SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
For the fiscal year ended December 31, 1997
------------------
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
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
- --------------------------------------------------------------------------------
(formerly HEALTH CARE CENTERS OF AMERICA, INC.)
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Nevada 62-1210877
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 North Arlington (ste. 22F)
Reno, Nevada 89501
--------------------------------------
(Address of Principal Executive Office)
(702) 786-1461
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12 (b) of Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common stock, par value &.001 per share
- --------------------------------------------------------------------------------
Convertible Preferred Stock, par value $.001 per share
- --------------------------------------------------------------------------------
Check whether the registrant (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
1
<PAGE>
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 REGISTRANTS
State the number of shares outstanding of the issuer's common stock as of
December 31, 1997: 871,400,068 shares (871,401 after given effect of reverse
split).
Transitional Small Business Disclosure Format (check one):
Yes No X
---- ----
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: The issuers Second Amended Form
10-SB, and all exhibits attached thereto, filed December 1999.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Item Page
- ---- ----
PART I
------
<S> <C> <C>
Item 1 Description of Business 4
Item 2 Description of Property 4
Item 3 Legal Proceedings 4
Item 4 Submission of Matters to a Vote of
Security Holders 4
PART II
-------
Item 5 Market for Common Equity and Related 4
Stockholder Matters 4
Item 6 Management's Plan of Operation 5
Item 7 Financial Statements 7 - 16
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 30
PART III
--------
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 30
Item 10 Executive Compensation 30
Item 11 Security Ownership of Certain Beneficial
Owners and Management 31
Item 12 Certain Relationships and Related
Transactions 31
Item 13 Exhibits and Reports on Form 8-K 31
</TABLE>
3
<PAGE>
PART I
------
Item 1. Description of Business.
The information contained in Part I, Item 1, "Description of Business"
of the issuer's Second Amended Form 10-SB is incorporated herein by reference.
Item 2. Description of Property
The information contained in Part I, Item 3, "Description of Property"
of the issuer's Second Amended Form 10-SB is incorporated herein by reference.
Item 3. Legal Proceedings
The information contained in Part II, Item 2, "Legal Proceedings" of
the issuer's Second Amended Form 10-SB is incorporated herein by reference.
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:
4
<PAGE>
High Bid Low Bid
-------- -------
1997
Quarter ended December 31 $ .0275 $ .001
Quarter ended September 30 .07 .015
Quarter ended June 30 .105 .021
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
Holders
The approximate number of record holders of the Company's common stock
as of December 31, 1997, was 1,240.
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
The information contained in Part II, Item 4, "Recent Sales of
Unregistered Securities, of the issuer's Second Amended Form 10-SB is
incorporated herein by reference.
Item 6. Management's Discussion and Analysis
or Plan of Operation
The information contained in Part I, Item 2, "Management's Plan of
Operation", of the issuer's Second Amended Form 10-SB is incorporated herein by
reference.
5
<PAGE>
Item 7. Financial Statements
Index to Financial Statements
Page
no.
--------
Accountant's Audit Report 9
Financial Statements
Balance Sheet 10 - 11
Statement of Operations 12
Statement of Changes in Stockholders' Equity 13 - 15
Statement of Cash Flows 16
Notes to Financial Statements 17 - 26
Accountant's Report on Supplemental Schedules 27
Supplemental Schedules
Schedule A Property, Plant and Equipment 28
Schedule B Accumulated Depreciation of
Property, Plant and Equipment 29
6
<PAGE>
Form 10K
SEC File No. 0-29006
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
7
<PAGE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
TABLE OF CONTENTS
Page
----
ACCOUNTANT'S REPORTS
on Financial Statements 9
on Supplemental Schedules 27
FINANCIAL STATEMENTS
Consolidated Balance Sheets 10 - 11
Consolidated Statements of Operations 12
Consolidated Statements of Changes in Stockholders' Equity 13 - 15
Consolidated Statements of Cash Flows 16
Notes to the Consolidated Financial Statements 17 - 26
Supplemental Schedules 28 - 29
8
<PAGE>
W. DALE Mcghie Town & Country Plaza
CERTIFIED PUBLIC ACCOUNTANT 1539 Vassar St. Reno, Nevada 89502
Tel: 702-323-7744
Fax: 702-323-8288
To the Board of Directors
Hexagon Consolidated Companies of America, Inc.
ACCOUNTANT'S AUDIT REPORT
I have audited the accompanying consolidated balance sheets of Hexagon
Consolidated Companies of America, Inc. (formerly Health Care Centers of
America, Inc.) (a development stage company) as of December 31, 1997, 1996 and
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, 1997. 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 Hexagon Consolidated
Companies of America, Inc. as of December 31, 1997, 1996, and 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, as discussed in Note 4 to the
financial statement. A majority of the Company's assets consist of mineral
inventories and mineral properties with a carrying value of $269,375,000.
Recovery of the Company's mineral inventories is dependent upon the extraction
and recovery of mineral ore in an economical fashion The financial statements do
not include any adjustments that might result in a negative outcome as a result
of this uncertainty.
/s/ W. Dale McGhie
- ------------------
W. Dale McGhie
Reno, Nevada
November 14, 1999
9
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
ASSETS
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash (Note 1) $ 470 $ 196,214 $ 865
Prepaid expenses -- 1,500 --
------------ ------------ ------------
Total current assets 470 197,714 865
------------ ------------ ------------
PROPERTY, PLANT and EQUIPMENT (Note 1)
Equipment held for rent 555,185 555,185 --
Equipment 525,418 24,935 16,046
Furniture and fixtures 12,307 6,249 1,679
------------ ------------ ------------
1,092,910 586,369 17,725
Less accumulated depreciation 19,433 11,355 7,055
------------ ------------ ------------
Net property, plant and equipment 1,073,477 575,014 10,670
------------ ------------ ------------
MINERAL INVENTORIES (Note 5)
Purchased mineral inventory 200,000,000 200,000,000 200,000,000
Acquisition costs 69,375,000 -- --
------------ ------------ ------------
269,375,000 200,000,000 # 200,000,000
------------ ------------ ------------
OTHER ASSETS
Investment in future acquisitions (Note 3,12) -- 49,016,330 49,016,330
Notes receivable (Note 6) -- 260,000 260,000
Interest receivable -- 6,600 1,650
Organizational costs, net
of amortization (Note 1) -- 47,422 56,782
Deposit held in escrow -- -- 191,564
------------ ------------ ------------
Total other assets -- 49,330,352 49,526,326
------------ ------------ ------------
Total assets $270,448,947 $250,103,080 $249,537,861
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
10
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 82,281 $ 28,206 $ 31,460
Shareholder advance -- 4,400 4,400
Accrued expenses 130,523 74,922 5,474
Notes payable - shareholder (Note 7) 267,373 462,809 462,809
------------- ------------- -------------
Total current liabilities 480,177 570,337 504,143
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value;
900,000,000 shares authorized;
issued and outstanding:
885,182 shares; 510,182 shares and
410,115 shares on December 31, 1997,
1996 and 1995, respectively 885 510 410
Convertible preferred stock, $0.001 par value;
200,000,000 shares authorized; issued
and outstanding: 200,000,000 shares
on December 31, 1997 200,000 -- --
Paid in capital 319,884,007 263,840,731 262,967,384
Retained deficit (Note 1) -- (13,702,162) (13,702,162)
Deficit accumulated during the
development stage (50,116,122) (606,336) (231,914)
------------- ------------- -------------
Total stockholders' equity 269,968,770 249,532,743 249,033,718
------------- ------------- -------------
Total liabilities and stockholders' equity $ 270,448,947 $ 250,103,080 $ 249,537,861
============= ============= =============
The accompanying notes are an integral part of these financial statements
</TABLE>
11
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
AND THE PERIOD FROM JUNE 29, 1993 THROUGH DECEMBER 31, 1997
<CAPTION>
June 29, 1993
Through
December 31, December 31, December 31, December 31,
1997 1996 1995 1997
--------------- --------------- --------------- ---------------
REVENUE $ - $ - $ - $ -
--------------- --------------- --------------- ---------------
EXPENDITURES
<S> <C> <C> <C> <C>
Depreciation and amortization 8,078 13,660 5,487 31,571
Dues and subscriptions 1,010 4,627 -- 9,507
Organizational costs 47,422 -- -- 47,422
Professional fees 206,689 119,545 48,305 383,047
Postage and courier service 5,975 16,500 1,668 25,401
Management fee 200,000 -- -- 200,000
Marketing and promotion 970 1,367 -- 33,453
Travel and entertainment 55,391 60,894 18,599 178,694
Telephone 50,698 35,761 4,680 93,711
Other office expenses 31,072 26,473 4,592 65,832
Program development 4,000 750 5,000 41,710
Rent 8,080 4,220 -- 14,507
Imputed wages 48,000 30,000 -- 81,172
------------ ------------ ------------ ------------
Total expenses from operations 667,385 313,797 88,331 1,206,027
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES)
Interest income -- 8,822 3,214 12,036
Bad debt expense (266,600) -- -- (266,600)
Interest expense (55,601) (69,447) (10,283) (135,331)
------------ ------------ ------------ ------------
Total other income (expense) (322,201) (60,625) (7,069) (389,895)
------------ ------------ ------------ ------------
Net loss before
Federal income taxes (Note 1) (989,586) (374,422) (95,400) (1,595,922)
------------ ------------ ------------
Federal income taxes (Note 1) -- -- -- --
------------ ------------ ------------ ------------
Net loss before
extraordinary item (989,586) (374,422) (95,400) (1,595,922)
------------ ------------ ------------
EXTRAORDINARY ITEM
Impairment of investments (Note 5) 48,520,200 -- -- 48,520,200
------------ ------------ ------------ ------------
Total extraordinary item 48,520,200 -- -- 48,520,200
------------ ------------ ------------ ------------
Net loss $(49,509,786) $ (374,422) $ (95,400) $(50,116,122)
============ ============ ============ ============
Net loss per share before
extraordinary item (Note 1) $ (1.1589) $ (0.8137) $ (0.3131)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
12
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JUNE 29, 1993 THROUGH SEPTEMBER 30, 1997
<CAPTION>
Deficit
Accumulated
during the
Common Stock Preferred Stock Additional Retained Development
Stock Amount Stock Amount paid in capital Deficit Stage
----- ------ ----- ------ --------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 29, 1993 12,038,500 $ 240,770 - $- $ 13,461,391 $ (13,702,162) $ -
January 4, 1994, reverse stock split
one share of new stock
for three shares
of old stock and change
par value from
$.02 to $.001 (8,025,667) (236,757) 236,757
June 30, 1998, reverse
stock split - one
share of new stock
for 1,000 shares of
old stock (4,008,820) (4,009) 4,009
Issuance of fractional shares 446
On June 29, 1993, Issued
Common stock to current
shareholders for loss
of prior stock 600 -
Issued shares of common stock to
Masterhouse Ltd. (a related party)
for 3500 master recording value
unknown 1,500 2 (2)
Net loss through December 31, 1993 (819)
-------------------------------------------------------------------------------------
Balance December 31, 1993 6,559 6 - - 13,702,155 (13,702,162) (819)
In January and May 1994, Issued
common stock for services valued
at par 31,960 32 31,928
In May 1994, record retroactive adjustment
in connection with the acquisition of
ElfWorks, Ltd., pooling of interest 40,000 40 39,960
(Note 2)
In May 1994, Issued common stock, held in
trust capacity, valued at estimatd
cost of learning center (Note 2) 400 - 50,000
In May 1994, Issued common stock for
a mining company, valued at current
replacement cost of equipment 12,000 12 86,118
(see Note 2)
</TABLE>
...continued
The accompanying notes are an integral part of these financial statements
13
<PAGE>
<TABLE>
HEXAGON CONSOLIDATEDCOMPANIES OF AMERICA, INC.
(Formerly Health Care Centers of America, Inc.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JUNE 29, 1993 THROUGH SEPTEMBER 30, 1997
<CAPTION>
Deficit
Accumulated
during the
Common Stock Preferred Stock Additional Retained Development
Stock Amount Stock Amount paid in capital Deficit Stage
----- ------ ----- ------ --------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
In July and September 1994, Issued common
stock, held in trust capacity, in
exchange for real estate valued
atfair market value 94,921 $ 95 - $ - $ 22,942,267 $ - $ -
In September 1994, Issued shares for a
mining co., valued replacement cost
of equipment, (Note 2) 20,000 20 409,980
Capital contributed by shareholders - - 126,768
Net loss through December 31, 1994 (135,695)
---------------------------------------------------------------------------------------
Balance December 31, 1994 205,840 205 - - 37,389,176 (13,702,162) (136,514)
In February 1995, Issued common stock
for services, recorded at par value 5,000 5 4,995
In February and August 1995, Issued
common stock, held in trust capacity, in
exchange for real estate valued at
fair market value 95,000 95 22,961,276
In August 1995, Issued common stock in
for a music Co. valued at a discounted
stock price 4,000 4 2,499,996
In August 1995, Issued common stock
for inventory of precious metal ore,
valued at a discounted stock price
(Note 5) 100,000 100 199,999,900
In September 1995, Issued common
stock in exchange for
services performed in
conjunction with the real estate
transactions, valued at fair market value 275 1 66,466
Capital contributed by shareholders - - 45,575
Net loss through December 31, 1995 (95,400)
---------------------------------------------------------------------------
Balance December 31, 1995 410,115 410 - - 262,967,384 (13,702,162) (231,914)
</TABLE>
...continued
The accompanying notes are an integral part of these financial statements
14
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM JUNE 29, 1993 THROUGH SEPTMEBER 30, 1997
<CAPTION>
Deficit
Accumulated
during the
Common Stock Preferred Stock Additional Retained Development
Stock Amount Stock Amount paid in capital Deficit Stage
----- ------ ----- ------ --------------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
In June 1996, Issued common stock for
a mining interest, transaction not
consummated, stock to be recovered,
valued at zero (Note 9) 98,000 $ 98 - $ - (98) $ - $ -
In June 1996, Issued common stock
in exchange for equipment (Note 1) 2,067 2 555,183
Imputed value of services provided by
Officers and/or Directors (Note 10) - - 34,970
Capital contributed by shareholders - - 283,292
Net loss through December 31, 1996 (374,422)
---------------------------------------------------------------------------------------
Balance December 31, 1996 510,182 510 - - 263,840,731 (13,702,162) (606,336)
InFebruary 1997, Issued shares of
common stock in
exchange for a Mining
Interest valued at a discounted
stock price (Note 2) 375,000 375 - - 69,374,625
Quasi-reorganization, 1997 (Note 1) (13,702,162) 13,702,162
In October 1997, authorized and
issued convertible preferred stock
for services and expenses, valued
at par (Note 1) 200,000,000 200,000
Imputed value of services provided by
Officers and/or Directors (Note 13) - - 51,960
Capital contributed by shareholders - - 318,853
Net loss through December 31, 1997 (49,509,786)
---------------------------------------------------------------------------------------
Balance December 31,1997 885,182 $ 885 200,000,000 $ 200,000 $319,884,007 $ - $(50,116,122)
======= ===== =========== ========= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
15
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
AND FROM JUNE 29, 1993 THROUGH DECEMBER 31, 1997
<CAPTION>
June 29, 1993
Through
December 31, December 31, December 31, December
1997 1996 1995 31, 1997
---------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (49,509,786) $ (374,422) $ (95,400) $ (50,116,122)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 8,078 13,660 5,487 31,571
Services paid in stock - - 5,000 36,960
Imputed value of services provided by
Officers and Directors (Note 13) 51,960 34,970 - 86,930
Impairment of investments (Note 3) 48,520,200 - - 48,520,200
Preferred stock issued for services 200,000 - - 200,000
Organizational costs 47,422 - (7,160) 27,862
Net (Increase) Decrease in:
Prepaid expenses 1,500 (1,500) - -
Notes receivable 260,000 - (260,000) -
Interest receivable 6,600 (4,950) (1,650) -
Deposits - 191,564 (191,564) -
Net Increase (Decrease) in:
Accounts payable 54,075 (3,254) 31,459 82,280
Accrued expenses 55,601 69,448 5,474 130,523
---------------- ----------------- --------------- -----------------
Net Cash Used by Operating Activities (304,350) (74,484) (508,354) (999,796)
---------------- ----------------- --------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and fixtures (6,058) (4,570) 830 (12,307)
Purchase of equipment (4,353) (8,889) - (29,288)
---------------- ----------------- --------------- -----------------
Net Cash Used by Investing Activities (10,411) (13,459) 830 (41,595)
---------------- ----------------- --------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed by shareholders 318,853 283,292 45,575 774,487
Payment on shareholder loan (195,436) - - (195,436)
Borrowings (Note 7) (4,400) - 462,808 462,810
---------------- ----------------- --------------- -----------------
Net Cash Provided by Financing Activities 119,017 283,292 508,383 1,041,861
---------------- ----------------- --------------- -----------------
Net Increase (Decrease) in Cash (195,744) 195,349 859 470
-
Cash at the beginning of period 196,214 865 6 -
---------------- ----------------- --------------- -----------------
Cash at the end of period $ 470 $ 196,214 $ 865 $ 470
================ ================= =============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
16
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
Hexagon Consolidated Companies of America, Inc. a Nevada Corporation
headquartered in Reno, Nevada was incorporated under the name Carleton
Enterprises, Ltd. On November 13, 1984 the Company changed its name to SCN, Ltd.
On December 15, 1986, an involuntary petition for reorganization, under Chapter
11 of the U.S. Bankruptcy Code, was filed against SCN, Ltd. In December 1988,
the Company became debtor in possession of its assets under a voluntary
proceeding. The Company was dormant until September 31, 1993 at which time the
bankruptcy was ordered dismissed. On November 19, 1993 the Company changed its
name to Health Care Centers of America, Inc. (HCCA). On July 7, 1999, the
Company changed its name to Hexagon Consolidated Companies of America, Inc. The
Company is a development stage enterprise as defined by FASB No. 7. "Accounting
and Reporting by Development Stage Enterprises".
On June 30, 1998, the Company authorized a reverse stock split. One new share
was issued for 1,000 old shares. The par value remained the same at $.001 per
share. These financial statements have been retroactively restated for this
change in capital stock.
In January, 1997, the Company voted to eliminate the previous retained deficit
through a quasi-reorganization. This resulted in the elimination of the deficit
in retained earnings of $13,702,162. It had no effect on assets or liabilities.
On October 2, 1997, the Company authorized and issued 200,000,000 of the
Company's preferred stock for services and expenditures valued at $200,000.
NATURE OF BUSINESS:
Currently the Company is focused on the development, management and exploitation
of three primary industry segments. The first is the development of mining
interests and exploitation of existing inventories of ore concentrate. The
second is the management and development of a wide range of real estate
interests. The third is to continue its previous entertainment activity of
marketing master recordings and recording new master recordings.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of its wholly owned
subsidiaries, MedAway International, Inc., Music Alley, Inc. and Peeples Mining
Company, Inc. All significant inter-company transactions have been eliminated.
MINERAL PROPERTIES;
Acquisition costs of mineral properties, rights and options together with direct
exploration and development expenditures thereon are deferred in the accounts to
be written off when production is attained or disposition occurs.
Such expenditures are accumulated and amortized using the units of production
method based upon the estimated proven mineral reserves in each cost center as
determined by independent assayers, or charged to income if any cost center is
determined to be unsuccessful.
If results from exploration warrant the abandonment of certain mineral
properties included in a group and retention of the remainder, all acquisition,
exploration and development expenditures relating to the entire group are deemed
to represent those expenditures relating to the mineral properties and
consequently, no adjustment is made in the accounts in respect of mineral
properties abandoned.
17
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
Administrative expenditures are charged to income in the year they are incurred.
ORGANIZATIONAL COSTS:
The Company has adopted Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities" issued in April 1998 by the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants.
Pursuant to SOP 98-5, organizational costs are expenses as incurred instead of
being capitalized and amortized.
FINANCIAL INSTRUMENTS:
At September 30, 1997 and December 31, 1996, the fair value of the Company's
notes payable and note receivable (see Notes 6 and 7) are assumed to be equal to
their reported carrying amounts.
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 units, an
on-site machine to process medical waste. The Company plans to sell or lease
these machines to hospitals. The machines were purchased June 1996 through an
exchange of 2,067 shares (after given effect to reverse split (see Note 1)) of
the Company's common stock. The transaction was valued at the seller's cost of
$555,185 or $23,133 per unit. This equipment is not being depreciated because it
has not yet been placed in service.
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 and since consolidation, there is
no provision for federal income tax.
USE OF ESTIMATES:
The preparation of financial statements in conformity with general accepted
accounting principals requires 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 853,932 for December 31, 1977; 460,149 for December 31, 1996,
and 304,673 for December 31,1995.
NOTE 2 - ACQUISITIONS
1. On June 26, 1996 the Company issued 40,000 shares (after given effect to
reverse split (see Note 1)) of its common stock in exchange for all of the
outstanding common stock of ElfWorks, Ltd. The business combination has
been accounted for as a pooling of interest and, accordingly, the Company's
consolidated financial statements have been given retroactive effect to
include the accounts and operations of ElfWorks, Ltd. for all periods prior
to the acquisition. ElfWorks, Ltd. had not commenced operations and had no
activity since inception, except for organizational costs of $40,000.
Therefore, the combined corporations will show no effect on the profit and
loss from ElfWorks Ltd. operations.
This combination was accounted for as a pooling of interest after
satisfying the twelve criteria referenced under APB 16, as follows: 1) each
company is autonomous, 2) each company is independent, 3) the combination
was effected in a single transaction, 4) common stock was issued for all
the common stock of ElfWorks, Ltd., 5) the equity interest of common stock
of each company was unchanged, 6) the combining companies reacquired a
nominal number of shares, 7) the ratio interest of individual stockholders
18
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
was unchanged, 8) voting rights are exercisable, 9) the combination was
resolved at the consummation date of June 26, 1996, 10) ElfWorks, Ltd.
agreed not to retire common stock to effect the combination, 11) there is
no intent to dispose of a significant part of the assets of ElfWorks, Ltd.,
and 12) no financial arrangements have been made for the benefit of former
stockholders.
Advertising credits (trade due bills) were acquired through the acquisition
of ElfWorks, Ltd. Such credits are recorded at the predecessor's cost of
zero. With reference to Staff Accounting Bulletin No. 48 Topic 5-G
(9/27/82), when a company acquires assets from shareholders in exchange for
stock prior to registration of a the company, such asset should generally
be recorded at the cost to the shareholder. The credits are an irrevocable
promise (trade due bill) to provide the holder with network programming
time and commercial advertising time. According to AIN's current rate card,
the Company could broadcast a 1/2 hour program 5 days a week at prime time
for more than 4 years, throughout the networks 161 stations. The
certificates are transferable and negotiable.
2. The Company's recent registration of their common stock under the Exchange
Act has been declared effective on February 4, 1997. Consummation of the
following stock exchange agreements have been declared effective:
o Effective February 4, 1997, the Company consummated the purchase of
Nashville Music Consultants, Inc. (NMC) a Tennessee Corporation
headquarters in Nashville. On April 21, 1995, the Company entered into a
stock exchange agreement with NMC whereby 4,000 shares (after given effect
to reverse split (see Note 1)) of the Company's common stock valued by
using the stock price on the date of the agreement discounted 50% for
restricted stock issued, was exchanged for all the issued and outstanding
shares of NMC. The subject matter of the stock exchange agreement with NMC
concerned only the music publishing operation of NMC. On September 1, 1998,
NMC (now Nashville Music Group (NMG)) and the Company entered into an
amendment to the stock exchange agreement, which was effective as of April
21, 1995. The reason for the amendment was to conform operations to the
intent of the initial stock exchange. NMC had expanded its operations into
areas beyond music publishing. As a result of the amendment, the publishing
division of NMC, Music Alley, Inc., was transferred to the Company. Since
the amendment to the agreement, HCCA received various rights to the
publishing operation. Since receiving these rights, there has been no
activity and Music Alley, Inc. has been dormant. The remaining value has
been reserved as impairment of assets (see Note 3). The uncertainty of
obtaining this information is so great, it is felt that the value may have
been impaired to an unknown extent. Therefore, it has been fully reserved
against until such time that the appropriate information is obtained.
o Effective February 4, 1997, the Company consummated the purchase of F & H
Mining, Inc. (F&H), an international business corporation, and Peeples
19
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
Mining L.L.C. (Peeples LLC), an Arizona limited liability company,
accounted for as a purchase. Both F& H and Peeples LLC are primarily
engaged in the mining of precious metals. On March 25 1994, the Company
entered into a stock exchange agreement with F&H, whereby 12,000 shares
(after given effect to reverse split (see Note 1)) of the Company's common
stock was exchanged for all the issued and outstanding shares of F&H valued
current replacement cost of equipment purchased of $86,130. On June 18,
1994, the Company entered into a stock exchange agreement with Peeples LLC,
whereby 20,000 shares (after given effect to reverse split (see Note 1)) of
the Company's common stock was exchanged for all the issued and outstanding
shares of Peeples LLC also valued at current replacement cost of the
equipment purchased of $410,000. Both companies were dormant and had no
operations for several years.
o On February 4, 1997, the Company formed Peeples Mining Company, a Nevada
Corporation, and a wholly owned subsidiary of the Company. The assets of
Peeples LLC and F&H were consolidated into the new corporation. As a
result, Peeples Mining Company now has mining operations in Arizona, Nevada
and California. The Arizona operation includes a mineral lease on 377.11
acres. The Nevada property includes 7 claims on 140 acres. The production
facility and lab equipment owned by Peeples Mining Company located at the
Arizona mill site operation. Assay reports obtained by professionals in the
industry indicate the expected value of these reserves to be in excess of
the stock value on the date of these agreements discounted by 50% for
restriction.
o On February 6, 1997, 375,000 shares (after given effect to reverse split
(see Note 1)) of common stock was issued to Zarzion, Ltd., for the purchase
of 17 mining claims covering a 340-acre site in San Bernardino County,
California. The shares were valued at $69,375,000, the stock price on the
date of the agreement discounted by 50% for restriction. Assay reports
obtained by an independent registered assayer indicate a value in excess of
this value. There has been no activity on this property for several years.
3. The following stock exchange agreements have not yet consummated:
o In March, 1994, the Company entered into a stock exchange agreement with
Mr. William Jackson, thereafter amended, whereby 400 shares (after given
effect to reverse split (see Note 1)) of the Company's common stock was
exchanged for the future operations of a learning center in Reno, Nevada.
The stock was valued at $50,000, the estimated cost to commence operations
for the Reno facility. Consummation of the transaction is dependent on
completion of the learning center, which is unknown at this time. The
Company has directed its stock transfer agent to issue a "stop transfer"
order regarding the stock previously transferred with respect to this
transaction. Therefore, this acquisition has been deemed to be impaired
(see Note 3).
o The company has entered into two stock exchange agreements to acquire real
estate from The Rainbow Group and The Senior Group. The subject matter of
these agreements is currently in litigation in the Circuit Courts of Cook
and DuPage Counties, Illinois and the Federal District Court for Middle
Tennessee, Nashville, Tennessee. The Company has directed its transfer
agent to issue a "stop transfer" order concerning all stock that had been
issued in exchange for the real estate. Also, it is the Company's position
that all such stock is being held by the recipient in a trust capacity for
the benefit of both parties. Due to this litigation, the Company is unable
to obtain necessary and required financial information. The uncertainty of
obtaining this information is so great, it is felt that the value may have
been impaired to an unknown extent. Therefore, it has been fully reserved
against until such time that the appropriate information is obtained (see
Note 3). Furthermore, the final determination of the consummation of these
transactions shall be determined by the above referenced courts.
As a good faith measure, the Company issued stock upon the signing of the
various stock exchange agreements. In the event that any of the agreements
are not ultimately consummated, the Company shall pursue the return of the
stock issued or the fair market value of such stock.
20
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
NOTE 3 - CONTRACTS FOR ACQUISITION
The Company has identified and entered into stock exchange agreements with
entities in the mining, real estate, entertainment and education industries.
These agreements provided that the other party to the agreement would 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. This right has lapsed inasmuch as the Company's recent registration of its
common stock under the Exchange Act was declared effective on February 4, `1997.
All of such contracts became effective as of that date, with the exception of
the Company's contracts of the acquisition of the real estate, which are the
subject of litigation and have not been consummated. The uncertainty of
obtaining the required financial information and of the consummation of the
transactions, it is felt that the value may have been impaired to an unknown
extent. Therefore, it has been fully reserved against until such time that the
transactions are consummated.
As shown below, the criteria used to value the stock exchange transactions vary
by agreement. For the purposes of these financial statements, the value was
calculated using the lower of the following: 1) the market value estimated by
cash flow/income, if available, or 2) the value of the stock on the date of the
agreement discounted 50% for restriction. The calculated value of each probable
exchange agreement was booked to Investment in Future Acquisition (Asset)
resulting in a total value recorded of $49,016,330 at December 31, 1996 (see
below). Exchange agreements entered into but now determined to be "not probable"
have been reserved against in the financial statements until further negotiated
and consummated. Such contracts included abandoned contracts for the acquisition
of health care practices and an adjustment of shares for the learning centers
and assets deemed to have been impaired (see Note 2).
<TABLE>
<CAPTION>
Stock exchanged for the specific assets have been valued as follows:
Value
Description of Assets to be acquired by the Company Assigned Ref.
- --------------------------------------------------- -------- ----
<S> <C> <C>
o A future learning center to be located in Reno, Nevada $ 50,000 (a)
o A mining interest in 7 claims on 140 acres, located in Nevada 86,130 (b)
o A mineral lease on 377.11 acres, located in Arizona 410,000 (b)
o The acquisition of Nashville Music Co., located in Nashville, TN 2,500,000 (c)
o 26 town homes plus surrounding amenities 3,863,130 (d)
o Office Building, restaurant/banquet facility and vacant land 6,669,930 (d)
o A motel located in Northbrook, Illinois, with 38 luxury suites 2,700,000 (e)
o A country club located in the Village of Lakemore, Illinois 359,758 (f)
o An interest in a golf course and country club in Naperville, Illinois 2,684,779 (d)
o A water and utility service located in Oakbrook Terrace, IL 408,000 (f)
o A restaurant site located in Shiller Park, Illinois 620,789 (f)
o An interest in a shopping center in Palatine, Illinois 6,689,596 (f)
o An interest in two leases and land located Shiller Park, IL 1,207,207 (g)
o 12-acre commercial parcel located in Dania, Florida 1,618,103 (f)
o An interest in a Yacht located in Ft. Lauderdale, Florida 688,608 (h)
o A Large land development in Gallatin, TN referred to as "Foxland" 16,000,000 (i)
o 24 acres of residential vacant land near Bellevue, Tennessee 800,400 (j)
o 56-acre parcel located on Dickerson Road in Nashville, TN 1,659,900 (d)
------------
Total value for Stock Exchanged and held in Trust Capacity
December 31, 1996 49,016,330
Less: Impairment of investments (Note 2) (48,520,200)
Capitalization of mining equipment (Note 2) (496,130)
------------
Value at September 30, 1997 $ 0
============
</TABLE>
21
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
The above investments, excluding the mining interests, are under litigation to
determine legal ownership.
Ref:
(a)- Valued at the estimated cost to commence operations for the Reno facility.
(b)- Valued at replacement cost of equipment purchased.
(c)- Value determined by using the stock price on the date of the agreement
discounted 50% for restriction, and compared to a valuation model
projecting earnings for the company.
(d)- Value based on tax assessors current Fair Cash Value.
(e)- Valued at market value determined by independent appraisers and
consultants.
(f)- Value obtained from financial statement schedules indicating cost basis of
property.
(g)- Value determined by calculating the annual lease income times approximately
6 years.
(h)- Value calculated based on the estimated annual net income discounted at
10%.
(i)- Value based on a current contract offer price.
(j)- Valued at the current market value of a lot recently sold adjacent the
property.
As a good faith measure, stock was issued upon signing the agreements. It is the
Company's position that the stock certificates issued in transactions which have
yet to be consummated are being held by the recipient in a trust capacity for
the benefit of both parties, and will be forfeited and canceled if the agreement
is annulled or void. The Company has no control over any of the entities
included in these potential acquisitions and will not have any control until
such time as the acquisition is complete.
NOTE 4 - GOING CONCERN
As discussed in Note 1, the company has been in the development stage since June
29, 1993. A major portion of its assets includes mineral inventories valued at
$200,000,000 and mining claims located in San Bernardino County, California
valued at $69,375,000. Realization of a major portion of these assets is
dependent upon the Company's ability to successfully liquidate the mineral
inventory. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. These factors raise concern about
the Company's ability to continue as a going concern. It is management's
intention to raise additional capital through a) leasing of the MedAway machines
(Note 1), b) sale of some or all of the ore inventory (Note 5), c) sale of some
of the advertising trade credits (Note 2), and d) a private placement of
securities.
NOTE 5 - MINERAL INVENTORIES:
Mineral properties include:
a) An inventory of concentrated precious metals ore located on land leased
from the State of Arizona through the year 2003. Recent assay reports
commissioned by the Company indicate there is a combination of precious
metals, rare earth and common elements. These concentrates were purchased
in exchange for 100,000 shares (after given effect to reverse split (see
Note 1)) of the Company's common stock. Such stock was valued at
$200,000,000, based on the stock price on the date of the agreement
discounted by 50% due to restrictions on transferability, applicable to
such stock. A subsequent independent valuation indicated a fair-market
value in excess of the recorded amount.
b) The San Bernardino County, California site consists of the purchase of 17
mining claims covering a 340-acre site. These claims were purchased in
exchange for 375,000 (after given effect to reverse stock split (see Note
1)) of the Company's common stock. The shares were valued at $69,375,000,
the stock price on the date of the agreement discounted by 50% for
restriction. Assay reports obtained by an independent assayer indicate a
value in excess of this value. There has been no activity on this property
for several years.
c) On April 30, 1998, the Company entered into a joint venture agreement with
Hidden Splendor Smelting Company (HSS) to share in the profits for
processing mineral inventories. HSS will be granted the exclusive right to
earn an undivided 20% interest in the net revenues received as a result of
the sale of processed inventory. HSS shall provide proper permits for the
processing, equipment, laboratory facilities and structures for the initial
period of the processing operations. The term of the agreement is eight
years from the effective date of the agreement.
22
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
NOTE 6 - NOTES RECEIVABLE:
September 30, December 31,
1997 1996
-------------- ------------
<S> <C> <C>
A note from INMOB (a Mexican corporation) dated November 6, 1995, payable
November 5, 1996, with no interest. This was advanced for the purpose of
evaluating a project in Mexico, and, if consummated, entitles the Company to a
66-2/3% interest in the project, as it is management's intent is to converted
their interest into the investment. This interest is for
assisting the joint venture in obtaining all financing arrangements. $ 0 $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 an assignment of interest in an unrelated law suit. 0 45,000
-------------- -------------
Total Notes Receivable $ 0 $260,000
============== =============
Both notes are delinquent as of the date of this report. Management is unsure of
whether these notes are collectable. Therefore, they have been reversed out of
the financial statements until such time that the sums owed are collected.
NOTE 7 - NOTES PAYABLE:
September 30, December 31,
1997 1996
------------- ------------
A note payable to R.K. Company, dated November 17, 1995, payable $43,367 per
month with interest at 10% per annum through May 17,1996,
18% thereafter, unsecured . $ 52,373 $247,809
A note payable to R. K. Company, dated November 17,1995,
payable $37,624 per month with interest at 10% per annum
through May 17 1996, 18% thereafter, unsecured. 215,000 215,000
-------------- ------------
Total Notes Payable $267,373 $462,809
============= ============
</TABLE>
In March 1997, a payment of $195,436 was made on the note payable to R.K.
Company. Both notes are delinquent and there has been a demand for payment on
both notes. A final determination of the enforceability of these notes is
subject to the outcome of the litigation reported above (see Note 2). Should the
courts determine that these notes are not enforceable, the Company will pursue
recovery of the $195,436 payment made in March 1997.
NOTE 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:
23
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
Expiration Date Operating Losses
--------------- ----------------
2008 $800
2009 101,000
2010 90,000
2011 308,200
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 and 200,000,000 shares of convertible
preferred stock and changed the par value of its common stock from $0.02 per
share to $0.001 per share. In January 1994, the Company declared a one for three
reverse stock split. In June 1998, the Company declared a one for one thousand
reverse stock split.
NOTE 10 - CONTINGENCIES:
The Company is subject to disputes, various claims and legal proceedings
primarily relating to its contracts to acquire real estate and on account of
various transactions affiliated with the owner of the real estate. Consummation
of the agreements have not yet occurred, and such contracts are the subject of
litigation, the outcome of which cannot presently be predicted to be favorable
or unfavorable to the Company. Should the outcome of the real estate litigation
be unfavorable to the Company, the outstanding shares will be recovered and the
remaining unrecoverable shares will be pursued.
In 1996, the Company entered into a contract for the acquisition of an interest
in a mining operation, but the transaction was not consummated. The Company
issued 98,000 shares (after given effect to reverse split (see Note 1)) for the
interest in the mining operation. The Company is attempting to reacquire those
shares, but, at this time, management is unable to determine if collectability
is probable.
Stock options for an aggregate of 50,000 shares (after given effect to reverse
split (see Note 1)) were issued to The Rainbow Group and The Senior Group
(25,000 each). Such options must be exercised within 10 years from the option
grant date of June 28, 1994. The first 25,000 shares are reserved at an exercise
price of $1,000 per share. The next 25,000 may be exercised at a price per share
equal to the last trading price at the close of business for the day immediately
preceding the day on which the option is exercised. In no event can the price be
less than 110% of the trading price on June 28, 1994. The holder of these
options is the same individual who holds the 98,000 shares discussed above.
NOTE 11 - FINANCIAL INFORMATION FOR BUSINESSES ACQUIRED OR TO BE ACQUIRED
Effective February 4, 1997, F&H Mining Company, Inc. (F&H) and Peeples
Mining, L.L.C. (Peeples LLC) were acquired by the Company through the
exchange for common stock of the Company. These acquisitions were accounted
for under the purchase method.
Effective February 4, 1997, Nashville Music Consultants, Inc. (NMC) was
acquired by the Company through the exchange for common stock of the
Company. On August 20, 1998, the Company entered into an Amendment To Stock
Exchange Agreement, which related back to the same date as the original
stock exchange agreement. The original stock exchange agreement provided
for the acquisition of only the music publishing operations of NMC. NMC
(now known as Nashville Music Group, Inc. (NMG) has failed to provide the
mCo usic publishing. The uncertaintly of obtaining this information is so
great, it is felt that the value may have impaired to an unknown extent.
Therefore, it has been fully reserved against until such time the
appropriate information is obtained.
The combined assets of F&H and Peeples LLC were 496,130 as of February 4,
1997. There have been no operations in either company for several years.
24
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION:
Non-cash services and acquisitions are listed below, including common stock
where applicable. Stated at value prior to reverse stock split.
Date Exchanged for: No. of Shares Value Assigned
------ -------------- ------------- -------------
1 1/94 Services 31,960,000 $ 31,960
2 5/94 A Future Learning Center 400,000 50,000
3 5/94 Mining Interest 12,000,000 86,130
4 7/94 Real Estate Properties 54,572,361 13,190,066
5 9/94 Real Estate Properties 40,348,988 9,752,296
6 9/94 Mining Interest 20,000,000 410,000
------------ ---------------
Total 1994 159,281,349 23,520,452
------------ ---------------
7 2/95 Services 5,000,000 5,000
8 2/95 Real Estate Properties 22,000,000 5,317,370
9 8/95 Music Company 4,000,000 2,500,000
10. 8/95 Real Estate Properties 73,000,000 17,644,001
11. 8/95 Mineral Inventory (Note 5) 100,000,000 200,000,000
12. 9/95 Services 275,000 66,467
------------ ---------------
Total 1995 204,275,000 225,532,838
------------ ---------------
13. 6/96 Mining Interest 40,000,000 --
14. 6/96 Medical Decontamination
Machines 2,066,115 555,185
15. 7/96 Acquisition of
ElfWorks, Inc. 40,000,000 40,000
16. 1996 Services (Note 12) -- 34,970
------------ ---------------
Total 1996 82,066,115 630,155
------------ ---------------
17 2/97 Mining Interest (Note 2) 375,000,000 69,375,000
18 1997 Services (Note 12) -- 39,060
------------ ---------------
Total 1997 375,000,000 69,414,060
------------ ---------------
TOTAL 1994 - 1997 820,622,464 $319,097,495
============ ===============
To reflect reverse stock split: 820,622
25
<PAGE>
HEXAGON CONSOLIDATD COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
NOTE 13 - RELATED PARTY TRANSACTIONS:
o Inventories consisting of ore concentrates located in Arizona were
purchased from Zarzion Ltd. in exchange for shares of the Company's common
stock (see Note 5).
o October 2, 1997, 200,000,000 shares of preferred stock were issued for
services and expenditures. The transaction was booked at the Company's par
value of preferred stock.
o Services contributed by officers and reimbursements forfeited were expensed
to "Imputed Wages" at an hourly rate proportionate to the services
performed. Contributed office occupancy provided by Maurice Furlong, the
Company's president and CEO, was expensed to rent at an average of $340 a
month.
o Mining claims located in San Bernardino County, California were purchased
from Zarzion Ltd. In exchange for shares of the Company's stock (see Note
2).
o In April 1997, Maurice Furlong, CEO, President and major shareholder,
obtained voting control of all common stock of the Company held by Zarzion,
Ltd.
26
<PAGE>
W. 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
Hexagon Consolidated Companies of America, Inc.
I have audited the consolidated balance sheets of Hexagon Consolidated Companies
of America, Inc. (formerly Health Care Centers of America, Inc.) (a development
stage company) as of December 31, 1997, 1996 and 1995, and the related
statements of operations, stockholders' equity, and cash flows for the years
then ended, and have issued my opinion thereon dated November 14, 1999. My
examination also comprehended Supplemental Schedules A and B of Hexagon
Consolidated Companies of America, Inc. (formerly 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/W. Dale McGhie
- -----------------
W. Dale McGhie, CPA
Reno, Nevada
November 14, 1999
27
<PAGE>
<TABLE>
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. AND SUBSIDIARIES
(formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE A - PROPERTY, PLANT AND EQUIPMENT
THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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, 1997:
Furniture and fixtures $ 6,249 $ 6,058 $ - $ - $ 12,307
Equipment 24,935 4,353 - - 29,288
Equipment - mining - - - 496,130 496,130
Equipment - other * 555,185 - - - 555,185
------------------- -------------- ------------- ----------------- ------------
Total $ 586,369 $ 10,411 $ - $ 496,130 $1,092,910
=================== ============== ============= ================= ============
December 31, 1996:
Furniture and fixtures $ 1,679 $ 4,570 $ - $ - $ 6,249
Equipment 16,046 8,889 - - 24,935
Equipment - other * - 555,185 - - 555,185
------------------- -------------- ------------- ----------------- ------------
Total $ 17,725 $ 568,644 $ - $ - $ 586,369
=================== ============== ============= ================= ============
December 31, 1995:
Furniture and fixtures $ 2,507 $ - $ 828 $ - $ 1,679
Equipment 16,046 - - - 16,046
------------------- -------------- ------------- ----------------- ------------
Total $ 18,553 $ - $ 828 $ - $ 17,725
=================== ============== ============= ================= ============
</TABLE>
* Equipment is not depreciated at this time because not placed in service yet.
28
<PAGE>
<TABLE>
HEXAGON CONCOLIDATED COMPANIES OF AMERICA, INC. AND SUBSIDIARIES
(formerly HEALTH CARE CENTERSOF AMERICA, INC.)
(A DEVELOPMENT STAGE COMPANY)
SCHEDULE B - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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>
December 31, 1997:
Furniture and fixtures $ 1,522 $ 2,409 $ - $ - $ 3,931
Equipment 9,833 5,669 - - 15,502
Equipment - mining - - - - -
Equipment - other * - - - - -
------------------- ----------------- ------------ ----------------- ------------
Total $ 11,355 $ 8,078 $ - $ - $ 19,433
=================== ================= ============ ================= ============
December 31, 1996:
Furniture and 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 and 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.
29
<PAGE>
Item 8. Changes In and Disagreements With
Accountants and Financial Disclosure
The information contained in Part II, Item 3, "Changes in and
Disagreements with Accountants" of the issuer's Second Amended Form 10-SB is
incorporated herein by reference.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Directors and Executive officers
The infromation contained in Part I, Item 5, "Directors, Executive
Officers, Promoters and Control Persons" of the issuer's Second Amended Form
10-SB is incorproated herein by reference.
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, not all of the section 16(a) filing
requirements applicable to its officers, directors, and greater-than-10%
stockholders have been complied with during the last fiscal year.
Significant Employees and Consultants
The information contained in Part I, Item 5, "Director's, Executive
Officers, Promoters and Control Persons", of the issuer's Second Amended Form
10-SB is incorporated herein by reference.
Certain Legal Proceedings Involving Directors and Officers
The information contained in Part I, Item 5, Director's, Executive
Officers, Promoters and control Persons", of the issuer's Second Amended Form
10-SB is incorporated herein by reference.
Item 10. Executive Compensation
The compensation table set forth in Part I, Item 6, "Executive
Compensation", of the issurers Second Amended Form 10-SB, is incorporated herein
by reference.
30
<PAGE>
Item 11. Security Ownership of Certain
Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The information contained in Part I, Item 4, "Security Ownership of
Certain Beneficial Owners and Management" of the issuer's Second Amended Form
10-SB is incorporated herein by reference.
Security Ownership of Management
The information contained in Part I, Item 4, "Security of Certain
Beneficial Owners and Management", of the issuer's Second Amended Form 10-SB is
incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
The information contained in Part I, Item 7, "Certain Relationshis and
Related Transactions", of the issuer's Second Amended Form 10-SB is incorporated
herein by reference.
Item 13. Exhibits and Reports on Form 8-K
Index to Exhibits
The index to exhibits contained in the issuer's Second Amended Form
10-SB is incorporated herein
Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
31
<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.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(Registrant)
By: /s/ MAURICE W. FURLONG
----------------------
Maurice W. Furlong, President
Date December 1, 1999
----------------
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, President and
Chairman of the Board
Date December 1, 1999
----------------
By: /s/ MICHAEL J. PIETRZAK
------------------------
Michael J. Pietrzak, Executive Vice President,
General Counsel and Director
Date December 1, 1999
----------------
32
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 470
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 470
<PP&E> 270467910
<DEPRECIATION> 19433
<TOTAL-ASSETS> 270448947
<CURRENT-LIABILITIES> 480177
<BONDS> 0
0
200000
<COMMON> 885
<OTHER-SE> 269767885
<TOTAL-LIABILITY-AND-EQUITY> 270448947
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 667385
<OTHER-EXPENSES> 266600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55601
<INCOME-PRETAX> (989586)
<INCOME-TAX> 0
<INCOME-CONTINUING> (989586)
<DISCONTINUED> 0
<EXTRAORDINARY> (48520200)
<CHANGES> 0
<NET-INCOME> (49509786)
<EPS-BASIC> (1.159)
<EPS-DILUTED> (1.159)
</TABLE>
