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IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THIS FORM 10-SB IS
BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION.
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
MEDIFORCE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA 65-0786902
------------------------------- ------------------------------------
<S> <C>
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
580 Village Boulevard, Suite 160, West Palm Beach, FL. 33409
- ------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 640-6000
-----------------------------
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 Stock, $.0001
- --------------------------------------------------------------------------------
(Title of class)
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
MediForce, Inc. (the "Company"), a Florida corporation, develops,
manufactures and markets state-of-the-art, high quality, transparent,
lightweight, and revolutionary medical body support devices. Currently, the
Company offers four products to the world market and is in the process of
developing other products which will be added to its product line. The Company
sees itself as an innovative major worldwide source for ergonomic devices,
manufactured in the United States, that are cost effective, durable, and
attractive enough to encourage the patient or wearer to actually utilize the
devices in order to receive the device's therapeutic and preventive benefits.
In September 1998, the Company formed MediForce Products, Inc. ("MPI"),
a wholly-owned subsidiary. MPI was established for the purpose of allowing the
Company to separate its business relating to medical devices and allow those
operations to develop separately.
Additionally, in September 1998, the Company agreed to purchase the
outstanding shares of stock of General Environmental Technologies, Inc.
("GETI"), a Florida corporation, in exchange for the issuance of 8,500,000
shares of the Company's stock. GETI is engaged in the business of demolition,
remediation and environmental clean up of polluted land for large corporations
and governmental agencies.
COMPANY HISTORY
In 1986, Michael F. Cox, the former Chairman of the Company, a widely
recognized inventor and artist, injured his back severely and designed a device
to support his back. He continued development of his device, which centers on
the use of light weight, transparent, and cost effective materials which utilize
the physics of opposing forces in order to properly brace various parts of the
human anatomy. On March 25, 1993, Mr. Cox incorporated the Company under the
name Mold-A-Brace, Inc. to develop and market his back device. The Company later
changed its name to MediForce, Inc. on August 22, 1996.
SUBSIDIARIES
MediForce Products, Inc.
On September 8, 1998, the Company's Board of Directors agreed to form a
wholly-owned subsidiary, MediForce Products, Inc. ("MPI"). MPI was incorporated
on October 16, 1998, in the State of Florida. In connection with MPI's
formation, the Company transferred all of its assets and liabilities to MPI,
including the Company's inventory and patents. The Company's founder and former
Chairman of the Board was appointed Chairman of the Board of MPI. MPI will
continue to offer the products offered by the Company, which are described
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below.
General Environmental Technologies, Inc.
General Environmental Technologies, Inc. ("GETI"), was incorporated in
the State of Florida on October 7, 1997, as Clean Land Company, and on May 21,
1998, it changed its name to General Environmental Technologies, Inc. GETI is a
holding company for three wholly-owned subsidiaries engaged in the business of
demolition, remediation and environmental clean up of polluted land for large
corporations and governmental agencies.
On September 9, 1998, the Company agreed to purchase GETI by issuing
8,500,000 shares of its common stock in exchange for 100% of the stock owned by
GETI's shareholders. In addition, it is anticipated the Company will receive
$250,000 over a period of one year from GETI to provide working capital for MPI.
Iroquois Wrecking Corp.
Iroquois Wrecking Corp. ("Iroquois Wrecking"), a wholly-owned
subsidiary of GETI, is a New York corporation, which provides building
demolition services to governmental agencies and all sites which require union
or prevailing wage labor pools. Iroquois Wrecking has just completed demolition
of a structure at Queens Hospital in Queens, New York, and is continuing
operations for the removal of face brick for the New York Housing Authority at
Williamsburg Houses in Brooklyn. In November 1998, Iroquois Wrecking will begin
the demolition of the Brooklyn Psychiatric Center and an abandoned steel mill in
a suburb of Philadelphia, Pennsylvania.
Iroquois Wrecking does not market its services, but instead procures
its contracts by assignment from Iroquois Corp., a related entity. Its parent,
GETI, believes that this is the best method of marketing its services because
the industry users and insurers then rely on one company as a "one stop shop"
for their needs.
Indigo Industries, Inc.
Indigo Industries, Inc. ("Indigo"), a Florida corporation, was
incorporated on January 21, 1997. Indigo, a wholly-owned subsidiary of GETI, has
completed a government-related demolition job for the Veterans Administration
and is awaiting final payment. GETI contemplates that Indigo will be operated as
the asbestos abatement and environmental remediation subsidiary of GETI
beginning in 1999. This operational change will allow Indigo to relieve Iroquois
Corp., a related entity, of its current asbestos abatement operations. Indigo
will begin marketing itself for stand alone operations while providing all
related services required by other GETI subsidiaries.
Competition in asbestos removal and site remediation has dwindled to a
minimal number since the demise of the "Super Fund" program which provided for
site cleanup with guaranteed federal government payments. The majority of the
asbestos removal is now done in buildings undergoing remodeling and in
demolition.
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Iroquois Corporation
Iroquois Corporation ("Iroquois"), a Florida corporation, was
incorporated on April 28, 1998. Iroquois, a wholly-owned subsidiary of GETI,
provides building demolition, tear outs and asbestos abatement services to
property owners who do not require union or prevailing wage labor pools.
Additionally, Iroquois generally removes all scrap metal from demolished
buildings and markets such scrap to enhance each job's profitability. Various
trade-related publications have considered Iroquois to be one of the top twenty
companies in the United States in both demolition and abatement.
Iroquois participates in an extremely fragmented industry in which most
competitors contract for and complete less than $10 million of work annually.
The reasons for this limited competition vary by company; however, all seem to
share common attributes such as lack of bonding capacity, lack of financing
availability and chronic equipment shortages. Iroquois is anticipated to secure
$20 million in contracts in the period from March 1998 through February 1999.
Iroquois believes that adequate funding and bonding commitments are in place to
meet its needs for the foreseeable future.
Iroquois is currently completing a $1.8 million demolition job for
Federated Department Stores in Hempstead, New York. It is anticipated that this
project will be completed in 1998. Additionally, several bids are pending and
one bid has been accepted. Iroquois markets itself in the Northeast,
Pennsylvania, Delaware, Ohio and Michigan. Also, Iroquois intends to utilize its
contacts in the Washington D.C. to Baltimore area as well as in California and
Florida to facilitate expansion.
PRODUCTS
Mold-A-Brace
Mold-A-Brace is a back brace that is a unique transparent body support
and brace designed for localized immobilization of parts of the living body
whereby the supports are conformable to the area that needs immobilization and
healing may be observed. The brace is individually applied on each patient by
heat-forming two opposing transparent plates to the patients abdomen and back,
which are locked in place with velcro straps. MPI designs and manufactures the
brace under the Mold-A-Brace trademark. The Company plans to have Mold-A-Braces
available for twenty different parts of the human body. There is a worldwide
potential need for 16 million conformable braces per year, based upon a rate of
only one brace per month per medical practitioner who utilizes such braces.
Bio-Back
Bio-Back is a pre-formed generic lower back support which uses the
science of physics and applies opposing forces, to align the spine, support the
abdomen, and ergonomically promote correct and erect posture. Bio-Back helps
prevent back injury and promotes correct posture.
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Based upon 80 million Americans who suffer from back pain, the Company
estimates there is a total of 1.1 billion potential users for the Bio-Back in
the marketplace of eighteen countries.
Bio-Wrist
Bio-Wrist is a new state-of-the-art patented product which alleviates
the pain of Carpal Tunnel Syndrome. The Bio-Wrist immobilizes the human wrist
with opposing forces without impeding the use of the hand and fingers. Based
upon 20 million Americans who suffer from wrist pain, the Company estimates
there is a worldwide total of 270 million potential users of the Bio-Wrist.
Bio-Elbow
The Bio-Elbow uses patented opposing forces and an extensor muscle dome
to aid in eliminating the pain of tennis or golf elbow as well as repetitive
motion tendinitis. Based upon 10 million Americans who suffer from forearm
pain, the Company estimates there is a worldwide total of 138.5 million
potential customers for the Bio-Elbow.
SERVICES
GETI, through its wholly-owned subsidiaries, Iroquois Wrecking Corp.,
Indigo Industries, Inc., and Iroquois Corporation, provides services relating to
the demolition, remediation, and environmental clean up of polluted land for
large corporations and governmental agencies. GETI has won several contracts for
services subject to adequate financing of these projects, which total
approximately $14,324,000 and are anticipated to be completed within the next
two years. Furthermore, GETI has upcoming bids totalling approximately
$38,600,000 subject to adequate financing which may be completed over the next
one to three years. These bids require adequate working capital to service these
projects.
THE MARKET
The market for the Company's orthopedic and ergonomic products is
growing at a rapid rate. The world's population is sustaining more recreational
and occupational injuries than ever before. There is a worldwide market of 1.5
billion people with medical problems, back, wrist, or arm, who need and can use
the Company's current products.
The Company's orthopedic and ergonomic products have a current market
place in the areas of:
<TABLE>
<S> <C> <C>
Medical Practitioners Occupational Safety Internet Sales
Hospitals Sports and Recreation Home Shopping Television
Medical Supply Dealers Mass Marketing Infomercial
Sport Medicine Mail Order Television Commercials
</TABLE>
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The American Institute of Preventive Health estimates that there are 80
million Americans currently suffering from some form of back pain. Back injuries
are the leading cause of Workers Compensation claims, and the second largest
cause of absenteeism. According to CTDNEWS, from the Center for Workplace Health
Information, back supports have annual sales of $300 million in the U.S. alone.
Additionally, due to the increase of occupations requiring repetitive
motion, such as working at a computer, Carpal Tunnel Syndrome is becoming a
major factor in health costs. University of Minnesota researchers estimate that
Carpal Tunnel Syndrome costs Americans at least $2 billion each year.
Marketing Plan
The Company's marketing strategy is to enhance, promote, and support
the fact that the Company's products are state-of-the-art, cost effective, and
offer more benefits than competing products.
Sales Strategy
The Company's sales strategy is to position the Company's products as
the cost effective "Roll Royce" of body supports in both the therapeutic and
preventive marketplaces. Sales strategy specific to the Bio-Wrists and Bio-Elbow
will be based upon test marketing currently being done.
The Company started marketing its products in September of 1995 and has
successfully shown products at the National Safety Council Congress, the Medical
Trade Show, the American Academy of Orthosists and Prosthesists, and the
Promotional Products Association International Show. Additionally, the Company
plans to film commercials which will be produced and used in the Company's
advertising campaign. The Company believes that advertising and promotion, along
with attendant publicity, is the keystone for successful marketing and brand
recognition. The strategy is to position the Company as the leading manufacturer
in the market.
All Company products are presently featured on a CD-ROM medical supply
catalog distributed by the Medical Data Institute. This catalog contains over
575,000 products and is regarded as the main reference source for medical supply
dealers and health care facilities. Products brochures, catalog sheets and the
Bio-Back video are professional state-of-the-art sales materials.
PATENTS
The Mold-A-Brace is protected under United States Patent Number
5,433,697 under its generic name "Conformable Back Brace with Abdominal
Support." This patent is granted to Michael Cox, the Company's former, and MPI's
current, Chairman of the Board. The Bio-Wrist is protected under United States
Patent Number 5,672,150. This patent is also granted to Mr. Cox. All of the
other products of the Company are protected under patent pending as well as
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patents pending in 17 foreign countries granted to Mr. Cox. All medical body
support devices manufactured by MPI are protected under an exclusive patent
license agreement in 18 countries.
On May 25, 1993, the Company executed a license agreement with Mr. Cox
to exclusively use, sell, distribute, manufacture, market, develop and
sublicense the orthopedic supports in the United States. The license agreement
will continue in effect until the patent expires on December 24, 2008, or, under
certain conditions, the patents will be sold to the Company. In consideration
for this license agreement, Mr. Cox is to receive $40,000 annually, payable
$10,000 quarterly for the life of the patent. Subsequent to the fifth year, the
payment shall be two percent of the gross sales price, payable quarterly if it
is in excess of the $40,000 minimum yearly payment.
EMPLOYEES
As of September 30, 1998, the Company had personnel consisting of 60
full-time employees and 5 part-time employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS OPERATIONS OVERVIEW
During the first quarter of the fiscal year 1998, the Company spent the
majority of management time designing new molds for the currently marketed
product and developing additional products for the support of chronically
painful or injured wrists and elbows. The Company also concentrated on
interviewing potential manufacturers and mold makers as well as preparing
additional marketing materials for the roll out of the new and improved product
line.
The Company intends to market all of the products over the remainder of
the fiscal year by returning to television advertising in January 1999, and
hiring a sales force to market directly to the country's major drug store
chains, and general merchandise discounters. Additional niche markets include
golf and tennis pro shops, and medical professional practices, including
orthopedic physicians and chiropractors. All of the above markets will be
attacked nationwide. Initially, the Southeast and East markets will enjoy the
product roll out. The ability to market the product line is dependent upon
receiving adequate financing.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
attached condensed financial statements and notes thereto.
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Financial Results of Operations
The Comparison of the Three Months Ended June 30, 1998, to the Three
Months Ended June 30, 1997.
The Company's revenue decreased from $357,388 for the quarter ended
June 30, 1997, to $18,317 for the quarter ended June 30, 1998. This decrease is
a direct result of the failure to find suitable manufacturing for the Bio-Back
products after the prior manufacturing of the product was found to be defective.
Cost of sales decreased to $16,230 for the quarter ended June 30, 1998,
from $42,886 for the same quarter in 1997. The reduction is due to the decline
in sales. The increase in the percentage of cost of sales is explained by the
requirement to fulfill warranty requirements for the products returned to the
Company due to the defective manufacturing described above.
The Company's general and administrative costs decreased to $117,532
for the quarter ended June 30, 1998, from $554,927 for the quarter ended June
30, 1997. The decrease is due to the fact the 1997 quarter included $458,127 in
advertising costs for which no comparable costs were incurred in the 1998
quarter.
The Company reported a net loss for the first fiscal quarter of 1998 of
$24,480 compared to a loss of $253,635 for the 1997 first fiscal quarter. The
loss reduction was created by a one-time event for additional earnings not
related to operations totaling $93,258. The largest gain was from the issuance
of common stock for $74,144.
The Comparison of the Year Ended March 31, 1998, to the Year Ended
March 31, 1997.
The Company's annual revenues increased from $113,570 for the year
ended March 31, 1997, to $1,648,606 for the same annual period ending March 31,
1998. This increase was a result of the first full year of direct marketing
efforts for the Bio-Back. Previous product marketing had not been effective.
The Company's cost of sales increased to $107,707 for the year ended
March 31, 1998, from $51,121 for the year ended March 31, 1997. The cost
increase was a direct result of the increase in units sold and the shift to a
new and less expensive product.
The Company's annual general and administrative expenses increased to
$542,601 for the year ended March 31, 1998, from $262,948 for the comparable
period ending in 1997. This increase is explained by increases in personnel and
related expenses. Moreover, cost for advertising increased to $1,669,212 for the
1998 year end from $364,110 for the year ended 1997. The increase was a direct
result of television marketing nationwide designed to introduce the Bio-Back,
which was reasonably successful as evidenced by the increase in revenue.
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For the year ended 1998 the net loss increased to $800,524 from a net
loss of $603,097 for the fiscal year ended 1997 as a result of the increased
costs mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
Because of the improper manufacturing and product failure, which
resulted in the Company honoring requests for refunds, the Company lost a great
deal of money. The Company's management made attempts to secure additional
financing which were ultimately unsuccessful leading to the emergency meeting to
acquire another company which could provide financing.
The infusion of capital by the newly acquired subsidiary will allow the
Company to perform. In the event of an unexpected failure of the business plan
or future financing, the Company will seek revenues from additional business
partners as may be required. As a result of the acquisition, the subsidiary is
required to provide $250,000 for working capital. The subsidiary's commitment
covers a one year time period rather than an immediate cash infusion.
The Company had a net deficit of $1,133,247 at June 30, 1998. The
Company for the years ended March 30, 1998 and 1997, had a negative cash flow
from operations of $598,204 and $623,581, respectively. Furthermore, for three
months ended June 30, 1998, the negative cash flow from operations was $38,056.
Additionally, as a result of the acquisition of General Environmental
Technologies, Inc. ("GETI") and the conversion of debt to equity, the pro forma
stockholder's equity increased to $2,909,458 as if the transaction had occurred
at June 30, 1998. The acquisition of GETI was in the form of an exchange of
stock for stock. As of June 30, 1998, GETI had a book value equity of
$3,065,205. MediForce Products, Inc. must become profitable in the very near
future or it will be spun off as a separate entity.
ITEM 3. DESCRIPTION OF PROPERTY
The Company maintains its headquarters in West Palm Beach, Florida. The
Company rents warehouse space under a two year operating lease expiring January
31, 1999. The lease calls for base rent of $3,000 per month.
GETI maintains its headquarters in Florida and has facilities located
in New York and Michigan. GETI leases its headquarters from its management
and, accordingly, GETI is not
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required to pay rent for its headquarters. However, this arrangement will end
shortly at which time GETI will obtain adequate facilities to service its
operations. GETI and its subsidiaries are not required to pay rent through
September 30, 1999, for its New York City location in Queens County. This
location is shared with several other contractors (unrelated parties) one of
which performed services for the landlord in 1993 and currently receives space
rent free in consideration for those services. That contractor does business
with GETI.
The land and building utilized by GETI in Michigan (part of the related
party transactions) was acquired to provide an area for a demolition yard and
repair facility for anticipated jobs in Detroit and other potential sites in
Michigan, Ohio, and Indiana. It will take approximately $100,000 to renovate the
building to meet the above job requirements plus a commitment to acquire the
needed equipment and vehicles to service such projects is approximately $300,000
of leased equipment (not a capital lease). If the anticipated contracts for
demolition jobs do not materialize, GETI may have to sell or lease the Michigan
property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of October 28,1998, the number and
percentage of shares of Common Stock owned of record and beneficially by each
officer and/or director of the Company, and by any other person or firm that
owns more than five percent (5%) of the Company's outstanding Common Stock and
by all officers and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND PERCENTAGE OF
TITLE OF CLASS BENEFICIAL OWNER NATURE OF OWNER CLASS
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<S> <C> <C> <C>
Common Bradley T. Ray 1,501,000 15.7%
580 Village Boulevard
West Palm Beach, Fl. 33409
Common Norman J. Birmingham 1,501,000 15.7%
580 Village Boulevard
West Palm Beach, Fl. 33409
Common Charles C. Chillingworth 1,401,000 14.6%
580 Village Boulevard
West Palm Beach, Fl. 33409
Common Mary Schwab 3,397,500 35.5%
Common All officers and directors 4,403,000 46.0%
as a group
</TABLE>
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
MANAGEMENT -- DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
MediForce, Inc.
The following sets forth the name of the Company's directors, executive
officers, and key employees as of September 9, 1998. The directors of the
Company are elected annually by the shareholders and the officers are appointed
annually by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Bradley T. Ray 48 Chairman of the Board of Directors
Norman J. Birmingham 43 Director, Chief Financial Officer
Charles C. Chillingworth 55 Director, President
</TABLE>
All directors hold office until the next annual meeting of shareholders
of the Company (currently expected to be held during the fourth Tuesday of
December) and until their successors are elected and qualified, subject to
earlier removal and replacement by the shareholders. Officers hold office until
the first meeting of directors following the annual meeting of shareholders and
until their successors are elected and qualified, subject to earlier removal and
replacement by the Board of Directors.
Biographies of the Company's Directors, Executive Officers and Key Employees
Bradley T. Ray is Chairman of the Board of the Company and GETI. Mr. Ray is also
an executive officer with A/R Mediquest.
Norman J. Birmingham is a director and Chief Financial Officer of the Company
and GETI. Mr. Birmingham is also president of Wolverine Financial Services, Inc.
Charles C. Chillingworth is a director and President of the Company and GETI.
MediForce Products, Inc.
Wilma Cox currently serves as President, Secretary and Director of MPI.
Prior to September 1998, Ms. Cox served as President, Secretary and Director of
the Company.
Michael Cox currently serves as Chairman of the Board of Directors MPI.
Prior to September 1998, Mr. served as Chairman of the Board of the Company.
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ITEM 6. COMPENSATION
Director Compensation
The Company does not pay compensation to its directors. However, all
officers and directors are reimbursed for any expenses incurred on behalf of the
Company. Directors are reimbursed for expenses pertaining to attendance at
meetings, including travel, lodging and meals.
Executive Compensation
The Company has written employment agreements with Bradley T. Ray,
Norman J. Birmingham, and Charles C. Chillingworth. Pursuant to the agreements,
the Company has agreed to pay each officer an annual salary of $120,000, plus
two percent (2%) of the annual net pre-tax profit of the Company. In addition,
each officer receives an automobile allowance of $800 a month from the Company.
Each contract is for a term of five years.
Also, GETI entered into a Business Consulting Agreement with Philip
Schwab, pursuant to which GETI pays Mr. Schwab $120,000 per year, for a period
of five years, commencing on January 1, 1998, in exchange for business advice.
Under the Agreement, Mr. Schwab is also entitled to a bonus of two percent (2%)
of the annual net pre-tax profit of GETI.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated on March 23, 1993. Since its
incorporation, the Company has issued 8,146,398 shares of its Common Stock.
The former majority stockholder of the Company advanced funds to the
Company during the years ended March 31, 1998 and 1997, for operational expenses
incurred on behalf of the Company. The advances are non-interest bearing and
payable to the stockholder when funds are available.
GETI has a $700,000 line of credit with a national bank secured by
Certificates of Deposit ("CD's") of a related party. GETI is owed $814,596 in
related party receivables from the same individual who secured the credit line
with personal CD's. The net receivable balance is $293,196 and is shown on
GETI's balance sheet as a net receivable since those were related party
transactions in the individual's name. Between November 13, 1998 and December
11, 1998 its anticipated that the credit line will revert to the Company as the
related party individual will repay the Company and remove his personal CD's as
collateral for the credit line.
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ITEM 8. DESCRIPTION OF SECURITIES
The Company is authorized to issue 60,000,000 shares of common
stock, $.0001 par value per share. As of September 7, 1998, 8,146,398 shares of
Common Stock are issued and outstanding. The holders of Common Stock have one
vote per share on all matters (including election of directors) without
provision for cumulative voting. Thus, holders of more than 50% of the shares
voting for the election of directors can elect all of the directors, if they
choose to do so. The Common Stock is not redeemable and has no conversion or
pre-emptive rights. There are no sinking fund provisions. In the event of
liquidation of the Company, the holders of Common Stock will share equally in
any balance of the Company's assets available for distribution to them after
satisfaction of creditors and preferred shareholders, if any. The Company may
pay dividends, in cash or in securities or other property when and as declared
by the Board of Directors from funds legally available therefore, but had paid
no cash dividends on its Common Stock to date.
DIVIDENDS
The payment by the Company of dividends, if any, in the future rests
within the discretion of its Board of Directors and will depend, among other
things, upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid any
dividends since its inception, however, it intends to pay dividends as soon as
business operations permit.
ADDITIONAL INFORMATION
The foregoing statements are a summary of the rights and privileges of
the holders of the Company's Common Stock. It does not purport to be complete
and its subject to the provisions of the corporate law of the State of Florida,
the Securities Act of 1993, the Securities Exchange Act of 1934, as amended, and
to the terms of the Company's Articles of Incorporation, as amended, and Bylaws.
The foregoing statements are qualified in their entirety by such references.
PART II.
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 2. LEGAL PROCEEDINGS
Neither the Company nor its subsidiaries are a party to any legal
actions which could have a material adverse effect on its business, financial
condition or results of operations.
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ITEM 3. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation, as amended, of the Company provide for
indemnification to the full extent permitted by Florida law of all persons it
has the power to indemnify under Florida law. Such indemnification is not deemed
to be exclusive of any other rights to which those indemnified may be entitled,
under any bylaw, agreement, vote of stockholders or otherwise. The provisions of
the Company's Articles of Incorporation, as amended, which provide for
indemnification may reduce the likelihood of derivative litigation against the
Company's directors and officers for breach of their fiduciary duties, even
though such action, if successful, might otherwise benefit the Company and its
stockholders.
PART F/S
FINANCIAL STATEMENTS
The following selected financial data should be read in conjunction
with the financial statements and the notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations included elsewhere
herein. The Company's statement of operations for the periods ended March 31,
1998 and 1997, and the Company's balance sheet as of March 31, 1998 and 1997 are
derived from, and are qualified by reference to, the audited financial
statements, which have been audited by Weinberg & Company, P.A. and should be
read in conjunction with those financial statements and notes thereto. GETI's
consolidated statement of income from inception on March 23, 1998, until June
30, 1998, and the consolidated balance sheet at June 30, 1998, are derived from,
and are qualified by reference to, the unaudited financial statements, which
have been reviewed by Oppenheim & Ostrick and should be read in conjunction with
those financial statements and notes thereto.
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INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
PART I - FINANCIAL INFORMATION FOR MEDIFORCE, INC.
ITEM 1 - AUDITED FINANCIAL STATEMENTS:
INDEPENDENT AUDITORS' REPORT WEINBURG & COMPANY, P.A. .................................1
BALANCE SHEETS - MARCH 31, 1998 AND 1997 ..............................................2
STATEMENT OF STOCKHOLDERS' DEFICIT - YEARS ENDED MARCH 31, 1998 AND 1997 ..............3
STATEMENTS OF OPERATIONS - YEARS ENDED MARCH 31, 1998 AND 1997 ........................4
STATEMENTS OF CASH FLOWS - YEARS ENDED MARCH 31, 1998 AND 1997 ........................5-6
NOTES TO FINANCIAL STATEMENTS .........................................................7-15
ITEM 2 UNAUDITED FINANCIAL STATEMENTS:
ACCOUNTANTS' COMPILATION REPORT .......................................................16
BALANCE SHEET - JUNE 30, 1998 .........................................................17
STATEMENT OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1998 ............................18
STATEMENT OF STOCKHOLDERS' DEFICIT - THREE MONTHS ENDED JUNE 30, 1998 .................19
STATEMENT OF CASH FLOWS - THREE MONTHS PERIODS ENDED JUNE 30, 1998 AND 1997 ...........20
NOTES TO FINANCIAL STATEMENTS .........................................................21
PART II - FINANCIAL INFORMATION FOR GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
ACCOUNTANTS' REVIEW REPORT - OPPENHEIM & OSTRICK, CPA'S ...............................22
CONSOLIDATED BALANCE SHEET - JUNE 30, 1998 ............................................23
CONSOLIDATED STATEMENT OF INCOME - FROM INCEPTION ON MARCH 23, 1998
UNTIL JUNE 30, 1998 .................................................................24
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT - FROM
INCEPTION ON MARCH 23, 1998 UNTIL JUNE 30, 1998 .....................................25
CONSOLIDATED STATEMENT OF CASH FLOWS - FROM INCEPTION ON
MARCH 23, 1998 UNTIL JUNE 30, 1998 ..................................................26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ............................................27-31
PART III - UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
PRO FORMA COMBINED FINANCIAL DATA .....................................................32
PRO FORMA BALANCE SHEET - JUNE 30, 1998 ...............................................33-34
PRO FORMA STATEMENT OF OPERATIONS - JUNE 30, 1998 .....................................35
PRO FORMA STATEMENT OF STOCKHOLDERS' EQUITY - JUNE 30, 1998 ...........................36
NOTES TO PRO FORMA COMBINED FINANCIAL DATA ............................................37
</TABLE>
<PAGE> 16
MEDIFORCE, INC.
FINANCIAL STATEMENTS
AS OF MARCH 31, 1998
[LOGO]
<PAGE> 17
MEDIFORCE, INC.
CONTENTS
<TABLE>
<S> <C>
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEETS AS OF MARCH 31, 1998 AND 1997
PAGE 3 - STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
PAGE 4 - STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
MARCH 31, 1998 AND 1997
PAGE 5-6 - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
MARCH 31, 1998 AND 1997
PAGE 7-15 - NOTES TO FINANCIAL STATEMENTS AS OF
MARCH 31, 1998 AND 1997
</TABLE>
[LOGO]
<PAGE> 18
[WEINBERG & COMPANY, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Mediforce, Inc.
We have audited the balance sheets of Mediforce, Inc., as of March 31, 1998 and
1997 and the related statements of operations, stockholders' deficiency 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
These 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mediforce, Inc. as of March 31,
1998 and 1997 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 shown in the financial statements,
the Company incurred a net loss of $800,524 during the year ended March 31,
1998, and, as of that date, had a working capital deficiency of $355,477 and a
stockholders' deficiency of $1,226,711. As discussed more fully in Note 14 to
the financial statements, the Company's business plan for the year ended March
31, 1999 contemplates reduced operating losses and obtaining additional working
capital from a public offering. The Company's ability to achieve the foregoing
elements of its business plan, which would be necessary for it to realize its
assets and satisfy its liabilities in the ordinary course of business is
uncertain. Those conditions raise some substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainy.
/s/ WEINBERG & COMPANY, P.A.
--------------------------------------
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 22, 1998
<PAGE> 19
[WEINBERG & COMPANY, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Mediforce, Inc.
We have audited the balance sheets of Mediforce, Inc., as of March 31, 1998 and
1997 and the related statements of operations, stockholders' deficiency 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. These 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mediforce, Inc. as of March
31, 1998 and 1997 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 shown in the financial
statements, the Company incurred a net loss of $800,524 during the year ended
March 31, 1998, and, as of that date, had a working capital deficiency of
$355,477 and a stockholders deficiency of $1,226,711. As discussed more fully
in Note 14 to the financial statements, the Company's business plan for the
year, ended March 31, 1999 contemplates reduced operating losses and
obtaining additional working capital from a public offering. The Company's
ability to achieve the foregoing elements of its business plan, which would be
necessary for it to realize its assets and satisfy its liabilities in the
ordinary course of business is uncertain. Those conditions raise some
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty .
/s/ WEINBERG & COMPANY, P.A.
-----------------------------------------
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 22, 1998
<PAGE> 20
MEDIFORCE, INC.
BALANCE SHEETS
AS OF MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,919 200,635
Accounts receivable 7,632 30,801
Inventory 62,286 44,407
Prepaid expenses and other
current assets 15,574 5,689
----------- -----------
Total Current Assets 97,411 281,532
PROPERTY AND EQUIPMENT - NET 63,343 65,400
DEPOSITS 5,850 5,600
LICENSES, PATENTS AND TRADEMARKS -
NET OF AMORTIZATION 114,768 23,234
----------- -----------
TOTAL ASSETS $ 281,372 $ 375,766
=========== ===========
LIABILITIES AM STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Notes payable $ 220,000 $ 50,000
Accounts payable and accrued expenses 232,888 50,909
----------- -----------
Total Current Liabilities 452,888 100,909
NOTES PAYABLE - STOCKHOLDERS 849,959 799,962
ADVANCES FROM STOCKHOLDER 205,236 200,736
----------- -----------
Total Liabilities 1,508,083 1,101,607
----------- -----------
STOCKHOLDERS' DEFICIENCY
Common stock, $.0001 par value,
10,000,000 shares authorized,
3,586,398 and 2,803,300 shares
issued and outstanding respectively
as of March 31, 1998 and 1997 359 280
Common stock warrants 14 13
Capital in excess of par 333,964 34,390
Deficit (1,553,548) (753,024)
----------- -----------
Total (1,219,211) (718,341)
Less Treasury Stock 7,500 7,500
----------- -----------
Total Stockholders' Deficiency (1,226,711) (725,841)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 281,372 $ 375,766
=========== ===========
</TABLE>
See accompanying notes to financial statements.
2
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<PAGE> 21
MEDIFORCE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL TOTAL
COMMON STOCK WARRANTS IN EXCESS TREASURY STOCK STOCKHOLDERS'
SHARES AMOUNT NUMBER AMOUNT OF PAR DEFICIT SHARES AMOUNT DEFICIENCY
---------- ------ -------- ------ --------- ----------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - MARCH 31, 1996 $ 99,800 $ 10 -- -- $ 34,390 $ (149,927) 1,000 $(7,500) $ (123,027)
ISSUANCE OF COMMON STOCK
AND WARRANTS - CASH 2,703,500 270 128,000 13 -- -- -- -- 283
NET (LOSS) FOR THE YEAR
ENDED MARCH 31, 1997 -- -- -- -- -- (603,097) -- -- (603,097)
---------- ---- -------- --- -------- ----------- ------ ------- -----------
BALANCE - MARCH 31, 1997 2,803,300 280 128,000 13 34,390 (753,024) 1,000 (7,500) (725,841)
ISSUANCE OF COMMON STOCK
WARRANTS - CASH 16,000 2 8,000 1 -- -- -- -- 3
ISSUANCE OF COMMON STOCK-
ACQUISITION OF INTANGIBLE
ASSETS 25,000 2 -- -- 87,498 -- -- -- 87,500
ISSUANCE OF COMMON STOCK -
SETTLEMENT OF DEBT 175,000 18 -- -- 174,982 -- -- -- 175,000
ISSUANCE OF COMMON STOCK -
SERVICES 567,098 57 -- -- 37,094 -- -- -- 37,151
NET (LOSS) FOR THE YEAR
ENDED MARCH 31, 1998 -- -- -- -- -- (800,524) -- -- (800,524)
---------- ---- -------- --- -------- ----------- ------ ------- -----------
BALANCE - MARCH 31, 1998 $3,586,398 $359 $136,000 14 $333,964 $(1,553,548) 1,000 $(7,500) $(1,226,711)
========== ==== ======== --- -------- ----------- ------ ------- -----------
</TABLE>
See accompanying notes to financial statements.
3
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<PAGE> 22
MEDIFORCE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
REVENUES NET $ 1,648,606 $ 113,570
COST OF SALES 107,707 51,121
----------- -----------
GROSS PROFIT 1,540,899 62,449
----------- -----------
OPERATING EXPENSES
Advertising 1,669,212 364,110
General and administrative
expense 542,601 262,948
Depreciation and amortization 25,106 13,598
Interest expense 104,504 24,890
----------- -----------
Total Operating Expenses 2,341,423 665,546
----------- -----------
NET (LOSS) $ (800,524) $ (603,097)
=========== ===========
(LOSS) PER SHARE
(Loss) per share (.24) (.23)
=========== ===========
Weighted average shares
outstanding 3,295,200 2,603,467
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
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<PAGE> 23
MEDIFORCE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) from operations $(800,524) (603,097)
Adjustments to reconcile net (loss)
to net cash (used in) operating activities:
Depreciation and amortization 25,106 13,598
Changes in assets (increase) decrease:
Accounts receivable 23,169 (30,801)
Inventory (17,879) (8,195)
Prepaid expenses and other current assets (9,885) (5,689)
Deposits (250) (5,600)
Changes in liabilities increase (decrease):
Customer deposits -- (9,000)
Accounts payable and accrued expenses 181,979 25,203
--------- ---------
Net Cash Flow (Used In)
Operating Activities (598,284) (623,581)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (18,083) (47,047)
License, patents and trademarks (96,500) --
--------- ---------
Net Cash Flows (Used In)
Investing Activities (114,583) (47,047)
--------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from note payable - bank -- 50,000
Proceeds from note payable - stockholders 49,997 799,962
Proceeds from note payable - Scarlett
Investment Group 170,000 --
Issuance of common stock and warrants 299,654 283
Loans from stockholder 4,500 14,638
--------- ---------
Net Cash Provided By
Financing Activities 524,151 864,883
--------- ---------
NET INCREASE (DECREASE) IN CASH (188,716) 194,255
CASH AND CASH EQUIVALENTS -
BEGINNING 200,635 6,380
--------- ---------
CASH AND CASH EQUIVALENTS -
ENDING $ 11,919 $ 200,635
========= =========
</TABLE>
See accompanying notes to financial statements.
5
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<PAGE> 24
MEDIFORCE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1998 AND 1997
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1998 1997
---------- -------
<S> <C> <C>
Cash paid during the years for:
Interest $ 10,459 $5,776
========== ======
</TABLE>
See accompanying notes to financial statements.
6
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<PAGE> 25
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization
Mediforce, Inc., F/K/A Mold-A-Brace, Inc. a Florida corporation
incorporated in 1993, engages in the manufacturing of orthopedic and
ergonomic supports.
On August 10, 1996, the Company changed the Company's name to
Mediforce, Inc. and amended the Articles of Incorporation to
authorize the issuance of up to 10,000,000 shares of $.0001 par
value common stock.
B. Accounts Receivable and Revenue Recognition
Accounts receivable are presented net of the allowance for doubtful
accounts. Revenue is recorded upon shipment of the product to the
customer.
C. Inventory
Inventory consists of raw materials and finished goods which are
stated at the lower of cost or market by the first-in, first-out
method.
D. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
on the accelerated and straight-line methods over the estimated
useful lives of the respective assets. Maintenance and repairs are
charged to expense as incurred; major renewals and betterments are
capitalized. When items of property or equipment are sold or
retired, the related cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in the results of
operations.
E. License, Patents and Trademarks
License, patents and trademarks are being amortized over their
respective remaining lives, up to 15 years, on a straight line
basis. Accumulated amortization as of March 31, 1998 and 1997 was
$4,966 and $3,112, respectively.
7
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<PAGE> 26
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. Industry Segment
The Company is in the business of developing manufacturing and
marketing certain medical brace products. Initial marketing is
contemplated in the major population centers of the United States.
Later expansion will be in additional domestic and international
markets.
G. Advertising Costs
Advertising costs consist of costs relating to the production of video
commercials, infomercials and their marketing costs. All advertising
costs are expensed in the period incurred.
H. 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.
I. Use of Estimates in the preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates
K. Fair Value
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of
information about the fair value of certain financial instruments for
which it is practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or liquidation.
8
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<PAGE> 27
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The carrying amounts of the Company's financial instruments, including
receivables, accounts payable and accrued liabilities, approximates
fair value due to the relatively short period to maturity for these
instruments. The carrying value of the Company's notes payable
approximates fair value based on the current rates offered to the
Company for debt of the same remaining maturities.
NOTE 2 - LICENSE AGREEMENT
On May 25, 1993, the Company executed a license agreement with the
inventor and holder of the patents to exclusively use, sell,
distribute, manufacture, market, develop and sublicense the orthopedic
supports in the United States. The license agreement will continue in
effect until the patent expires on December 24, 2008 or, under certain
conditions, the patents will be sold to the Company (See Note 8). In
consideration for this license agreement, the inventor and holder of
the patents is to receive $40,000 annually, payable $10,000 quarterly
for the life of the patent. Subsequent to the fifth year, the payment
shall be two percent of the gross sales rice, payable quarterly if it
is in excess of the $40,000 minimum yearly payment. Included in
accounts payable and accrued expenses is $40,000 relating to this
agreement for the year ended March 31, 1998. All prior amounts owed
under this agreement through March 31, 1997 had been forgiven.
NOTE 3 - RELATED-PARTY TRANSACTIONS
The majority stockholder of the Company advanced funds during the years
ended March 31, 1998 and 1997, to Mediforce, Inc. for operational
expenses incurred on behalf of the Company. The advances are
non-interest bearing and payable to the stockholder when funds are
available. The majority stockholder has agreed to continue advancing
funds as necessary to finance the working capital and other financial
requirements of the Company (See Note 10).
9
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<PAGE> 28
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 4 - INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Raw materials and supplies $42,834 $ -
Finished goods 19,452 44,407
------- -------
TOTAL $62,286 $44,407
======= =======
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at March 31,
1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Molds $46,753 $35,753
Equipment 43,031 36,245
Furniture and fixtures 8,457 8,160
Leasehold improvements 700 700
------- -------
Total 98,941 80,858
Less: Accumulated depreciation 35,598 15,458
------- -------
PROPERTY AND EQUIPMENT - NET $63,343 $65,400
======= =======
</TABLE>
NOTE 6 - NOTES PAYABLE
<TABLE>
<S> <C> <C>
Note payable - bank,
collateralized by an assignment
of a life insurance policy
and the personal guarantee of
the president of the Company.
Interest at 2 1/4% over
bank's prime (10.75% at March 31,
1998) payable monthly. $ 50,000 $50,000
Note payable - Scarlett Investment
Group, Inc., secured by 325,000
shares of stock to be held in
escrow. The loan becomes due 90
days after Mediforce, Inc. is
trading on NASD Electronic
Bulletin Board. Interest is at
7.8%, accrued interest was
$9,554 at March 31, 1998. In June
1998 $20,000 was repaid and $150,0OO
was converted into common stock
(See Note 15). $170,000 -
-------- --------
TOTAL NOTES PAYABLE - CURRENT $220,000 $ 50,000
======== ========
</TABLE>
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<PAGE> 29
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 7 - 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 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. As
of March 31, 1998 and 1997, the Company had no material current tax
liability, deferred tax liability or deferred asset because the
Company's valuation reserve is equal to the deferred tax asset arising
from the net operating losses.
As of March 31, 1998, the Company had available, for income tax
purposes, approximate net operating loss carryforwards expiring as
follows:
<TABLE>
<S> <C>
March 31, 2009 $ 25,000
March 31, 2010 76,000
March 31, 2011 45,000
March 31, 2012 603,000
March 31, 2013 800,000
----------
TOTAL $1,549,000
==========
</TABLE>
NOTE 8 - LEASE COMMITMENTS
The Company rents warehouse and office space in Boca Raton, Florida
under two and one year operating leases expiring January 31, 1999 and
October 15, 1998, respectively. The leases call for base rent of $3,000
and $2,092 per month, respectively. The office lease is subject to a 5%
annual base rate adjustment on the yearly anniversary. This lease also
calls for the Company to pay common area maintenance (CAM) expenses (as
defined) in addition to the base rent. Future minimum lease payments due
under noncancellable leases at March 31, 1998 are as follows:
<TABLE>
<S> <C>
For the year ending March 31, 1999 $ 44,650
--------
TOTAL $ 44,650
========
</TABLE>
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<PAGE> 30
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 9 - SIGNIFICANT CONCENTRATION OF CREDIT RISK
The Company's cash balances on deposit with banks are guaranteed by the
Federal Deposit Insurance Corporation up to 100,000. The Company is
exposed to risk for the amount of funds held in any one bank in excess
of the insurance limit. At March 31, 1998, the Company did not have any
bank deposits in excess of the insurance limit. In assessing its risk,
the Company's policy is to bank with high quality financial
institutions.
NOTE 10 - STOCK ISSUANCES AND NOTES PAYABLE - STOCKHOLDERS
During the year 1996, the majority stockholder returned 476,200 shares
to the Company. The financial statements for all of the years have been
adjusted to reflect this transaction.
On August 22, 1996, the Company increased its authorized common stock to
10,000,000 shares, with a par value of $.0001. The Board of Directors
also approved a stock split increasing the number of then outstanding
shares to 2,149,800, of which 2,100,000 are held by the controlling
shareholder.
During the year ended March 31, 1998 and 1997, the Company issued
783,098 and 653,500 new shares at a par value of $.0001 per share.
On June 6, 1996, the Company entered into an agreement with AMG
Investing Group, Inc. (AMG) for the purpose of acquiring interim
financing leading to an initial public offering of the Company's stock.
The interim financing was to generate at lease $1 million followed by an
anticipated initial public offering. Each $25,000 investing unit
consisted of a promissory note, with interest at 10% payable one year in
arrears. Each unit also contained 8,000 shares of common stock which
will have registration rights in the initial public offering, and 4,000
three year warrants to purchase 1 share per warrant of common stock at
$5.00 per share. The common stock underlying the warrant will be
registered with the initial public offering. The notes will be retired
with proceeds of the initial public offering or at the end of two years,
whichever comes first. For each $25,000 unit issued, $.80 was allocated
to common stock and $.40 was allocated to the warrant.
12
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<PAGE> 31
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 10 - STOCK ISSUANCES AND NOTES PAYABLE - STOCKHOLDERS - CONTINUED
In May 1997, the interim financing was completed. Thirty four units were
sold resulting in notes payable balances of $849,959. In addition,
272,000 shares of common stock at a par value of $.0001 totaling $27 and
136,000 warrants amounting to $14 were issued. As of March 31, 1998
accrued interest relating to the notes was $103,615 and is included in
accounts payable and accrued expenses. (See Note 15)
In consideration for the above services being performed by AMG, the
Company agreed to pay AMG 10% on all monies delivered to the Company
from the interim financing, and 1% of all monies delivered by the
initial public offering if said offering is a direct result of AMG's
efforts and set in place by AMG. Total payments made to AMG or any other
agent shall not exceed 10% of total monies raised.
On June 20, 1997, the Company entered into a release and settlement
agreement with AMG Investment Group, Inc. (AMG) for all compensation to
be paid to AMG. The company issued 125,000 shares of founder stock at a
par value of $.0001. Only 13% of the shares (16,250 shares) may be sold
the first day Mediforce, Inc. trades publicly, the remainder falls under
the normal registration period for the founder stock.
NOTE 11 - ASSET ACQUISITION
On August 28, 1997, the Company entered into an agreement with an
individual to purchase molds, inventory and the patent and trademark
rights of a hand exercise devise for 25,000 common shares having a
total value of $87,500.
NOTE 12 - PUBLIC TRADING
On November 25, 1997, the Company was approved by the NASD to list its
common shares on the OTC Electronic Bulletin Board.
NOTE 13 - SALES AND MANUFACTURING INTERRUPTION
In October, 1997, the Company temporarily discontinued manufacturing and
its television advertising program due to a breakage problem with one of
its major products. Although some products sold were replaced, the
Company estimates that approximately $252,000 in sales will be or have
been refunded.
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<PAGE> 32
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 13 - SALES AND MANUFACTURING INTERRUPTION - CONTINUED
Laboratory testing results indicated that the Company's primary
subcontractor supplier did not meet the specifications required for
production. In December, 1997, the Company changed suppliers and is
currently producing replacement inventory. In addition, the Company is
pursuing various legal and other remedies to mitigate its financial and
goodwill losses.
No estimates of the potential for recovery of losses can be estimated at
the date of this report.
NOTE 14 - GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained substantial operating losses in recent years. In addition, the
Company has used substantial amounts of working capital in its
operations. Further, at March 31, 1998 current liabilities exceed
current assets by $355,477 and total liabilities exceed total assets by
$1,226,711.
As discussed in Note 13, Sales and Manufacturing Interruption, the
Company sustained substantial operating losses during fiscal year ended
March 31, 1998 due to production defects in one of its major products,
which had since been remedied.
The Company is currently restructuring some of its debt and seeking
alternate public or private financing. (See Note 15)
In view of these matters, realization of a portion of the assets in
the accompanying balance sheet is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to
meet its financing requirements, and the success of its future
operations. Management believes that actions presently being taken to
revise the Company's operating and financial requirements provide the
opportunity for the Company to continue as a going concern.
14
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<PAGE> 33
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF MARCH 31, 1998 AND 1997
NOTE 15 - SUBSEQUENT EVENTS
Pursuant to the terms of a settlement agreement dated June 25, 1998, the
325,000 shares of common stock held in escrow as collateral for the
$150,000 loan discussed in Note 6 will be owned by Scarlett Investment
Group, Inc. In consideration for taking the shares, Scarlett agreed that
it would not seek payment of the $161,700 in principal and accrued
interest on the loan. Additionally, any 'restrictions placed on the
300,000 freely tradeable shares received by Scarlett in consideration
under the terms of its consulting agreement will be removed.
The Company's management is proposing converting its bridge notes (Note
10) to equity. Under the proposal the Company will issue 100 shares of
its common stock for each $100 of bridge note.
On June 15, 1998, the majority shareholder's wife filed a UCC-1
financing statement in connection with loans to the Company covering all
of Mediforce's assets now owned or subsequently acquired by the
Company.
On June 20, 1998, the majority shareholder advanced $150,000 to the
Company, in the form of a loan.
15
[LOGO]
<PAGE> 34
[OPPENHEIM & OSTRICK, C.P.A.'S LETTERHEAD]
Page 16
ACCOUNTANTS' COMPILATION REPORT
To the Board of Directors
Mediforce, Inc.
West Palm Beach, Florida
We have compiled the accompanying balance sheet of Mediforce, Inc. as of June
30, 1998, and the related statements of operations, stockholders' deficit and
cash flows for the three months ended June 30, 1998 and 1997 in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any form of assurance on them.
/s/ OPPENHEIM & OSTRICK
Culver City, California
October 7, 1998
<PAGE> 35
Page 17
MEDIFORCE, INC.
BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
ASSETS
<TABLE>
<S> <C> <C>
Current Assets:
Cash $ 17,204
Accounts receivable - house, net of allowance
for doubtful accounts of $10,000 8,070
Inventory 47,856
Prepaid expenses 6,104
-----------
Total current assets $ 79,234
Property & equipment (at cost) 98,241
Less accumulated depreciation (39,200)
-----------
Property and equipment, net 59,041
Other assets:
Deposits 5,850
Other assets 112,720
-----------
Total other assets 118,570
-----------
$ 256,845
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable 78,356
Loan payable - bank 50,000
-----------
Total current liabilities $ 128,356
Long-term liabilities:
Note payable - stockholders 935,000
Note payable - stockholder 326,736
-----------
Total long-term liabilities 1,261,736
-----------
Total liabilities 1,390,092
Stockholders' deficit:
Common stock, $.0001 par value, authorized 10,000,000
shares, issued and outstanding 3,999,120 shares 400
Stock warrants 14
Additional paid-in capital 456,324
Treasury stock (11,957)
Accumulated deficit (1,578,028)
-----------
Total stockholders' deficit (1,133,247)
------------
$ 256,845
============
</TABLE>
See accompanying selected notes to financial statements
<PAGE> 36
Page 18
MEDIFORCE, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 18,317 $ 357,388
Cost of sales 16,230 42,886
----------- -----------
Gross profit 2,087 314,502
General and administrative expenses 117,532 554,927
----------- -----------
Operating loss (115,445) (240,425)
Other income (expense):
Interest expense (2,293) (23,210)
Miscellaneous income 19,114 0
Gain on issuance of common stock 74,144 0
----------- -----------
90,965 (23,210)
----------- -----------
Net loss $ (24,480) $ (263,635)
=========== ===========
Loss per share $ (.01) $ (.10)
=========== ===========
Weighted average shares outstanding 3,792,759 2,632,300
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 37
Page 19
MEDIFORCE, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common
Common Stock Stock Warrants Paid-in
Shares Amount Number Amount Capital Deficit
----------- ----------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1998 3,586,398 $ 359 136,000 $ 14 $ 333,964 $(1,553,548)
Legal services rendered 87,722 9 36,991
Exchange of common
stock for debts 325,000 32 74,112
Retirement of common stock 11,257
Net loss for three months
ended June 30, 1998 (24,480)
--------- ----------- ------- ----------- ----------- -----------
Balance, June 30, 1998 3,999,120 $ 400 136,000 $ 14 $ 456,324 $(1,578,028)
========= =========== ======= =========== =========== ===========
<CAPTION>
Total
Treasury Stock Stockholders'
Shares Amount Deficit
------ ----------- -----------
<S> <C> <C> <C>
Balance, March 31, 1998 1,000 $ (7,500) $(1,226,711)
Legal services rendered 37,000
Exchange of common
stock for debts 74,144
Retirement of common stock 20,000 (4,457) 6,800
Net loss for three months
ended June 30, 1998 (24,480)
------ ----------- -----------
Balance, June 30, 1998 21,000 $ (11,957) $(1,133,247)
====== =========== ===========
</TABLE>
See accompanying selected notes to financial statements
<PAGE> 38
Page 20
MEDIFORCE, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (24,480) $(263,635)
Non-cash expenses included in net loss:
Amortization 2,048 2,048
Depreciation 4,302 2,725
Issuance of common stock for professional service
rendered 37,000 0
Gain on exchange of common stock for debts 74,144 0
(Increase) decrease in:
Accounts receivable (438) 12,322
Inventory 14,430 8,225
Prepaid expenses 9,470 (2,293)
Increase (decrease) in:
Accounts payable and accrued expenses (154,532) 72,003
--------- ---------
Net cash used by operating activities (38,056) (168,605)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment 0 (2,310)
Retired of common stock 6,800 0
--------- ---------
Net cash provided (used) by investing
Activities 6,800 (2,310)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) short-term borrowings (170,000) 150,000
Proceeds from short-term borrowings - officer 206,541 49,998
Issuance of common stock and warrants 0 15
--------- ---------
Net cash provided by financing activities 36,541 200,013
--------- ---------
Net increase in cash 5,285 29,098
Cash, beginning of period 11,919 200,635
--------- ---------
Cash, end of period $ 17,204 $ 229,733
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,293 $ 2,198
========= =========
Cash paid during the period for income taxes $ 0 $ 0
========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE> 39
Page 21
MEDIFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
1. General:
The unaudited financial statements have been prepared on the same
basis as the audited consolidated financial statements and, in the
opinion of management, reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation for each of
the periods presented. The results of operations for interim periods
are not necessarily indicative of results to be achieved for full
fiscal years.
The Company is in the business of developing, manufacturing and
marketing certain medical brace products. Initial marketing is
contemplated in the major population centers of the United States.
Later expansion will be in additional domestic and international
markets.
2. Summary of significant accounting policies:
(See audited financial statements in Item 1.)
3. Going concern uncertainty:
(See audited financial statements in Item 1.)
<PAGE> 40
Page 23
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Current Assets:
Accounts receivable $ 310,734
Inventory 55,638
Advance to contractors 244,798
Receivable from related party 293,196
-----------
Total current assets $ 904,366
Property & equipment (at cost) 2,973,792
Less accumulated depreciation (69,545)
-----------
Property and equipment, net 2,904,247
Other assets:
Deposits 14,000
-----------
Total other assets 14,000
-----------
$ 3,822,613
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 269,757
Accrued expenses 14,731
Note payable - related party 450,919
Income taxes payable 22,000
-----------
Total current liabilities $ 757,407
Stockholders' equity:
Common stock authorized 10,000,000 shares, no par
value; issued and outstanding 2,969,693 shares 2,969,693
Additional paid-in capital 55,638
Retained earnings 39,874
-----------
Total stockholders' equity 3,065,205
-----------
$ 3,822,612
===========
</TABLE>
See accompanying notes and accountants' review
report which are integral parts of this balance sheet
<PAGE> 41
Page 24
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
From Inception
on March 23, 1998
Until June 30, 1998
-----------------------------------
<S> <C> <C>
Net sales $1,240,742 100.0 %
Cost of sales 813,909 65.6
---------- ----------
Gross profit 426,833 34.4
Operating expenses 364,959 29.4
---------- ----------
Income before taxes 61,874 5.0
Income taxes 22,000 1.8
---------- ----------
Net income $ 39,874 3.2 %
========== ==========
</TABLE>
See accompanying accountants' review report and
notes which are integral parts of this statement
<PAGE> 42
Page 25
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM INCEPTION ON MARCH 23, 1998
UNTIL JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
Shares Amounts Capital Earnings Balance
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock 2,969,693 $2,969,693 $ 0 $ 0 $2,969,693
Inventory contributed 0 0 55,638 0 55,638
Net income 0 0 0 39,874 39,874
---------- ---------- ---------- ---------- ----------
End of period 2,969,693 $2,969,693 $ 55,638 $ 39,874 $3,065,205
========== ========== ========== ========== ==========
</TABLE>
See accompanying accountants' review report and
notes which are integral parts of this statement
<PAGE> 43
Page 26
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
From Inception
on March 23, 1998
Until June 30, 1998
-------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,874
Non-cash expenses included in net income:
Depreciation 69,545
(Increase) decrease in:
Advance to contractors (165,295)
Accounts receivable (310,734)
Prepaid expenses 49,781
Related party receivable (293,196)
Deposits (1,000)
Increase (decrease) in:
Accounts payable 269,757
Related party payables 305,799
Income tax payable 22,000
Accrued expenses 14,731
-----------
Net cash provided by operating activities 1,262
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,098)
-----------
Net cash used by investing activities (4,098)
-----------
Net decrease in cash (2,836)
Cash, beginning of period 2,836
-----------
Cash, end of period $ 0
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 9,532
===========
Cash paid during the year for income taxes $ 0
===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING INFORMATION:
Inventory contributed $ 55,638
===========
Property and equipment contributed $ 2,969,693
===========
</TABLE>
See accompanying accountants' review report and
notes which are integral parts of this statement
<PAGE> 44
Page 27
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
1. Summary of significant accounting policies and business activity:
Consolidation
The consolidated financial statements for June 30, 1998 include the
accounts of the Company and its wholly owned subsidiaries. Significant
inter-company accounts and transactions have been eliminated.
Organization and principal business activities
The Company was incorporated in Florida on March 1, 1998 as Clean Land
Company. On May 13, 1998, the Company changed its name to General
Environmental Technologies, Inc.
The Company activities are demolition, remediation and environmental
clean up of polluted land for large corporations and governmental
agencies.
On March 1, 1998 the Company contributed plant, equipment and set up
operations on March 23, 1998.
Cash and equivalents
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents for purposes
of the statements of cash flows. The Company held no cash equivalents at
June 30, 1998
Accounts receivable
Accounts receivable are recorded based on the stage of completion
accounting. There is a 10% retainer until final customer approval after
the job is completed. Most jobs are based on bids ending in project job
contracts.
As of June 30, 1998, there were no disputes that would cause the Company
to setup an estimate for uncollectible customer projects.
Inventories
Inventories are stated at lower of cost or market. Cost is determined by
the first-in, first-out method. The Company's inventory consist mostly
of land fill materials used directly in its operations. As of June 30,
1998. The inventory of $55,638 was contributed to the Company by a
stockholder.
Advances to Contractors
The Company has advanced to suppliers and subcontractors in order to
meet delivery schedules specified in their contract with their
customers. It is anticipated all advances will be earned no later than
December 31, 1998 by which time all the projects are anticipated to be
complete.
See accompanying accountants' review report
<PAGE> 45
Page 28
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
1. Summary of significant accounting policies and business activity (cont'd):
Property and equipment
Major expenditures for property and equipment and those which
substantially increase useful lives are capitalized. Maintenance,
repairs and minor renewals are expensed as incurred. When assets are
retired or other wise disposed of, their costs and related accumulated
amortization and depreciation are removed from the respective accounts
and resulting gains or losses are included in income. Depreciation is
based on a useful life of three (3) years for vehicle and three (3) to
seven (7) years useful life for all other types of equipment. Buildings
have a useful life of thirty nine (39) years.
Deferred income tax accounts
Deferred tax provision/benefits are calculated for certain transactions
and events because of differing treatments under generally accepted
accounting principals and the currently enacted tax laws of the federal
government. The results of these differences on a cumulative basis,
known as temporary differences, result in the recognition and
measurement of deferred tax assets and liabilities in the accompanying
balance sheets.
Management use of estimates and certain significant estimates
The preparation of financial statement in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
2. Income taxes:
The Company will file its taxes as a C corporation for the federal and
state tax returns.
See accompanying accountants' review report
<PAGE> 46
Page 29
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
3. Deferred income taxes:
The Company has adopted SFAS No. 109, "Accounting for Income Taxes,"
which requires a liability approach to financial accounting and
reporting for income taxes.
The difference between the financial statement and tax basis of assets
and liabilities is determined annually. Deferred income tax assets and
liabilities are computed for those differences that have a future tax
consequences using the currently enacted tax laws and rates that apply
to the periods in which they are expected to affect taxable income.
Valuation allowances are established, if necessary, to reduce deferred
tax asset accounts to the amounts that will more likely than not be
realized. Income tax expense is the current tax payable or refundable
for the period, plus or minus the net change in the deferred tax asset
and liability accounts.
4. Related party transactions:
Receivable and payables related party transactions and credit line
facility:
The Company has a $700,000 line of credit with a national bank secured
by certificates of deposits (CD's) of a related party. The interest
rates are 8% fixed on the outstanding loan balance and 5% on the
$700,000 of collateralized CDs per annum, as of June 30, 1998. The
Company had an outstanding loan balance of $521,400 leaving the Company
approximately $179,000 availability on its credit line. The line of
credit is in force over a three year period maturing May 13, 2001.
The Company also is owed $814,596 in related party receivables from the
same individual who secured the credit line with personal CD's. The net
receivable balance is $293,196 and is shown on the balance as a net
receivable since those were related party transactions in the individual
name. Between November 13, 1998 and December 11, 1998 its anticipated
that the line will revert to the Company as the related party individual
will repay the Company and remove his personal CD's as collateral
totaling $700,000 for the line.
See accompanying accountants' review report
<PAGE> 47
Page 30
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
4. Related party transactions (cont'd):
Notes payable from related parties will mature as follows:
<TABLE>
<S> <C>
Principal payment plus accrued interest at 10%
per annum all payable on March 31, 1999 $241,919
Principal payments plus accrued interest at 10%
per annum all payable on April 30, 1999 209,000
--------
Total principal payments $450,919
========
</TABLE>
None of the above transactions are collateralized by UCC filings or any
conversion rights into shares of common stock.
Capital stock contributed
The Company received an independent appraisal on property, plant and
equipment items totaling $2,721,000 of the $2,969,693 on the June 30,
1998 balance sheet. The other capital expenditure totaling $248,693 were
purchased from an individual in exchange for stock. All of these assets
were contributed to the Company in return for common stock at a price of
one dollar per share. The only related party active is a consultant to
the business who contributed the $419,493 of equipment and vehicles and
the president who is legal counsel to the Company.
Rent
The headquarters building in Florida is rent free from an attorney who
is legal counsel to the Company. This arrangement will end shortly and
the Company will get adequate space to service company operations.
Related party transactions
The Company's source of capital contributions came from the transfer of
equipment of other corporations who are related parties. However, the
Company is taking steps to remove the related party influence. None of
the related parties are directors of the Company as however, one party
is actively engaged as a management consultant because of his stature in
sales and operations within the industry and the president is the firms
attorney. The individual who are related parties plan to put their
shares in a trust with an independent trustee, so there is no appearance
of influence on company activities except for the shareholder who acts
as the management consultant.
See accompanying accountants' review report
<PAGE> 48
Page 31
GENERAL ENVIRONMENTAL TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
5. Commitments and contingencies:
The Company and its subsidiaries are not required to pay rent through
September 30, 1999 for its New York City location in Queens County. This
location is shared with several other contractors (unrelated parties)
one of which performed services for the landlord in 1993 and currently
receives space rent free in consideration for those services. That
contractor does business with the Company.
The land and building located in Michigan (part of the related party
transactions) was acquired to provide an area for a demolition yard and
repair facility for anticipated jobs in Detroit and other potential
sites in Michigan, Ohio, and Indiana. It will take approximately
$100,000 to renovate the building to meet the above job requirements
plus a commitment to acquire the needed equipment and vehicles to
service such projects is approximately $300,000 of leased equipment (not
a capital lease). If the anticipated contracts for demolition jobs don't
materialize, the Company may have to sell or lease the Michigan
property.
6. Subsequent events:
The Company has won several contracts for services subject to adequate
financing of these projects, approximating $14,324,000 and are
anticipated to be complete within the next two years.
Furthermore, the Company has upcoming bids totaling approximately
$38,600,000 subject to adequate financing which may be completed over
the next one to three years. These bids require adequate working capital
to service these projects. If the Company can not show adequate working
capital, they will not win these bids.
On September 9, 1998, Mediforce, Inc. purchased General Environmental
Technologies, Inc. (GETI) by issuing 8,500,000 shares of its common
stock in exchange for the 100% shares owned by GETI shareholders.
Furthermore, Mediforce, Inc. will receive $250,000 from GETI to provide
working capital for Mediforce Products, Inc. a wholly owned subsidiary
of Mediforce, Inc. GETI will make payments from anticipated cash flow
within a one year period from the acquisition date from anticipated
equity financing or from current operations.
See accompanying accountants' review report
<PAGE> 49
Page 32
MEDIFORCE, INC.
UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
The following unaudited pro forma condensed, combined balance sheet of
Mediforce, Inc. has been prepared to present the consolidated financial position
of Mediforce, Inc. a publicly held entity as if the exchange of General
Environmental Technologies, Inc. (GETI) common stock for Mediforce shares of
common stock took place on April 1, 1997.
Upon completion of the transaction, Mediforce, Inc. will own 100% of the
outstanding common stock of GETI, and the corporate name of GETI will be changed
to Mediforce, Inc.
(1) On September 9, 1998, Mediforce, Inc. purchased General Environmental
Technologies, Inc. (GETI) by issuing 8,500,000 shares of its common
stock in exchange for the 100% shares owned by GETI shareholders.
Furthermore, Mediforce, Inc. will receive $250,000 from GETI to provide
working capital for Mediforce Products, Inc. a wholly owned subsidiary
of Mediforce, Inc. GETI will make payments from anticipated cash flow
within a one year period from the acquisition date from anticipated
equity financing or from current operations.
(2) Mediforce, Inc., an electronic bulletin board firm had no ability to
have adequate funding to support its manufacturing and marketing of its
product line, and GETI wants to go public to raise capital to meet the
cash requirements of some larger projects the Company is planning to
bid.
(3) All of the pro forma adjustments were made as of June 30, 1998 in
consideration of the September 9, 1998 acquisition described earlier.
The adjustments reflected transactions effected during the minutes of
shareholders and directors of Mediforce, Inc. meetings on September 8
and 9, 1998. Earnings per share take into effort a 1 for 40 common stock
reverse split of all shares outstanding effective September 8, 1998. On
on September 2, 1998, Mediforce increased its authorized shares of
common stock to 60,000,000. Earnings per share calculations for the
fiscal year ended March 31, 1998 and the three months ended June 30,
1998 take the reverse split into effect.
The purpose for the pro forma adjustments is to reflect the change in
capitalization of the combined entity, with appropriate changes to earnings per
share of Mediforce, Inc. to reflect the acquisition of GETI.
The following unaudited pro forma, condensed financial statements of Operations
of Mediforce, Inc. for the twelve months period ended March 31, 1998 and the
three months ended June 30, 1998 have been prepared as if the exchange of common
stock of GETI for Mediforce, Inc. took place on April 1, 1997.
These unaudited pro forma condensed financial statements should be read in
conjunction with the selected financial data and notes included elsewhere
herein.
The following unaudited pro forma, condensed financial statements are not
necessarily indicative of the results of combined operations that would have
occurred had the acquisition been effective on April 1, 1997 or the future
results of the combined companies. All material non-recurring charges are fully
disclosed in the pro forma financial statements.
<PAGE> 50
Page 33
MEDIFORCE, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1998
ASSETS
<TABLE>
<CAPTION>
Mediforce, Pro Forma
Inc. GETI Pro Forma Adjustments Totals
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 17,204 $ 0 $ 0 $ 0 $ 17,204
Accounts receivable - house, net of
allowance for doubtful accounts 8,070 310,734 0 0 318,804
Inventory 47,856 55,638 0 0 103,494
Prepaid expenses 6,104 0 0 0 6,104
Other receivables 0 244,798 0 0 244,798
----------- ----------- ----------- ----------- -----------
Total current assets 79,234 611,170 0 0 690,404
----------- ----------- ----------- ----------- -----------
Property & equipment (at cost) 98,241 2,973,792 0 0 3,072,033
Less accumulated depreciation (39,200) (69,545) 0 0 (108,745)
----------- ----------- ----------- ----------- -----------
Property and equipment, net 59,041 2,904,247 0 0 2,963,288
Investment in wholly owned sub 0 0 3,065,205(5) (3,065,205)(7) 0
Other assets:
Deposits 5,850 14,000 0 0 19,850
Due from related company 0 293,196 0 0 293,196
Organization costs, net of amortization 112,720 0 0 0 112,720
----------- ----------- ----------- ----------- -----------
Total other assets 118,570 307,196 3,065,205 (3,065,205) 425,766
----------- ----------- ----------- ----------- -----------
$ 256,845 $ 3,822,613 $ 3,065,205 $(3,065,205) $ 4,079,458
=========== =========== =========== =========== ===========
</TABLE>
See accompanying accountants' compilation report
<PAGE> 51
Page 34
MEDIFORCE, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Mediforce, Pro Forma
Inc. GETI Pro Forma Adjustments Totals
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 78,356 $ 269,757 $ 0 $ 0 $ 348,114
Accrued expenses 0 14,731 0 0 14,731
Due to related company 0 450,919 0 0 450,919
Loan payable - bank 50,000 0 0 0 50,000
Income taxes payable 0 22,000 (15,000)(6) 0 7,000
----------- ----------- ----------- ----------- -----------
Total current liabilities 128,356 757,407 (15,000) 0 870,764
----------- ----------- ----------- ----------- -----------
Long-term liabilities:
Note payable, stockholders 935,000 0 (742,500)(1) 0 192,500
Loan payable - stockholders 326,736 0 (220,000)(2) 0 106,736
----------- ----------- ----------- ----------- -----------
Total long-term liabilities 1,261,736 0 (962,500) 0 299,236
----------- ----------- ----------- ----------- -----------
Total liabilities 1,390,092 757,407 (977,500) 0 1,170,000
----------- ----------- ----------- ----------- -----------
Stockholders' equity:
Common stock authorized 60,000,000
shares, par value $.004, issued
and outstanding 9,570,603 shares 400 2,969,693 (2,969,604) 37,793 38,282
Stock warrants 14 0 (14) 0 0
Additional paid-in capital 456,324 55,638 (55,727) 4,034,926 4,491,161
Treasury stock (11,957) 0 0 0 (11,957)
Retained earnings (accumulated
deficit) (1,578,028) 39,874 (69,874) 0 (1,608,028)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity (1,133,247) 3,065,205 (3,095,219) 4,072,719 2,909,458
----------- ----------- ----------- ----------- -----------
$ 256,845 $ 3,822,612 $(4,072,719) $ 4,072,719 $ 4,079,458
=========== =========== =========== =========== ===========
</TABLE>
See accompanying accountants' compilation report
<PAGE> 52
Page 35
MEDIFORCE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Mediforce, Inc. GETI Adjustments
Amount Percent Amount Percent Amount Percent
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 18,317 100.00 % $ 1,240,742 100.00 % $ 0 0.00 %
Cost of sales 16,230 88.61 813,909 65.60 0 0.00
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 2,087 11.39 426,833 34.40 0 0.00
Operating expenses 119,825 654.17 364,959 29.41 45,000(3) 0.00
----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) (117,738) (642.78) 61,874 4.99 (45,000) 0.00
Other income:
Miscellaneous income 19,114 104.35 0 0.00 0 0.00
Gains on issuance
of stock 74,144 404.78 0 0.00 0 0.00
----------- ----------- ----------- ----------- ----------- -----------
93,258 509.13 0 0.00 0 0.00
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
taxes (24,480) (133.65) 61,874 4.99 (45,000) (0.00)
Income taxes (benefit) 0 0.00 22,000 1.77 (15,000)(6) (0.00)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) (24,480) (133.65)% 39,874 3.21 % (30,000) (0.00) %
=========== =========== ===========
Accumulated deficit,
beginning (1,553,548) 0 0
Adjustment to retained
Earnings 0 0 (39,874)
----------- ----------- ----------- -----------
Retained earnings,
ending (deficit) $(1,578,028) $ 39,874 $ (69,874)
=========== =========== ===========
<CAPTION>
Pro Forma
Totals
Amount Percent
----------- -----------
<S> <C> <C>
Net sales $ 1,259,059 100.00 %
Cost of sales 830,139 65.93
----------- -----------
Gross profit 428,920 34.07
Operating expenses 529,784 42.08
----------- -----------
Operating income (loss) (100,864) (8.01)
Other income:
Miscellaneous income 19,114 1.52
Gains on issuance
of stock 74,144 5.89
----------- -----------
93,258 7.41
----------- -----------
Income (loss) before taxes (7,606) (0.60)
Income taxes
(benefit) 7,000 0.56
----------- -----------
Net income (loss) (14,606) (1.16)%
Accumulated deficit,
beginning (1,553,548) (123.39)
Adjustment to retained
Earnings (39,874) (3.17)
----------- -----------
Retained earnings,
ending (deficit) $(1,608,028) (127.72)%
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 53
Page 36
MEDIFORCE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common
Common Stock Stock Warrants Paid-in
Shares Amount Number Amount Capital Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, Mediforce, Inc.
June 30, 1998 99,978 $ 400 136,000 $ 14 $ 456,324 $(1,578,028)
Balance, GETI June 30, 1998 2,969,693 55,638 39,874
Exchange of common
stock for debts (1) 103,125 413 742,087
Exchange of common
stock for debts (2) 830,000 3,230 216,770
Issuance of common
stock for professional
service rendered (3) 37,500 150 44,850 (45,000)
Purchase of GETI (5) 8,500,000 34,000 3,031,205
Cancellation of out-
standing stock warrants (4) (136,000) $ (14) 14
Pro forma income tax
Provision adjustment (6) 15,000
Pro Forma elimination (7) (55,727) (39,874)
----------- ----------- ----------- ----------- ----------- -----------
Combined Pro Forma
Balance, June 30, 1998 9,570,603 $ 38,272 0 $ 0 $ 4,481,161 $(1,608,028)
=========== =========== =========== =========== =========== ===========
<CAPTION>
Treasury Total
Stock Investment Stockholders'
Shares Amount in GETI Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, Mediforce, Inc.
June 30, 1998 31,000 $ (11,957) $(1,133,247)
Balance, GETI June 30, 1998 3,065,205
Exchange of common
stock for debts (1) 742,500
Exchange of common
stock for debts (2) 220,000
Issuance of common
stock for professional
service rendered (3) 0
Purchase of GETI (5) (3,065,205) 0
Cancellation of out-
standing stock warrants (4) 0
Pro forma income tax
Provision adjustment (6) 15,000
Pro Forma elimination (7) 3,065,205 0
----------- ----------- ----------- -----------
Combined Pro Forma
Balance, June 30, 1998 31,000 $ (11,957) 0 $ 2,909,458
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 54
Page 37
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(1) To record bridge loan to shareholders conversion into common stock
shares issued 103,125 par value .004 shares converted higher fair market
value than debt owed.
(2) To record 830,000 shares for debts converted to common stock totaling
$220,000 at fair market value par value .004. Debt outstanding since
1995 - valued at 2/3 of 1% a related party transaction.
(3) To record issuance of 37,500 shares for services rendered in law suit
against prior supplier or company product 1/32 fair market value at
transaction date.
(4) To cancel warrants outstanding. (See footnotes on warrants issued March
31, 1998 and 1997.
(5) To record exchange of 8,500,000 shares to GETI in exchange for 100%
shareholder stock of GETI with stockholder equity at book value of
3,065,205 based on 6/30/98 financial statements of GETI.
(6) To setup tax adjustment based on combined taxable income.
(7) To record elimination entry of investment in wholly owned subsidiary
(GETI).
<PAGE> 55
Page 18
MEDIFORCE, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 18,317 $ 357,388
Cost of sales 16,230 42,886
----------- -----------
Gross profit 2,087 314,502
General and administrative expenses 117,532 554,927
----------- -----------
Operating loss (115,445) (240,425)
Other income (expense):
Interest expense (2,293) (23,210)
Miscellaneous income 19,114 0
Gain on issuance of common stock 74,144 0
----------- -----------
90,965 (23,210)
----------- -----------
Net (loss) $ (24,480) $ (263,635)
=========== ===========
(Loss) per share $ (.01) $ (.10)
=========== ===========
Weighted average shares outstanding 3,792,759 2,632,300
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 56
PART III.
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
3.1 Articles of Incorporation of Registrant
3.2 Articles of Amendment to Articles of Incorporation of the
Registrant, filed August 22, 1996
3.3 Articles of Amendment to Articles of Incorporation of the
Registrant, filed September 16, 1996
3.4 Articles of Amendment to Articles of Incorporation of the
Registrant, filed September 2, 1998
3.5 Bylaws of the Registrant
10.1 Promissory Note
</TABLE>
13
<PAGE> 57
<TABLE>
<S> <C>
10.2 Employment Contract, dated October 8, 1998, between Registrant
and Bradley T. Ray
10.3 Employment Contract, dated October 9, 1998, between Registrant
and Norman J. Birmingham
10.4 Employment Contract, dated October 8, 1998, between Registrant
and Charles C. Chillingworth
10.5 Employment Contract, dated May 1, 1998, between General
Environmental Technologies, Inc. and Bradley T. Ray
10.6 Employment Contract, dated May 1, 1998, between General
Environmental Technologies, Inc. and Norman J. Birmingham
10.7 Employment Contract, dated May 1, 1998, between General
Environmental Technologies, Inc. and Charles C. Chillingworth
10.8 Business Consulting Agreement, dated May 1, 1998, between
General Environmental Technologies, Inc. and Philip B. Schwab
10.9 Lump Sum Contract, dated February 17, 1998, between Federated
Corporate Services, Inc., and Iroquios Corp.
10.10 Assignment of Contract, dated May 11, 1998, between Indigo
Industries Incorporated and Indigo Industries, Inc., with
reference to that certain Contract No. V527C-850, Demolition
of Water Tower and 3 Buildings at the VA St. Albans Extended
Care Center, St. Albans, New York, dated July 25, 1997.
10.11 Assignment of Contract, dated April 17, 1998, between Iroquois
Corp. and Iroquois Wrecking Corp., with reference to that
certain Subcontract between Iroquois Corporation and Trataros
Construction, Inc., dated March 26, 1998.
10.12 Agreement, dated June 14, 1998, between Iroquois Wrecking
Corp. and Rapid Demo.
10.13 Agreement, dated June 15, 1998, between Iroquois Corporation
and Rapid Demo.
10.14 Agreement, dated July 10, 1998, between 95 Lorimer Street,
L.L.C. and Iroquois Wrecking Corp.
</TABLE>
14
<PAGE> 58
<TABLE>
<S> <C>
10.15 License Agreement, dated May 25, 1998, between Registrant and
Michael Cox.
21.1 List of Subsidiaries of the Registrant.
21.2 Articles of Incorporation of MediForce Products, Inc.
21.3 Bylaws of MediForce Products, Inc.
21.4 Articles of Incorporation of General Environmental
Technologies, Inc., formerly known as Clean Land Company.
21.5 Articles of Amendment to Articles of Incorporation of General
Environmental Technologies, Inc., filed May 21, 1998.
21.6 Bylaws of General Environmental Technologies, Inc.
21.7 Articles of Incorporation of Iroquois Corporation
21.8 Bylaws of Iroquois Corporation
21.9 Articles of Incorporation of Iroquois Wrecking Corporation
21.10 Bylaws of Iroquois Wrecking Corporation
21.11 Articles of Incorporation of Indigo Industries, Inc.
21.12 Bylaws of Indigo Industries, Inc.
23.1 Consent of Weinberg & Company, P.A., independent auditors.
</TABLE>
15
<PAGE> 59
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
MediForce, Inc.
Date: November 13, 1998 By: /s/ Norman J. Birmingham
-------------------------------
Norman J. Birmingham
Chief Financial Officer
16
