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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS PURSUANT TO SECTION 12 (b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(Name of Small Business Issuer in its charter)
Colorado, USA 91-1869677
(State of Incorporation) (IRS Employer Identification No.)
21800 Oxnard Street, #440, Woodland Hills, California 91367
(Address of principal executive offices)
Issuer's Telephone Number, (818) 598-8888
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares, with par value of $0.001
(Common Stock)
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NATIONAL HEALTHCARE TECHNOLOGY, INC.
FORM 10-SB
TABLE OF CONTENTS
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Page
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PART I
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis or Plan of Operation 14
Item 3. Description of Property 16
Item 4. Security Ownership of Certain Beneficial Owners
and Management 17
Item 5.Directors, Executives Officers, Promoters
and Control Persons 19
Item 6. Executive Compensation 20
Item 7. Certain Relationships and Related Transactions 21
Item 8. Description of Securities. 22
PART II
Item 1. Market Price and Dividends on the Registrant's
Common Equity and Other Shareholder Matters 22
Item 2. Legal Proceedings 22
Item 3. Chances in and Disagreements with Accountants 22
Item 4. Recent Sales of Unregistered Securities 23
Item 5. Indemnification of Directors and Officers 23
PART FS
PART III
Item 1. Index to Exhibits
Articles of Incorporation and
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
National Healthcare Technology, Inc. (the "Company"), was incorporated
on February 29, 1996 as "Patriot Holding Corporation" under the laws of
the State of Colorado, to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. On
August 26, 1996, the Company changed its name to "National Healthcare
Technology, Inc." At the time of its name change, the Company entered
into certain agreements to acquire a patent for Magkelate, an
intravenous drug developed to re-establish normal electrolyte balance
in ischemic tissue and certain other patents for medical instruments
and medical instrument technology. In exchange, the Company issued
certain shares of stock to the patent holders.
At the time of the Company's patent acquisition, Magkelate had not yet
been approved by the Food and Drug Administration. The Company needed
to initiate and complete Phase III double blind studies of Magkelate in
order to secure approval from the Food and Drug Administration for this
new drug. Phases I and II had been successfully completed prior to the
Company's acquisition of the patents. Although the Company was
successful in raising one million dollars to help fund the Phase III
studies, ultimately the Company was unable to undertake and complete
the Phase III studies due to its inability to secure additional
financing to fund the study.
Subsequently, the developer of the Magkelate passed away and the patent
expired, leaving the Company unable to proceed with the Phase III study
even if it were able to secure financing for the study. The Board of
Directors of the Company has elected as this time to attempt to locate
and consummate a merger or acquisition with a private entity as the
Company's principal business purpose described below.
The Company can be defined as a shell company whose sole purpose at
this time is to locate and consummate a merger or acquisition with a
private entity. As part of its business plan, this Company is filing
this registration statement on Form 10-SB in order to become subject to
the reporting requirements of the Securities Exchange Act of 1934.
The Company's office is located at 21800 Oxnard Street, Suite 440,
Woodland Hills, California 91367. The contact person is James Smith,
President. The telephone number is (818) 598-8888.
The Company's authorized capital includes 25,000,000 shares of common
stock with a par value of $.001; at September 30, 1999, the end of the
most recent fiscal year, 5,575,000 shares of common stock were
outstanding; at December 31, 1999, 5,575,000 shares were outstanding.
The Company's common stock trades on the NASD Electronic Bulletin Board
under the symbol "NHKT-BB".
The information in the Registration Statement is current as of January
12, 2000, unless otherwise indicated.
The Company's business plan is to seek, investigate, and, if warranted,
acquire one or more properties or businesses, and to pursue other
related activities intended to enhance shareholder value. The
acquisition of a business opportunity may be made by purchase, merger,
exchange of stock, or otherwise, and may encompass assets or a business
entity, such as a corporation, joint venture, or partnership. The
Company has very limited capital, and it is unlikely that the Company
will be able to take advantage of more than one such business
opportunity. The Company intends to seek opportunities demonstrating
the potential of long-term growth as opposed to short-term earnings.
At the present time, the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any
agreement or definitive understanding with any person concerning an
acquisition.
It is anticipated that the Company's Officers and Directors will
contact broker-dealers and other persons with whom they are acquainted
who are involved in corporate finance matters to advise them of the
Company's existence and to determine if any companies or businesses
they represent have an interest in considering a merger or acquisition
with the Company. No assurance can be given that the Company will be
successful in finding or acquiring a desirable business opportunity,
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given the lack of any funds available for acquisitions, or that any
acquisition that occurs will be on terms that are favorable to the
Company or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which
are able to satisfy, or anticipate in the reasonably near future being
able to satisfy, the minimum asset requirements in order to qualify
shares for trading on NASDAQ or on a stock exchange (See "Investigation
and Selection of Business Opportunities"). The Company anticipates
that the business opportunities presented to it will (i) be recently
organized with no operating history, or a history of losses
attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of
funds to develop a new product of service or to expand into a new
market; (iv) be relying upon an untested product or marketing concept;
or (v) have a combination of the characteristics mentioned in (i)
through (iv). The Company intends to concentrate its acquisition
efforts on properties or businesses that it believes to be undervalued.
Given the above factors, investors should expect that any acquisition
candidate may have a history of losses or low profitability.
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its
limited resources. This includes industries such as service, finance,
natural resources, manufacturing, high technology, product development,
medical, communications and others. The Company's discretion in the
selection of business opportunities is unrestricted, subject to the
availability of such opportunities, economic conditions, and other
factors.
As a consequence of this registration of its securities, any entity
which has an interest in being acquired by, or merging into the
Company, is expected to be an entity that desires to become a public
company. In connection with such a merger or acquisition, it is highly
likely that an amount of stock constituting control of the Company
would be issued by the Company or purchased from the current principal
shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction
is very likely to result in substantial gains to them relative to their
purchase price for such stock. In the Company's judgment, none of its
Officers and Directors would thereby become an underwriter within the
meaning of the Section 2(11) of the Securities Act of 1933, as amended.
Depending upon the nature of the transaction, the current Officers and
Directors of the Company may resign their management positions with the
Company in connection with the Company's acquisition of a business
opportunity. See "Form of Acquisition", below, and "Risk Factors - The
Company - Lack of Continuity in Management". In the event of such
resignations, the Company's current management would not have any
control over the conduct of the Company's business following the
Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its Officers and
Directors, its other stockholders, professional advisors such as
attorneys and accountants, securities broker-dealers, venture
capitalists, members of the financial community, and others who may
present unsolicited proposals. The Company has no plans,
understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its Officers or
Directors are currently affiliated. Should the Company determine in
the future, contrary to the foregoing expectations, that a transaction
with an affiliate would be in the best interests of the Company and its
stockholders, the Company is in general permitted by Colorado law to
enter into such a transaction if:
1. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are
known to the Board of Directors, and the Board in good faith authorizes
the contract or transaction by the affirmative vote of a majority of
the disinterested directors, even though the disinterested directors
constitute less than a quorum; or
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2. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
3. The contract or transaction is fair as to the Company as of the
time it is authorized, approved or ratified, by the Board of Directors
or the stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of
the other company's management and personnel, the anticipated
acceptability of new products or marketing concepts, the merit of
technological changes, the perceived benefit the company will derive
from becoming a publicly held entity, and numerous other factors which
are difficult, if not impossible, to analyze through the application of
any objective criteria. In many instances, it is anticipated that the
historical operations of a specific business opportunity may not
necessarily be indicative of the potential for the future because of
the possible need to shift marketing approaches substantially, expand
significantly, change product emphasis, change or substantially augment
management, or make other changes. The Company will be dependent upon
the owners of a business opportunity to identify any such problems
which may exist and to implement, or be primarily responsible for the
implementation of, required changes. Because the Company may
participate in a business opportunity with a newly organized firm or
with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because
management in many instances will not have proved its abilities or
effectiveness, the eventual market for such company's products or
services will likely not be established, and such company may not be
profitable when acquired.
It is anticipated that the Company will not be able to diversify, but
will essentially be limited to one such venture because of the
Company's limited financing. This lack of diversification will not
permit the Company to offset potential losses from one business
opportunity against profits from another, and should be considered an
adverse factor affecting any decision to purchase the Company's
securities
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders
pursuant to the authority and discretion of the Company's management to
complete acquisitions without submitting any proposal to the
stockholders for their consideration. Holders of the Company's
securities should not anticipate that the Company necessarily will
furnish such holders, prior to any merger or acquisition, with
financial statements, or any other documentation, concerning a target
company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the
stockholders for their consideration, either voluntarily by such
directors to seek the stockholders advice and consent or because state
law so requires.
The analysis of business opportunities will be undertaken by or under
the supervision of the Company's President, who is not a professional
business analyst. See "Management". Although there are no current
plans to do so, Company management might hire an outside consultant to
assist in the investigation and selection of business opportunities,
and might pay a finder's fee. Since Company management has no current
plans to use any outside consultants or advisors to assist in the
investigation and selection of business opportunities, no policies have
been adopted regarding use of such consultants or advisors, the
criteria to be used in selecting such consultants or advisors, the
services to be provided, the term of service, or regarding the total
amount of fees that may be paid. However, because of the limited
resources of the Company, it is likely that any such fee the Company
agrees to pay would be paid in stock and not in cash. Otherwise, the
Company anticipates that it will consider, among other things, the
following factors:
1. Potential for growth and profitability, indicated by new
technology, anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's
stockholders;
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3. Whether, following the business combination, the financial
condition of the business opportunity would be, or would have a
significant prospect in the foreseeable future of becoming sufficient
to enable the securities of the Company to qualify for listing on an
exchange or on a national automated securities quotation system, such
as NASDAQ, so as to permit the trading of such securities to be exempt
from the requirements of Rule 15c2-6 adopted by the Securities and
Exchange Commission. See "Risk Factors - The Company - Regulation of
Penny Stocks";
4. Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations, through the
sale of additional securities, through joint ventures or similar
arrangements, or from other sources;
5 The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the
requirements that the issuer of the securities that are sought to be
listed have net tangible assets of at least $4,000,000 or a market
capitalization of $50 million or $950,000 in net income in the latest
fiscal year. Many, and perhaps most, of the business opportunities
that might be potential candidates for a combination with the Company
would not satisfy the NASDAQ listing criteria.
Not one of the factors described above will be controlling in the
selection of a business opportunity, and management will attempt to
analyze all factors appropriate to each opportunity and make a
determination based upon reasonable investigative measures and
available data. Potentially available business opportunities may occur
in many different industries and at various stages of development, all
of which will make the task of comparative investigation and analysis
of such business opportunities extremely difficult and complex.
Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited
experience in business analysis, the Company may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific
proposals and the selection of a business opportunity may take several
months or more.
Prior to making a decision to participate in a business opportunity,
the Company will generally request that it be provided with written
materials regarding the business opportunity containing such items as a
description of products, services and company history; management
resumes; financial information; available projections, with related
assumptions upon which they are based; an explanation of proprietary
products and services; evidence of existing patents, trademarks, or
services marks, or rights thereto; present and proposed forms of
compensation to management; a description of transactions between such
company and its affiliates during relevant periods; a description of
present and required facilities; an analysis of risks and competitive
conditions; a financial plan of operation and estimated capital
requirements; audited financial statements, or if they are not
available, unaudited financial statements, together with reasonable
assurances that audited financial statements would be able to be
produced within a reasonable period of time not to exceed 60 days
following completion of a merger transaction; and other information
deemed relevant.
As part of the Company's investigation, the Company's executive
Officers and Directors may meet personally with management and key
personnel, may visit and inspect material facilities, obtain
independent analysis or verification of certain information provided,
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check references of management and key personnel, and take other
reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the
impact of Securities and Exchange Commission regulations regarding
purchase and sale of penny stocks. The regulations would affect, and
possibly impair, any market that might develop in the Company's
securities until such time as they qualify for listing on NASDAQ or on
another exchange which would make them exempt from applicability of the
penny stock regulations. See "Risk Factors - Regulation of Penny
Stocks".
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the
Company to be attractive. These include acquisition candidates
desiring to create a public market for their shares in order to enhance
liquidity for current shareholders, acquisition candidates which have
long-term plans for raising capital through the public sale of
securities and believe that the possible prior existence of a public
market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of
development of a public market for their securities will be of
assistance in that process. Acquisition candidates which have a need
for an immediate cash infusion are not likely to find a potential
business combination with the Company to be an attractive alternative.
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may
participate in an business opportunity. Specific business
opportunities will be reviewed as well as the respective needs and
desires of the Company and the promoters of the opportunity and, upon
the basis of that review and the relative negotiating strength of the
Company and such promoters, the legal structure or method deemed by
management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements,
licenses, joint ventures and other contractual arrangements. The
Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization. Implementing
such structure may require the merger, consolidation or reorganization
of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the
Company would be the surviving entity. In addition, the present
management and stockholders of the Company most likely will not have
control of a majority of the voting shares of the Company following a
reorganization transaction. As part of such a transaction, the
Company's existing directors may resign and new directors may be
appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of Common Stock or other
securities of the Company. Although the terms of any such transaction
cannot be predicted, it should be noted that in certain circumstances
the criteria for determining whether or not an acquisition is a so-
called tax free reorganization under the Internal Revenue Code of 1986
depends upon the issuance to the stockholders of the acquired company
of a controlling interest (i.e., 80% or more) of the common stock of
the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions
rather than other tax free provisions provided under the Internal
Revenue Code, the company's current stockholders would retain in the
aggregate 20% or less of the total issued and outstanding shares. This
could result in substantial additional dilution in the equity of those
who were stockholders of the Company prior to such reorganization. Any
such issuance of additional shares might also be done simultaneously
with a sale or transfer of shares representing a controlling interest
in the Company by the current Officers, Directors and principal
shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In
some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain conditions
or at specified times thereafter. The issuance of substantial
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additional securities and their potential sale into any trading market
that might develop in the Company's securities may have a depressive
effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms
of such agreement cannot be predicted, generally such an agreement
would require specific representations and warranties by all of the
parties thereto, specify certain events of default, detail the terms of
closing and the conditions which must be satisfied by each of the
parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon
default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
Officers and principal shareholders will enter into a letter of intent
with the management, principals or owners of a prospective business
opportunity prior to signing a binding agreement. Such a letter of
intent will set forth the terms of the proposed acquisition but will
not bind any of the parties to consummate the transaction. Execution
of a letter of intent will by no means indicate that consummation of an
acquisition is probable. Neither the Company nor any of the other
parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the
acquisition as described in the preceding paragraph is executed. Even
after a definitive agreement is executed, it is possible that the
acquisition would not be consummated should any party elect to exercise
any right provided in the agreement to terminate it on specified
grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others. If a decision is made not to
participate in a specific business opportunity, the costs incurred in
the related investigation would not be recoverable. Moreover, because
many providers of goods and services require compensation at the time
or soon after the goods and services are provided, the inability of the
Company to pay until an indeterminate future time may make it
impossible to procure goods and services.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does
not, however, intend to engage primarily in such activities.
Specifically, the Company intends to conduct its activities so as to
avoid being classified as an investment company under the Investment
Company Act of 1940 (the Investment Act), and to avoid application of
the costly and restrictive registration, regulation and other
provisions of the Investment Act.
Section 3(a) of the Investment Act contains the definition of an
investment company, and it excludes any entity that does not engage
primarily in the business of investing, reinvesting or trading in
securities, or that does not engage in the business of investing,
owning, holding or trading investment securities (defined as all
securities other than government securities or securities of majority-
owned subsidiaries) the value of which exceeds 40% of the value of its
total assets (excluding government securities, cash or cash items).
The Company intends to implement its business plan in a manner, which
will result in the availability of this exception from the definition
of an investment company. Consequently, the Company's participation in
a business or opportunity through the purchase and sale of investment
securities will be limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it
consummates a reorganization as discussed above. Each of these areas
is regulated by the Investment Act, in order to protect purchasers of
investment company securities. Since the Company will not register as
an investment company, stockholders will not be afforded these
protections.
Any securities which the Company might acquire in exchange for its
Common Stock will be "restricted securities" within the meaning of the
Securities Act of 1933, as amended (the Act). If the Company elects to
resell such securities, such sale cannot proceed unless a registration
statement has been declared effective by the Securities
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and Exchange Commission or an exemption from registration is available.
Section 4(1) of the Act, which exempts sales of securities not
involving a distribution, would in all likelihood be available to
permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be
necessary, the Company would be required to comply with the provisions
of the Act to effect such resale.
An acquisition made by the Company may be in an industry that is
regulated or licensed by federal, state or local authorities.
Compliance with such regulations can be expected to be a time-consuming
and expensive process.
COMPETITION
The Company expects to encounter substantial competition in its efforts
to locate attractive opportunities, primarily from business development
companies, venture capital partnerships and corporations, venture
capital affiliates of large industrial and financial companies, small
investment companies, and wealthy individuals. Many of these entities
will have significantly greater experience, resources and managerial
capabilities than the Company and will therefore be in a better
position than the Company to obtain access to attractive business
opportunities. The Company also will experience competition from other
public blind pool companies, many of which may have more funds
available than does the Company.
CORPORATE OFFICES
The Company currently shares office space with its attorney and a
related entity at 21800 Oxnard Street, Suite 440, Woodland Hills,
California 91367. The Company's telephone number is (818) 598-8888.
Other than this office, the Company does not currently maintain any
other office facilities, and does not anticipate the need for
maintaining additional office facilities at any time in the foreseeable
future. The Company pays approximately $1,500.00 a month in rent and
approximately another $500.00 a month for utilities and other office
expenses. The lease is on a month to month basis.
EMPLOYEES
The Company is a development stage company and currently has no
employees. Management of the Company expects to use consultants,
attorneys and accountants as necessary, and does not anticipate a need
to engage any full-time employees so long as it is seeking and
evaluating business opportunities. The need for employees and their
availability will be addressed in connection with the decision whether
or not to acquire or participate in specific business opportunities.
RISK FACTORS
Current and prospective shareholders should carefully consider the
following risk factors, together with the other information contained
in this Form 10-SB, in evaluating the Company and its business. In
particular, readers should note that this Form 10-SB contains forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1996 and that actual results could differ
materially from those contemplated by such statements. The factors
listed below represent certain important factors the Company believes
could cause such results to differ. These factors are not intended to
represent a complete list of the general or specific risks that may
affect the Company. It should be recognized that other risks may be
significant, presently or in the future, and the risks set forth below
may affect the Company to a greater extent than indicated.
CONFLICTS OF INTEREST. Certain conflicts of interest exist between the
Company and its Officers and Directors. They have other business
interests to whom they devote their attention, and they may be expected
to continue to do so in the future. As a result, conflicts of interest
may arise that can be resolved only through their exercise of such
judgment as is consistent with their fiduciary duties to the Company.
See Management, and Conflicts of Interest.
It is anticipated that Company's Officers and Directors may actively
negotiate or otherwise consent to the purchase of a portion of their
common stock as a condition to, or in connection with, a proposed
merger or acquisition transaction. In this process, the Company's
Officers and Directors may receive a substantial premium to acquire
their shares in a merger or acquisition transaction and could consider
their own personal pecuniary benefit rather than the best interests of
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other Company shareholders, and the other Company shareholders are not
expected to be afforded the opportunity to approve or consent to any
particular stock buy-out transaction. See "Conflicts of Interest".
NEED FOR ADDITIONAL FINANCING. The Company has very limited cash funds
and has received a going concern qualification by its auditors for the
fiscal year ended September 30, 1999, and it may be impossible to take
advantage of any available business opportunities. Even if the lack of
funds does not hinder the acquisition of an interest in, or complete a
transaction with, a business opportunity, the Company will not, in all
likelihood, have enough capital to exploit the opportunity.
Accordingly, the ultimate success of the Company may depend upon its
ability to raise additional capital. The Company has not investigated
the availability, source, or terms that might govern the acquisition of
additional capital and will not do so until it determines a need for
additional financing. If additional capital is needed, there is no
assurance that funds will be available from any source or, if
available, that the funds can be obtained on terms acceptable to the
Company. If not available, the Company's operations will be limited to
those that can be financed with its debt/equity securities.
REGULATION OF PENNY STOCKS. The Company's securities are subject to a
Securities and Exchange Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to
persons other than established customers or accredited investors. For
purposes of the rule, the phrase Accredited investors means, in general
terms, institutions with assets in excess of $5,000,000, or individuals
having a net worth in excess of $1,000,000 or having an annual income
that exceeds $200,000 (or that, when combined with a spouse's income,
exceeds $300,000). For transactions covered by the rule, the broker-
dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of broker-
dealers to sell the Company's securities and also may affect the
ability of purchasers in this offering to sell their securities.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate Penny stocks. Such rules include Rules
3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the
Securities Exchange Act of 1934, as amended. Because the securities of
the Company may constitute Penny stocks within the meaning of the
rules, the rules would apply to the Company and to its securities. The
rules may further affect the ability of owners of Shares to sell the
securities of the Company.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has
suffered in recent years from patterns of fraud and abuse. Such
patterns include (i) control of the market for the security by one or a
few broker-dealers that are often related to the promoter or issuer;
(ii) manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases; (iii) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differentials and markups by selling broker-
dealers; and (v) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a
desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses. The Company's management
is aware of the abuses that have occurred historically in the penny
stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines
of practical limitations to prevent the described patterns from being
established with respect to the Company's securities.
LIMITED OPERATING HISTORY. The Company was formed on February 29, 1996
for the purpose of engaging in any lawful activity; however, the
Company has limited operating history, no revenues from operations, and
limited assets. The Company faces all of the risks of a new business
and the special risks inherent in the investigation, acquisition, or
involvement in a new business opportunity. The Company must be
regarded as a new or start-up venture with all of the unforeseen costs,
expenses, problems, and difficulties to which such ventures are
subject.
<PAGE>12
NO ASSURANCE OF SUCCESS OR PROFITABILITY. There is no assurance that
the Company will acquire a favorable business opportunity. Even if the
Company should become involved in a business opportunity, there is no
assurance that it will generate revenues or profits, or that the market
price of the Company's Common Stock will be increased thereby.
POSSIBLE BUSINESS NOT IDENTIFIED AND HIGHLY RISKY. The Company has not
identified and has no commitments to enter into or acquire a specific
business opportunity and therefore can disclose the risks and hazards
of a business or opportunity that it may enter into in only a general
manner, and cannot disclose the risks and hazards of any specific
business or opportunity that it may enter into. A shareholder can
expect a potential business opportunity to be quite risky. The
Company's acquisition of or participation in a business opportunity
will likely be highly illiquid and could result in a total loss to the
Company and its stockholders if the business or opportunity proves to
be unsuccessful. See "ITEM 1 Description of Business".
TYPE OF BUSINESS ACQUIRED. The type of business to be acquired may be
one that desires to avoid effecting its own public offering and the
accompanying expenses, delays, uncertainties, and federal and state
requirements which purport to protect investors. Because of the
Company's lack of capital, it is more likely than not that any
acquisition by the Company will involve other parties whose primary
interest is the acquisition of control of a publicly traded company.
Moreover, any business opportunity acquired may be currently
unprofitable or present other negative factors.
IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION. The Company's lack of
funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exhaustive investigation and
analysis of a business opportunity before the Company commits its
capital or other resources thereto. Management decisions, therefore,
will likely be made without detailed feasibility studies, independent
analysis, market surveys and the like which, if the Company had more
funds available to it, would be desirable. The Company will be
particularly dependent in making decisions based upon information
provided by the promoter, owner, sponsor, or others associated with the
business opportunity seeking the Company's participation. A
significant portion of the Company's available funds may be expended
for investigative expenses and other expenses related to preliminary
aspects of completing an acquisition transaction, whether or not any
business opportunity investigated is eventually acquired.
LACK OF DIVERSIFICATION. Because of the lack of financial resources
that the Company has, it is unlikely that the Company will be able to
diversify its acquisitions or operations. The Company's probable
inability to diversify its activities into more than one area will
subject the Company to economic fluctuations within a particular
business or industry and therefore increase the risks associated with
the Company's operations.
POSSIBLE RELIANCE UPON UNAUDITED FINANCIAL STATEMENTS. The Company
generally will require audited financial statements from companies that
it proposes to acquire. No assurance can be given, however, that
audited financials will be available to the Company. In cases where
audited financials are unavailable, the Company will have to rely upon
unaudited information received from target companies management that
has not been verified by outside auditors. The lack of the type of
independent verification which audited financial statements would
provide increases the risk that the Company, in evaluating an
acquisition with such a target company, will not have the benefit of
full and accurate information about the financial condition and
operating history of the target company. This risk increases the
prospect that the acquisition of such a company might prove to be an
unfavorable one for the Company or the holders of the Company's
securities.
Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the Exchange Act), and
thus will be required to furnish certain information about significant
acquisitions, including audited financial statements for any business
that it acquires. Consequently, acquisition prospects that do not
have, or are unable to provide reasonable assurances that they will be
able to obtain, the required audited statements would not be considered
by the Company to be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable. Should the
Company, during the time it remains subject to the reporting provisions
of the Exchange Act, complete an acquisition of an entity for which
audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and
<PAGE>13
Exchange Commission (the Commission) and to corresponding
administrative sanctions, including permanent injunctions against the
Company and its management. The legal and other costs of defending a
Commission enforcement action are likely to have material, adverse
consequences for the Company and its business. The imposition of
administrative sanctions wold subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ,
the automated quotation system sponsored by the National Association of
Securities Dealers, Inc., or on any existing stock exchange. Moreover,
the lack of such financial statements is likely to discourage broker-
dealers from becoming or continuing to serve as market makers in the
securities of the Company. Without audited financial statements, the
Company would almost certainly be unable to offer securities under a
registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited
until such financial statements were to become available.
OTHER REGULATION. An acquisition made by the Company may be of a
business that is subject to regulation or licensing by federal, state,
or local authorities. Compliance with such regulations and licensing
can be expected to be a time-consuming, expensive process and may limit
other investment opportunities of the Company.
DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT. The
Company currently has three individuals who serve as its Officers and
Directors. The Company will be heavily dependent upon their skills,
talents, and abilities to implement its business plan, and may, from
time to time, find that the inability of the Officers and Directors to
devote their full time attention to the business of the Company results
in a delay in progress toward implementing its business plan.
Furthermore, since only three individuals are serving as the Officers
and Directors of the Company, it will be entirely dependent upon their
experience in seeking, investigating, and acquiring a business and in
making decisions regarding the Company's operations. See Management.
Because investors will not be able to evaluate the merits of possible
business acquisitions by the Company; they should critically assess the
information concerning the Company's Officers and Directors.
LACK OF CONTINUITY IN MANAGEMENT. The Company does not have an
employment agreement with its Officers and Directors, and as a result,
there is no assurance that they will continue to manage the Company in
the future. In connection with acquisition of a business opportunity,
it is likely the current Officers and Directors of the Company may
resign. A decision to resign will be based upon the identity of the
business opportunity and the nature of the transaction, and is likely
to occur without the vote or consent of the stockholders of the
Company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's Articles of
Incorporation provide for the indemnification of its Directors,
Officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation
to which they become a party arising from their association with or
activities on behalf of the Company. The Company will also bear the
expenses of such litigation for any of its Directors, Officers,
employees, or agents, upon such person promise to repay the Company if
it is ultimately determined that any such person shall not have been
entitled to indemnification. This indemnification policy could result
in substantial expenditures by the Company, which it will be unable to
recoup.
DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the business
experience of its Officers and Directors, the Company may be required
to employ accountants, technical experts, appraisers, attorneys, or
other consultants, or advisors. The selection of any such advisors
will be made by the Company's President without any input from
stockholders. Furthermore, it is anticipated that such persons may be
engaged on an as needed basis without a continuing fiduciary or other
obligation to the Company. In the event the President or the Company
considers it necessary to hire outside advisors, he may elect to hire
persons who are affiliates, if they are able to provide the required
services.
LEVERAGED TRANSACTIONS. There is a possibility that any acquisition of
a business opportunity by the Company may be leveraged, i.e., the
Company may finance the acquisition of the business opportunity by
borrowing against the assets of the business opportunity to be
<PAGE>14
acquired, or against the projected future revenues or profits of the
business opportunity. This could increase the Company's exposure to
larger losses. A business opportunity acquired through a leveraged
transaction is profitable only if it generated enough revenues to cover
the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss
of a portion or all of the assets acquired. There is no assurance that
any business opportunity acquired through a leveraged transaction will
generate sufficient revenues to cover the related debt and expenses.
COMPETITION. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially
greater financial and management resources and capabilities than the
Company. These competitive conditions will exist in any industry in
which the Company may become interested.
NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on the
Common Stock and does not anticipate paying such dividends in the
foreseeable future.
LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS. The Company
may consider an acquisition in which the Company would issue as
consideration for the business opportunity to be acquired an amount of
the Company's authorized but unissued Common Stock that would, upon
issuance, represent the great majority of the voting power and equity
of the Company. The result of such an acquisition would be that the
acquired company's stockholders and management would control the
Company, and the Company's management could be replaced by persons
unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In
addition, the Company's majority shareholders could sell their control
blocks of stock at a premium price to the acquired company's
stockholders.
The acquisition will, in all probability, be structured as a tax-free
exchange under the Internal Revenue Code of 1986 to accommodate the
shareholders of the shareholders of the business entity to be acquired.
Of so structured, the Company's shareholders will not be impacted
either positively or negatively.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of
shares of the Company's common stock in the public market could
adversely affect the market price of the 5,575,000 shares outstanding
at December 31, 1999, 1,100,000 shares of common stock are free
tradable. 4,475,000 shares of common stock are eligible for sale in the
public market, subject to compliance with Rule 144 under the Securities
Act of 1933, as amended (the Securities Act). Rule 144 generally
provides that beneficial owners of shares who have held such shares for
one year may sell within a three month period a number of shares not
exceeding the greater of 1% of the total outstanding shares or the
average trading volume of the shares during the four calendar weeks
preceding such sale. The outstanding 392,020 shares of restricted
common stock held by Officers and Directors could be sold in accordance
with Rule 144 at any time since they have held their shares for at
least one year. The 4,082,980 shares of restricted common stock issued
for services and patents could be sold at any time in accordance with
Rule 144 since that stock has been held for more than one year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-SB, the words anticipated, estimate, expect,
and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks,
uncertainties and assumptions including the possibility that the
Company's will fail to generate projected revenues. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the development stage and since inception has
experienced no significant change in liquidity or capital resources or
stockholders equity other than the receipt of $1,000,000 from an
offering conducted under Rule 504 of Regulation D in 1997. The
Company's balance sheet as of September 30, 1999 reflects limited
<PAGE>15
assets and limited liabilities. Further, there exists no agreements or
understandings with regard to loan agreements by or with the Officers,
Directors, principals, affiliates or shareholders of the Company.
The Company will attempt to carry out its plan of business as discussed
above. The Company cannot predict to what extent its lack of liquidity
and capital resources will hinder its business plan prior to the
consummation of a business combination.
RESULTS OF OPERATIONS
During the period from November 5, 1989 (inception) through September
30, 1999, the Company engaged in limited operations and attempted to
initiate its double blind study of its drug, Magkelate. No revenues
have been received by the Company during this period.
The Company anticipates that until a business combination is completed
with an acquisition candidate, it will not generate revenues and may
operate at a loss after completing a business combination, depending
upon the performance of the acquired business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition, changes in
financial condition and results of operations of the Company for the
fiscal years ended September 30, 1999 and September 30, 1998 should be
read in conjunction with the financial statements of the Company and
related notes included therein.
The Company was incorporated on February 29, 1996 as Patriot Holding
Corporation. On August 26, 1996, the Company amended its Articles of
Incorporation to change its name to National Healthcare Technology,
Inc. At the same time, the Company entered into agreements to acquire
certain assets in exchange for the issuance of common stock.
In August, 1996, the Company entered into an agreement to issue 685,850
shares of its common stock to National Medical Technology, Inc. in
exchange for all of its assets. National Medical Technology, Inc. was
involved in the manufacturing and marketing of surgical optics,
laryngoscopes, otoscopes, specula, and portable light sources. The
sole shareholder of National Medical Technology, Inc. was Ivan C.
Tiholiz, subsequently President and Chairman of the Board of the
Company. Subsequently, National Medical Technology, Inc. was dissolved
and the shares owned by it were transferred to Dr. Tiholiz. This
transaction was recorded at $55,287. During the year ended September
30, 1997, the Company wrote off $47,350 of these assets. During the
year ended September 30, 1998, the Company wrote off the remaining
$7,937 of these assets.
In August, 1996, the Company entered into an agreement to issue 200,000
shares of its common stock to Ivan C. Tiholiz, valued at $200,
subsequently President and Chairman of the Board of the Company, and
William Ogden, subsequently Vice-President and Director of the Company.
The stock issuance was in exchange for their assignment of all right,
title and interest in the invention and in the patent of the United
States of America for the invention entitled "A Co-Active Instruments
with Non-slip Surfaces and Method for their Manufacture". The shares
were divided equally between Dr. Tiholiz and Mr. Ogden. The Company
intended to refine the diamondizing process of this patent and
manufacture diamondized instruments for the medical industry. The
death of Mr. Ogden in late 1997 led to the Company's abandonment of its
diamondizing division.
In August, 1996, the Company entered into an agreement to issue
1,364,150 shares of its common stock, valued at $1,362 to Ivan C.
Tiholiz, subsequently President and Chairman of the Board of the
Company, for the assignment of all right, title and interest in an
invention and patent of the United States of America relating to an
invention entitled "Divalent/Monovalent Bipolar Cation Therapy for
Enhancement of Tissue perfusion and Reperfusion in Disease States".
This patent is the patent for Magekelate. This patent has expired.
In August, 1996, the Company entered into an agreement to issue
2,150,000 shares of its common stock, valued at $2,150, to Phoenix
Consulting Services, Inc. in exchange for investment banking and
consulting services that Phoenix provided to the Company.
Since the agreements described above, the Company has financed its
activities through the distribution of equity capital, including a
private placement of 100,000 units which raised $1,000,000 in 1997.
The Company used the proceeds from this offering to commence its
operations, to pay salaries, to pay general and administrative expenses
and any necessary expenses. The Company hired employees and began
refining the parameters of the double-blind study for Magkelate and
began to develop its medical instruments division. The Company ordered
<PAGE>16
a quantity of Magkelate and on May 1, 1998, began to conduct the
double-blind study of Magkelate at Mission Community Hospital in
Panorama City, California. The Company received indications of
interest from certain hospitals in Israel and Los Angeles, California
in participating in the double blind study of Magkelate. However,
before the Company could enter into letters of intent with these
hospitals, it would have had to raise an additional three to four
million dollars. Additionally, the Company became concerned that the
study being conducted at Mission Community Hospital was flawed although
the results were encouraging. Due to concerns about the protocols and
testing methods being used, the Company ceased the double-blind study
at Mission Community Hospital and sought and received FDA approval to
modify the protocols and testing procedures. However, at that time,
the Company was became low on funds and could not commence the revised
double-blind study without raising additional capital. The Company was
unable to raise this additional capital. Shortly thereafter, the
Company CEO and Chairman, Dr. Tiholiz, was diagnosed with stomach
cancer. Dr. Tiholiz passed away in the fall of 1999. Following its
inability to raise capital and needing to conserve its financial
resources, the Company dismissed all of its employees in early 1999.
The Company will attempt to carry out its business plan as discussed
above. The Company cannot predict to what extent its lack of liquidity
and capital resources will hinder its business plan prior to the
consummation of a business combination.
NEED FOR ADDITIONAL FINANCING
The Company believes that its existing capital will not be sufficient
to meet the Company's cash needs, including the costs of compliance
with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended. Once a business combination is completed, the
Company's needs for additional financing are likely to increase
substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
funds will be available to the Company to allow it to cover its
expenses.
The Company might seek to compensate providers of services by issuances
of stock in lieu of cash.
ITEM 3 DESCRIPTION OF PROPERTY.
The Company currently shares office space with its attorney and a
related entity at 21800 Oxnard Street, Suite 440, Woodland Hills,
California 91367. The Company pays approximately $1,500.00 per month
for the use of this office. The Company believes that its facilities
are sufficient for its needs at the present time. The Company's
telephone number is (818) 598-8888
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of the date of this Registration
Statement, the number of shares of Common Stock owned of record and
beneficially by executive Officers, Directors and persons who hold 5.0%
or more of the outstanding Common Stock of the Company. Also included
are the shares held by all executive officers and directors as a group.
</TABLE>
<TABLE>
<CAPTION>
Names and Addresses Number of Shares Percent of
Owned Beneficially Beneficially
Owned Shares
<S> <C> <C>
Cede and Co. 329,388 5.9%
P.O. Box 22
New York NY 10274
Irving M. Einhorn (1) 10,000 .17%
11900 Olympic Blvd. Ste 5
Los Angeles, CA 9004
Toni Hussain (1) 254,000 4.56%
24000 Laurel Place
Calabasas, CA 92302
<PAGE>17
Phoenix Consulting Services, Inc. 2,130,000 38.2%
7107 Enders Ave
San Diego, CA
James H. Smith (1) 127,520 2.2%
348 Georgetown Ave
San Mateo, CA 94402
Estate of Ivan C. Tiholiz 1,950,000 34.98%
MD 14860 Roscoe Blvd. Ste 307
Van Nuys, CA 91402
</TABLE>
(1) Denotes officer or director
ITEM NO. 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
The Directors and executive Officers currently serving the Company are
as follows:
<TABLE>
<CAPTION>
Name Age Position Held and Tenure
<S> <C> <C>
Irving M. Einhorn 57 Director since June 17, 1998
Toni A. Hussain 50 Secretary and Director since August 23, 1997
James Smith 55 President and Director since November 1, 1997
</TABLE>
The Directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, Directors will be elected for
one-year terms at the annual stockholders meeting. Officers will hold
their positions at the pleasure of the Board of Directors, absent any
employment agreement, of which none currently exist or is contemplated.
There is no arrangement or understanding between the Directors and
Officers of the Company and any other person pursuant to which any
Director or Officer was or is to be selected as a Director or Officer
of the Company.
There is no family relationship between or among any Officer and
Director.
The Directors and Officers of the Company will devote their time to the
Company's affairs on an as needed basis. As a result, the actual
amount of time which each will devote to the Company's affairs is
unknown and is likely to vary substantially from month to month.
The Company has no audit or compensation committee.
BIOGRAPHICAL INFORMATION
IRVING EINHORN, ESQ.: Mr. Einhorn has been a practicing attorney for
the past 26 years and he is an expert in the field of securities. Mr.
Einhorn's expertise in securities began upon graduation from law school
in 1971 when he joined the Securities and Exchange Commission's Chicago
Regional office as a staff attorney. He was promoted to the position
of Branch Chief in charge of the Enforcement in 1974 and in 1975 to the
position of Senior Trial Counsel where he was responsible for all
litigation conducted by that office. In 1980, Mr. Einhorn transferred
to the Commission's headquarters in Washington, D.C. where for the next
four years he was Assistant Chief Trial Attorney with the Division of
Enforcement's Trial Unit. In this position, Mr. Einhorn was
responsible for prosecuting the Commission's most sensitive and complex
cases. In March, 1984, he was appointed to the position of Regional
Administrator of the Securities and Exchange Commission's Los Angeles
office. In this position, Mr. Einhorn supervised a staff of over 100
persons engaged in performing the Commission's enforcement and
regulatory responsibilities in the states of Arizona, Nevada, Hawaii
and California.
In May, 1989, Mr. Einhorn resigned from the SEC and joined Pacific
Brokerage Services, Inc., a member of the New York Stock Exchange, as
Executive Vice President and General Counsel. While there, he
participated in management of all aspects of the firm's operations on
the New York Stock Exchange. As legal counsel, he directed and
conducted all firm arbitration proceedings and exercised oversight of
the firm's compliance department. In October 1990, Mr. Einhorn entered
<PAGE>18
the private practice of law, limiting his practice to securities
litigation and the representation of individuals before the SEC. He
has also served as an expert witness in a number of securities cases.
In 1968, Mr. Einhorn received a Bachelor of Arts degree from Temple
University. Mr. Einhorn then obtained his Juris Doctorate from
Valparaiso University School of Law in 1972. Mr. Einhorn has received
further education by way of the National Institute for Trial Advocacy,
whereby he obtained education in the art of Trial Advocacy and Advanced
Trial Advocacy Skills in 1977 and 1982, respectively.
JAMES H. SMITH: Mr. Smith has over 30 years of experience in
automotive, electronic component manufacturing and distribution, and
pharmaceutical wholesaling. Currently, Mr. Smith is chief operations
officer of Decision Dynamix Corporation. Prior to that, Mr. Smith
served as the president for McKesson Drug Company, which is an $11
billion wholesaler of pharmaceutical and generic products, home health
care, and health and beauty care products. Prior to McKesson, Mr. Smith
served as the president for the world's largest electronic component
distributor, Hamilton Hallmark, which is a division of Avnet, Inc. Mr.
Smith led the consolidation of Hamilton/Avnet with its third largest
competitor, Hallmark Electronics. Mr. Smith also served as corporate
senior vice president of Avnet, Inc.
Mr. Smith spent sixteen years with electronic component manufacturing
companies: Harris Semiconductor, Rockwell Microelectronics, ITT
Semiconductor Components Group, Texas Instruments, and International
Rectifier. Mr. Smith's vast experience stems from holding positions in
sales, sales management, product line marketing, customer services,
advertising, and worldwide sales and marketing with offshore profit and
loss responsibility.
Mr. Smith graduated from Michigan State University with a Bachelor of
Arts in Economics.
TONI A. HUSSAIN. Mrs. Hussain was employed by the Walt Disney Company
as senior contract administrator where she was responsible for
negotiating software contracts and licensing agreements. Mrs. Hussain
also managed the development and construction of 25 Disney stores
located in shopping centers throughout the United States. Prior to
Disney, Mrs. Hussain implemented various cost reduction procedures at
several ITT Corporations resulting in savings in excess of $20 million.
Additionally, Mrs. Hussain administered prime contracts for several
major companies ranging from $10 million to $4 billion in value.
Mrs. Hussain received a Bachelor of Arts in Mathematics and Bachelors
of Science in Psychology and Teaching from Southern Illinois University
in 1971. In 1973, Mrs. Hussain received a Master of Arts in
Psychology. Mrs. Hussain also attended the University of Southern
California Graduate School of Business where she received a Corporate
Management Effectiveness Degree in 1990.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado law, the Company's Articles of Incorporation
provide that the Company will indemnify its Directors and Officers
against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of
their being or having been Company Directors or officers unless, in any
such action, they are adjudged to have acted with gross negligence or
willful misconduct. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to Directors,
Officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in that Act and is, therefore,
unenforceable.
OTHER PUBLIC SHELL ACTIVITIES
No Officer and/or Director of the Company has any prior involvement
with public shell companies or experience in identifying emerging
companies for investment and/or business combinations.
CONFLICTS OF INTEREST
The Officers and Directors of the Company will devote only a small
portion of their time to the affairs of the Company, estimated to be no
more than approximately 5 hours per month. There will be occasions
when the time requirements of the Company's business conflict with the
<PAGE>19
demands of their other business and investment activities. Such
conflicts may require that the Company attempt to employ additional
personnel. There is no assurance that the services of such persons
will be available or that they can be obtained upon terms favorable to
the Company.
There is no procedure in place that would allow the Officers and
Directors to resolve potential conflicts in an arms-length fashion.
Accordingly, they will be required to use their discretion to resolve
them in a manner, which they consider appropriate.
The Company's Officers and Directors may actively negotiate or
otherwise consent to the purchase of a portion of their common stock as
a condition to, or in connection with, a proposed merger or acquisition
transaction. It is anticipated that a substantial premium over the
initial cost of such shares may be paid by the purchaser in conjunction
with any sale of shares by the Company's Officers and Directors which
is made as a condition to, or in connection with, a proposed merger or
acquisition transaction. The fact that a substantial premium may be
paid to the Company's Officers and Directors to acquire their shares
creates a potential conflict of interest for them in satisfying their
fiduciary duties to the Company and its other shareholders. Even
though such a sale could result in a substantial profit to them, they
would be legally required to make the decision based upon the best
interests of the Company and the Company's other shareholders, rather
than their own personal pecuniary benefit.
ITEM 6. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Name and Year Salary Bonuses Other Restricted Options/ LTIP All Other
Principal Position Annual Stock SARS Payouts($) Compensation
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Smith
CEO and Director 1999 0 0 0 0 0 0 0
Ivan C. Tiholiz
CEO and Director 1999 25,000 0 0 0 0 0 0
1998 100,000 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
Other Officers
/Directors 1999 20,000 0 0 0 0 0 0
1998 71,583 0 0 0 0 0 0
1997 8,333 0 0 0 0 0 0
</TABLE>
Compensation of Directors
For the fiscal year ended September 30, 1998, the Company issued 10,000
shares of its common stock to five non-employee directors as
compensation for their services to the Company.
The Company adopted a Stock Option Plan for employees and directors on
October 1, 1998. The Company awarded 100,000 options to each of its
directors, with 20,000 shares to vest each year for the next five years
if the director is re-elected at that year's annual meeting of
shareholders. Other than these options, no director receives or
accrues any compensation for his services as a Director, including
committee participation and or special assignments. The annual meeting
to be held early in the year 2000. If the Company's current directors
are re-elected to the Board, then 20,000 options will vest for each of
its three directors. At the present time, no options have vested.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at
meeting of the Board of Directors.
The Company has no material bonus or profit-sharing plans pursuant to
which cash or non-cash compensation is or may be paid to the Company's
directors or executive officers except as described above.
The Company has no compensatory plan or arrangements, including
payments to be received from the Company, with respect to any executive
officer or director, where such plan or arrangement would result in any
compensation or remuneration being paid resulting from the resignation,
retirement or any other termination of such executive officer's
employment or from a change-in-control of the Company or a change in
such executive officer's responsibilities following a change-in-control
<PAGE>20
and the amount, including all periodic payments or installments where
the value of such compensation or remuneration exceeds $100,000 per
executive officer.
During the last completed fiscal year, no funds were set aside or
accrued by the Company to provide pension, retirement or similar
benefits for Directors or Executive Officers.
The Company has no written employment agreements.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In August, 1996, the Company issued a total of 2,150,000 shares of its
common stock to Ivan C. Tiholiz, M.D., an officer and director, in
exchange for the transfer of certain patents and technology to the
Company. 100,000 shares were issued to William Ogden, co-patent holder
along with Dr. Tiholiz of certain medical instrument plating
techniques. Both Dr. Tiholiz and Mr. Ogden were appointed officers and
directors of the Corporation.
Also in August, 1996, the Company entered into an agreement to issue
2,150,000 shares of its common stock to Phoenix Consulting Corp. in
exchange for investment banking services and business consulting.
During the period ended September 30, 1996, Dr. Tiholiz advanced the
Company $28,300 for working capital and the Company repaid hi, $23,700,
which resulted in an amount owed to Dr. Tiholiz of $4,600 at September
30, 1996. During the year ended September 30, 1997, Dr. Tiholiz
advanced the Company $23,256 and the Company paid Dr. Tiholiz which
resulted in an amount due from Dr. Tiholiz of $10,094 at September 30,
1997. During the year ended September 30, 1998, management of the
Company determined the receivable to be uncollectible and wrote off the
entire $10,094 balance. Management of the Company also determined that
a receivable due from an employee totaling $640 was uncollectible.
During the period from November 5, 1995 (inception) through September
30, 1998, the Company made payments totaling $19,467 to Dr. Tiholiz
for consulting fees.
During the year ended September 30, 1997, the Company issued 1,000
units, consisting of 1,000 shares of its $.0001 par value common stock
and 10,000 warrants, to Toni A. Hussain, an officer and director of the
Company, in exchange for a vehicle valued at $5,000.
In October, 1998, the Company adopted the National Healthcare
Technology, Inc. 1998 Stock Option Plan. This plan provides for the
issuance of stock options to employees and directors as compensation
for their service to the Corporation and as an incentive to retain
loyal and qualified employees and directors. The number of shares
reserved for issuance under the plan is 5,000,000 common shares. The
Company approved options of 100,000 shares of its common stock under
the plan for its directors in the year ended September 30, 1999.
20,000 shares will vest each year that the director is re-elected as a
director of the Company. Two of the five directors issued options have
subsequently resigned and these options are no longer outstanding and
no shares vested under those options. The Company's current directors
will each have 20,000 shares of their options vest if they are re-
elected as directors at the Company's next annual meeting. The plan
expires September 30, 2008.
No officer, director, promoter, or affiliate of the Company has or
proposes to have any direct or indirect material interest in any asset
proposed to be acquired by the Company through security holdings,
contracts, options, or otherwise.
The Company will adopt a policy under which any consulting or finder's
fee that may be paid to a third party for consulting services to assist
management in evaluating a prospective business opportunity would be
paid in stock or in cash. Accordingly, the Company is unable to
predict whether or in what amount such a stock issuance might be made.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an
acquisition candidate requiring the sale of all or a portion of the
common stock held by the Company's current stockholders to the
acquisition candidates or its principals, or to other individuals or
business entities, or requiring some other form of payment to the
Company's current stockholders, or requiring the future employment of
specified officers and payment of salaries to them. It is more likely
than not that any sale of securities by the Company current
stockholders to an acquisition candidate would be at a price
substantially higher than that originally paid by such stockholders.
Any payment to current stockholders in the context of an acquisition
involving the Company would be determined entirely by the largely
unforeseeable terms of a future agreement with an unidentified business
entity.
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of Common Stock. Each record holder of Common Stock
is entitled to one vote for each share held in all matters properly
submitted to the stockholders for their vote. Cumulative voting for
the election of directors is not permitted by the Amended Articles of
Incorporation.
Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of
Directors out of legally available funds; and, in the event of
liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive, ratably, the net assets of the Company
available to stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon liquidation.
Holders of outstanding shares of Common Stock have no preemptive,
conversion or redemptive rights. All of the issued and outstanding
shares of Common Stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and
nonassessable. To the extent that additional shares of the Company's
Common Stock are issued, the relative interests of then existing
stockholders may be diluted.
<PAGE>21
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
500,000 shares of preferred stock, par value $.01. The Board of
Directors of the Company is authorized to issue the preferred stock
from time to time in series and is further authorized to establish such
series, to fix and determine the variations in the relative rights and
preferences as between series, to fix voting rights, if any, for each
series, and to allow for the conversion of preferred stock into Common
Stock. No preferred stock has been issued by the Company. The Company
anticipates that preferred stock may be utilized in making
acquisitions.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its
independent certified public accountants. In the event the Company
enters into a business combination with another company, it is the
present intention of management to continue furnishing annual reports
to stockholders. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate. The Company intends to comply
with the periodic reporting requirements of the Securities Exchange Act
of 1994 for so long as it is subject to those requirements.
<PAGE>22
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the NASD Electronic Bulletin Board
in the United States, having the trading symbol "NHKT" and CUSIP
#635904-105. The common stock commenced trading in late 1997.
The range of high and low bid information for the Company's common
stock over the last two fiscal years is shown below, by quarter:
<TABLE>
<CAPTION>
High Bid Low Bid
<S> <C> <C>
1st Qtr. 1998 5 1.0625
2nd Qtr. 1998 3.625 1.50
3rd Qtr. 1998 3.75 1.875
4th Qtr. 1998 2.625 .75
1st Qtr. 1999 2.75 1.50
2nd Qtr. 1999 1.50 .1563
3rd Qtr. 1999 .1563 .1563
4th Qtr. 1999 .1563 .04
</TABLE>
The NASD provided the above information to the Company. These
quotations may reflect inter-dealer prices without retail mark-up/mark-
down/commission and may not reflect actual transactions.
As of December 31, 1999, the Company estimates there are 75 "holders of
record" of its common stock and estimates that there are approximately
85 beneficial shareholders of its common stock.
There are no restrictions that limit the Company's ability to pay
dividends on its common stock. The Company has not declared any
dividends since incorporation and does not anticipate that it will do
so in the foreseeable future. The present policy of the Company is to
retain future earnings for use in the operations and expansion of its
business.
The Company's common stock is issued in registered form. United Stock
Transfer, Inc. of Englewood, Colorado is the registrar and transfer
agent for the common stock.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
No Director, Officer or affiliate of the Company, and no owner of
record or beneficial owner of more than 5.0% of the securities of the
Company, or any associate of any such Director, Officer or security
holder is a party adverse to the Company or has a material interest
adverse to the Company in reference to pending litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company hired a new auditing firm, Moffitt & Company, P.C., to
conduct the audit for the fiscal year ended September 30, 1999.
Moffitt & Company, P.C. replaced the company's previous auditors,
Cordovano & Harvey, P.C. Cordovano and Harvey, P.C. were replaced on
September 30, 1999.
Cordovano & Harvey, P.C.'s reports on the Company's financial
statements for the previous two fiscal years did not contain an adverse
opinion or disclaimer of opinion nor were its reports modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Company's Board
of Directors.
There were no disagreements with the Company's former auditor on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which if not resolved to the
former auditor's satisfaction would have caused it to make reference to
the subject matter of the disagreement in connection with its report.
<PAGE>23
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company completed one private
placement in the United States under Rule 504 of Regulation D in which
100,000 units were subscribed for at $5 per unit by 35 investors.
Under the terms of the private placement, ten common stock warrants,
exercisable at $.50 each, were issued with each one share of common
stock issued. The warrants were immediately exercisable and tradable
after the closing of the private placement Each common stock purchase
warrant entitled the holder to purchase an additional share of common
stock at a price of $.50 per share until January 12, 1998 (extended to
July 31, 1998 by corporate resolution). All 1,000,000 warrants were
exercised, raising an additional $500,000. The Company sold the units
to friends and business acquaintances of the Officers and Directors.
There was no underwriter and no underwriter's discounts or commissions
were paid.
In December, 1997, the Company issued 500 shares of its common stock,
valued at $2,500 to two individuals as consideration for services they
provided to the Company for design of its website and for graphic art
displays. The Company relied on an exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended, as
an offering not involving the public.
On September 30, 1998, the Company approved the issuance of shares of
its common stock to certain past and present Officers and Directors as
consideration for their services to the Company for the previous fiscal
year. The stock was valued at $2.50 per share, based on the then
current market price of the Company's common stock. The names and
numbers of shares issued are as follows:
<TABLE>
<CAPTION>
Name Number of Shares
<S> <C>
Dr. W. Plance, D.O. 4,000
Vincent Hussain 5,000
Mildred Seelig, M.D. 10,000
James Smith 10,000
Carlos Collazo 10,000
Irving Einhorn 10,000
Michael Shechter, M.D. 8,000
Toni A. Hussain 17,500
</TABLE>
The Company relied on an exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as amended, as an issuance
not involving a public offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and the Bylaws of the Company, filed as
Exhibits 3.1 and 3.2, respectively, provide that the Company will
indemnify its Officers and Directors for costs and expenses incurred in
connection with the defense of actions, suits, or proceedings where the
Officer or Director acted in good faith and in a manner he reasonably
believed to be in the Company's best interest and is a party by reason
of his status as an Officer or Director, absent a finding of negligence
or misconduct in the performance of duty.
<PAGE>24
PART F/S
The following financial statements required by Item 310 of Regulation S-B are
furnished below
Independent Auditor's Report dated October 28, 1999
Balance Sheet as of September 30, 1999
Statement of Operations for the year ended September 30, 1999 and
for the period November 5, 1995 (Date of Inception) through September
30, 1999
Statement of Stockholders' Equity for the year ended September 30, 1999
and for the period November 5, 1995 (Date of Inception) through
September 30, 1999
Statement of Cash Flows for the year ended September 30, 1999 and for
the period November 5, 1995 (Date of Inception) through September 30,
1999
Notes to Financial Statements
Independent Auditor's Report dated October 28, 1998
Balance Sheet as of September 30, 1998
Statement of Operations for the year ended September 30, 1998 and
for the period November 5, 1995 (Date of Inception) through September
30, 1998
Statement of Stockholders' Equity for the year ended September 30, 1998
and for the period November 5, 1995 (Date of Inception) through
September 30, 1998
Statement of Cash Flows for the year ended September 30, 1998 and for
the period November 5, 1995 (Date of Inception) through September 30,
1998
Notes to Financial Statements
<PAGE>25
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page No.
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statements of Operations 3
Statement of Changes in Stockholder's Equity 4 - 5
Statements of Cash Flows 6 - 7
Notes to Financial Statements 8 - 11
</TABLE>
<PAGE>26
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
National Healthcare Technology, Inc.
(A Development Stage Company)
Woodland Hills, California
We have audited the balance sheet of National Healthcare Technology,
Inc. (A Colorado Corporation and a Development Stage Company) as of
September 30, 1999, and the related statements of operations, changes
in stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of
National Healthcare Technology, Inc. for the period from November 5,
1995 (Date of Inception) to September 30, 1998, were audited by other
auditors whose report dated December 3, 1998, expressed an unqualified
opinion on those statements with a statement that there was substantial
doubt about the company's ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the September 30, 1999 financial statements referred to
above present fairly, in all material respects, the financial position
of National Healthcare Technology, Inc. as of September 30, 1999, and
the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 8
to the financial statements, the company incurred net losses of
$1,204,960 from inception, needs additional capital and abandoned its
present development programs. These factors raise substantial doubt
about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result form the
outcome of these uncertainties.
Moffitt & Company, P.C.
Scottsdale, Arizona
October 28, 1999
<PAGE>27
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash 9,656
Loan receivable 8,678
-------
TOTAL ASSETS $18,334
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
California franchise tax payable $800
------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value
500,000 shares authorized
-0- shares issued and outstanding
Common stock, $.001 per share
25,000,000 shares authorized
5,575,500 shares issued and outstanding $5,575
Paid in capital in excess of par value of stock $1,216,919
Deficit accumulated during the development stage ( 1,204,960)
-----------
TOTAL STOCKHOLDERS' EQUITY 17,534
----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $18,334
==========
<PAGE>28
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 1999
</TABLE>
<TABLE>
<CAPTION>
November 5, 1989
(Date of
Inception)
Year Ended Through
September 30, September 30,
1999 1999
----------- --------------
<S> <C> <C>
REVENUE $ 0 $0
DEVELOPMENT COSTS 214,674 1,203,360
-------- ---------
NET (LOSS) BEFORE INCOME TAXES ( 214,674) ( 1,203,360)
INCOME TAXES 800 1,600
--------- -----------
NET (LOSS) $( 215,474) $(1,204,960)
========== ===========
NET (LOSS) PER COMMON SHARE
Basic and diluted $( 0.38)
=======
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic and diluted 5,575,500
=========
</TABLE>
<PAGE>29
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
BALANCE, NOVEMBER 5, 1995
(DATE OF INCEPTION) 0 $0 0 $0
SHARES ISSUED FOR PATENT
RIGHTS 0 0 1,564,150 1,564
NET (LOSS) FOR THE PERIOD
ENDED SEPTEMBER 30, 1996 0 0 0 0
BALANCE, SEPTEMBER 30, 1996 0 0 1,564,150 1,564
SHARES ISSUED TO RELATED
PARTY FOR EQUIPMENT 0 0 685,850 686
SHARES ISSUED TO RELATED
PARTY FOR SERVICES 0 0 2,150,000 2,150
SALE OF COMMON STOCK,
PURSUANT TO PRIVATE
OFFERING, NET OF OFFERING
COSTS OF $25,617 0 0 61,740 62
CONVERSION OF PROMISSORY
NOTES AND RELATED ACCRUED
INTEREST TO COMMON STOCK
UPON EFFECTIVE DATE OF
PRIVATE OFFERING 0 0 37,260 37
SHARES ISSUED TO RELATED
PARTY FOR VEHICLE, UPON
EFFECTIVE DATE OF PRIVATE
OFFERING 0 0 1,000 1
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1997 0 0 0 0
--- --- ---------- ------
BALANCE, SEPTEMBER 30, 1997 0 0 4,500,000 4,500
</TABLE>
<PAGE>30
<TABLE>
<CAPTION
Paid in Capital Deficit Accumulated
In Excess of During the
Par-Value of Developmental
Stock Stage
<S> <C> <C>
$0 $0
0 0
0 ( 49,807)
0 ( 49,807)
54,601 0
0 0
272,821 0
187,263 0
4,999 0
0 ( 300,410)
------- ---------
519,684 350,217
</TABLE>
<PAGE>31
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Preferred Stock Common Stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
WARRANTS EXERCISED, NET
OF $17,440 COSTS 0 $0 1,000,000 1,000
SHARES ISSUED FOR SERVICES
0 0 1,000 1
SHARES ISSUED FOR SERVICES 0 0 49,000 49
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1998
0 0 0 0
BALANCE, SEPTEMBER 30, 1998
0 0 5,550,000 5,550
SHARES ISSUED FOR SERVICES
0 0 25,500 25
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1999
0 0 0 0
BALANCE, SEPTEMBER 30, 1999
0 $0 5,575,500 $5,575
</TABLE>
<PAGE>32
<TABLE>
<CAPTION>
Paid in Capital Deficit Accumulated
In Excess of During the
Par-Value of Developmental
Stock Stage
<S> <C> <C>
$0 $0
$481,560 $0
4,999 0
146,951 0
0 ( 639,269)
1,153,194 ( 989,486)
63,725 0
0 ( 215,474)
$1,216,919 $( 1,204,960)
</TABLE>
<PAGE>33
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
November 5, 1999
(Date of Inception)
Year Ended Through
September 30, September 30,
1999 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ( 215,474) $( 1,204,960)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation and amortization 0 22,977
Common stock issued as payment for
interest expense 0 12,300
Common stock issued for services 63,750 217,900
Loss on abandoned assets 65,100 120,387
Gain on sale of assets 0 ( 500)
Increases (decreases) in:
Accounts payable ( 4,162) ( 17,539)
California franchise tax payable 800 800
Accrued payroll and payroll taxes ( 775) 9,664
NET CASH FLOWS (USED) BY OPERATING
ACTIVITIES ( 90,761) ( 838,971)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ( 40,179) ( 87,314)
Proceeds from sale of equipment 0 5,500
NET CASH FLOWS (USED) BY INVESTING
ACTIVITIES ( 40,179) ( 81,814)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 0 195,000
Repayments on notes payable 0 ( 20,000)
Proceeds from issuance of common stock
and subscriptions 0 798,500
Payments on offering costs 0 ( 43,059)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 0 930,441
</TABLE>
<PAGE>34
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
November 5, 1999
(Date of Inception)
Year Ended Through
September 30, September 30,
1999 1999
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH $( 130,940) $9,656
CASH BALANCE, BEGINNING OF PERIOD 140,596 0
CASH BALANCE, END OF PERIOD $ 9,656 $9,656
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 0 $ 55
Taxes $ 0 $ 0
NON CASH INVESTING AND FINANCING
ACTIVITIES
Common stock issued for notes payable $ 0 $175,000
Common stock issued for patent rights $ 0 $ 1,562
Common stock issued for equipment $ 0 $ 60,287
Common stock issued for services and
Directors' fees $63,750 $215,750
</TABLE>
<PAGE>35
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Nature of Business
National Healthcare Technology, Inc. was organized on November 5, 1995,
under the laws of the state of Colorado for the purpose of developing,
manufacturing and marketing an intravenous drug and several high
technology products for use in the medical industry. In the current
year, the company abandoned all of its development programs and is
pursuing new areas to develop.
Accounting Estimates
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were used.
Cash Equivalents
For purposes of the statement of cash flows, the company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the deferred
tax assets and liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rate are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Net Earnings Per Share
The company adapted Statement of Financial Accounting Standards No. 128
that requires the reporting of both basic and diluted earnings per
share. Basic earnings per share is computed by dividing net income
available to common shareowners by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock. In accordance with FASB 128, any anti-dilutive effects on net
loss per share are excluded.
<PAGE>36
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 2 INCOME TAXES
<TABLE>
<S> <C>
(Loss) from operations before income taxes $( 215,474)
The provision for income taxes is estimated as follows:
Currently payable $ 800
Deferred receivable $ 475,000
A reconciliation of the provision for income taxes
compared with the amounts at the U.S. Federal statutory
rate was as follows:
Tax (refund) at U.S. Federal statutory income
tax rate $ 474,200
Deferred income tax assets and liabilities reflect the
impact of temporary differences between amounts of
assets and liabilities for financial reporting purposes
and the basis of such assets and liabilities as measured
by tax laws. The net deferred tax asset is $ 0
</TABLE>
Temporary differences and carryfowards that give use to
deferred tax assets and liabilities included the following:
<TABLE>
<CAPTION>
Deferred Tax
Assets Liabilities
<S> <C> <C>
Net operating loss $475,000 $ 0
Valuation allowance 475,000 0
Total deferred taxes $ 0 $ 0
</TABLE>
As discussed in note 8, there is substantial doubt about the company's
ability to continue as a going concern. Consequently, the company must
maintain a 100% valuation allowance for the deferred tax asset as there
is doubt that the company will generate profits which will be absorbed
by the tax differences. A reconciliation of the valuation allowance is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, September 30, 1998 $363,370
Addition to allowance for
year ended September 30, 1999 80,000
Addition due to change in
corporation status from
Colorado to California 31,630
Balance, September 30, 1999 $ 475,000
</TABLE>
<PAGE>37
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 3 TAX CARRYFORWARD
The Company has the following tax carryforwards at September 30, 1999:
<TABLE>
<CAPTION>
Expiration
Year Ended Amount Date
<S> <C> <C>
September 30, 1999 $215,474 2019
September 30, 1998 614,265 2018
September 30, 1997 279,456 2012
September 30, 1996 78,959 2011
$1,188,154
</TABLE>
NOTE 4 COMMON STOCK
In October 1998, the board of directors authorized the issuance of
25,500 shares of common stock as compensation to officers.
NOTE 5 RENT
The company rents its facilities on a month to month basis from an
affiliated company. The rent expense for the year ended September 30,
1999 was $20,633.
NOTE 6 LONG LIVED ASSETS
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carry
amount of the asset in question may not be recoverable. The company
abandoned and wrote-off $39,040 of property and equipment during the
current year.
NOTE 7 STOCK OPTION PLAN
The company adopted the National Healthcare Technology, Inc. 1998 stock
option plan. The board of directors is required to designate a
committee of not less then three directors to administer the plan. The
committee has the power to:
A. Designate participants
B. Determine the number of shares to be covered by options
C. Determine the terms and conditions of any options
D. Administer the plan
<PAGE>38
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 7 STOCK OPTION PLAN (CONTINUED)
The maximum number of shares that may be issued under the option plan
is 5,000,000. In addition, no participant shall be granted more than
500,000 shares in any one fiscal year.
The company did not grant any options during the current year.
The option plan terminates on September 30, 2000.
NOTE 8 GOING CONCERN
These financial statements are presented on the basis that the company
is a going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal cause of
business over a reasonable length of time. The company has incurred
development losses of $1,204,960 since inception. In addition, the
company has abandoned all development activities. These factors raise
substantial doubt as to the company's ability to continue as a going
concern.
NOTE 9 PREFERRED STOCK
No rights or preferences have been assigned to the preferred stock.
<PAGE>39
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
With
INDEPENDENT AUDITORS' REPORT
September 30, 1998
Prepared by:
Cordovano and Harvey, P.C.
Certified Public Accountants
Denver, Colorado
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
<PAGE>40
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-2
Balance Sheet, September 30, 1998 F-3
Statements of Operations, for the years ended September 30,
1998 and 1997, and November 5, 1995 (inception) through
September 30, 1998 F-4
Statement of Shareholders' Equity, November 5, 1995 (inception)
through September 30, 1998 F-5
Statements of Cash Flows, for the years ended September 30,
1998 and 1997, and November 5, 1995 (inception) through
September 30, 1998 F-7
Summary of Significant Accounting Policies F-9
Notes to Financial Statements F-11
</TABLE>
<PAGE>41
Cordovano and Harvey, P.C. Certified Public Accountants
201 Steele Street
Suite 300
Denver, Colorado 80206
(303) 329-0220 Phone
(303) 316-7493 Fax
To the Board of Directors and Shareholders
National Healthcare Technology, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheet of National Healthcare Technology,
Inc. ( a development stage company) as of September 30, 1998, and the
related statements of operations, shareholders' equity and cash flows
for the years ended September 30, 1998 and 1997, and the period from
November 5, 1995 (inception) through September 30, 1998. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of National
Healthcare Technology, Inc. as of September 30, 1998, and the results
of its operations and its cash flows for the years ended September 30,
1998 and 1997, and the period from November 5, 1995 (inception) through
September 30, 1998, in conformity with generally accepted accounting
principles.
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's significant operating losses
raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note A. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Cordovano & Harvey, P.C.
Denver, Colorado
December 3, 1998
October 28, 1999
<PAGE>42
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 1998
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash.................................. ......... $ 140,596
-------------
TOTAL CURRENT ASSETS 140,596
EQUIPMENT AN D LEASEHOLD IMPROVEMENTS, LESS $22,151 OF
ACCUMULATED DEPRECIATION AND AMORTIZATION (Note C)............. ...24,985
OTHER ASSETS
Patent rights, less $827 of accumulated amortization 737
Deposit. 8,677
--------------
$ 174,995
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable.................................. $ 4,962
Accrued payroll and payroll taxes.... 775
--------------
TOTAL CURRENT LIABILITIES 5,737
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares
authorized -0- shares issued and outstanding -
Common stock, $.001 par value, 25,000,000 shares
authorized, 5,550,0 issued and outstanding 5,550
Additional paid-in capital 1,253,194
Deficit accumulated during the development stage (989,486)
--------------
TOTAL STOCKHOLDERS' EQUITY 169,258
--------------
$ 174,995
==============
</TABLE>
<PAGE>43
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
November 5,
1995
For The For The (Inception)
Year Ended Year Ended Through
September 30, September 30, September 30,
1998 1997 1998
<S> <C> <C> <C>
OPERATING EXPENSES
Payroll and payroll taxes $ 202,950 $ 23,346 $ 225,296
Professional fees... 104,054 54,257 159,981
Consulting............... .. 14,295 43,212 59,407
Consulting, related party (Note B) - 1,667 19,467
Directors' fees (Note F). 147,000 - 147,000
Supplies . 26,042 17,423 47,140
Licenses and fees 8,388 5,362 22,944
Advertising and promotions 11,883 4,359 16,483
Insurance . 22,188 9,430 31,618
Communications 883 8,430 9,313
Rent 25,060 42,722 80,986
Depreciation and amortization. 8,316 13,939 22,978
Loss on abandoned assets
(Note D). 7,937 47,350 55,287
Other 50,386 19,058 69,444
------- ------- --------
LOSS FROM OPERATIONS (629,382) (289,555) (967,344)
NON-OPERATING INCOME AND (EXPENSE)
Bad debt expense (Note B) (10,734) - (10,734)
Gain on sale of asset 500 - 500
Other, net 402 45 447
Interest expense (55) (10,900) (12,355)
------- ------- --------
NET LOSS BEFORE (639,169) (300,410) (989,486)
INCOME TAXES (Note E)
Income tax benefit, current 238,447 117,452 363,370
Income taxes, deferred (238,447) (117,452) (363,370)
-------- --------- --------
NET LOSS $639,269) $(300,410) $ (989,486)
======== ========= ============
BASIC WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 5,333,917 3,350,000 3,105,914
========= ========== ===========
BASIC NET LOSS PER
COMMON SHARE $ (0.12) $ (0.09) $ (0.32)
======== ========= ==========
</TABLE>
<PAGE>44
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
November 5, 1995 (inception) through September 30, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Preferred Common Paid-In Development
Share Amount Shares Amount Capital Stage Total
-------------------- ------------------ ------------ -------------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, NOVEMBER 5, 1995
(DATE OF INCEPTION) 0 $0 0 $ 0 $ 0 $ 0 -
SHARES ISSUED FOR PATENT
RIGHTS 0 0 1,564,150 1,564 0 0 200
NET (LOSS) FOR THE PERIOD
ENDED SEPTEMBER 30, 1996 0 0 0 0 0 ( 49,807) (49,807)
--- --- ---------- ------ ----- --------- -------
BALANCE, SEPTEMBER 30, 1996 0 0 1,564,150 1,564 0 ( 49,807) (49,607)
SHARES ISSUED TO RELATED
PARTY FOR EQUIPMENT 0 0 685,850 686 54,601 0 55,287
SHARES ISSUED TO RELATED
PARTY FOR SERVICES 0 0 2,150,000 2,150 0 0 2,150
SALE OF COMMON STOCK,
PURSUANT TO PRIVATE
OFFERING, NET OF OFFERING
COSTS OF $25,617 0 0 61,740 62 272,821 0 272,883
CONVERSION OF PROMISSORY
NOTES AND RELATED ACCRUED
INTEREST TO COMMON STOCK
UPON EFFECTIVE DATE OF
PRIVATE OFFERING 0 0 37,260 37 187,263 0 187,300
SHARES ISSUED TO RELATED
PARTY FOR VEHICLE, UPON
EFFECTIVE DATE OF PRIVATE
OFFERING 0 0 1,000 1 4,999 0 5,000
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1997 0 0 0 0 0 ( 300,410) (300,410)
--- --- --------- ----- ------- --------- -------
BALANCE, SEPTEMBER 30, 1997 0 0 4,500,000 4,500 519,684 (350,217) 172,603
WARRANTS EXERCISED, NET
OF $17,440 COSTS (Note F) 0 0 1,000,000 1,000 481,560 0 482,560
SHARES ISSUED FOR SERVICES 0 0 1,000 1 4,999 0 5,000
SHARES ISSUED FOR SERVICES
(Note F) 0 0 49,000 49 146,951 0 147,000
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1998 0 0 0 0 0 ( 639,269) (639,269)
--- --- --------- ----- ---------- --------- --------
BALANCE, SEPTEMBER 30, 1998 0 0 5,550,000 5,550 1,153,194 ( 989,486) $167,894
<PAGE>45
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
</TABLE>
<TABLE>
<CAPTION>
November 5, 1995
(Date of
For the For the Inception
Year Ended Year Ended Through
September 30, September 30, September 30,
1998 1997 1998
--------- ----------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss... $ (639,269) $( 300,410) $( 989,486)
Transactions not requiring cash:
Depreciation and amortization. 8,316 13,938 22,977
Common Stock issued as payment
for interest expense 12,300 12,300
Common stock issued for services 152,000 2,150 154,150
Loss on abandoned assets (Note D) 7,937 47,350 55,287
Gain on Sale of Asset (500) (500)
Changes in current assets and current liabilities:
Receivables and other current assets 14,558 (27,935) (13,377)
Accounts payable and other
current liabilities (17,336) 21,675 10,439
--------- -------- -------
NET CASH (USED IN)
OPERATING ACTIVITIES (474,294) ( 230,932) ( 748,210)
--------- -------- --------
INVESTING ACTIVITIES:
Purchases of equipment and
leasehold improvements (18,180) (28,955) ( 47,135)
Proceeds from sale of equipment 5,500 0 5,500
-------- ------- -------
NET CASH FLOWS (USED IN
NVESTING ACTIVITIES (12,680) (28,955) ( 41,635)
-------- ------- -------
FINANCING ACTIVITIES:
Proceeds from notes payable - 95,000 195,000
Repayments on notes payable - ( 20,000) (20,000)
Proceeds from issuance of common stock
and subscriptions 500,000 298,500 798,500
Payments for offering costs (17,440) (19,529) (43 ,059)
--------- --------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 482,560 353,981 930,441
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,414) 94,094 140,596
Cash and cash equivalents, beginning of year 145,010 50,916 -
--------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 140,596 145,010 140,596
========= ======= =======
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 55 $ - $ -
Income taxes $ - $ - $ -
NON CASH INVESTING AND
FINANCING TRANSACTION:
Common stock issued for notes payable $ - $ 175,000 $ 175,000
Common stock issued for patent rights (Note B) $ - $ - $ 1,562
Common stock issued for equipment (Note B) $ - $ 60,287 $ 60,287
Common stock issued for services $ 5,000 $ - $ 5,000
Common Stock issued for directors fees (Note F) $ 147,000 $ - $ 147,000
</TABLE>
<PAGE>46
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
September 30, 1998
Development stage company
National Healthcare Technology, Inc. (the Company) is in the
development stage in accordance with Statement of Financial Accounting
Standards (SFAS) No. 7 and was formed for the purpose developing,
manufacturing and marketing an intravenous drug and several high
technology products for use in the medical industry.
Use of estimates
The preparation of the financial statements in conformity with
generally accepted accounting principals requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from these
estimates.
Cash equivalents
For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalent.
Equipment and depreciation
Equipment is stated at cost. Depreciation is recorded by the straight-
line method based upon estimated useful lives of assets.
Leasehold and improvements
Leasehold improvements are stated at cost. Amortization is recorded by
the straight-line method based upon the terms of each lease.
Amortization expense for the leasehold improvements was $-0- and $-0-
for the years ended September 30, 1998 and 1997, respectively, and $827
for the period November 5, 1995 (inception) through September 30, 1998.
Patent rights and amortization
Patent rights are recorded at cost. Amortization is calculated by the
straight-line method over the life of the asset, which is estimated to
be sixty months. Amortization expense for the patent rights was $52
and $52 for the years ended September 30, 1998 and 1997, respectively,
and $827 for the period November 5, 1995 (inception) through September
30, 1998.
<PAGE>47
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies, Continued
September 30, 1998
Net loss per share
The net loss per common share has been computed on the basis of the
weighted average number of shares outstanding during each period.
Earnings per share is reported using a dual presentation of basic and
diluted earnings per share. Basic earnings per share excludes the
impact of commons stock equivalents. Diluted earnings per share
utilizes the average market price per share when applying the treasury
stock method in determining common stock equivalents. However, the
Company has a simple capital structure for the periods presented and,
therefore, there is no variance between the basic and diluted earnings
per share. Common stock warrants outstanding were not considered in
the computation of loss per share because their effect would be
antidilutive.
Income taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the recorded
book basis and tax basis of assets and liabilities for financial and
income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred tax assets and
liabilities are also recognized for operating losses that are available
to offset future taxable income and tax credits that are available to
offset future income taxes.
Reclassifications
Certain changes have been made to the September 30, 1997 financial
statements to conform to the current period presentation.
<PAGE>48
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
September 30, 1998
Note A: Nature of Organization
National Healthcare Technology, Inc. was incorporated under the laws of
Colorado as Patriot Holding Corporation and subsequently changed its
name to National Healthcare Technology, Inc. (Colorado). The Company
is the successor to National Healthcare Technology, Inc. (California).
Present development stage activities of the Company commenced November
5, 1995. Activities from November 5, 1995 through February 28, 1996
were conducted through National Healthcare Technology, Inc.
(California), and activities from February 29, 1996 through September
30, 1998 were conducted through National Healthcare Technology, Inc.
(Colorado).
The Company is a development stage company engaged in the development
and testing of an intravenous drug, organizational matters and the sale
and issuance of shares of its $.001 par value common stock. Upon
completion of product development and receipt of regulatory approvals,
it intends to manufacture and market products developed through its
research programs. The Company's main focus is directed towards
achieving approval from the Food and Drug Administration (FDA) for an
intravenous drug named Magkelate.
In the course of its development activities, the Company sustained
continuing operating losses and expects such losses to continue for the
foreseeable future. The Company plans to continue to finance its
operations with a combination of stock sales and, in the longer term,
revenues from product sales. The Company's ability to continue as a
going concern is dependent upon successful completion of additional
financing and, ultimately, upon the production and selling of its drug.
Note B: Related party transactions
During the period ended September 30, 1996, the Company issued
1,364,150 shares of its $.001 par value common stock, valued at $1,362,
to an officer and director of the Company in exchange for the patent
rights to Magkelate.
During the period ended September 30, 1996, the Company issued 200,000
shares of its $.001 par value common stock, valued at $200, to two
officers and directors of the Company in exchange for the patent rights
of certain medical products under development.
During the period ended September 30, 1996, the Company issued 685,850
shares of its $.001 par value common stock to an affiliated company in
exchange for equipment valued at $55287 (see Note D).
<PAGE>49
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements, Continued
September 30, 1998
Note B: Related party transactions, continued
During the period ended September 30, 1997, the Company issued
2,150,000 shares of its $.001 par value common stock to an affiliate
company in exchange for investment banking services valued at $2,150.
During the period ended September 30, 1996, a former officer advanced
the Company $28,300 for working capital and the Company repaid $23,700,
which resulted in an amount owed to the former officer of $4,600 at
September 30, 1996. During the year ended September 30, 1997, the
former officer advanced the Company $23,256 and the Company paid the
former officer $37,950 which resulted in an amount due from the former
officer of $10,094 at September 30, 1997. During the year ended
September 30, 1998, management of the Company determined the receivable
to be uncollectible and wrote off the entire $10,094 balance.
Management of the Company also determined that a receivable due from an
employee totaling $640 was uncollectible. Receivables written off
during the year ended September 30, 1998 totaled $10,734, which is
included in the accompanying statements of operations as bad debt
expense.
During the period from November 5, 1995 (inception) through September
30, 1998, the Company made payments totaling $19,467 to an affiliated
company for consulting fees. These amounts are included in the
accompanying financial statements as consulting, related party.
During the year ended September 30, 1997, the Company issued 1,000
units, consisting of 1,000 shares of its $.0001 par value common stock
and 10,000 warrants, to a shareholder and director in exchange for a
vehicle valued at $5,000.
Note C: Equipment and leasehold improvements
Equipment and leasehold improvements at September 30, 1998 consisted of the
following:
<TABLE>
<S> <C>
Equipment $ 33,881
Leasehold Improvements 13,255
47,136
Less accumulated depreciation and amortization (22,151)
$ 24,985
</TABLE>
Depreciation and amortization expense for the years ended September 30,
1998 and 1997 totaled $8,264 and $13,887, respectively.
<PAGE>50
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements, Continued
September 30, 1998
Note D: Loss on abandoned assets
On August 13, 1996, through a related party transaction with an
affiliated company, the Company received equipment recorded at $55,287
in exchange for 685,850 shares of the Company's $.001 par value common
stock. Management no longer plans to enter the line of business that
would use the equipment and therefore, wrote off the fixed assets and
incurred an abandonment loss. Loss on abandoned assets totaled $7,937
and $47,350 for the years ended September 30, 1998 and 1997,
respectively.
Note E: Income taxes
A reconciliation of the U.S. statutory federal income tax rate to the
effective tax rate follows for the years ended September 30, 1998 and
1997:
<TABLE>
<CAPTION>
September 30,
1998 1997
<S> <C> <C>
U.S. statutory federal rate 34.0% 32.85%
State income tax rate 3.30% 6.25%
Net operating loss for which no tax
benefit is currently available -37.0% -39.10%
</TABLE>
Income taxes from operations for the years ended September 30, 1998,
consisted of the following components: (1) a current tax benefit of
$238,447, resulting from the net loss before income taxes, and (2)
deferred tax expenses of $238,447, resulting from the valuation
allowance recorded against the deferred tax asset.
Income taxes from operations for the year ended September 30, 1997,
consisted of the following components: (1) a current tax benefit of
$117,452 resulting from the net loss before income taxes, and (2)
deferred tax expense of $117,452 resulting from the valuation allowance
recorded against the deferred tax asset.
The change in the valuation allowance from September 30, 1996 through
September 30, 1997 was $117,452. The change in valuation allowance
from September 30, 1997 through September 30, 1998 was $238,447. Net
operating loss carryforwards will expire 2018.
<PAGE>51
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements, Continued
September 30, 1998
Note E: Income taxes, continued
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will
be realized. At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the
allowance if positive evidence indicates that the value of the deferred
tax asset is no longer impaired and the allowance is no longer
required.
Note F: Shareholders' equity
During the fiscal year ended September 30, 1998, shareholders exercised
warrants totaling 1,000,000 common shares for net proceeds of $482,560,
after deducting offering costs totaling $17,440.
Effective September 30, 1998, the board of directors approved the
issuance of 49,000 shares of the Company's common stock as payment in
exchange for Directors' services valued at $147,000. The $147,000 is
included in the accompanying statements of operations as directors'
fees.
Note G: Private Stock Offering
Through a private offering, the Company sold 100,000 units at $5.00 per
share. Each unit consisted of one share of the Company's $.001 par
value common stock and ten common stock purchase warrants. Each
warrant entitles the holder to purchase one share of common stock of
the Company at a price of $.50 per share. The securities have not been
registered pursuant to the Securities Act of 1933, as amended (the
Act), nor have they been registered under the securities laws of any
state. These securities were offered pursuant to an exemption from
registration provided by applicable state securities laws. Proceeds of
the offering were $272,883, net of offering costs of $25,617. In
connection with the offering, certain short-term convertible debt,
totaling $187,3oo including accrued interest, was converted into 37,260
shares of common stock and 372,600 warrants. All 1,000,000 warrants
were exercised during the year ended September 30, 1998 (See Note F).
Note H: Subsequent event
In October, 1998, the Company prepared a private offering document to
offer for sale 200,000 shares of the Company's $.001 par value common
stock at $2.50 per share. No shares have yet been sold through the
offering. The securities have not been registered pursuant to the
Securities Act of 1933, as amended (the Act), nor have they been
registered under the securities laws of any state. These securities
were offered pursuant to an exemption from registration provided by
applicable state securities laws. The Company plans to received
proceeds of $475,000, after deducting $25,000 for offering costs,
through the offering and plans to use all proceeds for working capital.
<PAGE>52
PART III
ITEM 1. INDEX TO EXHIBITS
(2) Charter and by-laws
(3) Instruments defining the rights of security holders
(5) Voting Trust Agreement - Not Applicable
(6) Material Contracts - Not Applicable
(7) Material Foreign Patents - Not Applicable
(12) Additional Exhibits - Not Applicable
ITEM 2. DESCRIPTION OF EXHIBITS
(2.1) Articles of Incorporation
(2.2) Bylaws
(3.1) Stock Option Plan
(12) Additional Exhibits
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
NATIONAL HEALTHCARE TECHNOLOGY, INC.
Date: January 5, 2000
By /s/ James Smith
James Smith, CEO
By /s/Toni A. Hussain
Toni A. Hussain, Secretary/Treasurer
<PAGE>53
ARTICLES OF INCORPORATION
OF
PATRIOT HOLDING CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Incorporator,
being a natural person of the age of eighteen years or more, and
desiring to form a body corporate under the laws of the State of
Colorado, does hereby sign, verify and deliver in duplicate to the
Secretary of State of the State of Colorado these Articles of
Incorporation:
ARTICLE I
Name
The name of the Corporation is Patriot Holding Corporation.
ARTICLE II
Period of Duration
The Corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of
Colorado unless and until dissolved according to the laws of the State
of Colorado.
ARTICLE III
Purposes
The nature of the business of the Corporation and the objects and
purposes and business thereof proposed to be transacted, promoted or
carried on are as follows:
A. To carry on any business including the transaction of all lawful
business for which corporations may be organized pursuant to the
Colorado Business Corporation Act, to have and exercise all powers,
privileges and immunities now or hereafter conferred upon or permitted
to corporations by the laws of the State of Colorado, and to do any and
all things herein set forth to the same extent as natural persons could
do insofar as permitted by the laws of the State of Colorado.
B. To do those things which are authorized and permitted by the
Colorado Business Corporation Act.
C. To do all things authorized by law or incidental thereto.
ARTICLE IV
Capital Structure
4.1 Authorized Capital. The aggregate number of shares of all classes
which the Corporation shall have authority to issue is 25,500,000
shares of which 25,000,000 shall be Common Shares, $.001 par value per
share and 500,000 shall be Preferred Shares, $.01 par value per share,
and the designations, preferences, limitations and relative rights of
the shares of each class are as follows:
4.2 Preferred Shares. The Corporation may divide and issue the
Preferred Shares in series. Preferred Shares of each series when
issued shall be designated to distinguish them from the shares of all
other series. The Board of Directors is hereby expressly vested with
authority to divide the class of Preferred Shares into series and to
fix and determine the relative rights and preferences of the shares of
any such series so established to the full extent permitted by these
Articles of Incorporation and the laws of the State of Colorado in
respect of the following:
A. The number of shares to constitute such series, and the distinctive
designations thereof;
B. The rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from which
the dividends shall accrue;
C. Whether the shares may be redeemed and, if so, the redemption price
and terms and conditions of redemption;
<PAGE>54
D. The amount payable upon shares in the event of involuntary
liquidation or voluntary liquidation;
E. Sinking fund or other provisions, if any, for the redemption or
purchase of shares;
<PAGE>
F. The terms and conditions on which shares may be converted, if the
shares or any series are issued with the privilege of conversion;
G. Voting powers, if any; and
H. Any other relative rights and preferences of the Preferred Shares,
including, without limitation, any restrictions and increase the number
of share s or any series theretofore authorized and any limitation of
restriction of rights or powers to which shares of any future series
shall be subject.
4.3 Common Shares.
A. The rights of holders of Common Shares to receive dividends or
share in the distribution of assets in the event of liquidation,
dissolution or winding up of the affairs of the Corporation shall be
subject to the preferences, limitations and relative rights of the
Preferred Shares fixed in the resolution or resolutions which may be
adopted from time to time by the Board of Directors of the Corporation
providing for the issuance of one or more series of the Preferred
Shares.
B. The holders of the Common Shares shall be entitled to one vote for
each Common Share held by them of record at the time for determining
the holders thereof entitled to vote. Cumulative voting shall not
be permitted in the election of directors or otherwise.
4.4 Consideration for Shares. The authorized Common Shares of the
Corporation shall be issued for such consideration as shall be fixed
from time to time by the Board of Directors. In the absence of fraud
in the transaction, the determination by the Board of Directors as to
the value of any property or services received in full or partial
payment for shares shall be conclusive. When shares are issued upon
payment of the consideration fixed by the Board of Directors, such
shares shall be taken to be fully paid stock and shall be
nonassessable.
4.5 Preemptive Rights. Shareholders shall not have a preemptive right
to subscribe for, purchase or acquire additional unissued or treasury
shares of the Corporation or securities convertible into shares or
carrying share purchase warrants or privileges as the same may be
issued from time to time by the Corporation.
4.6 Dividends. Dividends in cash, property or shares of the
Corporation may be paid, as and when declared by the Board of
Directors, out of funds of the Corporation to the extent and in the
manner permitted by law.
ARTICLE V
Voting by Shareholders
5.1 Voting Rights: Cumulative Voting. Each outstanding Common Share
is entitled to one vote on each matter submitted to a vote of
shareholders, except that in the election of Directors every
shareholder entitled to vote at such election shall have the right to
vote the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote.
5.2 Majority Vote. When, with respect to any action to be taken by
the shareholders of the Corporation, the Colorado Corporation Code
requires the vote or concurrence of the holders of two-thirds of the
outstanding shares entitled to vote thereon, or of any class or series,
any and every such action shall be taken, notwithstanding such
requirements of the Colorado Corporation Code, by vote or concurrence
of the holders of a majority of the outstanding shares entitled to vote
thereon, or of any class or series.
<PAGE>55
ARTICLE VI
Board of Directors
6.1 The corporate powers shall be exercised by a decision of a
majority of the Board of Directors. No action by the Corporation,
requiring the vote of the Board of Directors, shall be valid unless the
same is approved by a majority of the Board of Directors of the
Corporation at the time of said vote. The number of individuals to
serve on the Board of Directors shall be set forth in the Bylaws of the
Corporation; provided, however, that the initial Director shall be:
Name of Director Address
Moses R. Luna 1280 Bison Avenue, Suite B-9
Newport Beach CA 92660
Each person shall serve as a director of the Corporation until the
first annual meeting of shareholders or until a successor shall have
been elected and qualified.
6.2 If, in the interval between the annual meetings of shareholders
of the Corporation, the Board of Directors of the Corporation deems its
desirable that the number of Directors be increased, additional
Directors may be elected by a majority vote of the Board of Directors
of the Corporation then in office or as otherwise set forth in the
Bylaws of the Corporation.
6.3 The number of Directors comprising the whole Board of Directors
may be increased or decreased from time to time within such foregoing
limit as set forth in the Bylaws of the Corporation.
6.4 Cumulative Voting. Cumulative voting shall not be allowed in the
election of directors or otherwise.
ARTICLE VII
Registered Agent and Registered Office
The registered and principal office of the Corporation is 1781 South
Estes, Lakewood CO 80227, and the name of the registered agent at such
address is Marcia Hawker.
ARTICLE VIII
Incorporator
The name and address of the Incorporator is:
Claudia Zaman, 10850 Wilshire Blvd., Suite 1170, Los Angeles CA 90024.
ARTICLE IX
Powers of Directors
In furtherance and not in limitation of the powers conferred by the
State of Colorado, the Board of Directors is expressly authorized and
empowered:
9.1 Bylaws. To make, alter, amend or repeal the Bylaws, subject to
the power of the shareholders to alter or repeal the Bylaws made by the
Board of Directors.
9.2 Books and Records. Subject to the applicable provisions of the
Bylaws then in effect, to determine, from time to time, whether and to
what extent, and at what times and places, and under what conditions
and regulations, the accounts and books of the Corporation or any of
them, shall be open to shareholder inspection. No shareholder shall
have the right to inspect any of the accounts, books, or documents of
the Corporation, except as permitted by law, unless and until
authorized to do so by resolution of the Board of Directors or of the
shareholders of the Corporation.
9.3 Power to Borrow. To authorize and issue, without shareholder
consent, obligations of the Corporation, secured and unsecured, under
such terms and conditions as the Board, in its sole discretion, may
determine, and to pledge, or mortgage, as security therefor, any real
or personal property of the Corporation, including after-acquired
property.
<PAGE>56
9.4 Dividends. To determine whether any and, if so, what part, of the
earned surplus of the Corporation shall be paid in dividends to the
shareholders, and to direct and determine other use and disposition of
any earned surplus.
9.5 Profits. To fix, from time to time, the amount of the profits of
the Corporation to be reserved as working capital or for any other
lawful purpose.
9.6 Employees' Plans. From time to time to provide and carry out and
to recall, abolish, revise, amend, alter, or change a plan or plans for
the participation by all or any of the employees, including Directors
and officers of this Corporation or of any corporation in which or in
the welfare of which the Corporation has any interest, and those
actively engaged in the conduct of this Corporation's business, in the
profits of this Corporation or of any branch or division thereof, as
apart of this Corporation's legitimate expenses, and for the furnishing
to such employees and persons, or any of them, at this Corporation's
expense, of medical services, insurance against accident, sickness, or
death, pensions during old age, disability, or unemployment, education,
housing, social services, recreation, or other similar aids for their
relief of general welfare, in such manner and upon such terms and
conditions as may be determined by the Board of Directors.
9.7 Compensation. To provide for the reasonable compensation of its
members by Bylaws, and to fix the terms and conditions upon which such
compensation will be paid.
9.8 Not in Limitation. In addition to the powers and authority
hereinabove or by statute, expressly conferred upon it, the Board of
Directors may exercise all such powers and do all acts and things as
may be exercised or done by the Corporation, subject, nevertheless, to
the provisions of the laws of the State of Colorado, of these Articles
of Incorporation and of the Bylaws of the Corporation.
ARTICLE X
Right of Directors to Contract with Corporation
No contract or other transaction between the Corporation and one or
more of its Directors or any other corporation, firm, association or
entity in which one or more of the Directors of the Corporation are
directors or officers or are financially interested, shall be either
void or voidable solely because such directors are present at the
meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction or solely
because their votes are counted for such purpose if:
A. The fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient
for that purpose without counting the votes or consents of the
interested directors; or
B. The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
C. The contract or transaction is fair or reasonable to the
Corporation.
D. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorizes, approves or ramifies such contract
or transaction.
ARTICLE XI
Indemnification of Officers, Directors and Others
In furtherance and not in limitation of the powers conferred by the
State of Colorado, the Board of Directors of the Corporation is
expressly authorized and empowered to:
A. Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason
of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
<PAGE>57
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in the best interests of the
Corporation and, with respect to any criminal action or proceedings,
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
B. Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of the
Corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in the best interests of the Corporation; but no
indemnification shall be made in respect of any claim, issue or matter
as to which such person has been adjudged to be liable for negligence
or misconduct in the performance of his duty to the Corporation unless
and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
C. Indemnify a director, officer, employee or agent of the Corporation
to the extent that such person has been successful on the merits in
defense of any action, suit or proceeding referred to in Paragraph A or
B of this Article 11 or in defense of any claim, issue, or matter
therein, against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
D. Authorize indemnification under Paragraph A or B of this Article 11
(unless ordered by a court) in the specific case upon a determination
that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard
of conduct set forth in said Paragraph A or B. Such determination
shall be made by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or, if such a quorum is not obtainable or even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or by the shareholders.
E. Authorize payment of expenses (including attorney's fees) incurred
in defending a civil or criminal action, suit or proceeding in advance
of the final disposition of such action, suit or proceeding as
authorized in Paragraph D of this Article 11 upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent
to repay such amount unless it is ultimately determined that he is
entitled to be indemnified by the Corporation as authorized in this
Article 11.
F. Purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or who is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this
Article 11. Such insurance may be procured from any insurance company
designated by the Board of Directors, whether such insurance company is
formed under the laws of this state or any other jurisdiction of the
United States or elsewhere, including any insurance company in which
the Corporation has an equity or any other interest through stock
ownership or otherwise.
G. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under these Articles of Incorporation, and the Bylaws,
agreement, vote of shareholders or disinterested directors or
<PAGE>58
otherwise, and any procedure provided for by any of the foregoing, both
as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of heirs, executors and administrators of such a
person.
ARTICLE XII
Corporate Opportunity
The officers, directors and other members of management of this
Corporation shall be subject to the doctrine of "corporate
opportunities" only insofar as it applies to business opportunities in
which this Corporation has expressed an interest as determined from
time to time by this Corporation's Board of Directors as evidenced by
resolutions appearing in the Corporation's minutes. Once such areas of
interest are delineated, all such business opportunities within such
areas of interest which come to the attention of the officers,
directors, and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it. The
Board of Directors may reject any business opportunity presented to it
and thereafter any officers, directors or other member of management
may avail himself of such opportunity. Until such time as this
Corporation, through its Board of Directors, has designated an area of
interest, the officers, directors and other members of management of
this Corporation shall be free to engage in such areas of interest on
their own and this doctrine shall not limit the right of any officer,
director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is
designated by the Corporation. This provision shall not be construed
to release any employee of this Corporation (other than an officer,
director or member of management) from any duties which he may have to
this Corporation.
IN WITNESS WHEREOF, the undersigned has signed and acknowledged these
Articles of Incorporation this 28th day of February, 1996.
___________________________________
Claudia J. Zaman, Incorporator
___________________________________
Marcia Hawker, Registered Agent
<PAGE>59
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation
FIRST: The name of the Corporation is Patriot Holding Corporation.
SECOND: The following amendment to the Articles of Incorporation
was adopted on August 26, 1996, as prescribed by the Colorado Business
Corporation Act, in the manner marked with an "X" below:
No Shares have been issued or directors elected - Action by
Incorporators.
No Shares have been issued but directors elected - Action by Directors
Such amendment was adopted by the board of directors where shares have
been issued and shareholder action was not required.
Such amendment was adopted by a vote of the shareholders. The number
of shares voted for the amendment was sufficient for approval.
THIRD Article I is hereby amended to change the name of the Corporation
to National Healthcare Technology, Inc.
PATRIOT HOLDING CORPORATION
/s/ Claudia Zaman
Claudia J. Zaman, President
<PAGE>60
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation
FIRST: The name of the Corporation is National Healthcare Technology,
Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on December 23, 1997, as prescribed by the Colorado Business
Corporation Act, in the manner marked with an "X" below:
No Shares have been issued or directors elected - Action by
Incorporators.
No Shares have been issued but directors elected - Action by
Directors
Such amendment was adopted by the board of directors where shares
have been issued and shareholder action was not required.
Such amendment was adopted by a vote of the shareholders. The number
of shares voted for the amendment was sufficient for approval.
THIRD: Section 5.1 is hereby amended to read as follows:
5.1 Voting Rights: No Cumulative Voting. Each outstanding Common
Share is entitled to one vote on each matter submitted to a vote of
shareholders.
NATIONAL HEALTHCARE TECHNOLOGY, INC.
By: /s/ Ivan C. Tiholiz, M.D.
Ivan C. Tiholiz, M.D., President
<PAGE>61
AMENDED BYLAWS
OF
NATIONAL HEALTHCARE TECHNOLOGY, INC.
ARTICLE I
Office
The principal office of the Corporation in the State of California
shall be located at 21800 Oxnard Street, Suite 440, Woodland Hills, CA
91367 and thereafter at such location as the Board of Directors may
determine.
The Corporation may have such other offices, either within or without
the State of Colorado, as the Board of Directors may determine or as
the affairs of the Corporation may require from time to time.
The Corporation shall have and continuously maintain in the State of
Colorado a registered office, and a registered agent whose office is
identical with such registered office as required by the Colorado
Business Corporation Act.
ARTICLE II
Shareholders' Meetings
Section 1. Annual Meetings.
A. Time and Place. The Annual Meeting of the Shareholders of the
Corporation, commencing with the year of incorporation, shall be as
determined by the Board of Directors on a date not less frequent than
once every 365 days. If said day is a legal holiday, the meeting shall
be held on the next succeeding day not a legal holiday.
B. Purpose of Annual Meeting. The business to be transacted at such
Annual Meeting shall be the election of Directors and such other
business as shall be properly brought before the meeting.
C. Alternate Election Date. If the election of Directors shall not be
held on the day designated for the Annual Meeting, or at the designated
date upon adjournment of such meeting, the Board of Directors shall
call a Special Meeting of the Shareholders as soon as conveniently
possible thereafter. At such meeting, the election of Directors shall
take place, and such election and any other business transacted there
at shall have the same force and effect as at an Annual Meeting duly
called and held.
D. Notice. Written notice at the address last shown on the books of
the Corporation stating the place, day and hour of the meeting, and in
the case of a Special Meeting, the purpose for which the meeting is
called, shall be delivered not less than five days nor more than 50
days before the date of the meeting, either personally or by mail at
the direction of the President, Secretary or other officer or person
calling the meeting; except that if the authorized shares of the
Corporation are to be increased, at least 10 days notice shall be
given.
Section 2. Special Meetings. Special Meetings of the Shareholders may
be called by the President, Board of Directors or by the holders of at
least 10% of the stock entitled to vote at such meeting.
Section 3. Waiver of Notice. A Shareholder may waive the notice of
meeting by attendance, either in person or by proxy, at the meeting, or
by so stating in writing either before or after such meeting.
Attendance at a meeting for the express purpose of objecting that the
meeting was not lawfully called or convened shall not, however,
constitute a waiver of notice. Except where otherwise required by law,
notice need not be given of any adjourned meeting of the Shareholders.
Section 4. Quorum. A quorum at all meetings of Shareholders shall
consist of a majority of the Shareholders entitled to vote (of record),
represented in person or by proxy.
Section 5. Closing of Transfer Books; Record Date. In order to
determine the Shareholders of record of the Corporation's stock who are
entitled to notice of meetings, to vote at a meeting or adjournment
thereof, and to receive payment of any dividend, or to make a
determination of the Shareholders of record for any other proper
<PAGE>62
purpose, the Board of Directors of the Corporation may order that the
Stock Transfer Books be closed for a period not to exceed 50 days. If
the purpose of such closing is to determine who is entitled to notice
of a meeting and to vote at such meeting, the Stock Transfer Books
shall be closed for at least ten days preceding such meeting.
A. Record Date. In lieu of closing the Stock Transfer Books, the
Board of Directors may fix a date as the record date for such
determination of Shareholders, such date in any case to be not more
than 50 days prior to the date of action which requires such
determination, nor in the case of a Shareholders' meeting, not less
than ten days in advance of such meeting.
B. Alternate Record Date. If the Stock Transfer Books are not closed
and no record date is fixed for such determination of the Shareholders
of record, the date on which notice of the meeting is mailed or on
which the resolution of the Board of Directors declaring a dividend is
adopted, as the case may be, shall be the record date for such
determination of Stockholders.
C. Adjournment. When a determination of Stockholders entitled to vote
at any meeting has been made, as provided in this Section, such
determination shall apply to any adjournment of such meeting.
Section 6. Presiding Officer. Meetings of the Stockholders shall be
presided over by the President.
Section 7. Proxies. At all meetings of Stockholders a Stockholder may
vote by proxy executed in writing by a Stockholder or Stockholder's
duly authorized attorney-in-fact. Such proxies shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after 11 months from the date of its execution,
unless otherwise provided in the proxy.
Section 8. Voting of Shares by Stockholders. Neither treasury shares,
nor shares of its own stock held by the Corporation in a fiduciary
capacity, nor shares held by another Corporation if a majority of the
shares entitled to vote for the election of Directors of such other
Corporation is held by this Corporation, shall be voted at any meeting
or counted in determining the total number of outstanding shares at any
given time.
Section 9. Informal Action by Stockholders.
A. Any action required to be taken at a meeting of the Stockholders or
any other action which may be taken at a meeting of the Stockholders
may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the Stockholders
entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and affect as a unanimous vote of the
Stockholders and may be stated as such in any documents filed with the
Secretary of State of Colorado under the Colorado Business Corporations
Act.
B. Validity of Stockholder Meetings. Failure to comply with the
requirements of this Section shall not affect the validity of any
action taken at such meeting of the Stockholders.
Section 10. Presumption of Assent. A Stockholder of the Corporation
who is present at a meeting of the Stockholders at which action on any
corporate matter is taken shall be presumed to have assented to the
action taken unless such Stockholder's dissent shall be entered in the
Minutes of the meeting or unless such Stockholder shall have filed
written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such
dissent by certified mail to the Secretary of the Corporation
immediately following the adjournment of the meeting. Such right to
dissent shall not apply to a Stockholder who voted in favor of such
action.
ARTICLE III
Directors
Section 1. Number. The property, affairs and business of the
Corporation shall be managed by a Board of Directors of not less than
one person nor more than nine. Except as hereinafter provided,
Directors shall be elected at the Annual Meeting of the Stockholders
and each Director shall serve for one year or until his resignation or
removal and until his successor shall be elected and qualify.
<PAGE>63
Section 2. Increase in Numbers. The number of Directors may be
increased or decreased from time to time by an amendment to these
Bylaws. Any increased number of Directors shall be appointed by
majority vote of the Board of Directors to serve until the directors
are elected by the Stockholders at the next regular Annual Meeting or
at a Special Meeting called for that purpose.
Section 3. Qualification. Directors need not be Stockholders of the
Corporation.
Section 4. Quorum. A majority of the Directors in office shall be
necessary to constitute a quorum for the transaction of business. If
at any meeting of the Board of Directors there shall be less than a
quorum present, a majority of those present may adjourn the meeting
without further notice, from time to time, until a quorum shall have
been obtained.
Section 5. Vacancies. Any Director may resign at any time by giving
written notice to the President or to the Secretary of the Corporation.
Such resignation shall take effect at the time specified therein
except such resignations as shall not be submitted effective
retroactively. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective. Any
Director may be removed at any time in the manner provided in the
Colorado Business Corporations Act. Any vacancy occurring in the Board
of Directors may be filled by the affirmative vote of the Stockholders,
or by the remaining Directors, though less than a quorum, or by a sole
remaining Director. A Director elected to fill a vacancy shall be
elected for the unexpired term of such Director's predecessor in
office. Any Directorship to be filled by the affirmative vote of a
majority of Directors then in office or by an election at an Annual
Meeting or at a Special Meeting of Stockholders called for that
purpose, and a Director so chosen shall hold office until the next
Annual meeting of Stockholders and thereafter until such Director's
successor shall have been elected and qualified.
Section 6. Meetings. Regular meetings of the Board of Directors shall
be held at such times as are fixed from time to time by resolution of
the Board. Special Meetings may be held at any time upon call of the
President, or a majority of Directors serving as members of the Board
of Directors. A meeting of the Board of Directors shall be held
without notice immediately following the Annual Meeting of the
Stockholders. Notice need not be given of regular meetings of the
Board of Directors held at any time without notice if all the Directors
are present, or if before the meeting, those not present waive such
notice in writing. Notice of a meeting of the Board of Directors need
not state the purpose of nor the business to be transacted at such
meeting.
Section 7. Presumption of Assent. A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the
action taken unless such Director's dissent shall be entered in the
Minutes of the meeting or unless such Director shall have filed written
dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
certified mail to the Secretary of the Corporation immediately
following the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
Section 8. Removal. At any meeting of the Board of Directors or
Shareholders, any Director or Directors may be removed from office,
without assignment or any reason therefor, by a majority of the members
of the Board of Directors or a majority of the Shareholders constitute
a Quorum at such meeting. When any Director or Directors are removed,
new Directors may be elected at the same meeting of Stockholders for
the unexpired term of the Director or Directors to be removed. If the
Stockholders fail to elect persons to fill the unexpired term or terms
of the Director or Directors removed, such unexpired terms shall be
considered vacancies on the Board to be filled by the remaining
Directors.
Section 9. Informal Action by Directors. Any action required to be
taken at a meeting of the Board of Directors or any other action which
may be taken at a meeting of the Board of Directors may be taken
without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors entitled to vote with
respect to the subject matter thereof. Such consent shall have the
same force and effect as a unanimous vote of the Directors and may be
stated as such in any documents filed with the Secretary of State of
Colorado under the Colorado Business Corporations Act.
<PAGE>64
Section 10. Compensation. Directors and members of any committee of
the Board of Directors shall be entitled to such reasonable
compensation for their services as Directors and members of any such
committee as shall be fixed from time to time by resolution of the
Board of Directors, and shall also be entitled to reimbursement for any
reasonable expenses incurred in attending such meetings. The
compensation of Directors may be on such basis as is determined in the
resolution of the Board of Directors. Any Directors receiving
compensation under these provisions shall not be barred from serving
the Corporation in any other capacity and receiving reasonable
compensation for such other services.
Section 11. Committees. The Board of Directors, by a resolution or
resolutions adopted by a majority of the members of the whole Board,
may appoint an executive committee and such other committees as it may
deem appropriate. Each such committee shall consist of at least two
members of the Board of Directors. Each committee shall have and may
exercise such powers as shall be conferred or authorized by the
resolution appointing it and as otherwise limited by Colorado law. A
majority of any such committee may determine its action and may fix the
time and place of its meetings, unless provided otherwise by the Board
of Directors. The Board of Directors shall have the power at any time
to fill vacancies in, to change the size of membership of and to
discharge any such committee.
A. Committee to Keep Written Records. Each such committee shall keep
a written record of its acts and proceedings and shall submit such
record to the Board of Directors at each regular meeting thereof and at
such other times as requested by the Board of Directors.
B. Failure to Keep Written Records. Failure to submit such records,
or failure of the Board to approve any action indicated therein will
not, however, invalidate such action to the extent it has been carried
out by the Corporation prior to the time the record of such action was,
or should have been, submitted to the Board of Directors as herein
provided.
Section 12. Director Voting. At all meetings of the Board of
Directors, each Director present shall have one vote, irrespective of
the number of shares of stock, if any, which such Director may hold.
Section 13. Majority. The action of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of
the Board of Directors with respect to regularly conducted business
affairs. Notwithstanding the foregoing, all major decisions, including
fundamental corporate changes or corporate affairs not occurring within
the ordinary course of business, shall require the unanimous action and
approval by the Board of Directors. Any action authorized, in writing,
by all of the Directors entitled to vote thereon and filed with the
minutes of the Corporation shall be the act of the Board of Directors
with the same force and effect as if the same had been passed by
unanimous vote at a duly called meeting of the Board.
ARTICLE IV
Officers
Section 1. Election and Term of Office. The Officers of the
Corporation shall be elected by the Board of Directors annually at the
first meeting of the Board held after each Annual Meeting of the
Stockholders. If the election of the Officers shall not be held at
such meeting, such election shall be held as soon thereafter as
conveniently may occur. Each Officer shall hold office until the first
of the following to occur: until such Officer's successor shall have
been duly elected and shall have qualified; or until such Officer's
death; or until such Officer shall resign; or until such Officer shall
have been removed in the manner herein provided. The Officers of the
Corporation shall be a President, Secretary, Treasurer and one (1) or
more Vice-Presidents, Assistant Secretaries or Assistant Treasurers, at
the discretion of the Board of Directors. In addition, there may be
such subordinate Officers as the Board of Directors may deem necessary.
Section 2. Removal. Any Officer or agent or employee of the
Corporation may be removed by a two-thirds vote of the Board of
Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of any Officer or agent shall not of itself
create contract rights.
<PAGE>65
Section 3. Vacancies. Any vacancy in an office from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
Section 4. Duties of President. The President shall be the chief
executive and operation Officer of the Corporation and shall exercise
detailed supervision over the business of the Corporation and over its
several Officers, subject, however, to the control of the Board of
Directors. The President shall preside at all meetings of the
Stockholders and Directors, and in general perform all duties incident
to the office of President and such other duties as from time to time
may be assigned to the President by the Board of Directors.
The President shall execute all deeds, conveyances, deeds of trust,
bonds and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some Officer
or agent of the Corporation.
Section 5. Duties of Secretary. The Secretary shall:
A. Keep the minutes of the meeting of the Stockholders and of the
Board of Directors in books provided for that purpose.
B. Disseminate all notices in accordance with the provisions of these
Bylaws or as required by law.
C. Maintain custody of the seal of the Corporation and affix the seal
to all stock certificates prior to their issuance and to all other
documents, the execution of which on behalf of the Corporation under
its seal is duly authorized and in accordance with the provisions of
these Bylaws.
D. Keep or cause to be kept records relating to the transfer of stock
in such manner as to show at any time the amount of stock of the
Corporation issued and outstanding, the manner in which and the time
when such stock was paid for, the names and addresses of the holders of
record.
E. Execute certificates of stock of the Corporation with the
President.
F. Maintain all books, reports, statements, certificates and all other
documents of the Corporation required by law in a proper fashion.
G. Perform all duties incident to the office of Secretary and such
other duties as, from time to time, may be assigned by the Board of
Directors or by the President.
Section 6. Duties of Treasurer. The Treasurer shall:
A. Have charge and custody of, and be responsible for, all funds and
securities of the Corporation.
B. Render a statement of the condition of the finances of the
Corporation from time to time and at the specific request of the Board
of Directors.
C. Receive and give receipts for monies due and payable to the
Corporation from any source whatsoever.
D. Perform all duties incident to the office of Treasurer, and such
other duties as from time to time may be assigned by the Board of
Directors or by the President. The Treasurer may be required to give
bond for the faithful performance of Treasurer's duties in such sum and
with such surety as may be determined by the Board of Directors.
Section 7. Duties of Vice-President. The Vice-President(s), if
appointed in the discretion of the Board of Directors, shall perform
such duties as are incident to their offices, or are properly required
of them by the Board of Directors or are assigned to them by the
Articles of Incorporation or these Bylaws.
Section 8. Duties of Assistant Secretaries, Assistant Treasurers and
Other Subordinate Officers. Assistant Secretaries, Assistant
Treasurers, and other subordinate Officers appointed by the Board of
Directors shall exercise such powers and perform such duties as may be
delegated to them by the resolutions appointing them, or by subsequent
resolutions adopted from time to time.
<PAGE>66
Section 9. Salaries. The salaries of all Officers of the Corporation
shall be fixed by the Board of Directors. No Officer shall be
ineligible to receive such salary by reason of the fact that he is also
a Director of the Corporation and receiving compensation therefor.
Section 10. Checks and Endorsements. All checks and drafts upon the
funds to the credit of the Corporation in any of its depositories shall
be signed by such of its Officers or agents as shall from time to time
be determined by resolution of the Board of Directors which may provide
for the use of signatures under specific conditions, and all notes,
bills, receivables, trade acceptances, drafts and other evidences of
indebtedness payable to the Corporation shall, for the purpose of
deposit, discount, or collection be endorsed by such Officers or agents
of the Corporation or in such manner as shall from time to time be
determined by resolution of the Board of Directors.
ARTICLE V
Stock
Section 1. Certificates. The shares of stock shall be represented by
consecutively numbered certificates signed in the name of the
Corporation by its President and the Secretary and shall be sealed with
the seal of the Corporation, or with a facsimile thereof. The
signatures of the Corporation's Officers on such certificate may also
be a facsimile engraved or printed if the certificate is countersigned
by the transfer agent, or registered by a registrar. In the event any
Officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such before the
certificate is issued, it may be issued by the Corporation with the
same effect as if such Officer had not ceased to be an officer at the
date of its issue. Certificates of stock shall be in such form
consistent with law as shall be prescribed by the Board of Directors.
No certificate shall be issued until the shares represented thereby are
fully paid.
Section 2. Consideration for Shares. Shares shall be issued for such
consideration, expressed in dollars as shall be fixed from time to time
by the Board of Directors. Treasury shares shall be disposed of for
such consideration expressed in dollars as may be fixed from time to
time by the Board. Such consideration may consist in whole or in part
of money, promissory notes, other property, tangible or intangible, or
in labor or services actually performed or to be performed for the
Corporation.
Section 3. Lost, Destroyed or Stolen Certificates. No certificates for
shares of stock in the Corporation shall be issued in place of any
certificate alleged to have been lost, destroyed or stolen except on
production of evidence satisfactory to the Board of Directors of such
loss, destruction or theft; and if the Board of Directors so requires,
upon the furnishing of an indemnity bond in such amount and with such
terms and such surety as the Board of Directors may, in its discretion,
require.
Section 4. Transfer of Shares.
A. Upon surrender to the Corporation of a certificate of stock duly
endorsed or accompanied by proper evidence of succession, assignment,
or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, and cancel the
old certificate. Every such transfer of stock shall be entered on the
stock book of the Corporation which shall be kept either at the offices
of the Corporation's legal counsel, at the Corporation's principal
office or by its registered duly appointed agent.
B. The Corporation shall be entitled to treat the holder of record of
any share of stock as the holder in fact thereof, and, accordingly,
shall not be bound to recognize any equitable or other claim to
interest in such share on the part of any other person whether or not
it shall have express or other notice thereof, except as may be
required by the laws of the State of Colorado.
ARTICLE VI
Corporate Actions
The Board of Directors shall select banks or other depositories in
which all funds of the Corporation not otherwise employed shall, from
time to time, be deposited to the credit of the Corporation.
<PAGE>67
ARTICLE VII
Corporate Seal
The corporate seal of the Corporation shall consist of a circular
imprint bearing around the outside rim the name of the Corporation and
the word "Colorado" and in the center shall be inscribed the word
"Seal".
ARTICLE VIII
Amendment of Bylaws
Section 1. By Shareholders. All Bylaws of the Corporation shall be
subject to alteration or repeal and new Bylaws may be made by the
requisite vote of Stockholders, a quorum being present in person or by
proxy, provided that the notice or waiver of notice of such meeting
shall have summarized or set forth in full therein the proposed
amendment.
Section 2. By Directors. The Board of Directors shall have power to
make, adopt, later, amend or repeal, from time to time, these Bylaws of
the Corporation.
ARTICLE IX
Fiscal Year
The fiscal year end of the Corporation shall be as determined by the
Board of Directors.
ARTICLE X
Approval
The undersigned Directors of the Corporation, being the members of the
Board of Directors, by their signatures hereon, hereby certifies that
the foregoing and annexed Bylaws constitute a true and complete copy of
the Bylaws of National Healthcare Technology, Inc. and the same are
hereby approved, ratified and accepted as the Bylaws of the Corporation
this 23rd day of December, 1997.
Toni A. Hussain, Secretary
<PAGE>68
NATIONAL HEALTHCARE TECHNOLOGY, INC.
1998 STOCK OPTION PLAN
Section 1. Purpose
The purpose of this National Healthcare Technology, Inc. 1998 Stock
Option Plan (the "Plan") is to encourage selected employees and
directors of National Healthcare Technology, Inc., a Colorado
corporation (together with any successor thereto, the "Corporation"),
or any present or future Subsidiary corporation (as defined below) of
the Corporation to acquire a proprietary interest in the growth
performance of the Corporation, to generate an increased incentive to
contribute to the Corporation's future success and prosperity, thus
enhancing the value of the Corporation for the benefit of its
stockholders, and to enhance the ability of the Corporation to attract
and retain qualified individuals upon whom, in large measure, the
sustained progress, growth and profitability of the Corporation depend.
Section 2. Definitions
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(c) "Committee" shall mean a committee of the Board designated by the
Board to administer the Plan and composed of not less than three (3)
directors.
(d) "Fair Market Value" shall mean, with respect to Shares or other
securities, the fair market value of the shares or other securities
determined by such methods or procedures as shall be established from
time to time by the Committee in good faith or in accordance with
applicable law. Unless otherwise determined by the Committee, the Fair
Market Value of Shares shall mean (i) the closing price per Share of
the Shares on the principal exchange on which the Shares are then
trading, if any, on such date, or, if the Shares were not traded on
such date, then on the next preceding trading day during which a sale
occurred; or (ii) if the Shares are not traded on an exchange, but are
quoted on the NASDAQ stock market, the OTC Electronic Bulletin Board or
a successor quotation system, (1) the last sales price (if the Shares
are then listed as a National Market Issue on the NASDAQ Stock market)
or (2) the mean between the closing representative bid and ask prices
(in all other cases) for the Shares on such date as reported by the
NASDAQ Stock Market, the OTC Electronic Bulletin Board or such
successor quotation system; or (iii) if the Shares are not publicly
traded on an exchange and not quoted on the NASDAQ Stock market, the
OTC Electronic Bulletin Board or a successor quotation system, the mean
between the closing bid and asked prices for the Shares on such date as
determined in good faith by the Committee.
(e) "Incentive Stock Option" shall mean an option granted under the
Plan that is designated as an incentive stock option within the meaning
of Section 422 of the Code or any successor provision thereto.
(f) "Independent Contractor" shall mean each member of the Board who is
not an employee of the Corporation or any Subsidiary Corporation of the
Corporation.
(g) "Key Employee" shall mean any officer, director or other employee
who is a regular full-time employee of the Corporation or its present
and future Subsidiary Corporations.
(h) "Non-Qualified Stock Option" shall mean an Option granted under the
Plan that is not designated as an Incentive Stock Option.
(i) "Option" shall mean an Incentive Stock Option or a non-Qualified
Stock Option.
(j) "Option Agreement" shall mean a written agreement, contract or
other instrument or document evidencing an Option granted under the
Plan.
(k) "Participant" shall mean a Key Employee or Independent Director who
has been granted an Option under the Plan.
<PAGE.69
(l) "Person" shall mean any individual, corporation, partnership,
association, joint-stock corporation, trust, unincorporated
organization or government or political subdivision thereof.
(m) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.
(n) "Shares" shall mean the common stock of the Corporation, $.001 par
value, and such other securities or property as may become the subject
of Options pursuant to an adjustment made under Section 4(b) of the
Plan.
(o) "Subsidiary Corporation" shall have the meaning as described
thereto in Code Section 424(f).
(p) "Ten Percent Stockholder" shall mean a Person, who together with
his or her spouse, children and trusts and custodial account for their
benefit, immediately at the time of the grant of an Option and assuming
its immediate exercise, would beneficially own, within the meaning of
Section 424(d) of the Code, Shares possessing more than ten percent
(10%) of the total combined voting power of all of the outstanding
capital stock of the Corporation or any Subsidiary Corporation of the
Corporation.
Section 3. Administration
(a) Generally. The Plan shall be administered by the Committee. Unless
otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with
respect to the Plan or any Option shall be within the sole discretion
of the Committee, may be made at any time, and shall be final,
conclusive, and binding upon all Persons, including the Corporation,
any Participant, any holder or beneficiary of any Option, any
stockholder of the Corporation and any employee of the Corporation.
(b) Powers. Subject to the terms of the Plan and hereof, the Committee
shall have full power and authority to: (i) designate Participants;
determine the type or types of Options to be granted to each
Participant under the Plan; (ii) determine the number of Shares to be
covered by Options; (iii) determine the terms and conditions of any
option; (iv) determine whether, to what extent, and under what
circumstances, Options may be settled or exercised in cash, Shares,
other Options, or other property, or canceled, forfeited, or suspended,
and the method or methods by which Options may be settled, exercised,
canceled, forfeited, or suspended; (v) interpret and administer the
Plan and any instruments or agreements relating to, or Options granted
under, the Plan; (vi) establish, amend, suspend, or waive such rules
and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (vii) make any other
determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan.
Section 4. Shares Available for Options
(a) Shares Available. Subject to adjustment as provided in Section
4(b):
(i) Limitation on Number of Shares. Options issuable under the
Plan are limited such that the maximum aggregate number of Shares which
may be issued pursuant to, or by reason of, Options is 5,000,000.
Further, no Participant shall be granted Options to purchase more than
500,000 Shares in any one fiscal year; provided, however, that the
Committee may adopt procedures for the counting of Shares relating to
any grant of Options to ensure appropriate counting, avoid double
counting, and provide for adjustments in any case in which the number
of Shares actually distributed differs from the number of Shares
previously counted in connection with such grant. To the extent that an
Option granted to a (A) Key Employee or (B) an Independent Director
ceases to remain outstanding by reason of termination of rights granted
thereunder, forfeiture or otherwise, the Shares subject to such Option
shall again become available for award under the Plan to (x) Key
Employees and (y) Independent Directors, respectively.
(ii) Sources of Shares Deliverable Under Options. Any Shares delivered
pursuant to an Option may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
<PAGE>70
(b) Adjustments. In the event that the Committee shall determine that
any change in corporate capitalization, such as a dividend or other
distribution of Shares, or a corporate transaction, such as a merger,
consolidation, reorganization or partial or complete liquidation of the
Corporation or other similar corporate transaction or event, affects
the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits
or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem necessary to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made under the Plan, adjust any or all of (x) the number
and type of Shares which thereafter may be made the subject of Options,
(y) the number and type of Shares subject to outstanding Options, and
(z) the grant, purchase, or exercise price with respect to any Option
or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Option; provided, however, in each case, that
(i) with respect to Incentive Stock Options, no such adjustment shall
be authorized to the extent that such adjustment would cause the Plan
to violate Section 422 of the Code or any successor provision thereto;
(ii) such adjustment shall be made in such manner as not to adversely
affect the status of any Option as "performance-based compensation"
under Section 162(m) of the Code; and (iii) the number of Shares
subject to any Option denominated in Shares shall always be a whole
number.
Section 5. Eligibility
In determining the persons to whom Options shall be granted and the
number of Shares to be covered by each Option, the Committee shall take
into account the nature of the Person's duties, such Person's present
and potential contributions to the success of the Plan. A Key Employee
who has been granted an Option or Options under the Plan may be granted
an additional Option or Options, subject to such limitations as may be
imposed by the Code on the grant of Incentive Stock Options.
Notwithstanding anything herein to the contrary, Incentive Stock
Options may be granted only to Key Employees of the Corporation or any
Parent Corporation or Subsidiary Corporation.
Section 6. Options
The Committee is hereby authorized to grant Options to Participants
upon the following terms and the conditions (except to the extent
otherwise provided in Section 7) and with such additional terms and
conditions in either case not inconsistent with the provisions of the
Plan, as the Committee shall determine.
(a) Exercise Price. The exercise price per Share purchasable under
options shall be determined by the Committee at the time the Option is
granted but generally shall not be less that the fair Market Value of
the Shares covered thereby at the time the Option is granted.
(b) Option Term. The term of each Non-Qualified Stock Option shall be
fixed by the Committee but generally shall not exceed ten (10) years
from the date of grant.
(c) Time and Method of Exercise. The Committee shall determine the
time or times at which the right to exercise an Option may vest, and
the method or methods by which, and the form or forms in which payment
of the option price with respect to exercises of such Option may be
made or deemed to have been made (including, without limitation, (i)
cash, Shares, outstanding Options or other consideration, or any
combination thereof, having a Fair Market Value on the exercise date
equal to the relevant option price and (ii) a broker-assisted cashless
exercise program established by the Committee), provided in each case
that such methods avoid "short swing" profits to the Participant under
Section 16(b) of the Securities Exchange Act of 1934, as amended. The
payment of the exercise price of an Option may be made in a single
payment or transfer, in installments, or on a deferred basis, in each
case in accordance with rules and procedures established by the
Committee.
(d) Incentive Stock Options. All terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code, or any successor provision thereto, and any
regulations promulgated thereunder including that, (i)(A) in the case
of a grant to a Person that is not a Ten Percent Stockholder, the
purchase price per Share purchasable under Incentive Stock Options
shall not be less than the Fair Market Value of a Share on the date of
grant and (B) in the case of a grant to a Ten Percent Stockholder, the
purchase price per Share purchasable under Incentive Stock Options
shall not be less than 110% of the Fair Market Value of a Share on the
<PAGE>71
date of grant and (ii) the term of each Incentive Stock Option shall be
fixed by the Committee but shall in no event be more than ten (10)
years from the date of grant, or in the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, five (5) years from the
date of grant.
(e) Limits on Transfer of Options. Subject to Code Section 422, no
Option, and no right under any such Option, shall be assignable,
alienable, saleable or transferable by a Participant otherwise than by
will or by the laws of descent and distribution, and such Option, and
each right under any such Option, shall be exercisable during the
Participant's lifetime, only by the Participant or, if permissible
under applicable law (including Code Section 422, in the case of an
Incentive Stock Option), by the Participant's guardian or legal
representative. No Option and no right under any such Option, may be
pledged, alienated, attached, or otherwise encumbered, and any
purported pledge, alienation, attachment, or encumbrance thereof shall
be void and unenforceable against the Corporation. Notwithstanding the
foregoing, the Committee may, in its discretion, provide that Non-
Qualified Stock Options be transferable, without consideration, to
immediate family members (i.e., children, grandchildren or spouse), to
trusts for the benefit of such immediate family members and to
partnerships in which such family members are the only partners. The
Committee may attach such terms and conditions as it deems advisable to
any such transferability right. In addition, a Participant may, in the
manner established by the Committee, designate a beneficiary (which may
be a person or a trust) to exercise the rights of the Participant, and
to receive any distribution, with respect to any Option upon the death
of the Participant.
A beneficiary, guardian, legal representative or other person claiming
any rights under the Plan from or through any Participant shall be
subject to all terms and conditions of the Plan and any Option
Agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional restrictions deemed
necessary or appropriate by the Committee.
(f) Tax Withholding. The Corporation or any Subsidiary is authorized
to withhold from any Option granted any payment relating to an Option
under the Plan, including from the exercise of an Option, amounts of
withholding and other taxes due in connection with any transactions
involving an Option, and to take such other action as Committee may
deem advisable to enable the Corporation and Participants to satisfy
obligations for the payment of withholding taxes and other tax
obligations relating to any Option. This authority shall include
authority to withhold or receive Shares or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations.
(g) Loan Provisions. With the consent of the Committee, and subject at
all times to laws and regulations and other binding obligations or
provisions applicable to the Corporation, the Corporation may make,
guarantee or arrange for a loan or loans to a participant with respect
to the exercise of any Option, including a payment by a Participant of
any or all federal, state, or local income or other taxes due in
connection with the exercise of any Option. Subject to such
limitations, the Committee shall have full authority to decide whether
to make a loan or loans hereunder and to determine the amount, terms,
and provisions of any such loan or loans, including the interest rate
to be charged in respect of any such loan or loans, whether the loan or
loans are to be with or without recourse against the borrower, the
terms on which the loan is to be repaid and the conditions, if any,
under which the loan or loans may be forgiven.
Section 7. Options to be Awarded to Independent Directors
Each Independent Director who is a member of the Board on October 1 of
each year during the term of the Plan shall be eligible to be awarded
Non-Qualified Stock Options to purchase Shares for each year of service
on the Board if that director shall have served as a director for at
least 75% of the prior fiscal year. All Options granted pursuant to
this Section 7 shall (a) be at an exercise price per Share equal to
100% of the Fair Market Value of a Share on the date of the grant; (b)
have at term of ten (10) years; (c) terminate (i) immediately upon
termination of an Independent Director's service as a director of the
Corporation for any reason other than mental or physical disability or
death, (ii) three (3) months after the date the Independent Director
ceases to serve as a director of the Corporation due to physical or
mental disability or (iii) (a) twelve (12) months after the date the
Independent Director ceases to serve as a director due to the death of
<PAGE>72
the Independent Director or (b) three (3) months after the death of the
Independent Director if such death shall occur during the three (3)
month period following the date the Independent Director ceased to
serve as a director of the Corporation due to physical or mental
disability; and (d) be otherwise on the same terms and conditions as
all other Options granted pursuant to the Plan.
Section 8. Amendment and Termination
Except to the extent prohibited by applicable law and otherwise
expressly provided in an Option Agreement or in the Plan:
(a) Amendments to the Plan. The Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board, but no amendment without the approval
of the stockholders of the Corporation shall be made if such amendment
would be required under Sections 162(m) or 422 of the Code, Rule 16b-3
or any other law or rule of any governmental authority, stock exchange
<PAGE>5
or other self-regulatory organization to which the Corporation may then
be subject. Neither the amendment, suspension nor termination of the
Plan shall, without the consent of the holder of such Option, alter or
impair any rights or obligations under any Option theretofore granted.
(b) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option in the manner and to the extent
it shall deem desirable to carry the Plan into effect.
Section 9. General Provisions
(a) No Rights to Awards. No Key Employee shall have any claim to be
granted any Option under the Plan, and there is no obligation for
uniformity of treatment of Key Employees or holders or beneficiaries of
Options under the Plan. The terms and conditions of Options need not
be the same with respect to each recipient.
(b) No Right to Employment. The grant of an Option shall not be
construed as giving a Participant the right to be retained in the
employ of the Corporation. Further, the Corporation may at any time
dismiss a participant from employment, free from any liability, or any
claim under the Plan, unless otherwise expressly provided in the Plan
or in any Option Agreement.
(c) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Colorado and applicable by
Federal law.
(d) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Option under any law
deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, such provision
shall be deemed void, stricken and the remainder of the Plan and any
such Option shall remain in full force and effect.
(e) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall
determine whether cash, other securities, or other property shall be
paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated
or otherwise eliminated.
(f) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision hereof.
Section 10. General Provisions
The Plan is effective as of October 1, 1998, subject to stockholder
approval of the Plan prior to such date, if such stockholder approval
is required under Section 162(m) or 422 of the Code, Rule 16-b-3 or any
other law or rule of any governmental authority, stock exchange or
other self-regulatory agency to which the Corporation may be subject.
<PAGE>73
Section 11. Term of the Plan
The Plan shall continue until the earlier of (i) the date of which all
Options issuable hereunder have been issued, (ii) the termination of
the Plan by the Board or (iii) September 30, 2008. However, unless
otherwise expressly provided in the Plan or in an applicable Option
Agreement, any Option theretofore granted may extend beyond such date
and the authority of the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Option or to waive any conditions or
rights under any Option, and the authority of the Board to amend the
Plan, shall extend beyond such date.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,656
<SECURITIES> 0
<RECEIVABLES> 8,678
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,334
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,334
<CURRENT-LIABILITIES> 800
<BONDS> 0
<COMMON> 5,575
0
0
<OTHER-SE> 11,959
<TOTAL-LIABILITY-AND-EQUITY> 18,334
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 214,674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (214,674)
<INCOME-TAX> 800
<INCOME-CONTINUING> (215,474)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215,474)
<EPS-BASIC> (.038)
<EPS-DILUTED> (.038)
</TABLE>
