurse practitioner, who, among other things, reviews
the medical and sexual history with patients, performs the medical exam and
testing, does assessment, diagnosis and prescribes and implements
treatment. We also have two talk therapists who perform patient intake,
and conducts individual talk therapy and couples counseling. We have a patient
concierge who, among other things, welcomes the patient, coordinates the
patient’s schedule among clinicians, explains test results to the patient,
provides information regarding on-going treatment plans and performs other
administrative tasks related to the patients. We employ a fitness expert who
conducts yoga and pilates classes for stress relief, teaches exercises for
pelvic floor strengthening and provides information on proper nutrition.
We employ a medical assistant who checks vitals, draws blood, assists with
the
medical exam and testing and maintains the medical supply inventory.
We
employ an author who assists Dr. Berman with writing articles and
books.
29
Property
Our
executive offices are located at 211 East Ontario, Suite 800, Chicago, Illinois60611. The premises consist of 9,915 rentable square feet of space. Base rent
is
$23 per square foot in year one or $172,500 in the first year. The rent
escalates at 3% per year, except in year 3 when extra square footage becomes
chargeable. The term of the lease is for 10 ½ years. A $250,000 letter of credit
was required to provide credit support for the lease. The letter of credit
was
provided by LaSalle Bank.
We
have
also opened a new clinical office in Naperville, a suburb in Chicago, Illinois.
The Naperville office consists of approximately 837 rentable square fee of
space
and base rent is $2,000 per month, subject to subsequent escalations. The term
of the lease is nine months and terminates on May 31, 2006. The initial term
may
be extended to August 31, 2006, under the same terms and conditions, provided
that the sublessor from which we rent the premises is able to negotiate an
extension of the principal lease with the lessor.
All
of
our facilities are in good repair. We believe that our existing facilities
will
be adequate to meet our needs for the foreseeable future. Should we need
additional space, we believe we will be able to secure additional space at
commercially reasonable rates.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is quoted in the Pink Sheets under the symbol "BRMC." The following
table sets forth the high and low bid prices for our common stock as reported
by
the Pink Sheets Electronic Quotation Service. Quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent
actual transactions.
On
October 7, 2005, there were approximately 67 holders of record of our common
stock. On October 7, 2005, the closing bid price for our common stock in the
Pink Sheets was $2.00 per share.
Dividend
Policy
To
our
knowledge, we have never paid cash dividends on our common stock. We intend
to
keep future earnings if any, to finance the expansion of our business. We do
not
anticipate that any cash dividends will be paid in the foreseeable
future.
Equity
Compensation Plans
The
Company does not have any stock option or other equity incentive
plans.
30
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with our Financial
Statements, including the related notes thereto, and other financial information
included herein. The information in this report includes forward-looking
statements. In addition, past operating results are not necessarily indicative
of the results to be expected for future periods.
Overview
We
were
incorporated in October 1989 under the laws of the State of Georgia under the
name William E. York, Inc. for the purpose of acquiring Bio-Dyne Corporation,
a
Georgia corporation formed in 1986 ("Bio-Dyne") and ECBB Body Building, Ltd.,
a
New York corporation formed in 1979 ("ECBB"), which collectively manufactured,
marketed and distributed multi-station home gyms, exercise machines, weight
benches and specialty free weight equipment.
In
November 1989, we acquired all of the issued and outstanding shares of capital
stock of Bio-Dyne and ECBB. Following the closing of the transaction, Bio-Dyne
was formally dissolved and a Certificate of Dissolution of ECBB was filed with
the Department of State of New York. Thereafter, we used the trade name Bio-Dyne
and in January 1991, changed our name from William E. York, Inc. to Bio-Dyne
Corporation. We ceased active operations after the filing of bankruptcy in
December 1997. On January 18, 2005, we changed our name to No Good TV, Inc.
and
our shares were subsequently quoted in the Pink Sheets under the symbol “NTVN.”
In May 2005, we changed our name to LB Center, Inc.
On
June3, 2005, we entered into an Agreement and Plan of Merger with Berman Health
and
Media, Inc., a privately held Delaware corporation (“BHM”), pursuant to which
the stockholders of BHM acquired approximately 87% of our issued and outstanding
common stock through a merger transaction, with our existing stockholders
continuing to own the remaining 13% of our issued and outstanding common stock
after the merger. The merger was consummated through the merger of our
wholly-owned subsidiary, LBC MergerSub, Inc., a Nevada corporation, with and
into BHM, with BHM being the surviving corporation. The merger was intended
to
be a "tax-free" reorganization pursuant to the provisions of Section 368(a)
of
the Internal Revenue Code of 1986, as amended. As a result of the merger, BHM
became a wholly-owned subsidiary of the Company. Immediately after the merger
with Berman Health and Media, Inc., we reincorporated from the State of Georgia
to the State of Delaware and changed our name to Berman Center, Inc.
BHM
was
formed on January 16, 2003 and operated as a privately held Delaware limited
liability company under the name Berman Center LLC until June 2, 2005, when
it
reorganized into corporate form under the name “The Berman Center, Inc.”, in
accordance with the provisions of the Delaware Limited Liability Company Act.
On
June 20, 2005, we changed the name of The Berman Center, Inc. to Berman Health
and Media, Inc.
In
June
2005, Berman Health and Media, Inc. offered for sale (the "Offering") through
Hunter World Markets, Inc. on a “best efforts” basis units of its common stock
and warrants (the “Units”), each consisting of (i) two shares of its common
stock, (ii) one three-year warrant exercisable into one share of its common
stock at an exercise price of $1.05 and (iii) one three year warrant exercisable
into one share of its common stock at an exercise price of $1.575. The price
per
Unit was $1.05. On June 16, 2005, 2,952,381 Units were sold to certain of the
selling security holders. The Offering closed in June 2005. All of the shares
of
common stock sold by Berman Health and Media, Inc. in the Offering and exchanged
for securities in our company pursuant to a reverse merger in June 2005,
including shares of common stock issuable upon the exercise of the warrants,
are
being registered in this registration statement.
Following
the merger with BHM, Samuel P. Chapman, Laura A.C. Berman, Allan Charles, Alger
Chapman, Stuart Cornew, Jan Fawcett, Robert Goodmen and Michael Romano were
appointed to the Board of Directors of the Company. In addition, we appointed
Samuel P. Chapman as our Chairman and Chief Executive Officer, Laura A.C. Berman
as our President and William McDunn as our Chief Financial Officer. On August25, 2005, Mitchell Mondry, Robert Peele and Howard Zuker were each appointed
to
serve on our Board of Directors. Howard Zuker was selected by purchasers of
a
majority of the units of common stock and warrants pursuant to the private
placement agreement for the private placement occurring in June 2005.
We
are a
multimedia enterprise specializing in women's health, active across the domains
of radio, television, and print media, including books, magazines and
newspapers. Dr. Laura Berman, our President, is a premier name in women's sexual
health, a leading researcher in the field and has created a multi-faceted
platform for reaching out to consumers in a variety of settings, including
the
entertainment medium, product sales, medical and therapeutic services and online
subscription services. Dr. Berman, who is not a physician, earned her Master's
in Clinical Social Work and Doctorate in Health Education and Therapy
(specializing in human sexuality) at New York University.
Our
principal source of revenue is from the clinical services that we provide out
of
our downtown Chicago clinic, comprising approximately 10,000 square feet. Our
clinical staff works to improve every patient's quality of life, health and
relationships. Clinical services include talk therapy performed by licensed
clinical social workers, medicine, as practiced by physicians and nurse
practitioners, phlebotomy and serum and saliva testing services, nutritional
counseling and yoga classes. Clinical services accounted for 60% of our revenue
for the year ended December 31, 2004 and 83% of our revenue for the first six
months of 2005. Our
clinical staff includes one phlebotomist/ physician’s assistant, two nurse
practitioners and four talk therapists, all of whom work for us. We also offer
medical services to our patients through a physician, Dr. Brian Locker, who
practices at our offices. Dr. Locker acts as our Chief of Staff and is
compensated through his own medical company, FSM Associates, LLC. Dr. Locker
supervises the nurse practitioners, each of whom has the right to prescribe
medications in the state of Illinois including but not limited to vasodilators,
hormones, SSRI’s, SNRI’s and other medications.
We
operate a full-scale hormonal management clinic, counseling center and sexual
function testing center. Our
hormone management clinic is a facility that can treat the large variety of
female hormone deficiency cases including menopausal symptom relief and sexual
function improvement as well as nutrition and fitness. Our sexual function
testing center is a facility that measures hormone levels, nerve function and
other sensory impairment issues, blood flow abnormalities in the genital region,
and signs of emotional difficulty, relationships discord and past trauma and
abuse.
31
We
generate additional revenue from a continuing medical education course that
we
hold at various locations, including the Fairmont Hotel in Chicago, Illinois.
The medical education courses accounted for 25% of our revenue in 2004. We
are
scheduled to offer medical education courses in the future, including courses
in
Chicago at the Renaissance Hotel; in Marina del Rey, California at the Ritz
Carlton; in New York City at the Marriot Marques Hotel. We also generate revenue
through research funding, which accounted for 15% of our revenue in 2004. For
example, we received a $60,000 grant for a research project funded by
Drugstore.com and a $100,000 project funded by CB Fleet, both completed in
2004.
Obtaining funding for future research projects is an ongoing goal of our
management. Currently, no projects have been secured for 2005 or 2006. In
addition, radio advertising for the Dr. Laura Berman radio show, which we
produce, generated $50,000 in 2005, which accounted for 17% of revenue for
the
first six months of 2005.
We
have
recently entered into the television production business. We, in conjunction
with the Gantz Brothers’ View Film Productions, produced a pilot financed by
ShowTime Networks, Inc. ShowTime picked up the series in September 2005 and
intends to turn it into nine episodes projected to premier in June of 2006.
We
are entitled to receive a production fee equal to 10% of the production budget
of each episode, which fee equates to $375,000 per episode. The show,
which
is expected to be entitled Sexual Healing, will track three couples’ progress
through intensive couples therapy at the Berman Center over a one-week period.
The main set of the show will be our offices with additional footage taped
in
and around the city of Chicago as couples go on therapeutic dates arranged
by
Dr. Berman. It is expected that our clinical services and their impact on
patients will be an important feature of each week’s plot line.
We
also
receive revenue from books authored by Dr. Berman. Dr. Berman is a co-author
of
two published books—For Women Only (published by Henry Holtz) and Secrets of the
Sexually Satisfied Woman (published by Hyperion). Her residual rights and her
ongoing rights in future books are pledged to the Berman Center as part of
her
employment agreement with us. Her next book, entitled The Passion Prescription,
is scheduled to be released by Hyperion in January 2006 and is a do-it-yourself
guide to sexual wellness. A final advanced payment $71,000 will be received
in
January 2006 in conjunction with the book’s release. Revenue from future book
and media projects of Dr. Berman is also pledged to us as part of her employment
agreement.
We
are
also in contract negotiations with a publisher of self-help experts to develop,
market and distribute a free and subscription-based website and online
newsletters based upon Dr. Berman’s new book, The Passion Prescription. It is
anticipated that the website will be named after her next book, and that the
negotiations will be completed in October 2005. In addition to any subscription
revenue from the site, the website will sell Dr. Berman’s product line from
California Exotics Novelties, LLC and any other products or media that will
be
produced in the future. We also have plans to create a sexual health DVD series
entitled The Endless Passion series, which is in the concept phase. We are
currently in negotiations with different production and distribution groups
regarding the DVD series and production is anticipated to begin in November
2005, assuming negotiations with the potential production and distribution
partner are successfully completed on time. We have also created a line of
Kegal
exercises and sexual aids in partnership with California Exotics Novelties,
LLC.
Dr. Berman and our management team designed the products and California Exotics
is distributing and managing the products. We are entitled to an 8% share of
the
revenue of the product line paid to California Exotics.
We
prepare our financial statements in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect
the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management's
estimates and judgments are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
Revenue
Recognition
Revenues
are recognized when realized or realizable and earned. Patients at the clinic
are required to pay on the day of their appointment (at the point of service).
Patients are allowed to pay either with cash, check or credit card. Items for
bad debt or returned or rejected credit cards are very minimal and are recorded
as they occur. If the clinic changed its policy in the future and granted credit
to its patients, a review of the current procedures would be necessary and
allowances for bad debt write-offs would be warranted. Revenue related to
hosting CPE seminars for clinicians is recognized once the seminar has been
conducted. Revenue related to the publishing of books is recognized when the
book is released by the publisher. Revenue related to research and clinic trials
is recognized when the work is complete and results of the research or clinical
trial is released.
Results
of Operations
General
Because
we ceased active operations after the filing of bankruptcy until the merger
with
Berman Health and Media, Inc., our discussion and analysis of our financial
condition and results of operations are based upon the financial statements
of
Berman Health and Media, Inc., which have been prepared in accordance with
US
generally accepted accounting principles.
Revenue
from clinic operations for the first half of 2005 decreased by $101,257 from
the
first half of 2004, from $348,687 to $247,430. The first half of 2005 revenue
also included $50,000 in radio advertising revenue bringing the total revenue
for the first half of 2005 up to $297,430. By comparison, there was no radio
advertising revenue in the first half of 2004. The broadcasting of the Dr.
Laura
Berman Radio Show began in August of 2004. It was originally broadcasted on
one
radio station in Chicago. The program was then marketed to other radio markets.
The Company was not to receive any advertising revenue from the show until
a
minimum number of markets carried the show through syndication. This occurred
in
early 2005 and the Company received its first payment of advertising revenue.
However, the first half of 2004 included $60,000 in grant research revenue
bringing total revenue for the first half of 2004 to $408,687. As a result,
total revenue in the first half of 2005 decreased by $111,257 from the
year-earlier period. It is important to point out that the clinic itself was
not
opened for the first month and a half of the first quarter 2004 (the clinic
began seeing patients on February 16, 2004) and that the radio show did not
exist in the first half of 2004.
Cost
of
goods sold was higher in the first half of 2004 at $498,699 than in the same
period in 2005, $217,104 by the amount of $281,595. This is due mainly to higher
staffing levels at the opening of the clinic and the first half of 2004, than
during the first half of 2005. Staff reductions and salary cuts had been put
in
place by the latter part of 2004 that were still in place during the first
half
of 2005. Management implemented these reductions in an effort to move toward
profitability. Staff reductions included one doctor, one physical therapist
and
one couples therapist. Beginning in the third quarter of 2004, our staff was
reduced by nine employees through layoffs and attrition. The annual salaries
eliminated as a result of this amounted to $547,000. Also, two executives’
salaries were reduced by a combined $40,000 on an annual basis. In first half
of
2004, cost of services consisted of $425,461 in payroll, payroll taxes, benefits
and outside contractor costs, outside lab costs of $10,238 and research expense
of $63,000. In the first half of 2005, cost of services consisted of $203,289
in
payroll, payroll taxes and benefits and outside contractor costs, outside lab
fees of $12,090 and research expenses of $1,725.
Selling,
general and administrative expenses were higher in the first half of 2005 at
$1,258,334 than in the same period in 2004, $1,029,204 by the amount of
$229,130. This is mainly due to expenses related to our reverse merger and
equity financing transaction which occurred in the first half of 2005. In the
first half of 2004, the significant components of selling, general and
administrative expenses consisted of the following: $202,728 in payroll,
payroll taxes and benefit costs, $193,821 in costs for systems and technology
and $149,613 in expenses related public relations and promotions. In the first
half of 2005, the significant components of selling, general and administrative
expenses consisted of $450,741 in expenses related to the reverse merger and
equity financing transaction. The expenses for the reverse merger and equity
financing transaction consisted of the following expense categories: audit
and
legal fees, placement fees, roadshow expenses, filing fees and interest expense.
By comparison there was no such transaction or expenses in the first half of
2004. The remaining significant components of selling, general and
administrative expenses for the first half of 2005 included: $251,611 in
expenses related to payroll, payroll taxes and benefits, $112,790 in public
relations and promotions, $72,360 in consultant and broker fees.
Net
loss
increased from ($1,119,216) in the first half of 2004 versus ($1,178,008) in
the
same period of 2005. The change is mainly due to expenses related to our reverse
merger and equity financing transaction which occurred in the first half of
2005. Without the expenses for our reverse merger and equity
financing transaction, the loss for the first half of 2004 would be
greater
than the loss for the first half of 2005. The loss in the first half of 2004
included extra costs associated with setting up the new operation in the early
2004. In first half of 2004, cost of services amounted to $498,699 resulting
in
a negative gross margin of $90,012. Selling, administrative and general expenses
totaled $1,029,204 which resulted in a net loss for the first half of
($1,119,216).
In
the first half of 2005, cost of services amounted to $217,104 resulting
in
a gross margin of $80,326. Selling, administrative and general expenses totaled
$1,258,334 which resulted in a net loss for the first half of
($1,178,008).
In
2003,
Berman Health and Media, Inc. was formed and costs for most of 2003 consisted
of
formation expenditures. Revenue for 2003 was $75,000 from an unrestricted
educational grant supporting Dr. Berman’s survey and research related to the
state of women’s sexual health and satisfaction. In 2003, gross revenue and net
revenue was the same.
In
September 2004, we conducted a seminar on the State of Art Series on Women’s
Sexual Wellness and recorded $279,250 in revenue from registrants attending
and
sponsors supporting the conference.
In
2004,
we recorded $100,000 in revenue related to research, studies and clinical
trials. We also recorded $60,000 in revenue from research studies and $11,000
in
revenue from a major pharmaceutical company for participating in a clinical
trial. In 2004, there was only $1,500 difference between gross revenue and
net
revenue. The company’s experience for sales returns and credits is
nominal.
In
2003,
cost of services consisted of: $35,843 in payroll, benefits and outside
contractor costs, and $75,000 in expenses related to a research project. In
2004, cost of services consisted of: $745,497 in payroll, payroll taxes,
benefits and outside contractor costs, conference expenses of $249,195, research
expenses of $116,704 and outside lab fees of $54,035.
In
2003,
the significant components of selling, general & administrative expenses
consisted of the following: $98,702 in expenses related to public relations
and
promotions, $93,036 in start-up costs, $50,087 in legal expenses and $26,793
in
system and technology expenses. In 2004, the significant components of selling,
general & administrative expenses consisted of the following: $428,991 in
payroll, payroll taxes, benefits, outside contractor costs, $418,829 in public
relations, promotions and advertising, $251,797 of rent expense, $160,858 of
costs of commercial insurance, $122,314 in system and technology expenses,
$110,133 of depreciation expense and $74,008 in legal expenses.
Berman
Health and Media, Inc. has incurred net losses in each of the last two years
since its formation.
In
2003,
we incurred outside research expenses of $75,000 which was equal to the grant
revenue received from a major pharmaceutical company. Cost of services (payroll,
payroll taxes, benefit costs and outside contractor pay and related research
expenses) amounted to $110,843 resulting in a negative gross margin of $35,843.
Selling, general & administrative expenses totaled $287,973 which resulted
in a net loss for the year of $323,816.
In
2004,
the largest cost components contributing to our net loss were costs related
to
payroll, payroll taxes, benefit costs and outside contractor pay for the year
of
$1,174,488. We added significantly to staff in response to clinic revenue but
gradually reduced staff through a series of staff reductions.
Liquidity
and Capital Resources
At
June30, 2005, we had current assets of $2,306,044 consisting of cash and cash
equivalents of $2,206,517 and other current assets of $99,527. At June 30,2005,
we also had current liabilities of $1,064,924, consisting of accounts payable
of
$298,874 and other current liabilities of $766,050. This resulted in net working
capital at June 30, 2005 of $1,241,120. During the six months ended June 30,2005, we used cash in operating activities of ($892,344). From the date of
inception (January 2003) to June 30, 2005, we have had a net loss of
($3,421,653) and have used cash of ($2,660,038) in operating activities.
On
June16, 2005, Berman Health and Media, Inc. closed a private placement offering
of
common stock and warrants (the “Units”) each consisting of (i) two shares of
common stock, (ii) one three-year warrant exercisable into one share of common
stock at an exercise price of $1.05 and (iii) one three year warrant exercisable
into one share of common stock at an exercise price of $1.575. The price per
Unit was $1.05. Berman Health and Media, Inc. sold an aggregate of 2,952,381
Units and received $3,100,000 in gross proceeds from such sale. We have agreed
to assume the warrants issued by Berman Health and Media, Inc. in the private
placement. Each share of common stock underlying such warrants is now
exercisable into 1.535999487 shares of our common stock. These warrants are
currently exercisable into an aggregate of 9,069,714 shares of our common
stock.
In
connection with the private placement, Berman Health and Media, Inc. entered
into an agreement with Hunter World Markets, Inc. (“HWM”), our former
controlling stockholder and one of our current stockholders, pursuant to which
HWM offered for sale the Units on a “best efforts” basis. As consideration for
HWM's services, we have paid HWM (i) a $310,000 commission on the sale of the
Units, (ii) reimbursement of $62,000 in non-accountable expenses and (iii)
three-year warrants exercisable into 906,971 shares of our common
stock.
As
a
result of this private placement, we currently have sufficient funds on hand
to
fund our operations until approximately April 2006. We currently have a cash
balance of $1,645,000. The net proceeds from the private placement was
$2,281,250. This represents $3,100,000 in gross proceeds less placement fees
paid to the investment banker and the repayment of a bridge loan and interest.
The loan was necessary to pay for expenses leading up to the reverse merger
and
equity financing transaction including roadshow expenses as well as attorney
fees, auditor fees and filing fees.
The
net
proceeds from our recent private placement transaction in June 2005 was $2.3
million. We have and intend to use the net proceeds from the private placement
for expenses related to the private placement and reverse merger, working
capital and general corporate purposes. We intend to use approximately $500,000
in annual salaries for additions to our staff in order to expand our clinic’s
operation. We have hired eight new employees with annual salaries of
approximately $385,000. We also intend to use approximately $28,000 to provide
equipment and supplies for our new clinical office in Naperville, a suburb
of
Chicago, Illinois, and we have spent approximately $23,000 for such purpose.
In
addition, we intend to use a portion of the net proceeds to advertise our
services more aggressively than we have in the past. We are still determining
the appropriate amount to expend on advertising and have spent approximately
$51,000 to date for such advertising. In addition, we intend to use the net
proceeds from the private placement to pay for ongoing legal and audit services
and other fees related to our public filings with the Securities and Exchange
Commission.
We
currently lose approximately $200,000 per month but we anticipate that monthly
losses could become zero before the end of the next 12 months based on the
addition of a new clinic in Naperville, a suburb in Chicago, Illinois, revenue
from the ShowTime series, and from writing books with Hyperion. We believe
we
have the funds necessary to finance the working capital needs of our company
until we can generate positive net income and cash flow. There is a contingency
plan for reducing expenses should our future revenue not materialize as
expected. We intend to seek additional financing in the future to fund our
operations, however we currently do not have a definitive plan for raising
additional capital. Failure to secure additional financing in a timely manner
and on favorable terms if and when needed in the future could have a material
adverse effect on our financial performance, results of operations and stock
price and require us to implement cost reduction initiatives and curtail
operations.
Prior
to
converting into corporate form, Berman Center LLC sold in 2003, 2004 and 2005
an
aggregate of 3,767,390 membership interests in Berman Center LLC and received
an
aggregate of $2,966,223 in proceeds from such sales. These securities converted
into 19,730,504 shares of our common stock upon consummation of the merger
on
June 16, 2005.
36
In
addition, prior to converting into corporate form, Berman Center LLC issued
three-and-a-half year warrants exercisable into 117,315 membership interests
in
Berman Center LLC, at an exercise price of $1.074034786, to investors that
provided $400,000 in working capital to Berman Center LLC. These warrants
converted into warrants exercisable into 400,000 shares of Berman Health and
Media, Inc.'s common stock at an exercise price of $0.315 upon the
reorganization of Berman Center LLC into corporate form. We agreed to assume
these warrants in connection with the merger. Each share of common stock
underlying such warrants is now exercisable into 1.535999487 shares of our
common stock. These warrants are currently exercisable into an aggregate of
614,400 shares of our common stock. The shares of common stock issuable upon
exercise of the warrants are being registered under this registration
statement.
Off-Balance
Sheet Arrangements
None.
Dividends
and Distributions
We
have
not paid any cash dividends to date. We intend to retain our future earnings,
if
any, and we do not anticipate paying cash dividends on our stock in the
foreseeable future.
DIRECTORS,
EXECUTIVE OFFICERS AND CONTROL PERSONS
On
the
closing of the merger with Berman Health and Media, Inc. (“BHM”), all of the
directors and officers of BHM became directors and officers of the Company
and
all of the Company's existing directors and officers resigned. The following
new
executive officers of the Company will be elected annually by the Board of
Directors and the following new members of the Company's Board of Directors
will
serve one year terms until the earlier of their death, resignation or removal
by
the Board of Directors:
Name
Age
Position
Year
First
Appointed
Executive
Officer
and/or
Director of
BHM
Year
First
Appointed
Executive
Officer
and/or
Director
of our
Company
Samuel
P. Chapman
40
Chairman,
Chief Executive
Officer
and Director
2003
2005
Laura
A.C. Berman, LICSW, PHD.
36
President
and Director
2003
2005
William
McDunn
48
Chief
Financial Officer
2004
2005
Allan
Charles, M.D.
76
Director
2004
2005
Alger
Chapman
73
Director
2004
2005
Stuart
Cornew
47
Director
2004
2005
Jan
Fawcett, M.D.
71
Director
2004
2005
Robert
Goodman
49
Director
2004
2005
Michael
Romano
50
Director
2004
2005
Mitchell
Mondry
45
Director
N/A
2005
Robert
Peele
58
Director
N/A
2005
Howard
Zuker
65
Director
N/A
2005
37
The
following information describes the business experience during the past five
years of the executive officers and directors named above and certain other
persons who are expected to make significant contributions to the business
of
the Company.
SAMUEL
P.
CHAPMAN
Samuel
P.
Chapman has been President of Parson Capital Corporation for the past thirteen
years. Parson Capital is a venture capital boutique firm specializing in
start-up companies. He is also a Director of HDO, Inc. During his career with
Parson Capital he founded several companies playing the role of financier and
Co
Chairman of the Board along with his partner. One of the companies he co-founded
was Parson Group LLC, a consulting firm that achieved the number one ranking
by
Inc. Magazine as the fastest growing private company in America in the year
2000. Parson Group was sold the following year to a British Company for $55
million cash. Despite Mr. Chapman’s other ventures, Mr. Chapman devotes 100% of
his time to working at Berman Center.
Mr.
Chapman formerly worked for both Dillon Read & Co., Inc. (now owned by UBS)
and Lehman Brothers as a mergers and acquisitions specialist in New York. He
is
a member of the Board of Directors and former Cochairman of HDO Production
a
nationwide tent rental company. He is also a member of the Young Presidents
Organization (YPO) and of the Economics Club of Chicago. He was formerly Co
Chairman of Cantilever Technologies LLC, a software company he helped found,
a
past member of the Board of Trustees and the Executive Committee of the
Rehabilitation Institute of Chicago, the top rehabilitation hospital in the
world. Mr. Chapman graduated with a BA from Williams College in
1986.
LAURA
A.C. BERMAN, LICSW, PHD.
Dr.
Laura
Berman has been working as a sex educator and therapist for over fifteen years.
After obtaining her Master's in Clinical Social Work and Doctorate in Health
Education and Therapy (specializing in human sexuality) at New York University,
she went on to complete a training fellowship in Sexual Therapy with the
Department of Psychiatry at New York University Medical Center. Dr.
Berman
is currently an Assistant Clinical Professor of OBGYN and Psychiatry in the
Feinberg School of Medicine at Northwestern University.
Dr.
Berman is chair of the Women's Sexual Health State-Of-The-Art Series, an
accredited program for the Council of Continuing Medical Education and currently
serves on the foundation board of the Society for the Scientific Study of
Sexuality (SSSS). She is also a member of the American Association of Sex
Educators Counselors and Therapists (AASECT), the National Association of Social
Workers (NASW), and is one of the few non-physician members of the American
Urologic Association (AUA). She has been involved in numerous clinical sexual
pharmacology trials, including acting as lead investigator for testing the
effectiveness of Viagra on women's sexual complaints.
Dr.
Berman has authored over 25 articles published in peer reviewed journals, and
has been an invited speaker at over 45 venues in the United States and abroad.
She recently wrote the chapter on female sexuality in Obstetrics and Gynecology,
the definitive medical school text on the subject, edited by Dr. Sciarra, the
past chair of the Department of OBGYN at Northwestern Memorial Hospital. Dr.
Berman is also the recipient of many awards and honors, including Rising Star
of
the Year, (National Association of Women Business Owners, Los Angeles, February
2002), Women of Action Award (Israel Cancer Research Fund, August 2002) and
Women Who Make A Difference (Los Angeles Business Journal, August
2002).
In
July,
1998, Dr. Berman founded the Women's Sexual Health Center in the Department
of
Urology at Boston Medical Center. She was Co-Director there and established
the
first comprehensive protocol for treating female sexual dysfunction. In spring
of 2000, she was recruited to UCLA Medical Center to start the Female Sexual
Medicine Center, also within the department of Urology. She was Director of
this
Center until December 2002 when she moved to Chicago to join the clinical
faculty of Northwestern Memorial Hospital and start Berman Center
LLC.
38
ALLAN
CHARLES, M.D.
Allan
Charles is retired Chief of OBGYN at Michael Reese Hospital and Medical Center,
retired Chairman of the Board of Directors for the Research and Education
Foundation of the Michael Reese Medical Staff and presently Attending Physician
in the Department of OBGYN at the same institution.
ALGER
CHAPMAN
Alger
Chapman is Director of the Cambridge Group. He is also the recently retired
Chairman of ABN AMRO Financial Services, Inc. Prior to that Mr. Chapman was
Chairman and CEO of the CBOE from 1986 to 1997. He is also on the Board of
Arlington Capital, HDO Productions and Prime Insurance Holdings.
STUART
CORNEW
Stuart
Cornew is Managing Director of Pattern Associates which he founded ten years
ago. Pattern is a database mining and consulting company specializing in finding
answers in large data sets for the financial services industry. Currently he
also serves on the board of Harlem Furniture and the advisory board of the
Northwestern University Cancer Center.
JAN
FAWCETT, M.D.
Jan
Fawcett is Professor at the University of New Mexico school of Medicine and
the
recently retired chairman of the Department of Psychiatry at
Rush-Presbyterian-St. Luke's Medical Center.
ROBERT
GOODMAN
Robert
Goodman is Chairman and CEO, Asia/Pacific Hudson Highland Group. The Hudson
Highland Group is a world wide staffing, outsourcing and executive search firm,
headquartered in Chicago, IL.
MICHAEL
ROMANO
Michael
Romano is immediate past CEO of Romano Brothers Beverage Company. Romano
Brothers is the leading wine and spirits distributor in the State of Illinois.
Mr. Romano sold his Company to Southern Wine and Spirits in late
2002.
MITCHELL
MONDRY
Mitchell
Mondry has served on our Board of Directors since August 2005. Mr. Mondry is
Founder and President of M Group, a real estate investment and development
company located in Birmingham, Michigan established in 1993. Mr. Mondry guides
all aspects of the company’s investment and development activity. Mr. Mondry is
also a Managing Member of Leading Edge Properties, a real estate acquisition
and
development company and currently serves as President of the Michigan Venture
Capital Association. He is also a member of the Boards of Hennessey Capital
Solutions, Paramount Bank, a Michigan-based mortgage and commercial bank, and
the Jewish Federation of Metropolitan Detroit.
ROBERT
J.
PEELE
Robert
Peele has served on our Board of Directors since August 2005. Mr. Peele has
been
in the Financial Services industry since receiving his BA in Political Science
from Southern Illinois University in 1972. Mr. Peele has been advising clients
at Merrill Lynch since 1987. The business focuses on creating and maintaining
superior customer relationships while assisting high net worth clients with
their financial planning and investing needs. Currently, Mr. Peele is on the
Board of Directors at Butler national Golf Club is a Scholarship Chairman of
Alpha Tau Omega Fraternity at the University of Illinois.
HOWARD
ZUKER
Howard
Zuker has served on our Board of Directors since August 2005. Mr. Zuker, who
is
also known as Zack Norman, is the CEO of AEHC and has produced, presented or
financed more than thirty motion pictures, including Hard
Times starring
Charles Bronson, Night
Moves starring
Gene Hackman and Tracks
starring
Dennis Hopper. Mr. Zuker also acted in over 25 motion pictures. Mr. Zuker has
raised more than $100 million in investments in motion pictures.
WILLIAM
MCDUNN
William
McDunn has over 15 years of experience in Finance and Accounting. He was the
Controller for Parson Group for five years, managing a staff of 15 and reporting
directly to the CFO. Prior to Parson Consulting, he was Division Controller
for
Stone Container Corporation and responsible for oversight of accounting
activities in his business unit. Mr. McDunn received a BA in Accounting and
Liberal Arts from University of Illinois in Chicago in 1979. He received his
CPA
in 1981 and an MBA from Loyola University in 1989.
The
following contains biographical information of other persons that are expected
to make a significant contribution to the business of the Company.
KATHRYN
L. MONKE
Kathryn
L. Monke, age 38, has served as Corporate Secretary, Manager, Center Operations
of Berman Center since 2005. Ms. Monke has over eight years of experience with
internal operations and systems. She was employed at Parson Group and most
recently was a Senior Project Manager in internal operations and system
implementation. Throughout her career she has gained experience in recruiting,
interviewing, hiring, human resources, marketing, office management, training
and documentation. Kathy received her Bachelor of Science in Marketing from
Northern Illinois University.
39
DANA
DEMAS
Dana
Demas, age 29, is a writer for Berman Center since 2004. Ms. Demas is the author
of two books: Women's Health and Wellness: An Illustrated Guide and Dog Breeds:
An Illustrated Guide. She has a variety of writing and editing experience,
including feature-length articles, newsletter and website content for clients
from a diverse range of industries. Dana received her Bachelor of Arts in
English and Psychology from the University of Vermont in 1998.
SUZANNE
ROTH, MSN, APRN, BC
Suzanne
Roth, age 46, has served as Nurse Practitioner of Berman Center since 2004.
Ms.
Roth was most recently employed at Men's Health Boston as a clinical study
coordinator responsible for conducting/directing three clinical trials for
patients with erectile dysfunction under the supervision of Abraham Morgentaler,
M.D. She started her professional life at Massachusetts General Hospital as
a
Urological, Registered Professional Nurse. Suzanne received her Masters of
Science in Nursing, Adult Primary Care and Women's Health, from Simmons
College.
REBECCA
JEFFERS
Rebecca
Jeffers, age 32, has served as a Fitness Expert of Berman Center since 2004.
Ms.
Jeffers has been a yoga instructor for six years and is also certified in mat
Pilates. She was trained at the N. U. Yoga Center in Chicago, IL, where she
was
exposed to all the different yoga systems, serials, and sequencing of poses.
She
has also had training in diet and nutrition and holistic health, and experience
in developing and delivering specialized programs.
KERRIE
GROW MCLEAN, PSYD, LPC
Kerrie
Grow McLean, age 31, has served as Psychotherapist of Berman Center since 2004.
Ms. McLean received her undergraduate degree in Psychology from Michigan State
University, and received her Masters and Doctoral degrees in Clinical Psychology
from Chicago School of Professional Psychology. She completed her training
at Northwestern University's Counseling and Psychological Services where she
was
a predoctoral intern. Dr. Grow McLean also trained as a sex therapist
at
the Loyola University Medical Center Sexual Dysfunction Clinic. Her
experience includes individual, couples and sex therapy. Dr. Grow McLean
specializes in treating women's health issues including sexual health and
functioning, body image, genital image, and menopausal health. She
is
currently a member of the American Association of Sex Educators Counselors
and
Therapists as well as the American Psychological Association.
MARTHA
WEINFURTER, BSN
Martha
Weinfurter, age 47, has served as Patient Concierge of Berman Center since
2004.
Ms. Weinfurter was most recently employed at Highland Park Hospital in Highland
Park, IL as a Discharge Planner. She started her professional life at St. Luke's
Hospital in Milwaukee, WI, where she worked on a medical unit and Kidney
Dialysis. Martha then spent three years on a tertiary unit of Labor and Delivery
at St. Joseph's Hospital in Milwaukee. She has experience as a community health
nurse in the Washington D.C. area and received her Bachelor of Arts degree
in
Nursing from Marquette University in Milwaukee, Wisconsin.
Director
Compensation
We
do not
have an established policy to provide compensation to members of our Board
of
Directors for their services in that capacity. Directors are reimbursed for
reasonable out-of-pocket expenses incurred in connection with attendance at
Board meetings. Each of our outside directors prior to the merger in June 2005,
other than Jan Fawcett and Allan Charles, received 157,115 shares of our common
stock in consideration for their services as a director of our company. In
May
2004, Berman Center LLC granted options to two of its outside directors, Jan
Fawcett and Allan Charles, exercisable into an aggregate of 60,000 units of
Berman Center, LLC. These options became exercisable into 204,578 shares of
common stock of The Berman Center, Inc. upon the reorganization of Berman Center
LLC into The Berman Center, Inc. We agreed to assume the options upon closing
of
the merger and these options are now exercisable into an aggregate of 314,230
shares of our common stock.
40
The
Board of Directors and Committees
Our
Board
of Directors does not maintain a separate audit, nominating or compensation
committee. Functions customarily performed by such committees are performed
by
our Board of Directors as a whole. We are not required to maintain a nominating
committee or a compensation committee under the rules applicable to companies
quoted in the Pink Sheets. None of our independent directors qualify as an
"audit committee financial expert."
Family
Relationships
Samuel
P.
Chapman is the husband of Dr. Laura A. Berman. In addition, Alger Chapman is
the
father of Samuel P. Chapman.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth information concerning the compensation for fiscal
year 2003 and 2004 of our chief executive officer and one other executive
officer whose annual salary and bonus exceeded $100,000 in such fiscal years
(collectively, the “Named Executive Officers”). The amounts disclosed for fiscal
year 2003 and 2004 for each of the Named Executive Officers relate to such
person's compensation received as an executive officer of Berman Health and
Media, Inc.
Annual
Compensation
Name
and Principal Position
Year
Salary($)
Bonus($)
Samuel
P. Chapman - Chairman and Chief Executive Officer
2003
2004
$
$
0
110,769
$
$
0
0
Laura
A. C. Berman - President
2003
2004
$
$
0
110,769
$
$
0
0
Employment
Agreements
On
June16, 2005, our company and Dr. Laura Berman entered into a three-year employment
agreement. Pursuant to such agreement, Dr. Berman will receive an annual salary
of $200,000, provided that under certain circumstances our Board of Directors
may increase her salary. In addition, Dr. Berman has also agreed to contribute
to our company all income, revenue and other compensation received by Dr. Berman
in connection with activities related to the business operations of our company
during her employment, including, without limitation, all revenue from media
sources, talent agreements with television production companies or other media
sources and authorship royalties. The contribution of income and revenues
described above, however, does not include income, revenue and other
compensation derived by Dr. Berman from honorarium fees and speaking
engagements.
We
do not
currently have an employment agreement with Samuel Chapman.
41
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth the beneficial stock ownership of our common stock
that is owned by each of our Named Executive Officers, directors and
stockholders beneficially owning 5% or more of our common stock and all
directors and executive officers as a group. In calculating the number of shares
outstanding, each person's percentage of ownership in the following table is
based upon 31,795,415 shares of common stock outstanding as of September 30,2005. Unless indicated otherwise, the address for each person named is c/o
Berman Center, Inc., 211 East Ontario, Suite 800, Chicago, Illinois60611.
All
current directors and officers as a group (11 persons)
(12)
9,648,826
30.05
%
*
indicates less than 1%.
42
1.
The
persons named in this table have sole voting and investment power
with
respect to all shares of common stock listed. Beneficial ownership
also
includes that number of shares, which an individual has the right
to
acquire (such as through the exercise of warrants and options) within
60
days from September 30, 2005.
2.
Mr.
Samuel P. Chapman owns together with his wife Dr. Laura A. Berman,
his
wife, 2,897,906 shares of the Company's common stock. Berman Center
Holdings LLC, which is owned by Mr. Samuel P. Chapman and Dr. Laura
A.
Berman, owns 2,849,513 shares of the Company's common
stock.
3.
Represents
157,115 shares of Common Stock issuable upon exercise of stock options
that are currently exercisable or exercisable within 60 days of September30, 2005.
4.
Represents
157,115 shares of Common Stock issuable upon exercise of stock options
that are currently exercisable or exercisable within 60 days of September30, 2005.
5.
Mr.
Mondry may be deemed to control the voting and investment power of
Berman
Majec, LLC, which holds the shares. Mr. Mondry disclaims beneficial
ownership of these securities in excess of his pecuniary interest
therein.
6.
The
sole beneficiary of The Charles Rosner Bronfman Family Trust is Stephen
R.
Bronfman. The Charles Rosner Bronfman Family Trust is the beneficial
owner
of 100% of Esarbee Investments
Limited.
7.
Darius
Parsi has voting and investment powers for the shares held
by European
Catalyst Fund. Mr. Parsi disclaims beneficial ownership of
the shares held
by European Catalyst Fund except to the extent of his proportionate
pecuniary interest therein.
8.
Florian
Homm has voting and investment powers for the shares held by
Absolute
Return Europe Fund. Mr. Homm disclaims beneficial ownership of
the shares
held by Absolute Return Europe Fund except to the extent of his
proportionate pecuniary interest therein.
9.
Includes
4,388,570 shares of common stock issuable upon exercise of
warrants that
are currently exercisable.
10.
Includes
4,388,572 shares of common stock issuable upon exercise
of warrants that
are currently exercisable. Raj Nair has voting and investment
powers for
the shares held by Corporate Advisors Group. Mr. Nair disclaims
beneficial
ownership of the shares held by Corporate Advisors Group
except to the
extent of his proportionate pecuniary interest
therein.
11.
This
amount includes (i) 184,210 shares of the Company's common stock
owned by
Hunter World Markets, Inc. (“HWM”), (ii) warrants held by HWM currently
exercisable into 1,290,971 shares of the Company's common stock,
(iii) 1,000,000 shares of the Company's common stock owned
by Todd
Ficeto, the President of Hunter World Markets, Inc., (iv) 10,000
shares of
the Company's common stock owned by Hunter Ficeto, a family member
of Todd
Ficeto and (v) 10,000 shares of the Company's common stock owned
by
Natalia Ficeto, a family member of Todd Ficeto. Todd
M. Ficeto is President, Chief Executive Officer, and control
person of
Hunter World Markets, Inc. and may be deemed to have voting and
investment
power over the shares held by Hunter World Markets, Inc. Mr.
Ficeto
disclaims beneficial ownership of the shares held by Hunter World
Markets,
Inc. except to the extent of his pecuniary interest
therein.
12.
Includes
314,230 shares of Common Stock issuable upon exercise of stock
options
that are currently exercisable or exercisable within 60 days of
September30, 2005.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
June16, 2005, we completed a merger transaction with Berman Health and Media, Inc.
(“BHM”). At the effective time of the merger, BHM became a wholly-owned
subsidiary of our company and all outstanding securities of BHM were converted
into securities of our company. In addition, Hunter World Markets, Inc. (“HWM”),
our former controlling stockholder, served as the placement agent in connection
with BHM's closing of a private placement of $3,100,000 on June 16, 2005. We
assumed the warrants issued in the private placement. Todd Ficeto is the
President of HWM, and was our chief executive officer, chief financial officer
and sole director prior to the merger with BHM. In addition, HWM was one of
three lenders that provided bridge financing to BHM in connection with the
private placement and merger in June 2005. The bridge loan was in an aggregate
amount of $400,000, and HWM provided $250,000 of that amount. HWM received
a 10%
flat interest fee in connection with the loan and warrants to purchase 250,000
shares of BHM, which we assumed and was converted into warrants to purchase
384,000 shares of our common stock pursuant to the merger.
DESCRIPTION
OF CAPITAL STOCK
We
are
authorized to issue 100,000,000 shares of common stock, $0.001 par value per
share and 50,000,000 shares of preferred stock, $0.001 par value per share.
The
following description of our capital stock does not purport to be complete
and
is governed by and qualified by our certificate of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus forms a part, and by the provisions of applicable Delaware
law.
Preferred
Stock
As
of
September 30, 2005, we had no shares of preferred stock outstanding. The Board
of Directors of the Company has the power to issue shares of preferred stock
from time to time in one or more series. Pursuant to the Company's Certificate
of Incorporation, the Board of Directors is authorized to fix or alter the
designations, powers, preferences and other rights and restrictions of the
preferred stock, including, without limitation, the dividend rights, conversion
rights and voting rights of the preferred stock. Our Board of Directors can
issue preferred stock without any stockholder approval with voting, conversion
and other rights that could adversely affect the voting power and other rights
of the holders of common stock. The issuance of preferred stock in certain
circumstances may have the effect of delaying, deferring or preventing a change
in control of the Company, may discourage bids of our common stock at a premium
over the market price of the common stock and may adversely affect the market
price of our common stock.
43
Common
Stock
As
of
September 30, 2005, we had 31,795,415 shares of common stock outstanding, which
were held of record and beneficially by approximately 67 stockholders. As of
September 30, 2005, there were 10,591,085 shares of common stock underlying
outstanding warrants and 314,230 shares of common stock underlying outstanding
stock options.
The
holders of our common stock are entitled to one (1) vote per share on all
matters submitted to a vote of our stockholders. In addition, subject to the
preferences applicable to any shares of preferred stock outstanding, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by our Board of Directors out of funds legally
available therefore. In the event of the dissolution, liquidation or winding
up
of our company, the holders of common stock are entitled to share ratably in
all
assets remaining after payment of all liabilities of our company and any
preferences applicable to any shares of preferred stock outstanding. The holders
of common stock do not have any subscription, redemption or conversion rights,
nor do they have any preemptive or other rights to acquire or subscribe for
additional, unissued or treasury shares.
Pursuant
to our bylaws, except for any matters which pursuant to Delaware law require
a
greater percentage vote for approval, the holders of a majority of the
outstanding shares of common stock, if present in person or by proxy, are
sufficient to constitute a quorum for the transaction of business at meetings
of
our stockholders. Except as to any matters which pursuant to Delaware law
require a greater percentage vote for approval, the affirmative vote of the
holders of a majority of the shares of common stock present in person or by
proxy at any meeting (provided a quorum is present) is sufficient to authorize,
affirm or ratify any act or action, including the election of our Board of
Directors.
The
holders of our common stock do not have cumulative voting rights. Accordingly,
the holders of more than half of the outstanding shares of common stock can
elect all of the directors to be elected in any election, if they choose to
do
so. In such event, the holders of the remaining shares of common stock would
not
be able to elect any directors. The purchasers of a majority of interests of
the
units that Berman Health and Media, Inc. recently sold in a private placement
have the right to designate one member to the Board for a period of one year
following the closing of the merger with Berman Health and Media, Inc. In August
2005, the purchasers exercised their right to designate one member of the Board
and selected Howard Zuker, who now sits on our Board of Directors. Our Board
of
Directors is empowered to fill any vacancies on the Board created by the
resignation, death or removal of directors.
In
addition to voting at duly called meetings at which a quorum is present in
person or by proxy, Delaware law and our bylaws provide that stockholders may
take action without the holding of a meeting by written consent or consents
signed by the holders of a majority of the outstanding shares of our capital
stock entitled to vote thereon. Prompt notice of the taking of any action
without a meeting by less than unanimous consent of the stockholders will be
given to those stockholders who do not consent in writing to the action. The
purposes of this provision are to facilitate action by stockholders and to
reduce the corporate expense associated with special meetings of
stockholders.
Warrants
Berman
Health and Media, Inc. issued to certain of the selling security holders three
and a half year warrants to purchase 400,000 shares of its common stock at
an
exercise price of $0.315. We agreed to assume these warrants in connection
with
the merger. These warrants are currently exercisable into 614,400 shares of
our
common stock.
Berman
Health and Media, Inc. issued to certain of the selling security holders three
year warrants exercisable into 2,952,381 shares of its common stock at an
exercise price of $1.05 (the “Class A Warrants”). We agreed to assume these
warrants in connection with the merger. The Class A Warrants are currently
exercisable into 4,534,857 shares of our common stock. The Class A Warrants
are
redeemable by the Company at a price of $.05 per Class A Warrant in the event
(i) there is an effective registration statement covering the shares of common
stock underlying the Class A Warrants and (ii) the closing market price of
shares of common stock listed on a national securities market equals or exceeds
$1.575 for twenty of the thirty consecutive trading days immediately preceding
our notice of redemption to the holders of the Class A Warrants.
44
Berman
Health and Media, Inc. issued to certain of the selling security holders three
year warrants exercisable into 2,952,381 shares of its common stock at an
exercise price of $1.575 (the “Class B Warrants”). We agreed to assume these
warrants in connection with the merger. The Class B Warrants are currently
exercisable into 4,534,857 shares of our common stock. The Class B Warrants
are
redeemable by the Company at a price of $.05 per Class B Warrant in the event
(i) there is an effective registration statement covering the shares of common
stock underlying the Class B Warrants and (ii) the closing market price of
shares of common stock listed on a national securities market equals or exceeds
$2.10 for twenty of the thirty consecutive trading days immediately preceding
the our notice of redemption to the holders of the Class B
Warrants.
Berman
Health and Media, Inc. issued three year warrants to Hunter World Markets,
Inc.
exercisable into 590,476 shares of its common stock. We agreed to assume these
warrants in connection with the merger. These warrants are currently exercisable
906,971 shares of our common stock.
All
of
the shares of common stock underlying the warrants described above are included
in this prospectus and registration statement.
Stock
Options
In
May
2004, Berman Center LLC granted options to two of its outside directors, Jan
Fawcett and Allan Charles, exercisable into an aggregate of 60,000 units of
Berman Center, LLC. These options became exercisable into 204,578 shares of
common stock of The Berman Center, Inc. upon the reorganization of Berman Center
LLC into The Berman Center, Inc. We agreed to assume the options upon closing
of
the merger and these options are now exercisable into an aggregate of 314,230
shares of our common stock. The options are fully vested and expire ten years
from the date of grant.
Market
Price of Our Common Stock
The
price
of our common stock will likely fluctuate in the future. The stock market in
general has experienced extreme stock price fluctuations in the past few years.
In some cases, these fluctuations have been unrelated to the operating
performance of the affected companies. Many companies have experienced dramatic
volatility in the market prices of their common stock. We believe that a number
of factors, both within and outside our control, could cause the price of our
common stock to fluctuate, perhaps substantially. Factors such as the following
could have a significant adverse impact on the market price of our common
stock:
·
Our
ability to obtain additional financing and, if available, the
terms and
conditions of the
financing;
·
Our
financial position and results of
operations;
·
Concern
as to, or other evidence of, the safety or efficacy of our
proposed
products and services or our competitors' products and
services;
·
Announcements
of technological innovations or new products or services by
us or our
competitors;
·
U.S.
and foreign governmental regulatory
actions;
·
The
development of litigation against
us;
45
·
Period-to-period
fluctuations in our operating
results;
·
Changes
in estimates of our performance by any securities
analysts;
·
Possible
regulatory requirements on our
business;
·
The
issuance of new equity securities pursuant to a future
offering;
·
Changes
in interest rates;
·
Competitive
developments, including announcements by competitors of new
products or
services or significant contracts, acquisitions, strategic
partnerships,
joint ventures or capital
commitments;
·
Variations
in quarterly operating
results;
·
Change
in financial estimates by securities
analysts;
·
The
depth and liquidity of the market for our common
stock;
·
Investor
perceptions of our Company and Dr. Berman;
and
·
General
economic and other national
conditions.
Delaware
Anti-Takeover Law and Charter and Bylaw Provisions
We
are
subject to Section 203 of the Delaware General Corporation Law. This provision
generally prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date the stockholder became an interested stockholder,
unless:
·
prior
to such date, the Board of Directors approved either the business
combination or the transaction that resulted in the stockholder
becoming
an interested
stockholder;
·
upon
consummation of the transaction that resulted in the stockholder
becoming
an interested stockholder, the interested stockholder owned
at least 85%
of the voting stock of the corporation outstanding at the time
the
transaction commenced, excluding for purposes of determining
the number of
shares outstanding those shares owned by persons who are directors
and
also officers and by employee stock plans in which employee
participants
do not have the right to determine confidentially whether shares
held
subject to the plan will be tendered in a tender or exchange
offer;
or
·
on
or subsequent to such date, the business combination is approved
by the
Board of Directors and authorized at an annual meeting or special
meeting
of stockholders and not by written consent, by the affirmative
vote of at
least 66 2/3% of the outstanding voting stock that is not owned
by the
interested stockholder.
Section
203 defines a business combination to include:
·
any
merger or consolidation involving the corporation and the interested
stockholder;
·
any
sale, transfer, pledge or other disposition of 10% or more
of the assets
of the corporation involving the interested
stockholder;
·
subject
to certain exceptions, any transaction that results in the
issuance or
transfer by the corporation of any stock of the corporation
to the
interested
stockholder;
46
·
any
transaction involving the corporation that has the effect of
increasing
the proportionate share of the stock of any class or series
of the
corporation beneficially owned by the interested stockholder;
or
·
the
receipt by the interested stockholder of the benefit of any
loans,
advances, guarantees, pledges or other financial benefits provided
by or
through the
corporation.
In
general, Section 203 defines an “interested stockholder” as any entity or person
beneficially owning 15% or more of the outstanding voting stock of a
corporation, or an affiliate or associate of the corporation and was the owner
of 15% or more of the outstanding voting stock of a corporation at any time
within three years prior to the time of determination of interested stockholder
status; and any entity or person affiliated with or controlling or controlled
by
such entity or person.
Our
certificate of incorporation and bylaws contain provisions that could have
the
effect of discouraging potential acquisition proposals or making a tender offer
or delaying or preventing a change in control of our company, including changes
a stockholder might consider favorable. In particular, our certificate of
incorporation and bylaws, as applicable, among other things, will:
·
provide
our board of directors with the ability to alter our bylaws
without
stockholder approval;
·
provide
for an advance notice procedure with regard to the nomination
of
candidates for election as directors and with regard to business
to be
brought before a meeting of
stockholders;
·
provide
that vacancies on our board of directors may be filled by a
majority of
directors in office, although less than a
quorum.
Such
provisions may have the effect of discouraging a third-party from acquiring
us,
even if doing so would be beneficial to our stockholders. These provisions
are
intended to enhance the likelihood of continuity and stability in the
composition of our board of directors and in the policies formulated by them,
and to discourage some types of transactions that may involve an actual or
threatened change in control of our company. These provisions are designed
to
reduce our vulnerability to an unsolicited acquisition proposal and to
discourage some tactics that may be used in proxy fights. We believe that the
benefits of increased protection of our potential ability to negotiate with
the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
our
company outweigh the disadvantages of discouraging such proposals because,
among
other things, negotiation of such proposals could result in an improvement
of
their terms. However, these provisions could have the effect of discouraging
others from making tender offers for our shares that could result from actual
or
rumored takeover attempts. These provisions also may have the effect of
preventing changes in our management.
Transfer
Agent and Registrar
The
transfer agent for our common stock is American Stock Transfer and Trust
Company.
SHARES
ELIGIBLE FOR FUTURE SALE
As
of
September 30, 2005, we had outstanding 31,795,415 shares of common
stock.
Lock-Up
Arrangements
Our
shares of common stock that are owned by those former stockholders of Berman
Health and Media, Inc. who acquired their shares prior to the closing of Berman
Health and Media, Inc.'s recent private placement have agreed that for a period
of 12 months after the date of this prospectus, they will not sell any shares
of
our common stock, or securities convertible into shares of our common stock,
without the prior written consent of Hunter World Markets, Inc. Hunter World
Markets, Inc. may release such stockholders from these lock-up arrangements
at
any time without notice.
47
Rule
144
All
of
the 22,615,007 shares registered in this offering will be freely tradable
without restriction or further registration under the Securities Act of 1933,
as
amended (the “Securities Act”). If shares are purchased by our “affiliates” as
that term is defined in Rule 144 under the Securities Act, their sales of shares
would be governed by the limitations and restrictions that are described
below.
In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned shares of our common stock
for
at least one year, including any person who may be deemed to be an “affiliate”
(as the term “affiliate” is defined under the Securities Act), would be entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of:
·
1%
of the number of shares of common stock then outstanding,
which as of
September 30, 2005 would equal approximately 317,954 shares;
or
·
the
average weekly trading volume of our common stock during the
four calendar
weeks preceding the filing of a notice on Form 144 with respect
to such
sale.
Sales
under Rule 144 are also governed by other requirements regarding the manner
of
sale, notice filing and the availability of current public information about
us.
The selling security holders will not be governed by the foregoing restrictions
when selling their shares pursuant to this prospectus.
Rule
144(k)
Under
Rule 144(k), a person who is not deemed to have been one of our affiliates
at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, including the
holding period of any prior owner other than an affiliate, is entitled to sell
such shares without complying with the manner of sale, notice filing, volume
limitation or notice provisions of Rule 144.
We
cannot
predict the effect, if any, that market sales of common stock or the
availability of the securities offered in this prospectus will have on the
market price of the shares from time to time. Nevertheless, the possibility
that
substantial amounts of common stock may be sold in the public market could
adversely affect market prices for the common stock and could harm our ability
to raise capital through the sale of our equity and debt
securities.
DISCLOSURE
OF COMMISSION POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Under
Section 145 of the General Corporation Law of the State of Delaware, we can
indemnify our directors and officers against liabilities they may incur in
such
capacities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Our certificate of incorporation provides that, pursuant
to Delaware law, our directors shall not be liable for monetary damages for
breach of the directors' fiduciary duty of care to us and our stockholders.
This
provision in the certificate of incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive
or
other forms of nonmonetary relief will remain available under Delaware law.
In
addition, each director will continue to be subject to liability for breach
of
the director's duty of loyalty to us or our stockholders, for acts or omissions
not in good faith or involving intentional misconduct or knowing violations
of
the law, for actions leading to improper personal benefit to the director,
and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
Our
bylaws provide for the indemnification of our directors to the fullest extent
permitted by the Delaware General Corporation Law. Our bylaws further provide
that our Board of Directors has sole discretion to indemnify our officers and
other employees. We may limit the extent of such indemnification by individual
contracts with our directors and executive officers, but have not done so.
We
are required to advance, prior to the final disposition of any proceeding,
promptly on request, all expenses incurred by any director or executive officer
in connection with that proceeding on receipt of an undertaking by or on behalf
of that director or executive officer to repay those amounts if it should be
determined ultimately that he or she is not entitled to be indemnified under
our
bylaws or otherwise. We are not, however, required to advance any expenses
in
connection with any proceeding if a determination is reasonably and promptly
made by our Board of Directors by a majority vote of a quorum of disinterested
Board members that (a) the party seeking an advance acted in bad faith or
deliberately breached his or her duty to us or our stockholders and (b) as
a
result of such actions by the party seeking an advance, it is more likely than
not that it will ultimately be determined that such party is not entitled to
indemnification pursuant to the applicable sections of our bylaws.
48
We
have
been advised that in the opinion of the Securities and Exchange Commission,
insofar as indemnification for liabilities arising under the Securities Act
may
be permitted to our directors, officers and controlling persons pursuant to
the
foregoing provisions, or otherwise, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In
the
event a claim for indemnification against such liabilities (other than our
payment of expenses incurred or paid by our director, officer or controlling
person 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, we will, unless in the opinion of our counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by us
is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of such issue.
LEGAL
MATTERS
Kirkpatrick
& Lockhart Nicholson Graham LLP will render an opinion with respect to the
validity of the securities being offered by this prospectus.
EXPERTS
The
financial statements of Berman Center, Inc. appearing in this prospectus and
registration statement have been audited by Singer Lewak Greenbaum &
Goldstein LLP, independent registered public accounting firm, to the extent
and
for the periods indicated in their report appearing elsewhere herein, and are
included in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
In
addition, the financial statements of LB Center, Inc. (f/k/a Bio-Dyne
Corporation) appearing in this prospectus and registration statement have been
audited by AJ. Robbins, P.C., independent registered public accounting firm,
to
the extent and for the periods indicated in their report appearing elsewhere
herein, and are included in reliance upon such report and upon the authority
of
such firm as experts in accounting and auditing.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
On
June30, 2005, the Company dismissed AJ. Robbins, P.C. (“AJ. Robbins”) as its
independent registered public accounting firm following the change in control
of
the Company on the closing of the merger transaction with Berman Health and
Media, Inc. The Company engaged AJ. Robbins to audit its financial statements
for the years ended March 31, 2005 and 2004. The decision to change accountants
will be approved and ratified by the Company's Board of Directors at its next
scheduled board meeting. The report of AJ. Robbins on the financial statements
of the Company for the fiscal years ended March 31, 2005 and 2004 did not
contain any adverse opinion or disclaimer of opinion and was not qualified
or
modified as to uncertainty, audit scope, or accounting principle, except for
an
explanatory paragraph relative to the Company's ability to continue as a going
concern.
While
AJ.
Robbins was engaged by the Company, there were no disagreements with AJ. Robbins
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure with respect to the Company, which
disagreements if not resolved to the satisfaction of AJ. Robbins would have
caused it to make reference to the subject matter of the disagreements in
connection with its report on the Company's financial statements for the fiscal
years ended March 31, 2005 and 2004.
49
The
Company engaged Singer Lewak Greenbaum & Goldstein LLP as the Company's
independent registered public accounting firm as of June 30, 2005.
ADDITIONAL
INFORMATION
We
filed
with the Securities and Exchange Commission a registration statement on Form
SB-2 under the Securities Act of 1933, as amended, for the shares of common
stock in this offering. This prospectus does not contain all of the information
in the registration statement and the exhibits and schedules that were filed
with the registration statement. For further information with respect to us
and
our common stock, we refer you to the registration statement and the exhibits
and schedules that were filed with the registration statement. Statements
contained in this prospectus about the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not
necessarily complete, and we refer you to the full text of the contract or
other
document filed as an exhibit to the registration statement. A copy of the
registration statement and the exhibits and schedules that were filed with
the
registration statement may be inspected without charge at the Public Reference
Room maintained by the Securities and Exchange Commission at 100 F Street,
N.E.,
Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee. Information regarding the operation of the Public
Reference Room may be obtained by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site
that contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the SEC. The address of
the
site iswww.sec.gov.
We
are
subject to the information and periodic reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and in accordance with the
Exchange Act, we file annual, quarterly and special reports, and other
information with the Securities and Exchange Commission. These periodic reports,
and other information are available for inspection and copying at the regional
offices, public reference facilities and website of the Securities and Exchange
Commission referred to above.
50
BERMAN
CENTER, INC.
INDEX
TO FINANCIAL STATEMENTS
Page
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2
CONSOLIDATED
FINANCIAL STATEMENTS
Consolidated
Balance Sheets as of June 30, 2005 (unaudited) and
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders
Berman
Center, Inc. (f/k/a LB Center, Inc.)
We
have
audited the accompanying consolidated balance sheets (as restated) of Berman
Center, Inc. (f/k/a LB Center, Inc.) (a development stage company) as of
December 31, 2004 and 2003, and the related consolidated statements of
operations (as restated), stockholders'’ equity (as restated), and cash flows
(as restated) for the year ended December 31, 2004, the period from January16,2003 (inception) to December 31, 2003 and for the period from January 16, 2003
(inception) to December 31, 2004. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Berman Center, Inc. (f/k/a
LB Center, Inc.) as of December 31, 2004 and December 31, 2003, and the
consolidated results of their operations and their cash flows for the year
ended
December 31, 2004, the period from January 16, 2003 (inception) to December31,2003 and for the period from January 16, 2003 (inception) to December 31, 2004
in conformity with accounting principles generally accepted in the United States
of America.
The
accompanying consolidated financial statements have been prepared assuming
that
the Company will continue as a going concern. As discussed in Note 4 to the
financial statements, during the year ended December 31, 2004, the Company
incurred a net loss of $1,919,829 and had negative cash flows from operations
of
$1,559,055. In addition, the Company had an accumulated deficit of $2,243,645
at
December 31, 2004. These factors, among others, as discussed in Note 2 to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
As
described in Note 2 to the financial statements, the Company has restated its
financial statements for each of the two years in the period ended December31,2004 for a correction of an error related to recording the issuance of founders
common stock.
Adjustments
to Reconcile Net Income (Loss) to Net
Cash Used in Operating Activities:
Depreciation
and Amortization
65,039
42,110
110,133
175,173
Issuance
of Shares for Compensation
95,000
5,000
25,000
120,000
(Increase)
Decrease in
Accounts
Receivable
3,100
(2,770
)
(2,070
)
(1,030
)
-
Deposits
(15,000
)
-
-
-
(15,000
)
Prepaid
Expenses and Other Current Assets
(66,431
)
(57,739
)
(12,500
)
(78,931
)
Inventory
2,051
-
(7,647
)
-
(5,596
)
Increase
(Decrease) in
Book
Overdraft
-
(6,932
)
(6,932
)
(6,932
)
-
Accounts
Payable and Accrued Expenses
118,651
(87,004
)
72,448
(107,775
)
285,769
Deferred
Revenue
38,243
37,700
86,085
1,500
126,455
Accrued
Payroll
6,576
38,507
29,325
48,000
Deferred
Rent
38,435
26,774
66,932
105,745
Net
Cash used in Operating Activities
(892,344
)
(1,123,570
)
(1,559,055
)
(208,639
)
(2,660,038
)
Cash
Flows from Investing Activities:
Purchase
of Property and Equipment
(21,895
)
(494,184
)
(577,991
)
(141,361
)
(741,247
)
Net
Cash used in Investing Activities
(21,895
)
(494,184
)
(577,991
)
(141,361
)
(741,247
)
Cash
Flows from Financing Activities:
Proceeds
from Issuance of Common Stock
2,964,742
2,205,000
2,379,481
350,000
5,694,223
Offering
Costs Paid on Common Stock
(86,421
)
(86,421
)
Net
Cash provided by Financing Activities
2,878,321
2,205,000
2,379,481
350,000
5,607,802
Net
Increase/(Decrease) in Cash and Cash Equivalents
1,964,082
587,246
242,435
-
2,206,517
Cash
and Cash Equivalents, Beginning of Period
242,435
-
-
-
-
Cash
and Cash Equivalents, End of Period
$
2,206,517
$
587,246
$
242,435
$
-
$
2,206,517
Supplemental
schedule of non-cash investing and financing
activities
During
the year ended December 31, 2004, the Company issued 628,458 shares as
compensation to some members of the board of Directors, valued at $120,000.
The
shares were issued as compensation for three years of service. During the six
months ended June 30, 2005 and the year ended December 31, 2004, $95,000
(unaudited) and $25,000 was amortized to compensation expense,
respectively.
The
accompanying notes are an integral part of these financial
statements.
F-7
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND LINE OF BUSINESS
Berman
Center, Inc. (f/k/a LB Center, Inc.) (the “Company”) headquartered in Chicago,
Illinois, provides an array female health management products and services
marketed through a diversified media platform through its wholly owned
subsidiary, Berman Health and Media, Inc. (“BHM”). The face of the Company is
Dr. Laura Berman, the world renowned sex therapist and relationship guru. Berman
Center is leveraging Dr. Berman's credentials and celebrity status by creating
a
portfolio of branded related products and services that are marketed through
a
diversified media platform.
NOTE
2 - RESTATEMENT
Shares
Issued and Outstanding Restatement
Berman
Center, Inc. has restated its prior period financial statements for certain
adjustments related to accounting for shares issued during the years ended
December 31, 2003 and December 31, 2004. Berman Center, Inc. did not record
the
issuance of 2,849,513 shares of founder’s common stock. The resulting
misstatements affect shares outstanding in those periods as
follows:
Earnings
Per Share
Year
Ending December 31,
Common
Shares Outstanding as
Previously
Reported
Common
Shares Outstanding
as
Corrected
Previously Reported
As
Corrected
2003
1,833,013
4,682,526
(0.22
)
(0.08
)
2004
14,730,313
17,579,826
(0.17
)
(0.13
)
NOTE
3 - THE MERGER
On
June16, 2005, LBC MergerSub, Inc., a Nevada corporation and wholly owned subsidiary
of the Company, merged with and into BHM pursuant to an Agreement and Plan
of
Merger dated as of June 3, 2005. Pursuant to the merger (the “Merger”), BHM
became a wholly owned subsidiary of the Company and the issued and outstanding
shares of common stock of BHM were converted into an aggregate of 19,730,504
shares of common stock of the Company. After the Merger, the former BHM
stockholders owned approximately 87% of the Company's issued and outstanding
Common Stock. Following the Merger, the business conducted by the Company is
the
business conducted by BHM prior to the Merger.
As
a
result of the Merger, the 400,000 issued and outstanding warrants and 204,578
issued and outstanding stock options of BHM became exercisable to purchase
614,400 shares and 314,230 shares of the Company's Common Stock, respectively,
at an exercise price of $0.315 per share and $1.00 per share, respectively.
No
other terms of the warrants and options were changed as a result of the
Merger.
The
Merger was accounted for as a reverse merger under generally accepted accounting
principles. Therefore: (1) the Company's historical accumulated deficit for
periods prior to June 16, 2005 will be eliminated against
additional-paid-in-capital, and (2) the consolidated financial statements will
present the previously issued shares of common stock of the Company as having
been issued pursuant to the Merger on June 3, 2005, and the shares of common
stock of the Company issued to the former BHM stockholders in the Merger as
having been outstanding since January 16, 2003 (the inception of BHM). No
goodwill or other intangible asset was recorded as a result of the
Merger.
*
The
financial statements were audited by other auditors in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
and
their report on them was unqualified. However, their report contained an
explanatory paragraph that expressed substantial doubt about the Company's
ability to continue as a going concern. See report of other auditors at
F-20.
BHM
was
formed on January 16, 2003 and operated as a privately held Delaware limited
liability company under the name Berman Center LLC until June 2, 2005, when
it
reorganized into corporate form under the name The Berman Center, Inc., in
accordance with the provisions of the Delaware Limited Liability Company Act.
On
June 20, 2005, the Company changed the name of The Berman Center, Inc. to Berman
Health and Media, Inc.
NOTE
4 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. During the year
ended December 31, 2004, the Company incurred a net loss of $1,919,829 and
had
negative cash flows from operations of $1,559,055. In addition, the Company
had
an accumulated deficit of $2,243,645 at December 31, 2004. These factors raise
substantial doubt about the Company's ability to continue as a going
concern.
Recovery
of the Company's assets is dependent upon future events, the outcome of which
is
indeterminable. Management plans to continue to provide for its capital needs
during the year ended December 31, 2005 by issuing debt and equity securities
and by the continued development of its business. The financial statements
do
not include any adjustments relating to the recovery and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue in existence.
F-9
NOTE
5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The
consolidated financial statements include the accounts of Berman Center, Inc.
and its wholly-owned subsidiaries Berman Health and Media, Inc., Female Sexual
Medicine and Women's Physical Therapy. All significant inter-company accounts
and transactions are eliminated in consolidation.
Development
Stage Enterprise
The
Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises."The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced. All losses accumulated since inception has been considered
as
part of the Company's development stage activities.
Revenue
Recognition
Revenues
are recognized when realized or realizable and earned. Patients at the clinic
are required to pay on the day of their appointment (at the point of service).
Patients are allowed to pay either with cash, check or credit card. Items for
bad debt or returned or rejected credit cards are very minimal and are recorded
as they occur. If the clinic changed its policy in the future and granted credit
to its patients, a review of the current procedures would be necessary and
allowances for bad debt write-offs would be warranted. Costs for these revenues
constitute primarily outside lab fees and internal payroll expenses for clinical
staff. These costs are recognized as they are incurred.
Revenue
related to the hosting CPE seminars for clinicians is recognized once the
seminar has been conducted. Costs for these revenues constitute primarily of
hotel charges for the rooms and audio visual equipment as well as payments
of
honorariums to speakers at the seminar. Costs for these revenues are also
recognized once the seminar has been conducted. Revenue related to the
publishing of books is recognized when the book is released by the publisher.
Costs for these revenues constitute primarily internal payroll expenses for
a
staff writer. These costs are recognized as they are incurred.
Revenue
related to research and clinic or (clinical) trials is recognized when the
work
is complete. Because of the nature of the contracts, which generally require
the
Company to release the results of their studies when complete, release of the
results of the clinical research is the indicator that the Company uses to
measure delivery and acceptance of the related services. Therefore, recognition
of revenue prior to release would be precluded. Costs for these revenues
constitute primarily research expenses paid to outside contractors. These costs
are also recognized as they are incurred.
From
time
to time, the Company and its executives may be compensated for performing
certain media appearances. The Company recognizes this income when it is earned,
the services are performed and collection is probable.
Cash
and Cash Equivalents
For
the
purpose of the statements of cash flows, the Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
Property
and Equipment
Property
and equipment are stated at cost. The Company provides for depreciation and
amortization using the straight-line method over estimated useful lives of
five
to seven years. Expenditures for maintenance and repairs are charged to
operations as incurred while renewals and betterments are capitalized. Gains
or
losses on the sale of property and equipment are reflected in the statements
of
operations.
Fair
Value of Financial Instruments
The
Company's financial instruments include cash and cash equivalents, prepaid
expenses and other current assets, accounts payable and accrued expenses,
accrued payroll, and deferred revenue. The book value of all other financial
instruments are representative of their fair values.
F-10
NOTE
5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based
Compensation
SFAS
No.
123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148,
“Accounting for Stock-Based Compensation-Transition and Disclosure,” defines a
fair value based method of accounting for stock-based compensation. However,
SFAS No. 123 allows an entity to continue to measure compensation cost related
to stock and stock options issued to employees using the intrinsic method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the
accounting method of APB Opinion No. 25 must make pro forma disclosures of
net
income and earnings per share as if the fair value method of accounting defined
in SFAS No. 123 had been applied. The Company has elected to account for its
stock-based compensation to employees under APB Opinion No. 25 using the
intrinsic value method.
The
Company has adopted only the disclosure provisions of SFAS No. 123. Accordingly,
no compensation cost other than that required to be recognized by APB 25 for
the
difference between the fair value of the Company's common stock at the grant
date and the exercise price of the options has been recognized. Had compensation
cost for the Company's stock option plan been determined based on the fair
value
at the grant date for awards consistent with the provisions of SFAS No. 123,
the
Company's net loss and basic and diluted loss per share for the year ended
December 31, 2004 would have been increased to the pro forma amounts indicated
below:
Deduct
total stock based employee
compensation expense
determined Under
fair value method for
all awards, net of tax
(9,460
)
--
(4,723
)
--
Pro
forma
$
(1,187,468
)
$
(1,119,216
)
$
(1,924,552
)
$
(323,816
)
Loss
per common share
Basic
and diluted - as reported
$
(0.06
)
$
(0.09
)
$
(0.13
)
$
(0.08
)
Basic
and diluted - pro forma
$
(0.06
)
$
(0.09
)
$
(0.13
)
$
(0.08
)
For
purposes of computing the pro forma disclosures required by SFAS No. 123, the
fair value of each option granted to employees and directors is estimated using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for the year ended December 31, 2004: dividend yield of 0%; expected
volatility of 29%; risk-free interest rate of 3.07%; and expected life of three
years. The weighted-average fair value of options granted during the year ended
December 31, 2004 for which the exercise price equals the market price on the
grant date was $1, and the weighted-average exercise price was $1. No stock
options were granted during the year ended December 31, 2004 for which the
exercise price was less than or greater than the market price on the grant
date.
Loss
Per Share
The
Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share
is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have
been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
F-11
At
June30, 2005 and 2004 and December 31, 2004 and 2003, the following common
equivalent shares were excluded from the computation of loss per share since
their effect is anti-dilutive.
The
Company is taxed under sections of the federal and California income tax laws
which provide that, in lieu of corporation income taxes, the members separately
account for their pro rata share of the Company's items of income, deductions,
losses, and credits. The provision for state income taxes represents the
statutory California franchise taxes applicable to limited liability
companies.
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations
of Credit Risk
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist of cash and cash equivalents. The Company places its cash and
cash
equivalents with high credit, quality financial institutions. At times, such
cash and cash equivalents may be in excess of the Federal Deposit Insurance
Corporation insurance limit of $100,000. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Recently
Issued Accounting Pronouncements
In
November 2004, the FASB issued SFAS No. 151,”Inventory Costs”. SFAS No. 151
amends the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB No.
43,
Chapter 4,"Inventory Pricing”. Paragraph 5 of ARB No. 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and re-handling costs may be so
abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not expect adoption
of SFAS No. 151 to have a material impact on the Company's financial
statements.
In
December 2004, the FASB issued SFAS No. 152,”Accounting for Real Estate
Time-Sharing Transactions”. The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2,”Accounting for Real
Estate Time-Sharing Transactions”. SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on
the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS No. 66,”Accounting for Sales of
Real Estate”, for real estate time-sharing transactions. SFAS No. 152 amends
Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152
also amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of
Real Estate Projects”, to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to the Company.
F-12
In
December 2004, the FASB issued SFAS No. 153,”Exchanges of Nonmonetary Assets,”
an amendment to Opinion No. 29,”Accounting for Nonmonetary Transactions”.
Statement No. 153 eliminates certain differences in the guidance in Opinion
No.
29 as compared to the guidance contained in standards issued by the
International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange
has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective
for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring
in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company's financial
statements.
In
December 2004, the FASB issued SFAS No. 123(R),”Share-Based Payment”. SFAS
123(R) amends SFAS No. 123,”Accountung for Stock-Based Compensation”, and APB
Opinion 25,”Accounting for Stock Issued to Employees.” SFAS No.123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS
No.
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or
by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective (1) for public companies qualifying
as
SEC small business issuers, as of the first interim period or fiscal year
beginning after December 15, 2005, or (2) for all other public companies, as
of
the first interim period or fiscal year beginning after June 15, 2005, or (3)
for all nonpublic entities, as of the first fiscal year beginning after December15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on
the
Company's financial statements.
In
March
2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for
Conditional Asset Retirement Obligations”. FIN No. 47
clarifies that the term conditional asset retirement obligation
as
used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations,”
refers to a legal obligation to perform an asset retirement activity
in
which the timing and (or) method of settlement are conditional on a future
event
that may or may not be within the control of the entity. The obligation
to
perform the asset retirement activity is unconditional even though uncertainty
exists about the timing and (or) method of settlement. Uncertainty
about
the timing and/or method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when
sufficient information exists. This interpretation also
clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. Fin No. 47 is
effective no later than the end of fiscal years ending after December 15, 2005
(December 31, 2005 for calendar-year companies). Retrospective application
of
interim financial information is permitted but is not required. Management
does
not expect adoption of FIN No. 47 to have a material impact on the Company's
financial statements.
In
May
2005, the FASB issued Statement of Accounting Standards (SFAS) No. 154,
“Accounting Changes and Error Corrections” an amendment to Accounting Principles
Bulletin (APB) Opinion No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements” though SFAS No. 154 carries
forward the guidance in APB No. 20 and SFAS No. 3 with respect to accounting
for
changes in estimates, changes in reporting entity, and the correction of errors.
SFAS No. 154 establishes new standards on accounting for changes in accounting
principles, whereby all such changes must be accounted for by retrospective
application to the financial statements of prior periods unless it is
impracticable to do so. SFAS No. 154 is effective for accounting changes
and error corrections made in fiscal years beginning after December 15, 2005,
with early adoption permitted for changes and corrections made in years
beginning after May 2005.
Depreciation
and amortization expense for the six months ended June 30, 2005 and 2004 was
$65,039 (unaudited) and $42,110 (unaudited), respectively. Depreciation and
amortization expenses was $110,133 and $0 for the years ended December 31,2004
and 2003, respectively.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Leases
The
Company leases its facilities under various non-cancelable operating leases
which require monthly payments ranging from $563 to $14,375 and expire through
August 13, 2014.
Future
minimum lease payments under these non-cancelable operating obligations at
December 31, 2004 were as follows:
Year
Ending
December
31,
Operating
Leases
2005
$
194,015
2006
246,720
2007
256,174
2008
262,203
2009
263,061
Thereafter
1,336,329
$
2,514,477
Rent
expense was $138,623 (unaudited), $109,063 (unaudited), $251,797 and $0 for
the
six months ended June 30, 2005 and 2004 and the years ended December 31, 2004
and 2003, respectively.
Employment
Agreements
On
June16, 2005, the Company and Dr. Laura Berman entered into a three-year employment
agreement. Pursuant to such agreement, Dr. Berman will receive an annual salary
of $200,000, provided that under certain circumstances the Board of Directors
may increase her salary. In addition, Dr. Berman has also agreed to contribute
to the Company all income, revenue and other compensation received by Dr. Berman
in connection with activities related to the business operations of the Company
during her employment, including, without limitation, all revenue from media
sources, talent agreements with television production companies or other media
sources and authorship royalties. These items are the sole property of the
Company and may not be removed from the Company without approval of at least
a
majority in interest of the Company's stockholders and adequate compensation
to
the Company. The contribution of income and revenues describe above, however,
does not include income, revenue and other compensation derived by Dr. Berman
from honorarium fees and speaking engagements.
In
the
event that Dr. Berman performs services and earns compensation that would fall
under this agreement, such amounts would be recorded when the contribution
is
considered due to the Company and the services have been completed by Dr.
Berman. The Company did not receive any material revenue of this type in the
periods presented. Contributions will be recorded as revenue or expense as
appropriate.
F-14
NOTE
8 - STOCKHOLDERS' EQUITY
Common
Stock
During
the six months ended June 30, 2005 (unaudited), the Company completed the
following transactions:
·
Issued
1,653,147 shares for a cash total of $236,742 to third party
investors.
·
Issued
497,531 shares of common stock to several members of the board
of
directors as compensation for services earned. Compensation
expense
recognized in the six months ended June 30, 2005 is $95,000.
This amount
was previously recorded as deferred compensation at December31, 2004 and
was earned upon the completion of the reverse
merger
·
Issued
9,069,712 shares of common stock to third party investors for
a cash total
of $2,641,579 net of offering costs of $458,421. In connection
with the
issuance, the Company issued 4,534,857 Class A warrants, 4,534,857
Class B
warrants and 906,971 warrants to a placement
agent.
The
Class
A Warrants shall be redeemable by the Company at a price of five (5) cents
per
warrant in the event (i) there is an effective registration statement covering
the shares of Common Stock underlying the Class A Warrants and (ii) the closing
market price of shares of Common Stock listed on a national securities market
equals or exceeds 300% of the price (the “Issue Price”) of the shares of Common
Stock issued further to the Private Placement Unit Offering for twenty of the
thirty consecutive trading days immediately preceding the Company’s notice of
redemption. The exercise price of the Class A warrants is $0.684 per warrant
and
will have a three year term. The fair value of each warrant has been calculated
with the following assumptions at the grant date; dividend yield of 0%, expected
volatility of 29%, risk free interest rate of 3.07% and an expected life of
3
years.
The
Class
B Warrants shall be redeemable by the Company at a price of five (5) cents
per
warrant in the event (i) there is an effective registration statement covering
the shares of Common Stock underlying the Class B Warrants and (ii) the closing
market price of shares of Common Stock listed on a national securities market
equals or exceeds 400% of the Issue Price for twenty of the thirty consecutive
trading days immediately preceding the Company’s notice of redemption. The
exercise price of the Class B warrants is $1.025 per warrant and will have
a
three year term. The fair value of each warrant has been calculated with the
following assumptions at the grant date; dividend yield of 0%, expected
volatility of 29%, risk free interest rate of 3.07% and an expected life of
3
years.
The
Placement Warrants will receive registration rights identical to the rights
granted to the holders of Class A Warrants and Class B Warrants. The warrants
will be exercisable at a price of $0.341 per share and will have a three year
term. The fair value of these warrants have been calculated at $2,182 and have
been included in offering costs. The fair value of each warrant has been
calculated with the following assumptions at the grant date; dividend yield
of
0%, expected volatility of 29%, risk free interest rate of 3.07% and an expected
life of 3 years.
Issued
628,462 restricted shares to several members of the Board of
Directors, as
compensation for future employment of three years, valued at
$120,000.
Total compensation expense recorded for the year ended December31, 2004
is $25,000.
·
Issued
12,766,370 shares for a cash total of $2,729,481 to third party
investors.
Employee
Stock Options
During
the year ended December 31, 2004, the Company granted stock options to purchase
314,230 shares of common stock to certain members of the Board of Directors
of
the Company. The stock options have an exercise price of $1 per unit, vest
over
three years and expire ten years from the date of grant. A compensation expense
was not recorded in connection with the issuance of such options as the exercise
price of the stock options granted was not less then the fair market value
of
the Company's stock price as of the date of grant.
A
summary
of the Company's outstanding options and activity is as follows:
The
weighted average remaining contractual life of the options outstanding at
December 31, 2004 is 9.5 years. The weighted-average fair value per share of
options granted was $0.24 for the year ended December 31, 2004.
The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which do not have vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of
highly subjective assumptions, including the expected stock price
volatility.
Because
the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
Report
of Independent Registered Public Accounting Firm
To
The
Board of Directors and Stockholders of
LB
Center, Inc.
Chicago,
Illinois
We
have
audited the accompanying balance sheet of LB Center, Inc. (f/k/a Bio-Dyne
Corporation) (a development stage company) as of March 31, 2005, and the related
statements of operations, stockholders’ deficit and cash flows for the years
ended March 31, 2005 and 2004 and for the period from inception of the
development stage (November 13, 2003) to March 31, 2005. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of LB Center, Inc. (f/k/a Bio-Dyne
Corporation) as of March 31, 2005, and the results of their operations and
cash
flows for the years ended March 31, 2005 and 2004 and for the period from
inception of the development stage (November 13, 2003) to March 31, 2005, in
conformity with accounting principles generally accepted in the United States
of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred a significant loss for the year ended
March31, 2005 and at March 31, 2005 has a stockholders’ deficit and a working capital
deficit that raises substantial doubt about the entity’s ability to continue as
a going concern. Management’s plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
LB
Center, Inc. (f/k/a Bio-Dyne Corporation) (the "Company") is currently a
development stage company under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 7. The Company was formed as William E. York,
Inc. on October 13, 1989, under the laws of the State of Georgia to acquire
Bio-Dyne Corporation ("Bio-Dyne") and ECBB Body Building, Ltd. ("ECBB"), which
collectively developed, manufactured, and distributed fitness equipment. On
November 30, 1989, the Company acquired 100% of the stock of Bio-Dyne and
ECBB.
Following
the closing of the transaction, Bio-Dyne was formally dissolved and a
Certificate of Dissolution of ECBB was filed with the Department of State of
New
York. In August 1996, due to narrowing profit margins, the Company closed its
operations, and in December 1997 filed a voluntary chapter 11 bankruptcy
petition in the State of Georgia. This Chapter 11 bankruptcy petition was later
changed to a chapter 7 petition. On November 12, 2003, the bankruptcy case
was
closed. No assets and $487,352 in liabilities survived the
bankruptcy.
Prior
to
filing bankruptcy, the Company manufactured and sold physical fitness equipment
principally for resale to retailers throughout the United States. The Company
also sold a full range of physical fitness equipment and accessories of various
manufacturers to retail consumers and to commercial and institutional users
through its Carolina Fitness Equipment, Inc. (Carolina) and Home Fitness
Studios, Inc. (HFS) stores.
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
has incurred a significant loss for the year ended March 31, 2005 and at March31, 2005 has a stockholders' deficit and a working capital deficit. This matter
raises substantial doubt about the Company's ability to continue as a going
concern. These financial statements do not include any adjustments relating
to
the recoverability and classification of recorded asset amounts, or amounts
and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management
plans to take the following steps that it believes will be sufficient to provide
the Company with the ability to continue in existence: Management has located
a
merger or acquisition partner that will benefit from the Company's
publicly-traded status (See Note 8). Management also intends to raise additional
financing through private debt or equity financing or other means that it deems
necessary with a view to moving forward with a merger or
acquisition.
2.
SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents
The
Company considers cash on hand, deposits in banks, and short-term investments
purchased with an original maturity date of three months or less to be cash
and
cash equivalents. The carrying amounts reflected in the balance sheets for
cash
and cash equivalents approximate the fair values due to short maturities of
these instruments.
The
Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share have
been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrants have been excluded as common stock
equivalents in the diluted earnings per share because they are
anti-dilutive.
Fair
Value of Financial Instruments
For
certain of the Company's financial instruments, none of which are held for
trading purposes, including cash, notes payable, accounts payable and accrued
expenses, the carrying amounts approximate fair value due to their short
maturities.
The
amounts shown for notes payable also approximate fair value because current
interest rates and terms offered to the Company for similar debt are
substantially the same.
Revenue
Recognition
The
Company is currently in the development stage and does not have any operations
or revenue.
Advertising
and Marketing Costs
The
Company expenses costs of advertising and marketing as incurred. The Company
did
not have any advertising and marketing expense for the years ended
March 31, 2005 and 2004.
Income
Taxes
The
Company accounts for income taxes in accordance with SFAS No. 109,
“Accounting for Income Taxes.” Deferred taxes are provided on the liability
method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary
differences.
Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws
and
rates on the date of enactment.
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
Concentrations
of Credit Risks
Financial
instruments and related items, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash, cash equivalents
and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess
of
the FDIC insurance limit.
Comprehensive
Income
Statement
of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income," establishes standards for reporting and displaying of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company does not have any items of comprehensive income in
any
of the periods presented.
In
November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
151,
Inventory Costs- an amendment of ARB No. 43, Chapter 4. This Statement amends
the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
previously stated that "under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs may be so
abnormal as to require treatment as current period charges" This Statement
requires that those items be recognized as current-period charges regardless
of
whether they meet the criterion of "so abnormal." In addition, this Statement
requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. This
Statement is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Management does not believe the adoption of
this
Statement will have any immediate material impact on the Company.
On
December 16, 2004, the Financial Accounting Standards Board ("FASB") published
Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
Payment ("SFAS 123R"). SFAS 123R requires that compensation cost related to
share-based payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include stock
options, restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS 123R are
effective as of the first interim period that begins after June 15, 2005.
Accordingly, the Company will implement the revised standard in the third
quarter of fiscal year 2006. Currently, the Company accounts for its share-based
payment transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements.
Management is assessing the implications of this revised standard, which may
materially impact the Company's results of operations in the third quarter
of
fiscal year 2006 and thereafter.
On
December 16, 2004, FASB issued Statement of Financial Accounting Standards
No.
153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29,
Accounting for Nonmonetary transactions ("SFAS 153"). This statement amends
APB
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Under SFAS 153, if
a
nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted
for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in fiscal periods that begin after June15, 2005. The Company does not anticipate that the implementation of this
standard will have a material impact on its financial position, results of
operations or cash flows.
3.
BANKRUPTCY AND QUASI-REORGANIZATION
On
December 10, 1997, the Company submitted voluntary chapter 11 bankruptcy
petition # 97-82049-crm to the U.S. Bankruptcy Court, Northern District of
George (Atlanta), which was later changed to a chapter 7 bankruptcy petition.
In
November 2003, the bankruptcy case was closed. No assets and liabilities in
the
amount of $487,352 survived the bankruptcy.
The
Company's emergence from bankruptcy was treated as a quasi-reorganization on
the
Company's financial statements. The amount of accumulated deficit for the period
prior to the discharge of the bankruptcy (inception through November 12, 2003)
is shown as “Accumulated deficit prior to quasi-reorganization” on the Company's
balance sheet as of March 31, 2005. The amount of accumulated deficit for the
period subsequent to the discharge of the bankruptcy (November 13, 2003 through
March 31, 2005) is shown as “Accumulated deficit subsequent to
quasi-reorganization” on the Company's balance sheet as of March 31,2005.
During
the year ended March 31, 2005, the Company issued a non-interest bearing
convertible note payable in the amount of $50,000 to Hunter World Markets
(“Hunter”), a firm controlled by the Company's President and Chief Executive
Officer. During the year ended March 31, 2005, Hunter made additional loans
to
the Company under this convertible note agreement in the aggregate amount of
$45,000, and the Company repaid $15,000 to Hunter. In March 2005, the remaining
principal amount of this note of $80,000 was converted into 2,795,210 shares
(post reverse-split) of the Company's common stock. The Company's President
and
Chief Executive Officer has agreed to pay the Company's expenses as they are
incurred.
5.
STOCK
TRANSACTIONS
Reverse
Stock-Split
The
Company executed a 1-for-500 reverse-split of its common stock effective on
the
close of business on January 17, 2005. Immediately before the reverse split,
there were 19,463,529 shares outstanding, and immediately after the
reverse-split there were 38,989 shares of common stock outstanding. All per
share amounts and number of shares outstanding have been retroactively restated
for this adjustment.
Common
Stock
In
December 2004, the Company sold 159,000 shares (post reverse-split) of its
common stock for $65,000.
In
December 2004, the Company issued 2,000 shares (post reverse-split) of its
common stock valued at $818 for services performed.
In
March
2005, the Company issued 2,795,210 shares (post reverse-split) of its common
stock for the conversion of a note payable in the amount of
$80,000.
6.
INCOME
TAXES
Due
to
the Company's operating losses, there was no provision for U.S. income taxes
for
the years ended March 31, 2005 and 2004.
For
income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $6,600,000, which if not utilized, begin to expire in 2006,
subject to limitations of Section 382 of the Internal Revenue Code, as amended.
The deferred tax asset related to the carryforward is approximately $2,704,000.
Due to the change in ownership and control, the future use of the carryforward
for tax purposes will be limited.
The
Company has provided a valuation reserve against the full amount of the deferred
tax asset, since in the opinion of management based upon the earning history
of
the Company, it is more likely than not that the benefits will be
realized.
Components
of deferred tax assets as of March 31, 2005 are as follows:
Non
Current:
Net
operating loss carryforward
$
2,704,000
Valuation
allowance
(2,704,000
)
Net
deferred tax asset
$
--
The
net
change in the valuation allowance is $53,000.
In
November, 1991, the Company adopted a non-qualified stock option plan (the
"1991
Plan") to permit employees to purchase 200 shares of the Company's common stock
post-reverse stock split. Options granted under the Plan are exercisable under
terms and conditions set by the Board of Directors, which state among other
things that employees are 100% vested after two years from the date of grant.
No
options have been exercised under the Plan as of March 31, 2005. All former
employees have been terminated since the adoption of this non-qualified stock
option plan and their options expired.
In
April
1994, the Company adopted a non-qualified stock option plan ("the 1994 Plan")
to
permit officers, directors, consultants, and employees of the Company to
purchase up to 2,000 shares of the Company's common stock (post-reverse stock
split). Options granted under the 1994 Plan are exercisable under terms and
conditions set by the Board of Directors, which currently provide, among other
things, that the exercise price shall not be less than the then current fair
market value of the shares of common stock subject to the option on the date
of
grant. All former employees have been terminated since the adoption of this
non-qualified stock option plan and their options expired.
8.
SUBSEQUENT EVENTS
On
June3, 2005, the Company entered into an Agreement and Plan of Merger with The
Berman Center, Inc., a privately held Delaware corporation (“Berman Center”),
pursuant to which the stockholders of Berman Center acquired approximately
87%
of the Company's issued and outstanding common stock through a merger
transaction, with the Company's existing stockholders continuing to own the
remaining 13% of the issued and outstanding common stock after the merger.
The
merger was consummated through the merger of the Company's newly formed
wholly-owned subsidiary, LBC MergerSub, Inc., a Nevada corporation, with and
into Berman Center, with Berman Center being the surviving corporation. The
merger was intended to be a "tax-free" reorganization pursuant to the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as amended. As a result
of the merger, Berman Center is a wholly-owned subsidiary of the Company. The
shareholders of Berman Center were issued 1.535999487 shares of the Company's
common stock for each share of Berman Center common stock. In addition, each
Berman Center warrant or option outstanding immediately prior to the merger
are
now warrants or options to purchase 1.535999487 shares of the Company's common
stock. On June 20, 2005, The Berman Center, Inc. changed its name to Berman
Health and Media, Inc.
On
June20, 2005, the Company merged with and into Berman Center, Inc. a newly formed
Delaware Corporation. Berman Center, Inc. is the surviving corporation
and
the Company's name is now Berman Center, Inc.
F-26
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification Of Directors And Officers.
Under
Section 145 of the General Corporation Law of the State of Delaware, we can
indemnify our directors and officers against liabilities they may incur in
such
capacities, including liabilities under the Securities Act of 1933, as amended
(the “Securities Act”). Our certificate of incorporation provides that, pursuant
to Delaware law, our directors shall not be liable for monetary damages for
breach of the directors' fiduciary duty of care to us and our stockholders.
This
provision in the certificate of incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive
or
other forms of nonmonetary relief will remain available under Delaware law.
In
addition, each director will continue to be subject to liability for breach
of
the director's duty of loyalty to us or our stockholders, for acts or omissions
not in good faith or involving intentional misconduct or knowing violations
of
the law, for actions leading to improper personal benefit to the director,
and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
Our
bylaws provide for the indemnification of our directors to the fullest extent
permitted by the Delaware General Corporation Law. We may, but only to the
extent that our Board of Directors may (but shall not be obligated to) authorize
from time to time, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Company to the fullest extent of the
provisions of our bylaws. We may limit the extent of such indemnification by
individual contracts with our directors and executive officers, but have not
done so. We are required to advance, prior to the final disposition of any
proceeding, promptly on request, all expenses incurred by any director or
executive officer in connection with that proceeding on receipt of an
undertaking by or on behalf of that director or executive officer to repay
those
amounts if it should be determined ultimately that he or she is not entitled
to
be indemnified under our bylaws or otherwise. We are not, however, required
to
advance any expenses in connection with any proceeding if a determination is
reasonably and promptly made by our Board of Directors by a majority vote of
a
quorum of disinterested Board members that (a) the party seeking an advance
acted in bad faith or deliberately breached his or her duty to us or our
stockholders and (b) as a result of such actions by the party seeking an
advance, it is more likely than not that it will ultimately be determined that
such party is not entitled to indemnification pursuant to the applicable
sections of our bylaws.
We
also
have directors' and officers' liability insurance.
Item
25. Other Expenses Of Issuance And Distribution.
The
following table sets forth the costs and expenses, other than underwriting
discounts and commissions, if any, payable by us relating to the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee.
SEC
registration fee
$
21,294.29
Printing
and engraving expenses
$
10,000.00
Legal
fees and expenses
$
150,000.00
Accounting
fees and expenses
$
15,000.00
Transfer
agent and registrar's fees and expenses
$
2,500.00
Miscellaneous
expenses
$
2,500.00
Total
$
201,294.29
We
have
agreed to bear all reasonable expenses that relate to the registration of the
shares of common stock being offered and sold by the selling security holders,
including, without limitation, all registration, listing and qualification
fees,
printers and accounting fees, the fees and disbursements of our counsel, and
the
reasonable fees and disbursements of one counsel selected by certain of the
selling security holders.
II-1
Item
26. Recent Sales Of Unregistered Securities.
Berman
Health and Media, Inc. recently closed a private placement offering of common
stock and warrants (the “Units”) each consisting of (i) two shares of common
stock, (ii) one three-year warrant exercisable into one share of common stock
at
an exercise price of $1.05 and (iii) one three year warrant exercisable into
one
share of common stock at an exercise price of $1.57.
The
Units
were offered solely to persons who qualified as “accredited investors” within
the meaning of Rule 501 of the Securities Act of 1933, as amended (the “Act”),
“Qualified Institutional Buyers” within the meaning of Rule 144A of the Act and
to certain persons in offshore transactions in reliance on Regulation S of
the
Act.
The
price
per Unit was $1.05. On June 16, 2005, Berman Health and Media, Inc. sold an
aggregate of 2,952,381 Units and received $3,100,000 in gross proceeds from
such
sale. The securities were issued in reliance upon an exemption from registration
with the SEC as provided by Section 4(2) of the Act and Regulation D and
Regulation S promulgated thereunder and similar provisions under applicable
state laws which provide exemptions from the securities registration provisions.
We have agreed to assume the warrants issued by Berman Health and Media, Inc.
in
the private placement. Each share of common stock underlying such warrants
is
now exercisable into 1.535999487 shares of our common stock. These warrants
are
currently exercisable into an aggregate of 9,069,714 shares of our common
stock.
In
connection with the private placement, Berman Health and Media, Inc. entered
into an agreement with Hunter World Markets, Inc. (“HWM”), our former
controlling stockholder and one of our current stockholders, pursuant to which
HWM offered for sale the Units on a “best efforts” basis. As consideration for
HWM's services, we have paid HWM (i) a $310,000 commission on the sale of the
Units, (ii) reimbursement of $62,000 in non-accountable expenses and (iii)
three
year warrants exercisable into 906,971 shares of our common stock. The warrants
were issued in reliance upon an exemption from registration with the SEC as
provided by Section 4(2) of the Act and Regulation D promulgated thereunder
and
similar provisions under applicable state law which provides exemptions from
the
securities registration provisions.
Prior
to
converting into corporate form, Berman Center LLC sold in 2003, 2004 and 2005
an
aggregate of 3,767,390 membership interests in Berman Center LLC, solely to
persons who qualified as “accredited investors” within the meaning of Rule 501
of the Act. Berman Center LLC received an aggregate of $2,966,223 in proceeds
from such sales. These securities converted into 19,730,504 shares of our common
stock upon consummation of the merger on June 16, 2005. The securities were
originally issued in reliance upon an exemption from registration with the
SEC
as provided by Section 4(2) of the Act and Regulation D promulgated thereunder
and similar provisions under applicable state laws which provide exemptions
from
the securities registration provisions.
In
addition, prior to converting into corporate form, Berman Center LLC issued
to
certain “accredited investors” providing $400,000 in working capital to Berman
Center LLC, three and a half year warrants exercisable into 117,315 membership
interests in Berman Center LLC at an exercise price of $1.074034786. These
warrants converted into warrants exercisable into 400,000 shares of Berman
Health and Media, Inc.'s common stock at an exercise price of $0.315 upon the
reorganization of Berman Center LLC into corporate form. We agreed to assume
these warrants in connection with the merger. Each share of common stock
underlying such warrants is now exercisable into 1.535999487 shares of our
common stock. These warrants are currently exercisable into an aggregate of
614,400 shares of our common stock. The securities were originally issued in
reliance upon an exemption from registration with the SEC as provided by Section
4(2) of the Act and Regulation D promulgated thereunder and similar provisions
under applicable state laws which provide exemptions from the securities
registration provisions.
Form
of Stock Purchase Warrant (Class A) dated as of June 16, 2005 issued
by
Berman Health and Media, Inc. (f/k/a The Berman Center, Inc.) to
the
Warrant Holders indicated on the schedule thereto (incorporated
by
reference to Exhibit 4.1 to the Registrant's current report on
Form 8-K
filed with the SEC on June 22, 2005).
4.2
Form
of Stock Purchase Warrant (Class B) dated as of June16, 2005 issued
by
Berman Health and Media, Inc. (f/k/a The Berman Center, Inc.) to
the
Warrant Holders indicated on the schedule thereto (incorporated
by
reference to Exhibit 4.2 to the Registrant's current report on
Form 8-K
filed with the SEC on June 22, 2005).
4.3
Form
of Stock Purchase Warrant dated as of June 16, 2005 issued by Berman
Health and Media, Inc. (f/k/a The Berman Center, Inc.) to Hunter
World
Markets, Inc. (incorporated by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed with the SEC on June22,2005).
5.1
Opinion
of Kirkpatrick & Lockhart Nicholson Graham LLP.
Placement
Agent Agreement dated April 11, 2005 by and among Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Hunter World Markets, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrant's
current
report on Form 8-K filed with the SEC on June 22,2005).
10.3**
Lease
Agreement dated November 20, 2003 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Zeller Management Corp., an
agent for
Zeller-211 Trust.
10.4**
Novelty
Agreement dated August 1, 2004 by and between Berman Health and
Media,
Inc. (f/k/a Berman Center LLC) and California Exotic Novelties,
LLC.
10.5**
Loan-Out
Agreement dated as of October 28, 2004 by and between Berman Health
and
Media, Inc. (f/k/a Berman Center LLC) and View Film.
10.5(a)
Pick Up
Letter
Agreement dated September 9, 2005 for Berman Television Series by
and
between Showtime Networks, Inc. and View Film.
10.6**
Hyperion
Agreement dated November 5, 2004 by and between Hyperion, an imprint
of
Buena Vista Books, Inc. and Laura Berman Ph.D.
10.7**
Option
Agreement dated as of May 17, 2004 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Dr. Allan Charles.
10.8**
Option
Agreement dated as of May 17, 2004 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Dr. Jan Fawcett.
10.9**
Form
of Indemnification Agreement between Berman Center LLC and its
directors.
10.10
Book Agency
Agreement
dated November 6, 2004 by and between International Creative Management
and Dr. Laura Berman.
10.11
Production
and
Distribution Agreement dated March 4, 2004 by and between UBC Radio
Network Inc. and Berman Health and Media, Inc. (f/k/a Berman Center
LLC).
10.12
Sublease
dated
September 1, 2005 by and between Naperville Psychiatric Ventures
and
Berman Health and Media, Inc. (f/k/a Berman Center, LLC).
16.1
Letter
from AJ. Robbins to the Securities and Exchange Commission (incorporated
by reference to Exhibit 16.1 to the Registrant's current report
on Form
8-K filed with the SEC on June 30, 2005).
Consent
of Singer Lewak Greenbaum & Goldstein LLP.
23.2
Consent
of AJ. Robbins, P.C.
23.3
Consent
of Kirkpatrick & Lockhart Nicholson Graham LLP (contained in Exhibit
5.1).
24.1
Power
of Attorney (included
on signature page).
*
To
be
filed as an amendment.
** Previously
filed.
II-3
Item
28. Undertakings.
The
undersigned small business issuer hereby undertakes to:
(1)
For
determining any liability under the Securities Act, treat the information
omitted from this 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 small business issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Securities and Exchange Commission declared it effective.
(2)
For
determining any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement
for
the securities offered in this registration statement, and that offering of
the
securities at that time as the initial bona fide offering of those
securities.
The
undersigned small business issuer hereby undertakes with respect to the
securities being offered and sold in this offering:
(1) To
file, during any period in which it offers or sells securities, a post-
effective amendment to this Registration Statement to:
(a) Include
any prospectus required by Section 10(a)(3) of the Securities Act;
(b) Reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in this 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 Securities and Exchange 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;
and
(c) Include
any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each post- effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3) File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
Insofar
as indemnification by the undersigned small business issuer for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
II-4
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
undersigned small business issuer will, unless in the opinion of its counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the Registrant has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on the 19th day of October, 2005.
Berman
Center, Inc.
By:
/s/ Samuel
P. Chapman
Samuel
P. Chapman
Chief
Executive Officer
II-5
POWER
OF ATTORNEY
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Samuel P. Chapman, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any
and all amendments to this Form SB-2, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission and any other regulatory authority, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this Amendment
No. 1 to Registration Statement has been signed by the following persons in
the
capacities and on the dates indicated:
SIGNATURE
TITLE
DATE
/s/
Samuel P. Chapman
Chairman,
Chief Executive Officer and Director (Principal
Executive
Form
of Stock Purchase Warrant (Class A) dated as of June 16, 2005 issued
by
Berman Health and Media, Inc. (f/k/a The Berman Center, Inc.) to
the
Warrant Holders indicated on the schedule thereto (incorporated
by
reference to Exhibit 4.1 to the Registrant's current report on
Form 8-K
filed with the SEC on June 22, 2005).
4.2
Form
of Stock Purchase Warrant (Class B) dated as of June16, 2005 issued
by
Berman Health and Media, Inc. (f/k/a The Berman Center, Inc.) to
the
Warrant Holders indicated on the schedule thereto (incorporated
by
reference to Exhibit 4.2 to the Registrant's current report on
Form 8-K
filed with the SEC on June 22, 2005).
4.3
Form
of Stock Purchase Warrant dated as of June 16, 2005 issued by Berman
Health and Media, Inc. (f/k/a The Berman Center, Inc.) to Hunter
World
Markets, Inc. (incorporated by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed with the SEC on June22,2005).
5.1
Opinion
of Kirkpatrick & Lockhart Nicholson Graham LLP.
Placement
Agent Agreement dated April 11, 2005 by and among Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Hunter World Markets, Inc.
(incorporated by reference to Exhibit 10.2 to the Registrant's
current
report on Form 8-K filed with the SEC on June 22,2005).
10.3**
Lease
Agreement dated November 20, 2003 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Zeller Management Corp., an
agent for
Zeller-211 Trust.
10.4**
Novelty
Agreement dated August 1, 2004 by and between Berman Health and
Media,
Inc. (f/k/a Berman Center LLC) and California Exotic Novelties,
LLC.
10.5**
Loan-Out
Agreement dated as of October 28, 2004 by and between Berman Health
and
Media, Inc. (f/k/a Berman Center LLC) and View Film.
10.5(a)
Pick
Up Letter Agreement dated September 9, 2005 for Berman Television
Series
by and between Showtime Networks, Inc. and View Film.
10.6**
Hyperion
Agreement dated November 5, 2004 by and between Hyperion, an imprint
of
Buena Vista Books, Inc. and Laura Berman Ph.D.
10.7**
Option
Agreement dated as of May 17, 2004 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Dr. Allan Charles.
10.8**
Option
Agreement dated as of May 17, 2004 by and between Berman Health
and Media,
Inc. (f/k/a Berman Center LLC) and Dr. Jan Fawcett.
10.9**
Form
of Indemnification Agreement between Berman Health and Media, Inc.
(f/k/a
Berman Center LLC) and its directors.
10.10
Book
Agency Agreement dated November 6, 2004 by and between International
Creative Management and Dr. Laura Berman.
10.11
Production
and Distribution Agreement dated March 4, 2004 by and between UBC
Radio
Network Inc. and Berman Health and Media, Inc. (f/k/a Berman Center
LLC).
10.12
Sublease
dated
September 1, 2005 by and between Naperville Psychiatric Ventures
and
Berman Health and Media, Inc. (f/k/a Berman Center, LLC).
16.1
Letter
from AJ. Robbins to the Securities and Exchange Commission (incorporated
by reference to Exhibit 16.1 to the Registrant's current report
on Form
8-K filed with the SEC on June 30, 2005).
