UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number: 01-28911
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(Name of Small Business Issuer in its charter)
Colorado 91-1869677
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
21800 Oxnard Street Suite 440, Woodland Hills CA 91367
------------------------------------------------------
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (818) 598-8888
--------------
Securities registered pursuant to Section 12(b) of the Act: None.
Name of each exchange on which registered: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such
shorter period of that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Check if there is no disclosure of delinquent filers to Item 405 of Regulation
S-B contained in this form, and if no disclosure will be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. |_|
State Issuer's Revenues for its most recent fiscal year: $9,578
The number of shares outstanding of the Company's $.001 Par Value Common Stock,
as of September 30, 2000 were 5,575,500. The aggregate number of shares of the
voting stock held by non-affiliates on January 9, 2000 was 1,114,000. The market
value of these shares, computed by reference to the market closing price on
January 9, 2000 was $139,250. For the purposes of the foregoing calculation
only, all directors and executive officers of the registrant have been deemed
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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PART I
ITEM 1. BUSINESS
A) General
National Healthcare Technology, Inc. (the "Company") was incorporated on
February 29, 1996 as "Pyramid Holdings, Inc." 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, in 1999, 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.
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.
The Company's office is located at 21800 Oxnard Street, Suite 440, Woodland
Hills, California 91367.
As of September 30, 2000, the Company had no employees.
Item 2. Properties.
The Company presently shares office space with a related entity and its
attorney. The Company's portion of the rent is approximately $1,500 and the
lease expires in 2002. The Company anticipates that this space is sufficient for
the near future.
Item 3 Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders
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None.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The Company's common stock has been traded on the OTC Electronic Bulletin
Board since Winter, 1997 under the symbol "NHKT". The following table reflects
the high and low quarterly bid prices for the fiscal year ended September, 2000.
This information was provided to the Company by the National Association of
Securities Dealers, Inc. (the ANASD@). These quotations reflect inter-dealer
prices, without retail mark-up or mark-down or commissions. These quotations may
not necessarily reflect actual transactions.
--------------------------------------------------------------------------------
Period High Bid Low Bid
--------------------------------------------------------------------------------
1st Qtr 2000 .1563 .04
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2nd Qtr 2000 .125 .03
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3rd Qtr 2000 .125 .02
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4th Qtr 2000 .125 .02
--------------------------------------------------------------------------------
As of September 30, 2000, the Company had 5,575,500 shares of its common stock
issued and outstanding, of which 1,114,000 were held by non-affiliates.
The Company's CUSIP number is 635904-105. The Company has authorized a total of
25,000,000 shares of common stock, par value $.001. The Company has authorized a
total of 500,000 shares of preferred stock, par value $.01 and presently has no
shares of preferred stock issued and outstanding. As of September 30, 2000, 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.
Item 6. Management's Discussion and Analysis or Plan of Operation.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-KSB, 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, 2000
reflects limited assets and limited liabilities. Further, there exists no
3
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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, 2000,
the Company engaged in limited operations and attempted to initiate its double
blind study of its drug, Magkelate. The only revenues received by the Company
during this period was approximately $9,500 received from the sale of assets
which were previously written off by the Company.
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, 2000 and September 30, 1999 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.
In August, 1996, the Company entered into an agreement to issue 200,000 shares
of its common stock to Ivan C. Tiholiz, 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 "Co-Active Instruments with
Non-slip Surfaces and Method for their Manufacture". The shares were divided
equally between Dr. Tiholiz and Mr. Ogden.
4
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In August, 1996, the Company entered into an agreement to issue 1,364,150 shares
of its common stock 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
Magkelate.
In August, 1996, the Company entered into an agreement to issue 2,150,000 shares
of its common stock 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 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. The co-patent holder for the
diamondizing process passed away in late 1997. 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.
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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.
For the year ended September 30, 2000, the Company had revenues of $9,578. This
amount reflects the proceeds from the sale of business equipment that the
Company had previously written off.
For the year ended September 30, 2000, the Company had expenses of $60,876
compared to expenses of approximately $215,000 at September 30, 1999. The
Company's expenses consisted primarily of development costs and general and
administrative expenses. The net loss for the year ended September 30, 2000 was
($52,098) or ($.01) per share of common stock.
For the year ended September 30, 1999, the Company had no revenue and expenses
of $214,674. The Company's expenses consisted primarily of development costs and
general and administrative expenses. The net loss for the year ended September
30, 1999 was ($215,474) or ($.04) per share of common stock.
At September 30, 2000, shareholder equity was a deficit of $(34,564) compared to
shareholder equity of $17,534 at September 30, 1999. This decrease in
shareholder equity is due primarily to the Company's borrowing money to pay its
debts and not having adequate revenues to pay for its expenses at the present
time. The net loss per share of common stock for the year ended September 30,
2000 was (.01) compared to a net loss per share of common stock for the year
ended September 30, 1999 of ($.04) per share.
Liquidity and Capital Resources
At September 30, 2000, the Company had negative working capital of approximately
($35,000) which consisted of current assets of $2,115 and current liabilities of
$36,679. The Company's assets at September 30, 2000 consisted of cash of $2,115.
At September 30, 1999, the Company had assets of approximately $18,000 which
consisted of cash and accounts receivables. At September 30, 1999, the Company
had current liabilities of $800, resulting in working capital of approximately
$17,500. The current liabilities of the Company at September 30, 2000 are
composed primarily of accounts payable of $13,679 and a note payable of $22,200
to a shareholder of the Company which was incurred in early 2000 to pay the
Company's debts and which is presently due and owing to the shareholder.
Effect of Inflation
Inflation did not have any significant effect on the operations of the Company
during the year ended September 30, 2000. Further, inflation is not expected to
have any significant effect on future operations of the Company.
Item 7. Financial Statements.
Financial statements are audited and included herein beginning on Exhibit 1,
page 1 and are incorporated herein by this reference.
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Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no disagreements with accountants on accounting and financial
disclosure during the relevant period.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers of the Company
The following table sets forth the names and ages of all directors and executive
officers of the Company and all persons nominated or chosen to become a
director, indicating all positions and offices with the Company held by each
such person and the period during which he has served as a director:
The principal executive officers and directors of the Company are as follows:
Name Age Positions Held and Tenure
-----------------------------------------------------------------
Toni A. Hussain 51 Secretary and Director since August 23,
1997
James Smith 56 President and Director since November 1,
1997
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.
Business Experience. The following is a brief account of the business experience
during at the least the last five years of the directors and executive officers,
indicating their principal occupations and employment during that period, and
the names and principal businesses of the organizations in which such
occupations and employment were carried out.
7
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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.
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 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 which 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.
8
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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.
Identification of Certain Significant Employees. The Company does not employ any
persons who make or are expected to make significant contributions to the
business of the Company.
Item 10. Executive Compensation.
During fiscal 2000, and as of the date of the filing of this report, none of the
Company's officers were paid any compensation by the Company.
Compensation of Directors
The Company adopted an Incentive Stock Option Plan for non-employee directors on
October 1, 1998. The Company has not awarded any options under this plan. No
director receives or accrues any compensation for his services as a Director,
including committee participation and or special assignments.
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 and the amount, including all periodic payments or
installments where the value of such compensation or remuneration exceeds
$100,000 per executive officer.
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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.
Compensation Pursuant to Plans. Other than disclosed above, the Company has no
plan pursuant to which cash or non-cash compensation was paid or distributed
during the last fiscal year, or is proposed to be paid or distributed in the
future, to the individuals and group described in this item.
Compensation of Directors. Directors of the Company are entitled to reasonable
reimbursement for their travel expenses in attending meetings of the Board of
Directors.
Termination of Employment and Change of Control Arrangement. Except as noted
herein, the Company has no compensatory plan or arrangements, including payments
to be received from the Company, with respect to any individual names above from
the latest or next preceding fiscal year, if such plan or arrangement results or
will result from the resignation, retirement or any other termination of such
individual's employment with the Company, or from a change in control of the
Company or a change in the individual's responsibilities following a change in
control.
Section 16(a) Beneficial Ownership Reporting Compliance. During the year ended
September 30, 2000, the following persons were officers, directors and more than
ten-percent shareholders of the Company's common stock:
Name Position Filed Reports
----
Toni A. Hussain Director, Secretary-Treasurer No
James Smith Director Yes
Phoenix Capital Corp. Shareholder Yes
Estate of Ivan Tiholiz Shareholder Yes
Item 11. Security Ownership of Certain Beneficial Owners and Management.
There were 5,575,500 shares of the Company's common stock issued and outstanding
on September 30, 2000. No preferred shares were issued and outstanding at
September 30, 2000. The following tabulates holdings of shares of the Company by
each person who, subject to the above, at the date of this Report, holds or
record or is known by Management to own beneficially more than five percent (5%)
of the Common Shares of the Company and, in addition, by all directors and
officers of the Company individually and as a group.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Name and Address Number of Shares Owned Beneficially Percent of Beneficially Owned
Shares
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cede & Co. 329,388 5.9%
PO Box 222
New York NY 10274
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
10
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<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Name and Address Number of Shares Owned Beneficially Percent of Beneficially Owned
Shares
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Toni A. Hussain* 254,000 4.56%
24000 Laurel Place
Calabasas CA 91302
---------------------------------------------------------------------------------------------------------
Phoenix Consulting Services, Inc. 2,130,000 38.2%
7107 Enders Avenue
San Diego CA
---------------------------------------------------------------------------------------------------------
James H. Smith* 127,520 2.29
348 Georgetown Avenue
San Mateo CA 94402
---------------------------------------------------------------------------------------------------------
Estate of Ivan C. Tiholiz, MD 1,950,000 34.98%
14860 Roscoe Blvd. Ste. 307
Van Nuys CA 91402
---------------------------------------------------------------------------------------------------------
All Directors and Executive 392,020 7.03%
Officers as a Group (two persons)
---------------------------------------------------------------------------------------------------------
</TABLE>
* Denotes officer or director
Changes in Control. There are no arrangements known to the Company, including
any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change of control of the Company.
Item 12. Certain Relationships and Related Transactions.
The Company shares office space with its attorney and with a shareholder of the
Company who has loaned the Company money to fund its operations for the ast
year. The Company's portion of the rent is approximately $1,500 per month and
the lease runs through November, 2002.
Item 13. Exhibits and Reports on Form 8-K.
(a) Financial Statements and Schedules
The following financial statements and schedules are filed as part of this
report:
Independent Auditors' Report dated October 16, 2000
Balance Sheet for the Fiscal Years Ended September 30, 2000 and 1999
Statement of Operations for the Fiscal Years Ended September 30, 2000 and 1999
Statement of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
Independent Auditors' Report dated December 3, 1998
List of Exhibits
The following exhibits are filed with this report.
Financial Statements.
Financial Data Schedule
(b) There were no Reports filed on Form 8-K during the fourth quarter of the
Company's fiscal year ended September 30, 2000.
11
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
January 10, 2000 NATIONAL HEALTHCARE TECHNOLOGY, INC.
/s/ James Smith
----------------------------------------
James Smith, President, Director
/s/ Toni A. Hussain
----------------------------------------
Toni A. Hussain, CFO, Director
12
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NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT ......................................... 1
FINANCIAL STATEMENTS
Balance Sheets ................................................ 2
Statements of Operations ...................................... 3
Statement of Changes in Stockholders' Equity (Deficit) ........ 4 - 5
Statements of Cash Flows ...................................... 6 - 7
Notes to Financial Statements ................................. 8 - 11
<PAGE>
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 sheets of National Healthcare Technology, Inc. (A
Colorado Corporation and a Development Stage Company) as of September 30, 2000
and 1999, and the related statements of operations, changes in stockholders'
equity (deficit) and cash flows for the years 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 audits. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the September 30, 2000 and 1999 financial statements referred to
above present fairly, in all material respects, the financial position of
National Healthcare Technology, Inc. as of September 30, 2000 and 1999, and the
results of its operations and its cash flows for the years 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 10 to the
financial statements, the company incurred net losses of $1,257,058 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 from the outcome of these uncertainties.
Moffitt & Company, P.C.
Scottsdale, Arizona
October 16, 2000
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
ASSETS
2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,115 $ 9,656
Accounts receivable 0 8,678
----------- -----------
TOTAL ASSETS $ 2,155 $ 18,334
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 13,679 $ 0
Note payable 22,200 0
Corporation income tax payable 800 800
----------- -----------
TOTAL CURRENT LIABILITIES 36,679 800
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value
500,000 shares authorized
-0- shares issued and outstanding 0 0
Common stock, $.001 per share
25,000,000 shares authorized
5,575,500 shares issued and outstanding 5,575 5,575
Paid in capital in excess of par value of stock 1,216,919 1,216,919
Deficit accumulated during the development stage (1,257,058) (1,204,960)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (34,564) 17,534
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,115 $ 18,334
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
2
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
November 5, 1989
(Date of
Inception)
Years Ended September 30, Through
---------------------------- September 30,
2000 1999 2000
----------- ----------- ----------------
<S> <C> <C> <C>
REVENUE
Sale of abandoned equipment $ 9,578 $ 0 $ 9,578
DEVELOPMENT COSTS 60,876 214,674 1,264,236
----------- ----------- -----------
NET (LOSS) BEFORE INCOME TAXES (51,298) (214,674) (1,254,658)
INCOME TAXES 800 800 2,400
----------- ----------- -----------
NET (LOSS) $ (52,098) $ (215,474) $(1,257,058)
=========== =========== ===========
NET (LOSS) PER COMMON SHARE
Basic and diluted $ (.01) $ (.04)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic and diluted 5,575,500 5,575,500
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
3
<PAGE>
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, 2000
<TABLE>
<CAPTION>
Paid in Deficit
Capital Accumulated
Preferred Stock Common Stock in Excess During the
----------------------- ----------------------- of Par Development
Shares Amount Shares Amount Value of Stock Stage
--------- --------- --------- --------- -------------- -----------
<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
NET (LOSS) FOR THE PERIOD
ENDED SEPTEMBER 30, 1996 0 0 0 0 0 (49,807)
--------- --------- --------- --------- --------- ----------
BALANCE, SEPTEMBER 30, 1996 0 0 1,564,150 1,564 0 (49,807)
SHARES ISSUED TO RELATED
PARTY FOR EQUIPMENT 0 0 685,850 686 54,601 0
SHARES ISSUED TO RELATED
PARTY FOR SERVICES 0 0 2,150,000 2,150 0 0
SALE OF COMMON STOCK,
PURSUANT TO PRIVATE
OFFERING, NET OF OFFERING
COSTS OF $25,617 0 0 61,740 62 272,821 0
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
SHARES ISSUED TO RELATED
PARTY FOR VEHICLE, UPON
EFFECTIVE DATE OF PRIVATE
OFFERING 0 0 1,000 1 4,999 0
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1997 0 0 0 0 0 (300,410)
--------- --------- --------- --------- --------- ----------
BALANCE, SEPTEMBER 30, 1997 0 0 4,500,000 4,500 519,684 (350,217)
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
4
<PAGE>
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, 2000
<TABLE>
<CAPTION>
Paid in Deficit
Capital Accumulated
Preferred Stock Common Stock in Excess During the
----------------------- ----------------------- of Par Development
Shares Amount Shares Amount Value of Stock Stage
--------- --------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
WARRANTS EXERCISED, NET
OF $17,440 COSTS 0 $ 0 1,000,000 $ 1,000 $ 481,560 $ 0
SHARES ISSUED FOR SERVICES 0 0 1,000 1 4,999 0
SHARES ISSUED FOR SERVICES 0 0 49,000 49 146,951 0
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1998 0 0 0 0 0 (639,269)
--------- --------- --------- --------- ----------- -----------
BALANCE, SEPTEMBER 30, 1998 0 0 5,550,000 5,550 1,153,194 (989,486)
SHARES ISSUED FOR SERVICES 0 0 25,500 25 63,725 0
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 1999 0 0 0 0 0 (215,474)
--------- --------- --------- --------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 0 0 5,575,500 5,575 1,216,919 (1,204,960)
NET (LOSS) FOR THE YEAR
ENDED SEPTEMBER 30, 2000 0 0 0 0 0 (52,098)
--------- --------- --------- --------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 0 $ 0 5,575,500 $ 5,575 $ 1,216,919 $(1,257,058)
========= ========= ========= ========= =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
5
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
November 5, 1989
(Date of
Inception)
Years Ended September 30, Through
------------------------- September 30,
2000 1999 2000
--------- ---------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $(52,098) $(215,474) $(1,257,058)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Depreciation and amortization 0 0 22,977
Common stock issued as payment for
interest expense 0 0 12,300
Common stock issued for services 0 63,750 217,900
Loss on abandoned assets 0 65,100 120,387
Gain on sale of assets 0 0 (500)
Changes in operating assets and liabilities:
Accounts receivable 8,678 0 8,678
Accounts payable 13,679 (4,162) (3,860)
Corporation income tax payable 0 800 800
Accrued payroll and payroll taxes 0 (775) 9,664
-------- --------- -----------
NET CASH (USED) BY
OPERATING ACTIVITIES (29,741) (90,761) (868,712)
-------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment 0 (40,179) (87,314)
Proceeds from sale of equipment 0 0 5,500
-------- --------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES 0 (40,179) (81,814)
-------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from notes payable 22,200 0 217,200
Repayments on notes payable 0 0 (20,000)
Proceeds from issuance of common stock
and subscriptions 0 0 798,500
Payments on offering costs 0 0 (43,059)
-------- --------- -----------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 22,200 0 952,641
-------- --------- -----------
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
6
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD NOVEMBER 5, 1995 (DATE OF INCEPTION)
THROUGH SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
November 5, 1989
(Date of
Inception)
Years Ended September 30, Through
------------------------- September 30,
2000 1999 2000
------- --------- ----------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH $(7,541) $(130,940) $ 2,115
CASH BALANCE, BEGINNING OF
PERIOD 9,656 140,596 0
------- --------- --------
CASH BALANCE, END OF PERIOD $ 2,115 $ 9,656 $ 2,115
======= ========= ========
SUPPLEMENTARY DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 0 $ 0 $ 55
======= ========= ========
Taxes $ 800 $ 800 $ 2,400
======= ========= ========
NON CASH INVESTING AND
FINANCING ACTIVITIES
Common stock issued for notes payable $ 0 $ 0 $175,000
======= ========= ========
Common stock issued for patent rights $ 0 $ 0 $ 1,562
======= ========= ========
Common stock issued for equipment $ 0 $ 0 $ 60,287
======= ========= ========
Common stock issued for services and
directors' fees $ 0 $ 63,750 $215,750
======= ========= ========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
7
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 1999, the company
abandoned all of its medical 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 and 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
basis 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 rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Net (Loss) Per Share
The company adopted Statement of Financial Accounting Standards No. 128
that requires the reporting of both basic and diluted earnings (loss) per
share. Basic earnings (loss) per share is computed by dividing net income
(loss) 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.
See Accompanying Notes and Independent Auditors' Report.
8
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 2 NOTE PAYABLE
On March 20, 2000, the company received a $20,000 loan from Stein's
Holdings, Inc. The note is unsecured, bears interest at 12% and was due on
June 1, 2000.
The note provided that if the note and accrued interest were not paid on
June 1, 2000, then the holder of note could elect to receive stock of the
company at a price to be mutually agreed upon by both parties. As of
September 30, 2000, Stein's Holdings, Inc. has not elected to convert the
note to common stock.
NOTE 3 INCOME TAXES
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
(Loss) from operations before income taxes $ (52,098) $(215,474)
--------- ---------
The provision for income taxes is estimated as follows:
Currently payable $ 800 $ 800
--------- ---------
Deferred receivable $ 0 $ 0
--------- ---------
A reconciliation of the provision for income taxes
taxes compared with the amounts at the federal
statutory income tax rate was as follows:
Tax at federal statutory income tax rate $ 800 $ 800
--------- ---------
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 $ 0
--------- ---------
Temporary differences and carryfowards that give
use to deferred tax assets and liabilities included
the following:
<CAPTION>
Deferred Tax
-------------------------
Assets Liabilities
--------- -----------
<S> <C> <C>
Net operating loss $ 496,000 $ 0
Valuation allowance 496,000 0
--------- ---------
Total deferred taxes $ 0 $ 0
========= =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
9
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 3 INCOME TAXES (CONTINUED)
As discussed in note 10, 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:
2000 1999
-------- --------
Balance, beginning of year $475,000 $363,370
Addition to allowance for year 21,000 80,000
Addition due to change in corporation status
from Colorado to California 0 31,630
-------- --------
Balance, end of year $496,000 $475,000
======== ========
NOTE 4 NET OPERATING LOSS CARRYFORWARD
The company has the following net operating loss carryforward at September
30, 2000:
Expiration
Year Ended Amount Date
------------------ ---------- ----------
September 30, 2000 $ 52,098 2020
September 30, 1999 215,474 2019
September 30, 1998 614,265 2018
September 30, 1997 279,456 2012
September 30, 1996 78,959 2011
----------
$1,240,252
==========
Future changes in ownership may limit the ability of the company to
utilize these net operating loss carryforwards prior to their expiration.
NOTE 5 COMMON STOCK
In October 1998, the board of directors authorized the issuance of 25,500
shares of common stock as compensation to officers.
NOTE 6 RENT
The company rents its facilities on a month to month basis. The rent
expense for the years ended September 30, 2000 and 1999 was $19,407 and
$20,633, respectively.
See Accompanying Notes and Independent Auditors' Report.
10
<PAGE>
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 7 INTEREST
Interest expense for the years ended September 30, 2000 and 1999 was
$2,200 and $0, respectively.
NOTE 8 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 year ended
September 30, 1999.
NOTE 9 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
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 under this plan.
The option plan terminates on September 30, 2008.
NOTE 10 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 course of business over a
reasonable length of time. The company has incurred development losses of
$1,257,058 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 11 PREFERRED STOCK
No rights or preferences have been assigned to the preferred stock.
See Accompanying Notes and Independent Auditors' Report.
11
<PAGE>
CORDOVANO & HARVEY, P.C.
Certified Public Accountants
201 Steele Street Suite 300
Denver, Colorado 80206
(303) 329-0220
(303) 316-7493 Fax
To the Board of Directors and Stockholders
National Healthcare Technology, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheets 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 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
