<PAGE> 1
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
--------------------------------------------
Commission file number 0-22115
--------------------------------------------
COMPLETE WELLNESS CENTERS, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1910135
(State or jurisdiction of Incorporation or Organization) (IRS Employer Identification Number)
</TABLE>
---------------------------------------------
1964 HOWELL BRANCH ROAD, SUITE 201, WINTER PARK, FL 32792
--------------------------------
(Address and telephone number of principal executive offices)
(407) 673-3073
-------------------------
(Issuer's telephone number)
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) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___.
State the number of shares outstanding of each of the issuer's classes of common
equity, at June 30, 2000: 5,725,178 shares of Common Stock.
Transitional Small Business Disclosure Format (check one) Yes ___ No _X_
1
<PAGE> 2
COMPLETE WELLNESS CENTERS, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30,1999
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5 OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
2
<PAGE> 3
ITEM 1 -- FINANCIAL STATEMENTS
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $210,225 $272,034
Certificate of deposit, restricted 111,002 111,002
Patient receivables, net of allowance for
doubtful accounts of $6,980,000 and
$5,270,000 at June 30, 2000 and December 31, 1999,
respectively 4,325,696 5,485,901
Prepaid expenses 35,000 46,667
Other assets 1,555
------------------------ -------------------
Total current assets 4,681,923 5,917,159
Furniture and equipment, net 181,977 225,978
Deposits 1,400 1,400
------------------------ -------------------
Total assets $4,865,300 $6,144,537
======================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY/( DEFICIT)
Current liabilities:
Current portion of notes payable $1,064,142 $582,525
Accounts payable and accrued expenses 2,746,158 2,729,786
Accrued management fees and leases 2,035,268 2,573,463
------------------------ -------------------
Total current liabilities 5,845,568 5,885,774
Note payable 298,740 314,475
Stockholders' equity/(deficit):
Common Stock,$.0001665 par value per share
50,000,000 shares authorized, 5,725,178
and 4,881,149 shares issued and outstanding
at June 30, 2000 and December 31, 1999,
respectively 951 813
Senior Convertible Preferred Stock, $.01 par
value per share, 8% Cumulative, and
113,880 and 121,107 shares issued and
outstanding at June 30, 2000 and December
31, 1999, respectively 1,139 1,211
Junior Convertible Preferred Stock, $.01 par
value per share, 8% cumulative, 2,175 and
and 2,071 shares issued and outstanding
at June 30, 2000 and December 31, 1999,
respectively 22 21
Additional capital 19,697,053 18,838,475
Accumulated deficit (20,978,173) (18,896,232)
------------------------ -------------------
Total stockholders' deficit (1,279,008) (55,712)
------------------------ -------------------
Total liabilities and stockholders'equity/(deficit) $4,865,300 $6,144,537
======================== ===================
</TABLE>
Note: The Balance Sheet at December 31, 1999 has been extracted from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Integrated medical clinics $2,076,922 $2,530,352 $4,396,130 $7,025,214
Other income 30,428 115,600
----------------- ----------------- ------------------ -------------------
Total operating revenue 2,076,922 2,560,780 $4,396,130 7,140,814
Direct expenses:
Salary and consulting costs 352,124 605,557 960,227 1,407,952
Management fees 1,655,933 1,295,201 2,776,132 4,609,124
Cost of revenues 7,178
Rent 10,000 37,879 21,047 79,350
Advertising and marketing 150 4,852 3,798 7,999
Bad debt expense 888,608 605,990 1,559,344 761,939
----------------- ----------------- ------------------ -------------------
Total direct expenses 2,906,815 2,549,479 5,320,548 6,873,542
General and administrative 421,918 661,276 678,090 927,976
Depreciation and amortization 22,000 31,646 44,000 63,300
----------------- ----------------- ------------------ -------------------
Operating gain/loss (1,273,811) (681,621) (1,646,508) (724,004)
Interest expense 110,870 28,825 136,104 38,325
Interest income 1,300 1,813 2,347 3,000
----------------- ----------------- ------------------ -------------------
Net income/loss before income taxes (1,383,381) (708,633) (1,780,265) (759,329)
Income taxes
----------------- ----------------- ------------------ -------------------
Net income/loss after income taxes ($1,383,381) ($708,633) $(1,780,265) ($759,329)
================= ================= ================== ===================
Income/loss per share - basic ($0.26) ($0.22) ($0.34) ($0.24)
================= ================= ================== ===================
- diluted ($0.26) ($0.22) ($0.34) ($0.24)
================= ================= ================== ===================
Weighted avg. common shares - basic 5,406,735 3,243,255 5,195,728 3,108,407
================= ================= ================== ===================
- diluted 5,406,735 3,243,255 5,195,728 3,108,407
================= ================= ================== ===================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
---------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income/loss ($1,383,381) ($708,633) ($1,780,265) ($759,329)
Adjustments to reconcile net income/loss to net
Cash used in operating activities:
Allocated proceeds of debt issued 57,994 57,994 0
Depreciation and amortization 22,000 31,646 44,000 63,300
Provision for bad debt 888,608 605,990 1,559,344 761,939
Recognition of compensatory granting
non-qualified stock options 3,405 6,810
Recognition of the issuance of common
stock warrants an options 400 95,826 0
Changes in operating assets and liabilities:
Accounts receivables (194,538) (180,190) (399,140) (1,485,215)
Other current assets 5,837 3,220 13,222 21,027
Accounts payable and other current (396,877) 199,200
liabilities 285,055 (273,384)
-----------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (318,025) (517,946) (805,896) (1,192,267)
INVESTING ACTIVITIES
Purchase of equipment (2,032) (3,116)
NET CASH USED IN INVESTING ACTIVITIES (2,032) (3,116)
FINANCING ACTIVITIES
Payment of notes (12,953) (31,112) 0
Proceeds from sale of common stock 435,000 435,000
Proceeds from sale of stock options 225,199 684,148
Proceeds from notes payable 250,000 550,000 177,000
-----------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 237,047 435,000 744,087 1,296,148
-----------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (80,978) (84,978) (61,809) 100,765
Cash and cash equivalents at beginning of year 291,203 630,706 272,034 444,963
-----------------------------------------------------------------
Cash and cash equivalents at end of period $210,225 $545,728 $210,225 $545,728
=================================================================
SUMMARY OF SUPPLEMENTARY CASH FLOWS DISCLOSURES:
Interest paid 0 0
Income taxes paid 0 0
</TABLE>
Significant non-cash transactions completed by the Company during the three
months ended March 31, 2000 include the following:
<TABLE>
<S> <C>
Payment of preferred stock dividends with shares of preferred stock $301,677
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMETNS
(UNAUDITED)
JUNE 30, 2000
NOTE A - LIQUIDITY
The consolidated financial statements of Complete Wellness Centers, Inc.,
(the "Company") have been presented on the basis that the Company is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. For the year ended December 31,
1999, the Company had recurring loss from operations of $2,805,000, and total
stockholders' deficiency of $56,000. The current ratio at December 31, 1999 was
1.01. For the six months ended June 30, 2000, the Company had recurring loss
from operations of $1,780,000, and total stockholders' deficiency of $1,279,000.
The current ratio at June 30, 2000 was 0.80.
The Company has undergone significant restructuring of its operations to
reduce overhead costs and is currently attempting to renegotiate its contractual
relationships with its current customers. As has been the Company's practice, as
certain contractual relationships cease to be honored, such lack of ability to
control the operations of the customer have been reflected in the financial
statements herein with adjusted for proper reflection in the consolidated
financial statements.
It is the Company's plan to seek relief from its creditors through debt
forgiveness and/or long-term payment plans as the Company cannot meet its
current obligations. Unless and until such relief is obtained, additional
capital infusion from investors will be unlikely.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. The financial statement information was derived
from unaudited financial statements unless indicated otherwise. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included in the accompanying condensed consolidated financial statements.
Operating results for the three and six month periods ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's Form 10-KSB dated March 28, 2000, for the period ended
December 31, 1999. Certain prior period amounts have been reclassified to
conform to the current period presentation.
6
<PAGE> 7
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE C - NET INCOME/(LOSS) PER SHARE
The Company's net income/(loss) per share calculations are based upon the
weighted average number of shares of Common Stock outstanding. Pursuant to the
requirements of the Securities and Exchange Commission (SEC) staff accounting
bulletin No. 98, the Company considers all potentially dilutive securities
issued for nominal consideration prior to the Company's initial public offering
as outstanding for all periods presented. Other shares issuable upon the
exercise of stock options or conversion of the 8% Senior Convertible Preferred
Stock (the "Senior Convertible Preferred Stock") or conversion of the 8% Junior
Convertible Preferred Stock (the "Junior Convertible Preferred Stock") have been
excluded from the computation because the effect of their inclusion would be
anti-dilutive for June 30, 1999 and 2000.
The following table sets forth the computation of basic loss per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Income/(Loss) ($1,383,381) ($708,633) ($1,780,265) ($759,329)
Weighted avg. shares outstanding
- Basic 5,406,735 3,243,255 5,195,728 3,108,407
Incremental shares under stock 0 0 0 0
option plans
Conversion of 8% Senior 0 0 0 0
Convertible Preferred Stock
Conversion of 8% Junior 0 0 0 0
Convertible Preferred Stock
Weighted average shares
outstanding - diluted 5,406,735 3,243,255 5,195,728 3,108,407
Basic income/(loss) per share ($0.26) ($0.22) ($0.34) ($0.24)
</TABLE>
NOTE D - FINANCINGS AND STOCKHOLDERS' EQUITY
On July 14, 1999, we entered into a Separation and Release Agreement with
Eric S. Kaplan, our former president and director, made effective as of July 21,
1999. In return and as consideration of Mr. Kaplan's resignation and release of
the Company from all employment claims or actions, we agreed to: (i) indemnify
him for actions taken by the Company or by him as an officer or director of the
Company; (ii) continue liability coverage for as long as the applicable statute
of limitations of claims shall run; (iii) transfer to him $200,000 in market
value of the Company's common stock at a rate of 5,000 shares per month through
stock issuances or stock option grants; (iv) reimburse a portion of his attorney
fees in the amount of $6,000; and (v) pay him the sum of $10,000 in cash. We
accelerated the vesting of the remaining options during the three months ended
March 31, 2000. Subsequently, Dr. Kaplan exercised an aggregate of 60,000
options, the value of which was recorded as compensation expense. As final
settlement of the remaining amounts owed Dr. Kaplan under this Agreement, on
August 4, 2000, Dr. Kaplan was granted 62,000 options from two of the Company's
stock option plans to purchase 62,000 shares of the Company's common stock at
$0.01 per share and Dr. Kaplan also accepted a non-interest bearing promissory
note from the Company for $19,000.
In January 2000, the Board made a grant of 20,000 options, from the 1996
Stock Option Plan, to purchase common stock in the Company at $0.01 per share
for the equal benefit of Nico Pronk and Wayne Horne, principals of Noble
Financial Group, Inc. Following the grant of such options, both exercised their
options and shares were issued. The Company received $200 for the exercise of
these options.
On January 4, 2000, the Company made a grant to Mrs. Joan Raymond of
100,000 options to purchase common stock in the Company, pursuant to the 1996
Stock Option Plan, at $1.25 per share. Following the grant of such options, Mrs.
Raymond exercised those options and shares were issued. The Company received
$125,000 for the exercise of such options. Mrs. Raymond is the sister-in-law of
Mr. Joseph Raymond, Jr., Chairman (at that time) and CEO of the Company.
7
<PAGE> 8
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE D - FINANCINGS AND STOCKHOLDERS' EQUITY (Continued)
On February 23, 2000, the Company also made a grant of 57,143 options,
from the 1999 Consultants Stock Option Plan, to purchase common stock in the
Company at $1.75 per share to Structure Management, Inc. Following the grant of
such options, Structure Management, Inc. exercised its options and shares were
issued. The Company received $100,000 for the exercise of these options. Mr.
Jeffrey Raymond is a principal in Structure Management, Inc. and Mr. Raymond is
the brother of Mr. Joseph Raymond, Jr., Chairman (at that time) and CEO of the
Company.
On March 23, 2000, Completewellness.com, Inc. ("cwc.com"), a wholly owned
subsidiary of the Company received $300,000 from DrAlt.com Corporation
("DrAlt"). The loan carries a 9% interest rate and is payable in full on
September 23, 2000. In addition, DrAlt was awarded five-year warrants to
purchase 150,000 shares of common stock of Complete Wellness Centers, Inc. at
$2.00 per share.
On April 3,2000, cwc.com received $250,000 from DrAlt. The loan carries a
9% interest rate is payable in full on October 3, 2000. In addition, DrAlt was
awarded five-year warrants to purchase 125,000 shares of common stock of
Complete Wellness Centers, Inc. at $2.00 per share.
On May 1, 2000, the holders of Senior Convertible Preferred Stock
submitted a request to convert 13,156 shares of Senior Convertible Preferred
Stock to 524,101 shares of common stock; such shares were issued on May 4, 2000.
On June 15, 2000, Raintree Systems, Inc. exercised 40,000 options to
purchase 40,000 shares of the Company's common stock at $0.01 per share.
On July 26, 2000, the Board of Directors voted to reprice certain stock
options as shown below. Mr. Raymond agreed to forfeit his rights to 50,000
vested options for the purchase of 50,000 shares of the Company's common stock
at $1.50 per share in return for the lower exercise price on his remaining
50,000 vested options.
1996 Stock Option Plan
Joseph J. Raymond From $1.50 per share to $0.4375 per
share on 50,000 shares
1998 Outside Directors Stock Option Plan
Directors From $1.25 per share to $0.4375 per
share on 52,500 shares
The Company's common stock and warrants are listed on the NASDAQ SmallCap
Market and the Company must meet certain requirements in order to maintain this
listing. The requirements for continued listing include satisfying one of the
following conditions: (a) net tangible assets of at least $2,000,000 (b) market
capitalization of at least $35,000,000 or (c) net income of at least $500,000 in
the most recent fiscal year or in two of the last three fiscal years. The
Company does not meet any of the criteria as of December 31, 1999 or as of March
31, 2000. The Company received notification from the NASDAQ SmallCap Listing
Qualifications Division for the purpose of deficiencies in the minimum listing
requirements of the NASDAQ SmallCap Market. The Company formally responded to
the inquiry, developed and submitted a plan and timeline through which such
minimum requirement would be met. There can be no assurance that NASDAQ will
allow the Company's shares to remain listed while it works to regain compliance.
Consequently, the Company's shares could be delisted from the NASDAQ SmallCap
Market at any time. In the event that the Company's shares are delisted from the
NASDAQ SmallCap Market, they could continue to trade on the NASDAQ "Bulletin
Board".
8
<PAGE> 9
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE E - CERTAIN RELATIONSHIPS AND TRANSACTIONS
On March 23, 2000, and April 3, 2000, cwc.com, borrowed $300,000 and
$250,000, respectively from DrAlt on an unsecured basis at a 9% interest rate
for six (6) months. On the same dates, as additional consideration for the
loans, the Company granted DrAlt five-year warrants to purchase 150,000 and
125,000 warrants respectively, to purchase shares of common stock of the Company
at $2.00 per share. These notes were pursuant to a five-year services agreement
made on March 7, 2000, by and between the Company, its subsidiary cwc.com and
DrAlt whereby the parties would together provide alternative medicine
information and products to practitioners and consumers through the Companies
web site, www.completewellness.com. The Company, cwc.com and DrAlt had certain
duties and compensation in the relationship based on their respective abilities
and expertise. On March 7, 2000, the Company also signed a non-binding letter of
intent to complete a tax-free merger with DrAlt. The Company would be the
surviving entity and would issue to the shareholders of DrAlt, such number of
fully paid and non-assessable shares of the Company's common stock as would
result in the shareholders of DrAlt collectively owning immediately after the
closing of such merger, fifty (50) percent of the common equity of the Company
on a fully diluted basis except for any outstanding warrants. DrAlt shareholders
would surrender their DrAlt shares to the Company at closing. There were
significant contingencies involved in the agreement, including but not limited
to completion of proper due diligence, conversion of the preferred shareholders
to common shareholders, additional funding of the Company through a private
placement and approval of the transaction by the shareholders of each company.
The non-binding letter of intent and related services agreement with DrAlt were
terminated on May 4, 2000.
NOTE F - CONTINGENCIES
As of August 8, 2000, the Company is in default on the interest payments
due related to the notes payable to DrAlt.com Corporation described above.
As of August 8, 2000, the Company is in default on the payments due
related to the note payable to Bowne Publishing Company.
A plaintiff has penetrated the corporate boundary between the Integrated
Medical Center and the Company, Complete Wellness Centers, Inc. The court
awarded $147,292 for wages and damages with a subsequent award for related legal
fees of $37,712 were rendered against us. We have appealed the decisions and
have obtained a bond in the amount of $222,005 for satisfaction of the
judgments, which is backed by an irrevocable letter of credit for $111,002,
against which we have pledged a certificate of deposit of $111,002. The full
amount of the judgment has been previously accrued for. In July 2000, the
Company was informed it had lost the appeal and would be required to pay the
judgment. On July 17, 2000, a petition was filed by the plaintiff seeking an
award of an additional $62,200 in attorney's fees and $7,031 in costs for work
surrounding the garnishments and appeal. No such award has been made at this
time. The bonding company has been notified of the original verdict being upheld
and will proceed accordingly with their duties and rights under the bond
agreement, which will include seizure of the certificate of deposit pledged
against the bond. Chances for success on subsequent appeal are very limited and
the Company has chosen not to pursue the appeal process further.
On November 12, 1999, C. Thomas McMillen, our former Chairman and Chief
Executive Officer filed suit in Superior Court for the District of Columbia
seeking damages resulting from the termination of his employment agreement with
us. Mr. McMillen alleges that we breached our employment contract with him and
that we breached a covenant of good faith and fair dealing, which the suit
alleges was implied in the agreement. He seeks salary, vacation, bonus pool,
stock options, office space, secretarial support, cellular phone and benefits
including health insurance from the date of termination, February 18, 1999,
through August 31, 2000. He seeks judgment in the amount of $500,000 plus
pre-judgment interest, the costs of his suit, attorney's fees and any further
relief that the court deems just and proper. We believe the action has no merit
but have attempted to arrive at a settlement agreement with Mr. McMillen without
success. In addition to defending this action, we have filed a counterclaim
seeking judgment for damages and costs. No hearings or depositions are scheduled
at this time.
In July 1999, Complete Wellness Weight Management, Inc., a wholly owned
subsidiary, filed for Chapter 7 bankruptcy protection. An initial hearing of the
creditors was held and one creditor appeared to be heard on September 29, 1999.
There are two suits pending related to landlord claims under the bankruptcy,
both of which we are defending.
9
<PAGE> 10
COMPLETE WELLNESS CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE F - CONTINGENCIES - Continued
The Company was named in a lawsuit filed in Washington, D.C. on December
15, 1999 by Crestar Bank, a landlord, for alleged failure to pay $108,981 of
rents and fees due under a sub-lease plus attorney's fees. The Company has
settled the claim. The full amount of the settlement has been previously accrued
in the Company's financial statements, however, the Company is in default of the
payment agreement as of June 30, 2000.
The Company was named in a lawsuit filed in Orange County, Florida on
July 24, 2000 by Michael T. Brigante, former Chief Financial Officer of the
Company, for alleged failure to pay $37,503 pursuant to a separation agreement
between Mr. Brigante and the Company dated November 30, 1999. The full amount of
the claim has been previously accrued in the Company's financial statements.
In November 1997, three of our facilities were searched by federal
authorities pursuant to search warrants, and the federal authorities removed
computer records and written documents in connection with an investigation of
alleged healthcare fraud. In June 1998, Complete Wellness Centers and several of
its employees, including its former Chief Executive Officer, were served with
subpoenas requesting records and documents related to billing and claims coding,
clinical relationships and corporate records. We believe that we could be a
target in this investigation. One employee received a letter dated January 13,
1998 from the United States Attorney General's Office stating that the employee
was a subject of the investigation. The investigation appears to be focused on
two clinics in Virginia. No charges have been filed against us or any of our
employees to date. However, any such charges could have a material adverse
effect on our future financial position and results of operations.
From time to time in the course of Complete Wellness Centers carrying out
its business, we encounter threatened litigation, none of which is presently
considered to be material.
10
<PAGE> 11
Independent Accountants' Review Report
The Board of Directors
Complete Wellness Centers, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Complete Wellness Centers, Inc. as of June 30, 2000, and the related condensed
consolidated statement of operations, and condensed consolidated statement of
cash flows for the three-month and six-month periods ended June 30, 2000. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statement of operations, stockholders' deficiency, and cash
flows for the year then ended (not presented herein); and in our report dated
March 28, 2000, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit, which raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
AMPER, POLITZINER & MATTIA P.A.
August 8, 2000
Edison, New Jersey
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Statements included in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" Section, and in other sections of
this Report and in prior and future filings by the Company with the Securities
and Exchange Commission, in the Company's prior and future press releases and in
oral statements made with the approval of an authorized executive which are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties that could cause actual
results to differ materially from those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. There are
important risk factors that in some cases have affected and in the future could
affect the Company's actual results and could cause the Company's actual
financial and operating performance to differ materially from that expressed in
any forward-looking statement. The following discussion and analysis should be
read in conjunction with the Condensed Consolidated Financial Statements and
notes appearing elsewhere in this report.
As of June 30, 2000, the Company was managing 33 operational Integrated
Medical Centers in 11 states. The Company also managed two Integrated Medical
Centers in one state, which became inactive during the three months ended March
31, 2000. The operations of all the medical corporations are included in the
consolidated financial statements of the Company. For the six months ended June
30, 2000, the Company, as a result of its medical operations, had revenues of
$4,396,000.
RESULTS FROM OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1999
Revenue. During the three and six months ended June 30, 2000 the Company
had revenues of $2,077,000 and $4,396,000 respectively, as compared to
$2,530,000 and $7,025,000 for the three and six months ended June 30, 1999. The
decrease of $453,000 and $2,629,000, respectively was due to the discontinuance
of contractual relationships with certain customers. The Company had 63 active
Integrated Medical Centers under contract at June 30, 1999 compared to 33 at
June 30, 2000. We and certain Integrated Medical Centers have mutually agreed to
discontinue contractual obligations related to certain operations.
Salary and Consulting Costs. During the three and six months ended June
30, 2000, the Company incurred salary and consulting costs of $352,000 and
$960,000 respectively, as compared to $606,000 and $1,408,000 for the three and
six months ended June 30, 1999. The decreases of $254,000 and $448,000
respectively, were primarily due to the reduction of personnel due to the
consolidation of corporate operations after June 30, 1999 and the reduction in
staffing at the corporate offices in June 2000.
Management Fees and Bad Debt Expense. Contractually, the Company's
patient accounts receivable balances at the Integrated Medical Centers and the
cash expended by those centers affect the Company's remaining liability for
management of the centers and the allowance for doubtful accounts. The accrued
management fee and the allowance for doubtful accounts should be evaluated on a
combined basis as an offset to gross patient accounts receivable to arrive at
net collectible patient accounts receivable for the Company. During the three
and six months ended June 30, 2000, the Company incurred combined management
fees and bad debt expense of $2,545,000 and $4,335,000 respectively, as compared
to $1,901,000 and $5,371,000 for the three and six months ended June 30, 1999.
The management fees are paid to the affiliated chiropractors' administrative
entities for managing the day-to-day operations of the Integrated Medical
Centers. The combined management fees and bad debt expense should vary directly
with revenue and gross patient accounts receivable. The combined provision was
122% and 99% of revenue for the three and six months ended June 30, 2000,
respectively, compared to 75% and 76% for the three and six months ended June
30, 1999. Due to the Company's changes to existing customer's contractual
arrangements, its cash flow difficulties and willingness to discount receivables
in favor of cash, significant additional bad debt expense and related accounts
receivable reserves have been recorded in the three months ended June 30, 2000.
The combined accrued management fee liability combined with the allowance for
doubtful accounts as a percentage of gross patient accounts receivable was 80%
at June 30, 2000 and 73% at December 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
12
<PAGE> 13
OPERATIONS - Continued
Rent. During the three and six months ended June 30, 2000, the Company
incurred rent expense of $10,000 and $21,000 respectively, as compared to
$38,000 and $79,000 for the three and six months ended June 30, 1999. Rent
consists of amounts incurred for administrative, medical office space and
certain equipment leased by the Company at corporate headquarters and the
medical clinics. The decreases of $28,000 and $58,000 respectively, were due
primarily to the consolidation of corporate operations in mid-year 1999.
General and Administrative. During the three and six months ended June
30, 2000, the Company incurred general and administrative expenses of $422,000
and $678,000 respectively, as compared to $661,000 and $928,000 for the three
and six months ended June 30, 1999. The decreases of $239,000 and $250,000 were
due primarily to reduction of costs from the consolidation of corporate
operations, net of increased legal fees during the three and six months ended
June 30, 2000 resulting from $127,000 in fees and legal costs associated with
ongoing matters, financings and acquisitions.
Depreciation and Amortization. During the three and six months ended June
30, 2000, the Company incurred depreciation and amortization expense of $22,000
and $44,000 respectively, as compared to $32,000 and $63,000 for the three and
six months ended June 30, 1999. The decreases of $12,000 and $19,000
respectively, resulted from the previous write down of idle assets.
Operating Loss. The consolidated operating losses of the Company were
$1,274,000 and $1,647,000 for the three and six months ended June 30, 2000
respectively, compared to consolidated operating losses of $682,000 and $724,000
for the three and six months ended June 30, 1999. The losses resulted primarily
from a 64% reduction in revenues derived from the closure or inactivity of 30 of
63 Integrated Medical Centers since June 30, 1999 coupled with fees and legal
costs associated with ongoing matters, financings and acquisitions present
during the three and six months ended June 30, 2000.
Interest Expense. During the three and six months ended June 30, 2000,
the Company had interest expense of $111,000 and $136,000 compared to $29,000
and $38,000 for the six months ended June 30, 1999. The increases of $82,000 and
$98,000 resulted from the interest accrued on outstanding notes payable for each
period, primarily the effective cost of the warrants issued along with the notes
payable to DrAlt.com Corporation that originated in late March 2000.
Interest Income. During the three and six months ended June 30, 2000, the
Company had interest income of $1,000 and $2,000 respectively, as compared to
$2,000 and $3,000 for the three and six months ended June 30, 1999. The
decreases are from a lower amount of invested funds in 2000 compared to the same
periods in 1999.
Earnings Per Share. During the three and six months ended June 30, 2000,
the Company had losses per share of $0.26 and $0.34 respectively, compared to
$0.22 and $0.24 for the three and six months ended June 30, 1999. The number of
shares outstanding increased 67% for both the three and six months ended June
30, 2000 compared to the same periods in 1999 due to conversions from preferred
stock to common stock, stock option exercises, common stock issued as payment
for debts and new shares issued in private placements after June 30, 1999. The
weighted average shares outstanding on a basic and fully diluted basis for the
three and six months ended June 30, 2000 were 5,407,000 and 5,196,000,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced net losses, negative cash flow from
operations and an accumulated deficit since its inception. For the three and six
months ended June 30, 2000, the Company had net losses of $1,383,000 and
$1,780,000 respectively, as compared to net losses of $709,000 and $759,000 for
the three and six months ended June 30, 1999. At June 30, 2000, the Company had
negative working capital of $1,164,000 and an accumulated deficit of
$20,978,000. Net cash used in operations for the three and six months ended June
30, 2000 were $318,000 and $806,000 respectively, as compared to $518,000 and
$1,192,000 for the three and six months ended June 30, 1999. Negative cash flows
are attributable primarily to net losses and increases in accounts receivable of
$399,000 and decreases in accounts payable and other current liabilities of
$397,000 for the six months ended June 30, 2000 compared to the six months ended
June 30, 1999 when accounts receivable increased $1,485,000 and operating
liabilities increased $199,000.
We are currently dependent on advances from investors to meet our day-to-day
cash needs. Operating expenses have been reduced to a minimum level as of June
30, 2000. As a result, we must identify other sources of cash immediately in
order to remain in business. Failure to immediately identify other sources of
cash could result in insolvency.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
13
<PAGE> 14
OPERATIONS - Continued
On March 23, 2000, and April 3, 2000, cwc.com, borrowed $300,000 and
$250,000, respectively from DrAlt on an unsecured basis at a 9% interest rate
for six (6) months. On the same dates, as additional consideration for the
loans, the Company granted DrAlt five-year warrants to purchase 150,000 and
125,000 warrants respectively, to purchase shares of common stock of the Company
at $2.00 per share. These notes were pursuant to a five-year services agreement
made on March 7, 2000, by and between the Company, its subsidiary cwc.com and
DrAlt whereby the parties would together provide alternative medicine
information and products to practitioners and consumers through the Companies
web site, www.completewellness.com. The Company, cwc.com and DrAlt had certain
duties and compensation in the relationship based on the respective abilities
and expertise. On March 7, 2000, the Company also signed a non-binding letter of
intent to complete a tax-free merger with DrAlt. The Company would be the
surviving entity and would issue to the shareholders of DrAlt, such number of
fully paid and non-assessable shares of the Company's common stock as would
result in the shareholders of DrAlt collectively owning immediately after the
closing of such merger, fifty (50) percent of the common equity of the Company
on a fully diluted basis except for any outstanding warrants. DrAlt shareholders
would surrender their DrAlt shares to the Company at closing. There were
significant contingencies involved in the agreement, including but not limited
to completion of proper due diligence, conversion of the preferred shareholders
to common shareholders, additional funding of the Company through a private
placement and approval of the transaction by the shareholders of each company.
The non-binding letter of intent and related services agreement with DrAlt.com
Corporation were terminated on May 4, 2000. The Company is in default of the
required payment terms of the notes payable with DrAlt described herein as of
August 8, 2000.
The Company has entered into employment agreements with certain
key employees. Each of the employment agreements requires the full-time services
of the employees, are for specified periods of time and specify the compensation
and termination terms. The agreements also contain covenants restricting the
employees from engaging in any activities competitive with our business during
the term of the agreement and for a period of one year thereafter, and
prohibiting the employee from disclosing confidential information regarding our
business. The Company has not met its obligations for cash payments under these
agreements.
The Company and its affiliates are involved in the following material
legal proceedings:
As of August 8, 2000, we or our affiliates currently have eight
legal proceedings in various stages of litigation. Five of these actions involve
suits brought by former employees or vendors of various Integrated Medical
Centers or chiropractors' management companies, seeking recovery of monies
allegedly owed for wages, goods or services rendered to the Integrated Medical
Center or management company. We believe that two of these disputes are not
material. We are defending all such actions and believe none is meritorious. One
case has the plaintiff having penetrated the corporate boundary between the
Integrated Medical Center and the Company, Complete Wellness Centers, Inc. The
court awarded $147,292 for wages and damages with a subsequent award for related
legal fees of $37,712 were rendered against us. We have appealed the decisions
and have obtained a bond in the amount of $222,005 for satisfaction of the
judgments, which is backed by an irrevocable letter of credit for $111,002,
against which we have pledged a certificate of deposit of $111,002. The full
amount of the judgment has been previously accrued for. In July 2000, the
Company was informed it had lost the appeal and would be required to pay the
judgment. On July 17, 2000, a petition was filed by the plaintiff seeking an
award of an additional $62,200 in attorney's fees and $7,031 in costs for work
surrounding the garnishments and appeal. No such award has been made at this
time. The bonding company has been notified of the original verdict being upheld
and will proceed accordingly with their duties and rights under the bond
agreement, which will include seizure of the certificate of deposit pledged
against the bond. Chances for success on subsequent appeal are very limited and
the Company has chosen not to pursue the appeal process further.
On November 12, 1999, C. Thomas McMillen, our former Chairman and Chief
Executive Officer filed suit in Superior Court for the District of Columbia
seeking damages resulting from the termination of his employment agreement with
us. Mr. McMillen alleges that we breached our employment contract with him and
that we breached a covenant of good faith and fair dealing, which the suit
alleges was implied in the agreement. He seeks salary, vacation, bonus pool,
stock options, office space, secretarial support, cellular phone and benefits
including health insurance from the date of termination, February 18, 1999,
through August 31, 2000. He seeks judgment in the amount of $500,000 plus
pre-judgment interest, the costs of his suit, attorney's fees and any further
relief that the court deems just and proper. We believe the action has no merit
but have attempted to arrive at a settlement agreement with Mr. McMillen without
success. In addition to defending this action, we have filed a counterclaim
seeking judgment for damages and costs. No hearings or depositions are scheduled
at this time.
In July 1999, Complete Wellness Weight Management, Inc., a wholly owned
subsidiary, filed for Chapter 7 bankruptcy protection. An initial hearing of the
creditors was held and one creditor appeared to be heard on September 29, 1999.
There are two suits pending related to landlord claims under the bankruptcy,
both of which we are defending.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - Continued
The Company was named in a lawsuit filed in Washington, D.C. on December
15, 1999 by Crestar Bank, a landlord, for alleged failure to pay $108,981 of
rents and fees due under a sub-lease plus attorney's fees. The Company has
settled the claim. The full amount of the settlement has been previously accrued
in the Company's financial statements, however, the Company is in default of the
payment agreement as of June 30, 2000 and subsequently.
The Company was named in a lawsuit filed in Orange County, Florida on
July 24, 2000 by Michael T. Brigante, former Chief Financial Officer of the
Company, for alleged failure to pay $37,503 pursuant to a separation agreement
between Mr. Brigante and the Company dated November 30, 1999. The full amount of
the claim has been previously accrued in the Company's financial statements.
In November 1997, three of our facilities were searched by federal
authorities pursuant to search warrants, and the federal authorities removed
computer records and written documents in connection with an investigation of
alleged healthcare fraud. In June 1998, Complete Wellness Centers and several of
its employees, including its former Chief Executive Officer, were served with
subpoenas requesting records and documents related to billing and claims coding,
clinical relationships and corporate records. We believe that we could be a
target in this investigation. One employee received a letter dated January 13,
1998 from the United States Attorney General's Office stating that the employee
was a subject of the investigation. The investigation appears to be focused on
two clinics in Virginia. No charges have been filed against us or any of our
employees to date. However, any such charges could have a material adverse
effect on our future financial position and results of operations.
From time to time in the course of Complete Wellness Centers carrying out
its business, we encounter threatened litigation, none of which is presently
considered to be material.
The Company's common stock and warrants are listed on the NASDAQ SmallCap
Market and the Company must meet certain requirements in order to maintain this
listing. The requirements for continued listing include satisfying one of the
following conditions: (a) net tangible assets of at least $2,000,000 (b) market
capitalization of at least $35,000,000 or (c) net income of at least $500,000 in
the most recent fiscal year or in two of the last three fiscal years. The
Company does not meet any of the criteria as of December 31, 1999 or as of June
30, 2000. The Company received notification from the NASDAQ SmallCap Listing
Qualifications Division for the purpose of deficiencies in the minimum listing
requirements of the NASDAQ SmallCap Market. The Company formally responded to
the inquiry, developed and submitted a plan and timeline through which such
minimum requirement would be met. There can be no assurance that NASDAQ will
allow the Company's shares to remain listed while it works to regain compliance.
Consequently, the Company's shares could be delisted from the NASDAQ SmallCap
Market at any time. In the event that the Company's shares are delisted from the
NASDAQ SmallCap Market, they could continue to trade on the NASDAQ "Bulletin
Board".
Year 2000 Issue
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These systems and
products will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, computer systems and software used
by many companies and government agencies may need to be updated to comply with
the year 2000 requirements or risk system failure or miscalculations causing
disruptions to business activities. All of the Company's internal operating
systems were compliant as of December 31, 1999, however, Year 2000 problems may
not surface until after January 1, 2000. Management estimates that the costs
associated with any additional activities will not have a material effect on the
Company's operations.
Net Operating Loss Carryforward
The Company files a consolidated federal tax return with its wholly owned
subsidiaries. At December 31, 1999, the Company had net operating loss
carryforwards for income tax purposes of approximately $8,713,000 which expire
between 2010 and 2012. Utilization of net operating loss carryforwards may be
significantly limited, based on changes in the Company's ownership. The use of
substantially all of the combined net operating loss carryforwards of CWC, LLC
will be limited to offset future taxable income of each separate subsidiary in
proportion to their share of the tax losses generated to date. In addition,
these carryforwards may be significantly limited under the Internal Revenue Code
as a result of ownership changes resulting from the Company's Senior and Junior
Convertible Preferred Stock financing and other equity offerings.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - Continued
The Company has a cumulative pretax loss for financial reporting purposes.
Recognition of deferred tax assets will require generation of future taxable
income. There can be no assurance that the Company will generate earnings in
future years. Therefore, the Company established a valuation allowance on
deferred tax assets of approximately $5,415,000 as of December 31, 1999,
respectively.
Seasonality
The Company believes that the patient volumes at its Integrated Medical
Centers are not significantly affected by seasonality.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its affiliates are involved in the following material
legal proceedings:
As of August 8, 2000, we or our affiliates currently have eight legal
proceedings in various stages of litigation. Five of these actions involve suits
brought by former employees or vendors of various Integrated Medical Centers or
chiropractors' management companies, seeking recovery of monies allegedly owed
for wages, goods or services rendered to the Integrated Medical Center or
management company. We believe that two of these disputes are not material. We
are defending all such actions and believe none is meritorious.
In one case, the plaintiff penetrated the corporate boundary between the
Integrated Medical Center and the Company, Complete Wellness Centers, Inc. The
court awarded $147,292 for wages and damages with a subsequent award for related
legal fees of $37,712 were rendered against us. We appealed the decisions and
obtained a bond in the amount of $222,005 for satisfaction of the judgments,
which is backed by an irrevocable letter of credit for $111,002, against which
we have pledged a certificate of deposit of $111,002. The full amount of the
judgment has been previously accrued for. In July 2000, the Company was informed
it had lost the appeal and would be required to pay the judgment. On July 17,
2000, a petition was filed by the plaintiff seeking an award of an additional
$62,200 in attorney's fees and $7,031 in costs for work surrounding the
garnishments and appeal. No such award has been made at this time. The bonding
company has been notified of the original verdict being upheld and will proceed
accordingly with their duties and rights under the bond agreement, which will
include seizure of the certificate of deposit pledged against the bond. Chances
for success on subsequent appeal are very limited and the Company has chosen not
to pursue the appeal process further.
On November 12, 1999, C. Thomas McMillen, our former Chairman and Chief
Executive Officer filed suit in Superior Court for the District of Columbia
seeking damages resulting from the termination of his employment agreement with
us. Mr. McMillen alleges that we breached our employment contract with him and
that we breached a covenant of good faith and fair dealing, which the suit
alleges was implied in the agreement. He seeks salary, vacation, bonus pool,
stock options, office space, secretarial support, cellular phone and benefits
including health insurance from the date of termination, February 18, 1999,
through August 31, 2000. He seeks judgment in the amount of $500,000 plus
pre-judgment interest, the costs of his suit, attorney's fees and any further
relief that the court deems just and proper. We believe the action has no merit
but have attempted to arrive at a settlement agreement with Mr. McMillen without
success. In addition to defending this action, we have filed a counterclaim
seeking judgment for damages and costs. No hearings or depositions are scheduled
at this time.
In July 1999, Complete Wellness Weight Management, Inc., a wholly owned
subsidiary, filed for Chapter 7 bankruptcy protection. An initial hearing of the
creditors was held and one creditor appeared to be heard on September 29, 1999.
There are two suits pending related to landlord claims under the bankruptcy,
both of which we are defending.
The Company was named in a lawsuit filed in Washington, D.C. on December
15, 1999 by Crestar Bank, a landlord, for alleged failure to pay $108,981 of
rents and fees due under a sub-lease plus attorney's fees. The Company has
settled the claim. The full amount of the settlement has been previously accrued
in the Company's financial statements, however, the Company is in default of the
payment agreement as of June 30, 2000.
16
<PAGE> 17
ITEM 1. LEGAL PROCEEDINGS - Continued
The Company was named in a lawsuit filed in Orange County, Florida on
July 24, 2000 by Michael T. Brigante, former Chief Financial Officer of the
Company, for alleged failure to pay $37,503 pursuant to a separation agreement
between Mr. Brigante and the Company dated November 30, 1999. The full amount of
the claim has been previously accrued in the Company's financial statements.
In November 1997, three of our facilities were searched by federal
authorities pursuant to search warrants, and the federal authorities removed
computer records and written documents in connection with an investigation of
alleged healthcare fraud. In June 1998, Complete Wellness Centers and several of
its employees, including its former Chief Executive Officer, were served with
subpoenas requesting records and documents related to billing and claims coding,
clinical relationships and corporate records. We believe that we could be a
target in this investigation. One employee received a letter dated January 13,
1998 from the United States Attorney General's Office stating that the employee
was a subject of the investigation. The investigation appears to be focused on
two clinics in Virginia. No charges have been filed against us or any of our
employees to date. However, any such charges could have a material adverse
effect on our future financial position and results of operations.
From time to time in the course of Complete Wellness Centers carrying out
its business, we encounter threatened litigation, none of which is presently
considered to be material
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed: None
(b) Reports on Form 8-K
Form 8-K as filed on July 7, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Complete Wellness Centers, Inc.
Date: August 14, 2000 By /s/ Joseph J. Raymond
-------------------------------
Joseph J. Raymond
Chief Financial Officer
17
