UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ending December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 0-26445
ACCESS HEALTH ALTERNATIVES, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 59-3542362
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4619 Parkbreeze Court
Orlando, Florida 32808
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Issuer's telephone number (407)299-0629
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which
each class is registered
-NONE-
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
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(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the exchange act during the past 12 months (or for such shorter
Period that the registrant was required to file such reports), and (2) has been
Subject to such filing requirements for the past 90 days.
[ X ] YES [ ] NO
Check if there is no disclosure of delinquent filers in response to item 405 of
Regulation s- b is not contained in this form, and no disclosure will be
Contained, to the best of registrant's knowledge, in definitive proxy or
Information statements incorporated by reference in part iii of this form 10-ksb
Or any amendment to this form 10-ksb. [ ]
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STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR: $523,484
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and ask price of such common equity, as of a
specified date within the past 60 days. (see definition of affiliate in rule
12b-2 of the exchange act.) The aggregate market value of the voting stock held
by non-affiliates computed be reference to the average bid and asked price of
such stock, as of March 30, 2000 is $1,253,278 based upon a per share price of
$0.75.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by section 12, 13 or 15(d) of the exchange act after the distribution of
Securities under a plan confirmed by a court.
[ ] YES [ ] NO
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
Company equity, as of the latest practicable date. As of March 20, 2000
2,636,887 shares of the issuer's $.001 par value common stack were outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: [ ] YES [ X ] NO
ACCESS HEALTH ALTERNATIVES, INC.
FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1999
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL CORPORATE HISTORY
Access Health Alternatives, Inc. (the "Company") was incorporated on
October 4, 1988 in Florida as b c Insurance Services, Inc., and changed its name
to plc venture corp. ("plc") on May 18, 1998. From its inception, plc had no
Assets and did not engage in business. Plc, Access Healthmax, Inc., a then
unaffiliated Florida corporation ("Healthmax"), and the holders of approximately
94% of the outstanding common stock of Healthmax (the "Healthmax principals")
entered into a share exchange agreement, dated as of September 2, 1998(the
"agreement"), pursuant to which the Healthmax principals on September 2, 1998
(the "exchange date") were issued 0.08 shares of common stock of plc for each
share of Healthmax' common stock owned by them (the "exchange"). In accordance
with the foregoing, the Healthmax principals received an aggregate of 565,930
shares of common stock of plc on the exchange date.
Healthmax originally was incorporated under the name "Access Nutritionals,
Inc." in December 1995; in January 1996 it changed its name to "access
Healthmax, inc." as of the exchange date, Healthmax became a majority-owned
subsidiary of plc. At that time, the Healthmax principals were appointed to the
Company's board of directors, and the previous officers and directors of the
Company resigned in all capacities. Following the exchange, the Healthmax
Principals owned approximately 56.4% of the Company's outstanding common stock;
The original shareholders of plc owned approximately 3% of the Company's
outstanding common stock; and other parties owned approximately 40.6% of the
Company's outstanding common stock, which they acquired from prior plc
Shareholders in a private transaction.
Prior to, and in contemplation of the exchange, the Company's articles of
Incorporation were amended to change its name to "access Healthmax holdings,
Inc.," and to increase its authorized capital stock to 50,000,000 shares of
Common stock, par value $0.001, and 10,000,000 shares of preferred stock, par
Value $0.01. In March 1999, the Company's amended and restated articles of
Incorporation were again amended to change its name to "access Health
Alternatives, inc.," and a 10-for-1 reverse split was declared effective March
15, 1999. All numbers of shares of common stock and preferred stock referenced
In this registration statement (including references earlier in this document)
Have been adjusted for this reverse split, unless otherwise indicated.
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On March 31, 1999, the board of directors authorized the acquisition of
Access Healthcare, inc. ("Healthcare"), an affiliated entity, in exchange for
Two million shares of the Company's common stock. In October 1999, the Company
And Healthcare verbally agreed to delay the closing of this transaction until
The securities and exchange commission has indicated it has no further comments
To the Company's form 10 sb presently on file with the commission, the timing of
Which cannot be predicted by the Company.
In late April 1999, the Company agreed to acquire the minority interests in
Healthmax for restricted stock of the Company, at the rate of one share of the
Company's common stock for each share of Healthmax stock exchanged. This
Transaction was substantially completed in May 1999, but documentation was not
Completed until January 2000. Approximately 50 minority shareholders have
Exchanged approximately 350,000 shares of Healthmax common stock for
Approximately 350,000 restricted shares of Health alternatives' common stock.
The Company currently operates as a holding Company with two subsidiaries.
Operations of the nutritional Health care business of the Company are conducted
Under its Healthmax subsidiary. In May 1999 the Company formed its second
Subsidiary, access Health assurance plans, inc. ("hap"), a Florida corporation
That will market the Company's member benefits programs. It is intended that the
Clinical aspects of the Company's complementary and alternative Health care
Program will be conducted under Healthcare through Healthcare-owned locations,
Following the conclusion of the pending acquisition. Unless the context
Indicates otherwise, references hereinafter to "the Company" include Healthmax,
Healthcare and hap. The Company's principal place of business is 4619 parkbreeze
Court, orlando, Florida 32808. Its telephone number is (407) 299-0629.
HISTORICAL CAPITALIZATION
Initial funding of Healthmax was provided through approximately $2.2
Million in short-term debt financing which was loaned to Healthcare by
Individual investors. Most of that indebtedness was assigned by Healthcare to
Healthmax. This indebtedness was $869,637 at December 31, 1998 and presently is
The $822,135.
In October 1997, Healthmax organized access Healthmax, llc ("llc i"), a
Colorado limited liability Company, to market the Company's nutritional program
In Florida and colorado. Utilizing the new marketing strategy, llc i established
A regional office in colorado springs, colorado, and also commenced operations
Out of the offices of the corporate offices in orlando, Florida. Healthmax
Organized Access Healthmax llc ii in 1997 to market the Company's nutritional
Products in Minnesota, Illinois, Wisconsin, Iowa, North Dakota, South Dakota,
Kansas, Nebraska, Missouri, Texas, Oklahoma, Arkansas And Louisiana. Healthmax
Organized Llc Iii in 1998 to Market the Program In Washington, D.C., Maine, New
Hampshire, Vermont, Massachusetts, Rhode Island, New Jersey, New York,
Connecticut, Delaware, Maryland And Pennsylvania. Llc i, llc ii and llc iii are
Separate legal entities; the respective investors in each limited liability
Company have no rights to participate in the marketing areas, business, profits
Or assets of the other entity, or in the capital structure of Healthmax or the
Company. For information about the relationship between the Company and its
Llcs, and the flow of goods, services and payments between the Company and the
Llcs, see "limited liability companies affiliated with the Company," below.
During the first half of 1998, Healthmax conducted an offering of
Securities, resulting in gross proceeds of approximately $450,000. In September
1998, Healthmax completed a reverse merger with plc venture corp. (which had
Been a dormant business from inception). In February 1999, the Company completed
A limited offering of common stock resulting in gross proceeds of $485,000. In
March 1999, the Company began an offering of units consisting of preferred stock
And warrants, for gross proceeds of up to $1,008,000 (the "unit offering"). That
Offering has been terminated, having raised gross proceeds of $25,000. Funds
Raised in the unit offering have been recorded as a liability on the Company's
Books, as they May be returned to the investor or converted to an investment in
A future offering by the Company, at the investor's election.
LIMITED LIABILITY COMPANIES AFFILIATED WITH THE COMPANY
The capital structure of each of the llcs is set forth in a separate
Operating agreement, with Healthmax as the manager of the llc and the investors
In each llc as economic members. The economic members generally have specified
Rights to participate in distributions of cash and assets, and to vote on
Certain limited matters, but have no rights to participate in the management of
The business of Healthmax. Healthmax, as the manager of each llc, has complete
Authority to manage the business of the llc.
Distributable cash from operations of each llc will be distributed as
Follows: first, to the economic members until they have received total cash
Disbursements equal to their preference; second, to the economic members until
They have received total cash disbursements equal to their initial capital
Contributions plus 25% thereof; third to Healthmax (as general member) until it
Has received total cash disbursements equal to its initial capital contribution
($10,000 for each llc); and thereafter, 25% to the economic members and 75% to
Healthmax.
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preference is defined in each operating agreement to be the right of each
Economic member to receive from distributable cash paid out by the llc, a
Non-guaranteed, cumulative, non-compounding cash payment equal to 10.5% (annual
Interest) of the economic member's initial capital contribution. Payment of the
Preference is not secured by assets of Healthmax, the Company or any affiliate
Of the Company, is not an obligation of any affiliate of the Company, and is to
Be paid only from profits derived from operating revenue realized by the llc.
Payment of the preference will continue, in amounts equal to 10.5% of the
Original initial capital contributions, until the economic members, as a class,
Have received total cash disbursements equal to their initial capital
Contributions plus an additional amount equal to 25% of such original initial
Capital contributions.
Profits of the llc generally will be allocated 100% to the economic members
Until cumulative net profits paid to them equal cumulative cash preference
Payments (including amounts equal to 125% multiplied by the amount of the
Initial capital contributions); thereafter, profits will be allocated 25% to the
Economic members and 75% to Healthmax. Losses are allocated 99% to the economic
Members and 1% to Healthmax, and are treated as a reduction of Healthmax'
Selling, general and administrative expenses. When an llc's account balance has
Been reduced to zero, there are no further allocations of losses, according to
The operating agreement.
pursuant to the operating agreement with each llc, Healthmax has received
From each llc $65,000 on a one-time basis for each regional office opened by the
Llc in their respective regions, such payment being for the right to use the
Computer systems software and clinic marketing data base of Healthmax, for
Accounting and other office administration services performed for the llc, and
For the payroll cost to Healthmax of providing personnel for training and
Marketing sessions for Healthcare doctors from participating clinics. In
Addition, each llc has reimbursed Healthmax approximately $75,000 for legal,
Accounting and other costs incurred and paid by Healthmax in connection with the
Development of the business plan for each llc.
also, pursuant to each llc operating agreement, Healthmax receives $10,000
Per month as a management fee for each regional office of each llc. The
Management fee offsets a portion of Healthmax' ongoing general and
Administrative overhead expenses.
pursuant to the operating agreement with each llc, Healthmax has the option
To purchase all of the limited liability Company interests held by the economic
Members, at a price equal to 125% of the original purchase price (initial cash
Capital contribution) therefor.
BUSINESS OVERVIEW.
The Company, through its subsidiaries, is building a diversified national
Alternative Healthcare network. The Company, through its majority-owned
Subsidiary Access Healthmax, Inc., presently offers a nutritional alternative to
Traditional Healthcare, in a clinical setting through Healthcare providers.
Healthmax has developed and is distributing proprietary blends of nutritional
Products under the supervision of Healthmax-trained professionals and through
Other distribution channels. Additionally, the Company plans to launch a robust
Internet gateway providing information about nutritional Health to consumers,
Along with product sales, and support for its national group of access Healthmax
Nutritional centers. Following the acquisition of Healthcare, the Company will
Offer complimentary and alternative Healthcare services, initially consisting of
Acupuncture, massage therapy, nutrition, and chiropractic services in the
Central Florida region. The Company's newest subsidiary, hap, offers an
Employer-directed program of nutritional support to employees, providing
Discounts on Healthmax products and services through the access Healthmax
Provider network.
Daniel J. Pavlik organized Healthmax to market to Healthcare clinics and
Independent distributors a comprehensive "wellness" and "preventive"
Healthstyle/lifestyle management program which incorporates the sale of
Nutrition supplement products. Healthmax commenced operations in February 1996.
Since that time, the Company has focused on the development of its proprietary
Blend of nutritional products, and has tested various methods of distribution.
The additions of Healthcare and hap to the Company are believed to add broader
Dimensions to the delivery of wellness and preventive care. As of January 2000,
Approximately 165 Healthcare centers either offer or have agreed to offer
Healthmax products and services.
The Company's primary clinical channel for distributing Healthmax
Nutritional products and services is the Healthmax nutritional center. This
Channel is supported by two additional networks presently under development: the
Independent Health assurance agent network; and the Health associate network.
Although the Company believes that these networks will form the foundation for
The distribution of the Company's products and services, the Company also
Believes that it is important to continuously evaluate the efficacy of these
Networks, and of the Company's delivery strategies in general. Accordingly, the
Company anticipates modifications in these networks, the elimination of one or
More networks, and the addition of other networks and methods of distribution,
From time to time as performance indicates.
HEALTHMAX NUTRITIONAL CENTERS
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The principal method for delivering the Company's nutritional products and
Services is through the Healthmax nutritional center, a clinical facility
Licensed to offer Healthmax' products and services. Healthcare providers who are
Associated with the centers are part of the Healthmax preferred provider
Network, and will be given access to members of the nutritional options plus
Plan, described below. Healthcare providers authorized to distribute Healthmax
Products must be recognized and licensed diagnosticians in the states in which
They operate, and must be either chiropractors, allopaths, or osteopaths. As of
January 2000 , providers servicing approximately 165 centers offer, or have
Agreed to offer, Healthmax products and services.
members of the Healthmax preferred provider network receive training and
Educational programs on an ongoing basis; the Company strongly recommends that
Members follow a course of Healthmax-designed study leading to Healthmax
Certification. This ongoing training, and the ongoing support provided by
Regional and national Healthmax staff, is one of the features the Company
Believes highlights the Company's emphasis on the clinical component of the
Delivery of its nutritional products, and distinguishes Healthmax from other
Participants in this industry.
ACCESS HEALTH ASSURANCE PLANS, INC. ("HAP")
Hap is the Company's newest subsidiary, and much if its business remains
Under development. It offers two member benefits programs, briefly described
Below.
The nutritional options plan is a member benefits plan open to individuals
And families, at no monthly fee. Discounts on Healthmax products are provided,
As are copies of the Company's wellcare bulletin and wellcare journal.
The nutritional options plus plan is an employee membership plan, designed
To primarily be an addition to existing Health benefit programs, similar to a
Vision care or dental care. For a fixed monthly fee per member per month,
Employers can provide their employees with discounted fees on services provided
By members of the Healthmax preferred provider network (including a free annual
Wellness exam and the lowest retail pricing available on Healthmax nutritional
Products). Members also will receive free copies of the Company's wellcare
Bulletin and other informational material on an ongoing basis.
Participants in the nutritional options plus plan receive a greater range
And depth of benefits than those in the nutritional options plan, including
Steeper discounts on products and an annual wellness exam. The "plus" plan is
Designed to provide maximum benefits when members take advantage of the clinical
Services of the Healthmax preferred provider network, in contrast with the basic
Plan, which provides more moderate discounts to consumers that either have no
Access to the Healthmax preferred provider network or prefer a more "self-help"
Form of nutritional Healthcare.
THE ROLE OF HEALTH ASSURANCE AGENTS AND HEALTH ASSOCIATES
The Company believes that the successful deployment of its method of
Distribution of products and services will be enhanced by the development of a
Robust network of independent "Health assurance agents" and a broad-based
Universe of "Health associates." Health assurance agents identify companies that
Appear to be candidates for participating in the nutritional options plus plan,
Based on their geographic location and their numbers of employees. These agents
Are expected to be currently involved in offering Health-related voluntary
Member benefits programs to and through employers, such as dental-care and
Vision-care programs, and will add the nutritional options plus plan to their
Menus. Agents will be paid commissions based on the number of employees
Enrolled.
Anyone that actively engages in enrolling members of the nutritional
Options plan is a Health associate. Compensation will be paid based on the
Volume of products purchased by members enrolled by the Health associate, and
For referrals to other Health associates, subject to quotas.
The Company is in the process of developing strategies to recruit Health
Assurance agents and Health associates, and anticipates active use of the
Internet and other direct marketing means as integral part of this effort.
Additionally, the Company intends to form alliances with an existing benefit
Communication and enrollment firms that specialize in worksite marketing and
Benefit delivery systems, in order to accelerate the development of Health
Assurance agents and the deployment of the nutritional options plus plan. One
Such alliance has been formed with the benecom group, a benefits enrollment
Company, that has agreed to represent the nutritional options plus plan to
Employees of employers recruited through their efforts
INDUSTRY
There are approximately 550,000 allopathic doctors and approximately 50,000
Chiropractors and 50,000 osteopaths who are licensed to practice in the united
States. A great majority of these practitioners work as solo practitioners or in
Small group practices. Most practitioners now are realizing reduced incomes as a
Result of the growth of hmos and other efforts by employers and government to
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Limit or stop increasing Health care costs. As an alternative to becoming direct
Employees of hmos, those doctors and other practitioners who wish to remain
Independent or in a small group need to achieve economies of scale and, where
Possible, diversify and increase revenue centers.
COMPETITION OVERVIEW
With respect to competition for the consumers of Healthmax products and
Services, the principal markets in which the Company competes are competitive
And fragmented, with competitors in the nutritional supplements market and the
Alternative Healthcare markets. Increased competition could have a material
Adverse effect on the Company, as competitors May have far greater financial and
Other resources available to them and possess extensive manufacturing,
Distribution and marketing capabilities far greater than those of the Company.
Although there are thousands of Health food stores, including some small
Chains and several national companies, all of which sell a variety of herbal and
Other nutritional items, and one national retail chain (general nutrition
Centers), the Company is unaware of any other Healthcare Company utilizing a
Systems approach, with a clinical component attached to the delivery of
Products. Moreover, while nutritional products, supplements and vitamins are
Being sold over the internet by such enterprises as vitamins.com, the Company is
Unaware of any website offering interaction with practitioners on a membership
Basis.
During the past several years, a number of companies (such as anabolic
Labs, inc., and metagenics, inc.) Have attempted to use Healthcare providers as
A sales channel for the distribution of vitamins, supplements and other
Nutritional Healthcare products. Most of these competitors, the Company
Believes, have used a multi-level marketing or network marketing approach, and
Have offered practitioners no education, support or training related to the
Delivery of the products. The Company believes that its ability to compete for,
And retain, the loyalty of its providers as vendors of Healthmax products will
Be derived largely from a comprehensive approach to the market that features a
"closed loop" of mutually supportive activities. Providers are trained in the
Healthmax approach to nutritional services and receive support through visits
With Healthmax-trained provider representatives. These providers also
Participate in the nutritional options plus plan, which is designed to deliver
New patients to their practice. Provider retention is expected to be enhanced by
The inclusion of free services such as patient newsletters and an internet
Presence that will be offered to practitioners who request it.
The Company believes it can effectively compete by establishing a robust,
And atypical, distribution channel through the offices of licensed professionals
Who have been trained in the evaluation of patients from a nutritional
Standpoint. This network of providers will create an underpinning for the
Company's program that communicates a significant point of difference from
Nutritional retail operations and, as such, a competitive advantage for
Healthmax. In addition, Healthmax will distribute products containing only
Pharmaceutical-grade raw material, which is not believed to be the case of most
Mass-marketed nutritional supplements. Lastly, Healthmax products are a unique
Blend of ingredients, which delivers in one bottle the ingredients often found
In multiple bottles. For example, oxyaccess contains 10 distinct anti-oxidants,
Which are more commonly sold individually or in smaller combinations. With
Respect to its ability to compete effectively for distributors (Healthcare
Providers who distribute the Company's products), Healthmax believes that the
Training and tools that it offers with respect to nutritional Healthcare are
Attractive incentives to professionals interested in expanding their scope
Beyond the curriculum taught in school, while providing a means of enhancing
Their revenue stream. Moreover, as the nutritional options plans offered
Through hap develop more fully, Healthmax will deliver new patients to the
Members of its provider network, an advantage the Company does not believe can
Be offered by others in this industry.
With respect to Healthcare, the Company believes that its competitive
Advantage will be derived from an ability to provide enhanced services, improved
Quality and greater availability than other providers of complimentary and
Alternative medicine (cam). The Company believes that it is the only cam center
In the orlando, Florida area that offers chiropractic, podiatric and nutritional
Medicine, as opposed to single modality centers. Further, its experience in
Managed care has resulted in the development of an administrative infrastructure
For credentialing, payment, and account processing as a means of delivering "one
Stop" operations, from administrative support, to provider availability to the
Managed care payor. Accordingly, while the managed care environment makes
Competition on the basis of price insignificant, the Company believes that
Healthcare's infrastructure should enhance its ability to operate more
Profitably.
INTELLECTUAL PROPERTY
The Company has relied on common law copyright, trademark and service mark
Rights to protect its intellectual property, and on common law trade secrecy
Laws with respect to the formulations of its products. Common law intellectual
Property rights do not provide the Company with the same level of protection as
Afforded by a united states federal registration of a mark. In
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Addition, common law rights are limited to the geographic area in which the mark
Is actually used, while a united states federal registration of a mark enables
The registrant to stop the unauthorized use of the mark by any third party
Anywhere in the united states even if the registrant has never used the mark in
The geographic area wherein the unauthorized use is being made provided,
However, that an unauthorized third party user has not, prior to the
Registration date, perfected its common law rights in the trademark in that
Geographic area). The Company also intends to register its trademarks in foreign
Jurisdictions where the Company's products are sold, when such international
Sales commence. However, the protection available in such jurisdictions May not
Be as extensive as the protection available to the Company in the united states.
As of January 2000, the Company (through Healthmax) had one federal
Trademark and service mark registration pending with the united states patent
And trademark office (the "pto"). The application (serial number 75/601,162
Filed December 7, 1998) covers the phrase "access Healthmax," for nutritional
Supplements (class 5), and for Healthcare services (class 42). In addition,
Healthmax has filed for copyright protection of the "access Healthmax system
Manual," and is awaiting a file number from the pto. The Company's policy will
Be to pursue registrations for all of the trademarks and service marks
Associated with its key products and services, as human and financial resources
Allow.
CURRENT NUTRITIONAL SUPPLEMENT PRODUCTS
Healthmax' proprietary formulations of vitamin, mineral and enzyme
Supplements have been formulated by a certified nutritionist, in consultation
With other Healthcare professionals. The products are made from natural, whole
Food plant sources and are formulated to address specific nutritional
Deficiencies through a systems approach to wellness. Products are manufactured
For Healthmax to its specifications by a private manufacturing Company that
Serves the nutritional supplement industry.
The following are descriptions of the key products being sold as of January
2000, categorized by the system they are designed to address. In addition, the
Company has formulated a number of other products, which have not yet been
Manufactured or sold.
DAILY NUTRITIONAL SYSTEM (DESIGNED TO SUPPLY THE BODY'S DAILY NEED FOR VITAMINS,
MINERALS, PLANT ENZYMES AND TRACE ELEMENTS):
DIGESTYME - AN ENZYME COMPLEX THAT HELPS OVERALL DIGESTION AND
ASSIMILATION OF FOOD AND REDUCES FATIGUE
VITADAY - A WHOLE FOOD MULTI-VITAMIN AND MINERAL COMPLEX THAT
SUPPLIES THE BODY'S DAILY NEED FOR VITAMINS, MINERALS
AND TRACE ELEMENTS
ENDOCRINE SYSTEM (DESIGNED TO INCREASE HORMONE LEVELS, BOOST IMMUNE FUNCTION AND
MEMORY FOR WOMEN, AND REDUCE AND PROTECT AGAINST PROSTATE GLAND ENLARGEMENT AND
INCREASE LIBIDO FOR MEN):
Prostatemax - a natural support for the prostate gland that protects
against prostate gland enlargement and improves
prostate function
Youngagain - an anti-aging formula containing natural aging factors
that serves to increase hormone levels and boosts
immune function and memory
Circulatory system (designed as a natural appetite suppressant and to increase
Metabolism of fat):
Slimmax - a fat and carbohydrate eliminator that binds dietary
lipids (fats), lowers dietary and serum cholesterol
and triglyceride levels and naturally reduces appetite
Thin-ergy - a thermogenic herbal energy formula designed to
activate metabolism of fat stored in the brown
adipose tissue
Detoxification system (designed to eliminate toxins from the blood stream and
Waste products from the body and to improve absorption of nutrients from food):
Liverpure - a gentle and effective herbal liver detoxifier that
gradually removes excess and stored waste products
from the body
Colonpure - a gentle and effective intestinal purifier that
improves absorption of nutrients and helps remove
waste products from the colon
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Musculo-skeletal system (designed to support tissue repair, reduce inflammation,
Swelling, arthritic pain and soft tissue pain due to injury):
M.B.J. - (muscle, bone & joint); an all natural support for the
musculoskeletal system that helps replace bone mineral
loss and provides nutritional building blocks for
joint surfaces
Inflammazyme - a natural anti-inflammation formula that reduces
swelling, joint pain, and soft tissue pain due to
injury
Digestive system (designed to replace digestive enzymes and the "good bacteria"
In the digestive tract):
digestyme - (see above)
floraplus - a probiotic that replenishes the "good bacteria" in the
digestive tract
Immune system (designed to promote anti-bacterial and anti-viral action and
Protects against free radical damage):
oxyaccess - an antioxidant that assists in protecting the body
against free radical damage and increases oxygen to
the cells
immunemax - an immune boosting formula that promotes
anti-bacterial action, anti-viral action, and
anti-fungal action
The Company also is developing a series of wellness protocols, such as its
Weight wellness program, which incorporate certain of its products (e.g.,
Vitaday, Slimmax and Thin-ergy, in the case of the weight wellness program) with
A specific clinical program (such as a low-carbohydrate diet) under the guidance
Of Healthmax trained Healthcare professionals.
PLANNED ACQUISITION OF HEALTHCARE
In March 1999, the Company decided to acquire Healthcare for approximately
Two million shares of the Company's common stock. The transaction is subject to
The completion of definitive agreements and additional due diligence. In October
1999, the parties agreed to defer closing on this transaction until the
Securities and exchange commission has indicated that it has no further comments
With respect to this registration statement. The Company's president and chief
Executive officer is the principal shareholder of Healthcare, and will receive
Most of the consideration on the completion of the acquisition. The Company
Believes that the acquisition of Healthcare will serve as the platform for the
Acquisition of additional revenue-generating complementary and alternative
Healthcare practices, consolidating back-office operations and increasing the
Consistency and quality of services, as well as enabling Healthcare to offer the
Benefits of its contracts to other complementary and alternative Healthcare
Practices.
Healthcare is currently engaged in the business of providing complementary
And alternative Healthcare services through its four Healthcare-owned locations
In the central Florida area and over 100 affiliated practices throughout the
State of Florida. The Healthcare-owned centers offer, to varying degrees,
Acupuncture, massage therapy, nutrition and chiropractic services. Affiliated
Practices all offer chiropractic services and May offer one or more other
Complimentary and alternative service. Services are provided under a range of
Reimbursement programs that include traditional insurance plans, workers'
Compensation, personal injury, private pay, hmos, and ppos.
Healthcare estimates that in excess of 90% of its revenue consistently
Comes from the four Healthcare-owned clinics, while less than 10% of its revenue
Is derived from the administrative fees generated by the affiliated centers.
Healthcare is the outgrowth of Daniel J. Pavlik, D.C., P.A., which was
Organized in the state of Florida in April 1983 by Dr. Pavlik. Dr. Pavlik owned
and operated Healthcare as a sole practitioner for a number of years with a
small support staff. As the practice grew, Dr. Pavlik hired additional
Chiropractic physicians to be associate doctors with him. Healthcare focused,
during its initial years, on the treatment of the work-related injury, pursuant
to claims under the Florida department of worker's compensation law. Dr. Pavlik
and Healthcare have worked diligently in the marketing of and the communication
with the third-party payors and many employers in the central Florida area.
<PAGE>
Due to requests from both insurance companies and employers for Healthcare
to provide wider geographic access to its clinical protocols, procedures, staff
and expertise, Healthcare started a process of looking at expansion, and did so
from late 1987 through early 1993. During its initial expansion, Healthcare made
a decision to move into the new area of Healthcare called "managed care."
In order to provide the breadth of geographic coverage required by the
Nature of managed care and the relationships with third-party payors, Healthcare
Established relationships with providers in the central Florida area in specific
Territories that were not otherwise serviced by Healthcare-owned centers. This
Enables Healthcare and Healthcare affiliated clinics to service a greater
Patient base, making the Healthcare enterprise, as a whole, more attractive to
Larger participants in the managed care arena, because more patients May be
Serviced through the relationships with Healthcare than could be serviced
Through the Healthcare-owned clinics alone.
An affiliated clinic is a clinic not owned by Healthcare but whose doctors
And staff are under contract with Healthcare to provide necessary services
Compensable through third-party payors, such as cigna, prucare and
Healthoptions. While the affiliated clinic contracts directly with the
Third-party payors as part of that payor's "panel" of Healthcare providers,
Healthcare serves as a liaison between the third-party payors and the affiliated
Clinics, processing and managing the claims and administrative aspects of their
Relationships. For these services, Healthcare retains 10%-18% of revenue
Collected by it on behalf of those providers from the third-party payors, and
Pays the balance to the providers, whether the provider's relationship with the
Payor calls for a captivated payment or on a discounted fee for service basis,
Or otherwise. Healthcare has no financial interest in the affiliated clinics,
Nor any responsibility for the delivery of Healthcare services. Healthcare does
Oversee the clinics' utilization management and quality assurance functions of
Patient care as part of its interaction between the providers and the payors,
However it does not take any role in the day-to-day operations of the affiliated
Clinics.
Healthcare, under the Company's umbrella, intends to expand its marketing
And operational plans throughout the united states, both in terms of acquired
Clinics and affiliated clinics. As the Company's human and financial resources
Allow, a focused market study will be developed to assess regional market
Opportunities and a specific acquisition strategy. Although there have been
Other attempts at national "roll-ups" of Healthcare practices, the Company
Believes that it will be able to offer advantages to target practices and
Otherwise will be well-positioned to make this venture successful.
Healthcare provides no products other than certain nutritional Healthcare
Products of Healthmax that it distributes, and certain durable medical equipment
Prescribed to patients during the normal course of patient care. These products
Are not unique to nor proprietary to Healthcare.
Healthcare maintains a diverse customer base, with no predominant payor or
Payor type. As a participant in the highly competitive field of complimentary
And alternative Healthcare, it May be expected that this Company competes with
Other practice groups who May have greater financial and human resources than
Healthcare.
REGULATION - PRODUCT FORMULATION AND LABELING.
The Company's products are subject to regulation by one or more federal
Agencies, including the fda, ftc, consumer product safety commission, and
Various state and local agencies. In particular, the fda regulates the labeling
And sales of dietary supplements, including vitamins, minerals and herbs, food
Additives, food supplements, cosmetics, and over-the-counter and prescription
Drugs. The private label companies used to manufacture the Company's products
Are subject, among other things, to regulation by the fda as food manufacturing
Facilities in compliance with the current good manufacturing practices ("cgmp")
Rule promulgated by the fda.
The dietary supplement Health and education act of 1994 (the "dsa") amends
The united states food, drug, and cosmetic act by defining dietary supplements
To include vitamins, minerals, nutritional supplements and herbs. The dsa
Provides a regulatory framework to ensure safe quality dietary supplements and
The dissemination of accurate information about such products. Dietary
Supplements are regulated as foods under the dsa and the fda is generally
Prohibited from regulating the active ingredients in dietary supplements as food
Additives or as drugs unless the product claims trigger drug status.
The dsa provides for specific nutritional labeling requirements for dietary
Supplements effective January 1, 1997. The dsa permits substantiated, truthful
And non-misleading statements of nutritional support to be made in labeling,
Such as statements describing general well-being from consumption of a dietary
Ingredient or the role of a nutrient or dietary ingredient in affecting or
Maintaining structure or function of the body. In addition, the dsa authorizes
The fda to promulgate cmgps for dietary supplements modeled after cmgps for food
Manufacturing. The fda will be proposing various rules and regulations to
Implement the dsa; however, Healthmax believes it is in material compliance with
All currently applicable laws.
<PAGE>
The dietary supplement industry is subject to regulations by the fda and
Local authorities. However, dietary supplements have now been affirmed by the
Dsa as a food and not a drug or food additive. As a result, the regulation of
Dietary supplements is significantly less restrictive than the regulatory
Framework imposed upon manufacturers or distributors of drugs and food
Additives. Unlike food additives, which are more regulated, and new drugs, which
Require regulatory approval of formulation and labeling prior to marketing,
Dietary supplement companies are authorized to make substantiated statements of
Nutritional support and to market new, manufacturer-substantiated-as-safe
Dietary supplement products without fda preclearances. Since the Company makes
No therapeutic claims for its products, the Company believes it falls within
This category. However, the fda retains jurisdiction to regulate labeling and
Printed sales literature insofar as such materials May invoke the fda's Health
Claims regulations. The Company cannot determine what effect new fda regulations
In this area might have on its business in the future. Such regulations could,
Among other things, require expanded or different labeling, the recall or
Discontinuance of certain products, additional record keeping and expanded
Documentation of the properties and certain products and scientific
Substantiation.
in the future, the Company May be subject to additional laws or regulations
Administered by the fda or other federal, state or foreign regulatory
Authorities, the repeal of laws or regulations that the Company considers
Favorable, such as the dshea, or more stringent interpretations of current laws
Or regulations. The Company is unable to predict the nature of such future laws,
Regulations, interpretations or application, nor can it predict what effect
Additional governmental regulations or administrative orders, when and if
Promulgated, would have on its business in the future. They could, however,
Require the reformulation of certain products to meet new standards, the recall
Or discontinuance of certain products not able to be reformulated, imposition of
Additional record keeping requirements, or expanded documentation of the
Properties of certain products, expanded or different labeling and scientific
Substantiation. Any or all of such requirements could have a material adverse
Effect on the Company's results of operations and financial condition.
RESEARCH AND DEVELOPMENT
Although the Company has chosen to integrate the costs of research and
Development in its general overhead, and has not separately accounted for
Research and development expenses, management is of the view that until 1999,
Virtually all of its expenditures were in the nature of research and
Development. Total expenditures for each of the last two fiscal years were
$1,697,789 in the fiscal year ended December 31, 1998, and $1,373,562, in the
Fiscal year ended December 31, 1997, virtually all of which were related to
Product formulation, development and revision of distribution methods,
Development and revision of marketing strategies, or development and revision of
Training and support protocols and associated manuals.
management anticipates spending little, if anything, on product research
And development in 1999, although it May bring to market several products
Already formulated but not presently being produced. To the extent significant
Research and development does occur in 1999, the Company believes that it will
Be related to adjustments and/or refinements in current product lines and in
Testing of new and old methods of distribution, training, marketing and support.
ITEM 2. DESCRIPTION OF PROPERTY.
Effective Novermber 1, 1999, the Company's corporate headquarters, including
Administrative offices, distribution and research and development facilities,
The offices of Healthmax and of hap, are located at 4619 parkbreeze court,
Orlando, Florida 32808. The facilities consists of approximately 1,500 square
Feet of office space and approximately 3,000 square feet of warehouse
Space and are leased by Access Healthcare, inc., under a three-year agreement
With Dr. Philips, inc., an unaffiliated party, for a monthly rent of $1,950,
With cost of living increases in the second and third years. Healthcare provides
The space to the Company at the same rent and under the same terms applicable to
It under its lease with the landlord. Dr. Pavlik, the Company's president (and
The president of Healthcare) has personally guaranteed the lease.
Prior to Novermber 1, 1999, the Company leased its offices on a
Month-to-month basis from psc realty, an affiliated party, at a monthly rent of
Approximately $1,500. Healthcare, which maintains a clinic and its principal
Administrative office at the same address (2016 s. Orange avenue, orlando,
Florida), has assumed the Company's portion of the space, and, as of Novermber
1, 1999, is obligated for monthly rent of $3,000.
The Company also maintains a regional sales office in bloomington,
Minnesota. Prior to September 1, 1999, the Company had been renting that office
From an employee, Dr. Mark leutem, on a month-to-month basis for $600 per month.
Dr. Leutem is no longer charging the Company rent, although it continues to
Maintain a presence at that location.
Until October 1, 1999, the Company maintained a regional sales office in
Colorado springs, colorado, which it had rented from an unaffiliated third
Party, tim rose as receiver, for a monthly rent of $600.00. The Company has not
Determined whether or to where it will relocate its colorado office.
5
<PAGE>
Until Novermber 1, 1999, the Company utilized certain distribution
Facilities in norcross, georgia, under a verbal agreement, for which it paid
$2,000 per month to solos management, an unaffiliated third party, through
Paideia Health, inc., an affiliated party. This arrangement has been terminated.
The Company believes all leased property is in good and satisfactory
Condition, and is suitable for the Company's business needs for the term of the
Respective leases.
addresses for the Company's present locations are as follows:
Florida: 4619 parkbreeze court, orlando, fl 32808
Minnesota: 2850 metro drive, suite 223, bloomington, mn 55425
the location for the principal office of Healthcare is 2016 s. Orange
Avenue, orlando, fl 32806.
Item 3. Legal proceedings.
On October 28, 1999, marty kass filed a lawsuit in the circuit court for
The eighth judicial circuit for alachua county, Florida, against Dr. Daniel j.
Pavlik, access Healthmax, inc., access Healthcare, inc., and access Health
Alternatives, inc. The action seeks repayment of a loan and enforcement of a
Settlement agreement, for approximately $51,664, plus court costs and fees. The
Company believes the suit will be satisfied upon payment of all outstanding
Amounts owed, and has recorded reflected a liability in the amount of $52,000 on
The balance sheet at September 30, 1999.
On January 4, 2000, an action was filed in the circuit court for the ninth
Judicial circuit for orange county, Florida, by james michaelides, the estate of
Anna michaelides and andrew nicolaides, against innovative Health solutions,
Inc., Healthmax, inc. [sic], Pavlik chiropractic group, p.a., richard a. Weaver
And daniel j. Pavlik. This action seeks the repayment of four loans totaling
$145,000 plus court costs and fees. The Company has not yet determined its
Response to this action. The sums sought are reflected as debt on the Company's
Books, and are among a series of loans evidenced by notes with an approximate
Present balance of $820,000. Although the notes each originally were due to
Mature in nine months from their making, they all have been renewed or extended
By their holders. Interest only, at the annual rate of 10.5%, is due until
Maturity. All interest payments were made through September 1999, although
None of been made since that time. Under the terms of the notes, non-payment
Of interest, when due, constitutes a default, and entitles the holder to
Accelerate the note if the delinquent payment has not been made within 21 days.
Other than the plaintiff in the foregoing lawsuit, none of the note holders has
Indicated any intention of accelerating their note. As of December 31, 1999, the
Amount of unpaid interest on the notes was approximately $22,400; as of February
29, 2000, this amount was approximately $37,300.
In October 1999 Healthmax was advised by the department of professional and
Financial regulation, bureau of banking, securities division for the state of
Maine that certain sales of the llc's interests to maine residents were not
Covered by an exemption from registration, and were effected with the assistance
Of a person not licensed to sell securities in that state, and therefore are
Subject to rescission. Without admitting any violations of applicable maine
Securities laws, Healthmax, through counsel, has confirmed that it will offer
Rescission to the maine investors, but has not yet determined the manner or
Method of this offer. Neither the llc's, Healthmax nor the Company has
Sufficient funds available to rescind the full amount of the maine investors'
Interests (approximately $763,750), should they all elect to rescind their
Investment. The potential impact this action May have on Healthmax or the
Company as a whole, or on their financialstatements, cannot be determined
At this time. The Company, however, has recorded a liability in the amount
Of $763,750 on its books.
In December 1999 the Company became aware of an inquiry by the
Comptroller's office of the state of Florida into the manner by which certain
Llc interests were sold to residents of Florida. The state has requested certain
Documents and information from the Company, from the llcs and from Healthmax in
What the Company believes is an effort to determine if securities were sold
Without registration or without an exemption from registration, or by persons
Not licensed to sell securities in the state. The Company is cooperating with
The state's inquiry, and is unable to speculate at this time as to the outcome
Of such inquiry.
In addition to the states of Florida and maine, where a total of $1,472,298
And $763,750, were raised, respectively, llc interests were sold in other
Jurisdictions as follows: utah, $80,000; texas, $204,198; missouri, $197,704;
Ohio, $65,500; California, $25,000; minnesota, $51,000; New Jersey, $25,000;
Michigan, $50,000; and Canada, $50,000. Although the Company has not received
Any communications from the regulators in the jurisdictions other than Florida
And maine concerning the sale of llc interests, further inquiries are possible.
It is impossible at this time to ascertain the potential impact such inquiries
May have on the llc, Healthmax or the Company. Without concurring that any
Improprieties occurred, the Company believes that further rescission offerings
May be required. The Company will continue to evaluate avenues of satisfying
<PAGE>
Any required rescission offerings, and the advisability of offering rescission
In jurisdictions where such rescission is not required by the regulatory
Authorities. Although it was believed at the time of the offerings that they
Were made substantially in compliance with applicable state law, further
Evaluation on a state-by-state basis would be required by the Company at this
Time before stating a position with respect to whether it had actually complied
In all material respects with such state laws, which evaluation will be
Undertaken by the Company in the near future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
THERE WERE NO MATTERS SUBMITTED TO SHAREHOLDERS DURING THE PERIOD.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION.
Bid and ask quotations for the Company's common stock, $.001 par value, are
Posted on the over-the-counter bulletin board of the national association of
Securities dealers, inc. From the commencement of trading in October 1998 until
The reverse stock split in March 1999, the stock traded under the symbol,
"ahmx." following the reverse stock split, through June 1999, the stock traded
Under the symbol, "ahmxd." the stock briefly resumed quotation under "ahmx"
Before changing to "ahmxe" in early July.
In early August 1999, the Company's common stock became ineligible for
Quotation on the bulletin board, and began being quoted on the "pink sheets" of
The national quotation bureau under the symbol, "ahmx."
The following table sets forth the range of high bid and low bid prices for
The Company's common stock on a quarterly basis since the commencement of
Trading in October 1998 (giving retroactive effect to the 1-for-10 reverse stock
Split declared in March 1999), as reported by the national quotation bureau
(which reflect inter-dealer prices, without retail mark-up, mark-down, or
Commission and May not necessarily represent actual transactions). The foregoing
And following information should not be taken as an indication of the existence
Of an established public trading market for the Company's common stock.
COMMON STOCK
HIGH BID LOW BID
--------- --------
QUARTER ENDED DECEMBER 31, 1998 $55.00000 $0.62500
QUARTER ENDED MARCH 31, 1999 $5.62500 $0.15630
QUARTER ENDED JUNE 30, 1999 $2.75000 $1.62500
QUARTER ENDED SEPTEMBER 30, 1999 $1.87500 $0.90163
QUARTER ENDED DECEMBER 31, 1999 $0.48000 $0.25000
HOLDERS.
As of March 20, 2000, the approximate number of record holders of the
Company's common stock was 128. This includes brokerage firms and/or clearing
Firm holding the Company's stock for their clientele (with each such brokerage
House and/or clearing house being considered as one holder). The Company
Believes that the number of beneficial owners exceeds 200, however there can be
No assurance that this is accurate.
DIVIDENDS.
Holders of common stock are entitled to receive dividends when, as and if
Declared by the board of directors out of funds available therefor, subject to
Any restrictions imposed by any loan or other agreements. The Company presently
Does not believe there are any such restrictions.
6
<PAGE>
THE COMPANY HAS NOT PAID OR DECLARED ANY DIVIDENDS ON ITS COMMON STOCK
SINCE ITS INCEPTION AND, BY REASON OF ITS PRESENT FINANCIAL STATUS AND ITS
CONTEMPLATED FINANCIAL REQUIREMENTS, DOES NOT CONTEMPLATE OR ANTICIPATE PAYING
ANY DIVIDENDS UPON ITS COMMON STOCK IN THE FORESEEABLE FUTURE.
RECENT SALES OF UNREGISTERED SECURITIES.
The following unregistered securities of the Company have been issued in
The period from September 2, 1998 (the exchange date) through March 31, 2000
(with adjustments shown to reflect the reverse stock split declared in March
1999). Although the Company believes that an exemption from registration under
The federal and/or state securities laws was available for each of these
Issuances, if it is otherwise determined at some future date, the Company May be
Required to offer rescission of such issuance or issuances.
The Company believes that each of the recipients of shares indicated below
Had access to the kind of information normally presented in a registration
Statement. Moreover, the Company believes that each party that purchased the
Company's securities was a sophisticated individual at the time of the receipt
Of the Company's common stock.
In February 1999, the Company sold a total of 323,334 shares of common
Stock, for an aggregate of $485,000, pursuant to rule 504, to the following
Persons and in the following amounts:
ALAN K. AVRA 10,000 SHARES
LONNIE E. AVRA 10,000 SHARES
JOSEPH CAMILLO 10,000 SHARES
CHEVERLTON FUND LTD. 60,000 SHARES
RICHARD W. COFFMAN 10,000 SHARES
THOMAS S. DANFORD 10,000 SHARES
DERRICK DENTAL CARE, P.A. MONEY PURCHASE PLAN 10,000 SHARES
ANTHONY C. & ROSEMARY E. DERRICK 10,000 SHARES
SEAN R. DERRICK 10,000 SHARES
HI-TEL GROUP, INC. 30,000 SHARES
GEORGE R. KINNEY 40,000 SHARES
ANGIE G. LANGLEY 14,334 SHARES
LYLE G. MEYERS 20,000 SHARES
SHEILA O'DERRICK 10,000 SHARES
PROGRESSIVE MEDIA GROUP, INC. 39,000 SHARES
GREIG A. RANK 10,000 SHARES
DAVID TUSCAN 10,000 SHARES
DOUG WARD 10,000 SHARES
In March 1999, the Company issued a total of 16,000 restricted shares to
Certain employees, independent contractors and consultants, as a bonus for
Services rendered. The issuance of these shares was not tied to performance,
Nor was it issued in lieu of cash compensation, although the Company has valued
The share (and, accordingly, the consideration for which they were issued)
At $1.00 per share. The Company issued these shares to the following persons
(none of whom is believed to be an accredited investor) in appreciation for
Their extraordinary service to the Company. None of the recipients of this
Stock received the type of information normally presented in a prospectus. The
Shares were issued under section 4(2) of the act, as follows:
BARRY BRADLEY 10,000 SHARES
RON BROMAN 500 SHARES
ROGER CAMERON 500 SHARES
KIRK JOHNSON 500 SHARES
MARK LEUTEM 1,500 SHARES
BRENT PHILLIPS 2,500 SHARES
MARY JO SABATA 500 SHARES
In April 1999, the Company issued 150,000 shares of common stock to
Patricia Cohen, in consideration for her assistance in facilitating revisions in
January and February 1999 to the original exchange and related transactions.
These shares were valued by the parties at $150,000, and were issued under rule
504.
In April 1999, the Company issued 75,000 shares of common stock to amy
Lewis, in consideration for consulting services rendered by her husband,
Michael, on behalf public acquisition consultants, inc. ("pac"). Mr. Lewis is
<PAGE>
The president of pac and ms. Lewis is its sole shareholder; the shares were
Issued to ms. Lewis personally at the request of pac. The shares were issued
Under section 4(2), and were due to have been issued immediately following the
Exchange in September 1998. The parties have valued the shares at $1.00 per
Share, as there was no trading market for them at the time they were earned, and
The services were valued at $75,000. Pac was instrumental in establishing and
Furthering the relationship between access Healthmax and plc, and received this
Stock grant in appreciation for its assistance. The Company does not believe
That pac is an accredited investor. It was not provided with the type of
Information normally presented in a prospectus.
In May 1999 the Company sold one unit of its securities pursuant to rule
506 promulgated under the act, for $25,000. The unit consisted of one shares of
Series a redeemable convertible preferred stock, one class a warrant and one
Class b warrant. As this was the only unit sold in the offering, the investor
And the Company agreed that the Company would not issue the unit. Instead, the
Company has recorded the $25,000 it received from the investor as a liability,
And, at the investor's election, the
Company will either return the funds or will apply it to an investment on the
Company's behalf in a future offering of securities by the Company.
In July 1999 the Company retained the edge unlimited, inc. ("the edge"),
Orlando, Florida to provide certain investor relations and public relations
Services valued at $120,000, for which the edge received 150,000 restricted
Shares of the Company's common stock, under section 4(2) ($.80 per share). The
Company is unaware of whether the edge is an accredited investor. Although the
Edge had access to management, and received such information concerning the
Company as it requested, it did not receive the type of information normally
Presented in a prospectus.
From April 1999 through January 2000, the Company exchanged common stock of
Healthmax for common stock of Health alternatives, under section 4(2).an
Aggregate of 353,503 shares of the Company's common stock were issued to
Approximately 50 former shareholders of Healthmax, some of whom are not
Accredited investors. Although all of these persons were provided with such
Information concerning the Company as was reasonably available at the time, and
Were invited to consult with their financial advisors and to request any other
Information of the Company as they believed appropriate, the information
Provided was not equivalent to the information that would normally be presented
In a prospectus.
FRANK ALDRIDGE 30,000 SHARES
AMBROSIA HEALTH ENTERPRISES, INC. 10,000 SHARES
JOHN H. BRETT, JR. 10,000 SHARES
ALBERT K. BRINSON, IRA 2,000 SHARES
SHELLEY D. BROWN 10,000 SHARES
PHILIP AND LINDA CARLAND 5,000 SHARES
RALPH W. CATANESE 20,000 SHARES
DOMINICK J. COSTANZO 5,000 SHARES
KENNETH R. CRUTCHFIELD 2,000 SHARES
JAMES D'ANGELO 5,000 SHARES
RALPH L. DAVIS, JR. 20,000 SHARES
HELEN DECKER 2,500 SHARES
BERTON L. DESELMS 2,000 SHARES
ROBERT A. FOSS 2,000 SHARES
RICHARD AND PHYLLIS GRUOSSO 5,000 SHARES
RONALD AND KIRAI HOFFMAN 5,000 SHARES
DOUGLAS JORDAL 5,000 SHARES
FREDERICK J. KOLLETT, JR. 5,000 SHARES
GARY S. KUSKIN 10,000 SHARES
PAT E. LUSE 2,500 SHARES
MICHAEL AND CHARLENE MACDONALD 30,000 SHARES
CATHY AND THOMAS MACHACYK 2,500 SHARES
BRUCE AND KIMBERLEY MADDOX 2,500 SHARES
PHILIP AND LINDA MANCUSI 10,000 SHARES
LILLIAN AND PETER MARCELLI 2,500 SHARES
LUCA AND YVONNE MASCIARELLI 9,200 SHARES
ROBERT AND ANNE MICELOTTA 2,500 SHARES
STANLEY MOREIRA 2,500 SHARES
MARCY MORGAN 2,500 SHARES
NELDA AND JAMES MURRAY 2,500 SHARES
PATRICK M. O'NEILL 2,500 SHARES
PENSCO PENSION FBO FAYE MILES 2,500 SHARES
PENSCO PENSION FBO RAYMOND D. BROWN 3,803 SHARES
7
<PAGE>
BRENT PHILLIPS 10,000 SHARES
TINA C. PIASIO 6,000 SHARES
PALMA PRIVITERA LIVING TRUST 2,500 SHARES
SHARON PROCACCIOANTI 2,500 SHARES
DELVIN E. RESSEL REVOCABLE TRUST 5,000 SHARES
RETIREMENTS ACCOUNTS, INC., FBO PHILIP J. CARLAND 5,000 SHARES
PAUL SEMBER 25,000 SHARES
MICHAEL D. SEMBER TRUST 35,000 SHARES
WILLIAM STRINGER 3,500 SHARES
ARMAND & MARIE TADDEO 5,000 SHARES
KAREN TADDEO 6,000 SHARES
WILBURN D. TAYLOR 2,500 SHARES
RONALD P. TERRILL 2,000 SHARES
ROBERT W. YARBER 10,000 SHARES
In Novermber 1999, the Company issued 100,000 shares each to Donald Metchick
And Steven Miracle, which issuance was intended to occur in January 1999,
Pursuant to their respective employment agreements, pursuant to section 4(2).
The Company has valued the share (and, accordingly the consideration for which
They were issued) at $1.10 per share. Neither Mr. Metchick nor Mr. Miracle is an
Accredited investor, and although neither received the type of information
Normally found in a prospectus, as members of management, they had access to
Such information.
In December 1999, the Company issued an aggregate of 400,000 shares of
Common stock to certain employees as follows, under section 4(2). The issuance
Of these shares was not tied to performance, nor was it issued in lieu of cash
Compensation, although the Company has valued the shares (and, accordingly, the
Consideration for which they were issued) at $.50 per share. The Company issued
These shares to the following persons (none of whom is believed to be an
Accredited investor) in appreciation for their extraordinary service to the
Company. None of the recipients of this stock received the type of information
Normally presented in a prospectus.
MARK LEUTEM 50,000 SHARES
BRENT PHILIPS 50,000 SHARES
STEVEN MIRACLE 100,000 SHARES
DANIEL J. PAVLIK 100,000 SHARES
DONALD METCHICK 100,000 SHARES
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discussion and analysis should be read in conjunction with
the financial statements of the Company and the acCompanying notes appearing
subsequently under the caption "financial statements." the following discussion
and analysis contains forward-looking statements, which involve risks and
uncertainties. the Company's actual results May differ significantly from the
results, expectations and plans discussed in these forward-looking statements.
In the fourth quarter of 1999 the Company focused primarily on
consolidating operations in light of its capital shortage. the distribution
center which had been established in atlanta, georgia was closed and relocated
to new warehouse space in orlando, Florida. development of new offices were
halted as the Company chose to focus on maintaining and developing sales to its
established network of consumers and providers. the Company continued to develop
the nutritional options plus program and test market direct sales within the
orlando market.
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
During the past two years, the Company, through its subsidiaries, has
Spent considerable time and capital resources on defining, developing and
Testing its strategic plan for delivering nutritional education, support and
Supplements through a network of Healthcare professionals certified in the
Access Healthmax method. The Company has tested a number of methods of tactical
Deployment for creating its network of nutritional Healthcare providers and
Marketing its services and products, all with the primary and overriding
Objective of maximizing the number of nutritional products delivered to
Consumers and patients. A comparison of the financial statements for the fiscal
Years ended December 31, 1999 and 1998 show the impact of the Company's
Continual efforts to determine the best method for delivery of its products and
Services, and the resulting change in tactics.
In addition to the historical activities relating to product formulation,
Development of the Healthmax instructional manuals, and creation and refinement
Of strategies for the delivery and marketing of the Company's services and
Products, management focused a significant portion of its resources on capital
Raising and on preparing for the establishment of a trading market for the
<PAGE>
Healthmax' (and, ultimately, the Company's) common stock. Although these efforts
Ultimately resulted in the reverse merger into plc venture corp., attention to
Financing the Company was a serious diversion of senior management time, one
Consequence of which was a slower than expected growth in the Company's core
Business. Although the Company continues to seek private debt and/or equity
Financing, management also will attempt to grow through operations by hiring
additional senior-level management and streamlining delivery of the Company's
Programs and Networks.
Management believes that a comparison of the financial performance of the
Company in the twelve months ended December 31, 1999 and in the twelve months
ended December 31, 1998 dramatically indicates the impact of four steps taken by
the Company beginning in mid-1998. These decisions, in no order of importance or
chronology, were (a) the termination of sales of labs and lab equipment
ancillary to its products and systems; (b) the launch of a program to sell
market licenses to distribute the Company's products and programs; (c) the
hiring of senior management personnel; and (d) the establishment of a public
trading market for the Company's Securities.
In addition as a result of the Company's persistent cash flow difficulties,
And as a consequence of certain unfulfilled funding commitments, senior
Management of the Company was forced to focus most of its time and resources on
The Company's corporate finance requirements, rather than on sales of new
licenses and expansion of the Company's networks. The impact of this was
reflected in the lack of new site licenses, and in a diminution in sales, which
accounted for the marked decline in revenue from $834,558 during the twelve
Months ended December 31, 1998 to $523,484 during the twelve months ended
December 31, 1999. Accordingly, sales of equipment (which are a component of new
licenses only) declined from $299,989 in the twelve months ended December 31,
1998, to $10,431 in fiscal 1999. Similarly, product sales declined both because
of the lack of new provider startups, which include a quantity of product sales,
and because new providers startups often are shortly followed by additional
sales generated by enthusiastic new participants. The increase in other revenue,
from $94,968 in fiscal 1998 to $147,128 in fiscal 1999 represent a change in the
company's licensing strategy from individual site licenses to a market license
concept and the subsequent increase in the cost of the license.
The gross profit margin declined over all from 77% in fiscal 1998 to 73%
in fiscal was primarily accounted for by a on time charge relating to expensing
all paper products, principally, marketing and center support materials, which
previously had been assigned to inventory. The cost of goods related to
product, on the other hand, had a favorable result declining to 22.8% in fiscal
1999 from 28.4% in fiscal 1998. This primarily is a reflection of a restructure
of the price points of individual products and a dramatic improvement in the
cost of product from the manufacture.
Selling, general and administrative expenses during the twelve months
ended December 31, 1999, were significantly greater than during the comparable
period in 1998, increasing from $1,191,534 to $1,839,724 or an 54% increase.
this was in part the result of the addition of new members of management,
(including a compensation expense resulting from shares of the Company's common
stock issued to a new and ongoing management) and professional fees necessitated
by operating in a public environment. Additionally, the Company posted
$640,663 in deferred rescission costs relating to the discussions regarding the
Llc's and the proposed rescission of funds raised to finance those entities.
LIQUIDITY AND CAPITAL RESOURCES
Despite non-binding commitments from third-parties to fund the Company's
operations in 1998 and through the first three quarters of 1999, the Company
continued to experience, and continues to experience, cash flow shortages that
have slowed the Company's growth. During fiscal 1999, the Company's ability to
raise funds from the sale of equity was significantly impeded as a result of the
"delisting" of its common stock from the over-the-counter bulletin board.
accordingly, the Company continues to rely on loans from affiliated and
unaffiliated parties to cover some of its cash flow shortfall. As of December
31, 1999, loans from affiliated parties were approximately $1.6 million, while
debt owed on third-party notes and commercial paper was approximately $2.1
million. Accrued liabilities were approximately $601,000, while accounts payable
were approximately $404,000. As a result, in large measure, of the Company's
increased activities related to installing new access Healthmax centers, trade
receivables at December 31, 1999 were approximately $59,000. This reflects
initial inventory orders placed by the new centers, as well as reorders from
existing centers.
In May 1999, the Company received a revolving loan commitment of $500,000
For the purchase of inventory ($250,000 of which has been funded) and a $75,000
loan for working capital (which are included in the amounts shown for notes and
commercial paper. In October 1999, the Company received an additional working
capital loan of $50,000. The inventory financing is expected to be repaid from
the sale of product during the next two years. It is anticipated that the
working capital loans will be repaid from the earlier to occur of operating
revenue or net proceeds of a private offering of equity and/or debt securities,
the terms of which offering have not been identified.
8
<PAGE>
The Company continues to experience negative cash flow, and anticipates
this continuing through the foreseeable future. Management believes that
additional funding will be necessary in order for it to continue as a going
concern. The Company is investigating several forms of private debt and/or
equity financing, although there can be no assurances that the Company will be
successful in procuring such financing or that it will be available on terms
acceptable to the Company, if at all. Moreover, despite the ongoing best efforts
of management, there presently is no firm plan in place for how the Company
intends to meet its liquidity and capital needs for the next year, or to address
Its working capital deficit.
In October 1999 Healthmax was advised by the department of professional and
Financial regulation, bureau of banking, securities division for the state of
Maine that certain sales of the llc's interests to maine residents were not
Covered by an exemption from registration, and were effected with the assistance
Of a person not licensed to sell securities in that state, and therefore are
Subject to rescission. Without admitting any violations of applicable maine
Securities laws, Healthmax, through counsel, has confirmed that it will offer
Rescission to the maine investors, but has not yet determined the manner or
Method of this offer. Neither the llc's, Healthmax nor the Company has
Sufficient funds available to rescind the full amount of the maine investors'
Interests (approximately $763,750), should they all elect to rescind their
Investment. The potential impact this action May have on Healthmax or the
Company as a whole, or on their financial statements, cannot be determined at
This time. The Company, however, has recorded a liability in the amount of
$763,750 on its books.
In December 1999 the Company became aware of an inquiry by the
Comptroller's office of the state of Florida into the manner by which certain
Llc interests were sold to residents of Florida. The state has requested certain
Documents and information from the Company, from the llcs and from Healthmax in
What the Company believes is an effort to determine if securities were sold
Without registration or without an exemption from registration, or by persons
Not licensed to sell securities in the state. The Company is cooperating with
The state's inquiry, and is unable to speculate at this time as to the outcome
Of such inquiry.
In addition to the states of Florida and maine, where a total of $1,472,298
And $763,750, were raised, respectively, llc interests were sold in other
Jurisdictions as follows: utah, $80,000; texas, $204,198; missouri, $197,704;
Ohio, $65,500; California, $25,000; minnesota, $51,000; New Jersey, $25,000;
Michigan, $50,000; and Canada, $50,000. Although the Company has not received
any communications from the regulators in the jurisdictions other than Florida
and maine concerning the sale of llc interests, further inquiries are possible.
it is impossible at this time to ascertain the potential impact such inquiries
May have on the llc, Healthmax or the Company. Without concurring that any
improprieties occurred, the Company believes that further rescission offerings
May be required. The Company will continue to evaluate avenues of satisfying
any required rescission offerings, and the advisability of offering rescission
in jurisdictions where such rescission is not required by the regulatory
authorities. Although it was believed at the time of the offerings that they
were made substantially in compliance with applicable state law, further
evaluation on a State-by-State basis would be required by the Company at this
time before stating a position with respect to whether it had actually complied
in all material respects with such state laws, which evaluation will be
undertaken by the Company in the near future.
It is premature to predict with any degree of certainty either the
magnitude of any rescission offering related to the llcs, the number of llc
investors that would accept such an offer, the dollar amount the Company would
be required to pay, or the cost of that money to the Company in terms of time,
expense and dilution of shares (in the event an equity offering is needed to
raise the needed funds). The Company presently does not have the funds
available to satisfy a cash rescission offer, and is considering a number of
methods of raising such funds. The allocation of funds to a rescission May have
a further impact on the Company's ability to continue as a going concern.
further, it is expected that any rescission offering would be made pursuant to a
Registration statement under the securities act of 1933, as amended, requiring
additional expenses, including legal and accounting expenses, for which the
Company is presently unable to pay.
In addition to either requiring rescission or taking advantage of the
Company's offer of rescission, if and when made, the investors in the llcs May
be entitled to seek monetary damages and May have the right to require the
Company or Healthmax to repurchase the llc interests which right May survive any
rescission offer by the Company. This May mean that an investor that declines a
rescission offer by the Company May nevertheless be entitled to retain the right
to require the Company to repurchase the llc investment at a future date. The
Company does not believe it is presently able to determine the likely duration
of any of the investors' rights, which are primarily a matter of state law and
vary from jurisdiction to jurisdiction, nor has the Company determined the value
of any potential monetary damages beyond the actual price of repurchasing all of
the llc interests, as previously described. Based on the Company's current
financial condition, however, it would be impossible for the Company to provide
cash remuneration (whether for monetary damages or to effect a rescission
Oofering) in the near future.
ITEM 7. FINANCIAL STATEMENTS
THE FOLLOWING FINANCIAL STATEMENTS ARE FILED AS EXHIBITS HEREWITH:
9
<PAGE>
(I) FOR ACCESS HEALTH ALTERNATIVES, INC., AND SUBSIDIARY F-1
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
THE SIX MONTHS ENDED JUNE 30, 1999 AND
1998 (UNAUDITED) F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED) F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
(II) FOR ACCESS HEALTHCARE, INC. F-21
INDEPENDENT AUDITORS' REPORT F-22
CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1999
(UNAUDITED) AND DECEMBER 31, 1998 F-23
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997 AND THE SIX
MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED) F-24
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED) F-25
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED) F-26
NOTES TO FINANCIAL STATEMENTS F-27
(III) PRO FORMA (UNAUDITED) CONSOLIDATED STATEMENTS F-33
PRO FORMA CONSOLIDATED BALANCE SHEET AT
DECEMBER 31, 1998 F-34
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 F-35
PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30,
1999 (UNAUDITED) F-37
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
1998 (UNAUDITED) F-38
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS F-40
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
THERE ARE NO CHANGES OR DISAGREEMENTS WITH THE ACCOUNTS REGARDING ACCOUNTING AND
FINANCIAL DISCLOSURE.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS.
Directors are elected annually and serve until the next annual
Shareholders' meeting, unless they resign or are removed earlier in accordance
With the Company's amended and restated articles of incorporation. Executive
Officers are appointed by the board of directors.
DANIEL J. PAVLIK, 49, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE
BOARD.
Dr. Pavlik has been active in the Healthcare industry for the last 20
Years. He obtained his undergraduate degree from indiana university of
Pennsylvania in 1973. In February 1997 he received his master of science degree
From rollins college, orlando, Florida. His postgraduate doctoral studies were
Completed by June of 1980, when he received his doctorate of chiropractic degree
From palmer college of chiropractic located in davenport, iowa. Dr. Pavlik has
Founded and developed three Healthcare companies during his professional career.
As president of nms rehabilitation, inc. From 1985 through 1992 he implemented
Nine full service physical rehabilitation facilities in a multi-state forum.
From 1987 through 1993 he founded and developed the academy of industrial Health
Consultants d/b/a the academy, a chiropractic ppo. From 1980 through the
Present, Dr. Pavlik has been the president of Access Healthcare. Since 1996, he
Has been the president and ceo of Healthmax, and has been the president and ceo
Of Health alternatives since completion of the exchange in September 1998.
STEVEN MIRACLE, 45, CHIEF OPERATING OFFICER.
Mr. Miracle joined the Company as of January 1, 1999, after over 20 years
of senior-level Healthcare administrative experience, which included developing
and implementing growth strategies for companies prepared to move to a new level
of productivity and orchestrating turn-around situations, as well as
establishing and carrying out business plans from start-up through profitable
operations. Mr. Miracle began his career in Healthcare administration after
receiving his M.B.A. from Vanderbilt University in 1977. As part of its early
Management group, Mr. Miracle was instrumental in developing and implementing
operating procedures for humana's primary care business, assisting in the
migration from a hospital-based business and creating templates for the
financial analysis of humana's acquisition targets. After serving as the
principal operations officer for several start-up ventures, Mr. Miracle served
from July 1994 through July 1996 as the president of AmHealth, Inc., an
occupational Health provider, taking it from near bankruptcy, through a creditor
work-out, consolidation, and successful sale. From July 1996 through December
1998, he was the president of Paideia Health, Inc., a Healthcare and small
business consulting and management Company. He has served as the chief operating
officer of the Company since January 1999.
DONALD METCHICK, 56, VICE PRESIDENT AND DIRECTOR.
Mr. Metchick has been in the financial services and estate planning areas
For 22 years. From 1973 until 1993, he was a general insurance agent for john
Hancock insurance co. Mr. Metchick filed for and was discharged from personal
Bankruptcy in the united states bankruptcy court in early 1994. From January
1992 through February 1996, Mr. Metchick was the president of preferred
Financial and estate planning services, inc., which provided life and Health
Benefit consulting and estate planning services. From February 1996 through the
Present he has been the vice president of Healthmax, and in July 1999, he became
The president of hap.
RICHARD D. EKSTROM, 55, DIRECTOR.
<PAGE>
Mr. Ekstrom was appointed to the Company's board of directors in May 1999.
He is the chairman of the board of directors and president of Demegen, Inc., a
Publicly-held Company, and has served in those capacities since January 1996.
Mr. Ekstrom was demegen's chief financial officer from December 1994 until
August 1998. Mr. Ekstrom holds a b.a. from cornell university and an M.B.A. from
Boston university. From 1990 through 1991, Mr. Ekstrom was president of cost
containment corporation and from 1993 through 1994, he was chief operating
officer of preferred solutions inc., both of which were start-up pharmacy
benefit management companies. Mr. Ekstrom is the founder of prescription price
watch, a buying guide for pharmacy benefit programs. From 1968 to 1990, he was
employed by westinghouse electric corporation where he served in a variety of
management positions, including controller, manufacturing manager and corporate
staff positions.
The board of directors intends to establish compensation and audit
Committees; as the only "outside director" at this time, Mr. Ekstrom is expected
To serve on those committees. The compensation committee will establish
Salaries, incentives and other forms of compensation for directors, officers and
Other employees for the Company, will administer the Company's incentive
Compensation and benefit plans and recommend policies relating to such incentive
Compensation and benefit plans. The audit committee will review the need for
Internal auditing procedures and the adequacy of internal controls and meets
Periodically with management and independent auditors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following officers or directors filed their Forms 3 late (all were filed as
of January 2000): Daniel J. Pavlik; Donald Metchick; Richard Eckstrom; and
Steven Miracle. Donald Metchick has not filed a Form 4 related to stock he sold
in a provate transaction in 1999. Steven Miracle and Donald Metchick have not
filed their Forms 4 related to shares due them in January 2000 as per their
employment agreement. Such shares have not been issued but will be within the
next thirty days.
ITEM 10. EXECUTIVE COMPENSATION.
During the past three fiscal years, the Company has operated without formal
employment agreements with respect to its executive officers. During that time,
the only person whose compensation, including salary and bonuses, exceeded
$100,000, was Dr. Daniel j. Pavlik (president and chief executive officer).
effective January 1, 1999, the Company entered into written agreements with
Donald Metchick and Steven Miracle, the principal terms of which agreements are
described below.
the Company presently does not have any form of stock option or stock grant
Plan, although it anticipates reserving up to two million shares for such a plan
In the near future.
SUMMARY COMPENSATION TABLE.
The following table shows all the cash compensation paid by the Company,
during the fiscal years indicated, to the president and ceo; no other person
earned or was paid at least $100,000 in all forms of compensation. There was no
long-term compensation earned or paid to any party, nor was any other form of
reportable compensation earned or paid.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------------------
(A) (B) (C) (D) (E)
TOTAL ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)
----------------------------------------------------------------------------
DANIEL J. PAVLIK, CEO 1999 175,000 -- 175,000
1998 174,999 -- 174,999
1997 153,845 -- 153,845
DONALD METCHICK, EVP 1999 100,000 -- 100,000
STEVEN MIRACLE, COO 1999 125,000 -- 125,000
The foregoing includes $100,961 earned in 1998 by Dr. Pavlik but not paid in
1998, which amount has not been paid to date. Additionally included for 1999 are
$74,038, $41,800, and $52,855 for Dr. Pavlik, Mr. Metchick, and Mr. Miracle
Respectively which has not been paid to date. These amounts do not include
Amounts paid by Healthcare, which was not a subsidiary during the reported years
And is not presently a subsidiary.
OPTION/SAR GRANTS TABLE.
NOT APPLICABLE.
AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE
TABLE.
<PAGE>
NOT APPLICABLE.
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.
NOT APPLICABLE.
COMPENSATION OF DIRECTORS.
The Company does not separately compensate its employee directors for their
Service as directors. Non-employee directors are expected to receive annual fees
Of $2,500, with no additional compensation for meetings attended. Non-employee
Directors also will be reimbursed any reasonable out-of-pocket expenses incurred
in connection with their attendance at meetings. No additional compensation is
anticipated for service on committees of the board of directors. Prior to April
1999, all of the Company's directors (and nominees for directors) also were
employees. Accordingly, no compensation reportable under this item was paid.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-
CONTROL ARRANGEMENTS.
Effective January 1, 1999, the Company has entered into an executive
employment agreement with Steven Miracle, pursuant to which Mr. Miracle serves
as the chief operating officer of access Health Alternatives, Inc. Mr. Miracle
also serves in that capacity with respect to Healthmax. The term of the
agreement is three years, with consecutive one-year terms if not terminated by
written notice prior to the expiration of an ongoing term. Mr. Miracle will
receive a base salary of $125,000 in each year of the term, and will be entitled
to a cash bonus equal to two percent (2%) of the Company's annual net profits
after taxes, subject to maximums as follows: $100,000 in 1999; $150,000 in 2000;
and $200,000 in 2001. Mr. Miracle also is to receive a common stock bonus as
follows: 100,000 shares upon commencement of his employment relationship;
100,000 shares on January 1, 2000; and 100,000 shares on January 1, 2001. In the
event of a change of control of the Company, as defined in the agreement,
additional compensation would be payable to Mr. Miracle equivalent to
aproximately three times his annual base salary plus taxes thereon.
effective January 1, 1999, the Company has entered into an executive
employment agreement with Donald Metchick, pursuant to which Mr. Metchick serves
as the Executive Vice President in charge of Health assurance plans of access
Health Alternatives, Inc., and as the president of hap. The term of the
agreement is three years, with consecutive one-year terms if not terminated by
written notice prior to the expiration of an ongoing term. Mr. Metchick will
receive a base salary of $100,000 in each year of the term, and will be entitled
to a cash bonus equal to two percent (2%) of the Company's annual net profits
after taxes, subject to maximums as follows: $100,000 in 1999; $150,000 in 2000;
and $200,000 in 2001. Mr. Metchick also is to receive a common stock bonus as
follows: 100,000 shares upon commencement of his employment relationship;
100,000 shares on January 1, 2000; and 100,000 shares on January 1, 2001. In the
event of a change of control of the Company, as defined in the agreement,
additional compensation would be payable to Mr. Metchick equivalent to
approximately three times his annual base salary plus taxes thereon.
The Company has no employment contracts with any other employees, although
It anticipates entering into an agreement with Dr. Daniel J. Pavlik, the terms
Of which agreement have not been finalized.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
As of March 20, 2000, the Company ha d issued and outstanding 2,636,887
shares of Its common stock. Instructions for the issuance of an additional
256,803 shares Were subsequently delivered to the Company's transfer agent.
Accordingly, the Percentages reflected below are based on 2,893,690 shares
outstanding.
NAME AND ADDRESS(1) # OF SHARES % OF TOTAL
- ------------------- ----------- ----------
The Daniel J. Pavlik Revocable Trust(2) 537,736 18.58
1602 Patton Avenue
Apopka, Fl 32703
Donald Metchick(3) 445,265 15.39
106 Wisteria Drive
Longwood, Fl 32792
Steven Miracle 300,000 10.37
3000 Old Alabama, Suite 119250
Alpharetta, Georgia 30022
<PAGE>
Patricia Cohen 150,000 5.18
203 Waymouth Harbor Cove
Longwood, Fl 32792
- -----------------
(1) For purposes of the table, a person is considered to "beneficially own"
any shares with respect to which he/she directly or indirectly has or
shares voting or investment power or of which he or she has the
right to acquire the beneficial ownership within 60 days. Unless
otherwise indicated and subject to applicable community property law,
voting power and investment power are exercised solely by the person
named above or shared with members of his or her household.
(2) Includes 218,618 shares owned of record by the Daniel J.
Pavlik revocable trust (trustee of which is Dr. Pavlik and
the beneficiary of which is Rebecca Pavlik). Also includes
218,618 shares owned of record by the Rebecca Pavlik
revocable trust (of which mrs. Pavlik is the trustee and Dr.
Pavlik is the beneficiary), as to which Dr. Pavlik disclaims
beneficial ownership since he does not have the ability to
directly or indirectly vote or dispose of the shares owned by
this trust. Does not include 715,000 shares issuable to the
Daniel J. Pavlik revocable trust upon closing of the
acquisition of Healthcare and does not include 715,000 shares
issuable to the Rebecca Pavlik revocable trust upon closing
of the acquisition of Healthcare.
(3) does not include 476,000 shares issuable upon closing of the
acquisition of Healthcare. Includes 60,000 shares sold in a
private transaction by Mr. Metchick in May 1999, as that
transaction has not yet been reflected on the Company's
transfer agent's records.
(B) SECURITY OWNERSHIP OF MANAGEMENT.
AS OF JANUARY 17, 2000, THE COMPANY HAD ISSUED AND OUTSTANDING 2,636,887
SHARES OF ITS COMMON STOCK. INSTRUCTIONS FOR THE ISSUANCE OF AN ADDITIONAL
256,803 SHARES WERE SUBSEQUENTLY DELIVERED TO THE COMPANY'S TRANSFER AGENT.
ACCORDINGLY, THE INFORMATION REFLECTED BELOW IS BASED ON 2,893,690 SHARES
OUTSTANDING. THE FOLLOWING TABLE SETS FORTH, AS OF JANUARY 19, 2000, CERTAIN
INFORMATION REGARDING BENEFICIAL OWNERSHIP OF THE COMMON STOCK BY MEMBERS OF
MANAGEMENT.
NAME AND ADDRESS(1) # OF SHARES % OF TOTAL
- ------------------- ----------- ----------
DANIEL J. PAVLIK(2) 537,736 18.58
1602 PATTON AVENUE
APOPKA, FL 32703
DONALD METCHICK(3) 445,265 15.39
106 WISTERIA DRIVE
LONGWOOD, FL 32792
STEVEN MIRACLE 300,000 10.37
3000 OLD ALABAMA, SUITE 119250
ALPHARETTA, GEORGIA 30022
<PAGE>
- --------------------
(1) based on 2,893,690 shares outstanding.
(2) includes 218,618 shares owned of record by the daniel j. Pavlik
revocable trust (trustee of which is Dr. Pavlik and the beneficiary of
which is Rebecca Pavlik). Also includes 218,618 shares owned of record
by the Rebecca Pavlik revocable trust (of which mrs. Pavlik is the trustee
and Dr. Pavlik is the beneficiary), as to which Dr. Pavlik disclaims
beneficial ownership since he does not have the ability to directly or
indirectly vote or dispose of the shares owned by this trust. Does not
include 715,000 shares issuable to the daniel j. Pavlik revocable trust
upon closing of the acquisition of Healthcare and does not include 715,000
shares issuable to the Rebecca Pavlik revocable trust upon closing
of the acquisition of Healthcare.
(3) does not include 476,000 shares issuable upon closing of the acquisition of
Healthcare. Includes 60,000 shares sold in a private transaction by Mr.
Metchick in May 1999, as that transaction has not yet been reflected on the
Company's transfer agent's records.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Prior to Novermber 1, 1999, the Company leased its corporate headquarters in
Orlando, Florida from psc realty, a partnership in which Dr. Pavlik, the
Company's president and chief executive officer, is a partner. Effective
Novermber 1, 1999, Healthcare became the sole tenant at this facility, for a
Total monthly rent of $3,000. Prior to Novermber 1st, the Company and
Healthcare shared this facility, each bearing monthly rent at the rate of
$1,500.
Prior to Novermber 1, 1999, the Company's distribution facilities in
Norcross, georgia, were provided at a rate of $2,000 per month under a verbal
Arrangement with paideia Health, inc. ("paideia"), a Company controlled by
Steven Miracle, the Company's chief operating officer. Paideia leases the
Premises from an unaffiliated third party. Effective Novermber 1, 1999, the
Company is no longer utilizing this space, and no further payments will be made
Or accrue in connection with this space.
Pavlik chiropractic group, p.a. ("pcg"), a professional association owned
And controlled by Dr. Pavlik, employs the doctors who provide services through
Access Healthcare, inc. Healthcare reimburses pcg for the costs associated with
The employment of the doctors, and pcg does not receive any premium or other
Compensation for its role.
a portion of the Company's operations, specifically those related to sales
And distribution of Healthmax products, are conducted through three affiliated
Limited liability companies ("llc"), each of which is responsible for a separate
Geographic territory under operating agreements with the Company. Healthmax is
The manager of the llc's, and performs all operating and administrative
Functions for them. The operating agreement with the llc's provide that net
Profits shall be allocated 100% to the investors in the llc's until they receive
125% of their investment, then 25% to the investor and 75% to the Company.
Losses are allocated 99% to the investor and 1% to Healthmax. The term of the
Llc's is for five years. Since all operating activities are conducted by
Healthmax on behalf of the llc's, Healthmax recognizes all of the sales and
Expenses related to the operations being conducted for tHE LLC'S.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
THE FOLLOWING EXHIBITS ARE FILED WITH THE COMPANY'S FORM 10-SB AND ARE
INCORPORATED BY REFERENCE:
EXHIBIT 3.1.1* ARTICLES OF INCORPORATION OF B C INSURANCE
SERVICES, INC.
EXHIBIT 3.1.2* ARTICLES OF AMENDMENT TO B C INSURANCE
SERVICES, INC.
EXHIBIT 3.1.3* ARTICLES OF RESTATEMENT TO THE ARTICLES OF
INCORPORATION OF PLC VENTURES CORP.
<PAGE>
EXHIBIT 3.1.4* ARTICLES OF AMENDMENT TO THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF
ACCESS HEALTHMAX HOLDINGS, INC.
EXHIBIT 3.1.5* ARTICLES OF AMENDMENT TO THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF
ACCESS HEALTHMAX HOLDINGS, INC.
EXHIBIT 3.2* BYLAWS
EXHIBIT 4.1* CLASS A COMMON STOCK PURCHASE WARRANT
EXHIBIT 4.2* CLASS B COMMON STOCK PURCHASE WARRANT
EXHIBIT 10.1* EMPLOYMENT AGREEMENT WITH STEVEN MIRACLE
EXHIBIT 10.1.1* AMENDMENT TO MIRACLE EMPLOYMENT AGREEMENT
EXHIBIT 10.2* EMPLOYMENT AGREEMENT WITH DONALD METCHICK
EXHIBIT 10.2.1* AMENDMENT TO METCHICK EMPLOYMENT AGREEMENT
EXHIBIT 10.3* FORM OF LLC OPERATING AGREEMENT (LLC II
GIVEN AS EXAMPLE)
EXHIBIT 10.3.1* SCHEDULE PERTAINING TO LLC OPERATING
AGREEMENTS
EXHIBIT 10.4* FORM OF MARKET LICENSE AGREEMENT
EXHIBIT 10.5* FORM OF AFFILIATED CLINIC AGREEMENT
(CHIROPRACTIC PHYSICIAN AGREEMENT)
EXHIBIT 10.6* CONSULTING AGREEMENT WITH DR. BARRY BRADLEY
EXHIBIT 10.7* AGREEMENT WITH THE BENECOM GROUP
EXHIBIT 21* LIST OF SUBSIDIARIES
*FILED AS EXHIBIT TO ISSUERS REGISTATION
STATEMENT ON FORM 10-SB AS AMENDED
EXHIBIT 27 FINANCIAL DATA SCHEDULE
SIGNATURE
Pursuant to the requirements of section 13 or 15(d) of the securities
Exchange act of 1934, the registrant has duly caused this report to be signed on
Its behalf by the undersigned, thereunto duly authorized.
ACCESS HEALTH ALTERNATIVES, INC.
By: /S/ Daniel J. Pavlik
--------------------------------------
Daniel J. Pavlik, Chairman Of The Board,
Chief Executive Officer And President
By: /S/ Steven Miracle
--------------------------------------
Steven Miracle, Chief Operating Officer
(Principal Financial Officer
<PAGE>
By: /S/ Daniel J. Pavlik
--------------------------------------
Daniel J. Pavlik, Director
By: /S/ Donald Metchick
--------------------------------------
Donald Metchick, Director
DATE: APRIL 14, 2000
<PAGE>
CONSOLIDATED
FINANCIAL STATEMENTS
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
ACCESS HEALTH ALTERNATIVES, INC.
DECEMBER 31, 1999 AND 1998
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . 1
Financial Statements:
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations. . . . . . . . . . . .4
Consolidated Statements of Stockholders' Deficit. . . . . . 5
Consolidated Statements of Cash Flows. . . . . . . . . . . .6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . .7
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Access Health Alternatives, Inc.:
We have audited the acCompanying consolidated balance sheet of Access
Health Alternatives, Inc. (the "Company") as of December 31, 1999, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Access Health
Alternatives, Inc. at December 31, 1999 and the results of their operations and
their cash flows for the years ended December 31, 1999 and 1998, in conformity
with generally accepted accounting principles.
The acCompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
9 to the financial statements, the Company has suffered recurring losses from
operations and has a net capital and working capital deficiency, which raises
substantial doubt about their ability to continue as a going concern.
Management's plans regarding those matters are described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Orlando, Florida
March 23, 2000
1
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
Consolidated Balance Sheet
December 31, 1999
ASSETS
------
<S> <C>
Current assets:
Cash $ 1,757
Receivables:
Trade, less allowance for doubtful accounts of $200 58,923
Other 4,380
--------
Total receivables 63,303
Inventories 144,250
--------
Total current assets 209,310
Property and equipment, net 52,357
Deferred rescission costs 640,663
Other assets 5,050
--------
Total assets $907,380
========
</TABLE>
See acCompanying notes to consolidated financial statements.
2
2
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
Consolidated Balance Sheet, Continued
December 31, 1999
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
<S> <C>
Current liabilities:
Notes and commercial paper $ 1,491,348
Current obligation under capital lease 8,847
Bank overdraft 8,016
Accounts payable 404,935
Accrued liabilities 610,511
Due to related parties:
Stockholders 185,137
Limited liability companies 1,603,809
Access Healthcare, Inc. 29,651
------------
Total due to related parties 1,818,597
------------
Total current liabilities 4,342,254
Unearned income 274,370
Obligation under capital lease, less current portion 10,749
Minority interest in subsidiary 129,545
------------
Total liabilities 4,756,918
Stockholders' deficit:
Common stock, $.001 par value, 50,000,000 share authorized,
2,626,787 shares issued and outstanding 2,627
Capital in excess of par value 1,530,217
Accumulated deficit (5,382,382)
------------
Total stockholders' deficit (3,849,538)
------------
Total liabilities and stockholders' deficit $ 907,380
============
</TABLE>
See acCompanying notes to consolidated financial statements.
3
3
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
Consolidated Statement of Operations
For the years December 31, 1999 and 1998
1999 1998
------------ ----------
<S> <C> <C>
Revenues:
Equipment $ 10,431 299,989
Products 365,925 439,601
Other 147,128 94,968
------------ ----------
Total revenues 523,484 834,558
Cost of sales:
Equipment 3,200 58,799
Products 83,470 125,027
Other 53,234 7,180
------------ ----------
Total cost of sales 139,904 191,006
------------ ----------
Gross profit 383,580 643,552
Selling, general and administrative 1,839,724 1,191,534
------------ ----------
Operating loss (1,456,144) (547,982)
Other expense:
Interest expense 116,978 164,057
Other, net 4,104 2,559
------------ ----------
Total other expense 121,082 166,616
------------ ----------
Net loss $(1,577,226) (714,598)
============ ==========
Basic net loss per share $ (0.94) (0.71)
============ ==========
</TABLE>
See acCompanying notes to consolidated financial statements.
4
4
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
Consolidated Statement of Operations
For the years December 31, 1999 and 1998
COMMON STOCK CAPITAL IN
------------------------ EXCESS OF ACCUMULATED
SHARES AMOUNT PAR VALUE DEFICIT TOTAL
------------ ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 750 $ - 7,500 (3,090,558) (3,083,058)
Shares issued to reflect
recapitalization for reverse
acquisition (Note 1a) 565,100 565 (565) - -
Impact of reverse acquisition
of PLC Ventures Corp.
shares outstanding
(Note 1a) 437,500 438 (438) - -
Shares issued for services 20,000 20 19,980 - 20,000
Net loss - - - (714,598) (714,598)
------------ ---------- ------------ ----------- -----------
Balances, December 31, 1998 1,023,350 1,023 26,477 (3,805,156) (3,777,656)
Shares issued in Rule 504
offering, February 1999 323,333 323 484,677 - 485,000
Shares issued for acquisition
of a portion of the
minority in Access
Health Max, Inc. (Note 10) 289,104 290 275,228 - 275,518
Shares issued for services 991,000 991 743,835 - 744,826
Net loss - - - (1,577,226) (1,577,226)
------------ ---------- ------------ ----------- -----------
Balances, December 31, 1999 2,626,787 $ 2,627 1,530,217 (5,382,382) (3,849,538)
============ ========== ============ =========== ===========
</TABLE>
See acCompanying notes to consolidated financial statements.
5
5
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
Consolidated Statement of Operations
For the years December 31, 1999 and 1998
1999 1998
------------ ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,577,226) (714,598)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 20,690 33,520
Losses of limited liability companies 137,858 506,255
Unearned income recognized (78,000) (78,000)
Allowance for doubtful accounts (5,371) -
Issuance of common stock for services 744,826 20,000
Cash provided by (used in) changes in:
Receivables (41,726) 515
Inventories (75,282) (15,202)
Other assets 11,661 -
Deferred rescission costs (640,663) -
Bank overdraft (93,341) 61,749
Accounts payable 120,298 132,788
Accrued liabilities 158,323 390,044
Unearned income 73,953 130,000
------------ ---------
Net cash provided by (used in) operating activities (1,244,000) 467,071
Cash flows from investing activities:
Purchases of property and equipment (9,213) (6,633)
------------ ---------
Net cash used in investing activities (9,213) (6,633)
Cash flows from financing activities:
Payments on notes and commercial paper (128,728) (526,200)
Proceeds from notes and commercial paper 458,400 150,015
Due to (from) related party (9,732) 143,233
Due to (from) stockholders 67,759 (23,741)
Advances (to) from limited liability companies 381,852 (610,144)
Proceeds from issuance of stock 485,000 405,063
------------ ---------
Net cash provided by (used in) financing activities 1,254,551 (461,774)
------------ ---------
Net increase (decrease) in cash 1,338 (1,336)
Cash at beginning of period 419 1,755
------------ ---------
Cash at end of period $ 1,757 419
============ =========
Supplemental disclosure:
Cash paid during the period for interest $ 94,219 146,448
============ =========
Supplemental disclosure of non-cash activities:
Capital lease obligation $ 12,800 -
============ =========
</TABLE>
See acCompanying notes to consolidated financial statements.
6
6
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
On September 2, 1998, Access Healthmax Holdings, Inc. ("Holdings"),
f/k/a PLC Ventures Corp. ("PLC") acquired approximately 94.3% of the
outstanding common stock of Access Healthmax, Inc. ("Healthmax"), for
565,100 shares of authorized, but previously unissued common stock.
Immediately preceding the exchange, there were 437,500 shares
outstanding of PLC. The shares of PLC had been issued for a total
consideration of $1,000. PLC had no sales or revenues since its
formation on October 2, 1988 and had zero stockholders' equity at the
time of acquisition of Healthmax. For accounting purposes, the
acquisition has been treated as an acquisition of PLC by Healthmax and
as a recapitilization ("Reverse Acquisition") of Healthmax. The
historical financial statements prior to September 2, 1998 are those
of Healthmax. Pro forma information is not presented, since the
combination is a recapitilization rather than a business combination.
The deficiency in the net assets of PLC were not adjusted in
connection with the Reverse Acquisition since it consisted of accounts
payable.
On March 11, 1999, Holdings changed its name to Access Health
Alternatives, Inc. ("Alternatives"). Unless the context indicates
otherwise, references hereinafter to (the "Company") include Healthmax
and/or Alternatives.
On March 3, 1999, the Board of Directors authorized a ten-for-one
reverse stock split effective March 15, 1999. All references in the
financial statements to number of shares, per share amounts and market
prices of the Company's common stock have been retroactively restated
to reflect the decreased number of common shares outstanding.
(B) BUSINESS
The Company, through Healthmax, distributes clinical nutrition
programs and products throughout the United States using small doctor
practices as its sales and clinical support base. Healthmax commenced
operations in 1996 and has spent the past three years developing its
blends of nutritional Health care products, and in establishing an
infrastructure for the distribution and sales of those products, as
well as a system of support for the participating doctors.
7
7
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(B) BUSINESS, CONTINUED
A portion of the Company's operations, specifically those related to
sales and distribution, are conducted through three affiliated limited
liability companies ("LLC"), each of which is responsible for a
separate geographic territory under operating agreements with the
Company. Healthmax is the manager of the LLC's, and performs all
operating and administrative functions for them. The operating
agreement with the LLC's provide that net profits shall be allocated
100% to the investors in the LLC's until they receive 125% of their
investment, then 25% to the investor and 75% to the Company. Losses
are allocated 99% to the investor and 1% to Healthmax. The term of the
LLC's is for five years. Since all operating activities are conducted
by Healthmax on behalf of the LLC's, Healthmax recognizes all of the
sales and expenses related to the operations being conducted for the
LLC's.
In May 1999, the Company formed Access Health Assurance Plans, Inc., a
Florida corporation that will market the Company's member benefits
programs.
(C) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(D) STATEMENT OF CASH FLOW
For purposes of the statement of cash flows, the Company considers all
short-term investments with a maturity of three months or less, at the
date of purchase, to be cash equivalents.
(E) INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial accounting Standards No. 109 Accounting for
Income Taxes. Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
8
8
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(F) USE OF ESTIMATES
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 reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
(G) REVENUE RECOGNITION
Sales are recognized when the product is shipped.
(H) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the individual assets using
straight-line and declining-balance methods.
(I) OTHER ASSETS
Deferred rescission costs included in the other assets on the balance
sheet are amortized over five years.
(J) BASIC NET LOSS PER SHARE
Basic loss per share amount is based on the weighted average shares
outstanding of 1,680,806 and 1,007,581 for December 31, 1999 and 1998,
respectively.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the Company's balance sheet for cash,
accounts receivable, notes and commercial paper payable, accounts
payable and accrued expenses approximate their fair value because of
the short-term maturity of these instruments.
(L) MINORITY INTEREST
The net proceeds received from a private placement of common stock of
Healthmax in 1998 has been reflected as a minority interest in
subsidiary. In view of agreement to acquire the minority interest in
1999, (see Note 10) all of the loss of Healthmax was reflected in the
acCompanying consolidated financial statement of operations for the
years ended December 31, 1999 and 1998.
9
9
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(M) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(N) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of financial Accounting Standards (SFAS) No. 130, Report
Comprehensive Income, effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income includes
all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The Company adopted
SFAS No. 130 in the current year; however, there were no changes in
equity during the period exclusive of common stock changes and net
loss. As such, comprehensive income for the year ended December 31,
1999 is the amount shown on the statements of operations as net loss.
(2) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1999 consisted of the following:
Computer equipment $ 83,660
Medical equipment 12,943
Furniture and fixtures 12,266
Leasehold improvements 2,149
Office equipment 15,075
--------
126,093
Less accumulated depreciation 73,736
--------
Total $ 52,357
========
For the years ended December 31, 1999 and 1998, depreciation expense
amounted to $20,690 and $28,049, respectively. The Company has reviewed its
long-lived assets and intangibles for impairment and has determined that no
adjustment to the carrying value of long-lived assets is required.
10
10
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) NOTES AND COMMERCIAL PAPER
Notes and commercial paper at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Commercial paper, bearing interest at 10.50%; collateralized
by inventory and accounts receivable
$822,136
Notes payable, bearing interest at 10.50%; unsecured 124,294
Lines of credit, bearing interest at 10% to 22%; unsecured 28,221
Note payable, bearing interest at 18%; unsecured 15,030
Note payable, non-interest bearing; unsecured 51,667
Notes payable, bearing interest at 12% to 18%; unsecured 450,000
----------
Total $1,491,348
==========
</TABLE>
The notes and commercial paper are all due within one year unless extended.
(4) TRANSACTIONS WITH RELATED PARTIES
In connection with forming the three LLC's, Healthmax received $225,000 as
reimbursement for costs incurred in connection with the formation and
development of their business plan, which has been reflected as a reduction
of selling, general and administrative expenses in the years ended December
31, 1999 and 1998 in the amount of $-0- and $75,000, respectively.
Healthmax also received $65,000 for each regional office opened by the
Company, which amounted to $-0- and $130,000 in the years ended December
31, 1999 and 1998, respectively. These amounts are being recognized over a
60 month period. Healthmax recognized income of $78,000 each year for 1999
and 1998. The LLC's were operating at a loss in 1999 and 1998. In
accordance with the operating agreement, 99% of the LLC's losses, which
amounted to $137,858 and $506,255, were reflected as a reduction of
selling, general and administrative expense of Healthmax in 1999 and 1998,
respectively. When the balance due to an LLC has been reduced to $-0-,
there are no further allocations of losses according to the operating
agreement. Healthmax has an option, exercisable within a five year period,
to purchase some or all of the members interest in the LLC's at a price
equal to 125% of their capital contribution, less any prior returns of
capital contributions, plus any amount necessary to pay a 10.50% preference
return to members. The amounts due to LLC's of $1,603,809 and $1,084,099 at
December 31, 1999 and 1998, respectively, reflects proceeds from the
Limited Liability Company offerings reduced by charges to the LLC's for
formation, opening regional offices, reimbursement for administrative
overhead expenses and 99% of the operating losses of the LLC's, until the
balances due to the LLC's are reduced to $-0-. The amount due to LLC's was
increased by deferred rescission costs as detailed in the following
paragraph.
11
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) TRANSACTIONS WITH RELATED PARTIES, CONTINUED
In October 1999, Healthmax was advised by the Department of Professional
and Financial Regulation, Bureau of Banking, Securities Division for the
State of Maine, that certain sales of LLC's economic interests to Maine
residents were not covered by an exemption from registration, and were
affected with the assistance of a person not licensed to sell securities in
that state, and therefore are subject to rescission. Healthmax, through
counsel, has confirmed that it will offer rescission to the Maine
investors, but has not yet determined the manner or method of this offer.
Neither the LLC's, Healthmax nor the Company, has sufficient funds
available to return the full amount of the Maine investors' interests
(approximately $743,750), should they all elect to rescind their
investment. At December 31, 1999, the total deferred rescission costs were
$640,663.
The Company rents its administrative office from a partnership in which the
principal shareholder of the Company is a partner. Lease expense relating
to the lease was $13,250 and $15,000 in 1999 and 1998, respectively. At
December 31, 1999, the Company had a liability for unpaid rent to the
partnership of $87,365 which is included in accrued liabilities (see note
7). Effective Novermber 1, 1999, the Company moved its administrative office
to a new location. The Company sells nutritional products to Healthcare at
cost. Such sales amounted to $28,127 and $36,517 in 1999 and 1998,
respectively. The liability of $9,547 at December 31, 1999 to Healthcare is
net of product sales and advances made to Healthcare and a loan from
Healthcare.
(5) LEASES
The following is a schedule by year of future minimum lease payments under
capital leases together with the present value of the net lease payments
for furniture and equipment:
2000 $11,478
2001 3,910
2002 3,910
2003 3,910
2004 3,258
------
Total lease payments 26,466
Less amount representing interest 6,870
------
Present value of lease payments 19,596
Less current obligations 8,847
------
Long-term capital lease obligations $10,749
=======
Total rental expense was $72,064 and $31,240 for the years ended December
31, 1999 and 1998, respectively.
12
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INCOME TAXES
The actual income tax benefit differs from the "expected" tax benefit,
computed by applying the U.S. Federal Corporate Income Tax Rate of 34%, to
the loss before income taxes, as follows:
1999 1998
--------- ---------
Income tax benefit computed at the $ 537,000 243,000
federal Statutory rate of 34%
State income tax benefit, net of tax 58,000 26,000
benefit federal
Nondeductible expenses (1,000) (2,000)
Increase in valuation allowances (594,000) (267,000)
$ - -
=========== =========
The components of the deferred income tax asset are as follows:
1999 1998
---------- -----------
Deferred tax assets:
Net operating losses $1,627,000 890,000
Start up costs capitalized
for tax purposes and amortized
over a five year nperiod,
expensed for financial
statement purposes 281,000 421,000
Unearned income 103,000 105,000
Other 2,000 3,000
2,013,000 1,419,000
--------- -----------
Valuation allowance (2,013,000) (1,419,000)
$ - -
============== ===========
At December 31, 1999, the Company had tax operating loss carryforwards of
approximately $4,326,000 available to reduce future federal income taxes,
which, if unused, will expire from 2011 to 2019.
13
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(7) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Estimated value of common stock
to be issued for services (note 10) $ 25,000
Accrued salaries 332,746
Accrued commissions 95,148
Accrued interest 65,811
Accrued rent 87,635
Accrued property taxes 3,492
Other 679
--------
$610,511
========
</TABLE>
(8) LITIGATION
The Company is a nominal defendant in a legal action. While the results of
the legal action cannot be predicted with certainty, the Company believes
that the final outcome of such litigation will not have a materially
adverse effect on its financial condition.
(9) CONTINGENCY
At December 31, 1999, the Company has suffered recurring losses and has a
net capital deficiency of $3,849,538 and a working capital deficiency of
$4,132,944, which raises substantial doubt about its ability to continue as
a going concern. The Company is contemplating a public or private offering
of securities as a means of raising funds to implement its business plan.
(10) COMMON STOCK ISSUED OR ISSUABLE FOR SERVICES
In April 1999, the Company issued 150,000 shares of common stock to a
non-employee in consideration for facilitating revisions in January and
February 1999 to the original agreement with PLC (see Note 1a) that had not
been complied with as of December 31, 1998. The value of the shares issued
was based on the trading price of the Company's common stock, less a
discount for the restriction on transferability of the shares.
14
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) COMMON STOCK ISSUED OR ISSUABLE FOR SERVICES, CONTINUED
Effective January 1, 1999, the Company entered into employment agreements
with two officers, which provided that each officer will receive a base
salary plus a cash bonus equal to two percent (2%) of the Company's net
profit after income taxes, subject to maximums of $100,000, $150,000 and
$200,000 in 1999, 2000 and 2001, respectively. The employment agreements
also provide common stock bonuses to each officer of 100,000 shares in
1999, 2000 and 2001, respectively. The 200,000 shares to be issued as of
January 1, 1999 have been reflected as compensation as of December 31,
1999. The value of the shares issued was based on the trading price of the
Company's common stock, less a discount for the restriction on
transferability of the shares.
During the year ended December 31, 1999, the Company issued 241,000 shares
of common stock for consulting services from non-employees. The Company
valued these transactions at the estimated fair value of the services
received.
In Novermber 1999, the Company issued 400,000 shares of common stock to
certain employees for services. The value of the shares issued was based on
the trading price of the Company's common stock, less a discount for the
restriction on transferability of the shares.
In 1999, the Company sold a total of 323,333 shares of Common Stock, for an
aggregate of $485,000, pursuant to Rule 504, promulgated under the
Securities Act of 1933, as amended.
The Company is authorized to issue 10,000,000 shares of preferred stock,
$.01 par value per share, the rights and preferences of which May be
designated by the Board of Directors without shareholder approval. On March
3, 1999, the Company designated the rights and preferences of its Series A
Redeemable Convertible Preferred Stock, and authorized the sale of up to
1,400,000 shares as part of an offering that was terminated in September
1999 (the "Unit Offering"). Prior to the Unit Offering, no series of
preferred stock had been designated. Although one Unit was sold in the Unit
Offering for $25,000, the purchaser has agreed to accept an investment in
the Company's next offering, provided the terms are as favorable to him as
were the terms of the Unit Offering. No definitive terms have been
established for the Company's next offering, and it is possible that the
$25,000 will be returned to the investor at some future date and has been
included in accrued liabilities (see note 7).
In April 1999, the Company agreed to acquire the minority interest in
Healthmax for restricted stock of the Company, at the rate of one share of
the Company's common stock for each share of Healthmax stock exchanged. If
all of the minority shareholders exchange their Healthmax stock for the
Company's stock, the Company would be required to issue approximately
430,000 additional shares of common stock. During 1999, the Company issued
289,104 shares for acquisition of a portion of the minority interest.
15
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS
The Company agreed to acquire Healthcare during 1999 (see Note 4), subject
to certain conditions. Under the terms of the acquisition, to be accounted
for as a pooling of interests, the Company will exchange approximately
2,000,000 shares of common stock for all of Healthcare's outstanding
shares. Healthcare operates a chiropractic group practice in Central
Florida and has affiliated chiropractic practices throughout Florida.
If the acquisition is consummated, the financial position and results of
operations of the Company and Healthcare will be combined in 2000
retroactive to January 1, 2000. In addition, all prior periods presented
will be restated to give effect to the pooling.
Presented below are condensed combined pro forma financial statements as of
and for the year ended December 31, 1999 and 1998 to give effect to the
transaction. The condensed combined financial statements reflect the
elimination of interCompany transactions.
Condensed balance sheet at December 31, 1999:
<TABLE>
<CAPTION>
COMPANY HEALTHCARE ELIMINATIONS COMBINED
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Assets:
Current assets $ 209,310 152,145 - 361,455
Property & equipment, net 52,357 76,728 - 129,085
Other assets 5,050 9,547 (9,547) 5,050
Deferred rescission costs 640,663 - - 640,663
$ 907,380 238,420 (9,547) 1,136,253
------------ ----------- ------------- -----------
Liabilities:
Current liabilities $ 4,342,254 360,429 (9,547) 4,693,136
Unearned income 274,370 - - 274,370
Long-term obligations 10,749 144,725 - 155,474
Minority interest 129,545 - - 129,545
4,756,918 505,154 (9,547) 5,252,525
------------ ----------- ------------- -----------
Stockholders' deficit (3,849,538) (266,734) - (4,116,272)
$ 907,380 238,420 (9,547) 1,136,253
</TABLE>
16
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS, CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Condensed statement of operations:
Revenues $ 523,484 1,937,144 (28,127) 2,432,501
Operating costs and expenses
1,979,628 1,766,097 (28,127) 3,717,598
Operating income (loss) (1,456,144) 171,047 - (1,285,097)
------------ ---------- -------- ------------
Other expenses (121,082) (52,732) - (173,814)
Net income (loss) $(1,577,226) 118,315 - (1,458,911)
Basic net loss per share $ (.40)
</TABLE>
Condensed balance sheet at December 31, 1998:
<TABLE>
<CAPTION>
COMPANY HEALTHCARE ELIMINATIONS COMBINED
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Assets:
Current assets $ 85,593 55,106 - 140,699
Property & equipment, net 51,034 61,923 - 112,957
Other assets 16,711 39,383 (39,383) 16,711
$ 153,338 156,412 (39,383) 270,367
------------ ----------- ------------- ------------
Liabilities:
Current liabilities $ 3,242,288 361,535 (39,383) 3,564,440
Unearned income 278,417 - - 278,417
Long-term obligations 5,226 179,926 - 185,152
Minority interest 405,063 - - 405,063
3,930,994 541,461 (39,383) 4,433,072
------------ ----------- ------------- ------------
Stockholders' deficit (3,777,656) (385,049) - (4,162,705)
$ 153,338 156,412 (39,383) 270,367
Condensed statement of operations:
Revenues $ 834,558 1,588,823 (36,517) 2,386,864
Operating costs and expenses
1,382,540 1,626,134 (36,517) 2,972,157
Operating income (loss) (547,982) (37,311) - (585,293)
------------ ----------- ------------- ------------
Other expenses (166,616) (38,195) - (204,811)
Net income (loss) $ (714,598) (75,506) - (790,104)
Basic net loss per share $ (.26)
</TABLE>
17
<PAGE>
FINANCIAL STATEMENTS
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
ACCESS HEALTHCARE, INC.
DECEMBER 31, 1999 AND 1998
<PAGE>
ACCESS HEALTHCARE, INC.
Table of Contents
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Deficit 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Access Healthcare, Inc.:
We have audited the acCompanying consolidated balance sheets of Access
Healthcare, Inc. (the "Company") as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Access Healthcare,
Inc. at December 31, 1999 and 1998, the results of their operations and their
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The acCompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has a net capital and working capital
deficiency, which raises substantial doubt about their ability to continue as a
growing concern. Management's plans regarding those matters are described in
Note 8. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Orlando, Florida
March 13, 2000
1
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
--------
1999 1998
---------- ---------
Current assets:
<S> <C> <C>
Cash $ 37 754
Accounts receivable, net of allowance for doubtful accounts 146,300 54,352
of $45,000 and $-0- in 1999 and 1998, respectively
Other current assets 5,808 -
---------- ---------
Total current assets 152,145 55,106
Property and equipment, net 76,728 61,923
Due from related parties-Access Health Alternatives, Inc. 9,547 39,383
---------- ---------
Total assets $ 238,420 156,412
========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
--------------------------------------
Current liabilities:
Line of credit $ 24,858 25,000
Bank overdraft 16,444 26,995
Current obligations under capital leases 42,737 30,237
Current maturities of long-term debt 17,060 14,822
Accounts payable 103,372 104,929
Accrued liabilities 23,566 24,160
Due to stockholders 54,179 57,179
Due to related parties-limited liability Company 78,213 78,213
---------- ---------
Total current liabilities 360,429 361,535
Obligations under capital leases, less current portion 130,340 145,080
Long-term debt, less current portion 14,385 34,846
---------- ---------
Total liabilities 505,154 541,461
Stockholders' deficit:
Common stock, $.001 par value, 40,000,000 shares
authorized, 7,868,750 shares issued and outstanding 787 787
Capital in excess of par value 301,757 301,757
Accumulated deficit (569,278) (687,593)
---------- ---------
Total stockholders' deficit (266,734) (385,049)
---------- ---------
Total liabilities and stockholders' deficit $ 238,420 156,412
========== =========
</TABLE>
See acCompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1999 and 1998
1999 1998
----------- ----------
<S> <C> <C>
Revenues:
Patient services, net $1,937,144 1,588,823
Expenses:
Selling, general and administrative 1,766,097 1,626,134
----------- ----------
Operating income (loss) 171,047 (37,311)
Other income (expense):
Interest expense (52,732) (35,515)
Loss on sale of assets - (2,847)
Miscellaneous income - 167
----------- ----------
Total other expense (52,732) (38,195)
----------- ----------
Net income (loss) $ 118,315 (75,506)
=========== ==========
</TABLE>
See acCompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1999 and 1998
COMMON STOCK CAPITAL
--------------------------- IN EXCESS OF ACCUMULATED
SHARES AMOUNT PAR VALUE DEFICIT TOTAL
------------ ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1997 7,868,750 $ 787 301,757 (612,087) (309,543)
Net loss for the year
ended December 31, 1998 - - - (75,506) (75,506)
------------ ------------- ----------- --------- ---------
Balances, December 31, 1998 7,868,750 787 301,757 (687,593) (385,049)
Net income for the year
ended December 31, 1999 - - - 118,315 118,315
------------ ------------- ----------- --------- ---------
Balances, December 31, 1999 7,868,750 $ 787 301,757 (569,278) (266,734)
============ ============= =========== ========= =========
</TABLE>
See acCompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
For the years ended December 31, 1999 and 1998
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 118,315 (75,506)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation 26,090 26,693
Loss on sale of assets - 2,847
Allowance for doubtful accounts 45,000 -
Cash provided by (used for) changes in:
Accounts receivable (136,948) 8,348
Other current assets (5,808) -
Bank overdraft (10,551) 26,995
Accounts payable (1,557) (12,634)
Accrued liabilities (594) -
---------- ---------
Net cash provided by (used in) operating activities 33,947 (23,257)
Cash flows from investing activities:
Purchases of equipment (10,939) (3,334)
Proceeds from sale of equipment - 1,500
---------- ---------
Net cash used in investing activities (10,939) (1,834)
Cash flows from financing activities:
Proceeds from borrowings - 342,635
Principal payments on borrowings (50,561) (217,255)
Due from related parties, net 29,836 (87,500)
Payment from stockholder (3,000) 40,679
Due to related parties, net - (55,733)
---------- ---------
Net cash provided by (used in) financing activities (23,725) 22,826
---------- ---------
Net decrease in cash (717) (2,265)
Cash at beginning of period 754 3,019
---------- ---------
Cash at end of period $ 37 754
========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 52,732 35,515
========== =========
Supplemental disclosure of non-cash transactions:
Capital lease obligation $ 29,956 -
========== =========
</TABLE>
See acCompanying notes to consolidated financial statements.
5
<PAGE>
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND BUSINESS
Access Healthcare, Inc. (the "Company") was originally organized as
Daniel J. Pavlik, D.C., P.A., a corporation in the State of Florida in
April 1983. In October 1993, the name was changed to Access
Healthcare, Inc.
(b) PRINCIPLES OF CONSOLIDATION
The acCompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary. All
significant interCompany transactions and balances have been
eliminated in consolidation.
(c) BUSINESS
The Company operates a chiropractic group practice in Central Florida
and has affiliated chiropractic practices throughout Florida.
(d) STATEMENT OF CASH FLOW
For purposes of the statement of cash flows, the Company considers all
short-term investments with a maturity of three months or less, at the
date of purchase, to be cash equivalents.
(e) INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109 Accounting for
Income Taxes. Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
6
<PAGE>
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f) USE OF ESTIMATES
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 reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
(g) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the individual assets using the
straight-line method. Property under capital leases is amortized over
the lease terms.
(2) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Computer equipment $ 75,276 37,251
Medical equipment 62,907 62,488
Furniture and fixtures 18,786 16,335
Vehicles 14,298 14,298
Leasehold improvements 32,158 32,158
203,425 162,530
-------- -------
Less accumulated depreciation 126,697 100,607
-------- -------
Total $ 76,728 61,923
======== =======
</TABLE>
For the years ended December 31, 1999 and 1998, depreciation expense amounted to
$26,090 and $26,693, respectively. The Company has reviewed its long-lived
assets for impairment and has determined that no adjustments to the carrying
value of long-lived assets is required.
7
<PAGE>
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C>
Notes payable to an individual with interest
rates ranging from 8.75% to 9.25%; with
an aggregated payment of $1,600 due
monthly $23,138 38,264
Note payable to a bank, bearing interest at
10.23%; $284 due monthly, secured by a
vehicle 8,307 10,741
Other notes - 663
------- ------
31,445 49,668
Less current maturities on long-term debt 17,060 14,822
------- ------
Total long-term debt $14,385 34,846
======= ======
</TABLE>
The following is a schedule by year of principal payments of long-term debt
subsequent to 1999:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------
<S> <C>
2000 $17,060
2001 7,124
2002 6,670
2003 591
--------
31,445
</TABLE>
(4) TRANSACTIONS WITH RELATED PARTIES
The Company rents its administrative office and a chiropractic clinic from
a partnership in which the principal shareholder of the Company is a
partner. Lease expense relating to the lease was $54,060 and $50,100 in
December 31, 1999 and 1998, respectively. At December 31, 1999 and 1998,
the Company had a liability for unpaid rent to the partnership of $52,860
and $59,814, respectively, which is included in accounts payable. Future
minimum lease payments under this lease are $66,000 per year through 2002.
The Company purchases nutritional products from a related party. Such
purchases are recorded at cost and amounted to $28,127 and $36,517 at
December 31, 1999 and 1998, respectively.
8
<PAGE>
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) LEASES
During 1999, the Company obligated existing equipment under long-term
capital leases. The following is a schedule by year of future minimum lease
payments under capital leases at December 31:
<TABLE>
<CAPTION>
Year ending December 31:
- ------------------------
<S> <C>
2000 $ 83,344
2001 80,633
2002 61,079
2003 31,409
2004 6,009
--------
Total lease payments 262,474
Less amount representing interest
(11% to 35%) 89,397
--------
Present value of lease payments 173,077
Less current obligations 42,737
--------
Long-term capital lease obligations $130,340
========
</TABLE>
(6) INCOME TAXES
The actual income tax expense (benefit) from both 1999 and 1998, differs
from the "expected" tax expense (benefit), computed by applying the U.S.
Federal Corporate Income Tax Rate of 34%, to the income (loss) before
income taxes, as follows:
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
Income tax expense (benefit) computed at the
federal statutory rate of 34% $ 40,000 (26,000)
State income tax benefit, net of federal
tax benefit 5,000 (3,000)
Nondeductible expenses 5,000 5,000
Decrease (increase) in valuation allowance (50,000) 24,000
--------- --------
$ - -
</TABLE>
9
<PAGE>
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INCOME TAXES, CONTINUED
The components of the deferred income tax asset at December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating losses $ 209,000 224,000
Allowance for doubtful accounts 17,000 -
Accrual method (book) to cash method
(tax) adjustment (24,000) 28,000
202,000 252,000
Valuation allowance (202,000) (252,000)
---------- ---------
$ - -
========== =========
</TABLE>
At December 31, 1999, the Company had tax operating loss carryforwards of
approximately $578,000 available to reduce future federal income taxes,
which expire from 2011 to 2019.
(7) LITIGATION
The Company is a party to a legal action. While the results of the legal
action cannot be predicted with certainty, the Company believes that the
final outcome of such litigation will not have a materially adverse effect
on its financial condition.
(8) CONTINGENCY
At December 31, 1999, the Company has a net capital deficiency of $266,734
and a working capital deficiency of $248,891, which raises substantial
doubt about their ability to continue as a going concern. The Company is
contemplating a public or private offering of securities as a means of
raising funds to implement its business plan.
(9) PENDING ACQUISITION
The Company entered into an agreement to be acquired by Access Health
Alternatives, Inc., a Company related by common management and
shareholders. Under the terms of the acquisition, to be accounted for as a
pooling of interests, the shareholders of the Company will exchange
7,868,750 shares of common stock for approximately 2,000,000 shares of
common stock of Access Health Alternatives, Inc.
10
<PAGE>
