IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS FORM 10-KSB IS BEING FILED
IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION (APPLIED FOR).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1996
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ___________ to ____________
Commission file no. 0-29006
HEALTH CARE CENTERS OF AMERICA, INC.
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(Name of Small Business Issuer in Its Charter)
Nevada 62- 1210877
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 North Arlington Avenue (ste. 22F)
Reno, Nevada 89501
- ---------------------------------------- ----------
(Address of Principal Executive Officer) (Zip Code)
(702) 786-1461
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock. par value $.001 per share
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
as been subject to such filing requirements for past 90 days. Yes |_| No |X|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|
State issuer's revenues for its most recent fiscal year. None
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the average bid and asked prices at closing of such
stock, as of March 31, 1997: approximately $172,031,090
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ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes |_| No n/a
APPLICABLE ONLY TO CORPORATE REG ISTRANTS
State the number of shares outstanding of the issuer's common stock as of March
31, 1997: 830,450,568 shares
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: None
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TABLE OF CONTENTS
Item Part I Page
----
Item 1 Description of Business 3
Item 2 Description of Property 18
Item 3 Legal Proceedings 23
Item 4 Submission of Matters to a Vote of Security Holders 26
Part II
Item 5 Market for Common Equity and Related Stockholder Matters 26
Item 6 Management's Plan of Operation 29
Item 7 Financial Statements 33
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 49
Part III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 49
Item 10 Executive Compensation 52
Item 11 Security Ownership of Certain Beneficial Owners and
Management 53
Item 12 Certain Relationships and Related Transactions 55
Item 13 Exhibits and Reports on Form 8-K 57
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PART I
Item 1. Description of Business.
Much of the discussion contained in this Item 1 is "forward looking", as
that term is identified in, or contemplated by, Section 27A of the Securities
Act and Section 21E of the Exchange Act. Actual results may materially differ
from projections. Information concerning factors that could cause actual results
to differ materially is set forth in this Item I and in Items 2 and 3 below. For
a complete understanding of such factors, this entire document, including the
financial statements and their accompanying notes, should be read in its
entirety.
Historical Overview of the Company
Health Care Centers of America, Inc., a Nevada corporation (the "Company"),
was originally incorporated in Montana in October 1967. The Company's executive
offices are located at 100 North Arlington Avenue (suite 22F), Reno. Nevada.
Originally known as Cadgie Taylor Co., the Company merged with Carleton
Enterprises, Ltd., a Nevada corporation, in 1984. Later that year, it changed
its name to SCN, Ltd., and effected a share exchange with Star-Com Network, Inc.
a Nevada corporation. In 1985, the Company filed for bankruptcy under Chapter 11
of the United States Bankruptcy Code. In September 1993, the bankruptcy
proceeding was dismissed.
Upon emerging from such bankruptcy proceedings, the Company changed its
name to Health Care Centers of America, Inc., reflecting its intention to
develop a network of multidisciplinary health care centers. A plan was
formulated whereby the Company would acquire health care practices in exchange
for shares of the Company's stock, the value of such shares to be supported by
other assets acquired for stock. Pursuant to such plan, the Company has acquired
or agreed to acquire assets in mining, real estate, entertainment, education,
and health care.
Many of the stock exchange agreements into which the Company entered for
such acquisitions provided that the other party to the agreement (the "target
entity") had the right to annul or void the agreement if a registration
statement registering the Company's stock under Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act") did not become effective within a
specified period of time (in most cases 18 months following the date of the
agreement). Many of such agreements or oral understandings supplementing such
agreements also provided that the assets, liabilities, and income of the target
entities would not inure to the benefit of the Company until the Company's
Exchange Act registration became effective.
In December 1996, the Company filed a registration statement under Section
12(g) of the Exchange Act which became effective February 4, 1997. With certain
exceptions hereinafter discussed, the time limitations for such registration
have been waived, and such acquisitions are deemed to have become effective.
While the Company planned and continues to plan to go into health care, at
the present time most of its assets and activities relate to other industries,
primarily mining/processing of precious metals and entertainment. At its next
annual meeting, management intends to ask the Company's stockholders to approve
a change of the Company's name to "HCCA International, Inc." to better reflect
the diversification of the Company's business.
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The Company is in the development stage and has not had any revenues during
the last five years, during which it has expended substantial funds. The
Company's future success is dependent on its ability to obtain funding for
processing its precious metals concentrate. The Company anticipates obtaining
such funding through the ore concentrates, certain television time credit
certificates, and possible real estate described below (see "Item I-Description
of Business"). There can be no assurance that the Company will be successful in
identifying buyers for such assets, or that its proposed operations will be
successful.
As of December 31, 1996, the Company did not have any employees, its
business being managed by its officers and directors without salary. (Nashville
Music Consultants, Inc., acquired by the Company subsequent to December 31,
1996, has five employees.)
Current Business (including lines of business
acquired subsequent to December 31, 1996)
A. Precious Metals Concentrate, Mining and Processing
1. Description of the business
The Company owns a substantial deposit of ore concentrate located
approximately 40 miles from Prescott, Arizona, which management believes, on the
basis of assays by an independent third party consultant, is substantially in
excess of 500,000 tons. Tests by independent metallurgist/assayers indicate that
such concentrate contains commercial quantities of precious metals and rare
earths. (See "Item 2-Description of Property".)
Through its wholly owned subsidiary, Peeples Mining Co. ("Peeples Mining"),
the Company also owns mineral rights in Arizona and Nevada.
Peeples Mining is currently inactive, but it is intended that it will
commence processing the Company's concentrate and development of its other
mining properties as soon as financing permits. It is intended that Peeples
Mining will process such concentrate to the next stage of concentration known as
dory bars. Dory bars are produced by liquefying the concentrate and pouring the
solution into a mold; as the material cools, the metals separate, with the
heaviest falling to the bottom strata. Dory bars can be sold for a higher price
than concentrate.
Peeples Mining does not presently have the equipment for producing dory
bars. Management is currently studying alternative refining methods to determine
the appropriate machinery and equipment to buy, but the Company may require
financing for such purchase. The Company does not anticipate obtaining the
equipment necessary to refine its concentrate or dory bars into bullion, rather
it intends to produce and sell dory bars to smelters which have such equipment.
Peeples Mining has certain facilities and equipment for leaching and
testing, but new equipment will be required to process ores from the Company's
properties into concentrates in the desired volume. Peeples Mining is capable of
processing approximately 25 tons of head ore per hour from its Arizona property,
bringing it to a first stage of concentration. Free milling gold will be
removed, and the remaining concentrate will be further concentrated and/or
separated by a chemical process.
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The Company (or its subsidiary, Peeples Mining) also has mineral rights in
lands in Arizona and Nevada, and subsequent to December 31, 1996, acquired an
additional mining property in California. (See "Item 2-Description of
Property".)
Peeples Mining, which was organized in 1981 as an Arizona limited liability
company ("Peeples LLC"), was acquired by the Company in 1994. Peeples LLC was
actively engaged in mining activities from 1988 to 1994. The Company also
acquired F&H Mining, Inc., a Nevada corporation ("F&H Mining") in 1994. F&H
Mining was organized in 1984, and was active working the property at Mesquite,
Nevada, until 1991. In February 1997, the assets of Peeples LLC and F&H Mining
were transferred to Peeples Mining, a newly formed Nevada corporation of which
the Company is the sole stockholder.
Peeples Mining does not presently have any employees.
2. Terms of Acquisition
The Company entered into the agreement to acquire all the issued and
outstanding stock of F&H Mining in March 1994. At that time, F&H Mining was a
corporation organized under the laws of the Island of Nevis. Under the
agreement, the Company agreed to acquire all of F&H Mining's issued and
outstanding stock in exchange for 12,000,000 shares of the Company's stock.
Maurice Furlong, the Company's president, has been a consultant to F&H Mining
since its inception. (See "Item 12-Certain Relationships and Related
Transactions", below). Consummation of the acquisition of F&H Mining was
contingent on effectiveness of the Company's Exchange Act registration
statement.
The Company entered into the agreement to acquire all the interests in
Peeples LLC in June 1994, at which time it was an Arizona limited liability
company. Under the agreement, the Company issued 20,000,000 shares of the
Company's stock, and through Peeples LLC acquired the mineral rights to the 340
acres near Prescott, Arizona. In August 1995, the Company issued an additional
100,000,000 shares in recognition of the value of the ore concentrate located on
such property. (At the direction of Peeples LLC, these shares were issued to one
of its principals, Zarzion, Ltd.)
Consummation of the acquisition of Peeples LLC was contingent on
effectiveness of the Company's Exchange Act registration statement. The
Company's ore concentrate. however, is owned outright, free and clear of any
contingencies.
In August 1996, the Company agreed with the former members of Peeples LLC
and the former shareholders of F&H Mining that any income realized from the
operations of F&H and Peeples was not to inure to the benefit of the Company
until such time as its Exchange Act registration became effective. In fact,
there were no revenues between the time the acquisition agreements were entered
into and the time the Company's Exchange Act registration became effective.
Provisions in the acquisition agreements for F&H and Peeples granting the former
stockholders of those companies the right to annul the sale of such companies
under certain circumstances, including the Company's failure to complete a
secondary offering of its securities within a prescribed time frame, have been
canceled.
In February 1997, the Company acquired 17 lode claims on 340 acres of land
in California. (See "Item 2-Description of Property ".) The Company believes
it will be eligible to apply for title to such property following a period of
exploitation. These claims were
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acquired from Zarzion, Ltd. (see Item 12-Certain Relationships and Related
Transactions ") in exchange for 375,000,000 shares of the Company's common
stock.
3. Risks attendant on mining and processing minerals
The value of the Company's concentrate depends on the amount of metals
contained in such ore, and on the cost and difficulty of refining. While the
Company believes that the there are significant quantities of precious metals in
such concentrate, the market price of such metals and the cost of extraction and
refining are yet to be determined. Management is of the opinion that the cost of
extraction and mining should not exceed 50 % of the value if indicated
quantities of precious metals are present in its concentrate.
No assurances can be given that a desirable level of recovery will be
realized from Peeples Mining's ore. Reserve estimates may require revision based
on actual production experience. Market price fluctuations of precious metals,
as well as increased production costs or reduced recovery rates, may drastically
affect the value of the Company's ore reserves, and may render reserves
containing relatively low grades of mineralization uneconomic to exploit.
Exploration and mining activities are highly speculative in nature, involve
many risks, and are frequently nonproductive. There can be no assurance that the
Company's mining activities will be successful. In the event minerals are
recoverable, it may take a number of years from the initial phases until
production is possible, during which time the economic feasibility of production
may change. As pertains to all the Company's mining interests, substantial
expenditures may be required to establish proven and probable ore reserves
through drilling, to determine metallurgical processes to extract the metals
from the ore, and in the case of new properties, to construct mining and
processing facilities. As a result of these uncertainties, no assurance can be
given that the Company would be able to expand with new sources of ore or
concentrate.
The business of mining and processing precious metals is subject to a
number of significant hazards, including environmental hazards, thefts and other
losses, industrial accidents, and labor disputes. Mining is also subject to the
risks of encountering unusual or unexpected geological formations, cave-ins,
flooding, rock falls, periodic interruptions due to inclement or hazardous
weather conditions, and other acts of God. Such risks could result in damage to
or destruction of mining properties or production facilities, personal injury or
death, environmental damage, delays in mining, monetary losses, and possible
legal liability. The Company will obtain insurance against risks that are
typical in the operation of its business and in amounts which management
believes to be reasonable, but no assurance can be given that such insurance
will continue to be available, that it will be available at economically
acceptable premiums, or that it will be adequate to cover any liability.
There can be no assurance that the test results obtained by the Company for
certain of its properties by independent assayers will prove to be accurate for
the entire property.
4. Regulation of mining and mineral processing
The Company's exploration, mining, and refining activities will be subject
to extensive state and federal laws and regulations governing prospecting,
developing, production, export, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the environment, protection of
endangered and protected species, mine safety, toxic substances,
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and other matters. Mining is subject to potential risks and liabilities
associated with pollution of the environment and the disposal of waste products
occurring as a result of mineral exploration, production, and processing. The
Company may in the future be subject to clean-up liability under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 and
comparable state laws which establish clean-up liability for the release of
hazardous and toxic substances for property owners and operators. In the context
of environmental permitting, including the approval of reclamation plans, the
Company must comply with applicable standards, laws, and regulations, which may
entail greater or lesser costs and delays depending on the nature of the
activity to be permitted and how stringently the regulations are implemented by
the permitting authority. It is possible that costs and delays associated with
compliance with such laws, regulations and permits could become such that the
Company would not proceed with the operation or development of a mine or other
project, or inauguration of a processing facility.
Amendments to current laws and relations governing operations and
activities of mining companies and companies processing metals or more stringent
implementation thereof are actively considered from time to time and could have
an adverse impact on the Company and its operations.
B. Entertainment
1. Description of the Business
In April 1995, the Company entered into an agreement to acquire all the
outstanding stock of Nashville Music Consultants, Inc., a Tennessee corporation
("NMC") organized in 1993, and such acquisition became effective in February
1997. NMC engages in screening, advising, developing, publishing, and managing
singers and songwriters. Revenues come from consulting fees, registration fees,
tuition, publishing royalties, and management commissions. Although the majority
of its clients have been in the country music field, NMC is presently expanding
into Christian music.
In addition to clients generated by NMC's own marketing efforts, new
singers and songwriters are referred by major record labels, publishing
companies, NMC, ASCAP, and other entities in the music industry. All clients pay
a one-time consulting fee of $350. Singers deemed to have outstanding potential
are offered a consulting contract pursuant to which NMC receives 7.5% of the
client's gross revenue for a period of seven years; songwriters with outstanding
potential are offered a contract with NMC's publishing division, pursuant to
which NMC receives 50% of each song copyright, and 50% of all song revenues.
NMC's president, Larry Butler, is a two-time grammy winner, and the only
country music producer to win a grammy for Producer of the Year. He also won a
grammy for writing the song of the year, "Somebody Done Somebody Wrong Song".
Mr. Butler has produced 65 gold and platinum albums, and served as president of
United Records from 1973 to 1979.
Each year since 1994, NMC has conducted the International Country Music
Expo. The 1996 expo, which drew over 750 participants, was conducted at the
Opryland Hotel, where the 1997 expo will also take place. Representatives from
many major record labels, publishing companies, and other music industry
companies participate each year. NMC owns all rights and charges a $300
registration fee for each participant.
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NMC has five employees, all of whom are full time. NMC's staff are
experienced in producing, songwriting, engineering, and management. NMC has
access to a fully equipped music producing studio on site with a full time staff
engineer.
NMC leases approximately 7,200 square feet of space at 24 Music Square
West, Nashville, Tennessee, for which it has agreed to pay $72,000, $73,800, and
$75,645, respectively, for the years ending June 30, 1997, 1998, and 1999. NMC
owns certain music production and analysis equipment valued at approximately
$25,000; NMC uses additional equipment belonging to its chief executive officer,
Alcy Baggott, with whom NMC is negotiating a lease.
2. Terms of Acquisition
The Company entered into the agreement to acquire NMC in April 1995. Under
the agreement, the Company agreed to acquire all the issued and outstanding
shares of NMC's stock in exchange for 4,000,000 shares of the Company's stock.
Consummation of the transaction was contingent on effectiveness of the Company's
Exchange Act registration statement, so that the acquisition was not consummated
until February 1997
Pursuant to the acquisition agreement, 51 % of the outstanding stock of NMC
is to be placed in a voting trust with Ally Cat Music, Inc., a company wholly
owned by Mr. Baggott, for a term of 10 years, renewable for 10 years, and the
Company is enjoined from interference with Ally Cat Music, Inc.'s management of
NMC. The Company also agreed to use its best efforts to provide $500,000 of
financing for NMC. Also under the agreement, the Company is entitled to an
annual "management fee" in an amount equal to 9% of NMC's gross revenues.
The agreement provides that the transaction may be canceled if the
Company's stock ceases to be "listed or traded on the NASDAQ Stock Exchange."
The effect of this condition is not clear, since the Company's shares have never
been listed on NASDAQ, but it is not impossible that such condition could
someday be invoked to disassociate NMC from the Company. The agreement also
indicates that NMC's stockholders can void the agreement if the transaction
turns out not to be a tax free transaction under federal tax laws. While the
Company has not obtained an opinion of counsel with respect to this matter,
management believes that the exchange of shares is indeed a tax free transaction
under the Internal Revenue Code.
3. Competition and Regulation
Management is unaware of any other entity offering a similar combination of
services. Other entities do however provide services similar to particular
services provided by NMC, and there can be no assurance that NMC's strategy of
providing integrated services will withstand competition from entities focused
on a single service, or that others may not bundle services in the future.
Federal and state laws relating to intellectual property have an extensive
impact upon the song writing, music publication, and music recording segments of
the entertainment industry. The industry is such that it is highly susceptible
to the unauthorized reproduction of previously published material. The Company's
ability to protect itself from the unauthorized reproduction of works generated
by its artists and songwriters, along with its ability to protect its publishing
rights, will be influenced by federal and state copyright, trademark, and
service mark laws.
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C. Medical Waste Decontamination Units
1. Description of Business
The Company owns 24 medical waste decontamination units manufactured by a
Japanese manufacturer, which owns a patent on the units' fume scrubber. Known as
MedAway 1, each unit is designed to decontaminate and physically alter up to
five cubic feet of medical waste, including bags, blood lines, syringes, sharps,
petri dishes, curettes, and similar items of waste generated by hospitals and
doctors' offices. The units use a dry heat process, including a patented
combination of resistance and "far infrared" quartz heating elements with a
proprietary condenser filtration system that obviates the need for external
venting. The units are mobile and self contained. No special wiring,
ventilating, or plumbing is needed, nor are building permits required. The units
heat the waste load to a temperature at which most viruses are rendered inactive
within five minutes. After treatment, waste is considered noninfectious. As the
waste load is heated in the unit, the plastics melt, encapsulating the sharps
and reducing volume by a factor of as much as ten. The units operate silently
without shredding, grinding, compacting, steaming or chemically treating the
waste, and approved by Underwriters Laboratory ("UL").
The Company intends to lease its units to hospitals, clinics, doctors'
offices, and nursing homes. Between 1993 and acquisition of such units by the
Company, four similar units were sold by the company from which the Company
purchased its units, MedAway International, and management believes such units
are operating satisfactorily. Management is in the process of formulating a
marketing plan and securing liability insurance, however, no units have been
leased to date.
The Company intends to contract with third-parties to maintain and repair
the units. The Company does not yet have any employees in its MedAway division.
2. Terms of Acquisition
The Company acquired its units together with other assets of MedAway
International, Inc. ("MedAway"), a Delaware corporation, in June 1996, in
exchange for $2,000,000 worth of the Company's common stock, which management
determined to be 2,066,115 shares at the time of the transaction. All of such
shares have been issued to MedAway's stockholders.
Among MedAway's assets was the exclusive right to market and distribute
such units in North America, the Caribbean, and Taiwan. Assignment of such right
to the Company, however, requires the manufacturer's consent, which will be
requested at such time as the Company has the financial resources to put into
effect a full-scale marketing plan. The manufacturer's consent is not required
for leasing the 24 units the Company acquired from MedAway.
3. Competition
Competition for MedAway 1 units currently comes principally from
incineration and chemical processing, over which management believes the MedAway
1 unit has significant advantages. Incineration requires cumbersome equipment
and permitting, while chemical treatment requires additional disposal
arrangements for the residue after treatment. Other systems for treating medical
waste are generally more costly. Many utilize grinders and shredders, some treat
infected materials with toxic chemicals, and all other systems require
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special power and external venting of emissions. Venting emissions generally
involves state and/or federal environmental compliance and permitting issues. In
addition, such alternative methods generally generate an end product, disposal
of which creates its own environmental compliance issues.
If the Company fails to obtain the manufacturer's consent to acquiring
MedAway's distribution rights, however, the manufacturer may be able to sell its
units in the United States in competition with the Company, directly or through
another distributor. There can be no assurance, moreover, that competitors with
a stronger financial base than that of the Company will not develop alternative
processes for the decontamination of medical waste.
4. Regulation
The treatment and disposal of medical waste is subject to federal, state
and local regulation, as is the disposal of fumes and other residue created in
the treatment of such waste. The Company believes that its units comply with
legal requirements in at least 36 states.
There is a possibility, however, that new regulations may be adopted at the
state or federal level, as by amendments to the Medical Waste Tracking Act,
which would restrict the disposal of materials such as the end product which
remains after treatment in the MedAway 1 units. Such regulations could have a
negative impact on the market for such units.
D. Television Advertising
1. Description of the Business
The Company owns 20 television time credit certificates issued by American
Independent Network, Inc. ("AIN"). Each certificate represents that AIN will
provide the bearer commercial air time valued at $5,000,000, calculated at going
rates, on AIN's national television network, subject to time availability or
agreement on a time plan.
Such certificates contain no restrictions as to transferability, assignment
or sale. The Company does not intend to engage in the business of marketing
television advertising time as such, but it may from time to time market and
sell time from its television time credit certificates, as well as utilize such
time for its own enterprises. In due course, management plans to use such
commercial air time in its marketing of health care facilities described below.
The Company does not have any employees specifically responsible for this
line of business, and does not anticipate employing any in the immediate future.
2. Terms of Acquisition
The Company's television time credit certificates were originally assets of
ELF Works, Ltd., a Nevada corporation ("ELF") which the Company acquired in June
1996. Following such acquisition, the television time credit certificates were
reissued by AIN in the Company's name. Under the terms of the agreement, the
Company issued ELF's stockholders 40,000,000 shares of the Company's common
stock in exchange for all ELF's outstanding stock. The Company also received a
right of first refusal with respect to any sale of the shares issued by it to
ELF's stockholders. For a period of five years, the Company has the right to
match any
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offer for the purchase of such shares. Inasmuch as ELF had no significant assets
other than its AIN certificates, it is planned to dissolve ELF.
3. Competition; Other Factors
To the extent that the Company decides to sell rather than use the
television time credit certificates, management perceives that competition in
the national television market is intense. There can be no assurance that the
Company could successfully market and sell such certificates in the event it
determines to do so. The value of such certificates may also be affected by
AIN's financial ability to perform.
Planned Business
E. Health Care Centers
1. Description of Business
One of the Company's objectives is to build a network of multi-disciplinary
health care centers to provide a combination of primary and alternative health
care to the general public. The Company intends to provide the services of
general practice medical doctors, chiropractors, physical therapists, and other
health care providers under one roof, creating a "one stop" source for a number
of medical services.
Management believes that today's changing environment for health care
delivery will place a premium on consolidation of various types of health care
providers into larger entities, and that consolidation and group practice
constitute the most desirable environment for medical services in the 1990s.
Management further believes that consolidation should benefit health care
providers by providing standard fees for services nationwide, volume buying to
hold down costs, centralized billing and purchasing operations, group insurance
coverage, a national marketing program, and an integrated network of
professionals. Inasmuch as such beliefs extend to foreign countries, the Company
contemplates the development of similar health care centers in Latin America and
Europe.
The Company has no employees at present devoted exclusively to its health
care business.
To commence its program, the Company intends to acquire individual medical,
chiropractic, dental, and other practices, with a view to establishing a system
with common procedures and marketing. While the Company will seek to acquire the
professional corporations which operate such practices, in states where such
ownership is not permitted, the Company will seek to enter into management
contracts. It will then initiate the integration and educational processes
necessary to develop a comprehensive health care delivery system. As soon as
possible, the Company will seek to relocate such practices into
multi-disciplinary health care centers managed by the Company. Management's
current plans contemplate that development of its multi-disciplinary health care
centers will commence within two years. This delay reflects the complexity of
the project and the diversity of the health care areas which the Company seeks
to bring together. Ultimately, it plans to create a national network of such
multi-disciplinary centers. It is estimated that it will take three to five
years to combine many of the practices. There can be no assurance that the
project can be accomplished in such time period, or that, if accomplished, such
centers would be successful.
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To ensure and facilitate continuing education for its professional staff,
the Company will seek to affiliate its health care centers with recognized
medical schools, chiropractic schools, and universities. It will also seek to
expand income for its health care staff by providing opportunities to obtain
additional certification in related fields, as for example by Recredentialing
chiropractors as licensed physical therapists. The Company's plans have yet to
be implemented, however, and will require substantial funds, availability of
which will depend on the Company's success with concentrating and marketing its
precious metals. There can be no assurance that management will be successful in
inaugurating its health care program, or that, if inaugurated, such program will
be successful.
The Company will utilize the expertise of its real estate division for land
search, acquisition, and development of its health care centers.
2. Initial Agreements for Health Care Practices
In 1993 and 1994, the Company entered into agreements for the acquisition
of 16 chiropractic practices in exchange for shares of the Company's common
stock; to date, a total of 1,855,720 shares have been issued for five of such
practices. The number of shares to be issued varied from practice to practice,
but was generally determined by multiplying the annual collected gross revenue
of the individual practice by 1.5, and dividing that product by the market price
of the Company's common stock, less 10%, on the date of issuance. In connection
with such agreements, the Company agreed with their former owners that any
income realized from the operation of such practices would not inure to the
benefit of the Company until such time as its Exchange Act registration became
effective. Accordingly, the Company has not realized any revenues with respect
to such practices.
More recently, the parties have discussed the legal and procedural
complications of such acquisitions, and have agreed that consummation of such
acquisitions should be deferred until a thorough study has been made of legal
and regulatory requirements, and orderly arrangements can be made to comply with
state laws and regulations. The Company is reexamining the status and validity
of these agreements in light of all the circumstances, and other conditions in
the contracts (including an obligation of the Company to complete a secondary
offering of its securities within a prescribed time frame, which has now
passed). It may be necessary to negotiate new arrangements, but many of the
individuals party to such agreements have assured management of their continued
interest in affiliation with the Company.
To the extent permitted by state, federal and local laws and regulations,
it is contemplated that the acquisitions will be structured as exchanges of the
Company's stock for stock of the professional corporation owning each practice,
with each practice becoming a wholly owned subsidiary of the Company. In other
states, the Company may enter into agreements to purchase assets and manage the
practices in exchange for an annual fee and, if permitted, a share of profits.
3. Competition in Health Care Industry
The market for health care services is highly competitive. In addition to
competition from other national, regional, and local health care centers, the
Company will be obliged to compete with hospitals, private clinics, physician
groups, outpatient clinics, and home health care agencies. Several health care
companies and other physician groups provide services like those to be provided
by the Company, including companies and groups with established operating
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histories and significantly greater resources than the Company's. To the extent
that reform measures proposed by the federal government make prepaid medical
care an attractive market and provide incentives to form regional delivery
systems, the Company may encounter increased competition.
Management believes the primary competitive factors in health care services
are quality of treatment, reliability of service, the ability to schedule
patients and report examination results on a timely basis, the ability to comply
with the requirements of regulatory authorities and third-party payers such as
Medicare and private insurance companies, and the ability to attract and retain
qualified licensed professionals. The Company's success will depend, in part, on
its ability to compete effectively with respect to each of these factors through
proper planning of staffing services, training of staff members in their
respective disciplines, quality assurance programs, proper supervision of its
staff members, and coordination of treatment plans with patients, patients'
families, and the facilities' staff. Management believes its proposed program
for recredentialling its staff members will assist the Company in attracting and
employing qualified personnel.
Many of the health care providers against which the Company will compete,
however, are substantially larger and better capitalized, and have substantial
records of profitable business operations. In addition, many of these
competitors have substantially greater financial, marketing, human and other
resources than the Company, which may give them competitive advantages in, among
other things, the recruitment of licensed professionals, equipment acquisitions,
and responding quickly to increased demand for rehabilitation and other
services. No assurance can be given that the Company will be able to compete
effectively against these other health care providers.
4. Regulation of Health Care Providers
The health care industry is subject to extensive regulation by federal,
state, and local governments. The various levels of regulatory oversight will
affect the Company's health care business by controlling its growth, requiring
licensure and/or certification of its facilities, regulating the use of its
properties, and controlling reimbursements to the Company for services provided.
These laws include fraud and abuse provisions in the Medicare and Medicaid
statutes, which prohibit solicitation, payment, receipt, or offering of any
direct or indirect remuneration for the referral of Medicare or Medicaid covered
services, and laws that impose significant penalties for false or improper
billings for physician services. These laws also impose restrictions on
physician referrals for designated health services to entities with which they
have financial relationships. Violation of these laws can result in substantial
civil or criminal penalties for individuals or entities, including large civil
money penalties and exclusion from participation in the Medicare and Medicaid
programs. Such exclusion and penalties, if applied to the Company's physicians,
could result in significant loss of reimbursement or even bankruptcy.
In some states, ownership of physicians' practices by publicly held
corporations is prohibited. Management believes, however, that the Company's
acquisition of health care practices and operations can be structured in such a
way as to comply with existing laws in most states in which it is interested in
conducting such business, or that alternative arrangements can be entered into.
Moreover, the laws of most states prohibit physicians from splitting fees with
non-physicians and prohibit non-physician entities from practicing medicine.
These laws and their interpretation vary from state to state, and are enforced
by the courts and regulatory authorities with broad discretion.
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There can be no assurance, however, that review of the Company's business
by courts or regulatory authorities will not result in a determination that
could adversely affect the Company's proposed operations, or that the health
care regulatory environment will not change so as to restrict the Company's
proposed operations or future expansion.
Through the Medicare program, the federal government has implemented a
resource based relative value scale ("RBRVS") payment methodology for physician
services. RBRVS is a fee schedule that, except for certain geographical and
other adjustments, pays similarly situated physicians the same amount for the
same services. The RBRVS is adjusted each year and is subject to increase or
decrease at the discretion of Congress. RBRVS-types of payment systems have also
been adopted by certain private third-party payers and may become a predominant
payment methodology. Increased dissemination of such programs could reduce
payments by private third-party payers and could indirectly reduce the Company's
operating margins to the extent that costs of providing management services
related to such procedures could not be proportionately reduced.
F. Education and Learning Centers
1. Description of the Business
In March 1994, the Company agreed to acquire three learning centers from
William Jackson in exchange for 1,200,000 shares of the Company's common stock.
Two of such centers, located in Toronto, were owned and operated by two Ontario
corporations operating under the name Academy for Mathematics and Science; the
third center was to be opened in the United States. The centers offered remedial
courses in mathematics, science, and English to children in grades two through
12.
In February 1997, the Company and Mr. Jackson determined to rescind the
acquisition of the two centers in Toronto, and Mr. Jackson has agreed to return
the 800,000 shares issued for these two centers. It is contemplated now that Mr.
Jackson and his wife, Jacqueline Jordan, will open a center in Reno, Nevada,
which center will offer remedial courses in mathematics, science, and English to
children in grades two through 12, and pre-college and university level courses,
with future expansion into computer and internet courses.
A deposit has been made on office space in Reno, Nevada, and it is
contemplated that Mrs. Jordan will move to the United States to organize and
manage such center.
2. Risk Factors
Commercial learning centers are a relatively new industry, for which reason
there is not yet significant competition. Operation of private schools is
frequently the subject of state and local regulation in the United States. At
least initially, the center will seek to avoid certification by operating as a
tutoring service rather than as a private school. It is anticipated that
increased competition will develop in this field; other organizations providing
such services already exist. There can be no assurance that the Company will be
successful in establishing any learning centers, or that, if it does, such
centers will result in profitable operations.
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G. Health Care Education, Research and Development
1. Description of Mexican Joint Venture
In 1994, the Company entered into a joint venture agreement with
Immobiliara y Fraccinoadora del 1 Nueva Viscaya, S.A. de C.V. and Oscar Neninger
G. (INMOB) for the development of approximately 11,625 acres in Sonora, Mexico,
for a research and development, educational, and recreational center. Such
venture is presently dormant for lack of financing, liens recently attached to
such property, and inability to determine the availability or feasibility of
developing sewer, water and similar connections.
2. Terms of Company's Interest.
Consummation of the agreement is contingent on the Company's ability to
raise financing for project development; if successful, the Company would
receive a two-thirds interest. The Company has expended approximately $215,000
in furthering the project, which monies were borrowed from The R.K. Company
("R.K. Company"), a stockholder of the Company. The Company is examining its
options in light of the fact that financing has not materialized, developments
affecting the joint venture's title to the property, and the amount of monies
which would be required to effect the first stage of such development, estimated
to be approximately $80,000,000. The Company has not yet entered into
discussions with any financial institutions or other sources for financing this
project.
No assurance can be given that the title will in fact be conveyed as
contemplated by the agreement, or that the Company will be able to obtain the
financing for development of the project. Nor can there be any assurance that,
if developed, the project will be completed and will be successful.
H. Real Estate
1. Description of the Business
In 1994, the Company entered into an agreement with two real estate holding
companies then beneficially owned by Robert R. Krilich, Sr., The Senior Group
("Senior Group") and The Rainbow Group ("Rainbow Group"), to acquire a
diversified portfolio of properties including commercial, residential,
industrial, recreational, and other real estate. (See "Item 2-Description of
Property".) Subsequently, Senior Group and Rainbow Group merged into The R&S
Group ("R&S Group"), all of whose beneficial interests are owned by the Company,
and which are controlled by Mr. Furlong, as the Company's president. R&S Group
is a common law business organization, as were Senior Group and Rainbow Group.
Subsequently, disputes have arisen with respect to such properties, and
deeds of conveyance have yet to be recorded in the Company's name or in the name
of its subsidiary, R&S Group. Such disputes relate to the sellers'
representations as to value at the time of the contract, transferability of
marketable title, the absence of or need for permits, and other matters
described below. (See "Item 2-Description of Property".)
While some of the properties acquired or to be acquired from Rainbow and
Senior Groups are income producing, the Company has not yet received any income
on account of the disputes referred to above. Most of the properties acquired
from Senior and Rainbow Groups will require the expenditure of considerable
funds for development. The Company is actively
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seeking to generate funds for this and other corporate purposes by selling some
or all of those properties which are not income producing; it will also consider
the sale of income producing properties. (See "Item 6-Management's Plan of
Operation".)
In August 1996, R&S Group entered into a partnership agreement to develop a
hotel on 1.5 acres of the land owned by it near Route I-95 in Dania, Florida.
The Company has a 50% interest in the proposed development; the remaining 50%
will be owned by Fairdan Suites, Inc., which will also manage the hotel for a
fee equal to 5 % of gross revenues. Fairdan is responsible for arranging the
financing. The Company's interest is subject to transfer of the property in
accordance with the terms of the stock exchange agreements with Rainbow Group
and Senior Group. There can be no assurance that clear title to the property can
be obtained (see "Item 3-Legal Proceedings"), that Fairdan Suites, Inc., will
be successful in obtaining financing for the project, or that such development,
if and when effected, will be successful. Such projects are subject to many
variables, including but not limited to ordinances, regulations, building codes,
availability of labor and materials, availability and terms of financing, and
its attractiveness to guests and residents. The development is still in the
planning stage. One year after a hotel opens on the property, the parties'
interests become subject to a "buy-sell" agreement, pursuant to which either
party must sell its interest at the price offered by the other, or purchase the
other's interest at such price.
From time to time, the Company may seek to acquire additional real estate
for stock, where management believes such property combines attractive income
with desirable capitalization rates. Such properties may include office and
apartment buildings, malls and industrial parks, hotels, and special purpose
buildings, as well as undeveloped acreage.
The Company does not presently employ anyone in its real estate
division.
2. Acquisition of R&S Group Properties
The agreements with Senior Group and Rainbow Group provided for the Company
to acquire 100% ownership of such entities, each of which is a common law
business organization, in exchange for 62,374,363 shares and 68,479,611 shares,
respectively, of the Company's common stock. All of such shares were assigned to
R.K. Company, a common law business organization which the Company believes is
beneficially owned and/or controlled by Mr. Krilich. The market price of the
Company's common stock was agreed to be $2.50 per share as of June 27, 1994, and
it was agreed that 50% of the shares to be issued should equal the value of the
various properties. It was further agreed that, if the market price of the
Company's shares declined, the sellers would be entitled to such additional
shares as necessary to make up the difference. While the agreement is difficult
to interpret and is subject to the various disputes described elsewhere in this
report, Senior Group and Rainbow Group have received additional shares amounting
to 11,439,300 and 28,909,688, respectively, making a total of 171,202,962 shares
issued for such properties. If adjusted to reflect current prices of the
Company's stock, the sellers could be entitled to a significant number of
additional shares. It is the Company's belief that the sellers made material
misrepresentations as to the value of properties acquired from or through Senior
and Rainbow Groups, that as a result such properties were significantly
overvalued, and that the agreement is so unclear that it is impossible to
determine what, if any, additional shares would be required. It is the Company's
intention to contest and settle such obligation in connection with any
settlement or litigation with Mr. Krilich, the former beneficial owner, and his
affiliates, arising out of the contract(s) with Senior and Rainbow Groups.
Should a court of law disagree with the
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Company's interpretation of the circumstances, the Company's stockholders could
incur significant dilution of their investment.
In June 1994, the Company agreed with the former owners of the Senior and
Rainbow Groups that the beneficial interest to the income and expenses of these
properties would not inure to Company's benefit until such time as its Exchange
Act registration became effective. The Company's stock was in the meantime held
in a trust capacity, without voting rights, and the former owners paid all
carrying costs of the properties, including interest and taxes. Notwithstanding
that the Company's Exchange Act registration became effective in February 1997,
the sellers have yet to provide the Company with any such income or any
accounting.
As part of the consideration for such properties, the Company issued
options to purchase 12,500,000 shares of the Company's stock to Rainbow Group,
and options to purchase 12,500,000 shares of the Company's stock to Senior
Group, in each case exercisable for a period of 10 years at $1.00 per share, and
additional options for 12,500,000 shares each exercisable at the last trading
price on the day before the option is exercised (but not less than 110% of the
price as of the date of the options' grant). These options were assigned to R.K.
Company.
All of such properties were to have been transferred free and clear of any
encumbrances, including notes or mortgages. Most of the Company's property in
Oakbrook Terrace, Illinois, has been conveyed to Senior Group (now R&S Group) by
a recorded deed of conveyance. None of the other properties have yet been
conveyed, but the Company has in its possession executed deeds and other
instruments of conveyance. The Company has since determined that certain of such
properties were not as represented. or are incapable of transfer on the terms
agreed. (See "Item 3-Legal Proceedings".)
None of the income attributable to such properties has been delivered to
the Company. The Company has taken the position that with respect to several of
the properties, material misrepresentations were made as to value, lack of
government permits, liens, inability to deliver marketable title, and/or similar
issues. Therefore, the sellers' rights to additional shares of the Company's
stock, and the outcome of related issues cannot be determined at this time, but
it is not impossible that the acquisitions could be found void, in which case
the Company would lose its interest in such properties, or that it would have to
pay a substantial amount of additional shares to the sellers. (See "Item
3-Legal Proceedings".)
3. Competition
The Company will be competing with numerous other real estate companies and
individuals with respect to the sale of its properties, the acquisition of other
real estate, financing the development of its real estate, and finding suitable
tenants or buyers. Competition among private and institutional purchasers, both
domestic and foreign, for real property investments has increased substantially
in recent years. Increases in demand have resulted in gradual increases in
prices paid for real estate, and consequently higher fixed costs. With lending
restrictions becoming tighter, success in this industry continues to narrow to
entities with greater equity positions and professional management teams. There
can be no assurance that the Company will be successful in obtaining suitable
properties or that if investments are made, the Company's objectives will be
realized.
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4. Regulation
The real estate development industry is subject to regulation by federal,
state and local governments in numerous ways, including laws and regulations
addressing zoning, land use, and environmental issues. The various levels of
regulatory oversight may adversely affect the Company's real estate activities.
Item 2. Description of Property
A. Precious Metal Concentrates and Mineral Rights
The Company owns a substantial deposit of ore concentrate located
approximately 40 miles from Prescott, Arizona, which management believes, on the
basis of assays by an independent metallurgist/assayer, contains substantially
in excess of 500,000 tons. Tests by Metallurgical Research & Assay Laboratory of
Henderson, Nevada, independent geologists, indicate that such concentrate
contains commercial quantities of precious metals, including gold, platinum,
iridium, and osmium. Sample tests (using a process known as "DCP") indicate as
much as 1.2 ounces of gold, 5 ounces of platinum, and 10 ounces of osmium, among
other precious and rare earths, in each ton of concentrate. The Company owns the
concentrate outright; it also has the mineral rights on the surrounding 340
acres pursuant to a mineral lease which expires in 2001. Gold in the form of
nuggets was extracted from the property's surface by high grading (the
extraction of free gold from the surface) from the 1970s to 1994, when the
property rights were acquired by Peeples LLC. The Company's concentrate consists
of the tailings from such high grading operations which were placed in a pit.
Payments under the lease are less than $10,000 per year.
Through Peeples Mining, its wholly owned subsidiary, the Company also owns
seven 20-acre lode mining claims near Mesquite, in Clark County, Nevada. Three
composite samples from the top three feet tested by Metallurgical Research &
Assay Laboratory indicate commercial quantities of precious metals, including
gold, platinum, iridium, and osmium in approximately 1,050,000 tons of ore.
Maintenance of the mineral lease rights requires annual assessment work on the
claims, for which approximately $500 per year is currently expended. This
property was acquired by F&H Mining in 1987.
In February 1997, the Company acquired 17 lode claims on 360 acres of land
in San Bernardino County, California, approximately 30 miles from Barstow,
California, which claims include all mineral rights. Such property includes a
600 foot deep shaft which operated from approximately 1920 until the late 1930s,
when operations were suspended on account of shortages incident to World War II.
Although not presently operating, the property was mined by high grading over
the past 20 years, and gold was produced as recently as 1996 using pan and water
techniques. Only about one acre has been exploited by such operations.
B. Real Estate
By virtue of its contracts with Senior Group and Rainbow Group (now R&S
Group), the Company has contractual interests in the properties described below.
Until February 1997, when the Company's Exchange Act registration became
effective, all revenues were to be retained by and all taxes and other costs
relating to such properties were required to be paid by the sellers.
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The Company has in its possession deeds and other executed documents of
conveyance for all of such real estate. None of such deeds have been recorded,
however, with the exception of certain property at Oakbrook Terrace, Illinois
(items a and b below), as to which deeds have been recorded in the name of
Senior Group. All of Senior Group's assets were subsequently assigned to R&S
Group, which is owned and controlled by the Company, but such transfer has yet
to be recorded. The Company is proceeding with recordation of its deeds or other
documents of conveyance for the other properties, which was not previously done
because the Company's Exchange Act registration statement was not yet effective.
Problems may be encountered in consummating the acquisition of some or all
of the properties acquired from Rainbow and Senior Groups. In March 1997, the
Company learned that Mr. Krilich had transferred and recorded title to
properties in Tennessee which were to have been transferred to Senior and/or
Rainbow Group to R.K. Company, which the Company believes is beneficially owned
and/or controlled by him. In September 1995, the U. S. District Court for the
Northern District of Illinois entered an order enjoining Mr. Krilich and others
from transferring, disposing of, or otherwise dealing with any property owned or
controlled by Mr. Krilich in any way which would affect its value, without
posting security in the amount of $20,000,000. (See "Item 3-Legal
Proceedings".) It is the Company's position that its agreements with Rainbow and
Senior Groups were executed before such order was entered, and that the Company
had no information of any proceedings which could restrict its rights to acquire
and deal with such properties. The effect of the order on conveyance of the
properties acquired from Rainbow and Senior Groups cannot yet be determined, but
management believes that this issue will be resolved in the near future, by
court proceedings if necessary.
It had been agreed that, pending effectiveness of the Company's Exchange
Act registration statement, the sellers would keep all income from the
properties and pay all taxes and costs relating to maintenance of the
properties; consequently, the Company was not entitled to any income from such
properties until February 1997, when its Exchange Act registration in fact
became effective. Demand has been made on the managers and trustees of such
properties, on Mr. Krilich, who the Company believes controls such managers and
trustees, and on most of the tenants of such properties, to the effect that all
payments deriving from such properties are to be made to the Company. To date
such persons have refused to comply with such demand, and the Company believes
that such monies are continuing to be paid to or as directed by Mr. Krilich.
In April 1997, the Company (through its wholly owned division, R&S Group),
filed a legal action in the Circuit Court of DuPage County, Illinois, against
Mr. Krilich, Royce Realty, R.K. Company, and other entities controlled by him,
demanding an accounting and cooperation in effecting transfer of title and
payments from such properties. (See "Item 3-Legal Proceedings".)
A number of other disputes have arisen with respect to the obligations of
the sellers, both of whom were controlled by Mr. Krilich at the time, under
these agreements. It is contemplated that such disputes will be settled in
connection with the above referenced litigation. (See "Item 3-Legal
Proceedings".) Because of such disputes and litigation, the Company does not
have reliable or current information with respect to acreage, size, rents,
occupancy, lease terms, or insurance.
The Company's contracts call for conveyance of the following properties,
for which full payment has been made:
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a. 26 rental town houses, with a tennis court and swimming pool, part of a
development known as Royce Renaissance, in Oakbrook Terrace, Illinois.
4,550,000 shares of the Company's common stock were is sued for this
property, whose value was represented to be $9,100,000. The Company has
recorded a deed conveying the property to Senior Group (now R&S Group,
which is owned by the Company), but rents received on account of this
property have not been turned over to R&S Group. This and the following
properties are subjects of the lawsuit filed by the Company in April 1997.
(See "Item 3-Legal Proceed ings ".)
b. A three story office building, a restaurant/catering/banquet facility, and
a single story building formerly used as a model building for potential
apartments near the Royce Renaissance development in Oakbrook Terrace,
Illinois. The Company also has recorded a deed conveying this property to
the Senior Group. The buildings require build out for utilization, and are
presently unoccupied, except for one half of the third floor, which is
occupied by Mr. Krilich and certain of his affiliates. 9,915,500 shares
were issued for this property, whose value was represented to be
$19,831,000.
c. A leasehold interest, believed to have six years remaining, in a property
located in Northbrook, Illinois, currently leased to a motel known as The
Sybris Inn. The inn, consisting of more than 50 cot- tages, is believed to
be leased to an operator for more than $40,000 per month. 3,750,500 shares
were issued for this property, whose value was represented to be
$7,500,000. Lease payments are currently being being made to Royce Realty,
which has thus far refused to convey such rents. (See "Item 3-Legal
Proceedings".)
d. A 100 % interest in the Lakemoor Country Club in Lakemoor, Illinois,
including the surrounding 155 acres, clubhouse, lakes, restaurant lease,
etc. 2,888,889 shares were issued for this property, whose value was
represented to be $6,500,000. The Company is not aware of any operations at
the club in 1995 or 1996, nor is it aware of any revenues from such
property. The property is the subject of finding of forfeiture by a jury in
a judicial proceeding against Mr. Krilich (see "Item 3-Legal
Proceedings").
e. The entire beneficial interest in Deer Park Trust, which owns a 50%
interest in a shopping center located in Palatine, Illinois. 4,876,000
shares were issued for this property, whose value was represented to be
$10,970,000. Lease payments are being made to the trustee, whom the Company
believes is an attorney for Mr. Krilich, and the trustee has thus far
refused to convey the Company's share of such rents to the Company.
Management has directed the trustee to pay such rents to the Company, but
he has thus far refused to comply. (See "Item 3-Legal Proceedings ".)
f. A site of approximately 6,200 square feet located in a strip mall in
Schiller Park, Illinois, which includes leases for a Denny's Restaurant and
a MaCleen's car wash. 4,500,000 shares were issued for this property, whose
value was represented to be $10,125,000. The Company believes that title is
currently in a land trust for the benefit of and/or controlled by Mr.
Krilich, with rents being collected by Royce Realty. The Company has an
assignment of Mr. Krilich's
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beneficial interest in an Illinois land trust, but it has not received any
records or accounting for income. (See "Item 3-Legal Proceedings ".)
g. 12 acres of undeveloped land zoned commercial, near Stirling Road and Route
I-95, in Dania, Florida. 12,500,000 shares were issued for this property,
whose value was represented to be $28,125,000. Extensive title work remains
to be done to enforce the Company's interest in this property. A portion of
this property is subject to a joint development agreement between R&S Group
and Fairdan Suites, Inc., for develop ment of a hotel (see "Item
1-Description of Business").
h. A leasehold interest in half the third floor in the office building located
at Royce Renaissance in Oakbrook Terrace, Illinois. 292,750 shares were
issued for such interest, whose value was represented to be $658,688. It
had been intended that such space would be occupied by the Company, but
build-out was never completed.
i. A 73 % interest in the land containing the golf course for Country Lakes
Country Club in Naperville, Illinois. 6,222,222 shares were issued for this
property, whose value was represented to be $14,000,000. Food and beverage
operations are believed to be leased to a third party for approximately
$10,000 per month. This property is subject to a verdict in the U.S.
District Court for the Northern District of Illinois finding that such
property is subject to forfeiture under federal RICO statutes. (See Item
3-Legal Proceedings".)
j. A water and sewage disposal facility at Lakemoor, Illinois, which was to
serve the Lakemoor Country Club and a 500 unit apartment complex. 1,244,444
shares were issued for this property, whose value was rep resented to be
$2,800,000. The facility is not currently operational because the necessary
permits were either not issued or expired, and is the subject of injunction
proceedings filed by the Illinois Environ mental Protection Agency. (See
"Item 3-Legal Proceedings".)
k. A restaurant site located at Lawrence Avenue and River Road, Schiller Park,
Illinois. 355,556 shares were issued for this property, whose value was
represented to be $800,000. The seller had represented that there was an
operating restaurant on the site, which proved not to be the case.
1. Approximately 419 acres of vacant land in Gallatin, Tennessee. 15,555,556
shares were issued for that portion suitable for subdivision into
single-family building lots, whose value was represented to be $35,000,000.
25,500,000 shares were issued for those portions planned for development of
a golf course, clubhouse, marina, apart- ments and a hotel. The value of
such portion was represented to be $51,000,000. Management believes such
property was materially overvalued by the seller.
m. Oakbrook Terrace Utility Service, servicing the Royce Renaissance Center
and a 17 story office building known as Lincoln Centre. 1,244,444 shares
were issued for this property, whose value was rep resented to be
$2,800,000. The sellers represented that this was the only fresh water
supplier authorized to supply Royce Renaissance Center, Lincoln Centre, and
other parts of the City of Oakbrook Terrace, Illinois. The Company believes
this to be a misrepresentation of the facts.
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n. Approximately 58 acres of undeveloped land zoned commercial on Dickerson
Road, in Nashville, Tennessee. 25,300,000 shares were is sued for this
property, whose value was represented to be $50,600,000. Management
believes such property was materially overvalued.
o. A 50% interest in a parcel of land just off Route 70 near Bellevue,
Tennessee. 3,200,000 shares were issued for this property, whose value was
represented to be $6,400,000. The Company believes that this property,
which was recently recorded by Mr. Krilich in the name of R.K. Company, was
materially overvalued by the seller.
p. Approximately 29 acres of land adjoining the above mentioned land near
Bellevue, Tennessee. 1,500,000 shares were issued for the bulk of such
property for which development with single family homes was deemed
suitable, the value of which was represented to be $3,000,000. 500,000
shares were issued for a small commercial site adjoining such parcel, whose
value was represented to be $1,000,000. The Company believes that this
property, which was recently recorded by Mr. Krilich in the name of R.K.
Company, was materially overvalued by the seller.
The Company did not obtain appraisals of such properties; in some cases
letters from real estate professionals as to the value of the properties to be
acquired were supplied by Mr. Krilich, in other cases the representations of Mr.
Krilich were relied upon. In some cases, the value ascribed was based on
anticipated income from the property following development.
The Company now believes that, in some cases, material misrepresentations
were made as to value, or that clear title cannot be obtained. As part of the
consummation of these transactions, the Company will attempt to reconcile the
value of each property acquired with the number of shares issued; such
reconciliation may result in an adjustment in the number of shares issued for
one or more of such properties, but there can be no assurance that the sellers
will agree to such revaluation without litigation, or that a court would find in
favor of the Company. (See "Item 3-Legal Proceedings".)
Where management is required, such properties are currently managed by
Royce Realty, whose sole stockholder is believed to be R.K. Company, a
stockholder of the Company, or Mr. Krilich, also a stockholder of the Company.
(See "Item 12-Certain Relationships and Related Transactions".) The Company
plans to terminate any interest or involvement of Royce Realty in any of the
properties. Management presently intends to sell some properties and perhaps
develop some properties directly as financing permits. Other properties may be
leased to others with a requirement that the property be developed.
The Company may acquire other properties in the future, with a view to
prospective income rather than resale. The Company has no limitations on the
percentage of assets which may be invested in any one investment or type of
investment.
C. Offices
The Company's executive offices are located in suite 22F, 100 North
Arlington Avenue, Reno, Nevada, where it occupies two offices and a store room
provided by the Company's president, Mr. Furlong, without rent. Mr. Furlong also
provides an office in his house at 60 Bay Colony, Ft. Lauderdale, Florida, for
which it pays no rent. (See "Item 12-Certain Relationships and Related
Transactions".)
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D. Other Property
Through its subsidiary Peeples Mining, the Company owns certain mining
equipment, including washer and concentrating equipment, loaders, a bulldozer,
and trucks, which the Company values at approximately $500,000. As a result of
its combination with F&H Mining, Peeples also owns certain equipment for
leaching and testing head ores, valued at approximately $50,000.
As part of its agreement with Senior Group in June 1994, the Company
acquired a 50 % interest in Rainbow Air Corporation, which owns two boats (43
and 63 feet respectively) and a 50% interest in a Hawker aircraft. 4,526,502
shares were issued for the interest in Rainbow Air Corporation, whose value was
represented to be $10,184,630. Rainbow Air Corporation also owned a 50% interest
in a 110 foot motor yacht, the R Rendezvous, located in Ft. Lauderdale, Florida.
The yacht was valued at $6,000,000, and 1,333,333 shares were issued for the
remaining 50% interest. Management currently plans to use the R Rendezvous for
charter cruises and for promotional purposes. The Company is in the process of
reevaluating this transaction to ensure that the number of shares issued
accurately reflect the intent of the parties.
Item 3. Legal Proceedings
A. Mar-Pro Transaction
In September 1996, the Company brought an action against Mar-Pro Services,
Ltd., an Irish corporation ("MarPro"), Asset Resource Management, and Robin Rood
IV, in the Second Judicial District Court, Washoe County, Nevada, to rescind the
purchase of certain ore concentrates by the Company.
In March and August of 1995, the Registrant entered into two agreements for
the purchase of a total of 150 tons of ore materials represented to be highly
concentrated. 41,749,500 shares were issued for this ore, whose value was
represented to be in excess of $100,000,000. The first agreement, dated March
15, 1995, was with Mr. Rood doing business as Asset Resource Management; under
that agreement, the Company purchased what was represented to be 80 tons of
concentrated ore material with a value of approximately $55,000,000; the second
agreement was with Asset Resource Management and Mar-Pro, pursuant to which the
Company purchased what was represented to be an additional 70 tons with a value
in excess of $45,000,000. The concentrate was delivered by Mar-Pro and is stored
in sealed and numbered containers at warehouses in Las Vegas, Nevada, and Long
Beach, California
The Company's suit alleges that the concentrate delivered by Mar-Pro and
Asset Resource Management did not assay at the value represented by Mar-Pro and
Mr. Rood, but on the contrary has no value at all. In October 1996, the Company
obtained a preliminary injunction enjoining the transfer of the Company's stock
issued in connection with such transactions. The Company has cancelled the
41,749,500 shares issued in connection with such transactions, and such shares
are no longer listed as outstanding in the Company's books and records.
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B. Krilich Real Estate
As pointed out above (see "Item 2-Description of Property "), the
Company's right to the properties and income from the properties subject of its
contract(s) with Senior Group and Rainbow Group (now R&S Group) has now vested,
but the persons controlling such properties have declined to cooperate to assure
the conveyance of or account for revenues from such properties. As previously
stated, in some cases deeds have been delivered made out to Senior Group and/or
Rainbow Group (now R&S Group), but such deeds have not yet been recorded because
of court orders against Mr. Krilich. The sole exception to this is the above
deed for most of the Oakbrook Terrace property, recorded in the name of Senior
Group. In cases where the property was grossly overvalued or clear title cannot
be obtained, the Company intends to adjust the number of shares, including
shares previously issued. The Company's obligation to issue additional shares on
account of the reduced market price for the Company's stock is also likely to be
an issue.
In April 1997, R&S Group and Maurice Furlong, individually and as a
director/trustee of R&S Group, filed a law suit in the Circuit Court of DuPage
County for equitable relief and damages against Royce Realty, Mr. Krilich, R.K.
Company, Senior Group, Rainbow Group, and others. Such action seeks a
declaration that R&S Group is the sole owner of any all real and personal
property owned by Rainbow Group and Senior Group, a constructive trust on the
rents and income obtained from the properties assigned to R&S Group, an
accounting for such rents, and delivery of the proper deeds, bills of sale, and
documents of title to the personal and real property assigned to R&S Group.
C. Certain Proceedings Involving Robert R. Krilich, Sr.
It is management's understanding that Robert R. Krilich, Sr., a shareholder
of the Company, owns or controls all or a majority interest, directly or
indirectly, in R.K. Company, which is the owner of more than 5% of the Company's
issued and outstanding shares.
Mr. Krilich has been named a defendant in at least the actions listed
below. Several of such actions involve parcels of real property which are the
subject of agreements between the Company and Senior Group and/or Rainbow Group,
and such actions could affect the Company's ability to consummate the
acquisition of such properties and utilize them in its business.
Further, the Company believes that it may be the target of claims that the
Company is no more than a vehicle for the transfer of real estate by Mr.
Krilich. It is possible, therefore, that plaintiffs in these actions may claim
that the Company is the alter ego of Mr. Krilich, or that Mr. Krilich has used
the Company to hide or shelter assets. It is the Company's opinion that such
claims would be groundless. Nevertheless, to the extent that the Company must
defend itself in any action against such claims, or to the extent such actions
involve real property the Company has acquired or agreed to acquire, the
following actions may have a negative effect on the Company's operations.
1. Environmental Proceedings, Oakbrook Terrace Property
In August of 1992, the United States filed a complaint in the U.S. District
Court, Northern District of Illinois, against Mr. Krilich and other entities
which the government claimed were closely held by him. The complaint alleged
that defendants had discharged fill material into woodlands on two Chicago area
construction sites without permits in violation
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of the Clean Water Act. The parties entered into a consent decree which, among
other things, provided for a remediation plan which would bring the property in
question into compliance with federal law. In April 1996, the United States
brought an action alleging violation of such consent decree, seeking sanctions
for violation of the decree and enforcement of its remediation provisions. The
action involves the Company's property in Oakbrook Terrace, Illinois, and
Sullivan Lake property in Lakemoor, Illinois, identified in Item 2-Description
of Property, above, and could have a negative effect on the Company's ability to
operate, sell, or otherwise utilize such property. Such litigation is still
pending.
2. Environmental Proceedings, Lakemoor Utilities
In September 1996, the Illinois Environmental Protection Agency filed an
action in the Circuit Court, Lake County, Illinois, against Mr. Krilich, Royce
Realty, and Parkway Bank & Trust, to enjoin operation of the waste water
treatment facility operated by defendants, and to impose monetary fines and
penalties. The complaint alleged that the defendants did not have the necessary
operating permits for the facility, such permits having expired. The action
involves the water and utility services located in Lakemoor, Illinois, one of
the properties subject of the Company's contract with Rainbow Group (see "Item
2-Description of Property "), and could have a negative effect on the Company's
ability to operate or sell the facility, especially to the extent the State
continues to enjoin operations at the facility.
3. Misstatements, Financing
In February 1995, Mr. Krilich was indicted by a Federal grand jury in
Chicago, Illinois, on multiple counts including, among others, making false
statements to a financial institution in violation of 18 U.S.C. ss. 1014. The
indictment also contains "RICO " allegations, and sought the forfeiture of
currency and real property. Following a jury trial in September 1995, Mr.
Krilich was convicted on all counts, and the Country Lakes Country Club golf
course in Naperville, Illinois, was found to be forfeitable to the United
States. The Country Lakes Country Club golf course is one of the properties
subject to the Company's agreement with Rainbow Group (see "Item 2-Description
of Property"). Forfeiture would have a negative impact upon the Company's
ability to consummate its exchange agreements with Senior and Rainbow Groups.
The action is still pending and the Court has not entered a judgment on the
verdict.
D. Threatened Legal Proceedings
Management understands that since September 1995, there has been a Federal
grand jury investigation in the Northern District of Illinois involving the
Company. The Company has not been put on notice by prosecutors of the exact
nature of the investigation because, as the Company has been informed, such
proceedings are secret. Accordingly, the Company is unaware of the exact date
when the proceedings began, the principal parties named in the proceedings, the
facts underlying the proceedings, or the relief which may be sought as a result
of the proceedings.
The Company and its officers have been subpoenaed and have testified in
connection with the investigation. The Company believes that the investigation
may involve the sale of the Company's securities, the Company's acquisition of
assets, and its relationship with Mr. Krilich. It is possible that the
government was seeking to establish that the Company is Mr. participating in a
scheme to hide Mr. Krilich's assets from government seizure, and may try to
attach or encumber the assets acquired from him, Senior Group and
Rainbow Group. The
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Company has no direct information about such proceedings, however, and its
belief as to the focus thereof is entirely speculative. Any action alleging
violations of law or seeking to attach or encumber the Company's assets could
have a negative impact on the Company's operations.
The Company believes that any claim that it has violated any laws or that
it is liable for any claims against Mr. Krilich would be without basis and would
be unsuccessful.
E. Other Proceedings
The Company is not a party to any other pending or threatened legal,
governmental, administrative or judicial proceedings that would have a
materially adverse effect upon the Company's financial condition or operation,
nor are any of its properties subject to any such proceedings.
Item 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted during the fiscal year covered by this report to
a vote of security holders, through the solicitation of proxies or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information
The Company's stock is currently traded over the counter. Quotations are
carried on the National Association of Securities Dealers, Inc.'s Bulletin Board
under the symbol "HCCA".
The following table sets forth the range of high and low bid prices for the
Company's common stock for the indicated periods as reported by NASDAQ's
Bulletin Board research service. Such quotations reflect inter-dealer prices
without retail markup, markdown or commission, and may not necessarily represent
actual transactions:
1997 High Bid Low Bid
-------- -------
Quarter ended March 31 $ .47 $ .10
1996
Quarter ended December 31 $ .60 $ .17
Quarter ended September 30 1.50 .50
Quarter ended June 30 2.10 .50
Quarter ended March 31 2.00 1.25
1995
Quarter ended December 31 $3.10 $1.25
Quarter ended September 30 2.05 1.06
Quarter ended June 30 2.00 1.31
Quarter ended March 31 2.25 .50
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Holders
The approximate number of record holders of the Company's common stock as
of December 31, 1996, was 1,235
Dividends
The Company has never paid cash dividends on its common stock and does not
intend to do so in the foreseeable future. The Company currently intends to
retain its earnings for the operation and expansion of its business.
Unregistered Securities Sold in 1996
During the three years prior to December 31, 1996, the Company issued and
sold the following unregistered shares of its commons stock:
In January 1994, the Company issued 31,960,000 shares of common stock, of
which 27,000,000 were issued to Maurice W. Furlong, and 3,960,000 shares were
issued to James M. Troester for reorganization costs and services. The remaining
1,000,000 shares were issued to Nevada Agency & Trust Co., the Company's
transfer agent, to extinguish indebtedness. All such transactions were exempt
from registration under the Securities Act of 1994 (the "Securities Act") by
virtue of Section 4(2) thereof.
In May 1994, the Company issued 1,200,000 shares to William Jackson, in
connection with the acquisition of three learning centers. It has been orally
agreed that 800,000 shares will be returned in connection with recision of the
acquisition of two of such centers. (See "Item 1-Description of Business ".)
Such transaction was exempt from registration under the Securities Act by virtue
of Section 4(2) thereof.
In May 1994, the Company issued 12,000,000 shares to Mr. Furlong in
connection with the acquisition of F&H Mining. (See "Item I-Description of
Business".) Such transaction was exempt from registration under the Securities
Act by virtue of Section 4(2) thereof.
In May 1994, the Company issued 3,447,683 shares to six doctors in
connection with the acquisition of certain chiropractic clinics. The issuance of
1,591,963 shares to one of such doctors was subsequently cancelled by mutual
agreement, leaving a total of 1,855,720 shares. Such transactions were exempt
from registration under the Securities Act by virtue of Section 4(2) thereof.
These transactions are subject to renegotiation.
In July 1994, the Company issued 51,479,611 shares to Rainbow Group and
6,374,363 to Senior Group in connection with the acquisition of such entities
and or their real estate, subject to certain conditions subsequent. Such
transactions were exempt from registration under the Securities Act by virtue of
Section 4(2) thereof. These transactions are the subject of dispute. (See "Item
3-Legal Proceedings".)
In September 1994, the Company issued 8,000,000 shares to Zarzion, Ltd. and
12,000,000 shares to its three stockholders in connection with the acquisition
of Peeples LLC. (See "Item I-Description of Business".) Such transactions were
exempt from registration under the Securities Act by virtue of Section
4(2) thereof.
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In September 1994, the Company issued 3,000,000 shares to R.K. Company,
11,439,300 shares to Senior Group, and 25,909,688 to Rainbow Group, pursuant to
price adjustment requirements contained in its agreements with Rainbow and
Senior Groups for the acquisition of such entities and/or their real estate.
Such transactions were exempt from registration under the Securities Act by
virtue of Section 4(2) thereof. These transactions are the subject of dispute.
(See "Item 3-Legal Proceedings".)
In February 1995, the Company issued 5,000,000 shares to an individual as a
finder's fee in connection with the proposed acquisition of real estate. Such
transaction was exempt from registration under the Securities Act by virtue of
Section 4(2) thereof.
In June 1995, the Company issued 22,000,000 shares of Common Stock to R.K.,
Company, at the direction of Senior Group and/or Rainbow Group, in connection
with the proposed acquisition of property in Nashville, Tennessee, and charter
of the yacht R Rendezvous described above. Such transaction was exempt from
registration under the Securities Act by virtue of Section 4(2) thereof. This
transaction is the subject of dispute. (See "Item 3-Legal Proceedings".)
In August 1995, the Company issued 4,000,000 shares to the stockholders of
NMC, a closely held company, in connection with the acquisition of NMC. (See
"Item I-Description of Business".) Such transaction was exempt from
registration under the Securities Act by virtue of Section 4(2) thereof.
In August 1995, the Company issued 41,749,500 shares to Mar-Pro in
connection with the acquisition of certain ore concentrates. Subsequently the
Company filed an action against Mar-Pro in connection with such transaction, and
cancelled such shares. (See "Item 3-Legal Proceedings".) Such transaction was
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof.
In August 1995, the Company issued an additional 100,000,000 shares to
Zarzion, Ltd., in connection with its acquisition of certain mining properties
and ore concentrates. (See "Item I-Description of Business ".) Such transaction
was exempt from registration under the Securities Act by virtue of Section 4(2)
thereof.
In August 1995, the Company issued 17,000,000 shares to Rainbow Group and
56,000,000 shares to Senior Group in connection with the acquisition of certain
real estate pursuant to their prior agreements. Such transactions were exempt
from registration under the Securities Act by virtue of Section 4(2) thereof.
These transactions are the subject of dispute. (See "Item 3-Legal
Proceedings".)
In September 1995, the Company issued 275,000 shares to four individuals
for legal services to R.K. Company in connection with the Company's proposed
acquisition of a property known as Springer Mine, which acquisition was
subsequently canceled. Such transactions were exempt from registration under the
Securities Act by virtue of Section 4(2) thereof. It is the Company's position
that such transactions will have to be reconciled with R.K. Company. (See "Item
3-Legal Proceedings".)
In February 1996, the Company issued 309,551 shares to two individuals in
connection with the Company's efforts to develop its health care segment. Such
transactions were exempt from registration under the Securities Act by virtue of
Section 4(2) thereof.
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In June 1996, the Company issued 98,000,000 shares to R.K. Company in
connection with the Company's agreement to acquire Springer Mine. Such
transaction was exempt from registration under the Securities Act by virtue of
Section 4(2) thereof. The owners of Springer mine would not permit assignment of
such shares from R.K. Company, and the acquisition was canceled. The issuance of
58,000,000 shares has been canceled by the Company, and the remaining shares
will be the subject of reconciliation between the Company and R.K. Company. (See
"Item 3-Legal Proceedings".)
In June 1996, the Company issued 2,066,115 shares to the stockholders of
MedAway, a closely held company, in connection with the acquisition of all
MedAway's assets. (See "Item I-Description of Business ".) Such transaction was
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof.
In July 1996, the Company issued 40,000,000 shares to the stockholders of
ELF, a closely held company, in connection with the acquisition of ELF's
television credit certificates. (See "Item I-Description of Business".) Such
transaction was exempt from registration under the Securities Act by virtue of
Section 4(2) thereof.
Item 6. Management's Discussion and Analysis or Plan of Operation
The discussion contained in this Item 6 is "forward looking" as that term
is identified in, or contemplated by, Section 27A of the Securities Act and
Section 21E of the Exchange Act. Actual results may materially differ from
projections. Factors that could cause results to differ materially are described
throughout this report.
Plan of Operation
The Company's plan of operation for the immediate future is to focus on the
sale of a portion of its ore concentrate, one or more of its AIN television time
credit certificates, and/or one or more properties out of its real estate
portfolio, and to use the proceeds for development equipment and working capital
for its mining and precious metals concentrate, for development and expansion of
its music consulting business, and for marketing leases of its MedAway medical
waste disposal units.
The Company is seeking to raise approximately $6,000,0000 from sale of
certain assets. Assets which are contemplated for sale include portions of the
Company's ore concentrate, one or more of its AIN television time credit
certificates, and certain real estate. There can be no assurance that the
Company will be able to sell such properties in the immediate future because of
the limited market for such assets, and because of title and related problems
affecting the Company's real estate. If necessary, a private placement offering
may be pursued in later 1997. Up to $5,000,000 would be used to fund equipment
and operations for minerals processing; if less is required for this purpose, up
to $1,000,000 would be used for development of the Company's real estate, and up
to $1,000,000 would be used for the planning and organizational stages of the
Company's health care segment. A portion of such proceeds would be used for
working capital for marketing the Company's MedAway leases, and possibly for
NMC. At such time as cash flow from one or more of these activities permits, the
Company will seek to develop its health care line of business.
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1. Mineral Processing Operations
The Company will seek to commence processing of its existing inventory of
ore concentrates as a matter of first priority. To initiate such processing, the
Company requires from $1,000,000 to $3,000,000 for equipment and another
$2,000,000 for working capital, for which it is presently seeking an appropriate
source of financing. The Company is exploring new, alternative technologies for
which equipment is significantly less expensive, but which is proprietary, and
which may require the negotiation of a joint venture arrangement. If less is
required for such purposes, the Company will apply the surplus from any sale of
properties for development of the Company's other lines of business described
below.
It is contemplated that the Company's mining and processing operations
could be operational as soon as 18 months after availability of financing. At
such time as the Company's planned facilities for producing dory bars are
operational, it is expected that revenues from this source will generate
sufficient cash flow for the Company's minerals division as well as for the
needs of its other business segments. Such plans may be impacted by numerous
contingencies, however, including but not limited to the accuracy of the various
assays obtained by the Company, the actual quality and quantity of precious
metals in such concentrates, the Company's ability to process such concentrates
for a reasonable price and market its product, the Company's ability to generate
funds through the sale of real estate or its television time credit certificates
and/or a private placement offering, the outcome of its negotiations or
litigation with Mr. Krilich and his affiliates, and state and federal regulation
of the minerals operations contemplated by the Company.
2. Entertainment Division
At the same time, the Company plans to continue development of the
activities of Nashville Music Consultants, Inc. ("NMC"). The Company's agreement
for acquisition of NMC became effective February 4, 1997, and from that time,
the Company is entitled to a management fee equal to 9% of NMC's gross revenues.
Heretofore focused on country and western music and performers, NMC is expanding
into gospel music. The Company is committed to trying to arrange $500,000 of
financing for NMC's development. As of December 31, 1996, NMC had liabilities of
$534,936, and experienced losses in 1996 of $201,393. The Company believes that
NMC's cash flow is improving, but there can be no assurance that NMC will not
require all or a portion of such financing to continue with its plans.
However, NMC's plans may be impacted by several contingencies, including
but not limited to the continued demand for country western and gospel music,
its ability to locate and identify talented and marketable country western and
Christian music writers and performers, and its ability to maintain cash flows
to support its own business activities.
3. MedAway Units
The Company is currently engaged in marketing leases for its 24 MedAway 1
medical waste decontamination units to a hospital chain. The Company intends
also to market leases of its units to hospitals, nursing homes, government
entities, and related businesses. Working capital for this segment of the
Company's business is hoped to be provided by initial lease arrangements with a
substantial hospital chain; if such a sale does not soon materialize, the
approximately $300,000 budgeted for this activity is anticipated to be available
from sales of real estate owned or to be acquired by the Company and/or its AIN
television time credit certificates. If such sales do not materialize in a
sufficiently short period of time, the Company
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<PAGE>
will seek a loan or loans to launch MedAway's marketing activities, or contract
with one or more marketing representatives. When leased, each machine is
expected to generate approximately $5,000 net income a month, which management
believes will be sufficient to sustain operations for this segment of the
Company's business. The Company plans to seek approval for assignment of the
MedAway distribution agreement, or a new distribution agreement with the
manufacturer as soon as the Company's financial resources appear sufficient to
support expanded marketing.
4. Learning Centers
The Company intends to open a learning center in Reno, Nevada, in the
summer of 1997. Approximately $50,000 is deemed necessary to commence
operations, which funds are being provided by William Jackson and his wife
Jacqueline Jordan. The Company's plans to start-up the learning center in Reno
is dependent on Mrs. Jordan's moving to the United States, and on the funding
committed by Mr. Jackson. Mr. Jackson's and Mrs. Jordan's plans to finance and
start-up a learning center in Reno, Nevada, as a subsidiary of the Company may
be impacted by various contingencies, including, but not limited to, their
ability to apply their business strategy to the United States, and their ability
to successfully compete with similar learning centers established in the United
States.
5. Health Care Centers
The Company continues to plan a national chain of health care centers.
Development of this business, however, will require significant investment,
including costs associated with background research, professional fees,
licensing, and organizational activities. It is hoped and anticipated that the
Company's mineral and real estate sectors will provide funds for the
organization of this line of business. The Company anticipates that the planning
and organizational phase may be completed in mid- 1998, at which time the
Company will commence marketing of its health care management and affiliation
arrangements.
Such plans may be impacted by several contingencies, including but not
limited to the Company's ability to locate health care providers willing to
participate with the Company; consumer acceptance of and demand for the health
care centers contemplated by the Company; the Company's ability to generate
funds through sale of real estate owned or to be acquired by the Company, and/or
its television time credit certificates; the ability of its mining and mineral
processing operations to generate excess cash flow for the health care segment's
working capital; and state and federal regulation of the industry. When enough
affiliates of various disciplines in one area have entered into contracts with
the Company, the Company plans to combine such practices into multi-disciplinary
health care centers. The goal will be to provide primary and alternative health
care at "one stop" health care facilities. It is expected that funding for the
multi-disciplinary health care centers will be obtained through traditional
financing arrangements, supplemented by funds from the Company's mining and
other operations. When a number of successful multi-disciplinary health care
centers are in operation in the United States, the Company will seek to
establish such centers in one or more foreign countries, initially in Central
and South America.
The Company intends to defer further commitments to the joint venture in
Mexico in the light of certain unforeseen problems with the joint venture
arrangements and title to the real estate in Mexico. As time and funds permit,
the Company will explore the resolution of such problems and the availability of
financing for the project.
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6. Real Estate
It is the Company's intent to sell at least some of the real estate
acquired from Senior and Rainbow Groups, particularly those properties which
require long term development effort and/or significant financing.
The Company's ability to sell or otherwise realize income from the
properties acquired from Senior Group or Rainbow Group will be adversely
affected by the disputes with Mr. Krilich, who formerly controlled (directly or
indirectly) Senior and Rainbow Groups, and by certain court orders affecting Mr.
Krilich and his properties. The Company has filed a lawsuit with respect to such
properties with a view to perfecting its rights. (See "Item 3-Legal
Proceedings".) Many of such properties are presently income producing, and will
provide cash flow for the Company as soon as such disputes and problems are
resolved. With respect to properties as to which it can perfect title, the
Company will seek immediately to sell those properties which appear easily
marketable. When funding becomes available for such activities, the Company may
seek to develop those properties which appear capable of generating income in
the near future.
Such plans will be impacted by several contingencies, including but not
limited to the unpredictability of the market for real estate, the outcome of
the Company's disputes with Mr. Krilich, and the Company's ability to generate
funds through its mineral processing segment to support development of its
properties. The properties owned or to be acquired by the Company are located in
different geographical locations. The real estate market will differ according
to location and there can be no assurance that fluctuations in such markets will
not negatively impact upon the Company's real estate operations. No assurance
can be given that the Company will ever realize income from such properties.
7. Other Considerations
To effectively manage the properties which it has acquired or agreed to
acquire, the Company will be obliged to perform numerous and extensive
administrative functions. It will be necessary for the Company to significantly
expand its employee base within the next 12 months. In addition, it will be
necessary for the Company to invest in the purchase of computer and other
equipment necessary to monitor the operations of its various lines of business.
During the next 12 months, the Company will require significant additional
funds to effect its plans. As indicated above, the Company is seeking to raise
approximately $6,000,000 from the sale of mineral concentrates, AIN television
time credit certificates, real estate owned or to be acquired by it, and/or a
private placement offering. Absent such financing, the Company may be unable to
effect its plans. Inasmuch as it is asset based with minimal operations,
however, delay in obtaining such financing is not deemed to pose a significant
threat to the Company's viability.
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Item 7. Financial Statements
Index to Financial Statements
Page
no.
----
Accountant's Audit Report 33
Financial Statements
Balance Sheet 34
Statement of Operations 36
Statement of Changes in Stockholders' Equity 37
Statement of Cash Flows 40
Notes to Financial Statements 41
Accountant's Report on Supplemental Schedules 46
Supplemental Schedules
Schedule A-Property, Plant and Equipment 47
Schedule B-Accumulated Depreciation of Property,
Plant and Equipment 48
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W. DALE MCGHIE
Town & County Plaza
CERTIFIED PUBLIC ACCOUNTANT 1539 Vassar St. Reno, Nevada 89502
Tel: 702-323-7744
Fax: 702-323-8288
To the Board of Directors
Health Care Centers of America, Inc.
ACCOUNTANT'S AUDIT REPORT
I have audited the accompanying consolidated balance sheets of Health Care
Centers of America, Inc. and Subsidiary (A development Company) as of December
31, 1996 and December 31, 1995, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years then
ended and from June 29, 1993 (date of reorganization) through December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
consolidated statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly in all material respects the financial position of Health Care Centers of
America, Inc. and Subsidiary as of December 31, 1996 and December 31, 1995, and
the results of their operations, changes in stockholders' equity and their cash
flows for the years then ended in conformity with generally accepted accounting
principals.
Reno, Nevada
April 18, 1997
34
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---- ----
CURRENT ASSETS
Cash (Note 1) $ 196,214 $ 865
Prepaid Expenses 1,500 --
Inventory (Note 5) -- --
----------- --------
Total Current Assets 197,714 865
----------- --------
PROPERTY, PLANT & EQUIPMENT (Note 1)
Equipment Held for Rent 555,185 --
Equipment 24,935 16,046
Furniture & Fixtures 6,249 1,679
----------- --------
586,369 17,725
Less Accumulated Depreciation 11,355 7,055
----------- --------
Net Property, Plant& Equipment 575,014 10,670
----------- --------
OTHER ASSETS
Advertising Credits (Note 4) 50,000,000 --
Notes Receivable (Note 6) 260,000 260,000
Interest Receivable 6,600 1,650
Organizational Costs, Net
0f Amortization 47,422 16,782
Deposit held in Escrow -- 191,564
----------- --------
Total Other Assets 50,314,022 469,996
----------- --------
$51,086,750 $481,531
=========== ========
The accompanying notes are an integral part of these financial statements
35
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
---- ----
CURRENT LIABILITIES
Accounts Payable $ 28,206 $ 31,460
Shareholder Advance 4,400 4,400
Accrued Expenses 51,756 5,474
Notes Payable - Shareholder (Note 7) 462,809 462,809
------------ ------------
Total Current Liabilities $ 547,171 $ 504,143
------------ ------------
STOCKHOLDERS' EQUITY
Common stock $ 001 par value;
900,000,000 shares authorized;
issued and outstanding;
455,450,568 shares on
December 31, 1996 and 372,324,902
on December 455,451 372,325
Paid in Capital 64,297,530 13,502,179
Retained Earnings (13,702,162) (13,702,162)
Deficit Accumulated during the
Development Stage (511,240) (194,954)
------------ ------------
Total Stockholders' Equity 50,539,579 (22,612)
------------ ------------
Total Liabilities and Stockholders' Equit $ 51,086,750 $ 481,531
============ ============
The accompanying notes are an integral part of these financial statements
36
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
AND THE PERIOD FROM JUNE 29, 1993 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
June 29, 1993
Through
December 31, December 31, December 31, December
1996 1995 1994 31, 1996
---------------------------------------- ---------
<S> <C> <C> <C> <C>
REVENUE $ -- $ -- $ -- $ --
---------------------------------------- ---------
EXPENDITURES
Depreciation and Amortization 13,660 5,48 4,346 23,493
Dues and Subscriptions 4,627 -- 3,870 8,497
Professional Fees 119,545 48,305 8,508 176,358
Postage and Courier Service 16,500 1,668 345 18,513
Marketing & Promotion 1,367 -- 31,116 32,483
Travel and Entertainment 60,894 18,599 43,810 123,303
Telephone Expenses 35,761 4,679 2,572 43,012
Other Office Expenses 26,473 4,592 6,772 37,881
Wages and Benefits -- -- 2,397 3,172
---------------------------------------- ---------
Total Expenses from Operations 278,827 83,330 103,736 466,712
---------------------------------------- ---------
OTHER INCOME (EXPENSES) (278,827) (83,330) (103,736) (466,712)
---------------------------------------- ---------
Interest Income 8,822 3,214 -- 12,036
Interest Expense (46,281) (10,283) -- (56,564)
---------------------------------------- ---------
Total Other Income (Expense) (37,459) (7,069) -- (44,528)
---------------------------------------- ---------
Net Income (Loss) before
Federal Income taxes (316,286) (90,399) (103,736) (511,240)
---------------------------------------- ---------
Federal Income Taxes (Note 1) -- -- -- --
---------------------------------------- ---------
Net Income (Loss) $(316,286) $(90,399) $(103,736) $(511,240)
---------------------------------------- ---------
Net Income (loss) Per Share $ (0.0008) $(0.0004) $ (0.0012)
--------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
37
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JUNE 29, 1993 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated
Retained during the
Common Stock Additional Earnings Development
Stock Amount paid in Capital (Deficit) Stage
----- ------ --------------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 29,1993 12,038,500 $ 240,770 $ 13,461,391 $(13,702,162) $ --
On June 29,1993: Issued
Common stock to current
shareholders for loss of prior stock 1,800,000 36,000 (36,000) -- --
Issued shares of common stock to
Masterhouse Ltd. (a related party)
for 3500 master recording value
unknown 4,500,000 90,000 (90,000) -- --
Reverse stock split
One share of new stock for three
shares of old stock and change
par value from S0.02 to $0.001 (12,225,667) (360,657) 360,657 -- --
Net loss through December 31,1993 (819)
-----------------------------------------------------------------
Balance December 31, 1993 6,112,833 6,113 13,696,048 (13,702,162) (819)
In January and May 1994, Common
stock issued for services, value
unknown 43,960,000 43,960 (43,960) -- --
* In May, July and September 1994:
Issued shares of common stock
held in trust, value to be determined,
see Note below 121,258,682 121,259 (121,259) -- --
Capital contributed by shareholders' -- -- 125,939 -- --
Net loss through December 31,1994 (103,736)
-----------------------------------------------------------------
Balance December 31, 1994 171,331,515 171,332 13,656,768 (13,702,162) (104,555)
</TABLE>
continued
The accompanying notes are an integral part of these financial statements
38
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JUNE 29, 1993 THROUGH DECEMBER 31, 1996
...continued
<TABLE>
<CAPTION>
Accumulated
Retained during the
Common Stock Additional Earnings Development
Stock Amount paid in Capital (Deficit) Stage
----- ------ --------------- --------- -----
<S> <C> <C> <C> <C> <C>
In February and September of
1995, Common stock issued
for services, value unknown 5,275,000 5,275 (5,275) -- --
* In February, August and September
1995: Issued shares of common
stock held in trust, see note below 99,000,000 99,000 (99,000) -- --
In August 1995, Common stock issued
for inventory, value unknown 96,718,387 96,718 (96,718) -- --
96,718,387
Capital contributed by shareholders' -- -- 46,404 --
Net loss through December 31,1995
-----------------------------------------------------------------
Balance December31, 1995 372,324,902 372,325 13,502,179 (13,702,162) (194,954)
* In February 1996: Issued shares of
common stock held in trust, see
note below 309,551 310 (310) -- --
In June 1996, Common stock issued
for services 40,000,000 40,000 (40,000) -- --
On June 28,1996, Issued shares of
common stock in exchange for
equipment (Note 1) 2,066,115 2,066 553,118 -- --
On July 23,1996, Issued shares of
common stock in exchange for
100% of the outstanding common
stock of ElfWorks, Ltd. (Note 2) 40,000,000 40,000 50,000,000 -- --
On November 21,1996, Issued shares
of common stock in exchange for
future services 750,000 750 (750) -- --
Capital contributed by shareholders' -- -- 283,293 -- --
Net loss through December 31,1996 (316,286)
-----------------------------------------------------------------
Balance December31,1996 455,450,568 $ 455,451 $ 64,297,530 $(13,702,162) $(511,240)
=================================================================
</TABLE>
* Note: These shares are in contemplation of various contingent agreements
and are held in a trust until the Securities and Exchange Commission (SEC)
form 10-SB has been filed and accepted by the SEC. These shares are
treated as outstanding. If these shares should not be considered
outstanding, the net loss per share would be .0017 in 1996, .0010 in 1995
and .0023 in 1994.
The accompanying notes are an integral part of these financial statements
39
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,1996,1995 AND 1994
AND FROM JUNE 29,1993 THROUGH DECEMBER 31,1996
<TABLE>
<CAPTION>
June 29, 1993
Through
December 31, December 31, December 31, December
1996 1995 1994 31, 1996
------------------------------------------ ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(316,286) $ (90,399) $(103,736) $(511,240)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation Amortization 13,660 5,487 4,346 23,493
Net (Increase) Decrease in:
Inventories (Note 5) -- -- -- --
Prepaid Expenses (1,500) -- -- (1,500)
Interest Receivables (4,950) (1,650) -- (6,600)
Deposits 191,564 (191,564) -- --
Organizational Costs -- (7,160) (9,000) (19,560)
Net Increase (Decrease) in:
Accounts Payable (3,254) 31,460 (205) 28,204
Accrued Liabilities 46,281 5,474 -- 51,755
----------------------------------------- ---------
Net Cash Provided (used) by Operating Activities (74,485) (248,352) (108,595) (435,448)
----------------------------------------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Equipment (note 11) (13,459) -- (17,725) (31,184)
Loans Made (note 60 -- (260,000) -- (260,000)
----------------------------------------- ---------
Net Cash Provided by Investing Activities (13,459) (260,000) (17,725) (291,184)
----------------------------------------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Sale of Common Stock 283,293 46,404 125,939 455,636
Borrowings (note7) -- 462,807 -- 467,206
----------------------------------------- ---------
Net Cash Provided by Financing Activities 283,293 509,211 125,939 922,842
----------------------------------------- ---------
Net Increase in Cash 195,349 859 (381) 196,210
Cash at the beginning of period 865 6 387 --
----------------------------------------- ---------
Cash at the end of period $ 196,214 $ 865 $ 6 $ 196,210
---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements
40
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
Health Care Centers of America, Inc. a Nevada Corporation headquarters in Reno,
Nevada was incorporated under the name Carleton Enterprises, Ltd. On November
13, 1984 the Company changed it's name to SCN, Ltd. On December 15, 1986, an
involuntary petition for reorganization, under Chapter 11 of the U.S. Bankruptcy
Code, filed against SCN, Ltd., was granted by the U.S. Bankruptcy Court. The
Company was dormant until September 31, 1993 at which time the bankruptcy was
ordered dismissed. On November 19, 1993 the Company again changed its name to
Health Care Centers of America, Inc. (HCCA). The Company is currently a
development stage enterprise as defined by FASB No. 7. "Accounting and Reporting
by Development Stage Enterprises".
NATURE OF BUSINESS:
Currently the Company is focused on the development, management and exploitation
of five primary industry segments. The first is to continue its previous
entertainment activity of recording new master recordings, TV specials and
marketing the recordings. The second is to procure, develop and promote a
nationally established chain of Health Care Centers both within and outside the
United States. The third is the development of mining interests and exploitation
of existing inventories of ore concentrate. The fourth is management and
development of a wide range of real estate interests. The fifth is the expansion
and continued operation of various educational facilities and products.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of its wholly owned
subsidiary, ElfWorks, Ltd. All significant inter-company transactions have been
eliminated.
ORGANIZATIONAL COSTS:
Organizational costs consisting of legal and accounting fees are capitalized and
amortized over a five year period.
PROPERTY, PLANT AND EQUIPMENT:
Equipment and furniture are stated at cost. Depreciation is computed using the
straight-line method over a period of five to ten years. Equipment also included
24 MedAway-1 infectious waste treatment machines, an on-site machine to process
medical waste. The Company plans to lease these machines to hospitals. The
machines were purchased June 1996 through an exchange of 2,066,015 shares of the
Company's common stock. The transaction was valued at the seller's cost of
$555,185 or $23,133 per unit.
CASH AND CASH EQUIVALENTS:
The company considers all short-term deposits with a maturity of three months or
less to be cash equivalent.
FEDERAL INCOME TAX:
Due to an operating loss, since reorganization, there is no provision for
federal income tax.
41
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 31, 1995
USE OF ESTIMATES:
The preparation of financial statements in conformity with general accepted
accounting principals require management to make estimates and assumptions that
affects certain reported amounts and disclosures. Accordingly, actual results
could differ from these estimates.
LOSS PER COMMON SHARE:
Weighted average shares outstanding used in the loss per common share
calculation were 410,371,000 for December 31, 1996, 203,792,000 for December 31,
1995 and 89,608,000 for December 31, 1994. Stock options are not included in the
calculation since they are anti-dilutive.
NOTE 2 - ACQUISITION
On June 26, 1996 the Company issued 40 million shares of its common stock in
exchange for all of the outstanding common stock of ElfWorks, Ltd. The
acquisition has been accounted for as a purchase and, accordingly, the Company's
consolidated financial statements have been restated to include the accounts and
operations of ElfWorks, Ltd. from July 26, 1996
NOTE - 3 POTENTIAL CONTRACTS:
The Company has identified and entered into stock exchange agreements with
entities in the health care, mining, real estate, entertainment and education
industries. Generally, these agreements provide that the other party to the
agreement shall have the right to annul or void the agreement if a registration
statement registering the Company's common stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), is not declared effective within a
specified period of time, which has lapsed. The Company recent registration of
their common stock under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), has been declared effective on February 4th, 1997 (see
Subsequent Events at Note 13).
As a good faith measure, stock was issued upon signing the agreements. It is the
Company's position that the holders of these stock certificates are doing so in
a trust capacity for the benefit of both parties, and will be forfeited and
canceled if the agreement is annulled or void. Currently the Company is
renegotiating several of these contracts of which some have been consummated
(see Subsequent Events at Note 13).
NOTE 4 - ADVERTISING CREDITS:
Advertising credits from American Independent Network (AIN) are irrevocable and
are a guaranteed promise (trade due bill) to provide the company with network
programming time and commercial advertising time. The certificates are
transferable and negotiable. The trade due bills were acquired through the
acquisition of ElfWorks, Ltd. (Note 2), having a face value of $100,000,000 and
were recorded at a discounted value of $50,000,000 which was determined to be
the liquidated value per brokers' quotations.
NOTE 5 - INVENTORIES:
Inventories at the Arizona site consist of ore concentrates, where assay reports
commissioned by the Company indicate there may be 30 oz of precious metals,
12,974 oz of rare earth and 1,166 oz of other common elements including 1% of
titanium, in each ton of ore concentrate. These concentrates were purchased
through an exchange for 100,000,000 shares of the Company's common stock. Since
valuation of the ore was not available, they were recorded at zero dollars.
42
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 31, l995
NOTE 6 - NOTES RECEIVABLE:
<TABLE>
<CAPTION>
December 31 December 31
1996 1995
-------- --------
<S> <C> <C>
A note from INMOB (a Mexican corporation) dated
ovember 6, 1995, payable November 5, 1996 with no
interest, secured by INMOB's interest in real estate $215,000 $215,000
A note from M. Philip and T. Carnes dated August 25, 1995,
payable August 25, 1996 with interest at 11% per annum,
secured by real estate 45,000 45,000
-------- --------
Total Notes Receivable $260,000 $260,000
-------- --------
</TABLE>
Both notes are delinquent as of April 18, 1997. Management believes both notes
will be paid and security underlying each exceeds the note value.
NOTE 7 - NOTE PAYABLE:
<TABLE>
<CAPTION>
December 31 December 31
1996 1995
-------- --------
<S> <C> <C>
A note payable to R.K. Company (a related party)
dated November 17, 1995, payable $43,367 per month
with interest at 10% per annum, unsecured (see Note 12) $247,809 $247,809
A note payable to R. K. Company dated November 17,1995,
Payable $37,624 per month with interest at 10% per annum
Unsecured (see Note 12) 215,000 215,000
-------- --------
Total Notes Payable $462,809 $462,809
-------- --------
</TABLE>
No payments have been made on either of the above notes, management has
verbal agreements on extending payment dates.
NOTES 8 - INCOME TAXES:
At December 31, 1993 the Company had a net operating loss carry forward for
federal income tax purposes which will be limited because of change in ownership
since 1993. Post 1993 net operating losses carry forward of approximately
$500,000 is available to provide future tax benefits:
Expiration Date Operating Losses
2008 $800
2009 101,000
2010 90,000
2011 308,200
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 31, 1995
NOTE 9 - CAPITAL STOCK:
On December 28, 1993 the Company amended its articles of incorporation's to
increase the authorized capitalization from 80,000,000 shares common stock to
900,000,000 shares of common stock. The Company also changed the par value of
its common stock from $0.02 per share to $0.001 per share, and declared a one
for three reverse stock split.
NOTE 10 - SEC INJUNCTION:
The President and a former Director of HCCA were enjoined in 1988 from directly
or indirectly making use of any means or instruments of transportation or
communication in interstate commerce or of the mails to offer to sell through
the use or medium of any prospectus or otherwise the common stock of SCN, Ltd.
or any other security unless and until a registration statement has been filed
with the Securities and Exchange Commission as to such securities.
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash investing and financing activities: Equipment purchased for $555,185 in
exchange for 2,066,015 shares of the Company's common stock. Advertising credits
of $50,000,000 and other assets acquired in an acquisition with ElfWorks, Inc.
in exchange for 40,000,000 shares of the Company's common stock. Inventory of
concentrated gold ore, value unavailable, in exchange for 100,000,000 shares of
the Company's common stock (see Notes 2, 4 and 12).Issue of 750,000 shares of
the Company's common stock to officers and directors during 1996 for future
services (see Note 12).
NOTE 12 - RELATED PARTY TRANSACTIONS:
On February 6th, 1997, the Company purchased claims covering a 340-acre site in
California from Zarzion, Ltd. Zarzion is a major shareholder and Maurice
Furlong, CEO and President of the Company, is a consultant to Zarzion, Ltd.
Inventories consisting of ore concentrates located in Arizona were purchased
from Zarzion Ltd. in exchange for shares of the Company's common stock (see
Notes 5 and 13).In November 1995, the Company borrowed $462,809 from R.K.
Company, a major stockholder of the Company (see Note 7).The Company's officers
and directors were issued common stock of the Company in exchange for future
services. All of the Company's officers and directors are stockholders of the
Company (see Note 11).
44
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND DECEMBER 31, 1995
NOTE 13 - SUBSEQUENT EVENTS
The recent registration of the Company's common stock under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), has been declared
effective on February 4th, 1997.Nashville Music Consultants, Inc. ("NMC") a
Tennessee Corporation headquarters in Nashville, Tennessee has been acquired by
the Company, effective February 4th, 1997. NMC is focused on the development of
selective artists and writers in the Country Western music industry where they
provide country music artists with professional advice on career development
through it's consulting division, administers publishing rights through its
publishing division and produces recorded material in its production division.
In addition, NMC is currently focusing on adding a song writing school to the
country western division, there is a strong focus on expanding the Company to
include gospel music.
Effective February 4th, 1997, the Company caused the formation of Peeples
Mining Company, a Nevada Corporation, a wholly owned subsidiary of the Company.
Peeples Mining Company has caused the consolidation of the assets of Peeples
Mining, L.L.C. and F&H Mining Company, Inc. As a result, Peeples Mining Company
now has mining operations in Arizona and Nevada. The Arizona operation includes
17 claims on 340 acres. The Nevada property includes 7 claims on 140 acres. The
production facility and lab equipment owned by Peeples Mining Company located in
Nevada is moving to Reno, Nevada.
On February 6th 1997, the Company acquired 17 load claims covering a 340-acre
site in Northern California from Zarzion Ltd., in exchange for 375,000,000
shares of common stock (see Note 12).
45
<PAGE>
DALE MCGHIE Town & Country Plaza
CERTIFIED PUBLIC ACCOUNTANT
1539 Vassar St. Reno, Nevada 89502
Tel: 702-323-7744
Fax: 702-323-8288
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Shareholders of
Health Care Centers of America, Inc.
I have audited the balance sheet of Health Care Centers of America, Inc. (A
Development Stage Company)as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended, and
have issued my opinion thereon dated April 18, 1997. My examination also
comprehended Supplemental Schedules A and B of Health Care Centers of America,
Inc. (A Development Stage Company). In my opinion, Schedules A and B. when
considered in relation to the basic financial statements, present fairly in all
material respects the information shown therein.
/s/ DALE W. MCGIE
- -----------------
W. Dale McGhie, CPA
Reno, Nevada
April 18, 199746
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE B - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Other Charges
Balance at Additions Reclassifications Balance at
Classification Beginning of Year at Cost Retirements Add (deduct) End of Year
-------------------- ----------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1996:
Furniture & Fixtures $ 1,679 $ 4,570 $ -- $ -- $ 6,249
Equipment 16,046 8,889 -- -- 24,935
Equipment - Other * -- 555,644 -- -- 555,185
-------- -------- -------- -------- --------
Total $ 17,725 $568,644 $ -- $ -- $586,369
-------- -------- -------- -------- --------
December 31, 1995:
Furniture & Fixtures $ 1,679 $ -- $ -- $ -- $ 1,679
Equipment 16,046 -- -- -- 16,046
-------- -------- -------- -------- --------
Total $ 17,725 $ -- $ -- $ -- $ 17,725
-------- -------- -------- -------- --------
</TABLE>
* Equipment is not depreciated at this time because not placed in service yet.
47
<PAGE>
HEALTH CARE CENTERS OF AMERICA, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE A-PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Additions Other Charges
Balance at Charges to Costs Reclassifications Balance at
Classification Beginning of Year And Expenses Retirements add (deduct) End of Year
- -------------- ----------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
December31, 1996:
Furniture & Fixtures $ 758 $ 764 $ -- $ -- $ 1,522
Equipment 6,297 3,536 -- -- 9,833
Equipment - Other * -- -- -- -- --
-------------------------------------------------------------------------------
Total $ 7,055 $ 4,300 $ -- $ -- $ 11,355
December 31, 1995:
Furniture & Fixtures $ 358 $ 400 $ -- $ -- $ 758
Equipment 3,088 3,209 -- -- 6,297
-------------------------------------------------------------------------------
Total $ 3,446 $ 3,609 $ -- $ -- $ 7,055
-------------------------------------------------------------------------------
</TABLE>
* Equipment is not depreciated at this time because not placed in service yet.
48
<PAGE>
Item 8. Changes In and Disagreements With Accountants and Financial Disclosure
In 1995, the Company retained an accountant in Nashville, Tennessee, Roy
Sinkovich, to perform the audit for the year ended December 31, 1995. In those
financial statements, management reported certain acquisitions subject of
agreements containing various conditions prior to consummation of the
transactions. As a result of the contingency status of the contracts, the
circumstances of which are described above (see "Item I-Description of Business
"), management adjusted its financial statements to reflect its understanding as
to how such contracts should be treated, and the audit was withdrawn by the
former auditor. There were no unresolved matters of significance or
disagreements between management and such independent accountant. During 1996,
the Company moved its principal office to Reno, Nevada. As a result, the
Company's Board of Directors determined to retain an accounting firm nearer the
Company's new principal office. The accounting firm of W. Dale McGhie in Reno,
Nevada, was retained to perform the audit of the Company for the periods ending
December 31, 1994, 1995, and 1996.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors and Executive officers
As of December 31, 1996, and March 31, 1997, the directors and executive
officers of the Company, their ages, positions in the Company, the dates of
their initial election or appointment as director or executive officer, and the
expiration of the terms as directors are as follows. Directors are elected at
its annual meeting of stockholders and hold office until their successors are
elected and qualified. The Company's officers are appointed annually by the
Board of Directors and serve at the pleasure of the Board.
Term as
Director
Name Age Positions Held Expires
- --------------------------------------------------------------------------------
Maurice F. Furlong 48 Chairman of the Board of Directors, 1997
Chief Executive Officer and President
Michael J. Pietrzak 48 Director, Secretary 1997
Barbara L. Krilich 37 Director, Treasurer 1997
Alexander H. Walker, III 36 Director 1997
Maurice W. Furlong, 48, has been the Company's President, Chief Executive
Officer, and Chairman since November 1984. Mr. Furlong was also the founder of
and a consultant to F&H Mining. From 1981 to 1984, he was a business consultant
to R.F. Scientific, Inc. Mr. Furlong has been active in business development and
capitalization for a number of public companies, including companies involved in
satellite communications, music recording,
49
<PAGE>
motion picture production and distribution, and chiropractic medicine. He was
founder of The American Music News, a nationally distributed music news
publication of which he served as president from 1979 through 1985. Also from
1979 through 1983, Mr. Furlong was a sales and marketing consultant for Koala
Record Co., a record company in Hendersonville, Tennessee. From 1976 through
1979, he was president of Hunter's International Manufacturing Co., a
manufacturer and wholesaler of sporting goods. From 1968 through 1976, he was
the owner of Furlong Contract Construction Co., a general contractor in
residential construction in Winan, Michigan. Mr. Furlong is the subject of
several court proceedings and cease and desist orders relating to the sale of
securities. (See "Involvement in Certain Legal Proceedings" below.)
Michael J. Pietrzak, 48, has been a Director and Secretary of the Company
since November 1996. Mr. Pietrzak is an attorney licensed in the State of
Illinois with a background in business law, and has provided legal and business
guidance to corporate and other business entities on a variety of issues,
including real estate, health care, mining, entertainment, environmental
matters, finance, international business organization, and banking. He has also
counseled clients with respect to litigation, mergers and acquisitions, general
issues relating to corporations and other types of business entities, employment
issues, state and federal regulations, copyrights and trademarks, marketing, and
advertising. He currently works full time for the Company.
Barbara L. Krilich, 37, has been the Company's Treasurer and a Director
since November 1996. Ms. Krilich is a Certified Public Accountant licensed in
Arizona. From 1984 to 1986, she was employed with Peat, Marwick & Mitchell & Co.
(now KPMG Peat Marwick), auditing financial statements for publicly-held clients
in the securities and real estate industries. From 1987 to 1993, Ms. Krilich
worked for various real estate holding companies as treasurer, financial
controller and chief financial officer. From 1993 to 1995, she was employed by
Security Capital Group, a real estate investment trust ("REIT") traded on the
New York Stock Exchange. As regional manager, she was responsible for management
of that company's properties in Phoenix, Arizona. From 1995 to 1996, she was
employed by Evans Withycombe Residential, Inc., another REIT, where Mrs. Krilich
was instrumental in the development of several multi-family sites in Phoenix,
Arizona; later she transferred into the acquisition division, where she was
responsible for negotiating assigned acquisitions and monitoring due diligence
with respect to such acquisitions.
Alexander H. Walker, III, 36, has been a Director of the Company since
November 1996. From 1987 through 1993, Mr. Walker practiced law with the firm of
Van Wagoner & Stevens, in Salt Lake City, Utah. Since 1993, he has practiced in
his own firm and as a sole practitioner, focusing primarily on business and
securities litigation. Mr. Walker also has performed securities transactional
and general corporate/business work for clients in a variety of industries,
including home health care, demolition blasting, dry cleaning, golf course
construction and operations, auto parts sales, and dental implant sales and
fabricating.
None of the Company's Directors are directors of other reporting companies.
There are no family relationships between the directors, executive officers
or with any person under consideration for nomination as a director or
appointment as an executive officer of the Company.
50
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission and the NASDAQ initial reports of ownership and reports of changes in
ownership of the Company's registered stock. Officers, directors and
greater-than-10% stockholders are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all section 16(a) filing requirements
applicable to its officers, directors, and greater-than-10% stockholders have
been complied with during the last fiscal year, except that the first filings
were not made until approximately 15 days after the effective date of the
Company's Exchange Act registration.
Significant Employees and Consultants
The Company currently has no employees except for certain officers and
directors. Although certain individuals, including Mr. Furlong, have devoted
substantial time and energy to the Company's operations, these individuals have
not been compensated by the Company. Messrs. Pietrzak and Walker and Mrs.
Krilich have received stock from the Company incident to their becoming
directors, and each has received some compensation, including professional fees,
from certain third parties who will not be reimbursed by the Company. The
Company is not a party to any collective bargaining agreement.
In January 1996, the Company entered into an agreement with Mr. Krilich,
pursuant to which Mr. Krilich was to provide advice and consulting services with
respect to management and organization of the Company, its financial policies,
real estate development and financing arrangements, and other matters arising
out of the Company's business. The Company agreed to pay Krilich on a
per-project basis, each project to be chosen and assigned by the Company. The
agreement is for a 10-year period with automatic renewal periods of 10 years
each, which renewals are at the option of the consultant. The fee to be paid to
Krilich has yet to be determined, but it was agreed that Mr. Krilich would not
be entitled to any payment until seven months after the effective date of the
Company's Exchange Act registration. In light of the disputes which have arisen
between Mr. Krilich and the Company and its management, it is unlikely that the
Company will call on Mr. Krilich's services.
Certain Legal Proceedings Involving Directors and Officers
In December 1994, the Securities Commissioner for South Carolina entered an
Order to Cease and Desist from Selling Unregistered Securities and Notice of
Right to Hearing in an administrative proceeding before the South Carolina
Securities Division against the Company, Maurice Furlong, Craig Furlong, and
James Troester. At the time in question, Messrs. Furlong, Furlong, and Troester
were officers of the Company. Such order contained allegations of sales of
unregistered securities, sales of securities by unregistered agents, and fraud
in the sale of securities. The order denied the availability of exemptions from
registration requirements under South Carolina law with respect to certain
transactions involving the sale of the Company's stock in South Carolina;
ordered the named respondents to cease and desist from issuing, offering, and
selling securities issued by the Company to persons in South Carolina until the
respondents became licensed broker-dealers or agents; and prohibited
51
<PAGE>
respondents from making any offer or sale of any security to any entity or
person in South Carolina by means of false or fraudulent sales practices.
In March 1994, in an action brought by the Tennessee Securities Division,
the Commissioner of Commerce and Insurance for Tennessee entered an Order to
Cease and Desist whereby the Company, its predecessor, SCN Ltd. and Maurice
Furlong, James Troester, and certain others were ordered to cease and desist
from (i) the further offer or sale of stock subscriptions of the Company from,
to or into the State of Tennessee until such time as such securities are
effectively registered with the Tennessee Securities Division; (ii) conduct as a
broker/dealer in Tennessee until such time as such person are effectively
registered with the Tennessee Securities Division; (iii) advertising stock
subscriptions; (iv) making any untrue statement of a material fact or failing to
state a material fact necessary in order to make the statements made, in the
light of circumstances in which they are made, not misleading; and (v) aiding,
abetting, or helping any of the respondents in any of such violations.
In 1988, the U.S. District Court for the Middle District of Tennessee
entered a Final Judgment of Final Injunction against the Company and its then
officers and directors (including Messrs. Furlong, Furlong, and Troester)
enjoining the them from, among other things, offering or selling common stock of
SCN Ltd. unless and until a registration statement has been filed with the
Securities and Exchange Commission as to such securities and from employing any
device scheme or artifice to defraud in connection with the sale of SCN common
stock.
None of the Company's Directors or executive officers have, in the past
five years, been (i) involved in any bankruptcy proceedings or (ii) subject to
criminal proceedings or convicted of a criminal act, and, except as indicated
above, none of the Company's Directors or executive officers have, in the past
five years, been (iii) subject to any order, judgment, or decree entered by any
Court for violating any laws relating to business securities or banking
activities; or (iv) subject to any order for violation of federal or state
securities laws or commodities laws.
Item 10. Executive Compensation
The following table sets forth the compensation paid or accrued by the
Company during the years ended December 31, 1996, 1995 and 1994 to the Company's
Chief Executive Officer and other officers and Directors whose compensation
exceeded $100,000 in any one year.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (e) (f) (g) (h) (i)
Other Restrict All other
annual ed stock Options/ LTIP compen-
Name and prin- comp. Awards SARs Payouts sation
cipal position Year Salary ($) ($) (#) ($) ($)
- -------------- ---- ------ ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Maurice Furlong, 1996 -0- -0- -0- -0- -0- -0-
CEO and Chair- 1995 -0- -0- -0- -0- -0- -0-
man 1994 -0- -0- -0- -0- -0- -0-
</TABLE>
52
<PAGE>
There were no options granted in the last fiscal year to any of the Company's
officers or Directors.
Compensation of Directors
Except for the 750,000 shares issued to the three new members in November
1996, members of the Board of Directors do not receive cash compensation for
their services as Directors. In addition, Directors are not presently reimbursed
for expenses incurred in attending Board meetings.
On November 1, 1996, Mr. Pietrzak, Ms. Krilich, and Mr. Walker were each
awarded 250,000 shares of the Company's common stock as compensation for
becoming directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect to the
beneficial ownership of each person who is know to the Company to be the
beneficial owner of more than 5 % of the Company's Common Stock as of March 31,
1997.
(1) (2) (3) (4)
Title Name and Address Amount and Nature Percent
of of Beneficial of Beneficial of
Class Owner Ownership 1.2 Class2
- ------- ---------------------------- ----------------- --------
Common Robert R. Krilich, Sr. 194,969,026(3) 23.5%
Stock 1000 Royce Road
Oakbrook Terrace, IL 60181
Common The R.K. Company 193,202,962(4) 23.3%
Stock 1000 Royce Boulevard
Oakbrook Terrace, IL 60181
Common Zarzion, Ltd. 462,737,143(5) 55.7%
Stock 1000 Royce Boulevard
Oakbrook Terrace, IL 60181
Common Maurice W. Furlong 497,804,020(6.7) 59.9%
Stock 60 Bay Colony Lane
Ft.Lauderdale. FL 33308
Unless otherwise noted, the security ownership disclosed in this table is of
record and beneficial.
(2) Under Rule 13-d under the Exchange Act, shares not outstanding but
subject to options, warrants, rights, or conversion privileges pursuant to which
such shares may be acquired in the next 60 days have deemed to be outstanding
for the purpose of computing t percentage of outstanding shares owned by the
persons having such rights, but have not been deemed outstanding for the purpose
of computing the percentage for any other person.
53
<PAGE>
(3) Includes 193,202,962 shares assigned to R.K. Company, a common law business
organization believed to be wholly owned and/or controlled by Mr. Krilich
(see note 4). Also includes 3,333 shares registered in the name of Robin
Keel, Mr. Krilich's daughter; 77,233 shares registered in the name of
Robert R. Krilich, Jr., Mr. Krilich's son; 255,332 shares registered in the
name of Barbara L. Krilich, Mr. Krilich's daughter (and a director and
officer of the Company); 3,333 shares registered in the name of Richard
Krilich, Mr. Krilich's son; 3,333 shares registered in the names of Gregory
and Racine Loesch, Mr. Krilich's daughter and son-in-law; 10,000 shares
registered in the name of Richard Gaydo, Mr. Krilich's uncle; 500 shares
registered in the name of Alexis L. Schnakenburg, Mr. Krilich's
granddaughter; 3,333 shares registered in the name of Karl and Sandy
Schnakenburg, Mr. Krilich's daughter and son-in-law; 500 shares registered
in the name of Kyle Schnakenburg, Mr. Krilich's grandson; and 50,000 shares
registered in the name of Debbie and John Sebek, Mr. Krilich's daughter and
son-in-law.
(4) All of such shares are currently registered in the name of Rainbow Group
(94,389,299 shares) and Senior Group (73,813,663 shares), to whom they were
issued in accordance with the 1994 Stock Exchange Agreements pursuant to
which the certain real estate and other properties were acquired from such
entities. In November 1995, following the merger of Rainbow and Senior
Groups into R&S Group which is owned by the Company, such shares were
assigned to R.K. Company, an affiliate of Mr. Krilich. Transfer of the
properties for which such shares were assigned to R.K. Group is currently
the subject of dispute (see "Item 3-Legal Proceedings"), and transfer of
such shares to R.K. Company has not yet been requested (although deeds have
been executed in favor of Senior Group and Rainbow Group).
(5) Includes 375,000,000 shares issued in February 1997 in exchange for mining
properties in California. As to the voting rights, see footnote 7.
(6) Includes 4,164,685 shares owned by Cynthia Ann Furlong, Mr. Furlong's
ex-spouse; 27,000,000 shares owned by The Furlong Family Trust; 32,358
shares owned by Craig Furlong, Mr. Furlong's son; 50,000 shares owned by
Valarie Furlong, Mr. Furlong's daughter-in-law; 40,000 shares owned by
Shirley Scott, Craig Furlong's mother-in-law; and 3,333 shares owned by
Billy Scott, Craig Furlong's brother-in-law.
(7) Includes 462,737,143 shares registered in the name of Zarzion, Ltd., as to
which Mr. Furlong has voting control pursuant to a voting trust agreement
with Zarzion, Ltd., dated April 21, 1997. Such agreement expires in
February 2007.
Security Ownership of Management
The following table sets forth certain information with respect to the
beneficial ownership of each officer and director, and of all directors and
executive officers as a group.
(1) (2) (3) (4)
Title Name and Address Amount and Nature Percent
of of Beneficial of Beneficial of
Class Owner Ownership 1.2 Class2
- ------- ---------------------------- ----------------- --------
Common Maurice W. Furlong 497,804,020(3) 59.9%
Stock 60 Bay Colony Lane
Ft. Lauderdale. FL 3330
Common Michael J. Pietrzak 290,334 *
Stock 289 S. President Street
Carol Stream, IL 6018854
<PAGE>
Common Barbara L. Krilich 255,332(4) *
Stock 2714 Cheryl Drive
Phoenix, AR 85208
Common Alexander H. Walker, III 250,000 *
Stock 57 West 200 South (no. 400)
Salt Lake City, UT 84101
All officers and directors 498,599,686(3) 60.0%
as a group (four persons)
* Indicates less than 1 %. 1
(1) Unless otherwise noted, the security ownership disclosed in this table
is of record and beneficial.
(2) In accordance with Rule 13-d under the Exchange Act, shares not
outstanding but subject to options, warrants, rights, or conversion
privileges pursuant to which such shares may be acquired in the next
60 days have been deemed to be outstanding for the purpose of
computing the percentage of outstanding shares owned by the persons
having such rights, but have not been deemed outstanding for the
purpose of computing the percentage for any other person.
(3) Includes 462,737,143 shares beneficially owned by Zarzion, Ltd. as to
which Mr. Furlong has voting rights, and other shares beneficially
owned by members of his family. See footnotes 6 and 7 in previous
table. Does not include 94,389,299 shares registered in the name of
Rainbow Group and 73,813,663 shares registered in the name of Senior
Group, now combined into R&S Group, which have been assigned to R.K.
Company but not yet transferred on the books of the Company. Mr.
Furlong controls R&S Group on behalf of The Company, which is its
beneficial owner.
(4) Does not include 194,964,026 shares attributed to her father, Robert
R. Krilich, Sr.
In April 1997, Zarzion, Ltd., entered into a voting trust agreement with
Mr. Furlong, pursuant to which Mr. Furlong is entitled to vote the 462,737,143
shares of the Company's stock registered in its name until February 2007. Such
agreement was entered into between Zarzion and Mr. Furlong individually, and had
no relationship to the purchase of Zarzion' Ltd.'s California mining property
which took place in February 1997.
Item 12. Certain Relationships and Related Transactions
Certain individuals interested in the Company's success have contributed
and continue to contribute time, office space. and travel. telephone and other
expenses, without compensation or reimbursement.
In March 1994, the Company agreed to acquire all the outstanding stock of
F&H Mining in exchange for stock of the Company (see "Item I-Description of
Business"). At the time of such agreement, Maurice Furlong, the Company's
President and Chairman, owned all the outstanding stock of F&H, and Mr.
Furlong's son, Craig Furlong, was F&H's president. In connection with such
transaction, Maurice Furlong received 12,000,000 shares of the Company's common
stock. Such transaction cannot be deemed to have been negotiated at arms length.
In the opinion of the Company's management, the agreements were on their terms
as favorable to the Company as would be available from an unrelated third
party.
55
<PAGE>
Barbara L. Krilich, the Company's Treasurer and a Director, is the daughter
of Robert R. Krilich, Sr. While Ms. Krilich was not a director at the time the
Company entered into the agreements for purchase of the Senior Group and Rainbow
Group properties, or at the time the Company entered into the consulting
contract with her father, her relationship to Mr. Krilich may create a conflict
of interest when the Company considers the pending disputes relating to the
acquisition of such real estate and the disposition to be made of such
consulting contract. Ms. Krilich will recuse herself from any votes of the Board
of Directors with respect to such matters.
In November 1995, the Company borrowed $462,809 from Mr. Krilich's
affiliate, R.K. Company. Such loan is represented by two notes which were due in
May 1996, with interest at 10 %. Approximately $ 195,000 of such notes was used
as down payment on a contract to purchase a mining property which was
subsequently canceled. In March 1997, the Company repaid R.K. Company such
$195,000. Payment of the balance due on these notes is overdue.
At the time the Company entered into the agreements with Senior Group and
Rainbow Group for the acquisition of real estate in exchange for shares of the
Company's common stock, Robert R. Krilich, Sr., was the beneficial owner and
controlling person of such entities, but he was not at that time an officer,
director, or significant stockholder of the Company. As the Company negotiates
the consummation of such agreements, however, Mr. Krilich's position as a
substantial stockholder could affect such negotiations.
At the time the Company entered into the agreement with Mr. Krilich for
consulting services, Mr. Krilich was the owner of a substantial portion of the
Company's outstanding common stock. Such agreement was made in the context of
negotiations on acquisition of the Company's real estate, and should not be
considered independently.
The properties to be acquired by the Company pursuant to the Stock Exchange
Agreements with Senior Group and Rainbow Group are currently managed by Royce
Realty, an Illinois corporation which has been in the business of managing real
estate since the mid-1960's. The R.K. Company, a major shareholder of the
Company, is believed to be the sole shareholder of Royce Realty. Such
arrangements were entered into by Senior and Rainbow Groups before the Company
controlled either them or their properties. The Company has commenced an action
at law to terminate Royce Realty's interest in and control of the properties
assigned to R&S Group. (See "Item 3-Legal Proceedings".) It is the Company's
understanding that Mr. Krilich is the beneficial owner of and/or controls R.K.
Company.
In 1994, the Company discovered that a property subject to its contract
with Senior Group was subject to a mortgage. Since all such properties were to
be free of any debt, it was determined that this property should be assigned to
Mr. Furlong, who reimbursed the Company for the stock theretofore issued to the
seller. The property consisted of a 50% interest in a high-rise commercial
building located on Michigan Avenue in Chicago, Illinois. 850,000 shares had
been issued in exchange for such property, which had been valued at $1,912,500.
Subsequently, there was a default on the note, which was repurchased by Mr.
Krilich, and Mr. Furlong's interest became valueless.
Mr. Pietrzak, a Director of the Company and its Secretary, also provides
legal services to the Company. Mr. Pietrzak received 250,000 shares of stock for
becoming a member of the Company's Board of Directors in November 1996. From
1992 to 1996, Mr. Pietrzak also served as counsel to Mr. Krilich and various of
his business organizations, including Senior Group and Rainbow Group. In
November 1996, Mr. Pietrzak severed all relationships with Mr. Krilich and his
organizations, and commenced full-time employment with the Company. Such
previous rela-
56
<PAGE>
tionships may create a conflict of interest with respect to the disputes between
the Company and Mr. Krilich.
Mr. Walker, a Director of the Company, also provides legal services to the
Company. Mr. Walker received 250,000 shares of stock for becoming a member of
the Company's Board of Directors in November 1996.
In March 1994, the Company entered into agreements to acquire all the
issued and outstanding stock of Academy for Mathematics and Science, which owned
two learning centers in Toronto, Ontario. The centers were operated by Ms.
Jacqueline Jordan, the wife of Mr. William Jackson, a consultant to the Company;
a third center was planned to be opened in the United States. 1,200,000 shares
were issued for these properties, 400,000 shares being allocated for each.
Consummation of these transactions was contingent on a number of contingencies
and subject to a number of conditions subsequent. In January 1997, it was
mutually agreed that the Company should not acquire the two learning centers in
Toronto, and Mr. Jackson has agreed to return the 800,000 shares received for
these centers. A new center is being established in Reno, Nevada, under the name
"Learning Centers of America". (See "Item 1-Description of Business".)
At the time the Company issued 375,000,000 shares of its stock to Zarzion,
Ltd., in exchange for its 17 lode claims in California, Zarzion, Ltd., was the
owner of approximately 87,737,143 shares, or approximately 21% of the Company's
issued and outstanding shares. Notwithstanding this interest, the Company
believes the terms of such acquisition were as favorable as would have been
obtainable from a third party in an arms length transaction.
In 1997, the Company's acquisition of NMC became effective. AS of December
31, 1996, NMC was indebted to Alcy Baggott, its chief executive officer, for
$402,135.
Item 13. Exhibits and Reports on Form 8-K Index to Exhibits
3 Corporate documents
(i) Articles of incorporation of Cadgie Taylor, Inc., filed April 8,
1984 (incorporated by reference to Exhibit A filed with Form
10-SB December 6, 1996)
(a) Agreement of Merger merging Cadgie Taylor Co. into Carleton
Enterprises, Ltd., filed May 24, 1984 (incorporated by
reference to Exhibit A filed with Form 10-SB December 6,
1996)
(b) Amendment to Articles of Incorporation filed November 18,
1984, inter alia changing name to SCN, Ltd. (incorporated by
reference to Exhibit A filed with Form 10-SB December 6,
1996)
(c) Certificate of Amendment of Articles of Incorporation filed
December 10, 1993, changing name to Health Care Centers of
America, Inc. (incorporated by reference to Exhibit A filed
with Form 10-SB December 6, 1996)
(d) Amendment to Articles of Incorporation filed January 4, 1994
(incorporated by reference to Exhibit A filed with Form
10-SB December 6, 1996)
57
<PAGE>
(e) Amendment to Articles of Incorporation filed March 31, 1995
(incorporated by reference to Exhibit A filed with Form
10-SB December 6, 1996)
(ii) Bylaws (incorporated by reference to Exhibit B filed
with Form 10-SB December 6, 1996)
9 Voting trust agreements
(i) Voting trust agreement dated June 18, 1994, between the
"stockholders" of Peeples Mining, LLC, and Maurice
Furlong (incorporated by reference to Exhibit H filed
with Form 10-SB December 6, 1996)
(ii) Voting trust agreement dated April 22, 1995, between
stockholders of Nashville Music Consultants, Inc., and
Maurice Furlong (incorporated by reference to Exhibit J
filed with Form 10-SB December 6, 1996)
(iii) Voting trust agreement dated April 21, 1997, between
Zarzion Ltd. and Maurice Furlong (filed with this
report, page 65)
10 Material contracts
(i) Transfer Agent and Registrar Agreement between
Registrant and Nevada Agency & Trust Co., dated June
28, 1993 (incorporated by reference to Exhibit B filed
with Form 10-SB December 6, 1996)
(ii) Stock Exchange Agreement dated December 14, 1993,
between Registrant and Hunt Chiropractic, and similar
agreements with other health care practices
(incorporated by reference to Exhibit K filed with Form
10-SB December 6, 1996)
(iii) Stock Exchange Agreement dated March 25, 1994, between
Registrant and F&H Mining Co., Inc. (incorporated by
reference to Exhibit G filed with Form 10-SB December
6, 1996)
(iv) Stock Exchange Agreement dated March 27, 1994, between
Registrant and 1056463 Ontario, Ltd. (similar to
agreements with 1040240 Ontario Ltd., and 1077671
Ontario, Ltd.) (incorporated by reference to Exhibit If
fled with Form 10-SB December 6, 1996)
(v) Stock Exchange Agreement dated June 18, 1994, between
Registrant and Peeples Mining LLC (incorporated by
reference to Exhibit H filed with Form 10-SB December
6, 1996)
(vi) Stock Exchange Agreement dated July 17, 1994, between
Registrant and Lee Chiropractic, and similar agreements
with other health care practices (incorpo rated by
reference to Exhibit Y filed with Form 10-SB December
6, 1996)
(vii) Agreement for acquisition of gold concentrate dated
March 15, 1995, between Registrant and Robert Rood, IV,
and Restated Agreement between Registrant and Mar-Pro
Services, Ltd. (incorporated by reference to Exhibit S
filed with Form 10-SB December 6, 1996)
(viii) Stock Exchange Agreement dated April 21, 1995, and
addenda between Registrant and Nashville Music
Consultants, Inc. (incorporated by reference to Exhibit
J filed with Form 10-SB December 6, 1996)
(ix) Joint venture agreement dated May 31, 1995, among
Registrant, Immobiliaray Fraccinoadora del 1 Nueva
Viscaya, S.A. de C.V. and Oscar Neninger G., and Robert
R. Krilich, Sr. (incorporated by reference to Exhibit Q
filed with Form 10-SB December 6, 1996)
(x) Stock Exchange Agreement dated June 5, 1995, between
Registrant and Senior Group (incorporated by reference
to Exhibit E filed with Form 10-SB December 6, 1996)
58
<PAGE>
(xi) Amended and Restated Stock Exchange Agreement dated
June 5, 1995, bet Registrant and Rainbow Group
(incorporated by reference to Exhibit D filed with Form
10-SB December 6, 1996)
(xii) Consulting services agreement dated January 10, 1996,
between Registrant and Robert R. Krilich, Sr
(incorporated by reference to Exhibit R filed with Form
10-SB December 6, 1996)
(xiii) Asset purchase agreement dated June 12, 1996, between
Registrant and MedAway International, Inc.
(incorporated by reference to Exhibit U filed with Form
10-SB December 6, 1996)
(xiv) Stock Exchange Agreement dated June 26, 1996, and
amendment dated November 8, 1996, between Registrant
and ELF Works, Ltd. (incorporated by reference to
Exhibit T filed with Form 10-SB December 6, 1996)
(xv) Partnership Agreement between dated August 30, 1996,
between R&S Group and Fairdan Suites, Inc.
(incorporated by reference to Exhibit V filed with Form
10-SB December 6, 1996)
(xvi) Sales Agreement dated February 6, 1997, between
Zarzion, Ltd. and the Registrant (filed with this
report, page 68
(11) Statement re computation of per share earnings (filed with this report,
page 71)
(16) Letter dated November 11, 1996, from Roy Sinkovich on change in certifying
accountant (incorporated by reference to Exhibit BB filed with Form 10-SB
December 6, 1996)
(18) Letter from Registrant dated November 29, 1996, on change in accounting
treatment of certain acquisitions (incorporated by reference to Exhibit BB
filed with Form 10-SB December 6, 1996)
(21) Subsidiaries of the Registrant (filed with this report, page 72)
(23) Consent of experts and counsel
(I) Consent of Metallurgical Research & Assay Laboratory (filed with this
report, page 73)
(ii) Consent of Dale McGhie, certified public accountant (filed with this
report, page 74)
(99) Additional exhibits
(i) Assay of F&H Mining, Inc.'s claims in Clark County, Nevada, by
Metallurgical Research & Assay Laboratory, dated February 9, 1996
(filed with this report, page 75)
(ii) Assay of Peeples Mining Co.'s concentrate by Metallurgical Research &
Assay Laboratory, dated March 21, 1997 (filed with this report, page
84)
Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
59
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, "hereunto duly
authorized.
HEALTH CARE CENTERS OF AMERICA' INC.
(Registrant)
By /s/ MAURICE W. FURLONG
------------------------------------------------
Maurice W. Furlong, President
Date April 30, 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ MAURICE W. FURLONG
------------------------------------------------
Maurice W. Furlong, principal executive officer,
and director
Date April 30, 1997
By /s/ BARBARA L. KRILICH
------------------------------------------------
Barbara L. Krilich, principal financial officer,
principal accounting officer, and director
Date April 30, 1997
By /s/ MICHAEL J. PIETRZAK
------------------------------------------------
Michael J. Pietrzak, director
Date April 30, 1997
60
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d)of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEALTH CARE CENTERS OF AMERICA, INC.
(Registrant)
By
------------------------------------------------
Maurice W. Furlong, President
Date: April 30, 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By
------------------------------------------------
Maurice W. Furlong, principle executive officer, director
Date April 30, 1997
By
------------------------------------------------
Barbara L. Krilich, principal financial officer, principal
accounting officer, and director
Date ___________________
By
------------------------------------------------
Michael J. Pietrzak, director
Date _________________
61
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEALTH CARE CENTERS OF AMERICA, INC.
(Registrant)
By
------------------------------------------------
Maurice W. Furlong, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By
------------------------------------------------
Maurice W. Furlong, principal executive officer, director
Date _________________
By
------------------------------------------------
Barbara L. Krilich, principal financial officer, principal
accounting officer, and director
Date 4/30/97
By
------------------------------------------------
Michael J. Pietrzak, director
Date__________________
62
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEALTH CARE CENTERS OF AMERICA. INC.
(Registrant)
By
------------------------------------------------
Maurice W. Furlong, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By
------------------------------------------------
Maurice W. Furlong, principal executive officer, director
Date _______________________
By
------------------------------------------------
Barbara L. Krilich, principal financial officer, principal
accounting officer, and director
Date ______________________
By
------------------------------------------------
Michael J. Pietrzak, director
Date April 30, 1997
63
EXHIBIT 9(iii)
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT is made this 21st day of April , 1997, between
Zarzion Ltd and the parties whose names are subscribed hereto being stockholders
of Health Care Centers of America, Inc. (HCCA), all of which stockholder are
called "Subscribers, and Maurice W. Furlong hereinafter called "Trustee".
RECITALS
With a view towards the continuity of capable and competent management of
HCCA, Inc., which is in the interest of all stockholders of the corporation, the
Subscribers hereto are desirous of creating a Trust as described herein.
For the above reason and in consideration of the agreements herein, and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto provide and agree as follows:
1. [TRANSFER TO TRUSTEE]: Subscribers shall forthwith endorse in blank and
assign and deliver to the Trustee the Stock Certificates for shares owned
by them respectively and shall do all things necessary to effect the
transfer of their stock to the Trustee on the books of the transfer agent
for HCCA Inc.
2. [TRUSTEE TO HOLD SUBJECT AGREEMENT]: The Trustee shall hold the shares of
stock so transferred to him for the common benefit of the Subscribers under
the terms and conditions hereinafter set forth.
3. [NEW CERTIFICATE TO TRUSTEE]: The Trustee shall surrender to the transfer
agent of HCCA for cancellation all Stock Certificates which shall be
assigned and delivered to him as hereinabove provided and in his stead
shall obtain a new stock certificate issued to him as Trustee under this
agreement.
65
<PAGE>
4. [TRUSTEE'S CERTIFICATE]: The Trustee shall issue to each of the Subscribers
a Trust Certificate for the number of shares represented by he the
certificates of stock transferred by the Subscriber to the Trustee. Each
Trust Certificate shall state that it is issued pursuant to the terms of
this agreement and shall set forth the nature and proportional amount of
the beneficial interest thereunder of the person to whom it is issued and
registered and shall be assigned in the same manner as Stock Certificates
on the books to be kept by the transfer agent.
5. [LISTS AND RECORDS]: The transfer agent shall keep a list of the shares of
stock transferred to the Trustee. The transfer agent shall also keep a
record of all Trust Certificates issued or transferred on its books which
records shall contain the names and addresses of the Trust Certificate
holders and the number of shares represented by each such Trust
Certificate. This list of Trust Certificates and the records pertaining
thereto shall be open at all reasonable times for the inspection of the
Trust certificate holders. Upon the transfer on the books of the Trustee of
any Trust Certificate, the transferee shall succeed to all of the rights
and obligations hereunder of the transferor.
6. [TRUSTEE RIGHTS AND DUTIES]: It shall be the duty of the Trustee, Maurice
W. Furlong to vote all stock or to otherwise deal with said stock,
including but not limited to, pledging, hypothecating or otherwise use of
same as collateral as would the subscribers, and as in his judgment may be
for the best interests of the stockholders of HCCA. In addition to the
authority granted in the previous sentence, this authority includes, but is
not limited to voting at all meetings of the stockholders for the election
of directors and on any other matter or question which may be brought
before any stockholders' meetings on behalf of any stockholder as if such
stockholder were personally present.
7. [DIVIDENDS]: The Trustee shall collect and receive all dividends that may
accrue upon the shares of stock subject to this Trust and shall promptly
pay over the proportionate amount due to each Trust Certificate holder in
proportion to the number of shares respectively represented by their Trust
Certificates.
2
66
<PAGE>
8. [TRUSTEE'S INDEMNITY]: The Trustee shall serve without fee and without
expense. The Trustee shall be entitled to be fully indemnified out of the
dividends coming into his hands against all costs, charges, expenses and
other liabilities properly incurred by him in the exercise of any power
conferred upon him by these presents.
9. [TERMINATION OF TRUST]: In the event of the death of the Trustee, Maurice
W. Furlong or his refusing or being unable to act, this Trust shall be
terminated. Notwithstanding anything to the contrary, the Trustee shall and
hereby does have the right to appoint a Successor Trustee in any legally
acceptable manner and shall notify the Subscribers of same, in writing.
10. [DURATION]: The Trust created hereby shall continue for period of ten (10)
years from date hereof, and shall he renewed without further action for an
additional like term unless the subscribers shall notify the Trustee, in
writing and signed by all the subscribers, within thirty (30) days of the
expiration of the original period of the subscribers decision not to renew
tho agreement.
IN WITNESS WHEREOF, the parties hereto have respectively signed this Voting
Trust Agreement on this the 21st day of April 1997.
SUBSCRIBERS: TRUSTEE:
Carole Aronson Maurice W. Furlong
- ------------------------ ---------------------------
ZARZION, LTD. Pres.-Dir. MAURICE W. FURLONG
WITNESS:
Dawn Myers
- -----------------
67
EXHIBIT 10(xvi)
ZARZION LTD SALE TO
HEALTH CARE CENTERS OF AMERICA, INC.
OF CERTAIN LODE CLAIMS
SALE OF LODE MINE:
Agreement made February 6, 1997, between Zarzion, Ltd. a corporation
organized under the laws of the country of the Bahamas in accordance with the
International Business Corporation Act, doing business at 2nd floor, Citibank
Building, East Mall Drive, P.O. Box F42544, Freeport, Bahamas, here referred to
as seller, and Health Care Centers of America, Inc., a corporation organized
under the laws of the State of Nevada, doing business at 100 North Arlington
Street, Suite 22F, Reno, NV 89501, here referred to as buyer.
The parties agree as follows:
SECTION ONE
IDENTIFICATION OF MINE; PURCHASE PRICE
Seller shall sell to buyer, and buyer shall buy from seller, on the terms
and conditions specified in this agreement, real property consisting of mines
and mining around, together with the improvements on the real property, and the
appurtenances to it, if any in San Bernardino County, California, particularly
described as follows:
The price for the above-specified real property shall be three hundred
seventy five million (375,000,000) shares and shall be issued within three (3)
days of this agreement. For purposes of this agreement, the parties agree that
the value of the shares of stock of HCCA herein involved shall be two dollars
($2.00) per share, which buyer shall pay to seller at the times and in the
amounts set forth in this agreement, and subject to the terms, covenants, and
conditions contained in this agreement.
SECTION TWO
TIME FOR PAYMENT
The buyer shall tender to the seller assignment(s) of all its interest in
and to all claims and other interest in the subject mater of the agreement. Said
assignment(s) shall be in a form acceptable to the buyer.
1
68
<PAGE>
SECTION THREE
LABOR AND MATERIALS
Buyer shall pay for all labor done on or in the property and for all
materials furnished, as well as for equipment of all kinds placed on the
property.
Buyer shall indemnify seller and the property to be conveyed against any
and all claims or liens for labor, materials, or equipment.
Immediately on commencement of any work by buyer, buyer shall notify seller
of the commencement, and seller shall have the right to post on the property and
to record notices of nonresponsibility for labor or materials furnished.
SECTION FOUR
TAXES
Buyer shall at all times during the term of this agreement pay before
delinquency all state and local taxes levied against the property and against
any personal property, tools, equipment and the like placed on the property by
buyer.
SECTION FIVE
LIABILITY FOR DAMAGES
Buyer shall indemnify seller against all liability and claims for damages
for any injury or injuries, including death, to any person or persons or
property of any kind, from any cause or causes, while in, on or in any way
connected with the property. Buyer shall indemnify seller against all
liabilities, charges and expenses, including attorney fees and costs, on account
of or by reason of the injury or injuries, including death, or any loss of
damage growing out of the same.
SECTION SIX
COMPLIANCE WITH LAWS
Buyer shall at all times during the term of this agreement conform with all
applicable laws of California and the United States in the operation of the
property, and ensure compliance with all safety laws and regulations for the
protection of any and all employees engaged in mining operations.
SECTION SEVEN
NOTICES
The addresses of the respective parties for the purpose of all notices
required by this agreement are as listed above.
Any change of address shall be immediately furnished by each party to the
other.
2
69
<PAGE>
Mailing to a party at the address for the party specified above, or to an
address furnished by a party to the other in the event of a change of address,
be registered mail (return receipt requested) of any and all notices required
shall constitute service of the notice and shall be conclusive evidence of the
mailing.
SECTION EIGHT
EFFECT OF AGREEMENT
This agreement and all its terms, covenants and conditions shall be binding
on the parties, their successors and assigns.
Time is of the essence of this agreement.
In witness whereof, the parties have executed this agreement at Reno,
Nevada, the day and year first above written.
SELLER: Zarzion, Ltd Health Care Centers of America, Inc.
By: Carole Aronson By: Maurice Furlong
---------------------- --------------------------
Title: Director-President President
Attest: J. Michael Pietrzak
-------------------
Secretary
3
70
EXHIBIT 11
HEALTH CARE CENTERS OF AMERICA, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
The Company's Statement of Operations prepared by Management and audited by W.
Dale McGhie for the years ending December 31, 1996, and 1995, include
computation of earnings per share determined my using the monthly weighted
average of shares outstanding during these periods. The weighted average shares
used in the loss per common share calculations were 410,371,000 for December 31,
1996, 203,792,000 for December 31, 1995, and 89,608,000 for December 31, 1994.
Stock options are not included in the calculation since they are anti-dilutive.
Health Care Centers of America, Inc.
SUBSIDIARIES OF THE REGISTRANT
1 Peeples Mining Co., Inc., a Nevada corporation
2. Nashville Music Consultants, Inc., a Tennessee corporation
3. R&S Group, a common law business organization organized under
the common law of Illinois
4. ELF Works, Ltd., a Nevada corporation (to be dissolved)
Exhibit 23(i)
CONSENT OF INDEPENDENT ASSAYER
Health Care Centers of America, Inc.
I hereby consent to the filing of my report dated February 9, 1996,
relating to seven mineral claims belonging to Health Care Centers of America,
Inc., in Clark County, Nevada, with the annual report of Health Care Centers of
America, Inc., filed on Form 10-KSB in accordance with Section 13 of the
Securities Exchange Act of 1934.
I further consent to the reference to my name in such report, to the effect
that I have tested three samples delivered to me from such claims, and that such
samples indicate commercial quantities of precious metals, including gold,
platinum, iridium, and osmium.
Metallurgical Research & Assay Laboratory
By: /s/ Donald E. Jordan
-----------------------
Donald E. Jordan
Henderson, Nevada
April 25, 1997
EXHIBIT 23 (ii)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Health Care Centers of America, Inc.
I hereby consent to the use of my report dated April 18, 1997, in the Form
10-KSB annual report of Health Care Centers of America, Inc., filed on Form
10-KSB in accordance with Section 13 of the Securities Exchange Act of 1934.
I also consent to my report referred to above being considered as
comprehending my opinion that the supplemental schedules of Health Care Centers
of America. Inc. and its subsidiaries as of December 31. 1995 and 1996 and for
each of the two years then ended, included in such annual report, when
considered in relation to the basic consolidated financial statements, present
fairly in all material respects the information shown therein.
/s/ W. Dale McGhie
-------------------
W. Dale McGhie, CPA
Reno, Nevada
April 22, 1997
EXHIBIT 99(i)
METALLURGICAL RESEARCH AND ASSAY LABORATORY
7 4 5 SUNSET RD. SUITE 8
HENDERSON, NV. 8 9015
February 9, 1996
Mr. Harrigan
We retrieved and analyzed three samples for you (results shown on separate
assay reports #'s 2220, 2221, and 2222 dated 2/9/96. These samples were taken
over a 7 claim area and identified as B4 foot bank, M14 foot bank, and T
prospect hole 200 yards to the north east. These samples, if representative of
the 7 claims, have values according to our assays above as follows:
7 claims = 700,000 cubic yards and each cubic yard weighs ca
1.5 ton. or 1,050,000 ton/7claims.
The average value/ton for each metal is:
Gold $ 80
Platinum 700
Rhodium 250
Osmium 1000
Ruthenium 18
Palladium 15
Iridium 180
TOTAL $2243/ton
$2243 X 1,050,000 tons = $2,355,150,000.00
Of course these values are just an estimate but from the assays and the
area covered we feel that they are a pretty good estimate.
Very truly yours
Donald E. Jordan
<PAGE>
Maps (pp 82-83) attached to Exhibit 99(i) filed on paper only.
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 1 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
--- -------- -------- ------ ---------
SW of NE 17 & 20 16 S 71 E See attached Map
- -------- ------- ----- ---- ----------------
SE of NW 17 & 20 16 S 71 E "
- -------- ------- ---- ---- ------------
NW of SE 17 & 20 16 S 71 E "
- -------- ------- ---- ---- ------------
NE of SW 17 & 20 16 S 71 E "
- -------- ------- ---- ---- ------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 600 feet wide, such that 600
feet is claimed in a North/South direction and 1,500 feet in a East/West
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: N Gray "
--- ---- -----------------
No. 3: NW Gray "
-- ---- -----------------
No. 4: SE Gray "
-- ---- -----------------
No. 5: S Gray "
--- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
------------------
(Agent)
RECORDER"S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
76
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 2 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
--- -------- -------- ------ ---------
NW of NE 20 16 S 71 E See attached Map
- -------- -- ----- ---- ----------------
NE of NW 20 16 S 17 E "
- -------- -- ---- ---- ------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 60 feet wide, such that 600
feet is claimed in a North/South direction and 1,500 feet in a East/West
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: N Gray "
--- ---- -----------------
No. 3: NW Gray "
-- ---- -----------------
No. 4: SE Gray "
-- ---- -----------------
No. 5: S Gray "
--- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
------------------------
(Agent)
RECORDER'S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
77
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 3 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
- --- ------- -------- ----- --------
NW 20 16 S 71 E See attached Map
- -- -- ----- ---- ----------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 600 feet wide, such that 600
feet is claimed in a North/South direction and 1,500 feet in a East/West
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: N Gray "
--- ---- -----------------
No. 3: NE Gray "
-- ---- -----------------
No. 4: SE Gray "
-- ---- -----------------
No. 5: S Gray "
--- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
----------------------------
(Agent)
RECORDER"S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
78
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 4 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
- --- ------- -------- ----- --------
SW 17 16 S 71 E See attached Map
- -- -- ---- ---- ----------------
NW 20 16 S 71 E "
- -- -- ---- ---- ------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 600 feet wide, such that 600
feet is claimed in a North/South direction and 1,500 feet in a East/West
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: N Gray "
--- ---- -----------------
No. 3: NW Gray "
-- ---- -----------------
No. 4: SE Gray "
-- ---- -----------------
No. 5: S Gray "
--- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
------------------------------
(Agent)
RECORDER"S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
79
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 6 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
--- ------- -------- ----- --------
SW of SE 17 16 S 71 E See attached Map
- -------- -- ---- ---- ----------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 600 feet wide, such that 600
feet is claimed in a East/West direction and 1,500 feet in a North/South
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: E Gray "
--- ---- -----------------
No. 3: SE Gray "
-- ---- -----------------
No. 4: NW Gray "
-- ---- -----------------
No. 5: W Gray "
-- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
--------------------------
(Agent)
RECORDER"S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
80
<PAGE>
CERTIFICATE OF LOCATION
LODE MINING CLAIM
TO ALL WHOM IT MAY CONCERN:
The Undersigned hereby certifies that he has caused to be located the MATZ
# 5 Lode Mining Claim in the following quarter section(s):
1/4 Section Township Range Meridian
--- ------- -------- ----- --------
SE of SW 17 16 S 71 E See attached Map
- -------- -- ---- ---- ----------------
SW of SE 17 16 S 71 E "
- -------- -- ---- ---- ------------
in Clark County, Nevada, on the 5th day of March, 1991.
The name and mailing address of the locator is:
Maurice W. Furlong, 5630 Sun Valley # 31, Sparks, Nevada 89433
Bill Harmatz, 3925 Bent Tree Dr., Sarasota, Florida 34241
The claim is approximately 1,500 feet long and 600 feet wide, such that 600
feet is claimed in a East/West direction and 1,500 feet in a North/South
direction from the point of discovery (monument of location), at which the
notice of location was posted, together with 30 feet on each side of the
monument of location and center line of the claim. The general course of the
lode or vein is from the North East to the South West direction.
The number, location and markings on each side corner or corner monument
are as follows:
Location Markings Description
-------- -------- -----------
No. 1: NE Gray Aluminum Tube 37" long
-- ---- ----------------------
No. 2: E Gray "
--- ---- -----------------
No. 3: SE Gray "
-- ---- -----------------
No. 4: NW Gray "
-- ---- -----------------
No. 5: W Gray "
--- ---- -----------------
No. 6: SW Gray "
--- ---- -----------------
As erected on the ground, each side center or corner monument is marked as
described above by Paint (e.g. metal tags, paint on posts).
The work of location consisted of making a claim map as provided in NRS
517.040.
Dated this 13th day of March, 1991.
SIGNATURE OF LOCATOR:
By: Maurice W. Furlong
------------------------------
(Agent)
RECORDER'S STAMP
Suggested Form - Nevada Department of Minerals
Nevada - Lode Certificate of Location - NRS 517.050
81
EXHIBIT 99(ii)
Metallurgical Research and Asssay Laboratory
745 Sunset Road Suite 8
Henderson, NV 89015
702-565-0074
702-564-0726
ASSAY REPORT
- ------------
ASSAY NUMBER 2813A DATE: 3/21/97
----------- ----------
CUSTOMER CRAIG FURLONG
---------------------------------------
SAMPLE INSTRUCTION COMPOSITE OF ARIZONA ORE
---------------------------------------
- --------------------------------------------------------------------------------
Element ppm or up/g troy oz/s.ton
------- ----------- -------------
Au-Gold 42.7 1.24
Ag-Silver 54.5 1.59
Pt-Platinum 180.5 5.26
Rh-Rhodium 56.0 1.63
Os-Osmium 357.0 10.41
Ru-Ruthenium 51.0 1.49
Pd-Palladium 13.8 .40
Ir-Iridium 279.5 8.15
Fe-Iron 441,000.0 12,862.21
Hg-Mercury 363.5 10.60
SULFUR: 0.043%
Sio2: 39.8%
REGISTERED ASSAYER
CERTIFICATE NO. 19127
DONALD E. JORDAN
Date signed 3/21/97
ARIZONA U.S.A.
UNLESS PRIOR ARRANGEMENTS ARE MADE, ALL SMAPLES WILL DISCSARDED AFTER 30 DAYS.
- --------------------------------------------------------------------------------
THESE RESULTS ARE BASED ON WELL KNOWN ACCEPTED ANALYTICAL PROCEDURES USED SOLELY
ON THE SAMPLE SUBMITTED BY THE CUSTOMER. THIS REPORT IS PREPARED FOR THE
EXCLUSIVE USE OF THE CUSTOMER. NO WARRANTIES AS TO THE REPRODUCIBILITY OR
EXTRACTABILITY OF MATERIAL OTHER THAN THE SAMPLE IS GIVEN. DONLD E. JORDAN
AND/OR METALLURGICAL RESEARCH AND ASSAY LABORATORY MAKE NO REPRESENTATION
EXPRESS OR IMPLIED ON MATERIAL OTHER THAN THAT REPRESENTED BY THE SAMPLE
ASSAYED.
- --------------------------------------------------------------------------------
NOTE: "# VALUE!" MEANS THAT ELEMENT HAS NOT BEEN ANALYZED FOR THIS REPORT.
<PAGE>
EXHIBIT 99(ii)
Metallurgical Research and Asssay Laboratory
745 Sunset Road Suite 8
Henderson, NV 89015
702-565-0074
702-564-0726
ASSAY REPORT
- ------------
ASSAY NUMBER 2813B DATE: 3/21/97
----------- ----------
CUSTOMER CRAIG FURLONG
---------------------------------------
SAMPLE INSTRUCTION COMPOSITE OF ARIZONA ORE
---------------------------------------
- --------------------------------------------------------------------------------
Element ppm or up/g troy oz/s.ton
------- ----------- -------------
B -Boron 0.0 0.0
Zn-Zinc 271.0 7.90
Ni-Nickel 1,110.0 32.37
Mo-Molybdenum 118.5 3.46
Re-Rhenium 4.0 0.12
As-Arsenic 1,385.0 40.39
Sb-Antimony 600.0 17.50
Co-Cobalt 630.0 18.37
Mn-Manganese 1,420.0 41.42
Mg-Magesium 375.0 10.94
Te-Tellerium 730.0 21.29
Sn-Tin 2,430.0 70.87
Cr-Chromium 17.1 0.50
Pb-Lead 765.0 22.31
Al-Aluminum 6,900.0 201.25
Tl-Thallium 89.5 2.61
Zr-Zirconium 40.5 1.18
Ti-Titanium 10,900.0 317.91
Li-Lithium 63.0 1.84
Cu-Copper 144.5 4.21
W -Tungsten 130.5 REGISTERED ASSAYER
Bi-Bismuth 54.5 CERTIFICATE NO. 19127
DONALD E. JORDAN
Date signed 3/21/97
ARIZONA U.S.A.
UNLESS PRIOR ARRANGEMENTS ARE MADE, ALL SMAPLES WILL DISCSARDED AFTER 30 DAYS.
- --------------------------------------------------------------------------------
THESE RESULTS ARE BASED ON WELL KNOWN ACCEPTED ANALYTICAL PROCEDURES USED SOLELY
ON THE SAMPLE SUBMITTED BY THE CUSTOMER. THIS REPORT IS PREPARED FOR THE
EXCLUSIVE USE OF THE CUSTOMER. NO WARRANTIES AS TO THE REPRODUCIBILITY OR
EXTRACTABILITY OF MATERIAL OTHER THAN THE SAMPLE IS GIVEN. DONLD E. JORDAN
AND/OR METALLURGICAL RESEARCH AND ASSAY LABORATORY MAKE NO REPRESENTATION
EXPRESS OR IMPLIED ON MATERIAL OTHER THAN THAT REPRESENTED BY THE SAMPLE
ASSAYED.
- --------------------------------------------------------------------------------
NOTE: "# VALUE!" MEANS THAT ELEMENT HAS NOT BEEN ANALYZED FOR THIS REPORT.
<PAGE>
EXHIBIT 99(ii)
Metallurgical Research and Asssay Laboratory
745 Sunset Road Suite 8
Henderson, NV 89015
702-565-0074
702-564-0726
ASSAY REPORT
- ------------
ASSAY NUMBER 2813C DATE: 3/21/97
----------- ----------
CUSTOMER CRAIG FURLONG
---------------------------------------
SAMPLE INSTRUCTION COMPOSITE OF ARIZONA ORE
---------------------------------------
- --------------------------------------------------------------------------------
Element ppm or up/g troy oz/s.ton
------- ----------- -------------
Se-Selenium 1,555.0 45.35
Ge-Geranium 1.7 0.05
Ga-Galium 820.0 23.92
Gd-Gadolinium 8.6 .25
Yb-Yitterbium 48.4 1.41
Nd-Neodymium 226.5 6.61
Pr-Praseodymium 17.1 0.50
Sm-Samerium 8.4 .24
Tm-Thulium 52.0 1.52
Lu-Luteium 44.2 1.29
Dy-Dysprosium 4.3 0.12
Ce-Cerium 435.5 12.70
Er-Erbium 153.0 4.46
Tb-Terbium 13.7 0.40
Eu-Europium 69.0 2.01
Ho-Holmium 3.1 0.09
U -Uranium 0.0 0.00
Sc-Sandium 4.3 0.13
Y -Yittrium 10.1 0.29
REGISTERED ASSAYER
CERTIFICATE NO. 19127
DONALD E. JORDAN
Date signed 3/21/97
ARIZONA U.S.A.
UNLESS PRIOR ARRANGEMENTS ARE MADE, ALL SMAPLES WILL DISCSARDED AFTER 30 DAYS.
- --------------------------------------------------------------------------------
THESE RESULTS ARE BASED ON WELL KNOWN ACCEPTED ANALYTICAL PROCEDURES USED SOLELY
ON THE SAMPLE SUBMITTED BY THE CUSTOMER. THIS REPORT IS PREPARED FOR THE
EXCLUSIVE USE OF THE CUSTOMER. NO WARRANTIES AS TO THE REPRODUCIBILITY OR
EXTRACTABILITY OF MATERIAL OTHER THAN THE SAMPLE IS GIVEN. DONLD E. JORDAN
AND/OR METALLURGICAL RESEARCH AND ASSAY LABORATORY MAKE NO REPRESENTATION
EXPRESS OR IMPLIED ON MATERIAL OTHER THAN THAT REPRESENTED BY THE SAMPLE
ASSAYED.
- --------------------------------------------------------------------------------
NOTE: " #VALUE!" MEANS THAT ELEMENT HAS NOT BEEN ANALYZED FOR THIS REPORT.
<PAGE>
EXHIBIT 99(ii)
Metallurgical Research and Asssay Laboratory
745 Sunset Road Suite 8
Henderson, NV 89015
702-565-0074
702-564-0726
ASSAY REPORT
- ------------
ASSAY NUMBER 2813D DATE: 3/21/97
----------- ----------
CUSTOMER CRAIG FURLONG
---------------------------------------
SAMPLE INSTRUCTION COMPOSITE OF ARIZONA ORE
---------------------------------------
- --------------------------------------------------------------------------------
Element ppm or up/g troy oz/s.ton
------- ----------- -------------
Ca-Calcium 8,050.0 234.79
Be-Beryllium 2.0 0.06
V -Venadium 1,485.0 43.31
Ta-Tantalum 4.6 .13
La-Lenthamum 147.5 4.30
Th-Thorium 95.5 2.79
P -Phosphorous 1,320.0 38.50
K -Potassium 520.0 15.17
REGISTERED ASSAYER
CERTIFICATE NO. 19127
DONALD E. JORDAN
Date signed 3/21/97
ARIZONA U.S.A.
UNLESS PRIOR ARRANGEMENTS ARE MADE, ALL SMAPLES WILL DISCSARDED AFTER 30 DAYS.
- --------------------------------------------------------------------------------
THESE RESULTS ARE BASED ON WELL KNOWN ACCEPTED ANALYTICAL PROCEDURES USED SOLELY
ON THE SAMPLE SUBMITTED BY THE CUSTOMER. THIS REPORT IS PREPARED FOR THE
EXCLUSIVE USE OF THE CUSTOMER. NO WARRANTIES AS TO THE REPRODUCIBILITY OR
EXTRACTABILITY OF MATERIAL OTHER THAN THE SAMPLE IS GIVEN. DONLD E. JORDAN
AND/OR METALLURGICAL RESEARCH AND ASSAY LABORATORY MAKE NO REPRESENTATION
EXPRESS OR IMPLIED ON MATERIAL OTHER THAN THAT REPRESENTED BY THE SAMPLE
ASSAYED.
- --------------------------------------------------------------------------------
NOTE: " #VALUE!" MEANS THAT ELEMENT HAS NOT BEEN ANALYZED FOR THIS REPORT.
