UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VISUALMED CLINICAL SYSTEMS CORP.
(Name of small business issuer in our charter)
Nevada
------
(State or other jurisdiction of incorporation or organization)
7373 Applied For
(Primary standard industrial (I.R.S. Employer
classification code number) Identification No.)
391 Laurier Street West, Montreal, Quebec H2V 2K3
(514) 274-1115.
(Address and telephone number of principal executive offices)
Eric P. Littman, Esquire
7695 S.W. 104th Street, Suite 210, Miami, FL 33156
Tel: (305) 663-3333; Fax: (305) 668-0003
(Name, address and telephone of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the Securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box: [X ]
CALCULATION OF REGISTRATION FEE
Title of class of Proposed Maximum be Amount of
securities to be Registered Aggregrate Offering Price Registration Fee1
be registered
Common Stock,
$.001 par value $66,510,000 $20,000
(1) Calculated pursuant to Rule 457(c). The closing bid price of the shares
of common stock being being registered on August 3, 2000 as quoted by the
National Quotation Pink Sheet Bureau was $3.50 on August 3, 2000.
This Registration statement relates to 19,002,785 shares of common stock
which are offered for sale by Selling Security Holders.
<PAGE>
TABLE OF CONTENTS
Part I Information Required In Prospectus
Item 1. Front of Registration Statement and Outside Front
Cover Page of Prospectus 1
Item 2. Inside Front and Outside Back Cover Pages of Prospectus 2
Item 3. Summary Information and Risk Factors 8
Item 4. Use of Proceeds 17
Item 5. Determination of Offering Price 17
Item 6. Dilution 17
Item 7. Selling Security Holders 17
Item 8. Plan of Distribution 17
Item 9. Legal Proceedings 19
Item 10.Directors, Executive Officers, Promoters and Control Persons 19
Item 11.Security Ownership of Certain
Beneficial Owners and Management 22
Item 12.Description of Securities 25
Item 13.Interest of Named Experts and Counsel 27
Item 14.Disclosure of Commission Position on Indemnification for
Securities Act Liabilities 27
Item 15.Organization Within Last Five Years
Item 16.Description of Business 27
Item 17.Management's Discussion and Analysis 29
Item 18.Description of Property 32
Item 19.Certain Relationships and Related Transactions 32
Item 20.Market for Common Equity and Related Stockholder Matters 32
Item 21.Executive Compensation 33
Item 22.Financial Statements 34
Item 23.Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 34
Part II Information Not Required In Prospectus
Item 24. Indemnification of Directors and Officers 34
Item 25. Other Expenses of Issuance and Distribution 34
Item 26. Recent Sales of Unregistered Securities 35
Item 27. Exhibits 35
Item 28.Undertakings 35
<PAGE>
PROSPECTUS
VISUALMED CLINICAL SYSTEMS CORP.
19,002,785 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS
---------------------------------------------
This Prospectus relates to the sale of 19,002, 785 shares of common
stock, $.001 par value (the "Common Stock"), of VisualMed Clinical Systems
Corp.(the "Company"), all of which are offered by the holders thereof
identified as "Selling Security Holders" in this Prospectus. See "SELLING
SECURITY HOLDERS."
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. Sales of shares of Common Stock may be
made from time to time (in transactions which may include block transactions) by
or for the account of the Selling Security Holders in the over the counter
market or in negotiated transactions, or otherwise, at market prices prevailing
at the time of sale or at negotiated prices. See "SELLING SECURITY HOLDERS"
and "PLAN OF DISTRIBUTION."
THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ALL OF THE 19,002,785 COMMON SHARES REGISTERED HEREIN ARE BEING OFFERED BY
SELLING SECURITY HOLDERS. THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE
SALE OF SHARES BY THE SELLING SECURITY HOLDERS. SEE PAGE 4 RELATING TO THE
RISKS INVOLVED IN THIS OFFERING.
ITEM 3. SUMMARY INFORMATION AND RISK FACTORS
References in this document to the "Company" refer to VisualMed
Clinical Systems Corp.
SUMMARY
THIS REGISTRATION STATEMENT CONTAINS FORWARD LOOKING STATEMENTS, WHICH
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING INFORMATION IS SELECTIVE AND QUALIFIED IN ITS ENTIRETY
BY THE DETAILED INFORMATION (INCLUDING FINANCIAL INFORMATION AND NOTES THERETO)
<PAGE>
APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY OF CERTAIN PROVISIONS OF
THE PROSPECTUS IS INTENDED ONLY FOR CONVENIENT REFERENCE AND DOES NOT PURPORT TO
BE COMPLETE. THE ENTIRE PROSPECTUS SHOULD BE READ AND CAREFULLY CONSIDERED BY
PROSPECTIVE INVESTORS BEFORE MAKING A DECISION TO PURCHASE COMMON STOCK.
The Company.
The Company, formerly known as Cherry Tree Capital Corp. was incorporated
in the State of Florida on October 4, 1996 and was reincorporated in the state
of Nevada effective January 29, 1999. The Company was basically inactive until
May 9, 2000 when it entered into an Exchange Agreement (the "Agreement") with
VisualMed Clinical Systems Inc., a Canadian corporation (VisualMed Canada") and
its shareholders. Pursuant to that agreement, the Company agreed to issue to
the shareholders of VisualMed Canada 19,002,785 common shares (the AShares") in
exchange for all of the issued and outstanding shares of VisualMed Canada.
VisualMed Canada became a wholly owned subsidiary of the Company and thereafter
the Company changed its name to VisualMed Clinical Systems Corp.(VisualMed
U.S.). The Company's shares are currently listed for trading on the National
Quotation Bureau Pink Sheets under the trading symbol AVSMD". The Company's
principal executive offices are located at 391 Laurier Street West, Montreal,
Quebec H2V 2K3 and its telephone number is (514) 274-1115. The Company is
authorized to issue 50,000,000 shares of common stock, $ .001 par value (the
"Common Shares"). At June 30, 2000 there were 13,330,000 common shares issued
and outstanding.
The Company's Business.
The Company is developing a state of the art expert physician order entry
system, operating in a P.C. environment. The VisualMed system will consist of
at least 11 specific modules, presently in various stages of development. At
present, the VisualMed system is in the Beta testing phase at the Montreal Heart
Institute, consisting of the core modules VisualADMIN, VisualMD and
VisualPHARMACY. VisualNURSE will be ready in fall 2000 for testing. VisualMed
is beginning to market this system in North and South America, and expects to
have commercial sales within the next year.
The Offering.
As of June 30, 2000 the Company had 13,330,000 shares of common stock
issued and outstanding. This offering is comprised of the 19,002,785
Shares which are to be issued as Pursuant to the Agreement.
FINANCIAL SUMMARY INFORMATION.
On May 9, 2000, VisualMed Canada, its shareholders and the Company entered
into a series of agreements whereby the shareholders of VisualMed Canada
acquired control of the Company by way of a reverse acquisition.
Although the Company legally acquired VisualMed Canada and will continue as
the legal successor company, for accounting purposes VisualMed Canada is
considered the acquirer. As a result, the acquisition will be accounted for as
if VisualMed Canada acquired the Company and then recapitalized its
shareholders' equity.
The information set forth below has been derived from the financial
statements of VisualMed Canada, and should be read in conjunction with and is
qualified in its entirety by reference to these financial statements, including
the notes thereto, included elsewhere in this registration statement. This
summary financial information has been prepared in accordance with accounting
principles generally accepted in the United States, and is expressed in Canadian
dollars, which is both the functional and reporting currency of VisualMed
Canada.
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CANADA
(a development stage company)
(in Canadian dollars)
OPERATING DATA
CUMULATIVE PERIOD
SIX MONTH PERIOD YEAR ENDED FROM DECEMBER 1,
ENDED MARCH 31, SEPTEMBER 30, 1997 (DATE OF
2000 1999 INCEPTION) TO MARCH
31, 2000
------------------ ----------------- --------------------
<S> <C> <C> <C>
REVENUES - - -
Research and development
expenses 593,613 579,902 1,173,515
Net loss (2,386,521) (938,959) (3,325,480)
Loss per share ($0.05) ($0.02)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
MARCH 31, 2000 SEPTEMBER 30, 1999
--------------- -------------------
<S> <C> <C>
Cash and cash equivalents 1,207,062 -
Total assets 2,110,613 459,478
Total liabilities 1,992,819 1,398,337
Shareholders' equity
Common stock 3,443,274 100
Deficit (3,325,480) (938,959)
--------------- -------------------
117,794 (938,859)
--------------- -------------------
</TABLE>
<PAGE>
EXCHANGE RATE DATA
Unless otherwise specified or the context otherwise requires, all dollar
amounts in this prospectus are in Canadian dollars. The following table sets
forth certain exchange rates to convert from Canadian into US dollars calculated
daily at 4:00 PM in London, based on the spot closing rates as provided by
Reuters.
<TABLE>
<CAPTION>
Period from December
Six month period 1, 1997 (date of
ended March 31, Year ended inception) to March 31,
2000 September 30, 1999 2000
---------------------- ---------------- ------------------ -----------------------
<S> <C> <C> <C>
High for the period 0.6974 0.6883 0.7107
Low for the period 0.6698 0.6425 0.6327
End of period 0.6888 0.6805 0.6765
Average for the period 0.6837 0.6655 0.6888
</TABLE>
RISK FACTORS
AN INVESTMENT INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE MADE ONLY BY
INVESTORS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE
INVESTORS, PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES, SHOULD CONSIDER
CAREFULLY THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS.
Development Stage Company with No Operating History.
The Company has had limited operating history upon which investors can
determine its potential profitability or evaluate its business strategy.
Investors must consider the risks and difficulties of our developmental
nature. The Company has very little working capital or sources of liquidity
and more than likely will experience financial difficulties during its
operational development. As such, even if the Company generates sales there
can be no assurance that it will have profitable operations. Its weak
financial condition could also adversely affect its ability to raise working
capital, which would have a materially adverse effect on the development of its
operations.
General Economic Conditions.
The Company is subject to risks generally inherent in the operation of a
business. These include, for example, inflation and increases or decreases in
interest rates which may impact upon the profitable operation of the Company.
The Company is also subject to specific risks such as decrease in computer
equipment prices, increases and decreases in salaries of software development
personnel, increases and decreases of hospital care costs, and increases and
decreases in drug prices.
Changes in the Healthcare Industry.
The Company operates in the healthcare industry which is highly regulated
and is subject to changing political, economic, and other regulatory influences
including the U.S. Food and Drug Administration AFDA" .
<PAGE>
Competition and Technology.
The Company has developed what it believes to be unique software. However,
there is no assurance that another company with more financing and which is
better established in the industry will not develop software which will compete
with the Company's software. In addition, as technology is rapidly changing,
there is no assurance that such competing company will not develop software
which renders the Company's software obsolete.
Competition.
The Company is entering into the market for healthcare information systems,
which is competitive, rapidly evolving and subject to rapid technological
change. The Company believes that the principal competitive factors in this
market include technology, functionality, reliability, ease of use, depth,
breadth of the system. Certain of VisualMed's competitors have greater
financial, technical, product development, marketing and other resources than
the Company and some of its competitors offer products that it does not offer.
The Company's principal existing competitors include Cerner Corporation, Shared
Medical Systems Corporation, IDX Systems Corporation, McKesson HBOC Inc.,
Eclipsys Corporation, and others. Certain competitive actions or possible
product developments by competitors, may have a material adverse effect upon the
operations of the company.
Uncertainty of Commercialization.
The VisualMed system is still in development stage and has yet to
achieve substantial commercial acceptance in order to maintain itself on
internal cash flow. This version of VisualMed is new and has yet to prove itself
in a practical work environment and has yet to obtain wide spread professional
acceptance, although the proto-type of VisualMed has proven itself at the Royal
Victoria Hospital in Montreal.
Limited Marketing Capabilities.
VisualMed's operating results will depend to a large extent on its
ability to successfully market the VisualMed system. VisualMed currently has
limited marketing capability. VisualMed intends to hire additional sales and
marketing personnel and enter into distribution and marketing joint ventures and
other agreements to market the VisualMed system.
Long Lead Time in Implementing Contracts.
The process of identifying a potential customer, entering into a contract,
obtaining and installing hardware and implementating the VisualMed software is a
lengthy process that is expected to take at least several months and perhaps
longer. Implementation of the VisualMed system requires specialized personnel
and special training. VisualMed currently has limited staff and outside
consultants availability for implementation. As demand for implementation
increases, the company will have to hire additional staff and train these people
/or consultants, which may cause delays in completion of certain sales.
Limited Public Market Exists for the Company's Common Stock.
At the present time, there is a limited public market for the Company's
common stock. The Company intends to apply for listing of the securities on the
Over the Counter Bulletin Board ("OTCBB"); however, the Company cannot assure
that it will be able to obtain such a listing. The over the counter market
("OTC") differs substantially from national and regional stock exchanges because
it (1) operates through communication of bids, offers and confirmations between
broker dealers, rather than one centralized market (exchange) and (2) securities
admitted to quotation are offered by one or more broker dealers rather than
"specialists" which operate in stock exchanges. To qualify for listing on the
OTCBB, an equity security must have at least one registered broker dealer, which
acts as the market maker
<PAGE>
listing bids or ask quotations and which sponsors an issuer listing. A
market maker sponsoring a company's securities is required in order to obtain
listing of securities on any of the public trading markets, including the OTCBB.
The Company does not have a market maker for its securities. If the Company is
able to obtain a market maker for its securities, it may obtain a listing on the
OTCBB or develop a trading market for its common stock. The Company may be
unable to locate a market maker that will agree to sponsor its securities. Even
if the Company does locate a market maker, there is no assurance that its
securities will be able to meet the OTCBB requirements or that the securities
will be accepted for a OTCBB listing.
Stock Price May Be Volatile.
The trading price of the Company's common stock may be volatile. The
market for the Company's common stock may experience significant price and
volume fluctuations in response to a number of factors including this being a
new stock listing which has yet to develop an established following, variations
in operating results, changes in expectations of future financial performance or
changes in estimates of securities analysts, governmental regulatory action,
healthcare reform measures, client relationship developments and other factors,
many of which are beyond the Company's control. As well, these factors may
influence the trading price, the time in the development of the various modules,
the ability to debug problems efficiently, market acceptance, generating sales,
favorable and unfavorable publicity, acceptance by healthcare professionals.
In recent months, the stock market in general, and the market for software,
healthcare and high technology companies in particular, has experienced extreme
volatility that often has been unrelated to the operating performance or
potential of particular companies. These broad market and industry fluctuations
may adversely affect the trading price of the Company's common stock, regardless
of actual operating performance or potential.
The Company Has Substantial Near Term Capital Needs; It May Be Unable To
Obtain Additional Funding.
The Company will require funding over the next twenty four (24) months
to develop its business. The percentage ownership of our current
shareholders will be reduced if additional funds are raised through the issuance
of equity securities. Such equity securities may have rights,
preferences, and privileges senior to those of our common stock holders.
Further, there can be no assurance that additional capital will be available on
terms favorable to our company or its shareholders.
The Company's cash requirements may vary materially depending on our rate
of development, research and development results, competitive and technological
advances and other factors. If adequate funds are not available, we may be
required to significantly curtail operations or obtain funds by entering into
collaboration agreements, which may contain unfavorable terms. Our inability to
raise capital would have a material adverse effect on our business, financial
condition, and operations.
In addition, the Company has no credit facility or other committed sources
of capital. There can be no assurance that it will be able to establish such
arrangements on satisfactory terms. If capital resources are insufficient to
meet future capital requirements, it may have to raise additional funds to
continue development.
To the extent that additional capital is raised through the sale of equity
and/or convertible debt securities, the issuance of such securities could result
in dilution to the shareholder value of our common stock. If such funds are
inadequate, the Company may be unable to sufficiently develop its operations.
The Company's inability to raise capital would have a material adverse effect on
our business, financial condition and operations.
<PAGE>
If Future Shares are Issued, Present Investors' per Share Value May be
Diluted.
The Company's Articles of Incorporation authorizes the issuance of a
maximum of 50,000,000 shares of common stock, $.001 par value. At the conclusion
of this Offering there will be 32,332,785 shares of common stock issued and
outstanding. The authority of our Board of Directors to issue additional stock
without shareholder consent may have a depressive effect on the market value of
the Company's stock.
The Company Has Never Paid Dividends.
As a new business, the Company has never paid dividends and it does not
anticipate declaring or paying any dividends in the foreseeable future. The
Company intends to retain earnings, if any, to finance the development and
expansion of its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, our financial condition, capital requirements, general business
conditions and other factors. Future dividends may also be subject to covenants
contained in loan or other financing documents the Company may execute.
Accordingly, there can be no assurance that cash dividends of any kind will ever
be declared or paid.
Proprietary Technology May Be Subjected to Infringement Claims or May
Be Infringed Upon.
The Company relies upon a combination of trade secrets, copyright
and trademark laws, license agreements, confidentiality procedures, employee
non-disclosure agreements and technical measures to maintain the trade secrecy
of its proprietary information. The Company has filed patent applications or
copyrights covering its software technology nonetheless patent protection in
software is not totally reliable. As a result, the Company may not be able to
protect against misappropriation of its intellectual property. In addition, the
Company could be subject to intellectual property infringement claims as the
number of competitors grows and the functionality of its products overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
to defend. If the Company becomes liable to third parties for infringing their
intellectual property rights, it could be required to pay a substantial damage
award and to develop non infringing technology, obtain a license or cease
selling the products that contain the infringing intellectual property.
Key Personnel.
As with all knowledge-based companies, certain personnel are important.
Departure of certain key employees may have an adverse effect upon the company.
The Company maintains key man life insurance in the amount of $1 million Cdn on
the following key employees: Gerard Dab, Arthur Gelston and Richard Le Hir.
Product Related Liabilities.
The Company's products provide critical information for providing
healthcare to patients. Although no such claims have been brought against the
Company to date regarding injuries related to the use of its products, such
claims may occur in the future. Although the Company employs numerous safeguards
and backups, there can be no guarantee that extreme unforeseen circumstances may
arise that can cause product failure and result in damages. Although the Company
maintains product liability insurance coverage in an amount that it believes is
sufficient for its business, there can be no assurance that such coverage will
prove to be adequate or that such coverage will continue to remain available on
acceptable terms, if at all. A successful claim brought against the Company
which is uninsured or under insured could materially harm its business, results
of operations or financial condition.
<PAGE>
System Errors and Warranties.
The Company's systems, are very complex and employ state of the art
technology which may be new to the healthcare industry. As with new and complex
systems, they may contain errors, especially when first introduced. Although the
Company conducts extensive testing, it may still discover software errors in its
products after their introduction. Failure of a client's system to meet these
certain performance criteria could constitute a material breach resulting in
contract cancellation, could require the Company to take corrective action or
result in damages in possible lawsuits. The Company's contract will generally
limit the Company's liability arising from such claims but such limits may not
be enforceable in certain jurisdictions.
ITEM 4. USE OF PROCEEDS
Not Applicable. The Company will not receive any proceeds from the sale
of the Securities by the Selling Security Holders.
ITEM 5. DETERMINATION OF OFFERING PRICE
Not Applicable. The Selling Security Holders will be able to determine the
price at which they sell the Securities.
ITEM 6. DILUTION
Not applicable.
ITEM 7. SELLING SECURITY HOLDERS
The Securities are being sold by the Selling Security Holders named
below. The table indicates that all the Securities will be available for
resale after the effective date of this Registration Statement. However, any
or all of the Securities listed below may be retained by any of the Selling
Security Holders; therefore, no accurate forecast can be made regarding the
number of Securities that will be held by the Selling Security Holders after
the effective date. The following table sets forth the number of Shares being
held of record or beneficially (to the extent known by the Company) by such
Selling Security Holders, all of which is based upon information currently
available to the Company. The Company will not receive any proceeds from the
sale of the Securities.
NAME NUMBER OF SHARES
Gerard Dab
6,566,990
Arthur Gelston
6,041,640
Robert Cohen
7,500
Elaine Rich Gelston
262,680
Irving Gelston Jr.
262,680
Philippe Panzini
1,080,215
Societe Innovatech du Grand Montr al
2,511,946
<PAGE>
Richard Le Hir
582,850
Gundyco en Fiducie pour le REER immobilis de
Richard Le Hir (551-77663-16)
34,722
Robert Chafetz
153,929
Joseph Mah
92,357
35,357
Barry Scharf
Guillaume M tayer
44,734
356,572
Linda McHarg
Richard Borenstein
287,100
Jayne Greer
23,679
Claude Michel Morin
30,000
Catherine Demars
15,000
Yonne Rosa
40,020
4,500
Vexpan Enterprises Inc.
Marina Mendeleva
10,500
4,500
Fred Berlin
Louis Dorion
900
Alexei Guevara
1,800
Linda Snell
3,000
Catherine Anne Kierans
600
Louis P. Desmarais
4,500
Jacques Dubuc
1,500
Francine Constantineau
1,500
Allen Huang
600
Christiane Jacques
12,153
Michel Felix
7,293
Vitaliano Torchia
45,000
<PAGE>
Dino Tagliabracci
12,675
Catherine Morin
8,499
Cyril Hebuterne
2,778
Francine Dagenais
750
Benoit Courchesne
17,594
Martin B rub
5,208
Michel Waskiewicz
867
ReJeanne Couture
10,416
Viviane Racicot
6,944
Pierre Roy 11,100
Joyce Pickering
3,471
Kenneth Flegel
437
Robert Salasidis
30,000
Suzanne LeBlanc Sterzi
6,249
Claudette Dion Pr vost
1,736
Alice Tremblay
1,736
Louise Craig
1,041
Fran ois Bertrand
5,468
Solomon Aboud
7,535
Alan Brox
8,681
Gloria Millett Stattner
17,264
George Szeben
1,736
795743 Ontario Limited
3,471
Dr. Walter Bloom
15,000
Michel Lemieux
3,000
Robert Dion
521
Hubert Ethier
8,681
<PAGE>
Denyse Anderson
3,472
Francoise Couture Gaarkeuken
30,000
Patrica Dawson
7,292
Claude Richard
25,233
Beverly Rowat
347
Morris Krymalowski
37,500
George Burger
37,239
Claret Asset Management
75,000
Fond Action CSN
41,250
Gerard Bozet
23,100
Sandro Spassatempo
1,177
TOTAL:
19,002,785
ITEM 8. PLAN OF DISTRIBUTION
The Selling Security Holders or their transferees may sell the
Securities offered by this Registration Statement from time to time. To our
best knowledge, no underwriting arrangements have been entered into by
the Selling Security Holders. The distribution of the Securities by the
Selling Security Holders may be effected in one or more transactions
that may take place in the over the counter market, including ordinary
broker's transactions, privately negotiated transactions or through sales to
one or more dealers for resale of such Securities as principals at prevailing
market prices at the time of sale and prices related to prevailing market prices
or negotiated prices.
The Selling Security Holders may pledge all or a portion of the Securities
owned as collateral for margin accounts or in loan transactions. Such
Securities may be resold pursuant to the terms of such pledges, accounts or
loan transactions. Upon default by such Selling Security Holders, the
pledgee in such loan transactions would have the same rights of sale as the
Selling Security Holders under this prospectus. The Selling Security Holders
also may enter into exchange traded listed option transactions which require
the delivery of the Securities listed hereunder. The Selling Security
Holders may also transfer Securities owned in other ways not involving market
makers or established trading markets, including directly by gift,
distribution, or other transfer without payment of consideration. Upon any
such transfer the transferee would have the same rights of sale as such Selling
Security Holders under this Prospectus.
Finally, the Selling Security Holders and any brokers and dealers through
whom sales of the Securities are made may be deemed to be "underwriters"
within the meaning of the Securities Act. The commissions or discounts
and other compensation paid to such persons may be regarded as underwriters'
compensation.
<PAGE>
There can be no assurances that the Selling Security Holders will sell any
or all of the Securities. In order to comply with certain state securities laws
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless such Securities have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with. Under applicable rules and regulations of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), any person engaged in a distribution of
the Securities may not simultaneously engage in market making activities with
respect to such Securities for a period of one or five business days prior to
the commencement of such distribution.
In addition to, and without limiting the foregoing, each of the Selling
Security Holders and any other person participating in a distribution will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations there under, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of any of the Securities
by the Selling Security Holders or any such other person.
All of the foregoing may affect the marketability of the Securities.
Pursuant to an understanding we have with the Selling Securities Holders, we
will pay all the fees and expenses incident to the registration of the
Securities (other than the Selling Security Holders' pro rata share of
underwriting discounts and commissions, if any, which is to be paid by the
Selling Security Holders).
ITEM 9. LEGAL PROCEEDINGS
To the best of our knowledge, the Company is not a party to any pending
legal proceeding. The Company is not aware of any contemplated legal proceeding
by a governmental authority involving the Company.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that the Company shall have
a minimum of one (1) director on the board at any one time. Any vacancies are
filled by a majority vote of the remaining directors then in office. Each of
the directors listed below will hold office until the next annual meeting of the
shareholders of the Company or until the election of his successor, unless he
resigns or his office becomes vacant by removal, death or other cause.
The directors and executive officers of the Company are as follows:
Name Age Position
Mr. G rard Dab 53 Chairman of the Board and
director
Dr. Arthur Gelston 51 President, Chief Science Officer
and director
Mr. Richard Le Hir 53 Chief Executive Officer and
director
Mr. Joseph Mah, C.A 8 Vice President of Finance and
Chief Financial Officer
Mr. Robert Cohen 41 Vice President of Sales and
Marketing
Mr. Barry Scharf 5 Vice President of Client
Services
<PAGE>
Dr. Linda McHarg 55 Director
Dr. Linda Snell 49 Director
Mr. Richard Borenstein 33 Director
Ms. Caroline Singleton 47 Director
Mr. G rard Dab is the Company's Chairman of the Board. He is a business
executive with more than twenty year's experience in international marketing and
has supervised marketing communications for several information management
companies. He has developed and continues to maintain an extensive network of
contacts in the field of healthcare communications throughout the world.
Dr. Arthur Gelston is President, Chief Science Officer and a director of
the Company. He is also an Associate Professor of Medicine and the former
Director of Medical Clinics of the Department of Internal Medicine, Royal
Victoria Hospital, McGill University.
Dr. Linda McHarg is a director of the Company. She has a diverse background
in nursing, teaching and psychology with more than twenty years' experience in
the field of nursing. She is currently Senior Nursing Educator at McGill
University and Vanier College, in Montreal.
Dr Linda Sara Snell is a director of the Company. She is the Director of
the Division of General Internal Medicine at the McGill University Health Center
in Montreal. She is also an Associate Professor of the Department of Medicine at
McGill University.
Mr. Richard Le Hir is the Company's Chief Executive Officer and a director.
He is an attorney and business executive with 25 years of senior management and
strategic planning experience in some of Canada's largest corporations and trade
associations, including the Quebec Manufacturer's Association and the Canadian
Manufacturers' Association. He has also served as a cabinet member of the Quebec
government.
Mr. Richard Borenstein is a director of the Company. He is a business
executive with ten years experience in the field of informatics,
telecommunications and international manufacturing. He was Vice President of
Sales at Michael Phillips Inc. Mr. Borenstein was also Vice President Corporate
Sales for Mpact Immedia/Bell Emergis. He is currently Senior Vice President of
Worldwide Sales at Onesoft Corporation.
Ms. Caroline Singleton is a director of the Company. Ms. Singleton is also
a director of TouchTunes Music Corporation, Nova Expertises Solutions, Math
Engine Canada and " Centre de Promotion de Logiciels Qu becois". During her
twenty years career in the field of informatics, she has developed and managed
medical software and banking systems. Since 1997, she has served as Vice
President Information Technologies and Telecommunications, at Innovatech, a
public corporation created by the Quebec Government to finance high tech start
ups.
Mr. Joseph Mah is the Company's Vice President of Finance and Chief
Financial Officer. He is a senior financial executive with over twenty years'
experience in several largest Canadian and international corporations such as
Canada Steamship Lines and Abbott Laboratories.
<PAGE>
Mr. Robert Cohen is Vice President of marketing. He is a healthcare
information sales and marketing executive with more than ten years' experience
in the field. After working five years in Medical Imaging for General Electric,
he was Director of Sales for a Florida based medical informatics company where
he supervised a sales force of fourteen people.
Mr. Barry Scharf is the Company's Vice President of Client Services. He is
an executive with more than fifteen years experience in informatics and medical
informatics. He was Chief Operating Officer for two years at Integraware, a
division of Phoenix International Life Sciences Inc. He was responsible for
developing and marketing software solutions to accelerate drug development.
To the best knowledge of the Company, no officer, director, promoter or
control person of our Company has been involved in any legal proceeding that
would be material to an evaluation of the ability or integrity of such person in
this capacity.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of June 30, 2000, there were 13,330,000 common shares of the Company
issued and outstanding. The following table lists the person(s) who, to the
knowledge of the Company, beneficially owned more than five percent (5%) of the
common shares of the Company as at June 30, 2000.
<TABLE>
<CAPTION>
Name and address of Amount and nature of
beneficial owner Title of class beneficial ownership Percent of class
-------------------- ------------------------------ ----------------------------------------------- -----------------
<S> <C> <C> <C>
Mr. Richard Le Hir Common shares, par 10,000,000 shares held 75 %
8360 Pelletier Blvd. value $.001 under a voting trust (1)
Brossard, Quebec
Canada
<FN>
(1) The voting trust was established pursuant to a letter agreement (the
"Letter Agreement") between Richard Le Hir and VisualMed Canada, dated May
9, 2000, whereby Richard Le Hir was appointed as the voting trustee in
respect of these shares. Pursuant to the Letter Agreement, Richard Le Hir
shall hold said shares of the Company for the benefit of all of the
shareholders of VisualMed Canada for the purpose of maintaining control of
the Company until (i) the registration of the Securities pursuant hereto in
favor of the shareholders of VisualMed Canada; and (ii) the issuance to
such shareholders of a number of common shares of the Company that
represents a majority of all of the issued and outstanding shares of the
Company, at which time the shares will be redeemed by the Company for $100.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets out the number of common shares and vested options
to purchase common shares of the Company which will be beneficially owned by the
directors and the executive officers of the Company at the conclusion of this
offering and after giving effect to the redemption of the 10,000,000 shares of
Common Stock currently held by Richard Le Hir.
Name and Address1 Number of Shares Percent of Class
Mr. Grard Dab 6,896,9902 29.8%
Dr. Arthur Gelston 6,371,6403 27.5%
Mr. Richard Le Hir 712,5864 3.1%
<PAGE>
Mr. Joseph Mah, C.A. 187,3715 0.8%
Mr. Robert Cohen 7,5006 .03%
Mr. Barry Scharf 35,3577 0.2%
Dr. Linda McHarg 356,572 1.5%
Dr. Linda Snell 3,000 .01%
Mr. Richard Borenstein 401,406 1.7%
(1) For purposes of this Registration Statement, the addresses for these
shareholders is the address of the Company.
(2) Includes 330,000 shares which are issuable upon exercise of options
previously granted. Mr. Dab has previously been granted fixed options for
528,000 common shares of which 330,000 are vested and exercisable, and
conditional options that could lead to ownership of another 0.5% of the
Company if certain conditions are met.
(3) Includes 330,000 shares which are issuable upon exercise of options
previously granted. Dr. Gelston has previously been granted fixed options
for 528,000 common shares of which 330,000 are vested and exercisable, and
conditional options that could lead to ownership of another 0.5% of the
Company if certain conditions are met.
(4) Includes 95,014 shares which are issuable upon exercise of options
previously granted. Mr. Le Hir has previously been granted conditional
options of which 95,014 are vested and exercisable upon completion of this
registration statement, and others that could lead to ownership of another
1.25% of the Company if certain conditions are met.
(5) Includes 95,014 shares which are issuable upon exercise of options
previously granted. Mr. Mah has previously been granted conditional
options, all 95,014 of which are vested and exercisable upon completion of
this registration statement.
(6) Mr. Cohen has previously been granted conditional options that could lead
to ownership of another 200,000 shares of the Company if certain conditions
are met.
(7) Mr. Scharf has previously been granted conditional options that could lead
to ownership of another 1.5% of the Company if certain conditions are met.
ITEM 12. DESCRIPTION OF SECURITIES
The following description is a summary and is qualified in its entirety by
the provisions of our Articles of Incorporation and by laws, copies of which
have been filed as exhibits to the Registration Statement.
<PAGE>
COMMON STOCK.
The Company's Articles of Incorporation authorize the issuance of up to
50,000,000 common shares with a par value of $.001 per share. As of June 30,
2000, there were 13,330,000 common shares issued and outstanding. All
outstanding common shares are fully paid and non assessable.
LIQUIDATION RIGHTS.
Upon the liquidation or dissolution of the Company, the holder of each
outstanding common share will be entitled to share on a pro rata basis in the
assets of the Company legally available for distribution to shareholders, after
the payment of all debts and other liabilities.
DIVIDEND RIGHTS.
There are no limitations or restrictions upon the rights of the Board of
Directors of the Company to declare dividends. Dividends may be paid at any
time in cash, property or shares of the Company, except when the Company is
insolvent or when the payment thereof would render the Company insolvent subject
to the laws of the State of Nevada. The Company has not paid dividends to date
and it is not anticipated that any dividends will be paid in the foreseeable
future.
VOTING RIGHTS.
Holders of the common shares of the Company are entitled to cast one vote
for each share held at all shareholders' meetings for all purposes.
OTHER RIGHTS.
The common shares of the Company are not redeemable nor are they
convertible. Further, they carry no preemptive or other rights to subscribe to
or purchase additional common shares in the event of an offering of common
shares by the Company.
There are no other material rights attaching to the common shares of the
Company which are not herein described. There is no provision in the Articles
of Incorporation nor the by laws of the Company that would delay, defer or
prevent a change in control of the Company. The Company has not issued any
preferred stock or debt securities.
SHARES ELIGIBLE FOR FUTURE RIGHTS.
The 19,002,785 Shares registered in this offering will be freely tradable
without restrictions under the Securities Act, except for any shares held by our
"affiliates", which will be subject to the resale limitations of Rule 144 under
the Securities Act.
In general, under Rule 144 as currently in effect, any of our affiliates
and any person (or persons whose sales are aggregated) who has beneficially
owned his or her restricted shares for at least one year, may be entitled to
sell in the open market within any three month period a number of shares of
common stock that does not exceed the greater of (i) 1% of the then outstanding
shares of our common stock, or (ii) the average weekly trading volume in the
common stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain limitations on manner of sale, notice
requirements and availability of current public information about us. Non
affiliates who have held their restricted shares for one year may be entitled to
sell their shares under Rule 144 without regard to any of the above limitations,
provided they have not been affiliates for the three months preceding such sale.
<PAGE>
Further, Rule 144A as currently in effect, in general, permits unlimited
resales of certain restricted securities of any issuer provided that the
purchaser is an institution that owns and invests on a discretionary basis at
least $100 million in securities or is a registered broker dealer that owns and
invests $10 million in securities. Rule 144A allows our existing stockholders
to sell their shares of common stock to such institutions and registered broker
dealers without regard to any volume or other restrictions. Unlike under Rule
144, restricted securities sold under Rule 144A to non affiliates do not lose
their status as restricted securities.
As a result of the provisions of Rule 144, all of the restricted securities
could be available for sale in a public market, if developed, beginning 90 days
after the date of this Prospectus. The availability for sale of substantial
amounts of common stock under Rule 144 could adversely affect prevailing market
prices for our securities.
ITEM 13. INTEREST OF NAMED EXPERTS AND COUNSEL
The validity of the issuance of the Securities will be passed upon for the
Company by Eric P. Littman, P.A. As of June 30, 2000, Mr. Littman was the
owner of 300,000 shares of Common Stock.
ITEM 14. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons, the
Company has been advised that in the opinion of the SEC, such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by it of expenses incurred or paid by our
directors, officers or controlling persons in the successful defense of
any action, suit or proceedings) is asserted by such director, officer,
or controlling person in connection with any securities being registered, the
Company will, unless in the opinion of our counsel the matter has been settled
by controlling precedent, submit to court of appropriate jurisdiction the
question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issues.
ITEMS 15 and 16. DESCRIPTION OF BUSINESS
General
The Company was incorporated on October 4, 1996 pursuant to the laws of the
state of Florida and reincorporated in the State of Nevada on January 29, 1999.
Until May 2000, the Company was basically inactive. On May 9, 2000, the Company
entered into the Agreement whereby it acquired all of the issued and outstanding
shares of VisualMED Canada, a private Canadian corporation. In exchange for the
shares so acquired, the Company agreed to issue a total of 19,002,785 shares of
the Company (such 19,002,785 shares being referred to above as the "Securities")
to the shareholders of VisualMed Canada. As a result of the transaction,
VisualMed Canada is now a wholly owned subsidiary of the Company and the Company
is currently controlled by the shareholders of VisualMed Canada.
The Company's strategy is based upon developing effective, affordable
clinical software solutions. The Company creates informatics tools which it
believes will revolutionize the practice of hospital and office based medicine
by providing physicians and other healthcare professionals with immediate on
screen electronic access to all relevant patient data on an integrated basis,
reflecting a practical approach to clinical problem solving.
Until recently, modern information and data storage systems have largely
ignored the clinical needs of North American hospitals. Though management
information systems have been developed for use in connection with the
administrative side of healthcare, clinical information systems to assist
doctors and nurses in patient care delivery are largely nonexistent. In
particular, the information systems that currently exist in the hospital milieu
are not clinical tools but rather are focused upon the reporting of numerical
data or images and the maintenance of demographic records.
<PAGE>
The Company's state of the art expert clinical system (the "VisualMed
System") is designed to fill this void in the market. It allows physicians to
enter all their orders for procedures and drugs through a computer interface.
All such information then travels electronically to the appropriate destinations
(e.g. pharmacy, laboratories, X ray, cat scan and all other imaging devices,
operating rooms and other relevant departments). The system provides an on
screen display to nursing staff listing all of the procedures which they are
required to administer to the patients under their care as well as the
scheduling information regarding same. Physicians can review patient care
records, consult lab test results for their patients and even access X ray
images or the results of all other visual imaging testing procedures ordered for
their patients. The VisualMed System also provides relevant expert content to
assist in the prescription of drugs or the selection of other methods of
treatment, thus allowing physicians to practice evidence based medicine. To the
best knowledge of the Company, the VisualMed System is the only one of its kind
to include an expert physician order entry function to have been proven to date
in a PC environment. In this regard, a similar prototype PC based expert
clinical system developed in 1994 by Dr. Arthur Gelston, the current President
and Chief Science Officer of the Company has been in continuous operation at the
Royal Victoria Hospital in Montreal (a McGill University teaching center) for
the past six years.
The prototype system was conceived as the result of more than twenty years
of clinical experience by Dr. Gelston at some of North America's most
prestigious medical centers, such as the New York Hospital and the North Shore
University Hospital in Long Island, both teaching hospitals affiliated with
Cornell University. The prototype system was designed as a clinical tool
supporting effective decision making through the integration of available
nursing, pharmaceutical, demographic and laboratory data. The system provided
physicians with empirical data and cost information at the time of decision
making, allowing them to practice evidence based medicine and thus raising the
standard of care.
Rapidly accepted by physicians, nurses and paramedics, the prototype system
was shown to reduce medication errors and costs, while increasing personnel
efficiency. As a result of user satisfaction, its use was extended to three
medical wards at the Royal Victoria Hospital.
The development of the VisualMed System
VisualMed Canada was founded in December 1997 by Dr. Gelston. In 1998,
building upon the prototype system previously developed by Dr. Gelston in
association with the Royal Victoria Hospital, VisualMed Canada began to develop
the VisualMed System, which unlike the prototype runs on a Windows platform.
This innovation became possible as the result of the introduction of more
flexible software platforms and more robust networking solutions which have
allowed the Company to develop a system that, in its view, is unparalleled at
present by any existing clinical software as regards flexibility and ease of
use. The VisualMed System provides physicians with an intuitive, user friendly
and ergonomic expert support system.
At present, the VisualMed System is in the Beta testing phase at the
Montreal Heart Institute. Similar tests are expected to begin in the fall of
2000 at the Sainte Justine Children's Hospital in Montreal. Both of these
institutions are internationally renowned tertiary care teaching hospitals
affiliated with the University of Montreal. The quality of these sites will
have a bearing on market acceptance. The Company expects that it will begin to
commercially market the system in the United States, Canada and South America in
the summer of 2000, while it pursues the Beta testing phase.
Once commercialized, the Company believes that its suite of software
will usher in a new era of clinical informatics, based upon the application of
previously unavailable technologies. The Company's suite of software will
conform to the speed and reliability criteria of the healthcare informatics
<PAGE>
environment, which heretofore have not been adequately addressed. Further, the
use of higher level programming languages, such as Delphi 5, among others, means
that the turnaround time and the cost to the client institution of new
development is reduced.
The VisualMed System
The VisualMed System is an informatics tool comprising a suite of software
that allows physicians and other medical professionals to make informed
decisions more rapidly and effectively in the areas of diagnosis and therapy.
This is accomplished by presenting decision support in real time in the context
of the order entry process. The VisualMed System suite is an expert system that
integrates information, such as laboratory, demographic and clinical data as
well as prescription information from the pharmacy, from a variety of
traditional sources, which information may then be viewed in tabular and color
graphics format so as to be used effectively. Data accessed using the VisualMed
System is presented to the physician in the clinical context of a particular
case and only those portions of the data relevant to the current situation are
displayed.
The key features of the VisualMed System are thus as follows:
DATA COLLECTION FEATURE: The VisualMed System replaces paper based recording as
well as clinical data entry.
MANAGEMENT, ADMINISTRATION AND SCHEDULING FEATURES: Through the integration of
laboratory, demographic and nursing data downloaded from legacy (existing)
systems or direct data entry by healthcare professionals, the VisualMed System
facilitates information management within the client institution. Information
is readily accessible to all administrative staff and medical professionals,
thus enhancing the efficient flow of information throughout the client
institution. From an administrative perspective, this allows the system
administrator to perform quality control audits in real time. As a result,
rather than waiting months for clinical data to become available, as is the case
with legacy systems, administrators can review clinical practice, costs and
performance almost instantaneously. Changes in policies and practices, as
required, may thus be instituted in a timely manner. In addition, scheduling and
booking of appointments for patients within a client institution, including
inter clinic bookings, are facilitated by the integration of all pertinent data
into a centralized scheduling system, which nonetheless takes into account the
scheduling rules established by each individual clinic. From a medical
perspective, the VisualMed System provides medical professionals with easy
access to vital information which might otherwise be overlooked despite its
clinical significance, such as serious drug interactions, dosage errors or
critical abnormal results.
EXPERT CONTENT FEATURE: The VisualMed System provides physicians with important
cues and suggestions regarding the most viable methods of treatment in the
clinical context of a given situation. Equipped with state of the art
pharmaceutical and clinical guides developed by the Company, the system provides
real clinical support to medical professionals. The VisualMed System's menus
contain the full repertory of prescription drugs, including their cost, thus
allowing physicians to make cost efficient judgments. The system, which
provides preferred diagnostic and therapeutic alternatives to a physicians,
nonetheless allows the end user to make the ultimate clinical decisions.
The VisualMed System consists of modules that are designed to respond to
the clinical needs of the individual medical and surgical specialties. A client
institution will use all or some of the modules depending on its mission. Based
on algorithms that can be custom modified through a unique user interface, each
client institution can readily adapt the system to its own needs and to the
needs of certain particular wards. Generally, the VisualMed System is suitable
for use in teaching hospitals at the tertiary care level as well as in the
general hospital or community hospital setting.
<PAGE>
The VisualMed System software is installed on database and application
servers that communicate with Windows NT workstations connected to the
hospital's local area network (LAN). Depending on the informatics capabilities
of the host institution, it may send test requests to the hospital's laboratory
systems, receive laboratory and image results for use in physician decision
support and be linked to an existing pharmacy inventory system.
The following are the modules comprised in the VisualMed System software
suite:
VISUALMD
VisualMD is an expert electronic physician order entry system designed for
use on multiple wards and departments of a hospital allowing physicians to enter
all their orders in a computerized database for future access and action by
themselves and other professionals providing care to their patients. VisualMD
contains a state of the art clinical guide, the index of which is directly
linked to specific lab results and medications of individual patients.
VISUALNURSE
VisualNURSE is an electronic nursing tool integrally related to VisualMD. Data
transferred from VisualMD automatically generates a nursing and medication
index, which constitutes the patient's medication record. A unique user
interface allows individual wards to handle nursing duties in a flexible manner
specific to that particular ward. Menus of nursing tasks on a given ward are
related to the types of patients seen on that ward. Nurses use VisualNURSE to
maintain the nursing hospital record, which is readily available for discharge
planning and medical and paramedical consultation.
VISUALSURGEON
VisualSURGEON is an expert electronic surgical order entry system designed for
use on multiple surgical wards and departments of a hospital. VisualSURGEON
functions similarly to VisualMD. However, the algorithms and user cues have been
adapted to surgical practice.
VISUALONCOLOGY
VisualONCOLOGY is an expert electronic physician order entry system designed for
use on the oncology ward or service of a hospital already using the VisualMed
System. VisualONCOLOGY functions similarly to VisualMD except that additional
algorithms and user cues are tailored to the practice of oncology. Through its
unique user interface, VisualONCOLOGY maintains the various chemotherapeutic
protocols in an easy to use tabular and pictographic format, which can be
customized by the hospital pharmacist. Automatic safety overrides prevent
inadvertent dosing errors; however these can be overridden by an attending
physician, where required. VisualONCOLOGY stores custom selected information to
file, facilitating the work of the protocol data manager. The protocol data
manager, responsible for collating thousands of data results for patients
enrolled in chemotherapy trials is more easily able to survey the course of
therapy, looking for unforeseen side effects and results of treatment.
VISUALER
VisualER is an expert electronic physician order entry system designed for use
in the emergency department of a hospital. VisualER functions similarly to
VisualMD except that the algorithms and user cues are tailored to emergency
department medical and surgical practice. It contains emergency "protocols" to
facilitate rapid order entry in a department that is generally busy. VisualER
also contains screens showing the diagnostic and therapeutic "progress" made by
the patient through his or her stay so that the physician can rapidly judge not
only the need for more in depth assessment, but also the overall function of the
emergency unit at any given time. This is especially important during periods
when the emergency department is overcome by large influxes of patients.
<PAGE>
VISUALCHART
VisualCHART is an electronic patient record that contains all information
pertinent to a patient's hospitalization. VisualCHART replaces the paper patient
record and is accessible to all members of the ward team, including doctors,
nurses, consultants, clerks, dieticians, physiotherapists, social workers and
students, among others. Data relevant to each particular class of users may be
easily retrieved through the use of customized display formats.
VISUALOR
VisualOR is a scheduling and order entry system for use in the operating and
recovery suite, integrally linked with VisualMD and VisualSURGEON on the
hospital wards. VisualOR links off ward order entry and results reporting
seamlessly with prescriptions created using VisualMD or VisualSURGEON on the
hospital ward. Prescribers all share the identical electronic record so that
seamless continuity of care is assured as the patient is physically moved from
one area of the institution to another. The VisualOR scheduling feature allows
for the effective booking of the operating room theater, taking into account
personnel needs and medical supplies.
VISUALPHARMACY
VisualPHARMACY is an electronic pharmacy inventory system integrally connected
with VisualMD, VisualSURGEON and the other VisualMed System modules.
VisualPHARMACY is linked to an adverse drug reactions database and a
pharmaceutical clinical guide. It shares data with the other modules of the
VisualMed System and has a unique user interface allowing for the development of
local prescription algorithms for use in the clinical pharmacy. VisualPHARMACY
algorithms verify medication dose, frequency, and administration route according
to demographic, laboratory, and diagnostic criteria and are an important factor
in the enhanced safety profile provided by the VisualMed System. Each physician
prescription, is, in effect, validated by the pharmacy service underlying
VisualPHARMACY.
VISUALBOOK
VisualBOOK is an electronic scheduling system for patient examination and
imaging visits in the hospital environment. VisualBOOK assures maximum
flexibility in physician and patient scheduling as well as with respect to inter
booking among multiple clinics, wards, laboratories and the emergency
department. Physician schedules generated by secretaries in individual clinics
are visible to users in any part of the system. Patients can be booked from one
clinic to another even if the clinic to be booked is closed. Follow up
appointments and appointment rescheduling can be accomplished without having to
re enter patient information.
VisualBOOK automatically cues the physician concerning periodic preventive care
interventions such as annual flu shots, other immunizations and mammographies,
among others. Suggested interventions are based on the most recent North
American guidelines, as set out in the Report on the Periodic Health Exam, and
on individual patient demographic, laboratory or diagnostic information.
VisualBOOK can handle as many as 250,000 annual appointment slots per
institution or center. Its data module functions integrally with the data
handling system incorporated into VisualMD, VisualSURGEON and the other clinical
modules of the VisualMed System.
VISUALPROF
VisualPROF is a didactic tool containing virtual patients and data for use by
undergraduate and graduate trainees in the setting of a teaching hospital.
VisualPROF contains a suite of electronic or virtual patients whose results and
prescriptions can be modified by student prescribers, thus complementing the
student's exposure to clinical materials. The user interface is the same as that
used by actual physicians in the care of their patients.
<PAGE>
VISUALADMIN
VisualADMIN is an electronic record that integrates the VisualMed System's
medical, laboratory, imaging, administrative and demographic data. VisualADMIN
regroups all clinical data emanating from within the same institution and makes
this data available to clinical users throughout the facility. Relevant data is
thus accessible by means of any module of the system in such a manner that only
the information which is relevant to a particular application is displayed at
the time of use. VisualADMIN data is shared with all of the modules in the
VisualMed System.
Benefits of the VisualMed System
The Company believes that the implementation of the VisualMed System in
client institutions may procure the following benefits:
ENHANCED PATIENT SAFETY: One of the main features of the system is better
prescription management which, in turn, should lead to a reduction in dosage
errors and potential drug conflicts. Further, the risk of human filing and
transcription errors should be reduced through the standardization of data
entry. Finally, physicians will be automatically cued in the event of abnormal
critical results which may otherwise have been overlooked.
- REDUCTION OF COSTS: The VisualMed System presents the least expensive
prescription alternatives to physicians in any given case and always displays
prescription costs to the prescriber at the time of order entry. In this
regard, the prototype system installed at the Royal Victoria Hospital, upon
which the VisualMed System is based, has been documented to result in a 29%
savings in prescription costs. Further, the system discourages unnecessary test
repeats by prompting the user about tests previously performed. Given that the
system is designed to reduce the administrative workload of medical personnel,
client institutions are likely to realize savings as a result of the more
efficient use of resources. Finally, the VisualMed System, given the technology
upon which it is based, can be offered to client institutions at an affordable
entry price as compared with competing mainframe-based systems.
- INCREASED EFFICIENCY: One of the main benefits of the system is that it
saves physicians, nurses and other medical professionals time by significantly
reducing their paperwork. It also provides all medical personnel with easy
access to patient information and facilitates communications among same. This
allows medical personnel to be deployed in a more efficient manner and, more
particularly, allows them to spend more time with their patients. Further the
implementation of the system may be done rapidly and without undue disruption
due to the fact that the system requires very little training on the part of
physicians and other medical personnel. The system links all medical personnel
with the patient booking system, thus allowing for the seamless management of
patient scheduling throughout the client institution.
- ENHANCED QUALITY CONTROL AND ADMINISTRATION: Through the means of the
VisualMed System, personnel activity and cost efficiency can be monitored in
real time in a non intrusive manner. As a result, problems are detected and
resolved more rapidly. Finally, the modules of the system are in conformity
with industry standards thus permitting links to be established with existing
software.
- TRAINING: The didactic module of the system enhances the students'
learning process by complementing their exposure to clinical materials.
Research and Development Activities
During the fiscal year ended September 30, 1999, VisualMed Canada spent $579,902
in connection with its research and development activities.
<PAGE>
Intellectual Property
VisualMed Canada has made an application for a patent registration in connection
with the VisualMed System. VisualMed Canada has also made an application in both
Canada and the United States for the registration of its trade mark "THE
WIRELESS HOSPITAL" for use in connection with the VisualMed System.
Principal Suppliers
The Company is not dependent upon any one particular supplier for the
supply of materials and equipment relating to the manufacture of the VisualMed
System software.
Industry Profile
The introduction of software solutions in clinical medicine has been slow.
Institutional software was initially developed for use in the areas of hospital
administration, personnel scheduling and pharmacy inventory. Clinical medicine
is complex and until recently, only mainframe systems, which are expensive to
develop and maintain, could generate screens rapidly enough for convenient
access by the user. However, the user was forced to adopt a pre established data
display and retrieval method.
The evolution of local area networks (LAN) and of the personal computers
(PC) they support has changed this. The introduction of the acceptably stable
Windows platforms has set the foundation for a revolution in clinical
informatics. Therefore, it is going to be much easier to expand the use of
electronic charting in critical care hospitals.
Currently, leading suppliers of hospital informatics solutions have focused
on the development of laboratory tools and have not fully focused on the demands
of physician practitioners.
The Market for the Company's Product
There are over 10,000 hospitals and long term care centers in the United
States, Canada, South America and Western Europe. To the Company's knowledge,
only a few North American institutions have experimented with electronic order
entry, consisting primarily of a few large centers whose mainframe technology is
not easily transferable. Notwithstanding the slow development in this field to
date, the Company is of the view that the use of electronic order entry and
electronic charting will become more prevalent in the healthcare industry in the
upcoming years as institutions begin to demand more clinically oriented
software, as a result of the growing pressures to practice efficient, evidence
based medicine and the globally perceived need to contain inflated medical
costs. The Company believes that it will be in a position to benefit from this
growing market.
Competition
In view of the Company, the healthcare information systems market is
competitive, rapidly evolving and subject to rapid technological change.
However, to the best knowledge of the Company, there are very few companies
which offer software which competes directly with the VisualMed System. The
Company believes that its competitive advantage is derived mainly from the fact
that, whereas its principal competitors offer mainframe based information
systems, the VisualMed System is PC based. As a result, the VisualMed System is
more flexible, user friendly and comprehensive. Further, the application of
previously unavailable technologies and higher level programming languages to
the VisualMed System increases the speed and reliability of the software and
reduces the turnaround time for new development. Finally, given the technology
upon which it is based, the VisualMed System can be offered to client
institutions at an affordable entry price as compared with competing mainframe
based systems.
<PAGE>
The Company's Design and Marketing Program
The Company has assembled an experienced design team, which has access to a
host of experienced consultants in the medical, nursing, paramedical and
informatics fields, with whom the principals of the Company have worked for a
number of years. As discussed above, an alliance has been forged with the
Montreal Heart Institute where the VisualMed System is currently undergoing Beta
testing. Further, the Company expects to conduct similar tests at the Sainte
Justine Children's Hospital of Montreal in the fall of 2000. These institutions
are to serve as the test sites for all future developments of the VisualMed
System.
The Company's marketing staff, currently under the direction of the Vice
President of Sales and Marketing of the Company, will consist of 7 persons
responsible for the marketing of the VisualMed System in Canada and the United
States. At present, the Company is in advanced stage of discussions with several
potential clients in North and South America, but has not yet concluded any
sales. The commercialization of the system outside of North America will be
handled by additions to the current marketing staff or through joint venture and
marketing agreements with third parties, where applicable, or both, as shall be
determined by the Company at a later date. In this regard, the Company is in
the advanced stages of negotiations relating to the establishment of joint
ventures in both Brazil and Panama. As aforementioned, the Company expects to
launch the system in Canada, the United States and South America in late 2000
and, shortly thereafter in Western Europe.
EMPLOYEES
As of June 1, 2000, VisualMed Canada had 38 full time employees.
REPORTS TO SECURITY HOLDERS.
After the effective date of this document, we will be subject to the
reporting requirements of the Exchange Act and will file reports and other
information with the Securities and Exchange Commission (the "SEC") in
accordance therewith. Our annual report will contain audited financial
statements. We are not required to deliver an annual report to security holders
and will not voluntarily deliver a copy of the annual report to the security
holders. Such reports and other information filed by us will be available for
inspection and copying at the public reference facilities of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1 800 SEC 0330. In addition, the SEC maintains
an Internet site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC.
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with
VisualMed Canada financial statements and accompanying notes included. Operating
results for the year ended September 30, 1999 and the six months ended March 31,
2000 are not necessarily indicative of results that may occur in future periods.
All figures are in Canadian dollars.
<PAGE>
Except for the historical information contained herein, discussion contains
forward looking statements that involve risks and uncertainties. When used
herein, the words "believe", "anticipate", "expect", "estimate" and similar
expressions are intended to identify such statements. There can be no assurance
that these statements will prove to be correct. VisualMed Canada's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in this section. VisualMed Canada undertakes no obligation to update
any of the forward looking statements contained herein to reflect any future
events or development.
RESULTS OF OPERATIONS
Revenue
The Company is still in development stage and does not have any revenues from
sales.
Research and Development
Research and development expenses were $594,000 for the six months ended
March 31, 2000 compared to $133,000 in the similar period last year, and
$580,000 for the year ended September 30, 1999. This increase is the result of
hiring more software development professionals.
General and Administrative
General and administrative expenses for the six months ended March 31, 2000
were $1,951,000 compared to $118,000 in the similar period last year, and
$516,000 for the year ended September 30, 1999. The major components of General
and Administrative expenses were salaries, marketing, professional fees, and
general office. The increase s for the six month period were related to the
development of business infrastructure and corporate finance advice.
Interest on Loans
Interest on loans was $42,000 for the six months ended March 31, 2000
compared to $9,000 in the similar period for last year and $20,000 for the year
ended September 30, 2000. Both increases were due to loan increases.
Depreciation
Depreciation expense was $50,000 for the six months ended March 31, 2000
compared to $9,000 for the similar period last year and $34,000 for the year
ended September 30, 1999. This reflects increases in computer equipment.
Net Loss
Net loss for the six months ended March 31, 2000 was $2,387,000 compared to
a net loss of $225,000 for the similar period last year, and $939,000 for the
year ended September 30, 1999. The increased net losses reflect the acceleration
in research and development activities, marketing, business development,
corporate finance advice.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended September 30, 1999, VisualMed Canada obtained
$1,200,000 in loans; $1,000,000 was used in operating expenses and $200,000 was
used in purchase of capital assets which comprise mainly of computer equipment.
<PAGE>
During the six months ended March 31, 2000 VisualMed Canada raised
$5,000,000 through sale of share capital, convertible securities and notes
payable, of which $1,600,000 represented deposits towards subscription for
shares in VisualMed U.S. With the proceeds from share issuance, VisualMed Canada
repaid the $1,200,000 in loans from the previous year, purchased capital assets
comprising mainly of computer equipment for $ 200,000 and incurred $2,400,000
in operating expenses, to develop the VisualMed software and building business
infrastructure, leaving a cash balance of $1,200,000 on March 31, 2000.
The Company plans to use available funds for ongoing research and
development, commercial and business development activities, other general
corporate and capital expenditures. Over the next twelve months, the VisualMed
software will be tested at several hospital test sites, and several large
hospitals who have expressed an interest in the product once a commercial
version is available. The Company expects to have commercial sales within the
next year.
As of June 2000, the Company's monthly operating expenses amounted to
approximately $500,000. Later in the year, the Company is planning to launch a
comprehensive marketing campaign in both the United States and Canada, which
together with increases in research and development expenses, is expected to
increase the monthly operating expenses level to approximately $700,000. Capital
expenditures are primarily for computer hardware and software necessary to
develop and test the Company's products will also be necessary within the next
year.
The Company has obtained financing for its operations primarily through the sale
of preferred and common stock to venture capital investors, institutional
investors and other investors. VisualMed was still in the development stage as
at March 31, 2000. The Company will not complete its development program until
the software under development has been completed and tested and the necessary
financing to perform these activities is obtained. The Company expects to
receive the balance of research and development tax credits receivable from the
governments of Canada and Quebec of $250,000 for the six month period ended
March 31, 2000 and $212,000 for the year ended September 30, 1999, which were
recorded as income tax recovery. Subsequent to March 31, 2000 the National
Research Council (NRC) of Canada will provide monthly disbursements over a one
year period, totaling over $400,000. These NRC advances are repayable as a
royalty on future sales.
The Company expects to incur substantial and increasing research and
development, and business development expenses. The company intends to seek
additional financings, as needed. At time of writing, the company is engaged in
ongoing discussions and negotiations with various potential investors to obtain
the necessary financing to execute its business plan. Additional financings may
come in the form of contractual arrangements with corporate partners and others,
and financing through convertible debentures and lines of credit. The company
must obtain additional financing to fund its operations, until commercial
sales generate sufficient cash flows. There can be no assurance that any
additional financing will be available or, if available, will be on favorable
terms.
ITEM 18. DESCRIPTION OF PROPERTY
<TABLE>
<CAPTION>
As of March 31, 2000, the Company leased the following premises:
Location Area Purpose Expiry Date
------------------------ ------------------ ------------ -----------
<S> <C> <C> <C>
391 and 397 Laurier West
Montreal, Quebec 2,700 sq. ft. Office space March 2003
393 Laurier West (approximately)
<PAGE>
Montreal, Quebec 1,300 sq.ft. Office space March 2003
395 Laurier West
Montreal, Quebec 1,600 sq.ft. Office space March 2003
</TABLE>
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the sale of stock to the Company's founders and officers and
directors, there have been no other related transactions.
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is currently listed for trading on the
National Quotation Bureau Pink Sheets under the symbol VSMD. There is currently
a limited trading market in the Company's common stock. The closing bid for the
Company's common stock on August 3, 2000 as quoted by the National Quotation
Service Bureau was $3.50 per share.
As of August 1, 2000, there were approximately 50 holders of record of the
common shares of the Company.
Since its incorporation, the Company has not paid any dividends to the
holders of its common shares. There are no restrictions limiting the ability of
the Company to pay dividends on its common shares. However, the Company does
not expect to declare or pay dividends in the foreseeable future.
ITEM 21. EXECUTIVE COMPENSATION
The following table depicts all plan and non plan compensation awarded to,
earned by or paid to the named executive officer of the Company for the period
indicated:
<PAGE>
<TABLE>
<CAPTION>
NAME & YEAR SALARY BONUS OTHER ANNUAL RESTRICTED STOCK (IN CANADIAN $)
PRINCIPAL ENDED (IN CANADIAN $) (IN CANADIAN $) COMPENSATION AWARD (IN CANADIAN$)
POSITION SEPTEMBER (CONSULTING FEES)
30, 1999 1 (IN CANADIAN $)
<S> <C> <C> <C> <C> <C> <C>
Richard Le Hir 1999 N/A 2
Director,
Senior Vice President
and Chief Executive
Officer
Gerard Dab 1999 0 0 119,165 0 119,165
Chairman
Arthur Gelston 1999 75,000 0 37,000 0 112,000
Director,
President and
Chief Science
Officer
Joseph Mah 1999 N/A 2 N/A N/A N/A N/A
Vice President
of Finance and
Chief Financial
Officer
Barry Scharf 1999 N/A 2 N/A N/A N/A N/A
Vice President
of Client
Services
Robert Cohen 1999 N/A 2 N/A N/A N/A N/A
Vice President
of Sales &
Marketing
Chafye Nemri 3 1999 11,667 0 0 0 11,667
Chief Executive
Officer
<PAGE>
<FN>
1. There were no operations prior to the year ended September 30, 1999.
2. Richard Le Hir, Joseph Mah, Barry Scharf, and Robert Cohen were hired
subsequent to September 30, 1999.
3. Chafye Nemri was Chief Executive Officer from August 30, 1999 to December
7, 1999. He was paid a salary of $29,167 and a severance salary of $30,000
after September 30, 1999.
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------
NAME & YEAR NUMBER OF % OF TOTAL EXERCISE PRICE EXPIRATION
PRINCIPAL ENDED OPTIONS OPTIONS ($/SH) DATE
POSITION SEPTEMBER GRANTED (#) GRANTED TO
30 EMPLOYEES IN
FISCAL YEAR
---------- ----------- ------------ --------------- ----------
<S> <C> <C> <C> <C> <C>
Gerard Dab
Chairman 1999 528,000 42.3% $0.50 Feb. 15, 2009
Arthur Gelston
Director,
President and
Chief Science
Officer 1999 528,000 42.3% $0.50 Feb. 15, 2009
</TABLE>
Employment Agreements
VisualMed Canada has entered into Employment Agreements with Mr. G rard
Dab, Dr. Arthur Gelston and Mr. Richard Le Hir. The Employment Agreements of the
Executives hereunder shall be for a fixed term of seven years, ended March 13,
2007, and shall be renewed only if the parties accept such a renewal. The annual
salary of the Executives is $180,000, subject to re evaluation twice per year.
The Executives are entitled to bonuses and options conditional to the Company's
reaching certain sales criteria. If the Agreement is terminated by VisualMed
Canada prior to the end of the term, VisualMed Canada shall pay an amount
representing the base salary for the remaining period of the contract, taking
into account the twice per year evaluations.
ITEM 22. FINANCIAL STATEMENTS
See attached. Exhibit F.
Statements included in this report that do not relate to present or
historical conditions are "forward looking statements" within the meaning
of the Safe Harbor provisions of the Private Securities Litigation Reform Act
<PAGE>
of 1995 (the "1995 Reform Act"). Additional oral or written forward looking
statements may be made by the Company from time to time and such statements
may be included in documents other than this Report that are filed with the
Commission. Such forward looking statements involve risks and uncertainties
that could cause results or outcomes to differ materially from those expressed
in such forward looking statements. Forward looking statements in this report
and elsewhere may include, without limitation, statements relating to our
plans, strategies, objectives, expectations, intentions and adequacy of
resources and are intended to be made pursuant to the Safe Harbor provisions of
the 1995 Reform Act Introduction.
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The accounting firm of Deloitte & Touche LLP audited the financial statements
of VisualMed Canada. Since inception, we have had no changes in or disagreements
with our accountants. Barry L. Friedman, CPA has audited the financial
statements of VisualMed U.SWe have no disagreements with this accountant.
Subsequent to the May 9, 2000 reverse acquisition of VisualMed U.S., the
accounting firm of Deloitte & Touche LLP will be appointed as auditors of the
Company.
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation provide that, to the fullest extent
permitted by law, none of our directors or officers shall be personally liable
to us or our shareholders for damages for breach of any duty owed to our
shareholders or us. Nevada law provides that a director shall have no personal
liability for any statement, vote, decision or failure to act, regarding
corporate management or policy by a director, unless the director breached
or failed to perform the duties of a director. A company may also protect its
officers and directors from expenses associated with litigation arising from
or related to their duties, except for violations of criminal law, transactions
involving improper benefit or willful misconduct. In addition, we shall have
the power, by our by laws or in any resolution of our stockholders or
directors, to undertake to indemnify the officers and directors of ours
against any contingency or peril as may be determined to be in our best
interest and in conjunction therewith, to procure, at our expense, policies of
insurance. At this time, no statute or provision of the by laws, any contract
or other arrangement provides for insurance or indemnification of any of
our controlling persons, directors or officers that would affect his or her
liability in that capacity.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemization of all expenses (subject to
future contingencies) which the Company has incurred or expects to incur in
connection with the issuance and distribution of the securities being offered
hereby. Items marked with an asterisk (*) represent estimated expenses. The
Company has agreed to pay all the costs and expenses of this offering. The
Selling Security Holders will pay no offering expenses.
EXPENSE
SEC Registration Fee $ 19,300
Legal Fees and Expenses* $ 200,000
Accounting Fees and Expenses* $ 100,000
Miscellaneous* $ 50,000
Total* $ 369,000
=============
* Estimated Figure
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The only shares which were issued and outstanding within the last three
years are the 10,000,000 shares currently owned by Richard Le Hir.
ITEM 27. EXHIBITS
Exhibit Number Exhibit Description
3.1 Articles of Incorporation*
3.2 By laws*
4 Instrument Defining the Right of Holders Share Certificate*
5 Legal Opinion
23 Consents of Experts
27 Financial Statements and Financial Data Schedule
* To be filed by Amendment
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells
securities, a post effective amendment to this registration statement to:
a. Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement;
c. Include any additional or changed material information on the plan
of distribution.
<PAGE>
2. That, for determining liability under the Securities Act, to treat
each post effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. To file a post effective amendment to remove from registration any
of the securities that Remain unsold at the end of the offering.
4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
5. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred and
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all the requirements of filing of Form SB 2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
August, on 11,2000.
------ ----
VISUALMED Clinical Systems Corp.
/s/ Richard Le Hir
_____________________
By: Richard Le Hir, Senior Vice President and C.E.O.
Date: August 11, 2000
In accordance with the requirements of the Securities act of 1933, this
registration statement was signed by the following persons in the capacities and
on the date stated.
Name Position Date
------------------
Gerard Dab Chairman and
Director
------------------
Arthur Gelston President and
Director
<PAGE>
------------------
Linda McHarg Director
------------------
Linda Snell Director
------------------
Richard Le Hir Senior Vice President and C.E.O.,
Director
------------------
Richard Borenstein Director
------------------
Caroline Singleton Director
------------------
Joseph Mah Chief Financial Officer
<PAGE>
VISUALMED CLINICAL SYSTEMS CORP.
Exhibit F - Financial information
Table of contents
AUDITED FINANCIAL STATEMENTS OF
CHERRY TREE CAPITAL CORP.
(NOW VISUALMED CLINICAL SYSTEMS CORP.)
Independent auditors' report . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of operations. . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of changes in stockholders' equity . . . . . . . . . . . . . . . F-6
Statements of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Notes to the financial statements . . . . . . . . . . . . . . . . . . . . . F-8
AUDITED FINANCIAL STATEMENTS OF
VISUALMED CLINICAL SYSTEMS INC.
Independent auditors' report. . . . . . . . . . . . . . . . . . . . . . . F-11
Statements of loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Balance sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Statements of shareholders' equity. . . . . . . . . . . . . . . . . . . . F-14
Statements of cash flows. . . . . . . . . . . . . . . . . . . . . . . . . F-15
Notes to the financial statements . . . . . . . . . . . . . . . . . . . . F-16
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS OF
VISUALMED CLINICAL SYSTEMS CORP.
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Pro forma consolidated statements of loss
- six months ended March 31, 2000 . . . . . . . . . . . . . . . . . . F-26
Pro forma consolidated statements of loss-twelve months
ended September 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . F-27
Pro forma consolidated balance sheet - March 31, 2000 . . . . . . . . . . F-28
Note to the pro forma consolidated financial statements . . . . . . . . . F-29
Barry L. Friedman, P.C., C.P.A.
1582 Tulita Drive
Las Vegas, Nevada 89123
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Cherry Tree Capital Corp.
Miami, Florida
I have audited the accompanying balance sheets of Cherry Tree Capital Corp., (A
Development Stage company), (Formerly Netmaximizer.Com, Inc.), as of March 31,
2000 and December 31, 1999, and the related statements of operations,
stockholders' equity and cash flows for the periods of January 1, 2000, to March
31, 2000, and January 29, 1999, (inception) to December 31, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
our audits.
I conducted my 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cherry Tree Capital Corp., (A
Development Stage Company), (Formerly Netmaximizer.Com, Inc.), as at March 31,
2000 and December 31, 1999, and the results of its operations and its cash flows
for the periods of January 1, 2000, to March 31, 2000, and January 29, 1999,
(inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #5 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern Management's
plan in regard to these matters are also described in Note #5. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Barry L. Friedman
-------------------------------
Certified Public Accountant
F - 2
<PAGE>
<TABLE>
<CAPTION>
CHERRY TREE CAPITAL CORP.
(FORMERLY NETMAXIMIZER.COM. INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN U.S. DOLLARS)
========================================================================================================
MARCH 31 December 31
2000 1999
<S> <C> <C>
--------------------------------------------------------------------------------------------------------
$ $
ASSETS
Current assets
Cash 10,000 10,000
--------------------------------------------------------------------------------------------------------
Total current assets 10,000 10,000
OTHER ASSETS
Total other assets - -
--------------------------------------------------------------------------------------------------------
TOTAL ASSETS 10,000 10,000
========================================================================================================
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
CHERRY TREE CAPITAL CORP.
(FORMERLY NETMAXIMIZER.COM. INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (CONT'D)
========================================================================================================
(IN U.S. DOLLARS)
MARCH 31 December 31
2000 1999
--------------------------------------------------------------------------------------------------------
$ $
LIABILITIES
Current liabilities
Officers' advances (Note 8) 1,840 1,040
--------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,840 1,040
--------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value
authorized 50,000,000 shares
issued and outstanding at
December 31, 1999 - 15,025,000 shares - 15,025
March 31, 2000 - 15,025,000 shares 15,025 -
Additional paid in capital (5,025) (5,025)
Deficit accumulated during the development stage (1,840) (1,040)
--------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 8,160 8,960
--------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 10,000 10,000
========================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
CHERRY TREE CAPITAL CORP.
(FORMERLY NETMAXIMIZER.COM. INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN U.S. DOLLARS, EXCEPT SHARE INFORMATION)
==============================================================================================
JANUARY 29,
JANUARY 1, January 29, 1999
2000 1999 (INCEPTION)
TO MARCH 31, to December 31, TO MARCH 31,
2000 1999 2000
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ $ $
INCOME
Revenue - - -
----------------------------------------------------------------------------------------------
Expenses
General and administrative 800 1,040 1,840
----------------------------------------------------------------------------------------------
Total expenses 800 1,040 1,840
----------------------------------------------------------------------------------------------
Net LOSS (800) (1,040) (1,840)
==============================================================================================
Net loss per share
Basic and diluted (Note 2) - (0.0002) (0.0002)
==============================================================================================
Weighted average number of common
shares outstanding 15,025,000 6,896,166 8,670,084
==============================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
CHERRY TREE CAPITAL CORP.
(FORMERLY NETMAXIMIZER.COM. INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN U.S. DOLLARS, EXCEPT SHARE INFORMATION)
==========================================================================
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
-------- ------- ---------- --------
<S> <C> <C> <C> <C>
$ $ $
February 9, 1999
issuance of common stock
from merger 5,025,000 5,025 (5,025) -
November 1, 1999
issuance of common stock
for cash 10,000,000 10,000 - -
Net loss,
January 29, 1999
to December 31, 1999 - - - (1,040)
----------------------------------------------------------------------
Balance,
December 31, 1999 15,025,000 15,025 (5,025) (1,040)
Net loss,
January 1, 2000, to
March 31, 2000 - - - (800)
Balance,
----------------------------------------------------------------------
March 31, 2000 15,025,000 15,025 (5,025) (1,840)
======================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 6
<PAGE>
<TABLE>
<CAPTION>
CHERRY TREE CAPITAL CORP.
(FORMERLY NETMAXIMIZER.COM. INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(IN U.S. DOLLARS)
========================================================================================
JANUARY 29,
JANUARY 1, January 29, 1999
2000 1999 (INCEPTION)
TO MARCH 31, to December 31, TO MARCH 31,
2000 1999 2000
<S> <C> <C> <C>
----------------------------------------------------------------------------------------
$ $ $
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss (800) (1,040) (1,840)
Adjustment to reconcile net loss to
net cash provided by
operating activities - - -
Changes in assets and liabilities
Increase in current liabilities 800 1,040 1,840
----------------------------------------------------------------------------------------
Net cash provided by
operating activities - - -
CASH FLOWS FROM
INVESTING ACTIVITIES - - -
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common
stock for cash - 10,000 10,000
----------------------------------------------------------------------------------------
Net increase in cash - 10,000 10,000
Cash, beginning of period 10,000 - -
CASH, END OF PERIOD 10,000 10,000 10,000
========================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
F - 7
<PAGE>
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 29, 1999, under the laws of the State of
Nevada, as Netmaximizer.Com. Inc. The Company currently has no operations
and, in accordance with SFAS #7, is considered a development stage company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting method
The Company records income and expenses on the accrual method.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumption that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reported period. Actual results could differ from those
estimates.
Cash and equivalents
The Company maintains a cash balance that currently does not exceed
federally insured limits. For the purpose of the statements of cash flows,
all highly liquid investments with a maturity of three months or less are
considered to be cash equivalents. There are no cash equivalents as of
March 31, 2000, or December 31, 1999.
Income taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
#109) "Accounting for Income Taxes". A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting.
Deferred tax expenses (benefits) result from the net change during the year
of the deferred assets and liabilities.
Loss per share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss
per share is computed by dividing losses available to common stockholders
by the weighted average number common shares outstanding during the period.
Diluted loss per share reflects per share amounts that would have been
converted to common stock. As of December 31, 1998, the Company had no
dilutive common stock equivalents such as stock options.
Year end
The Company has selected December 31st as its year-end.
F - 8
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reporting on costs of start-up activities
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up
Activities" which provides guidance on the financial reporting of start-up
costs and organization costs. It requires most costs of start-up activities
and organization costs to expensed as incurred. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998. With the adoption of SOP
98-5, there has been little or no effect on the Company's statements.
Year 2000 disclosure
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer
programs that have time sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business
activities. Since the Company currently has no operating business and does
not use any computers, and since it has no customers, suppliers or other
constituents, there are no material year 2000 concerns
3. INCOME TAXES
Thereis no provision for income taxes for the period ended March 31, 2000,
due to the net loss and no state income tax in Nevada, the state of the
Company's domicile and operations. The Company's total deferred tax asset
as of December 31, 1999, is as follows:
$
Net operating loss carryforward 1,040
Valuation allowance 1,040
Net deferred tax asset -
The federal net operating loss carryforward will expire by 2019.
This carryforward may be limited upon the consummation of a business
combination under IRC Section 381.
4. STOCKHOLDER'S EQUITY
Common stock
The authorized common stock of Cherry Tree Capital Corp. consists of
50,000,000 shares with a par value of $0.001 per share.
F - 9
<PAGE>
4. STOCKHOLDER'S EQUITY (CONTINUED)
Preferred stock
Cherry Tree Capital Corp. has no preferred stock.
On February 16, 1999, The State of Nevada approved the Articles of Merger
of Cherry Tree Capital Corp., a Florida Corporation, with Netmaximizer.Com,
Inc., a Nevada Corporation. Netmaximizer.Com, Inc. issued 5,025,000 of its
shares for each share of Cherry Tree capital corp. issued and outstanding.
On April 20, 1999, the Company changed its name to Cherry Tree Capital
Corp.
5. GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through a merger with an existing operating
company.
6. WARRANTS AND OPTIONS
There are no warrants or options outstanding to issue any additional shares
of common stock.
7. RELATED PARTY TRANSACTION
The Company neither owns nor leases any real or personal property. Office
services are provided without charge by a director. Such costs are
immaterial to the financial statements and, accordingly, have not been
reflected therein. The officers and directors of the Company are involved
in other business activities and may, in the future, become involved in
other business opportunities. If a specific business opportunity becomes
available, such persons may face a conflict in choosing between the Company
and their other business interests. The Company has not formulated a policy
for the resolution of such conflicts.
8. OFFICERS' ADVANCES
While the Company is seeking additional capital through a merger with an
existing operating company, an officer of the Company has advanced funds on
behalf of the Company to pay for any costs incurred by it. These funds are
interest-free.
DELOITTE & TOUCHE LLP
CHARTERED ACCOUNTANTS
1 Place Ville-Marie Telephone: (514) 393-7115
Suite 3000
Montreal QC H3B 4T9 Facsimile: (514) 390-4111
INDEPENDENT AUDITORS' REPORT
F - 10
<PAGE>
To the Directors of
VisualMED Clinical Systems Inc.
(a development stage company)
We have audited the balance sheets of VisualMED Clinical Systems Inc. (a
development stage company) as at March 31, 2000 and September 30, 1999 and the
related statements of loss, shareholders' equity and cash flows for the
six-month and twelve-month periods then ended, respectively, and for the period
from December 1, 1997 (date of inception) to March 31, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 2000 and
September 30, 1999 and the results of its operations and its cash flows for the
six-month and twelve-month periods then ended, respectively, and for the period
from December 1, 1997 (date of inception) to March 31, 2000 in conformity with
accounting principles generally accepted in the United States.
The Company is in the development stage at March 31, 2000. As discussed in Note
1 to the financial statements, successful completion of the Company's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including achieving a level of sales adequate to
support the Company's cost structure.
/s/ Deloitte & Touche LLP
-----------------------------
Chartered Accountants
April 20, 2000
F - 11
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
(IN CANADIAN DOLLARS)
=======================================================================================================
Cumulative
period from
SIX-MONTH Six month December 1, 1997
PERIOD ENDED Year ended Period ended (date of inception)
MARCH 31, September 30, March 31, to March 31,
2000 1999 1999 2000
-------------------------------------------------------------------------------------------------------
$ $ $ $
(unaudited)
<S> <C> <C> <C> <C>
EXPENSES
Research and
development 593,613 579,902 133,199 1,173,515
General and administrative 1,951,366 516,392 117,662 2,467,758
Interest on loans 41,675 20,263 9,157 61,938
Depreciation 49,621 34,385 8,649 84,006
-------------------------------------------------------------------------------------------------------
Loss before income taxes 2,636,275 1,150,942 268,667 3,787,217
Income tax recovery (249,754) (211,983) (43,850) (461,737)
-------------------------------------------------------------------------------------------------------
Net loss 2,386,521 938,959 224,817 3,325,480
=======================================================================================================
Basic and diluted net loss
per common share 0.05 0.02 0.01
</TABLE>
F - 12
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS AT MARCH 31, 2000 AND SEPTEMBER 30, 1999
(IN CANADIAN DOLLARS)
===============================================================================
MARCH 31 September 30
2000 1999
-------------------------------------------------------------------------------
$ $
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 1,207,062 -
Research and development tax credits receivable 305,574 211,983
Goods and services taxes receivable 63,666 70,689
Advances to employees 174,744 -
Prepaid expenses 49,945 500
--------------------------------------------------------------------------------
1,800,991 283,172
Fixed assets (Note 3) 309,622 176,306
--------------------------------------------------------------------------------
2,110,613 459,478
================================================================================
LIABILITIES
Current liabilities
Bank indebtedness - 30,491
Accounts payable and accrued liabilities 298,631 303,460
Convertible debenture (Note 4) 50,000 -
Advances payable (Note 5) 1,644,188 -
Accounts payable to shareholders - 35,386
Notes payable - 730,000
Loans payable to shareholders - 149,000
Deposit on share subscription - 150,000
-------------------------------------------------------------------------------
1,992,819 1,398,337
-------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common stock subscribed 3,957,195 100
Less subscriptions receivable (513,921) -
-------------------------------------------------------------------------------
Common stock, net (Note 6) 3,443,274 100
Deficit (3,325,480) (938,959)
-------------------------------------------------------------------------------
TOTAL SHAREHOLDER'S EQUITY 117,794 (938,859)
-------------------------------------------------------------------------------
2,110,613 459,478
================================================================================
See accompanying notes to financial statements
</TABLE>
F - 13
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN CANADIAN DOLLARS, EXCEPT FOR SHARE AMOUNTS)
===========================================================================================
Common Stock Accumulated
Shares* Amount Deficit Total
------------ ----------- ------------ -----------
$ $ $
<S> <C> <C> <C> <C>
BALANCE - DECEMBER 1, 1997
(Date of inception) - - - -
Common stock issued July 6, 1998
For cash 43,780,000 100 - 100
-------------------------------------------------------------------------------------------
Balance - September 30,1998 43,780,000 100 - 100
Net loss - - (938,959) (938,959)
-------------------------------------------------------------------------------------------
Balance - September 30, 1999 43,780,000 100 (938,959) (938,859)
Common stock issued January 15, 2000
For services rendered 350,000 29,700 - 29,700
For cash 4,363,073 370,200 - 370,200
Under employment agreements 905,000 76,788 - 76,788
Common stock issued March 2, 2000
For cash 1,767,857 150,000 - 150,000
For deposit on share
subscription 5,303,572 450,000 - 450,000
Common stock issued upon
conversion of notes payable
on March 2, 2000 4,714,286 400,000 - 400,000
Common stock issued March 14, 2000
For cash 1,592,380 1,375,816 - 1,375,816
For cash not yet received 7,431 6,421 - 6,421
Common stock issued March 23, 2000
For cash 42,445 61,545 - 61,545
Common stock issued March 27, 2000
For cash 137,500 279,125 - 279,125
Common stock issued March 29, 2000
For cash not yet received 250,000 507,500 - 507,500
Common stock issued March 30, 2000
For cash 123,153 250,000 - 250,000
-------------------------------------------------------------------------------------------
63,336,697 3,957,195 (938,959) 3,018,236
Less subscriptions receivable (257,431) (513,921) - (513,921)
Net loss - - (2,386,521) (2,386,521)
-------------------------------------------------------------------------------------------
BALANCE MARCH 31, 2000 63,079,266 3,443,274 (3,325,480) 117,794
===========================================================================================
<FN>
* Prior period share amounts restated to reflect a share split of 437,800-for-1 on
January 14, 2000
See accompanying notes to financial statements
</TABLE>
F - 14
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN CANADIAN DOLLARS)
===========================================================================================================
Cumulative
period from
SIX-MONTH Six month December 1, 1997
PERIOD ENDED Year ended Period ended (date of inception)
MARCH 31, September 30, March 31, to March 31,
2000 1999 1999 2000
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
(unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss (2,386,521) (938,959) (224,817) (3,325,480)
Adjustment to reconcile
net loss to cash flows
from operating activities
Depreciation 49,621 34,385 8,649 84,006
Shares issued for
services rendered 106,488 - - 106,488
Changes in non-cash
operating working
capital items
Increase in research
and development
tax credits
receivable (93,591) (211,983) (43,850) (305,574)
Increase in prepaid
expenses (49,445) (500) - (49,945)
Decrease (increase)
in sales taxes
receivable 7,023 (70,689) (16,160) (63,666)
Increase in advances
to employees (174,744) - - (174,744)
(Decrease) increase
in accounts
payable and
accrued liabilities (4,829) 303,460 - 298,631
(Decrease) increase
in accounts payable
to shareholders (35,386) 35,386 - -
-----------------------------------------------------------------------------------------------------------
(2,581,384) (848,900) (276,178) (3,430,284)
-----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
(Decrease) increase in
bank indebtedness (30,491) 30,491 30,071 -
Issuance of notes payable 250,000 730,000 - 980,000
Repayment of notes payable (980,000) - - (980,000)
(Decrease) increase in loans
payable to shareholders (149,000) 149,000 149,000 -
Issuance of convertible
debenture 50,000 - - 50,000
Issuance of convertible
notes payable 400,000 - - 400,000
Deposit on share
subscription - 150,000 150,000 150,000
Issuance of shares 2,786,686 - - 2,786,786
Increase in advances
payable 1,644,188 - - 1,644,188
-----------------------------------------------------------------------------------------------------------
3,971,383 1,059,491 329,071 5,030,974
-----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Additions to fixed assets (182,937) (210,691) (52,993) (393,628)
-----------------------------------------------------------------------------------------------------------
Change in cash and cash
equivalents 1,207,062 (100) (100) 1,207,062
Cash and cash equivalents,
beginning of period - 100 100 -
-----------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD 1,207,062 - - 1,207,062
===========================================================================================================
</TABLE>
See Note 9 for supplemental cash flow information
See accompanying notes to financial statements
F - 15
<PAGE>
1. DESCRIPTION OF BUSINESS
On December 1, 1997 (date of inception), VisualMED Clinical Systems Inc.
(the "Company" or "VisualMED") was incorporated under the name 3440231
Canada Inc. under the Canada Business Corporations Act. Effective June 30,
1998, the Company changed its name to Syst mes Cliniques VisualMED Inc. /
VisualMED Clinical Systems Inc. On October 1, 1998, the Company began its
activities. As at March 31, 2000, the Company was still in the development
stage. The Company will not complete its development program until the
software under development has been completed and tested and the necessary
financing to perform these activities is obtained. The Company conceives
and develops software solutions targeting clinical medicine and related
areas of the healthcare market.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States require management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent
liabilities in these financial statements. Actual results could differ from
those estimates.
Significant areas requiring the use of estimates and assumptions relate to
the assessment of the useful life of assets for purposes of depreciation
and amortization and their net realizable values; the recoverability of
research and development tax credits receivable; and the assessment of the
technological feasibility of the Company's software under development.
Unaudited interim information
The financial information with respect to the six-month period ended March
31, 1999 is unaudited. In the opinion of management, such information
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of such period.
Fixed assets
Fixed assets are recorded at cost and are depreciated over their estimated
useful lives using the straight-line method over the following periods:
Computer equipment 3 years
Software 3 years
Furniture and fixtures 5 years
Research and development
Research and development costs are charged to expenses when incurred.
Significant accounting policies (continued)
Software under development
In accordance with Statement of Financial Accounting Standards ("SFAS") 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed", costs related to the creation of software are to be
expensed as incurred as research and development until technological
feasibility has been established for the product. As at March 31, 2000, the
technological feasibility of the Company's software under development had
not been established.
F - 16
<PAGE>
Costs of start-up activities
The Company has adopted Statement of Position ("SOP") 98-5,"Reporting on
the Costs of Start-Up Activities," issued by the American Institute of
Certified Public Accountants' Accounting Standards Executive Committee. In
accordance with this standard, the costs of start-up activities and
organization costs are expensed as incurred.
Income taxes
The Company accounts for income taxes in accordance SFAS 109, "Accounting
for Income Taxes". The provision for income taxes consists of tax credits
related to research and development.
Comprehensive income
The Company has adopted SFAS 130, "Reporting Comprehensive Income". There
are no differences between the Company's net earnings as reported and its
comprehensive income as defined by SFAS 130. Accordingly, a separate
statement of comprehensive income has not been presented.
Cash and cash equivalents
The Company considers investments in highly-liquid investment instruments
with maturities of 90 days or less at the date of purchase to be cash
equivalents. The carrying amount reported in the balance sheets for cash
and cash equivalents approximates their fair value. Cash equivalents
consist principally of investments in certificates of deposit with
financial institutions.
Derivative instruments and hedging activities
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities," which will
be effective for the Company's 2001 fiscal year. Under the new standard,
companies will be required to record derivatives on the balance sheet as
assets or liabilities measured at fair value. For those derivatives
representing effective hedges of risks and exposures, unrealized gains or
losses resulting from changes in the fair values will be presented as a
component of comprehensive income as defined by SFAS 130. The Company
currently does not use any derivative instruments. Management is currently
evaluating the expected impact of implementing this policy.
F - 17
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and diluted net loss per share
The Company follows the provisions of SFAS 128, "Earnings Per Share". Basic
net loss per common share is based on the weighted average number of shares
outstanding during each period. Stock options and the convertible debenture
are not included in the computation of the weighted average number of
shares outstanding for dilutive net loss per common share during the period
as the effect would be antidilutive. The weighted average number of shares
outstanding for the six-month period ended March 31, 2000 was 48,137,753
(43,780,000 for the year ended September 30, 1999, and for the six-month
period ended March 31, 1999).
3. FIXED ASSETS
<TABLE>
<CAPTION>
MARCH 31, September 30,
2000 1999
====================================== --------
Accumulated Net Book Net Book
Cost Depreciation Value Value
------------ ------------- --------- --------
<S> <C> <C> <C> <C>
$ $ $ $
Computer equipment 228,692 49,857 178,835 98,460
Software 112,371 29,930 82,441 67,989
------------------------------------------------------------------------
Furniture and fixtures 52,565 4,219 48,346 9,857
393,628 84,006 309,622 176,306
========================================================================
</TABLE>
4. CONVERTIBLE DEBENTURE
The debenture bears interest at 12% and is due March 3, 2001. The debenture
is convertible at the option of the holder into common shares at the lesser
of $7 US or the share subscription price of the initial public offering of
the Company.
5. ADVANCES PAYABLE
Advances payable consist of amounts from investors who want to invest in
VisualMed Corp. upon conclusion of the transaction described in Note 10 and
who have deposited their money with the Company until that time.
Advances payable are non-interest bearing, with no fixed terms of repayment
and are payable upon demand.
F - 18
<PAGE>
6. CAPITAL STOCK
Authorized
An unlimited number of common shares
Class A shares, voting and participating
Class B shares, voting, participating and convertible at the option of
the holder on a one-for-one basis into Class E shares
Class C shares, voting, non-participating, redeemable automatically
upon death of the holder at the amount of the paid-up capital
Class D shares, voting, with a preferential non-cumulative annual
dividend equal to the bank's prime commercial lending rate less 1%,
retractable at the amount of paid-up capital
Class E shares, non-voting, with a preferential and non-cumulative
monthly dividend equal to 1% multiplied by the redemption value,
retractable at the fair market value of the Class B shares at the time
of their conversion
Class F shares, non-voting, with a preferential and non-cumulative
monthly dividend equal to 1% multiplied by the redemption value,
retractable at the fair market value of the consideration received at
the time of their issuance
Class G shares, non-voting, with a preferential and non-cumulative
annual dividend equal to the bank's prime commercial lending rate plus
1% multiplied by the redemption value, retractable at the fair market
value of the consideration received at the time of their issuance
Class H shares, non-voting, with a preferential and non-cumulative
annual dividend equal to 8% multiplied by the amount of paid-up
capital, retractable at the amount of paid-up capital
Class I shares, non-voting, with a preferential and non-cumulative
annual dividend equal to 8% multiplied by the amount of paid-up
capital, redeemable at the amount of paid-up capital
<TABLE>
<CAPTION>
MARCH 31, September 30,
2000 1999
---------------------------
<S> <C> <C>
$ $
Subscribed
63,079,266 Class A shares
(43,780,000 as at September 30, 1999,
post split) 3,443,274 100
================================================================================================
</TABLE>
F - 19
<PAGE>
6. CAPITAL STOCK (CONTINUED)
On July 6, 1998, the Company issued 100 Class A shares for a cash
consideration of $100.
On January 14, 2000, the board of directors approved a share split of
437,800-for-1 for all Class A shares issued and outstanding. Accordingly
all share and per share amounts have been retroactively restated to reflect
the stock split.
On January 15, 2000, the following share issuances were approved under
resolutions of the board of directors: the issuance of 350,000 Class A
shares in return for services rendered at a stated capital amount of
$29,700 ($0.085 per share), the issuance of 4,363,073 Class A shares for a
cash consideration of $370,200 ($0.085 per share), and the issuance of
905,000 Class A shares in virtue of employment agreements at a stated
capital amount of $76,788.
The shares issued in virtue of employment contracts were valued at the fair
value of the shares of the Company as at the dates on which the employment
contracts were entered. The shares issued in return for services rendered
were valued at the fair value of the shares of the Company as at the date
the board resolved to issue such shares.
On March 2, 2000, the Company issued 7,071,429 Class A shares for a cash
consideration of $600,000 ($0.085 per share), including the $150,000
deposit on share subscription existing as at September 30, 1999.
On March 2, 2000, the Company issued 4,714,286 Class A shares upon
conversion of $400,000 of notes payable issued in November and December
1999 at $0.085 per share.
On March 14, 2000, the Company issued 1,599,811 Class A shares for a cash
consideration of $1,382,237 ($0.864 per share) of which $6,421 had not been
received as at March 31, 2000.
On March 23, 2000, the Company issued 42,445 Class A shares for a cash
consideration of $61,545 ($1.45 per share).
On March 27, 2000, the Company issued 137,500 Class A shares for a cash
consideration of $279,125 ($2.03 per share).
On March 29, 2000, the Company issued 250,000 Class A shares for which cash
consideration of $507,500 ($2.03 per share) had not been received as at
March 31, 2000.
On March 30, 2000, the Company issued 123,153 Class A shares for a cash
consideration of $250,000 ($2.03 per share).
F - 20
<PAGE>
6. CAPITAL STOCK (CONTINUED)
Stock option plan
The Company continues to follow Accounting Principles Board Option No. 25
"Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. The exercise
price of the Company's employee stock options equals or is greater than the
fair value of the underlying stock on the date the options were granted,
and accordingly no compensation expense has been recognized in the
accompanying financial statements in any of the periods presented.
The Company has fixed stock options granted to specified employees by
resolution of the board of directors. An aggregate of 4,400,000 Class A
common shares has been reserved for the granting of such options.
On January 15, 2000, the Company established a stock option plan for its
officers, directors, employees and service providers. In accordance with
the plan, an aggregate of 4,400,000 Class A common shares has been reserved
for the granting of such options. The exercise price of each option is to
be determined by the board of directors. All options issued under the plan
will expire ten years after the date of granting.
The following table presents information concerning all stock options
granted to the Company's employees (the number of options presented in
comparative amounts reflects a share split of 437,800 for 1 on January 14,
2000):
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED Year ended
MARCH 31, September 30,
2000 1999
---------------------- --------------------
Weighted Weighted
average average
exercise exercise
Number of price per Number of price per
options share options share
---------- ---------- --------- ---------
$ $
<S> <C> <C> <C> <C>
Outstanding, beginning of period 4,600,000 0.15 440,000 0.15
Granted during the period 2,606,746 0.34 4,160,000 0.15
Outstanding, end of period 7,206,746 0.22 4,600,000 0.15
Exercisable, end of period 1,760,000 0.15 880,000 0.15
</TABLE>
All stock options outstanding at the beginning of the period had an
exercise price of $0.15. The range of exercise prices for stock options
granted during the period was from nil to $0.86. The weighted average
contractual life remaining on stock options outstanding as at March 31,
2000 was 8.71 years.
F - 21
<PAGE>
6. CAPITAL STOCK (CONTINUED)
Stock option plan
Had compensation cost for the Corporation's stock-based compensation been
determined based on the fair value at the grant dates consistent with SFAS
123, "Accounting for Stock-Based Compensation," the Company's pro-forma net
loss would have been as follows:
<TABLE>
<CAPTION>
MARCH 31, September 30,
2000 1999
-------------------------
$ $
<S> <C> <C>
Net loss
As reported 2,295,321 938,959
Pro-forma 2,382,190 938,959
Weighted-average fair value of options granted 0.13 -
</TABLE>
The fair value of each option calculated under SFAS 123 is estimated at the
date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for grants as follows:
<TABLE>
<CAPTION>
MARCH 31, September 30,
2000 1999
-------------------------
<S> <C> <C>
Dividend yield - -
Expected volatility - -
Risk-free interest rates 6.46% 5.09%
Expected life 5 YEARS 5 years
</TABLE>
7. INCOME TAXES
As at March 31, 2000, the Company has net operating loss carry-forwards
which may be applied against future taxable income of approximately
$497,000 and $2,000,000 which will expire in 2006 and 2007 respectively.
Deferred tax assets and liabilities reflect the future income tax effects
of temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and are
measured using enacted tax rates that apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. As at March 31, 2000, the deferred income tax balance was
comprised of the following:
F - 22
<PAGE>
7. INCOMES TAXES (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, September 30,
2000 1999
---------------------------
$ $
<S> <C> <C>
Deferred tax assets
Loss carry-forwards 766,677 190,464
Research and development expenditures
carried forward 329,079 235,637
Less valuation adjustment (911,690) (290,564)
--------------------------------------------------------------------
Total deferred tax assets 184,066 135,537
--------------------------------------------------------------------
Deferred tax liabilities
Depreciation of fixed assets 56,457 45,005
Research and development tax credits 127,609 90,532
--------------------------------------------------------------------
Total deferred tax liabilities 184,066 135,537
--------------------------------------------------------------------
Net deferred tax assets - -
====================================================================
</TABLE>
8. COMMITMENTS
As at March 31, 2000, commitments for space rental and other operating
leases due in each of the next fiscal years are as follows:
$
2000 65,355
2001 121,656
2002 95,168
2003 34,800
Rent expense amounted to $20,803 for the six-month period ended March 31,
2000 ($14,400 for the year-ended September 30, 1999).
F - 23
<PAGE>
9. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Cumulative
period from
SIX-MONTH Six month December 1, 1997
PERIOD ENDED Year ended Period ended (date of inception)
MARCH 31, September 30, March 31, to March 31,
2000 1999 1999 2000
-------------------------------------------------------------------------------------------------------
$ $ $ $
<S> <C> <C> <C> <C>
(unaudited)
Non-cash financing activities:
Issuance of common
stock in conversion
of notes payable 400,000 - - 400,000
Issuance of common stock
for deposit on share
subscription 150,000 - - 150,000
Cash paid (recovered) during
the year for:
Interest 45,772 16,166 9,157 61,938
Income taxes (156,163) - - (156,163)
</TABLE>
10. SUBSEQUENT EVENTS
On May 9, 2000, the Company, its shareholders and VisualMed Clinical
Systems Corp. ("VisualMed Corp."), formerly Cherry Tree Capital Corp.,
entered a series of agreements (the "transaction") whereby the shareholders
of the Company will acquire control of VisualMed Corp. by way of a reverse
acquisition. VisualMed Corp. is a non-operating public shell corporation.
The transaction involves a restructuring of the share capital of the
Company whereby existing common shares have, effective May 9, 2000, been
converted into exchangeable preferred shares (the "preferred shares") which
shares are exchangeable into common shares of VisualMed Corp. Concurrently
therewith, the Company issued 100 common shares to VisualMed Corp. for a
nominal amount. The preferred shareholders will have a controlling interest
in VisualMed Corp. upon completion of the transaction and following the
exchange of their shares for common shares of VisualMed Corp. at the option
of the holders, and, in a certain instances, at the option of VisualMed
Corp., on the basis of 0.3 of a common share of VisualMed Corp. for each
preferred share of the Company.
Upon completion of the transaction and exchange of the shares, the
shareholders of the Company will own approximately 85% of the outstanding
common shares of VisualMed Corp. For accounting purposes, the acquisition
will be treated as a recapitalization of the Company with the Company as
the acquirer. As a result of this transaction the Company will become a
publicly traded company.
11. COMPARATIVE FIGURES
Certain figures for the period ended September 30, 1999 have been
reclassified in order to conform with the presentation adopted in the
current period.
F - 24
<PAGE>
F - 25
<PAGE>
VISUALMED CLINICAL SYSTEMS CORP.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN CANADIAN DOLLARS)
================================================================================
INTRODUCTION
On May 9, 2000, VisualMed Clinical Systems Corp. (formerly Cherry Tree Capital
Corp.) (the Company", VisualMed Clinical Systems Inc. ("VisualMed Canada ") and
its shareholders, entered into a series of agreements whereby the shareholders
of VisualMed Canada acquired control of the Company by way of a reverse
acquisition. The pro forma consolidated financial statements reflect this
transaction as if it had taken place on October 1, 1998.
The pro forma consolidated balance sheet and statements of loss ("pro forma
statements") have been prepared using the financial statements of VisualMed
Canada for the six-month and twelve-month periods ended March 31, 2000 and
September 30, 1999, respectively; and of the Company for the three-month period
ended March 31, 2000 and the eleven-month period from inception to December 31,
1999. The pro forma statements should be read in conjunction with these
financial statements and other financial information with respect to these two
companies appearing elsewhere in this Registration Statement and are not
necessarily indicative of the financial position or results of operations that
would have resulted had the transaction taken place on October 1, 1998, nor are
they necessarily indicative of the financial position or results of operations
which may occur in the future.
F - 26
<PAGE>
F - 27
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS CORP.
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONSOLIDATED STATEMENT OF LOSS
SIX MONTHS ENDED MARCH 31, 2000
(UNAUDITED - IN CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)
=======================================================================================================================
VisualMed
Clinical
Systems Corp.
(formerly VisualMed
Cherry Tree Clinical Systems Pro forma
Capital Corp.) Inc. consolidated
Six months(1) Six months Pro forma
ended ended Adjustments Six months
March 31, 2000 March 31, 2000 March 31, 2000 ended
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
Research and development - 593,613 - 593,613
General and administrative 1,170 1,951,366 - 1,952,536
Interest on loans - 41,675 - 41,675
Depreciation - 49,621 - 49,621
------------------------------------------------------------------------------------------------------------------------
Loss before income taxes 1,170 2,636,275 - 2,637,445
Income tax recovery - (249,754) - (249,754)
------------------------------------------------------------------------------------------------------------------------
NET LOSS 1,170 2,386,521 - 2,387,691
========================================================================================================================
Basic and diluted net loss per common share ($) 0.11
Weighted average number of common
shares outstanding 22,332,785 (2)
</TABLE>
F - 28
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS CORP.
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONSOLIDATED STATEMENT OF LOSS
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED - IN CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)
====================================================================================================================
VisualMed
Clinical
Systems Corp.
(formerly VisualMed
Cherry Tree Clinical Systems Pro forma
Capital Corp.) Inc. consolidated
Eleven months Twelve months Twelve months
ended ended ended
December 31, September 30, Pro forma September 30,
1999 1999 Adjustments 1999
--------------------------------------------------------------------------------------------------------------------
$ $ $ $
<S> <C> <C> <C> <C>
Research and development - 579,902 - 579,902
General and administrative 1,545 516,392 - 517,937
Interest on loans - 20,263 - 20,263
Depreciation - 34,385 - 34,385
--------------------------------------------------------------------------------------------------------------------
Loss before income taxes 1,545 1,150,942 - 1,152,487
Income tax recovery - (211,983) - (211,983)
--------------------------------------------------------------------------------------------------------------------
NET LOSS 1,545 938,959 - 940,504
====================================================================================================================
Basic and diluted net loss per common share ($) 0.04
Weighted average number of common
shares outstanding 22,332,785 (2)
</TABLE>
F - 29
<PAGE>
<TABLE>
<CAPTION>
VISUALMED CLINICAL SYSTEMS CORP.
(A DEVELOPMENT STAGE COMPANY)
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2000
(UNAUDITED - IN CANADIAN DOLLARS)
==========================================================================================================
VisualMed
Clinical
Systems Corp.
(formerly VisualMed
Cherry Tree Clinical Systems Pro forma
Capital Corp.) Inc. consolidated
Pro forma
Adjustments
March 31, 2000 March 31, 2000 March 31, 2000
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ $
ASSETS
Current assets
Cash and cash equivalents 14,500 1,207,062 (145) (2) 1,221,417
Research and development
tax credits receivable - 305,574 - 305,574
Goods and services taxes
receivable - 63,666 - 63,666
Advances to employees - 174,744 - 174,744
Prepaid expenses - 49,945 - 49,945
----------------------------------------------------------------------------------------------------------
14,500 1,800,991 (145) 1,815,346
Fixed assets - 309,622 - 309,622
----------------------------------------------------------------------------------------------------------
14,500 2,110,613 (145) 2,124,968
==========================================================================================================
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities - 298,631 - 298,631
Convertible debenture - 50,000 - 50,000
Advances payable 2,668 1,644,188 - 1,646,856
----------------------------------------------------------------------------------------------------------
2,668 1,992,819 - 1,995,487
----------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock subscribed 22,237 3,957,195 (2,860) (2)(3) 3,976,572
Less subscriptions receivable - (513,921) - (513,921)
----------------------------------------------------------------------------------------------------------
Common stock, net 22,237 3,443,274 (2,860) 3,462,651
Additional paid-in capital (7,524) - - (7,524)
Deficit (2,715) (3,325,480) 2,715 (3) (3,325,480)
Cumulative translation adjustment (166) - - (166)
----------------------------------------------------------------------------------------------------------
Total shareholders' equity 11,832 117,794 (145) 129,481
----------------------------------------------------------------------------------------------------------
14,500 2,110,613 (145) 2,124,968
==========================================================================================================
</TABLE>
Basis of presentation
On May 9, 2000, the Company, VisualMed Canada and its shareholders, entered into
a series of agreements (the "transaction") whereby the shareholders of the
VisualMed Canada acquired control of the Company by way of a reverse
acquisition. Prior to May 9, 2000, the Company was a non-operating public shell
corporation.
F - 30
<PAGE>
The transaction involves a restructuring of the share capital of VisualMed
Canada whereby existing common shares have, effective May 9, 2000, been
converted into exchangeable preferred shares (the "preferred shares") which
shares are exchangeable into common shares of the Company. Concurrently
therewith, VisualMed Canada issued 100 common shares to the Company for a
nominal amount. The preferred shareholders will have a controlling interest in
the Company upon completion of the transaction and following the exchange of
their shares for common shares of the Company, at the option of the holders,
and, in a certain instances, at the option of the Company, on the basis of 0.3
of a common share of the Company for each preferred share of VisualMed Canada.
Upon completion of the transaction and exchange of the shares, the shareholders
of VisualMed Canada will own approximately 85% of the outstanding common shares
of the Company.
For accounting purposes, the acquisition will be treated as a recapitalization
of VisualMed Canada with VisualMed Canada as the acquirer. The pro forma
consolidated balance sheet as at March 31, 2000 reflects this recapitalization.
For the comparability of the figures and the convenience of users, the assets
and liabilities of the Company as at March 31, 2000, have been translated into
Canadian dollars at the rate of $1.45 Canadian dollars per U.S. dollar and the
statement of loss figures for the six months ended March 31, 2000 have been
translated into Canadian dollars at the rate of $1.4631 Canadian dollars per
U.S. dollar. Similarly, the assets and liabilities as at December 31, 1999, have
been translated into Canadian dollars at the rate of $1.4433 Canadian dollars
per U.S. dollar and the statement of loss figures for the eleven months ended
December 31, 1999 have been translated into Canadian dollars at the rate of
$1.4858 Canadian dollars per U.S. dollar. The translation should not be
construed as a representation that the amounts shown could be converted into
Canadian dollars at such rate or any other rate.
The following information pertains to the preparation of the pro forma
statements:
(1) Since VisualMed Clinical Systems Corp. is a non-operating shell
corporation, the results of operations for the three months ended March 31,
2000 are not significantly different from the results of operations for the
six months ended March 31, 2000. As a result, the three month actual
results have been used as an approximation of the six month results.
(2) The weighted average number of shares outstanding reflects the following:
(a) the actual number of shares outstanding in the Company as at the end
of each period less 1,695,000 shares cancelled subsequent to March 31,
2000 but prior to May 9, 2000
(b) the issuance of 19,002,785 shares of the Company to the holders of the
preferred shares of VisualMed Canada
(c) The redemption, for US$100, of 10,000,000 shares of the Company held
in trust for the voting benefit of the holders of preferred shares of
VisualMed Canada. These shares are being held in trust until such time
as (i) the registration of the 19,002,785 shares in favour of the
holders of preferred shares of VisualMed Canada: and (ii) the actual
issuance of the Company's shares to the holders of preferred shares of
VisualMed Canada represents a majority of all issued and outstanding
voting shares of the Company.
(3) Reflects the recapitalization of VisualMed Canada as a result of the
reverse acquisition.
(4) Total expenses associated with the transaction are expected to amount to
approximately $1,000,000. Of this amount approximately $400,000 had
previously been incurred and expensed in the six-month period ended March
31, 2000 of VisualMed Canada. These expenses have been excluded from the
pro Forma consolidated statements of loss because they are non-recurring in
nature.
F - 31
<PAGE>
