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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
HEALTHBRIDGE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 061538201
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
1177 West Hastings Street, Suite 1818, Vancouver, BC Canada V6E2K3
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(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (604) 602-1717
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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Common Stock, $0.0001 Par Value OTC Bulletin Board
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TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business............................... 3
Our Corporate History......................................... 3
Our Business.................................................. 4
Reports to Securities Holders................................. 5
Risk Factors.................................................. 5
ITEM 2. Management's Discussion and Analysis or Plan of
Operations............................................... 12
ITEM 3. Description of Properties............................. 13
ITEM 4. Security Ownership of Certain Beneficial Owners
and Management........................................... 14
ITEM 5. Directors and Executive Officers, Promoters and
Control Persons.......................................... 15
ITEM 6. Executive Compensation................................ 16
ITEM 7. Certain Relationships and Related Transactions........ 18
ITEM 8. Description of Securities............................. 18
PART II
ITEM 1. Market Price Of And Dividends On The Registrant's
Common Equity And Related Stockholder Matters............ 19
ITEM 2. Legal Proceedings..................................... 20
ITEM 3. Changes And Disagreements With Accountants On
Accounting And Financial Disclosure...................... 20
ITEM 4. Recent Sales Of Unregistered Securities............... 20
ITEM 5. Indemnification Of Directors And Officers............. 20
PART III
ITEM 1. Index To Exhibits..................................... 21
ITEM 2. Description of Exhibits............................... 22
ITEM 3. Signatures............................................ 23
Financial Statements And Exhibits............................. F-1
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
Information Regarding Forward Looking Statements: The statements contained in
this Form 10-SB that are not historical fact are "forward-looking statements".
These statements can often be identified by the use of forward-looking
terminology such as "estimates," "projects," "believes," "expects," "may,"
"will," "should," "intends," or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. We wish to caution the reader that these
forward-looking statements, such as the timing, costs and scope of acquisition
of, or investments in, existing businesses, the revenue and profitability levels
of such businesses, and other matters contained above and herein in this Form
10-SB regarding matters that are not historical facts, are only predictions. No
assurance can be given that the future results indicated, whether expressed or
implied, will be achieved. While sometimes presented with numerical specificity,
these projections and other forward-looking statements are based upon a variety
of assumptions relating to our business which, although we consider reasonable,
may not be realized. Because of the number and range of the assumptions
underlying our projections and forward-looking statements, many of which are
subject to significant uncertainties and contingencies that are beyond our
reasonable control, some of the assumptions inevitably will not materialize and
unanticipated events and circumstances may occur subsequent to the date of this
Form 10-SB. These forward-looking statements are based on our current
expectations, and we assume no obligation to update this information. Therefore,
our actual experience and results achieved during the period covered by any
particular projections or forward-looking statements may differ substantially
from those projected. Consequently, the inclusion of projections and other
forward-looking statements should not be regarded as a representation by us or
any other person that these estimates and projections will be realized, and
actual results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.
ITEM 1. DESCRIPTION OF BUSINESS
Our Corporate History
We were incorporated under the laws of the State of Texas on February
17, 1993 under the name of "GFB Alliance Services, Inc." On July 24, 1997, we
amended our Articles of Incorporation to, among other things, change our name to
"World Staffing II, Inc." On November 3, 1998, we further amended our Articles
of Incorporation to change our name to "WattMonitor, Inc." We amended our
Articles of Incorporation again on May 13, 1999 to, among other things, change
our name to Healthbridge, Inc. We are filing this Form 10-SB on a voluntary
basis under the Securities Exchange Act of 1934 (the "Exchange Act") in order to
be eligible for quotation on the OTC Bulletin Board.
We were originally organized for the purpose of providing specialized
personnel placement and employee leasing services to businesses. However, we
abandoned that project and remained essentially dormant until December 29, 1998,
when we entered into a letter of intent to acquire all of the issued and
outstanding stock of Healthbridge, Inc., a Delaware corporation ("Healthbridge
Delaware"). Healthbridge Delaware was a newly formed entity that had acquired
the right to purchase the assets and certain liabilities of Roatan Medical
Technologies, Inc., Wintex Corporation, Roatan Medical Services, Inc. and United
Services, Inc. (collectively, the "Roatan Companies"). The Roatan Companies
developed and operated a proprietary medical waste treatment system called the
Redloc II Waste Disposal System, as more fully described below ("Redloc II").
The Roatan Companies also acquired the rights to the
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microwave waste sterilization patent on which the Redloc II system is based, as
more fully described elsewhere herein.
Healthbridge Delaware acquired the assets and certain liabilities of
the Roatan Companies on January 27, 1999. Shortly thereafter, we entered into a
merger agreement with Healthbridge Delaware whereby we merged with Healthbridge
Delaware and we were the surviving corporation. Under the merger agreement, each
of the issued and outstanding shares of Healthbridge Delaware common stock was
converted into the right to receive one share of our common stock. The merger
was completed May 13, 1999 after it was approved by the shareholders of both
companies.
Our Business
We have developed, and intend to enhance and market the Redloc II
Waste Disposal System. The Redloc II Waste Disposal System allows waste handlers
to collect and dispose of regulated medical waste, with minimal risk of exposure
to the waste handlers and others.
Medical waste includes barrier items such as gloves, masks and
disposable gowns, intravenous bags used for blood transfusions, and items
contaminated by any body fluids during routine medical and dental office
visits, surgery or autopsy, including needles and surgical implements. Medical
waste is disposed of in specially-marked plastic bags in or near the area where
it is generated. For example, gloves used in surgery are disposed of in the
operating room. Most medical waste disposal methods require waste handlers to
transport the plastic bags containing medical waste from the area where the
waste is generated to an offsite facility where the waste is sterilized and
destroyed.
The Redloc II system allows waste handlers to sterilize and dispose of
medical waste on-site at the hospital or other facility where it is first placed
into a plastic bag. The Redloc II system consists of two vessel halves
resembling half-globes that are moveable with respect to one another such that
the upper vessel may be lowered onto the lower vessel. The upper vessel seats
itself directly onto a rubber O-ring attached to the lower vessel. The O-ring
allows the two vessels to form a seal, resulting in a globe-shaped chamber that
can be pressurized.
The Redloc II system operates by placing a bag containing medical waste
into a special receptacle and then closing the two vessel halves around the
receptacle. Once closed, the Redloc II system's operator sterilizes the plastic
bag and medical waste using microwaves and a small amount of water to heat and
pressurize the chamber. The automated system is controlled by a computer which
monitors the process to achieve sterilization. Through the Redloc II system, the
plastic bag and medical waste are sterilized and reduced to safe end-products
that are ready for shredding, transport or other disposal as normal waste. The
process produces no by-products that require subsequent treatment prior to
disposal.
The Redloc II system does not require employees to either handle
contaminated waste or maintain contaminated waste disposal equipment. The
problem of infection of hospital employees and even unrelated persons from
medical waste contaminated with viruses such as HIV and Hepatitis, and the
inability to dispose of untreated waste, are changing the way in which medical
waste will be handled in the future. The most prevalent method of
sterilization, incineration, involves burning the medical waste at an approved
incinerator facility. Incineration emits smoke containing particulates
considered dangerous by the U.S. Environmental Protection Agency. On September
30, 1999 the EPA, in its final ruling entitled Final Standards for Hazardous Air
Pollutants for Hazardous Waste Combustors, required medical waste incinerators
to significantly reduce the quantity of certain harmful particulates emitted by
medical waste incineration. Incinerators that produce unacceptable levels of
the particulates must be upgraded to ensure compliance with the rule by
September 30, 2002. We believe that the new EPA regulations will cause
incinerators to become more scarce and expensive to operate.
Until June 26, 2000, we operated a Redloc II beta-test system
installed at the Presbyterian Hospital in Dallas, Texas. The beta-test system
was purchased by Presbyterian Hospital for $275,000 in 1996. The beta-test
system began operations on October 9, 1996, pursuant to an agreement dated the
same day. Our agreement with the Presbyterian Hospital obligated us to operate
the Redloc II system and bear the cost of any shortfall in disposal capacity up
to 1,470 pounds per day at a cost of $0.23/per pound, and to reimburse
Presbyterian Hospital for labor costs associated with such shortfall at
$8.30/hour. The beta-test system experienced problems with throughput (ie, the
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amount of medical waste that can be processed over a specified time period),
such that the beta-test system produced a steady shortfall in disposal capacity.
Presbyterian Hospital shut down the beta-test system's operations on June 26,
2000, and has informally notified us that it is terminating our agreement due to
our inability to make timely shortfall reimbursements and due to the aging
nature of the equipment at the hospital. Because of our shortage of funds we
cannot currently replace or upgrade the equipment. The agreement expires by its
own terms on October 9, 2000. We do not intend to enter into additional
beta-testing agreements at other facilities. In the past, we have paid
Presbyterian Hospital up to $5,000 per month due to such shortfall. The average
cost per month of our shortfalls during the past year was $2,000, however, we
believe our obligation to reimburse Presbyterian Hospital for disposal
shortfalls was suspended along with the beta-test system's operations on June
26, 2000. As of July, 2000, the date of our last invoice from Presbyterian
Hospital, we owed $8,577.16. Our total expense due to shortfalls since we began
operating the beta- test system in 1996 is $51,947.61.
Our only developmental activities to date have been to observe the
beta-test system and to plan design modifications that might increase
throughput. Based on our observation of the beta-test system, we believe our
shortfall in throughput stems from the Redloc II system's seal design. The
Redloc II system is composed of an upper and lower vessel that are sealable and
resealable, as described above. The edge of each vessel ends in a flat lip that
extends out several inches. The O-ring is affixed to the lower vessel's lip.
At present, the upper vessel is designed to be lowered so that the lip on the
upper vessel lies flat against the O-ring to create a seal. Often, the upper
vessel is not properly aligned when lowered. Misalignment creates a weak seal,
and sometimes requires that the sterilization process be halted so that the
upper vessel can be raised and lowered again until a better seal is obtained.
Repeated raising and lowering of the upper vessel also causes wear and tear to
the O-ring, which results in a weaker seal between the upper and lower vessels.
A weak seal inhibits the Redloc II system's ability to generate pressure within
the chamber and requires that medical waste remain in the chamber for a longer
period of time before sterilization is achieved. Wear and tear also results in
downtime for the Redloc II system when a new O-ring must be installed.
Replacing the O-ring takes at least one day because the O-ring must be glued to
the lower vessel's lip and the glue must be allowed to set over a 24-hour
period. On average during the last year, we replaced the O-ring on the
beta-test system once per month.
We believe that we can modify the seal mechanism to enhance the
system's efficiency by replacing the vessels' flat lips with raised, toothed
tracks. We anticipate that the "teeth" of the tracks will be u-shaped and will
interlock when the upper vessel is lowered onto the lower vessel. We intend to
affix the O-ring along the toothed track of the lower vessel, and believe that
this design will enhance the alignment between the upper and lower vessels and
create a tighter seal. We expect this modification to increase the Redloc II
system's current throughput by 20%. We also expect that the O-ring will need to
be replaced only once every three months. We estimate that this modification
will cost approximately $30,000 and take approximately three months to design
and produce. We anticipate beginning work on this enhancement in approximately
two months.
We do not presently generate profits and we expend approximately
$15,000 per month on operations (not including expenses owed to the Presbyterian
Hospital due to shortfall). On August 15, 2000 we entered into a loan agreement
with ValorInvest Ltd., pursuant to which ValorInvest is loaning us $500,000 for
working capital purposes in exchange for our promissory note bearing interest of
7.5% per annum and warrants to purchase 200,000 shares of our common stock at
$0.50 per share (the "Interim Loan"). ValorInvest will advance the Interim Loan
to us in $50,000 increments every 30 days (up to $500,000 total) beginning on or
around September 1, 2000. We must repay the Interim Loan in full by September 1,
2001. In addition, we are in the process of raising up to $500,000 through a
private placement of up to 1,000,000 units (each consisting of one share of our
common stock and one common stock purchase warrant exercisable at $0.50 (the
"2000 Offering"). In February 1999 we sold 450,000 shares of our common stock
and raised $900,000. Since we were able to raise a total of $900,000 in that
offering, we believe that we have the capability to raise $300,000 at this time.
See "Part II-Item 4. Recent Sales of Unregistered Securities". As of August 8,
2000, we have sold 390,000 units and raised $195,000 in the 2000 Offering. Funds
raised in the 2000 Offering are being used first for working capital and general
corporate purposes, including the payment of certain past due obligations
(including legal, accounting and consulting fees of approximately $86,606.02).
We also expect to use some of the funds raised in the 2000 Offering to pay
accounting (estimated at $6,500), legal (estimated at $18,600), printing
(estimated at $900) and other miscellaneous costs associated with filing this
Registration Statement. Assuming we raise $300,000 in the 2000 Offering, we
intend to allocate the proceeds as follows:
<TABLE>
<S> <C> <C>
Cost of the 2000 Offering................ $32,000.00 11%
Past Due Legal Fees....................... $58,606.02 19%
Past Due Accounting Fees.................. $3,000.00 1%
Past Due Consulting Fees.................. $25,000.00 8%
Registration Under the Exchange Act....... $30,000.00 10%
Working Capital and General
Corporate Purposes...................... $151,393.98 51%
Total..................................... $300,000.00 100%
</TABLE>
At present, we have prior obligations of approximately $472,621
outstanding (including consulting fees of $40,000 owed to our director, Wilhelm
Liesner). If we are required to pay all of our outstanding obligations out of
the proceeds of the 2000 Offering and the Interim Loan, we anticipate that the
remaining funds would be adequate to continue our operations for twelve months,
however, we might be unable to develop and market our Redloc II system as
contemplated. In this event, we might market the Redloc II system as is, change
our business, or raise additional funds in order to develop our Redloc II
system. We would likely raise any such additional funds through private
placements of our common stock.
Our principal market for the Redloc II system is hospitals. Other
potential markets into which we might expand include medical and dental offices,
blood banks, nursing homes, outpatient offices, veterinary clinics and funeral
homes. We anticipate that we will be most dependent upon hospitals as customers
because hospitals produce more medical waste than smaller facilities and are
more likely to have a need for an on-site medical waste disposal facility.
We are not currently manufacturing Redloc II systems. We anticipate
that component parts for the Redloc II system, including any modification to our
current design, will be built by as yet undetermined third-party suppliers. See
"Risk Factors - We Have Limited Research and Design Capability and Must Depend
Upon Third Parties To Build Our Redloc II System". Once received, we anticipate
that the components will be assembled at our warehouse and the finished Redloc
II system shipped to the customer directly. As part of the cost of the Redloc
II system, we anticipate that we would train our customer's personnel to operate
the Redloc II system. We also anticipate providing maintenance for the Redloc
II system at an additional billable cost.
Our competition comes from other sources of medical waste sterilization
and disposal. We estimate that incineration accounts for approximately 65% of
the medical waste disposal market and autoclaving (the use of steam to heat
medical waste to a high temperature for a period of time sufficient to destroy
any pathogens) accounts for approximately 25%. We further estimate that
alternative treatment technologies such as the Redloc II system, other
microwave-based units and chemical treatment systems account for the remaining
10% of the medical waste disposal market. We believe that the Redloc II system
has a competitive advantage over incineration because it does not emit harmful
pathogens and because the cost of incineration is likely to rise in light of the
recent EPA regulations. Autoclaving requires that waste handlers open the
medical waste bag and evenly spread out medical waste so that the steam can
penetrate and sterilize it. We believe the Redloc II system has a competitive
advantage over autoclaving because it does not require waste handlers to come
into contact with medical waste. We believe we are competitive relative to
other alternative technologies because the Redloc II system is based upon our
Microwave Patents (as defined below). See "Risk Factors - Our Redloc II System
Depends Upon Our Microwave Patent" and "Legal Proceedings".
The technology underlying the Redloc II system does not produce air
emissions subject to regulation by the EPA. The Redloc II system is subject to
regulation by the EPA as a device under the Federal Insecticide, Fungicide and
Rodenticide Act ("FIFRA"). Under FIFRA, we are subject to a number of
requirements, including:
- Requirements regarding books and records under FIFRA Section 8 and 40
CFR Part 169 (we must maintain books and records subject to
inspection);
- Requirements regarding inspection under FIFRA Section 9 (we may be
subject to inspections by EPA officials);
- Requirements regarding violations, enforcement activities and penalties
under FIFRA Sections 12-14 (we could be penalized for failing to comply
with FIFRA); and
- Import and export requirements under FIFRA Section 17 (we must meet
certain requirements if we export Redloc II systems to other
countries).
We intend to comply with FIFRA and any other regulations before we assemble or
market any Redloc II systems. See "Risk Factors - Our Redloc II System is
Subject to Regulation Under The Federal Insecticide, Fungicide and Rodenticide
Act". We estimate that our costs to comply with FIFRA will be minimal, as most
of the requirements do not appear onerous and fit into our current corporate
policies. For instance, we already maintain books and records regarding our
Redloc II system. In addition, most state governments require that medical
waste treatment devices be on an approved list before being used. We estimate
that approximately 34 states have approved the use of microwave-based
technologies to treat medical waste. We do not know if we must obtain separate
approval to market our Redloc II system in those states that allow
microwave-based technologies. At present, we intend to focus our efforts in
Texas, and we have no immediate plans to encourage other states to approve the
use of microwave-based technologies or the Redloc II system. We are not aware
of any other actual or pending regulations impacting the Redloc II system.
We did not expend any funds for research and development during 1999 or
1998.
Since our primary focus is the development of the Redloc II system, we
have not implemented a marketing strategy and we do not have distribution
channels in place. We anticipate that we will use a direct sales force to market
our Redloc II systems to hospitals within Texas. We estimate that we will need
approximately $10,000 to initiate a direct sales marketing campaign. We expect
to begin marketing our Redloc II system in approximately two months. We expect
that our primary product distribution channel will consist of insured, private
carriers that can be hired to deliver our Redloc II system following a sale.
At present, we have one full-time employee who is our chief engineer in
charge of product development. We also have one part-time employee that assists
with marketing, development and bookkeeping.
We are a development stage company whose only business is the
development of the Redloc II system for future marketability. We will need
financing or future profitability to continue as a going concern. No assurance
can be given that we can achieve profitability or otherwise raise the capital
necessary to fund our future business and operating needs beyond 12 months. No
assurance can be given that we can successfully develop or market the Redloc II
system.
Reports to Securities Holders
We are required to file periodic reports with the Securities and Exchange
Commission ("SEC"), including Forms 10QSB and 10KSB. We expect to prepare and
provide annual reports to our security holders as required under the Exchange
Act.
A copy of the materials we file with the SEC may be obtained and copied
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Information on the Public Reference Room may be obtained by calling the
SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC at the site http://www.sec.gov.
Risk Factors
WE HAVE NOT GENERATED PROFITS SINCE OUR INCEPTION
Since our inception in 1993, we have engaged in limited business
activities and have generated no profits to date. Our primary activities to date
have been development of the Redloc II system and raising capital. We expend
approximately $15,000 per month on operations. We intend to enhance the Redloc
II system's design before we market or sell the product, and we expect to
continue to incur losses for the foreseeable future.
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OUR REDLOC II SYSTEM MAY NOT BE ACCEPTED BY OUR TARGET MARKET
There can be no assurance that hospitals will buy our Redloc II system
to process medical waste. Market acceptance of our Redloc II system will depend
in part upon our ability to demonstrate the advantages of our Redloc II system
over competing products. Competition in the alternative treatment technology
market is limited because the size of the alternative treatment market is small
relative to incineration and autoclaving. We are not aware of any hospitals
other than the Presbyterian Hospital that use on-site alternative treatment
technologies similar to the Redloc II system. Presbyterian Hospital shut down
the beta-test system's operations on June 26, 2000, and has informally notified
us that it is terminating our agreement due to our inability to make timely
shortfall reimbursements and due to the aging nature of the equipment at the
hospital. Because of our shortage of funds we cannot currently replace or
upgrade the equipment. The agreement expires by its own terms on October 9,
2000. For a discussion of the size of the alternative treatment technology
market see "Our Business". If our future marketing strategies are not effective
we may be required to change our target market, change our business or cease
operations.
THE SUCCESS OF THE REDLOC II SYSTEM IS DEPENDENT UPON FURTHER DEVELOPMENT
While our technology is sound, the current design of our Redloc II
system requires further engineering and development to increase throughput. We
will be required to devote substantial efforts to complete development of and to
enhance our existing product because we must redesign the seal mechanism of the
Redloc II system to increase its throughput. See "Our Business". We will also be
required to devote substantial financial resources to develop the Redloc II
system because we estimate the development cost will be $30,000. We have not
begun implementing our contemplated design change and there can be no assurance
that we will succeed with our effort to redesign the Redloc II system's seal
mechanism. If we are unable to develop our Redloc II system we will need to
market our current design, change our business or cease operations.
WE HAVE LIMITED RESEARCH AND DEVELOPMENT CAPABILITY AND WE MUST DEPEND UPON
THIRD PARTIES TO BUILD OUR REDLOC II SYSTEM
Our ability to develop the Redloc II system, and therefore our success,
depends, to a significant extent, upon past research and development activities
of third parties. We have no internal research and development capability. Our
research and development activities are limited to formulating modifications to
the Redloc II system based upon observations of the beta-test system. Our
anticipated design change, discussed above under "Our Business", assumes that
the underlying technology, purchased from third parties in 1999, can withstand
such modification. There can be no assurance that our proposed design change
can be made or, if made, will function properly.
Moreover, we depend upon third-party suppliers to implement the
proposed design change to our Redloc II system. We do not maintain our own
production facilities to manufacture Redloc II system components. The beta-test
system sold to Presbyterian Hospital was built from components manufactured by
local third party suppliers. For example, the waveguide, an apparatus contained
within the sealable and resealable vessels that focuses microwaves onto the
medical waste, was built by Texas Blazing of Mesquite, Texas. The beta-test
system's vessels were built by PVI Industries, Inc. of Fort Worth, Texas, and
its electrical components and controls were provided by Dealer Electric Supply
of Dallas, Texas. We have not yet determined whether these companies can help
us develop our Redloc II system, and we have not identified who, if anyone, can
implement the design change. If we are unable to locate suitable third-party
suppliers we will be unable to develop our Redloc II system.
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THERE MAY BE NO PUBLIC MARKET FOR OUR COMMON STOCK
On May 17, 2000, our common stock was de-listed and removed from
quotation on the OTC Bulletin Board because we did not register with the SEC in
a timely manner. We intend to apply to have our common stock listed again on the
OTC Bulletin Board, however, there can be no assurance that we will be able to
do so. At present our stock is traded on the "Pink Sheets" of the National
Quotation Bureau,LLC, which provides only a limited, sporadic and highly
volatile public market for shares of our common stock. There is no assurance
that any public market will exist in the future, or, if one exists, that it will
not be volatile. There have been periods of extreme fluctuation in the stock
markets that, in many cases, were unrelated to the operating performance of, or
announcements concerning, the issuers of the affected securities. Securities of
issuers like us which have limited capitalization are also particularly
susceptible to change based on short-term trading strategies of certain
investors. Accordingly, there can be no assurance that purchasers of our common
stock will be able to resell their shares at the purchase price or at any price.
OUR COMMON STOCK MAY BE SUBJECT TO PENNY STOCK REGULATIONS
The price of our common stock ranged from $0.75 to $0.9688 between
January 1, 2000 and April 17, 2000. Our common stock had a market price of $0.91
on May 26, 2000. The SEC has adopted regulations which generally define "penny
stock" to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price less than $5.00 per share, subject to
certain exceptions. During periods when our common stock does not qualify for
inclusion on the Nasdaq SmallCap Market or is removed therefrom, the common
stock may become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a disclosure schedule prepared by the SEC relating to the penny stock market.
The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our common stock and may affect
the ability of investors to sell our common stock in the public market.
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OUR REDLOC II SYSTEM IS SUBJECT TO REGULATION UNDER THE FEDERAL INSECTICIDE,
FUNGICIDE AND RODENTICIDE ACT
Our Redloc II system is subject to regulation by the Environmental
Protection Agency as a device under the Federal Insecticide, Fungicide and
Rodenticide Act as discussed above under "Our Business". We are not aware of
any current violations under FIFRA nor are we the subject of any inquiry by the
EPA. We cannot assure you, however, that we are in compliance with FIFRA
regulations. We intend to comply with FIFRA and any other regulations before we
manufacture or market any Redloc II systems. If we were found to be in
violation of FIFRA regulations, and if the EPA undertook enforcement actions
against us, we might be forced to pay fines, modify our Redloc II system or
cease operations completely.
OUR REDLOC II SYSTEM COULD BECOME SUBJECT TO MORE EXTENSIVE GOVERNMENTAL
REGULATION
The medical waste industry is subject to extensive federal, state and
local regulation. Existing laws and enforcement policies could be changed or
new ones enacted that could require us to obtain permits or modify our Redloc II
system. Currently, the Food and Drug Administration has determined that sharp
needle destructive devices require pre-market approval, although the agency has
not exercised its authority over medical waste disposal systems such as the
Redloc II system. In addition to the FDA, the Environmental Protection Agency
regulates systems used to disinfect and sterilize medical waste and the
Occupational Safety and Health Administration regulates devices that may pose a
threat to hospital workers. The Redloc II system has not been submitted to such
agencies. Moreover, areas into which we might expand in the future, such as the
veterinary clinic and funeral home markets, are often separately regulated. We
may be subject to oversight or need premarket approval prior to our being able
to enter these areas. See "Our Business". We might not be able to comply with
the requirements of any new laws, or changes to any existing laws or to current
enforcement policies. If we are unable to comply with applicable regulations we
may not be able to manufacture, or later market, our Redloc II system.
In addition, changes to federal and local laws could alter how medical
waste must be handled in the future. Any such changes could create business
opportunities for us if they have the effect of increasing the cost of other
disposal methods such as incineration. No assurance can be given, however, that
such opportunities will develop or that the Redloc II system will be a viable
solution should such opportunities develop.
8
<PAGE> 9
WE FACE COMPETITION FROM A NUMBER OF SOURCES THAT COULD LIMIT THE VIABILITY OF
OUR REDLOC II SYSTEM
The medical waste industry is very competitive. In Dallas, where the
beta-test system was located we competed with at least three medical waste
disposal companies including: American 3CI, MSM Medical Waste Management
Services and US Med-Disposal Inc. Competition from similar medical waste
disposal companies is likely to exist in each state into which we may try to
expand in the future. Our competitors could take actions that would hurt our
growth strategy, including the support of regulations which could delay or
prevent us from obtaining or keeping permits.
Our competitors and others are continuously trying to develop new and
better medical waste treatment and disposal technologies. These technologies may
operate more cheaply, handle more waste or have other advantages over the Redloc
II system. If our
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<PAGE> 10
competitors successfully introduce new or improved technologies, our Redloc II
system could be rendered less competitive or obsolete. New treatment and
disposal technologies could also render the Redloc II system obsolete. It might
not be possible to develop the Redloc II system to compete effectively with new
medical waste treatment technologies, and even if it is possible it could be
extremely expensive.
OUR REDLOC II SYSTEM DEPENDS UPON OUR MICROWAVE PATENTS
We own two patents relating to microwave waste sterilization and other
aspects of processing medical waste (the "Microwave Patents"). The Microwave
Patents are essential to the current design of the Redloc II system. We have
also patented our Redloc II system's design in Australia.
We believe that the Microwave Patents are important to our prospects
for success, however, we cannot be sure that the Microwave Patents will give us
a competitive advantage. It is possible that we could be successfully
challenged or circumvented by competitors or other parties. The ownership of our
Microwave Patents might be challenged by their co-inventors if they initiate
legal action to terminate our rights to the Microwave Patents and are
successful. See "Legal Proceedings". The design of the Microwave Patents may be
circumvented by competitors using microwave technology that is based upon a
design different than our Redloc II system. In addition, we cannot be sure that
our treatment processes do not infringe patents or other proprietary rights of
other parties. If our Microwave Patents are successfully challenged we could
lose the right to develop the Redloc II system. If our Microwave Patents are
successfully circumvented we could lose any competitive advantage provided by
them. At present, there are no filings of re-examination with the U.S. Patent
and Trademark Office, and no parties have challenged the design of our Microwave
Patents.
In addition, we may need to sue any company that is infringing our
Microwave Patents, and we may need to defend against claims of patent
infringement brought by other companies. Any litigation could be very costly and
demand a great deal of management's time and attention. At present we do not
have the financial resources to conduct such litigation. There can be no
assurance that we will have sufficient funds to pursue, or defend against, any
litigation or patent infringement claims in the future. We also could be
required to participate in proceedings before the U.S. Patent and Trademark
Office to determine the priority of inventions or the validity of patents, which
also could involve a substantial expense and significant management time and
attention.
An unfavorable judgment or decision in any lawsuit or proceeding could
result in substantial monetary liability, or prevent us from continuing to use
our Redloc II system. If we are prevented from using our processes or equipment,
we could attempt to negotiate a license from the party owning the patent, or we
could attempt to redesign our processes to avoid infringement.
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<PAGE> 11
OUR ORGANIC DOCUMENTS LIMIT THE LIABILITY OF OUR OFFICERS AND DIRECTORS
Our Articles of Incorporation and Bylaws provide that a director's
liability to us for monetary damages will be limited. In addition, we are
obligated under our Articles of Incorporation and Bylaws to indemnify our
directors and officers against certain liabilities incurred in connection with
their service in such capacities. We may also execute indemnification agreements
which will indemnify each director and officer against certain liabilities which
they may incur. Each of these measures could reduce the legal remedies available
to us and the stockholders against such individuals.
PROVISIONS IN OUR ORGANIC DOCUMENTS CONCERNING PREFERRED STOCK, NOTICE AND OUR
BOARD OF DIRECTORS MAY INHIBIT A CHANGE OF CONTROL AND ADVERSELY AFFECT THE
MARKET PRICE OF OUR STOCK
Our Board of Directors has the authority to issue up to 25,000,000
shares of preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by our
stockholders. The rights of the holders of common stock will be subject to, and
may be adversely affected by, the rights of the holders of preferred stock.
While we have no present intention to issue shares of preferred stock, such
issuance, while providing desirable flexibility in connection with any possible
acquisitions and other corporate purposes, could have the effect of delaying,
deferring or preventing a change in our control and entrenching existing
management. In addition, such preferred stock may have other rights, including
economic rights, senior to the common stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the common
stock. Certain other provisions of our Articles of Incorporation or Bylaws,
including a staggered Board of Directors and advance notice for stockholder
proposals and director nominations, may have the effect of delaying or
preventing changes of control or our management, which could adversely affect
the market price of our common stock.
OUR WARRANTS MAY RESTRICT OUR ABILITY TO OBTAIN FUTURE FINANCING BECAUSE THEIR
EXERCISE WILL BE DILUTIVE
The existence of warrants could adversely affect our ability to obtain
future financing, and their exercise will dilute the interests of current
shareholders. The price which we may receive for the common stock issued upon
exercise of such warrants may be less than the market price of the common stock
at the time such warrants are exercised. Moreover, the holders of warrants might
be expected to exercise them at a time when we might be able to obtain needed
capital by a new offering of our securities on terms
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<PAGE> 12
more favorable than those provided for by the warrants. As of filing, warrants
to purchase 1,140,000 shares of our common stock at $0.50 per share were
outstanding or due to be issued. Additional warrants to purchase up to 610,000
shares of our common stock at $0.50 per share may be issued in connection with
the 2000 Offering. We may also issue additional warrants in the future, which
issuances may have the same effect.
WE HAVE NEVER PAID DIVIDENDS
We have not paid any dividends on our common stock and do not intend to
pay dividends in the foreseeable future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
In the past two fiscal years we have not received any revenues and have
incurred ongoing operating losses due to costs related to business development,
legal fees, salaries, consulting fees, and other costs associated with
establishing the corporate infrastructure necessary to develop the Redloc II
system.
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<PAGE> 13
During the next twelve months we intend to continue developing the
Redloc II system. Our development activities are directed at increasing
throughput and the overall efficiency of the Redloc II system by redesigning the
seal mechanism. See "Our Business" for a discussion of our proposed development
activities. We anticipate that development of our Redloc II system will cost
approximately $30,000 and take three months to complete, and that we will begin
development within three months. We anticipate that we will begin marketing our
Redloc II system in approximately two months after completing an initial market
assessment to gauge interest in our redesigned Redloc II system. We expect it
will cost approximately $10,000 to market our Redloc II system using direct
sales marketing. We do not presently generate profits and we expend
approximately $15,000 per month on operations as follows: $9,125 for salaries,
$3,250 for rent and utilities, and $2,000 for general administrative expenses.
On August 15, 2000 we entered into a loan agreement pursuant to which
we obtained the Interim Loan as discussed above under "Our Business". The
Interim Loan provides us with working capital of up to $500,000 and will be
advanced to us in $50,000 increments every 30 days beginning on or around
September 1, 2000. We intend to apply the monthly Interim Loan advances as
follows:
<TABLE>
<S> <C>
Operating Expenses.................................... $15,000.00 30%
Past Due Obligations.................................. $15,000.00 30%
Working Capital and General
Corporate Purposes (including
any product development and
marketing expenses)................................... $20,000.00 40%
Total................................................. $50,000.00 100%
</TABLE>
In addition, we are in the process of attempting to raise approximately
$300,000 (up to a maximum of $500,000) through our 2000 Offering. As of August
8, 2000 we have raised $195,000 in our 2000 Offering. We anticipate that, if we
successfully raise $300,000 in the 2000 Offering, after payment of costs of the
offering and certain past due obligations, the remaining funds generated will
provide us with working capital of approximately $150,000. We anticipate that
the proceeds from the Interim Loan and the 2000 Offering will permit us to
continue our operations for at least twelve months and that we will not need to
raise additional funds during that time.
We do not expect any significant purchases or sales of plant and
significant equipment. We do not expect significant changes in the number of our
employees or in our business operations; provided, however, that if we are
unable to successfully develop and market our Redloc II system we may be
required to decrease the number of our employees, change our business or cease
operations altogether.
ITEM 3. DESCRIPTION OF PROPERTIES
Our headquarters is located at 870 Greenview Drive, Grand Prairie,
Texas 75050, where we lease approximately 2,100 square feet of warehouse and
office space. The property is rented on a month to
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<PAGE> 14
month basis and the lease is subject to cancellation upon one month's notice.
The current monthly rent is $1,250, including utilities.
We also lease approximately 500 square feet of office space at 1177
West Hastings Street, Vancouver, British Columbia, Canada V6E 2K3, on a
month-to-month basis at a monthly rental of $2,000, including utilities. The
lease of our Vancouver property is subject to cancellation upon one month's
notice.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of our common stock as of June 22, 2000, by each shareholder known by
us to be the beneficial owner of more than 5% of our common stock, each director
and all executive officers and directors as a group. Unless otherwise indicated
by footnote, each of the shareholders named in the table has sole voting and
investment power with respect to the shares of common stock beneficially owned.
There are no shares of our preferred stock issued and outstanding.
TITLE OF NAME AND ADDRESS NUMBER OF SHARES (1) % OF CLASS
CLASS OWNED
------------- -------------------------- -------------------- ------------
Common MFC Merchant Bank SA 3,861,000 32.73
6, Cours de Rive
P.O. Box Box 3540
1211 Geneva 3 Switzerland
Common Wilhelm Liesner 615,576 (2) 5.22
Prinzregentenstr. 124
D-81677 Munich
Germany
Director
Common United Systems, Inc. 2,077,800 17.61
3627 Cole Ave.
Suite 330
Dallas, Texas 75204
Common Antonio Ponte 10,000 0.08
c/o RAIFINANZ AG
Bahnhofstrasse 106
Zurich, Switzerland CH 8001
Director
Common Nora Coccaro (3) 20,000 0.17
President, Secretary,
Treasurer and Director
Common All Executive officers and 645,576 5.47
directors as a group (4)
------------------------
(1) Represents the number of shares of common stock owned of record and
beneficially by each named person or group, expressed as a percentage of
11,797,285 shares of our common stock outstanding as of June 22, 2000.
(2) Includes shares held in the name of the companies listed below, each of
which is owned 100% by Mr. Liesner unless otherwise indicated: RIB Roatan Gmbh
(110,023 shares), Betamark (99% owned by Mr. Liesner) (45,000 shares), LTEX Ltd.
(98,000 shares), RIG Real Invest (9,500 shares), Roatan Medical Services (23,053
shares) and Roatan Medical Technologies, Inc.(approximately 66% owned by Mr.
Liesner) (330,000 shares).
(3) On June 21, 2000, Ms. Coccaro received 20,000 shares of common stock
pursuant to her consulting agreement with us. Does not include an option to
purchase 30,000 shares of common stock vesting in equal amounts over 3 years
that Ms. Coccaro received under her consulting agreement, no portion of which is
exerciseable in the next six months.
(4) Includes: Nora Coccaro, President, Secretary, Treasurer and Director;
Wilhelm Liesner, Director; and Antonio Ponte, Director. Does not include an
option to purchase 30,000 shares of common stock vesting in equal amounts over 3
years that Ms. Coccaro received under her consulting agreement, no portion of
which is exerciseable in the next six months.
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<PAGE> 15
No arrangements presently exist which would result in a change in
control.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Our current officers and directors, who will serve until our next
annual meeting, or until their successors are elected or appointed and
qualified, are as follows:
NAME AGE YR. ELECTED OFFICE HELD
---- --- ----------- -----------
Nora Coccaro 43 1999 President, Secretary,
Treasurer and Director
Wilhelm Liesner 66 1999 Director
Antonio Ponte 45 1999 Director
Nora Coccaro. Ms. Coccaro grew up in Montevideo, Uruguay, where she attended
medical school at the University of Uruguay. Ms. Coccaro has been involved in
the North and South American financial communities for the past 15 years during
which time she has gained extensive experience in management of public companies
and particularly in Canadian and American mining activities in South America.
Ms. Coccaro was Venezuelan Operations Manager of Ourominas Minerals Inc. from
1995 until 1997. In 1997, Ms. Coccaro was retained by Homestake Mining Company
as a consultant in Central America to review mineral title administration
procedures, land status and market research. In 1998, Ms. Coccaro was appointed
Director of Americana Gold & Diamond Holdings, Inc. an OTC Bulletin Board
company, and from 1998 until May 1999 she served as a Director and Executive
Vice-President of Black Swan Gold Mines. Since September 1998 Ms. Coccaro has
also served as the Consul of Uruguay to Western Canada. Ms. Coccaro has been
President and Director of Net Master since January 25, 2000, and President and
Director of Thor Ventures Corp. since February 1999. Ms. Coccaro has been an
executive officer of our company since November 1999 and is currently our
President, Treasurer, Secretary and Director. Her term as our Director expires
at our 2001 annual meeting.
Antonio Ponte. Mr. Antonio Ponte founded RAIFINANZ AG-ZURICH in 1987 and has
served as Chairman of the Board and Chief Executive Officer since that time. Mr.
Ponte has 25 years of investment and financial services experience in
Switzerland, Germany, Italy and the United States. His employment background
includes the Neue Aargauer Bank, the largest regional bank in Switzerland, and
UBS, Union Bank of Switzerland, where his fluency in five languages led to
positions in business development and international banking. Mr. Ponte remained
with Citibank Switzerland for almost eleven years as a manager in private
banking, marketing and the institutional banking division overseeing the credit
risks of financial institutions, and as relationship manager for many Swiss
banks. These positions provided significant banking contacts and relationships
for RAIFINANZ in eight countries. After two years at
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<PAGE> 16
Zurich's Finter Bank, as portfolio manager of a large discretionary portfolio,
he founded RAIFINANZ. Mr. Ponte is currently our Director and his term expires
at our 2000 annual meeting.
Wilhelm H. Liesner. Mr. Wilhelm H. Liesner has been an investor, operator and
financier of real estate, manufacturing and trading ventures in Europe and the
United States for 25 years. Mr. Liesner made a significant personal investment
in the technology that served as the basis for the Redloc II System and helped
fund efforts to develop a commercially viable application of the technology. Mr.
Liesner is currently our Director and his term expires at our 2000 annual
meeting.
(b) We have no other employees required to be listed by Item 401(b) of
Regulation S-B.
(c) No family relationship exists among our directors and executive
officers.
(d) No legal proceedings have been instituted in the previous five
years against our directors and officers, Ms. Coccaro and Messrs. Liesner and
Ponte.
ITEM 6. EXECUTIVE COMPENSATION
We maintain a 1999 Stock Incentive Plan (the "Incentive Plan") and a
1999 Outside Directors' Stock Option Plan (the "Director Plan"). The Incentive
Plan allows our Board of Directors to award a variety of equity-based
incentives, including stock awards, options, stock appreciation rights, phantom
shares, dividend equivalent rights and similar rights (together, "Stock
Incentives") to our employees. Our Board of Directors sets the exercise price
and other terms for Stock Incentives on the date of issuance. The maximum number
of shares of common stock available for issuance under the Incentive Plan is
1,500,000. The Incentive Plan may be amended by our Board of Directors without
shareholder approval. The Incentive Plan is effective until May 3, 2009.
Pursuant to her consulting agreement, Ms. Coccaro received an option to purchase
30,000 shares of our common stock. Ms. Coccaro's option was granted as of May
30, 2000 with an exercise price per share of $0.71. Ms. Coccaro's option vests
in equal amounts over a period of 3 years from the date of grant. Except as
described above, no options have been granted under the Incentive Plan.
The Director Plan provides each non-employee director with an annual
grant of 5,000 shares of our common stock beginning on the date of the first
meeting of the Board of Directors which follows our 2000 annual meeting of
shareholders. The maximum number of shares of common stock available for
issuance under the Director Plan is 120,000. The Director Plan is effective
until May 3, 2009. To date, no options have been granted under the Director
Plan.
No other regular salary, bonus, stock option plan, stock appreciation
rights, stock incentive plan, or other compensation or perquisites have been
implemented by us, except as indicated in subsection (b) below.
The following table sets forth certain summary information concerning
the compensation paid to our current and former executive officers since January
1, 1997.
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<PAGE> 17
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL
NAME AND PRINCIPAL POSITION YEAR PAID SALARY BONUS OTHER COMPENSATION
--------------------------- --------- ------ ----- ------------------
<S> <C> <C> <C> <C>
Nora Coccaro, President, Secretary, Treasurer and 1999 0 0 $ 5,000 (1)
Director
Wilhelm Liesner, Director 1999 0 0 $ 5,000 (2)
Luciano Nicasio, Director 1999 0 0 $21,500 (3)
Andrew Fisch, Treasurer and Director 1999 0 0 $21,500 (3)
Norman Wareham, Secretary, Treasurer and Director 1999 0 0 $13,659 (4)
Joel Dumareq, President and Director 1999 0 0 $ 0
Mark Hale, Sales and Marketing 1999 0 0 $72,000
Norman Wareham, Secretary, Treasurer and Director 1998 0 0 $ 0
Joel Dumareq, President and Director 1998 0 0 $ 0
Norman Wareham, Secretary, Treasurer and Director 1997 0 0 $ 0
Joel Dumareq, President and Director 1997 0 0 $ 0
John Spicer, President and Director 1997 0 0 $ 0
J. Dan Sifford, Secretary, Treasurer and Director 1997 0 0 $ 0
</TABLE>
(c) OPTION/SAR GRANTS. We did not grant any options or stock
appreciation rights during the last fiscal year. Pursuant to her consulting
agreement dated March 16, 2000, Ms. Coccaro received an option to purchase
30,000 shares of our common stock. Ms. Coccaro's option was granted May 30, 2000
with an exercise price per share of $0.71. Ms. Coccaro's option vests in equal
amounts over a period of 3 years from the date of grant.
(d) AGGREGATE OPTION/SAR EXERCISES. No stock options or stock
appreciation rights were exercised during the last fiscal year.
-------------------------
(1) Ms. Coccaro was entitled by unwritten agreement to receive $2500 per month
in consideration for services rendered by her as an executive officer from
November 16, 1999 to March 16, 2000. Ms. Coccaro became an executive officer in
November 1999 and received $2500 for each of November and December 1999. Ms.
Coccaro's unwritten agreement was superceded by her consulting agreement dated
March 16, 2000, which for a term of 1 year entitles her to receive $2500 per
month and 2 months compensation if she is terminated for other than cause.
Pursuant to her consulting agreement Ms. Coccaro also received an option to
purchase 30,000 shares of common stock as discussed above. On June 21, 2000, Ms.
Coccaro received 20,000 shares of common stock as a signing bonus under her
consulting agreement.
(2) Mr. Liesner received $20,000 from us pursuant to a consulting agreement that
we assumed when we merged with Healthbridge Delaware. Mr. Liesner's consulting
agreement, which began on or around February 1, 1999, was for a term of one year
and provided that he would receive $5,000 per month in exchange for consulting
services. We are past due $40,000 in our payments to Mr. Liesner pursuant to the
consulting agreement. We intend to pay Mr. Liesner in part out of the proceeds
of the 2000 Offering.
(3) Messrs. Fisch and Nicasio received from us an aggregate of $21,500 pursuant
to a consulting agreement with Aurum Capital LLC of which Messrs. Fisch and
Nicasio are principals. The consulting agreement began June 1, 1999 and was
terminated by mutual agreement in November 1999. We owe Aurum Capital $5,499
under the consulting agreement.
(4) Mr. Wareham received from us $13,659 pursuant to a fee-for-time consulting
arrangement with Wareham Management Ltd. Mr. Wareham is the sole owner of
Wareham Management Ltd.
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<PAGE> 18
(e) LONG TERM INCENTIVE PLAN AWARDS. We did not award any long term
incentive plan awards during the last fiscal year.
(f) COMPENSATION OF DIRECTORS. All compensation paid to our directors
during the last fiscal year is detailed in subsection (b) above. Beginning on
the date of the first meeting of the Board of Directors which follows our 2000
annual meeting of shareholders, each of our non-employee directors will become
entitled to an annual grant of 5,000 shares of our common stock pursuant to our
Director Plan, as more thoroughly discussed elsewhere herein.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT. We entered into
a consulting agreement with Ms. Coccaro dated March 16, 2000. Under her
consulting agreement, Ms. Coccaro received 20,000 shares of our common stock and
an option to purchase 30,000 shares of our common stock. Ms. Coccaro's option
was granted as of May 30, 2000 and vests in equal amounts over 3 years. Ms.
Coccaro is also entitled to receive a salary of $2,500 per month. In addition,
Ms. Coccaro is eligible to be reimbursed for her actual out of pocket expenses
incurred in connection with her duties as our President. Ms. Coccaro's
consulting agreement can be terminated by us with or without cause; provided,
however, that if she is terminated without cause she is entitled to receive two
months salary ($5000).
No other compensation plans or arrangements exist that provide for
compensation in the event of the termination or resignation of one of our
executive officers.
(h) REPORT ON REPRICING OF OPTIONS/SARs. We did not adjust or amend the
exercise price of any options or stock appreciation rights during the last
fiscal year.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As discussed above under "Item 1: Description of Business," we merged
with Healthbridge Delaware on May 13, 1999 and we were the surviving
corporation. Wilhelm Liesner, our director, was a beneficial owner of
Healthbridge Delaware and received directly or through entities controlled by
him approximately 615,576 shares of our common stock as a result of the merger.
Aurum Capital LLC (an entity whose members were our former directors Andrew
Fisch and Luciano Nicasio) was also a beneficial owner of Healthbridge Delaware
and received 400,000 shares of our common stock as a result of the merger.
Substantially all of our assets were assets of Healthbridge Delaware prior to
the merger.
There have been no other related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item
404 of Regulation S-B.
ITEM 8. DESCRIPTION OF SECURITIES
We are authorized by our Articles of Incorporation to issue 50,000,000
shares of common stock, par value $0.0001 per share, and 25,000,000 shares of
preferred stock, par value $0.0001 per share.
All shares of our common stock are entitled to one vote at any
shareholders meeting or other authorized vote of the shareholders. All shares of
our common stock are equal to one another with respect to dividends and
liquidation rights. Holders of our common stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available for dividends, and upon liquidation, are entitled to participate
pro-rata in a distribution of assets available for such distribution to
shareholders. There are no conversion, preemptive, option, or subscription
privileges with respect to any shares of our common stock. Our common stock does
not have cumulative voting rights which means that the holder of more than 50%
of the shares voting for the election of directors may elect all of the
directors if they choose to do so.
At present, there are no shares of our preferred stock issued and
outstanding. Shares of our preferred stock that are not issued and outstanding
may be issued from time to time, and will have such rights, preferences,
privileges and restrictions, including voting rights and dividend preferences,
as our
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<PAGE> 19
Board of Directors may determine, without any vote or other approval by our
shareholders.
Our Articles of Incorporation contain certain provisions that could
delay, defer or prevent a change in our control. First, our Board of Directors
is authorized to issue preferred stock without further shareholder approval. The
issuance of preferred stock in response to a hostile bid could make it more
difficult for a third party to acquire a majority of our outstanding voting
stock, thereby delaying, deterring or preventing a change in our control.
Second, our Board of Directors is divided into three classes of directors, each
class as nearly equal in number of directors as possible. With a classified
Board of Directors, at least two annual meetings of stockholders, instead of
one, are generally required to effect a change in the majority of the Board of
Directors. As a result, our provisions for a classified Board of Directors may
discourage proxy contests for the election of directors and purchases of a large
block of our common stock because it is difficult to obtain control of the Board
of Directors in a short period of time. Finally, as stated above, our common
stock does not have cumulative voting rights which means that the holder of more
than 50% of the shares voting for the election of directors may elect all of the
directors if they choose to do so. The absence of cumulative voting may have the
effect of limiting the ability of minority stockholders to effect changes in our
Board of Directors and, as a result, may have the effect of delaying changes in
our control.
Reference is made to our Articles of Incorporation, as amended, and our
Bylaws as well as to the applicable statutes of the State of Texas for
additional details on the rights, privileges, and liabilities of holders of our
stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Our common stock began trading on the OTC Bulletin Board on September
8, 1998. From September 8, 1998 to November 6, 1998, it was traded under the
symbol "WSFF". On November 9, 1998, our symbol was changed to "WATZ". On May 25,
1999, our symbol was changed to "HLBR". On May 17, 2000, our common stock was
de-listed and removed from quotation on the OTC Bulletin Board. Our stock is
now traded on the "Pink Sheets" of the National Quotation Bureau, LLC. As of
June 22, 2000, we had approximately 205 shareholders of record and 11,797,285
shares of common stock outstanding.
The following table sets forth for the periods indicated the
approximate high and low bid prices for our common stock as reported each
quarterly period within the last two fiscal years on the OTC Bulletin Board. The
prices are inter-dealer prices, do not include retail mark up, mark down or
commission and may not necessarily represent actual transactions.
OTC BULLETIN BOARD
FISCAL QUARTER HIGH LOW
-------------- ---- ---
10/1/98-12/31/98.... 5 0.375
1/1/99-3/31/99...... 5.5 3
4/1/99-6/30/99...... 3.5 2.875
7/1/99-9/31/99...... 2 .5
10/1/99-12/31/99.... 1.75 .5
1/1/00-4/17/00...... .9688 0.75
During the last two years, we have not paid any dividends on our common
stock and we do not anticipate paying any cash dividends in the foreseeable
future. Although it is our intention to utilize all available funds for the
development of our business, no restrictions are in place which would limit or
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<PAGE> 20
restrict our ability to pay dividends.
ITEM 2. LEGAL PROCEEDINGS
There are no pending legal proceedings to which we, our directors, or
our officers are a party. We have no knowledge of any pending legal proceedings
to which those parties owning 5% of our common stock are a party. No legal
proceedings are known to us to be contemplated against us by a governmental
authority.
On April 11, 2000 we received a letter, dated April 7, 2000, from an
attorney representing the co-inventors of the Microwave Patents. That letter
demands a payment of $162,600 on behalf of one of the co-inventors. The claim is
allegedly based upon an agreement between the co-inventors and United Systems,
Inc., one of the Roatan Companies and the company from which we acquired the
rights to the Microwave Patents. The letter threatens to initiate legal action
to terminate our rights to the Microwave Patents if payment is not made. It is
our position that any claim which the co-inventor may have to a payment in the
amount of $162,600, would be against United Systems, Inc., and that we did not
at any time assume an obligation to make that payment. We intend to contest any
claim for this payment which may be brought against us. To date no
re-examination of our patents' artwork or method of use has been filed with the
U.S. Patent and Trademark Office.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
No principal accountant's report on our financial statements for either
of the past two years has contained an adverse opinion, disclaimer of opinion or
modification of opinion. There have been no disagreements with accountants as to
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. On February 28, 2000, we engaged
Clancy and Co., P.L.L.C. to replace Crouch, Bierwolf & Chisholm.
Pursuant to Item 304 of Regulation S-B, we disclose the following
information relating to Crouch, Bierwolf & Chisholm:
1. Crouch, Bierwolf & Chisholm was dismissed on February 27, 2000.
2. The report prepared by Crouch, Bierwolf & Chisholm on our financial
statements for the fiscal years ended December 31, 1998 and 1997 did not
contain any adverse opinion or disclaimer of opinion, nor was the report
qualified or modified as to uncertainty, audit scope or accounting
principles.
3. The decision to change accountants was ratified by our Board of
Directors.
4. There were no disagreements with Crouch, Bierwolf & Chisholm on any
matter of accounting principles or practices, financial statement
disclosure, auditing scope or procedure or any other matter requiring
disclosure pursuant to Item 304 of Regulation S-B.
We provided Crouch, Bierwolf & Chisholm with a copy of the above
statements and requested that Crouch, Bierwolf & Chisholm furnish a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the above statements. A copy of such letter dated May 30, 2000 is
included in this Form 10-SB as Exhibit 16.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
We made the following sales of unregistered common stock during the
previous 3 years. All denominations are in U.S. Dollars unless otherwise noted
and the number of shares sold has been restated to reflect a 10 for 1 reverse
split which occurred on October 29, 1998.
<TABLE>
<CAPTION>
DATE NUMBER OF
OF ISSUE SHARES TITLE OFFERING PRICE PURCHASE PRICE PURCHASER
-------- ----------- ----- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
9/9/98 65,000 Common N/A consulting services HJS Financial Services, Inc.
valued at $6,500
9/9/98 65,000 Common N/A consulting services Exim International
valued at $6,500
11/5/98 100,000 Common $5,000 $5,000 Alia Holdings Ltd.
11/5/98 100,000 Common $5,000 $5,000 Horsham Finance Ltd.
11/5/98 100,000 Common $5,000 $5,000 ValorInvest Ltd.
11/5/98 123,400 Common $6,170 $6,170 Nottinghill Resources Ltd.
11/5/98 100,000 Common $5,000 $5,000 Baycove Investments Limited
2/22/99 50,000 Common $100,000 $100,000 Affaires Financieres S.A.
2/22/99 50,000 Common $100,000 $100,000 Bank Julius Baer & Co., Ltd.
2/22/99 50,000 Common $100,000 $100,000 Bank Leu AG
2/22/99 50,000 Common $100,000 $100,000 Bank von Ernst & Cie AG
2/22/99 50,000 Common $100,000 $100,000 Clariden Bank
2/22/99 100,000 Common $200,000 $200,000 Rahn & Bodmer
2/22/99 100,000 Common $200,000 $200,000 Triple Tree Ventures
5/13/99 8,814,284 Common N/A N/A Merger with Healthbridge
Delaware
4/1/00 500,000 Common N/A Exchange for ValorInvest Ltd.
$250,000 debt
4/18/00 60,000 Common $30,000 $30,000 Kista Finance Ltd.
4/26/00 30,000 Common $15,000 $15,000 Kista Finance Ltd.
5/1/00 130,000 Common $65,000 $65,000 Kista Finance Ltd.
5/18/00 60,000 Common $30,000 $30,000 Kista Finance Ltd.
5/30/00 30,000 Common N/A N/A Nora Coccaro
6/21/00 20,000 Common N/A N/A Nora Coccaro
8/4/00 110,000 Common $55,000 $55,000 Kista Finance Ltd.
<CAPTION>
DATE
OF ISSUE EXEMPTION
-------- ---------
<S> <C>
9/9/98 Regulation D, Rule 504
9/9/98 Regulation D, Rule 504
11/5/98 Regulation D, Rule 504
11/5/98 Regulation D, Rule 504
11/5/98 Regulation D, Rule 504
11/5/98 Regulation D, Rule 504
11/5/98 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
2/22/99 Regulation D, Rule 504
5/13/99 Section 4(2)
4/1/00 Section 4(2)
4/18/00 Regulation S, Rules 901- 904
4/26/00 Regulation S, Rules 901- 904
5/1/00 Regulation S, Rules 901- 904
5/18/00 Regulation S, Rules 901- 904
5/30/00 Section 4(2)
6/21/00 Section 4(2)
8/4/00 Regulation S, Rules 901-904
</TABLE>
In September, 1998, we issued 130,000 shares of our common stock to
unaffiliated consultants in exchange for consulting services valued at $13,000.
According to our former counsel, we issued these shares in reliance on the
exemption provided by Regulation D, Rule 504 because the aggregate offering
price of the offering did not exceed $1 million less the aggregate offering
price for all securities sold by us within the 12-month period before the start
of and during such offering.
In November, 1998, we sold 523,400 shares of our common stock to
unaffiliated persons for $0.05 per share. The aggregate offering price was
$26,000. We issued these shares in reliance on the exemption provided by
Regulation D, Rule 504 because the aggregate offering price of the offering did
not exceed $1 million less the aggregate offering price for all securities sold
by us within the 12-month period before the start of and during such offering.
In February, 1999, we completed a private placement of 450,000 shares
of common stock at $2.00 per share for an aggregate offering price of $900,000
(the "1999 Offering"). The principal underwriter for the 1999 Offering was
ValorInvest Ltd. As compensation for its services, ValorInvest, Ltd. received
aggregate commissions equal to 10% ($90,000) of the purchase price paid for the
shares. The 1999 Offering was made in reliance on the exemption from the
registration requirements provided by Regulation D, Rule 504 of the Securities
Act of 1933. We relied on the exemption provided by Regulation D, Rule 504
because the aggregate offering price of the 1999 Offering did not exceed $1
million less the aggregate offering price for all securities sold by us within
the 12-month period before the start of and during the 1999 Offering. In
addition, we limited the 1999 Offering to accredited investors, none of whom
were resident in the U.S.
Beginning in May, 1999, we issued 8,814,284 shares of our common stock
in connection with our merger with Healthbridge Delaware. See "Our Corporate
History". Pursuant to the merger agreement, each share of Healthbridge Delaware
was cancelled and converted into the right to receive one share of our common
stock. We issued these shares in reliance on the exemption provided by Section
4(2) of the Securities Act of 1933 because the transaction did not involve any
public offering.
On April 1, 2000, we become obligated to issue 500,000 shares of our
common stock, plus a warrant to purchase 500,000 shares of our common stock at
an exercise price of $0.50 per share, in exchange for the conversion of $250,000
of debt. We agreed to issue these shares in reliance on the exemption provided
by Section 4(2) because the transaction did not involve any public offering.
In April, 2000, we commenced the 2000 Offering. The 2000 Offering is a
private placement of up to 1,000,000 units (each consisting of one share of our
common stock and one common stock purchase warrant exercisable at $0.50) at a
purchase price of $0.50 per unit. The placement agent for the 2000 offering is
ValorInvest, Ltd. As compensation for its services, ValorInvest Ltd. will
receive aggregate commissions equal to 8% of the purchase price paid for any
units sold. As of June 28, 2000, we have sold 390,000 units and raised a total
of $195,000 in the 2000 Offering. As a result, ValorInvest Ltd. has received
$15,600 in commissions. Units sold in the 2000 Offering were sold in reliance on
the exemption from the registration requirements provided by Regulation S, Rules
901-904 of the Securities Act of 1933 because no directed selling efforts were
made in the U.S. and because the units were offered only to non-U.S. persons
outside of the U.S.
On May 30, 2000, we granted Ms. Coccaro an option to purchase 30,000
shares of our common stock at a purchase price of $0.71 per share. Ms.
Coccaro's option vests in equal amounts over a period of 3 years from the date
of grant.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XIV of our Articles of Incorporation requires us to indemnify
and hold harmless our officers and directors to the fullest extent authorized by
the Texas Business Corporation Act against any and all liability, loss and
expense incurred in connection with a legal matter. This right to
indemnification is a contract right and includes the right to have us pay for
expenses incurred in defending any proceeding in advance of the proceeding's
final disposition. Our Articles of Incorporation also provide for the
elimination of personal monetary liability of directors and officers to the
fullest extent permissible under law.
20
<PAGE> 21
In addition, our Articles of Incorporation permit us to indemnify any
of our employees or agents to the extent authorized from time to time by the
Board of Directors.
Furthermore, Ms. Coccaro's consulting agreement requires us to
indemnify her against all claims arising out of actions reasonably taken by
her in the performance of her duties.
At present, there is no pending litigation or proceeding involving our
officers and directors as to which indemnification is being sought.
PART FS
Our Financial Statements, required by Regulation SB, commence on page
F-1 hereof in response to Part FS of this Registration Statement on Form 10-SB
and are incorporated herein by this reference.
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Item
Number Description
<S> <C>
1.1* Placement Agreement between WattMonitor, Inc. and ValorInvest Ltd., dated for reference January 28, 1999.
1.2* Placement Agreement between Healthbridge, Inc. and ValorInvest Ltd., dated as of April 5, 2000.
2.1* Asset Purchase Agreement, dated as of January 27, 1999, by and among Healthbridge, Inc., Roatan
Medical Technologies, Inc., Wintex Corporation, Roatan Medical Services, Inc. and United Services, Inc.
2.2* Agreement and Plan of Merger, dated as of February 28, 1999, by and among Healthbridge, Inc. and
WattMonitor, Inc.
3.1* Articles of Incorporation of GFB Alliance Services, Inc., filed February 17, 1993.
3.2* Articles of Amendment to the Articles of Incorporation of GFB Alliance Services, Inc., filed July 24, 1997.
3.3* Articles of Amendment to the Articles of Incorporation of World Staffing II, Inc., filed November 3, 1998.
3.4* Amended and Restated Articles of Incorporation of WattMonitor, Inc., filed May 13, 1999.
3.5* Bylaws of Healthbridge, Inc.
4.1* Article 4, Section 1 to Healthbridge's Articles of Incorporation (defining certain rights of preferred stock
holders).
4.2* Article 4, Section 2 to Healthbridge's Articles of Incorporation (defining certain rights of common stock holders).
10.1* Consulting Agreement between Healthbridge, Inc. and Wilhelm Liesner, dated on or around February 1, 1999.
10.2* Consulting Agreement between Healthbridge, Inc. and Nora Coccaro, dated as of March 16, 2000.
10.3* 1999 Stock Incentive Plan.
10.4* 1999 Outside Directors' Stock Option Plan.
10.5 Loan Agreement between Healthbridge, Inc. and ValorInvest Ltd., dated as of August 15, 2000 (filed herewith).
16* Letter re change in Certifying Accountant.
27.1 Financial Data Schedule (filed herewith).
27.2 Financial Data Schedule (filed herewith).
-------------------
* Incorporated by Reference to the same exhibit number to Form 10-SB filed with the Commission April 17, 2000 and Form
10-SB/A filed with the Commission July 19, 2000.
</TABLE>
21
<PAGE> 22
ITEM 2. DESCRIPTION OF EXHIBITS.
The documents required to be filed as Exhibit Number 2 in Part III of
Form 1-A filed as part of this Registration Statement on Form 10-SB are listed
in Item 1 of this Part III above. No documents are required to be filed as
Exhibit Numbers 5, 6 or 7 in Part III of Form 1-A, and the reference to such
Exhibit Numbers is therefore omitted. No additional exhibits are filed hereto.
22
<PAGE> 23
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
HEALTHBRIDGE, INC.
Date: August 17, 2000 By: /s/ Nora Coccaro
----------------
Nora Coccaro, President
23
<PAGE> 24
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report December 31, 1999 ..................................... F-2
Independent Auditors' Report December 31, 1998 ..................................... F-3
Balance Sheet at December 31, 1999 and 1998 ........................................ F-4
Statement of Operations For The Years Ended December 31, 1999 and 1998, and For the
Period From Inception (February 17, 1993) to December 31, 1999 ................ F-6
Statement of Stockholders' Equity For The Period From Inception (February 17, 1993)
to December 31, 1999 ......................................................... F-7
Statement of Cash Flows For The Years Ended December 31, 1999 and 1998, and For the
Period From Inception (February 17, 1993) to December 31, 1999 ................ F-9
Notes to the Financial Statements .................................................. F-11
Consolidated Balance Sheet at June 30, 2000
and December 31, 1999 (unaudited).............................................. F-23
Consolidated Statement of Operations for the Three and Six Months Ended June 30,
2000 and 1999 and for the Period From Inception (February 17, 1993) to June
30, 2000 (unaudited)........................................................... F-24
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2000 and
1999 and for the Period From Inception (February 17, 1993) to June 30, 2000
(unaudited).................................................................... F-25
Notes to the Financial Statements (unaudited)....................................... F-26
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
</TABLE>
F-1
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Healthbridge, Inc.
Vancouver, B.C. V6E 2K3
We have audited the accompanying balance sheet of Healthbridge, Inc. (formerly
WattMonitor, Inc.) (A Development Stage Company) (the Company) as of December
31, 1999, and the related statement of operations, stockholders' equity and cash
flows for the year then ended, and for the period from inception (February 17
1993) to December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of the Company
for the year ended December 31, 1998, were audited by other auditors whose
report thereon, dated January 6, 2000, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
1999, and the results of its operations and cash flows for the periods
indicated, in conformity with generally accepted accounting principles.
As discussed in Note 1, the Company has been in the development stage since its
inception on February 17, 1993. The Company is devoting substantially all of its
present efforts in establishing a new business and although planned principle
operations have commenced, there have been no significant revenues derived
therefrom. In addition, the Company does not presently have adequate financing
to carry out its business plan. These factors raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As more fully described in Note 3, subsequent to the issuance of the Company's
1999 financial statements and our report thereon dated April 6, 2000, we became
aware that those financial statements reflected the assumption of certain
liabilities in excess of those intended to be assumed per an agreement. In our
original report, we expressed an unqualified opinion on the 1999 financial
statements, and our opinion on the revised statements, as expressed herein,
remains unqualified.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 6, 2000, except as to the last paragraph and Note 3, which are as of June
26, 2000
F-2
<PAGE> 26
To the Board of Directors and Stockholders of
WattMonitor, Inc. (formerly WorldStaffing II, Inc.)
We have audited the accompanying balance sheets of WattMonitor, Inc. (formerly
WorldStaffing II, Inc.) (a Development Stage Company) as of December 31, 1998
and 1997 and the related statements of operations, stockholders' equity and cash
flows for the years then ended and from inception on February 11, 1995 through
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of WattMonitor, Inc. (formerly
WorldStaffing II, Inc.) (a Development Stage Company) as of December 31, 1998
and 1997 and the results of its operations and cash flows for the years then
ended and from inception on February 11, 1995 through December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
January 6, 2000
F-3
<PAGE> 27
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
Current Assets
Cash $ 4,508 $ 3,061
Inventory (Note 3, 4) 40,395 40,395
------ ------
Total Current Assets 44,903 43,456
Fixed Assets, Net (Note 3, 5) 5,782 10,778
Other Assets
Organizational Costs (Note 2, 3) 0 102,500
Patents, Net (Note 3, 6) 0 2,100,007
--------- ---------
0 2,202,507
--------- ---------
Total Assets $ 50,685 $ 2,256,741
========= =========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
---- ----
<S> <C> <C>
Current Liabilities
Accounts Payable (Note 3) $ 351,474 $ 233,215
Notes Payable, Other (Note 7) 70,000 1,000,000
Accrued Interest (Note 3, 7) 6,761 0
------- ---------
Total Current Liabilities 428,235 1,233,215
Commitments and Contingencies
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 28
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C>
Stockholders' Equity
Preferred Stock: $0.0001 Par Value, Authorized
25,000,000; Issued and Outstanding, None None None
Common Stock: $0.0001 Par Value, Authorized
50,000,000; Issued and Outstanding, 11,777,285 and
2,500,750, respectively 1,178 506
Additional Paid In Capital 4,825,444 1,140,601
Deficit Accumulated During the Development Stage (5,204,172) (117,581)
---------- ---------
Total Stockholders' Equity (A Deficit) (377,550) 1,023,526
--------- ---------
Total Liabilities and Stockholders' Equity $ 50,685 $ 2,256,741
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 29
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND FOR THE
PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
From Incep-
tion (February
17, 1993) to
Year Ended Year Ended December 31,
December 31, December 31, 1999
1999 1998 ----
---- ----
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Expenses
General and Administrative 994,705 36,896 994,705
--------- ------ ---------
Operating Loss (994,705) (36,896) (994,705)
Other Income (Expense)
Write-Off of Intangible Assets (2,100,007) 0 (2,100,007)
Interest Income 7,897 0 7,897
Interest Expense (6,761) 0 (6,761)
-------- ------- ---------
Total Other Income (Expense) (2,098,871) 0 (2,098,871)
-------- ------- ---------
Net Loss Before Cumulative Effect of Accounting Change (3,093,576) (36,896) (3,093,576)
Cumulative Effect of Accounting Change (102,500) 0 (102,500)
-------- ------- ---------
Net Loss Available to Common Stockholders $ (3,196,076) $ (36,896) $ (3,196,076)
========= ======== ==========
Basic Loss Per Common Share $ (0.02)
======
Loss Before Cumulative Effect of Accounting Change $ (0.27) $ (0.27)
Cumulative Effective of Accounting Change (0.01) (0.01)
----- -----
Net Loss $ (0.28) $ (0.28)
===== =====
Basic Weighted Average Number of
Common Shares Outstanding 11,286,448 1,956,773 11,286,448
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 30
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO DECEMBER 31, 1999
<TABLE>
<CAPTION> Deficit Accu-
mulated During
Additional the Develop-
Preferred Stock Common Stock Paid In ment Stage
Shares Amount Shares Amount Capital ----- Total
------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Shares Issued For Organization Costs 1,200,000 $ 120 $ 1,080 $ 1,200
Loss, Year Ended December 31, 1993 (200) (200)
Loss, Year Ended December 31, 1994 (240) (240)
Loss, Year Ended December 31, 1995 (240) (240)
Loss, Year Ended December 31, 1996 (240) (240)
----- ---------
Balance, December 31, 1996 0 0 1,200,000 120 1,080 (920) 280
Shares Issued for Cash 641,360 64 80,208 80,272
Loss, Year Ended December 31, 1997 (79,765) (79,765)
--------- --------
Balance, December 31, 1997 0 0 1,841,360 184 81,288 (80,685) 787
Shares Issued for Services 130,000 13 12,987 13,000
Shares Issued for Cash 523,400 52 26,118 26,170
Roundup for Stock Split 5,990 1 (1) 0
Loss, Year Ended December 31, 1998 (36,896) (36,896)
--------- --------
Balance, December 31, 1998 0 0 2,500,750 250 120,392 (117,581) 3,061
Retroactive Equity Effect of Asset Purchase Agreement
Dated January 27, 1999 2,560,237 256 1,020,209 1,020,465
--------- --- --------- ---------
Adjusted Balance, December 31, 1998 0 0 5,060,987 506 1,140,601 (117,581) 1,023,526
</TABLE>
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Reversal of Retroactive Equity Effect Presented in 1998 (2,560,237) (256) (1,020,209)
Rounding Adjustment to Prior Year Shares (750)
Shares Issued For Cash in Completion of Private Placement
Memorandum, February 1999 450,000 45 899,955
</TABLE>
<TABLE>
<CAPTION>
Deficit Accu-
mulated During
the Develop-
ment Stage
----- Total
-----
<S> <C> <C>
Reversal of Retroactive Equity Effect Presented in 1998 (1,020,465)
Rounding Adjustment to Prior Year Shares 0
Shares Issued For Cash in Completion of Private Placement
Memorandum, February 1999 900,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 31
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Offering Costs (105,000)
Issuance of Common Stock for the Net Book Value of
Healthbridge, Inc., January 27, 1999 410,000 41 (41)
Acquisition of Assets For Common Stock Per Asset Pur-
chase Agreement Dated January 27, 1999 2,560,237 256 1,020,209
Issuance of Common Stock As Dividends-In-Kind, at $2.00
Per Share, February 1999 1,004,048 101 2,007,995
Conversion of Debt to Equity, February 1999 4,850,000 485 999,515
Reverse Acquisition, Retirement of Old Shares of
WattMonitor, Inc., February 28, 1999 (2,950,000) (295) (915,347)
Reverse Acquisition, Common Stock Issued for the Merger
With Healthbridge, Inc. and WattMonitor, Inc., at Net
Book Value, February 28, 1999 2,950,000 295 797,766
Common Stock Share Adjustment For Shares Previously
Issued (Note 1) 3,000
Loss, Year Ended December 31, 1999
Balance, December 31, 1999 0 $ 0 11,777,285 $ 1,178 $ 4,825,444
======= ======= ========== ======= =========
</TABLE>
<TABLE>
<S> <C> <C>
Offering Costs (105,000)
Issuance of Common Stock for the Net Book Value of
Healthbridge, Inc., January 27, 1999 0
Acquisition of Assets For Common Stock Per Asset Pur-
chase Agreement Dated January 27, 1999 1,020,465
Issuance of Common Stock As Dividends-In-Kind, at $2.00
Per Share, February 1999 (2,008,096) 0
Conversion of Debt to Equity, February 1999 1,000,000
Reverse Acquisition, Retirement of Old Shares of
WattMonitor, Inc., February 28, 1999 117,581 (798,061)
Reverse Acquisition, Common Stock Issued for the Merger
With Healthbridge, Inc. and WattMonitor, Inc., at Net
Book Value, February 28, 1999 798,061
Common Stock Share Adjustment For Shares Previously
Issued (Note 1) 0
Loss, Year Ended December 31, 1999 (3,196,076) (3,196,076)
----------- ----------
Balance, December 31, 1999 $ (5,204,172) $ (377,550)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 32
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND FOR THE
PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
From Incep-
tion (February
17, 1993) to
Year Ended Year Ended December 31,
December 31, December 31, 1999
1999 1998 ----
---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (3,196,076) $ (36,896) $ (3,196,076)
Adjustments to Reconcile Net Loss to Net Cash Used In
Operating Activities
Common Stock Issued For Services Rendered 0 13,000 0
Depreciation and Amortization 4,996 40 4,996
Write Off of Organizational Costs 102,500 0 102,500
Write Off of Intangible Assets 2,100,007 0 2,100,007
Changes in Assets and Liabilities
Increase (Decrease) in Accounts Payable 118,259 0 118,259
Increase (Decrease) in Accrued Liabilities 6,761 0 6,761
--------- -------- ---------
Total Adjustments 2,332,523 13,040 2,332,523
--------- -------- ---------
Net Cash Used In Operating Activities (863,553) (23,856) (863,553)
Cash Flows From Investing Activities - - -
Cash Flows From Financing Activities
Borrowings Under Notes Payable 70,000 0 70,000
Proceeds From Sale of Common Stock 900,000 26,170 900,000
Offering Costs (105,000) 0 (105,000)
--------- ------ ---------
Net Cash Provided By Financing Activities 865,000 26,170 865,000
--------- ------ -------
Increase in Cash and Cash Equivalents 1,447 2,314 1,447
Cash and Cash Equivalents, Beginning of Year 3,061 747 3,061
------- ----- ------
Cash and Cash Equivalents, End of Year $ 4,508 $ 3,061 $ 4,508
======= ===== ======
</TABLE>
<TABLE>
<CAPTION>
From Incep-
tion (February
17, 1993) to
Year Ended Year Ended December 31,
December 31, December 31, 1999
1999 1998 ----
---- ----
<S> <C> <C> <C>
Supplemental Information:
-------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 33
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998, AND FOR THE
PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO DECEMBER 31, 1999
<TABLE>
<S> <C> <C> <C>
Cash paid for:
Interest $ 0 $ 0 $ 0
======== ====== =========
Income taxes $ 0 $ 0 $ 0
======== ====== =========
Supplemental Noncash Investing and Financing Activities:
Common Stock Issued For Services Rendered $ 0 $ 13,000 $ 13,000
========= ====== =========
Conversion of Debt to Equity $ 1,000,000 $ 0 $ 1,000,000
========= ===== =========
Assets Acquired For Common Stock $ 1,020,465 $ 0 $ 1,020,465
========= ===== =========
Common Stock Issued as Dividends-In-Kind $ 2,008,096 $ 0 $ 2,008,096
========= ===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 34
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION
Healthbridge, Inc. (the Company) (Healthbridge Texas) was incorporated
under the laws of the State of Texas on February 17, 1993, as GFB Alliance
Services, Inc., with an authorized capital of 10,000 shares of $0.10 par
value common stock. On December 17, 1996, the Company changed the name of
the corporation to World Staffing II, Inc., and increased its authorized
capital to 50,000,000 shares of $0.0001 par value common stock. The
articles of amendment were filed on July 24, 1997, with the State of
Texas. On November 3, 1998, the Company amended its articles of
incorporation and changed its name to WattMonitor, Inc. (WattMonitor). On
February 28, 1999, WattMonitor and Healthbridge, Inc. (a Delaware
Corporation) (Healthbridge Delaware) completed a merger converting
8,814,284 shares of Healthbridge Delaware common stock into WattMonitor
common stock as more fully described below. On May 13, 1999, the Company
amended its articles of incorporation and changed its name to
Healthbridge, Inc. (Healthbridge Texas), and increased its authorized
capital to 75,000,000 shares of stock: 25,000,000 shares of
$0.0001 par value preferred stock, and 50,000,000 shares of $0.0001 par
value common stock. The Company has a perpetual existence.
On February 17, 1993, WattMonitor issued 60,000 (1,200,000 current
equivalent) shares of common stock for organization costs at $0.02 per
share, or $1,200.
During February 1997, WattMonitor issued 641,360 shares of common stock
for cash of $80,272.
On February 12, 1997, the Board of Directors of WattMonitor approved a 200
for 1 forward split.
On September 9, 1998, WattMonitor issued 130,000 shares of common stock
for services rendered at $0.10 per share, or $13,000.
On October 29, 1998, WattMonitor issued 523,400 shares of common stock for
cash at $0.05 per share, or $26,170.
F-11
<PAGE> 35
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
On October 29, 1998, the Board of Directors of WattMonitor approved a 1
for 10 reverse split.
During 1998, WattMonitor adjusted its shares up by 5,990 shares of common
stock for rounding.
During 1999, WattMonitor adjusted its shares down by 750 shares of common
stock for rounding.
NOTE 1 - ORGANIZATION (CONTINUED)
During February 1999, WattMonitor completed a Private Placement Memorandum
for 450,000 shares of common stock for cash at $2.00 per share, or
$900,000, less offering costs of $105,000.
As of February 28, 1999, WattMonitor's total outstanding shares prior to
the merger agreement dated February 28, 1999, (as more fully described
below) were 2,950,000 shares of common stock.
On January 27, 1999, Healthbridge Delaware issued 2,560,237 shares of
common stock in exchange for certain assets per an Asset Purchase
Agreement dated January 27, 1999, at net book value, or $1,020,465. The
outstanding shares of Healthbridge Delaware common stock on this date were
410,000 shares, originally issued as founders shares at par value, or a
net book value of $0.
During February 1999, Healthbridge Delaware issued 1,004,048 shares of
common stock as dividends-in-kind at $2.00 per share, or $2,008,096.
During February 1999, Healthbridge Delaware issued 4,850,000 shares of
common stock by converting debt to equity at $0.21 per share, or
$1,000,000.
F-12
<PAGE> 36
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
As of February 28, 1999, Healthbridge Delaware's total outstanding shares
prior to the merger agreement dated February 28, 1999, (as more fully
described below) were 8,814,285 shares of common stock.
An "Agreement and Plan of Merger" dated February 28, 1999, was completed on
May 13, 1999, between Healthbridge Delaware and WattMonitor, with
WattMonitor being the surviving corporation and continuing in existence
under the laws of the State of Texas under the name "Healthbridge, Inc."
Healthbridge Texas (formerly WattMonitor) converted 8,814,284 shares of
Healthbridge Delaware common stock into the right to receive 8,814,284
shares of the Healthbridge Texas common stock. The authorized capital of
Healthbridge Delaware consists of 10,000,000 shares of $0.001 par value
common stock. As of the date of the merger, 8,814,284 shares (adjusted by
one share for rounding, or 8,814,285) of Healthbridge Delaware common stock
were outstanding, all of which were validly issued, fully paid and
nonassessable; and the outstanding common stock of WattMonitor was
2,950,000 shares, all of which were validly issued, fully paid and
nonassessable.
The merger is treated as a reverse acquisition as prescribed by Accounting
Principles Board No. 16, "Business Combinations," because the shareholders
of the company being acquired retained actual control of the resulting
combined company. Healthbridge Delaware is the continuing reporting entity
for accounting purposes and Healthbridge
NOTE 1 - ORGANIZATION (CONTINUED)
Texas (formerly WattMonitor) was the acquirer for legal purposes. The
equity section reflects the recapitalization of the merger: retirement of
old shares and issuance of new shares for the net equity of Healthbridge
Texas, with no goodwill being recorded, or $798,061.
During 1999, the Company adjusted its common shares up by 3,000 (30,000
shares adjusted for 1 for 10 reverse split) for certificates previously
issued on February 17, 1993, for organizational costs, but not reflected
as outstanding by the previous transfer agent.
F-13
<PAGE> 37
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The Company is engaged in the business of developing a product for the
medical waste industry known as the Redloc II Waste Disposal System, which
is a system that the Company represents can process regulated medical
waste near the point of generation and maintain containment throughout the
process of sterilization. The technology is based upon a proprietary
process that allows medical waste, including hard-to-shred materials such
as fabric, mopheads and metals, to be rendered benign with virtually no
dangerous exposure to the waste handlers and no by-products.
The Company is a development stage company, as defined in Financial
Accounting Standards Board No. 7. The Company is devoting substantially all
of its present efforts in developing its existing product, and although its
planned principal operations have commenced, there have been no significant
revenues derived therefrom. Management's plans include obtaining working
capital funds by seeking additional funding from private placements of its
common stock to meet such needs. Specifically, at December 31, 1999, the
Company had a working capital commitment from Valor Invest, Ltd. to fund
the Company up to $250,000. Then, on April 5, 2000, the Company commenced a
private placement offering of up to 1,000,000 units at $0.50 per share, or
$500,000. Each unit consists of one share of common stock and one common
stock purchase warrant. Therefore, for at least the next twelve months the
Company has viable plans to continue as a going concern.
The financial statements have been prepared on the basis of accounting
principles applicable to a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. The continuation of the Company as a going concern is
dependent upon the success of the Company in obtaining additional funding
or the success of its future operations. The Company's ability to achieve
these objectives cannot be determined at this time. The accompanying
financial statements should not be regarded as typical for normal operating
periods.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Company's financial statements are prepared using the accrual method
of accounting.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a maturity
of three months or less when acquired to be cash and cash equivalents.
F-14
<PAGE> 38
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventory Inventory is stated at cost.
Property and Equipment
Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives ranging from three
to seven years.
Intangible Assets
Intangible assets represent patents and are recorded at cost in accordance
with Accounting Principles Board (APB) Opinion No. 17, "Intangible
Assets." The Company amortizes the intangible assets using the
straight-line method over the term of the specific agreements.
Continually, the Company evaluates whether the estimated useful life used
to amortize an intangible asset is appropriate due to changing facts and
circumstances resulting in increases or decreases in the asset's estimated
useful life, and records the change prospectively.
Long-Lived Assets
The Company accounts for long-lived assets in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires impairment losses to be recorded on long-lived assets
used in operation when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of.
Use of Estimates
Preparing financial statements requires management to make estimates and
assumptions that effect the reported amounts of assets, liabilities,
revenue and expenses. Actual results may differ from these estimates.
F-15
<PAGE> 39
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Per Share of Common Stock
Basic earnings or loss per share has been computed based on the weighted
average number of common shares and common share equivalents outstanding.
All earnings or
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
loss per share amounts in the financial statements are basic earnings or
loss per share, as defined by SFAS No. 128, "Earnings Per Share." Diluted
earnings or loss per share does not differ materially from basic earnings
or loss per share for all periods presented. Convertible Securities that
could potentially dilute basic earnings per share in the future are not
included in the computation of diluted earnings per share because to do so
would be antidilutive. All per share and per share information have been
adjusted retroactively to reflect stock splits and changes in par value.
Capital Structure
The Company has implemented SFAS No. 129, "Disclosure of Information about
Capital Structure," effective January 1, 1998, which established standards
for disclosing information about an entity's capital structure. The
implementation of SFAS No. 129 had no effect on the Company's financial
statements
Comprehensive Income
The Company has implemented SFAS No. 130, "Reporting Comprehensive
Income," effective January 1, 1998, which requires companies to classify
items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid in capital in
the equity section of a statement of financial position. The
implementation of SFAS No. 130 had no effect on the financial statements.
F-16
<PAGE> 40
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Start-Up Costs
Effective January 1, 1999, the Company also adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
provides guidance on the financial reporting of start-up and organization
costs and requires such costs to be expensed as incurred. The total amount
of deferred start-up costs reported as a cumulative effect of a change in
accounting principle is $102,500. See Note 3. This new requirement did not
have a significant effect on 1998 loss before the cumulative effect of the
accounting change.
Presentation
Certain accounts from prior years have been reclassified to conform with
the current year's presentation.
Pending Accounting Pronouncements
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
Dividends-In-Kind
Dividends-in-kind represent the issuance of common stock without
consideration and are recorded at the fair value of the shares received.
Transfers of shares of the Company's common stock as dividends are
essentially no more than a realignment of stockholders' equity.
NOTE 3 - ASSET PURCHASE AGREEMENT
On January 27, 1999, Healthbridge Delaware completed an "Asset Purchase
Agreement" (APA), with Roatan Medical Technologies, Inc. (a Nevada
Corporation), WinTex Corporation (a Texas Corporation and wholly owned
subsidiary of Roatan Medical Technologies, Inc.), Roatan Medical Services
Inc. (a Texas Corporation), and United Services, Inc. (United), and Mr.
Wilhelm Liesner (an individual), the "Sellers." Healthbridge Delaware
issued 2,560,237 shares of Healthbridge common stock in exchange for all
of the assets of the Sellers including all patents, inventories,
machinery, equipment, intangibles, and cash on hand and in banks as
described below. Certain assets, such as all
F-17
<PAGE> 41
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
tax loss carryforwards, carrybacks, net operating losses, refunds,
offsets, etc., are excluded from the exchange. In accordance with the
restructuring, Healthbridge Delaware also assumed certain of the payment
and performance obligations of the Sellers and its principal stockholder.
The following is a summary of the assets acquired and liabilities assumed:
Assets Acquired:
<TABLE>
<S> <C> <C>
Inventory (Note 4) $ 40,395
Fixed Assets, Net (Note 5) 10,778
Organization Costs (Note 2) 102,500
Patents, Net (Note 6) 2,100,007 2,253,680
-----------------------------
Liabilities Assumed:
FCIC Promissory Note (FCIC) 1,000,000
Accounts Payable per agreement
(includes FCIC "Expense Notes"
of $84,681) (See below) 233,215 (1,233,215)
------------------------------ ----------
Additional Paid In Capital $ 1,020,465
=========
</TABLE>
On February 24, 1999, an "Assumption and Release Agreement," (ARA) was
executed by and among Healthbridge Delaware (the Assumptor), Roatan
Medical Technologies, Inc., Roatan Medical Services, Inc., and United
Services, Inc. (the Original Borrower Principals), Wilhelm Liesner
(Liesner) and First Capital Invest Corp., BVI (FCIC). Healthbridge
Delaware assumed all of the payment and performance obligations of the
Original Borrower Principals and Liesner to FCIC under the various
agreements. Additionally, FCIC was given a conversion right, which they
exercised on or around February 26, 1999, in connection with the transfer
of the assets in the APA which applied to the principal balance of the
note only for the conversion of 4,850,000 shares of common stock in
cancellation of $1,000,000 principal amount of the note. Interest accrued
under the note was forgiven upon the exercise of the conversion right.
Certain FCIC "Expense Notes" were assumed under the APA and are included
in accounts payable per above, and
F-18
<PAGE> 42
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
bear interest at 10% per annum. Accrued interest at December 31, 1999, on
the notes was $6,351.
NOTE 3 - ASSET PURCHASE AGREEMENT (CONTINUED)
Subsequent to the issuance of the Company's financial statements,
management became aware that certain liabilities assumed in the original
financial statements were in excess of those intended to be assumed per
the agreement as a result of a misinterpretation of the ARA. The deletion
of these items in the revised financial statements has the effect of
increasing additional paid in capital by $811,227 in connection with the
APA transaction (the total amount of the incorrect assumed liabilities).
As a result, notes payable decreased by $96,159, accounts payable
decreased by $37,046, and other assumed liabilities decreased by $678,022
($473,841 and $204,181, respectively) representing debt converted to
equity, or 711,448 (557,948 and 153,500, respectively) shares. The 711,448
shares of common stock were transferred as dividends-in-kind at $2.00 per
share (the fair value of the shares transferred), representing full
satisfaction of obligations incurred by the former principle stockholder
and his affiliated companies during various periods prior to the APA.
Additionally, in consideration for the 557,948 shares of Healthbridge
Delaware common stock transferred, the parties involved released the
principle stockholder and his affiliated companies of all claims and any
rights relating to the patents. These events occurred prior to the merger
agreement dated February 28, 1999, as more fully described in Note 1.
NOTE 4 - INVENTORY
Inventory consists of (6) sterilizers and various other supplies.
Inventory at December 31, 1999 was $40,395. See Note 3.
NOTE 5 - FIXED ASSETS
Property and equipment consists of office equipment and is as follows at
December 31, 1999:
<TABLE>
<S> <C>
Cost $ 24,786
Accumulated Depreciation 19,004
--------
Net Book Value $ 5,782
=======
</TABLE>
Depreciation charged to operations during 1999 was $4,956. See Note 3.
F-19
<PAGE> 43
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 6 - PATENTS
The Company has two patents: (1) U.S. Patent No. 5,728,310 "Microwave
waste sterilizer and method of use," and (2) U.S. Patent No. 5,495,941,
"Dual compartment sterilizable waste containment unit." The estimated
useful lives of the patents are seventeen (17) years. Patents represent
the rights to utilize a combination of microwave and steam technology to
sterilize infectious waste. The self-contained modular system known as the
"Redloc II Waste Disposal System," processes infectious waste in
pressurized reusable containers until the waste is sterilized. The waste
is then processed through a granulator before disposal in public waste
facilities. Included in operations for 1999 is a write-down of patents of
$2,100,007.
NOTE 7 - NOTES PAYABLE, OTHER
Notes Payable, other represents the following at December 31, 1999:
Valor Invest, Ltd. (1) $ 20,000
Valor Invest, Ltd. (2) 50,000
------
Total $ 70,000
======
(1) Valor Invest, Ltd. (an Irish Corporation) - dated December 16, 1999,
in the original amount of $20,000, together with interest due at the rate
of 9% per annum, and due on demand. Accrued interest at December 31, 1999,
was $69.
(2) Valor Invest, Ltd. (an Irish Corporation) - dated November 9, 1999, a
line of credit up to $150,000, with interest at 8% per annum. The term of
the loan commences on the date of the first advance and is due and payable
upon the earlier of (i) November 15, 2000, or (ii) the consummation of any
equity or debt financings providing the Company with at least $1,000,000
in gross proceeds. Individual promissory notes are executed to receive
funds. On November 15, 1999, $17,000 was advanced and on December 7, 1999,
$33,000 was advanced, for total advances of $50,000 at December 31, 1999.
Accrued
F-20
<PAGE> 44
interest at December 31, 1999, was $341. See Note 11.
NOTE 8 - INCOME TAXES
There is no current or deferred tax expense for the years ended December
31, 1999 and 1998, due to the Company's loss position. The benefits of
timing differences have not been previously recorded. The deferred tax
consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, as appropriate.
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes. The income tax
effect of temporary differences comprising the deferred tax assets and
deferred tax liabilities on the accompanying balance sheet is a result of
the following at December 31:
1999 1998
---- ----
Deferred Taxes
--------------
NOL Carryforwards $ 1,129,693 29,107
Valuation Allowance (1,129,693) (29,107)
----------- ---------
Net Deferred Tax Assets $ 0 $ 0
=========== =========
The Company has available net operating loss carryforwards of
approximately $3,200,000 for tax purposes to offset future taxable income,
which expire principally in the year 2019.
NOTE 9 - STOCK OPTION PLANS
On April 8, 1999, the Board of Directors approved the 1999 Stock Incentive
Plan and reserved 1,500,000 shares of common stock exclusively for
issuance pursuant to Stock Incentives. The exercise price per share will
be identified in each Stock Incentive Agreement, but in no event will be
less than the fair market value on the date of grant. The op-
F-21
<PAGE> 45
HEALTHBRIDGE, INC.
(FORMERLY WATTMONITOR, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
tion expiration date is ten years after the date the option is granted for
a participant who is not an over 10% owner, and five years for a
participant who is an over 10% owner.
On April 8, 1999, the Board of Directors approved the 1999 Outside
Directors' Stock Option Plan and reserved 120,000 shares of common stock
for issuance pursuant to an agreement stating the terms of the plan. Each
agreement shall provide the following terms: (1) the exercise price per
share will be the fair market value as of the date of grant; (2) the
option expiration date is ten years following the date of grant, or one
year after the date the Director ceases to serve upon the Board of
Directors; and (3) that the option is fully vested.
As of the date of these financial statements, no options have been
granted under the 1999 Stock Incentive Plan and no options have been
granted under the 1999 Outside Directors' Stock Option Plan.
NOTE 10 - SUBSEQUENT EVENTS
As of the date of these financial statements, the Company has received
additional advances of $175,000 from Valor Invest Ltd. (Valor), due on
demand, with interest at 9% per annum, for a total of $245,000 in
outstanding advances due Valor.
On April 1, 2000, the Company entered into an agreement with Valor to
borrow an additional $5,000 and to consolidate the notes outstanding of
$245,000, for a total of $250,000, bearing interest at 9% per annum from
the date of the advance, and maturing on April 14, 2001. The consolidated
note was converted into 500,000 "units" at the price of $0.50 per unit.
Each unit consists of one share of common stock, par value $0.0001 per
share, and one common stock purchase warrant carrying an exercise price of
$0.50 per share.
F-22
<PAGE> 46
HEALTHBRIDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
(Unaudited)
ASSETS 2000 1999
------ ---- ----
<S> <C> <C>
Current Assets
Cash $ 1,375 $ 4,508
Inventory 40,395 40,395
------ ------
Total Current Assets 41,770 44,903
Fixed Assets, Net (Note 2) 3,304 5,782
------- ------
Total Assets $ 45,074 $ 50,685
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 525,405 $ 351,474
Notes Payable, Other (Note 3) 0 70,000
Accrued Interest (Note 3) 0 6,761
---------- -----------
Total Current Liabilities 525,405 428,235
Commitments and Contingencies
Stockholders' Equity
Preferred Stock: $0.0001 Par Value, Authorized 25,000,000;
Issued and Outstanding, None None None
Common Stock: $0.0001 Par Value, Authorized 50,000,000;
Issued and Outstanding, 12,577,285 and 11,777,285 1,258 1,178
Additional Paid In Capital 5,248,280 4,825,444
Deficit Accumulated During the Development Stage (5,729,869) (5,204,172)
----------- ----------
Total Stockholders' Equity (A Deficit) (480,331) (377,550)
--------- ---------
Total Liabilities and Stockholders' Equity $ 45,074 $ 50,685
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 47
HEALTHBRIDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999, AND FOR
THE PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO JUNE 30, 2000
<TABLE>
<CAPTION>
From Inception
Three Months Three Months Six Months Six Months (February 17,
Ended Ended Ended Ended 1993) to
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0 $ 0
Expenses
General and Administrative 234,746 242,804 520,742 325,168 1,515,447
------------ ------------ ------------ ------------ ------------
Operating Loss (234,746) (242,804) (520,742) (325,168) (1,515,447)
Other Income (Expense)
Write Off Patents - - - (2,100,007) (2,100,007)
Interest Expense - - (4,955) 0 (11,716)
Interest Income - - 0 0 7,897
------------ ------------ ------------
Total Other Income (Expense) - - (4,955) (2,100,007) (2,103,826)
------------ ------------ ------------
Net Loss Before Cumulative Effect of
Accounting Change (234,746) (242,804) (525,697) (2,425,175) (3,619,273)
Cumulative Effect of Accounting Change - - - (102,500) (102,500)
------------ ------------
Net Loss Available to Common Stockholders $ (234,746) $ (321,833) $ (525,697) $ (2,527,675) $ (3,721,773)
============ ============ ============ ============ ============
Basic Loss Per Share:
Loss Before Cumulative Effect of
Accounting Change $ (0.02) $ (0.03) $ (0.04) $ (0.23) $ (0.30)
============ ============ ============
Cumulative Effect of Accounting Change - - - (.01) (.01)
------------ ------------
Net Loss $ (0.02) $ (0.03) $ (0.04) $ (0.24) $ (0.31)
============ ============ ============ ============ ============
Basic Weighted Average Number of
Common Shares Outstanding 12,167,285 9,526,685 11,972,285 10,727,361 11,972,285
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 48
HEALTHBRIDGE, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999, AND FOR THE
PERIOD FROM INCEPTION (FEBRUARY 17, 1993) TO JUNE 30, 2000
<TABLE>
<CAPTION>
From Inception
Six Months Six Months (February 17,
Ended Ended 1993) to
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (525,697) $ (2,527,675) $ (3,721,773)
Adjustments to Reconcile Net Loss to Net Cash Used In
Operating Activities
Accrued Interest Converted to Paid In Capital 4,955 0 11,716
Common Stock Issued For Services Rendered 21,200 0 21,200
Depreciation and Amortization 2,478 2,478 7,474
Write Off of Patents 0 2,100,007 2,100,007
Write Off of Organizational Costs 0 102,500 102,500
Changes in Assets and Liabilities
Increase (Decrease) in Accounts Payable 173,931 69,935 292,190
------------- ------------- -------------
Total Adjustments 202,564 2,274,920 2,535,087
------------- ------------- -------------
Net Cash Used In Operating Activities (323,133) (252,755) (1,186,686)
Cash Flows From Investing Activities - - -
Cash Flows From Financing Activities
Cash Received for Common Shares in Connection with the
WattMonitor, Inc. Acquisition 0 798,061 798,061
Proceeds From the Sale of Common Stock 140,000 0 140,000
Borrowings Under Notes Payable 180,000 0 250,000
------------- ------------- -------------
Net Cash Provided By Financing Activities 320,000 798,061 1,188,061
------------- ------------- -------------
Increase (Decrease) in Cash and Cash Equivalents (3,133) 545,306 1,375
Cash and Cash Equivalents, Beginning of Period 4,508 0 0
------------- ------------- -------------
Cash and Cash Equivalents, End of Period $ 1,375 $ 545,306 $ 1,375
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
From Inception
Six Months Six Months (February 17,
Ended Ended 1993) to
June 30, 2000 June 30, 1999 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
Supplemental Information:
Cash paid for:
Interest $ 0 $ 0 $ 0
============ ========== ==========
Income taxes $ 0 $ 0 $ 0
============ ========== ==========
Supplemental Noncash Investing and Financing Activities:
Common Stock Issued For Services Rendered $ 21,200 - $ 34,200
============ ==========
Accrued Interest Converted to Paid In Capital $ 4,955 - $ 11,716
============ ==========
Conversion of Debt to Equity $ 250,000 $1,000,000 $1,250,000
============ ========== ==========
Issuance of Common Stock in Completion of Asset
Purchase Agreement Dated January 27, 1999 - $1,020,465 $1,020,465
========== ==========
Common Stock Issued as Dividends-in-kind - $2,008,096 $2,008,096
========== ==========
Accounts Payable Assumed in Completion of Asset
Purchase Agreement Dated January 27, 1999 - $ 233,215 $ 233,215
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 49
HEALTHBRIDGE, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 30, 2000
Note 1. Statement of Information Furnished
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with Form 10QSB instructions and in the opinion of
management contains all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of June 30,
2000, the results of operations for the three and six months ended June 30,
2000, and the statement of cash flows for the six months ended June 30, 2000.
These results have been determined on the basis of generally accepted accounting
principles and practices and applied consistently with those used in the
preparation of the Company's 1999 Annual Report on Form 10-KSB.
Certain information and footnote disclosure normally included in the financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying financial
statements be read in conjunction with the accompanying financial statements and
notes thereto incorporated by reference in the Company's 1999 Annual Report on
Form 10-SB.
Note 2. Fixed Assets
Fixed assets consist of office equipment. The balance at June 30, 2000 consists
of:
<TABLE>
<S> <C>
Cost $ 24,786
Accumulated Depreciation 21,482
------
Net Book Value $ 3,304
=======
</TABLE>
Depreciation expense charged to operations during the six months ended June 30,
2000 was $2,478.
Note 3. Notes Payable, Other
Healthbridge, Inc. (Healthbridge) was advanced an additional $180,000, at 9% per
annum, for the six months ended June 30, 2000, from Valor Invest, Ltd., for a
total of $250,000. Included in operations is $11,716 of accrued interest that
was converted to paid in capital during the six months ended June 30, 2000. On
April 1, 2000, total advances of $250,000 were converted into 500,000 shares of
common stock, plus a warrant to purchase 500,000 shares of common stock at an
exercise price of $0.50 per share.
Note 4. Common Stock
Common stock issued during the six months ended June 30 ,2000 was as follows:
<TABLE>
<S> <C> <C>
Common stock for services (1) 20,000 $ 21,200
Conversion of debt to equity (2) 500,000 $ 250,000
Issued for cash under Private Placement (3) 280,000 $ 140,000
</TABLE>
(1) The common stock issued for services was valued at the fair market value of
the common stock at the date of issuance.
(2) See Note 3.
(3) Healthbridge is attempting to raise $500,000 by offering 1,000,000 units at
a price of $.50 per share under a private placement agreement dated April 5,
2000. Each unit consists of one share of common stock and one common stock
purchase warrant. During the six months ended June 30, 2000, Healthbridge raised
$140,000 and issued 280,000 units.
Note 5. Warrants
There were 830,000 total warrants outstanding as of June 30, 2000.
Note 6. Commitments
On August 15, 2000, Healthbridge entered into a loan agreement with Valor
Invest, Ltd. to obtain up to $500,000 in working capital funds, interest at 7.5
percent per annum, due and payable in full on September 1, 2001.
F-26
