UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the period from ______________ to ______________
Commission file number 0-26445
-------
ACCESS HEALTH ALTERNATIVES, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-3542362
------- ----------
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4619 Parkbreeze Court, Orlando, Florida 32808
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(407) 299-0629
---------------
(Issuer's Telephone Number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant 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 ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 2,636,887 shares of common stock
--------------------------------
as of January 17, 2000.
- --------------------------
Transitional Small Business Disclosure Format (Check one) Yes [ ] No [X]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------------- -------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash $ 18,464 419
Receivables:
Trade 101,321 8,218
Other 9,988 7,988
--------------- -------------
Total receivables 111,309 16,206
Inventories 54,439 68,968
Other current assets 979 -
--------------- -------------
Total current assets 185,191 85,593
Property and equipment, net 36,748 51,034
Other assets, net 12,608 16,711
Deferred rescission cost 640,663 -
--------------- -------------
Total assets 875,210 153,338
=============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Notes and commercial paper 1,632,882 1,155,723
Current obligation under capital lease 10,815 7,523
Bank overdraft 32,725 101,357
Accounts payable 193,251 284,637
Accrued liabilities 577,377 452,188
Due to related parties:
Stockholders 25,709 117,378
Limited liability companies including rescission
Of $763,750 to be offered to holders of economic
interests at September 30, 1999 1,649,184 1,084,099
Access Healthcare, Inc 31,107 39,383
--------------- -------------
Total due to related parties 1,706,000 1,240,860
--------------- -------------
Total current liabilities 4,153,050 3,242,288
Unearned income 294,584 278,417
Obligation under capital lease, less current portion 4,190 5,226
Minority interest in subsidiary 405,063 405,063
--------------- -------------
Total liabilities 4,856,887 3,930,994
Stockholders' deficit:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
none issued - -
Common stock, $.001 par value, 50,000,000 share authorized,
1,023,350 shares issued and outstanding at
December 31, 1998 and 1,737,684 at
September 30, 1999 1,737 1,023
Capital in excess of par value 917,043 26,477
Accumulated deficit (4,900,457) (3,805,156)
--------------- -------------
Total stockholders' deficit (3,981,677) (3,777,656)
--------------- -------------
Total liabilities and stockholders' deficit $ 875,210 153,338
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------
1999 1998 1999 1998
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Equipment $ - 29,134 - 244,267
Products 161,550 90,649 362,175 322,014
Other 53,164 3,472 109,741 53,275
---------- --------- ----------- ---------
Total revenues 214,714 123,255 471,916 619,556
Cost of sales:
Equipment - 3,155 - 67,390
Products 17,246 34,453 94,360 93,829
Other - - 2,460 771
---------- --------- ----------- ---------
Total cost of sales 17,246 37,608 96,820 161,990
---------- --------- ----------- ---------
Gross profit 197,468 85,647 375,096 457,566
Selling, general and administrative 539,894 215,748 1,365,633 739,845
---------- --------- ----------- ---------
Operating loss (342,426) (130,101) (990,537) (282,279)
Interest expense 55,389 39,879 104,764 143,857
Net loss $(397,815) (169,980) (1,095,301) (426,136)
========== ========= =========== =========
Basic net loss per share $ (0.24) (0.17) (0.75) (0.42)
========== ========= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------
1999 1998 1999 1998
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(397,815) (169,980) (1,095,301) (426,136)
Adjustment to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 9,174 8,141 27,521 24,423
Losses of limited liability companies 92,482 134,616 178,686 415,413
Unearned income recognized (23,500) (19,500) (63,833) (58,500)
Issuance of common stock for services 180,000 - 406,280 -
Cash provided by (used in) changes in:
Receivables (73,853) (96,196) (95,103) (89,517)
Inventories 1,366 12,583 14,529 (382)
Other assets 9,927 5,717 (979) -
Bank overdraft 32,725 42,844 (68,632) 127,733
Accounts payable 47,495 (36,804) (91,386) 27,720
Accrued liabilities 45,038 7,005 125,189 75,859
---------- --------- ----------- ---------
Net cash provided by (used in)
operating activities (76,961) (111,574) (663,029) 96,613
Cash flows from investing activities:
Payments for the purchase of property
and equipment (1,194) (2,831) (9,132) (5,331)
---------- --------- ----------- ---------
Net cash used in investing activities (1,194) (2,831) (9,132) (5,331)
Cash flows from financing activities:
Payments on notes and commercial paper (31,026) (119,213) (165,013) (483,745)
Proceeds from notes and commercial paper 199,999 - 644,428 150,015
Due to (from) related party (8,637) (20,890) (8,276) -
Due to (from) stockholders 3,001 165,219 (91,669) 16,600
Advances (to) from limited liability companies (147,575) (174,166) (254,264) (179,404)
Increase in unearned income - - 80,000 -
Proceeds from issuance of stock - 258,063 485,000 405,063
---------- --------- ----------- ---------
Net cash provided by (used in)
financing activities 15,762 109,013 690,206 (91,471)
---------- --------- ----------- ---------
Net increase (decrease) in cash (62,393) (5,392) 18,045 (189)
Cash at beginning of period 80,857 6,958 419 1,755
---------- --------- ----------- ---------
Cash at end of period $ 18,464 1,566 18,464 1,566
========== ========= =========== =========
Supplemental disclosure of non-cash activities:
Cash paid during the period for interest $ 55,389 34,053 91,871 122,846
========== ========= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(unaudited)
(1) 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
a recapitalization ("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
recapitalization rather than a business combination. The deficiency in the
net assets of PLC was 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, Access Health Assurance
Plans, Inc. (a wholly-owned subsidiary of Alternatives), and 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.
(2) BASIS OF PRESENTATION
In the opinion of the management, the accompanying unaudited interim
consolidated financial statements include all adjustments necessary to
present fairly the financial position of the Company, the results of its
operations and changes in cash flows for the interim periods reported.
These adjustments are of a normal recurring nature. All financial
statements presented herein are unaudited. However, the balance sheet as of
December 31, 1998, was derived from the audited consolidated balance sheet.
These statements should be read in conjunction with the financial
statements included in the Company's Registration Statement on Form 10SB,
filed with the Securities and Exchange Commission, which financial
statements include audited financial statements for the fiscal year ended
December 31, 1998. The results of operations for the interim periods shown
in this report are not necessarily indicative of results to be expected for
the fiscal year.
<PAGE>
(3) LITIGATION
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
effected 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 ($763,750),
should they all elect to rescind their investment. The Company has
recorded a liabiltity for the rescission as of September 30, 1999, which
resulted in an increase in the liability previously recorded with respect
to the state of Maine investors of $640,663. The Company has recorded
deferred rescission costs for $640,663.
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 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. All LLC interests
sold in the State of Florida are approximately $1,472,000.
The Company has been notified of a suit by a lender demanding, among other
things, the enforcement of a settlement agreement between the lender and
the Company. The Company believes the suit will be satisfied upon payment
of all outstanding amounts owed, which totals approximately $52,000 and is
reflected as a liability on the balance sheet at September 30, 1999.
The Company has been notified of a suit by a former employee seeking a
judgment for approximately $3,600 for expenses and salaries accrued and
owed prior to termination. The amount is reflected as a liability on the
balance sheet at September 30, 1999.
(4) CONTINGENCY
At December 31, 1998, the Company has suffered recurring losses and has a
net capital deficiency of $3,777,656 and a working capital deficiency of
$3,156,695, 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.
(5) ADDITIONAL CORPORATE EVENTS
In April 1999, the Company agreed to acquire Access HealthCare, Inc.,
("HealthCare") subject to certain conditions. The parties have agreed to
defer the closing of this transaction until the Securities and Exchange
Commission has indicated that it has no further comments to the Company's
Registration Statement on Form 10SB that was filed earlier this year. Under
the terms of the acquisition, the Company will exchange approximately
2,000,000 shares of common stock for all of HealthCare's outstanding
shares. Since the principal owners of HealthCare are also the principal
owners of the Company, the acquisition of HealthCare will constitute a
reorganization of entities under common control to be accounted for similar
to a pooling of interests. HealthCare operates a chiropractic group
practice in Central Florida and has affiliated chiropractic practices
throughout Florida.
The financial position and results of operations of the Company and
HealthCare will be combined in 1999 retroactive to January 1, 1999. In
addition, all prior periods presented will be restated to give effect to
the transaction.
Presented below are condensed combined pro forma financial statements as of
and for the nine months ended September 30, 1999, to give effect to the
transaction accounted for similar to a pooling of interests. The condensed
combined financial statements reflect the elimination of intercompany
transactions.
<TABLE>
<CAPTION>
Condensed balance sheet at September 30, 1999
COMPANY HEALTHCARE ELIMINATIONS COMBINED
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Assets:
Current assets $ 185,191 58,865 - 244,056
Property and equipment 36,748 48,570 - 85,318
Other assets 653,271 31,107 (31,107) 653,271
------------ ----------- ------------- -----------
875,210 138,542 (31,107) 982,645
============ =========== ============= ===========
Liabilities:
Current liabilities 4,153,050 399,717 (31,107) 4,521,660
Unearned income 294,584 - - 294,584
Long-term obligations 4,190 96,786 - 100,976
Minority interest 405,063 - - 405,063
------------ ----------- ------------- -----------
4,856,887 496,503 (31,107) 5,322,283
Stockholders' Deficit (3,981,677) (357,961) - (4,339,638)
------------ ----------- ------------- -----------
$ 875,210 138,542 (31,107) 982,645
============ =========== ============= ===========
Condensed statement of operations for the nine months ended September 30, 1999
Revenues $ 471,916 1,344,105 (33,672) 1,782,349
Operating costs and expenses 1,462,453 1,277,029 (33,672) 2,705,810
------------ ----------- ------------- -----------
Operating income (loss) (990,537) 67,076 - (923,461)
Other expenses 104,764 39,988 - 144,752
------------ ----------- ------------- -----------
Net income (loss) $(1,095,301) 27,088 - (1,068,213)
============ =========== ============= ===========
Basic loss per share $ (0.31)
============
</TABLE>
(6) NET LOSS PER SHARE
Basic loss per share is computed giving effect to the recapitalization with
Alternatives. For purposes of the computation of the basic net loss per
share 1,003,350 shares of common stock are assumed to be outstanding for
the three months and nine months ended September 30, 1998. The numbers of
weighted average shares outstanding for the three months and nine months
ended September 30, 1999 were 1,674,098 and 1,457,168 respectively.
(7) INCOME TAXES
The Company has recorded a valuation allowance for any income tax benefit
associated with the current and prior year loss before income taxes.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction with
the financial statements of the Company and the accompanying notes appearing
previously 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.
Results of Operations for the Periods Ended September 30, 1999 Compared with
Periods Ended September 30, 1998
Management believes that a comparison of the financial performance of the
Company in the three months ended September 30, 1999 and in the three months
ended September 30, 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.
Prior to the decision to terminate the sales of labs and lab equipment,
this equipment was sold to members of the Company's provider network, and
required a fairly high level of training and support. The equipment component
presently sold to providers is a much more basic, much less costly component,
with a higher profit margin to the Company. As a result of the decision to alter
the equipment component, revenue from the sales of equipment decreased from
$29,134 in the quarter ended September 30, 1998 to none in the comparable
period in 1999. Sales of the Company's products, however, increased from $90,649
in the three months ended September 30, 1998 to $161,550 in the comparable
period of 1999, or an increase of 78.2%. Notably, the cost of those sales
decreased dramatically, from $34,453 in the three months ended September 30,
1998, to $17,246 in the same period in 1999, or a decrease of 54.1%. As would
be expected, the cost of sales as a function of the sales decreased
substantially from 30.0% for the three months ended September 30, 1998, to 10.7%
for the three months ended September 30, 1999. Management believes that profit
margins on the sale of products can be further increased as volume increases.
Three limited liability companies affiliated with the Company experienced
losses in the nine-month periods ended September 30, 1999 and 1998.
Nine months ended 9/30/99
LLC I - $148,476
LLC II - $ 64,767
LLC III - $ 1,840
Total - $215,083
Nine months ended 9/30/98
LLC I - $184,085
LLC II - $190,346
LLC III - $ 64,767
Total - $419,609
Selling, general and administrative expenses during the three months ended
September 30, 1999, were significantly greater than during the comparable period
in 1998, increasing from $215,748 to $539,894, or a 150% 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. Ongoing increases in SG&A through the end of 1999 may
be anticipated.
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 the three months ended September 30,
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
<PAGE>
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 September 30, 1999, loans from affiliated parties were
approximately $1 million, while debt owed on third-party notes and commercial
paper was approximately $1.6 million. Accrued liabilities were approximately
$577,000, while accounts payable were approximately $190,000.
As a result, in large measure, of the Company's increased activities
related to installing new Access HealthMax centers, trade receivables at
September 30, 1999 were approximately $100,000. 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.
The cash used in operations for the three months ended September 30, 1999
and 1998 and the nine months ended September 30, 1999 and 1998 was $76,961,
$111,574, $663,029 and $96,613, respectively. The major items comprising the
cash used in operations were losses of $397,815, $169,980, $1,095,301 and
$426,136, respectively. The cash used in operations was reduced by non-cash
charges of $180,000 and $406,280 in the three months and nine months ended
September 30, 1999 relating to common stock issued for services.
Cash used in investing activities for the three months ended September 30,
1999 and 1998 and the nine months ending September 30, 1999 and 1998 of $1,194,
$2,831, $9,132 and $5,331, respectively related to purchases of property and
equipment.
The net cash provided by (used in) financing activities during the
applicable periods was $15,762, $109,013, $690,206 and ($91,471) respectively.
The net cash provided by (used in) notes and commercial paper borrowing and
payments was $168,973, ($119,213), $479,415 and ($333,730), respectively. The
Company also received $258,063, $485,000, and $405,063 and cash for issuing
common stock in the three months ended September 30, 1998 and nine months ended
September 30, 1999 and 1998, respectively.
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.
The Company has not determined the effect on the Company's business or
finances that the rescission offer required by the State of Maine may have
(please see the description of this matter under Part II, Item 1, Legal
Proceedings, below). If a cash rescission offer were to be made, and if all of
the recipients of that offer accepted it, the Company's affiliated LLC's would
be required to return approximately $750,000. The extent to which the Company's
business and financial relationship with the LLC's would cause this rescission
offering to affect the Company and its financial statements will be evaluated by
the Company and its consultants, and every effort will be made to satisfy the
State of Maine's requirements without impairing the Company's limited capital
resources.
The Company continues to experience negative cash flow, and anticipates
this continuing through the end of the current fiscal year. 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 defecit.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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
totalling $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 with an approximate
present balance of $820,000, with respect to which the Company may be in
default, although the Company has not received any other notices of default at
this time.
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.
ITEM 2. CHANGES IN SECURITIES
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. As only one Unit was sold in the Unit Offering for
$25,000, the investor and the Company agreed that the Company would not issue
the Unit. Instead, the Company has recorded the $25,000 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 investor'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, for which The Edge will received 150,000 restricted shares of the
Company's common stock, under Section 4(2).
From April through October 1999, the Company exchanged common stock of
HealthMax for common stock of Health Alternatives, under Section 4(2), as
follows:
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
<PAGE>
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 Kirsi 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
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
Retirement 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 October 1999, the Board of Directors authorized the issuance of an
aggregate of 420,000 shares of common stock to certain employees, 400,000 of
which were issued in December 1999, as follows. These were issued under Section
4(2).
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
In January, 2000, the Company issued 100,000 shares to each of Donald
Metchick and Steven Miracle pursuant to their respective employment
agreements, pursuant to Section 4(2).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
n/a
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
n/a
ITEM 5. OTHER INFORMATION.
In June 1999, the Company filed a registration statement on Form 10SB under
the Securities Exchange Act of 1934 (the "Exchange Act"). Sixty days
thereafter, the registration statement automatically became effective. The
Company received its first comment letter from the Securities and Exchange
Commission (the "Commission") dated October 14, 1999. The Company responded to
that comment letter and filed an amendment to the registration statement on
November 1, 1999. As of November 15, 1999, the Commission continues to review
the Company's filing.
In October 1999, the Company, and Access HealthCare, Inc. ("HealthCare"),
agreed to defer the closing of the acquistion of HealthCare until the Commission
has completed its review of the Company's registration statement filed under the
Exchange Act.
In November 1999, Access Health Alternatives, Inc., relocated its corporate
offices and the administrative offices of its subsidiaries to 4619 Parkbreeze
Court, Orlando, Florida 32808. Access HealthCare, Inc., an affiliated entity,
remains at 2016 Orange Avenue, Orlando, Florida 32818. The Company also closed
its distribution facilities in Atlanta, Georgia, and relocated them to the new
facilities at Parkbreeze Court in Orlando. The Colorado Springs, Colorado
office also has been closed, and the Company will consider looking for other
space for that regional office at some future date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
n/a
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCESS HEALTH ALTERNATIVES, INC.
-----------------------------------
(registrant)
Date: 1/30/00 /s/ Daniel J. Pavlik
-------- ---------------------------------------
(signature)*
Daniel J. Pavlik, President & CEO
Date: 1/30/00 /s/ Donald Metchick
-------- ---------------------------------------
(signature)*
Donald Metchick, Vice President
Date: 1/30/00 /s/ Steven Miracle
-------- ---------------------------------------
(signature)*
Steven Miracle, Chief Operating Officer
*Print the name and title of each signing officer under this signature.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 111
<ALLOWANCES> 0
<INVENTORY> 54
<CURRENT-ASSETS> 185
<PP&E> 112
<DEPRECIATION> 76
<TOTAL-ASSETS> 875
<CURRENT-LIABILITIES> 4153
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 917
<TOTAL-LIABILITY-AND-EQUITY> 875
<SALES> 362
<TOTAL-REVENUES> 472
<CGS> 94
<TOTAL-COSTS> 96
<OTHER-EXPENSES> 1365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> (1095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1095)
<EPS-BASIC> (.75)
<EPS-DILUTED> (.75)
</TABLE>
