<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
( X ) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended June 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to _________________
Commission file number 0-15179
NEUROTECH DEVELOPMENT CORPORATION
(Formerly Neurotech Corporation)
(Name if small business issuer in its charter)
DELAWARE 06-1100063
- -------------------- -------------------
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
45 ORCHARD STREET, MANHASSET, NEW YORK, 11030
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 869-9663
--------------
Securities registered under Section 12(b) of the Exchange Act: NONE
----
Securities registered under Section
12(g) of the Exchange Act: Common Stock, par value $0.01
-----------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ( ) No ( x )
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. ( )
Issuer's revenues for its fiscal year ended June 30, 1999 were $1,180,421
(from discontinued operations).
The aggregate market value of the voting stock held by non-affiliates
approximated $21,739,834, computed by reference to the average of the bid and
asked prices for such stock on January 28, 2000. In calculating this amount,
the Company has assumed that it is able to determine affiliate holdings from the
list of stockholders generated by its transfer agent, American Stock Transfer &
Trust Company.
44,196,714 shares of issuer's common stock were outstanding at February 14,
2000.
Transitional Small Business Disclosure Format (Check One): Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Organization
Neurotech Development Corporation ("Neurotech" or the "Company") was
incorporated in Delaware on September 13, 1983 as Bellevue Medical Corporation.
On October 9, 1984, the Company changed its name to Neurotech Corporation and on
July 1, 1998, to Neurotech Development Corporation. The Company has had to renew
its charter with the Delaware Secretary of State three times, February 25, 1985,
February 28, 1991 and February 28, 1998, for failure to pay franchise taxes.
Neurotech has three wholly-owned subsidiaries: Neuroscientific Corporation,
a dormant Delaware corporation; Global Health Enterprises, Inc. ("Global") a
Delaware corporation that has discontinued operations; and Doctors4Doctors.com,
Inc., a newly formed Delaware corporation. The accompanying consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries Neuroscientific Corporation and Global Health Enterprises, Inc.
Global's wholly-owned subsidiary, Health Systems Home Care, was sold effective
July 1, 1998. The remaining operations of Global were discontinued on October
17, 1998.
Historical Nature of Operations
Prior to 1996, the Company was engaged in the assembly, marketing and sale
of proprietary non-invasive medical research instruments and custom delay lines,
and the distribution of non-ozone depleting refrigerant products. These
businesses were discontinued in 1996. Effective June 1, 1996, the Company,
through its newly acquired subsidiary, Global, acquired the real property and
operating assets and liabilities of Mary E. Dickerson Memorial Hospital, a 49
bed acute care hospital in Jasper, Texas. Bank of America retained a mortgage on
the hospital to secure indebtedness of approximately $1.7 million. The hospital
was doing business as Lakes Regional Medical Center. Global defaulted on its
obligations to Bank of America in 1997. On October 17, 1998, the hospital was
closed and all operations were discontinued. Bank of America foreclosed and
recovered title to the hospital. The operations of all previous businesses of
the Company are reported as discontinued operations for all years presented in
the attached financial statements.
Current Operations
The Neurotech Healthcare System
The Company has spent the last 4 years in the design and development of a
rapid deployment healthcare system for the third world. The system which has
been developed consists of a series of linked institutions, consisting of
modular hospitals and tertiary hospitals. The deployment times and costs of
these hospitals are lower than conventional construction. The Company plans to
deploy prefabricated building systems purchased in the United States. The
Company has developed hospital management, patient management, and operational
techniques which allow the hospitals to operate and treat the maximum number of
patients. Additionally, the Company has a proprietary plan for medical education
for doctors and staff at these facilities, as well as an ongoing program for
continuing education.
Neurotech has letters of understanding with Indonesian and Chinese
companies or authorities to implement its health care system and provide modular
hospitals. These letters of understanding are generally contingent upon a
complete feasibility study and financing. In Indonesia, the Company has executed
such a letter of understanding with Techni-Lube Singapore for three (3) tertiary
hospitals in Jakarta and one (1) in Bandung. In China, Neurotech has letters of
understanding with Shantou Hongyan Economic Industry & Trade Co., Ltd., the Xian
Municipal Government, the Hangzhou Jiang Province Ming Economic and Trade Co.,
Ltd. and the People's Government of Jiading, Shanghai for a total of eight (8)
hospitals, including five (5) modular, one (1) tertiary, one (1) acute care and
one (1) geriatric.
2
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Although the Company has identified various suppliers for implementation of
its rapid deployment health care system, presently, it has no formal,
contractual arrangements for supply of materials or training of medical staff.
The Company is currently negotiating some of these arrangements. Management
believes that the Company will be able to meet its present supply commitments.
The Company plans to begin construction of its first modular hospital in
Indonesia in March of 2000. Such matters as geological analysis for the sites in
Indonesia have been contracted by Neurotech's customer and are expected to be
completed in January. The Company has a medical and engineering team scheduled
to begin work in Indonesia, February, 2000. The first hospital will be a
prototype and is expected to be the only hospital constructed during the first 5
months of the year. The Company then intends to build the additional hospitals
on the contracts over the next 2 years.
The Company expects to begin construction of its first modular hospitals in
China beginning in June, 2000. These China contracts cover turnkey modular
hospitals, tertiary hospitals, geriatric based modular hospitals, skilled
nursing facilities and senior housing. The Company anticipates that it will be
paid in advance for each phase of the contract, and will not have to raise any
additional funds to support this venture.
The Company's rapid deployment healthcare system may be affected by United
States and foreign government regulation, particularly export-import controls.
The Company will be subject to political, economic, environmental and other
risks associated with doing business in developing countries.
Other Activities
The Company has entered into a series of letter agreements to acquire up to
60% of the common stock of American International Medical Resources, Inc.
("AIM") for cash of $4,100,000 and notes of $3,900,000. AIM will, in turn
acquire 100% of Residential Health Care, Inc. ("RHC"). To, date, the Company has
invested $1,320,000 and received shares representing 12.5% of AIM's outstanding
common stock. AIM and RHC have a physician referral service. The Company intends
to expand the physician referral service via the internet through its newly
formed subsidiary Doctors4Doctors.com, Inc.
The Company employs three (3) executives and one (1) clerical person, but
has no other employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company presently leases office space at 45 Orchard Street, Manhasset,
New York from a corporation controlled by current and former members of the
Board of Directors. The Company occupies approximately 2,000 square feet and
pays a monthly rent of $2,000.
ITEM 3. LEGAL PROCEEDINGS
In two separate lawsuits recently consolidated as DVI Business Credit Corp.
and DVI Financial Services, Inc. vs. Global Health Enterprises, Inc. trading as
Lakes Regional Medical Center, et al, filed in the District Court of Bexar
County, Texas, 224/th/ Judicial District, in January and March of 1999, DVI
Business Credit Corp., and DVI Financial Services, Inc. (referred to generally
as "DVI") have alleged breaches of guarantee agreements relating to two
promissory notes made by Global and guaranteed by the Company. DVI Business
Credit Corp. has also filed a motion for partial summary judgment on its claim
relating to its loan against the accounts receivable of Global. The Court found
that the promissory note is valid and enforceable. However, the amount owed is
still in dispute. The Company contends that the collateral assumed by DVI was
sufficient to satisfy the Company's obligation. However, should the Company be
completely unsuccessful, the ultimate exposure could range up to approximately
$516,760 plus attorney's fees. At this point, it is uncertain as to the ultimate
resolution of this matter and it is uncertain as to the amount, if any, that
will finally be recovered by the Plaintiffs. The Company believes that it has
adequately provided for its future obligations and that the ultimate resolution
of this matter will not have a material effect on its financial position.
3
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In addition, on May 11, 1999, the Securities and Exchange Commission
("SEC") issued an Order Instituting Cease-and-Desist Proceedings against the
Company, one of its officers, Larry Artz, and a financial consultant. In the
notice, the SEC alleges that the Company's officer and the financial consultant
conducted a fraudulent internet offering. The matter is set for an
administrative hearing to determine whether a cease-and-desist order should be
issued. The Company and its officers intend to vigorously contest all issues and
expect that both will be absolved in the matter.
In 1997, the Company was formally advised by the SEC that it was deficient
in filing reports under the Securities Exchange Act of 1934. The Staff advised
that it was considering recommending to the Commission that it institute
enforcement actions, which could include civil penalties, against the Company
for violations of Section 13 (a) of the Exchange Act of 1934. Although the
Company completed the filings that were the subject of the 1997 advisory,
Neurotech is again delinquent in its 1934 Act filings. The Company expects to
become current in its filings in the near future.
National Linen Service has a default judgement against the Company's
subsidiary, Global Health Enterprises, Inc. in the amount of approximately
$18,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fiscal
years 1997, 1998 or 1999. A majority of the Company's stockholders executed a
written consent on December 10, 1999, increasing the Company's authorized
capital from 40,000,000 shares to 100,000,000 shares. The Articles of Amendment
were filed on December 14, 1999. The Company has not held regular annual
stockholders meetings since its inception. However, corporate actions have been
approved by written consent of a requisite majority of the Company's
stockholders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since March 7, 1991, the Company's common stock has been quoted on the
National Association of Securities Dealers Over-the-Counter Bulletin Board.
The following information furnished by the National Quotation Bureau, for
each quarter during the Company's fiscal years ended June 30, 1997, 1998 and
1999 reports the high and low bid quotations. Quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission, and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
High Low High Low High Low High Low
------ ----- ----- ------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1997 $.15 $.07 $.19 $.0625 $ .12 $.07 $ .23 $.125
Fiscal 1998 $.25 $.17 $.33 $ .09 $.275 $.11 $ .14 $ .06
Fiscal 1999 $.36 $.10 $.30 $ .125 $.825 $.12 $1.75 $ .53
</TABLE>
On January 28, 2000, the bid price for the Company's Common Shares was
$0.80.
(b) As of January 28, 2000, there were 715 holders of record of common
stock of the Company.
(c) The Company has not paid any cash dividends since its inception. For
the foreseeable future, it is anticipated that any earnings which may be
generated from operations of the Company will be retained for use in the
Company's business, and that cash dividends will not be paid to stockholders.
4
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained herein are not based on historical facts,
but are forward-looking statements that are based upon numerous assumptions
about future conditions that could prove not to be accurate. Actual events,
transactions and results may materially differ from the anticipated events,
transactions or results described in such statements. The company's ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of the Company's
products and services, regulatory approvals and developments, economic
conditions, the impact of competition and pricing results of financing efforts
and other factors affecting the Company's business that are beyond the Company's
control. The Company undertakes no obligation and does not intend to update,
revise or otherwise publicly release the result of any revision to these
forward-looking statements that may be made to reflect future events or
circumstances.
Result of Operations
Years Ended June 30, 1999, 1998 and 1997
The Company had revenues from discontinued operations for the years
ended June 30, 1999, 1998 and 1997 in the amounts of $1,180,421, $5,839,181 and
$6,786,014, respectively.
General and administrative expenses related to discontinued operations
for the year ended June 30, 1999 were $1,742,120, $6,559,178 for the
corresponding year end in 1998 and $7,010,694 for the corresponding year end in
1997. General and administrative expenses during those years consisted of fees
and related expenses associated with operating the Lakes Regional Medical
Center. The Company realized net losses of $498,339 for the fiscal year 1999,
$719,997 for the corresponding period in 1998 and $224,680 for the corresponding
year ended June 30, 1997.
The Company had losses from continuing operations for the years ended
June 30, 1999, 1998, and 1997 of $983,340, $708,389, and $406,480,
respectively. The losses resulted primarily from expenses incurred in the design
and development of a rapid deployment healthcare system.
The resulting net losses from continuing and discontinued operations for
the years ended June 30, 1999, 1998, and 1997 were $1,481,679, $1,428,386, and
$631,160, respectively.
Liquidity and Capital Resources
In June, 1999, the Company had $335 in cash. The Company has incurred
significant losses since inception resulting in a shareholders' deficit and
working capital deficit at June 30, 1999 of $2,289,742. Effective October 17,
1998, the Company has discontinued all of its previous operations. The Company's
subsidiary, Global, has defaulted on its obligations and Global's secured
creditors have taken substantially all of Global's assets. In addition, one
secured creditor has filed a motion for partial summary judgment against the
Company and Global. (See Legal Proceedings). The Company is exploring new
business ventures and sources of financing. Management has indicated that the
Company has continued to incur operating losses for periods subsequent to June
30, 1999. These factors raise substantial doubt about the Company's ability to
continue as a going concern.
In view of these matters, the continued existence of the Company is
dependent upon its ability to meet its financing requirements and, ultimately,
the success of its planned future operations. Management believes that actions
presently being taken to acquire an operating business and to develop a new line
of business constructing prefabricated hospitals in third wold countries provide
the Company the opportunity to continue as a going concern. Management has term
sheets with potential accredited investor groups to provide financing for future
acquisitions and business development, but no assurances can be made that the
Company will have enough capital to continue operations.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company appear at the end of this report
beginning with the Index to Financial Statements on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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ITEM 9. DIRECTORS AND OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16 (A) OF THE EXCHANGE ACT
Name Position
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Bernard Artz Chairman, Chief Financial Officer
Lawrence Artz Vice-President, Director
Jack Fishman (1) Chief Accounting Officer, Director
Joseph M. Cerra Director
Steven A. Massey (2) Director
(1) Mr. Fishman resigned his position as director and Chief Accounting
Officer as of July 7, 1999, due to health reasons.
(2) Mr. Massey resigned his position as director as of February 22, 1999.
Bernard Artz, age 75, has been the chairman and a director of the
Company since 1994. From 1993 to 1996, he was a vice president and director of
Travel Safety Corp. From 1994 to the present, he has been a director and co-
chairman of Lundell Technologies, Inc., a public company.
Lawrence Artz, age 48, has been an officer and director of the Company
since 1994. From 1994 to the present, Mr. Artz has been a director and vice
president of Lundell Technologies, Inc., a public company. From 1993 to the
present, Mr. Artz has been managing director of Safety & Technology Group, Ltd.
of Hong Kong, a manufacturer of non-ozone depleting refrigerants and children's'
safety products. From 1993 to the present, Mr. Artz has been a director of
Global Investment Fund, Ltd. From 1991 to 1993, Mr. Artz has been a managing
director of Starcomm, Ltd., a manufacturer of children's' safety products. From
1987 to 1991, Mr. Artz was a managing director of Asia Industries Group Ltd.
From 1981 to 1985 he was director of marketing for Conair Corporation.
Joseph M. Cerra, age 47, has been a director of the Company since 1994.
From 1994 to the present, Mr. Cerra has been secretary of Lundell Technologies,
Inc. From 1991 to the present, he has been a manager of user services for
Consolidated Edison of New York. From 1976 to 1991, he held various managerial
and administrative positions with Consolidated Edison.
Jack Fishman, age 70, was a director and an officer of the Company from
1994 to 1999. He is a Certified Public Accountant and has maintained an
independent accounting practice for more than 20 years. He resigned his position
as director of Neurotech on July 7, 1999, due to health reasons.
Steven A. Massey, age 43, was a director of the Company from 1994 until
February, 1999. He resigned as a director of Neurotech on February 22, 1999, but
still consults with the Company. Mr. Massey is currently director and president
of Lundell Technologies, Inc.
Compliance with Section 16(a) of the Exchange Act
Management believes that all relevant parties have failed to file any
reports under Section 16(a) of the Exchange Act since at least 1997. It is
difficult for the Company to reconstruct what filings should have been made in
prior periods.
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ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
the compensation paid or accrued for each of the Company's last three completed
fiscal years to the Chief Executive Officer and each of its other executive
officers that received compensation in excess of $100,000 during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual compensation Long term compensation
Awards Payouts
Securities
underlying
Restricted stock options/SARs Other
Name and principal position Year Salary Bonus Total award(s) (#) Compensation
($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard Artz , Chairman
1997 $-0- -0- -0- $150,000(1) 750,000(4) -0-
1998 $-0- -0- -0- 150,000(2) -0- -0-
1999 $-0- -0- -0- 150,000(3) 750,000(5) -0-
Lawrence Artz , Vice President
1997 $-0- -0- -0- $150,000(1) 750,000(4) -0-
1998 $-0- -0- -0- $150,000(2) -0- -0-
1999 $-0- -0- -0- $150,000(3) 750,000(5) -0-
Steven Massey, Director
1997 $-0- -0- -0- $150,000(1) 750,000(4) -0-
1998 $-0- -0- -0- $150,000(2) -0- -0-
1999 $-0- -0- -0- $150,000(3) 750,000(5) -0-
</TABLE>
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(1) The Company awarded restricted stock in the amount of 833,333 shares of
Common Stock as compensation for 1997 to each named executive officer. The
value of this award is calculated on the basis of the January 6, 1998 issue
date closing price of $0.18.
(2) The Company awarded restricted stock in the amount of 750,000 shares of
Common Stock as compensation for 1998 to each named executive officer. The
value of this award is calculated on the basis of the January 5, 1999 issue
date closing price of $0.20.
(3) The Company awarded restricted stock in the amount of 267,857 shares of
Common Stock as compensation for 1999 to each named executive officer. The
value of this award is calculated on the basis of the January 4, 2000 issue
date closing price of $0.56.
(4) On December 5, 1997 each named executive officer was granted an option to
purchase 750,000 shares of Common Stock for five (5) years at an exercise
price of $0.20. The closing price for Neurotech Common Stock on the date of
grant was $0.15.
(5) On January 5, 1999, each named executive officer was granted an option to
purchase 750,000 shares of Common Stock at an exercise price of $0.20 for
five (5) years. The closing price for Neurotech Common Stock on the date of
grant was $0.20.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 28, 2000, the name and
the number of shares of the Company's Common Stock, $.01 par value, held of
record or beneficially by each director, each named executive officer and all
officers and directors as a group. Other than officers and directors, the
Company knows of no other stockholder who holds of record or beneficially more
than 5% of the issued and outstanding Common Stock. Approximately 51% of the
Company's outstanding Common Stock is held in street name by Cede & Company.
<TABLE>
<CAPTION>
Name No. of Shares of Common (2)
and Address(1) Stock Beneficially Owned Percent of Class
- -------------- ------------------------ ----------------
<S> <C> <C>
Officers, Directors and Nominees:
Bernard Artz 5,502,315 (3) 14.75
Steven A. Massey 3,501,190 (3) 9.39
Lawrence M. Artz 4,583,658 (3) 12.29
Joseph M. Cerra 225,000 0.063
Jack Fishman 40,000 0.001
</TABLE>
7
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<TABLE>
<S> <C> <C>
Directors and Officers as 13,852,163 34.37
as a Group (5 persons)
</TABLE>
____________________
(1) The address for each of the named officers is 45 Orchard St.,
Manhassett, New York 11030.
(2) Based upon 35,803,672 shares outstanding as of January 28, 2000, plus for
each calculation the number of shares of Common Stock that such person or group
can acquire within 60 days by exercise of options, warrants or similar rights.
(3) Includes options for 1,500,000 shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its present office space from Lundell Technologies,
Inc. Bernard Artz, Lawrence Artz and Steve Massey, collectively, hold
approximately thirty-two percent (32%) of the outstanding stock of Lundell
Technologies, Inc. Management believes that this lease is commercially
reasonable. From time to time, members of the Board or stockholders have
advanced money to the Company to cover expenses. Neurotech has agreed to repay
these advances in stock in the amount of the loan plus twenty percent (20%).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit Number Title Page
<S> <C> <C>
3.1 Certificate of Incorporation, as Amended ***
3.2 By-Laws ***
4.0 SpecimenCertificate of Common Stock *
4.1 Company's Stock Option Plan *
10.3 Consent and Assumption Agreement **
10.4 Secured Renewal and Extension Promissory Note **
10.5 Modification Renewal and Extension Agreement **
10.6 Covenant Not to Sue **
10.7 Credit Agreement **
10.8 $1,500,000.00 Promissory Note **
10.9 $185,000 Promissory Note **
10.10 Deed of Trust, Security Agreement and Financing
Statement **
10.11 Assignment of Rents and Leases **
10.12 Commercial Security Agreement **
10.13 Assignment of Deposit Accounts and Security Agreement **
10.14 Guaranty Agreement **
10.15 Indemnity Agreement **
10.16 Corporate Certificate **
10.17 Asset Purchase Agreement **
10.18 Special Warranty Deed with Assumption **
10.19 Bill of Sale and Assignment - Jasper Associates **
10.20 Assignment of and Assumption of Lease **
10.21 Bill of Sale and Assignment -
Mary E. Dickerson Hospital Group, Ltd. **
10.22 Loan and Security Agreement **
10.23 Lease Agreement between Lundell Technologies, Inc. as
landlord and the Company, dated February 1, 1999 ***
10.24 Turnkey Hospital Purchase Contract between the Company
and Techni-Lube Singapore PTE, Ltd., dated
March 2, 1999 ***
10.25 Turnkey Hospital Purchase Contract between the Company
and Techni-Lube Singapore PTE, Ltd., dated
March 2, 1999 ***
10.26 Turnkey Hospital Purchase Agreement between the Company
and The Chaoshan Hospital, Hongyuan Economic
</TABLE>
8
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<TABLE>
<S> <C>
Industry Trade Co. Ltd. ***
10.27 Turnkey Hospital Purchase Agreement between the Company
and the Xian Municipal Government dated
November 19, 1999 ***
10.28 Turnkey Hospital Purchase Agreement between the Company
and the Zhen Jiang Province Riyueming Economic
and Trade Co. Ltd., dated October 24, 1999 ***
10.29 Turnkey Hospital Purchase Agreement between the Company
and The People's Government of Jiading Shanghai,
dated November 4, 1999 ***
10.30 Turnkey Hospital Purchase Contract between the Company
and The People's Government of Jiading Shanghai,
dated November 4, 1999 ***
10.31 Letter Agreements dated May 20, 1999 and July 30, 1999
relating to the Stock Purchase between the
Company and American International Medical
Resources, Inc. ***
21 Subsidiaries of the Registrant ****
27 Financial Data Schedule
</TABLE>
______________
* Previously filed with the Company's Registration Statement on Form S-18,
filed with the Commission on December 18, 1985.
** Previously filed with Form 8-K of May 31, 1997.
*** Previously filed on January 31, 2000, with the Company's Form 10-KSB for
the fiscal year ended June 30, 1999.
**** Previously filed on February 16, 2000, with the Company's Form 10-KSB/A for
the fiscal year ended June 30, 1999.
(b) Reports on Form 8-K
The Company has not filed its 1934 Act reports since June of 1997. It
has not filed any reports on Form 8-K since May 31, 1997.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized this 22nd day of February, 2000.
NEUROTECH DEVELOPMENT CORPORATION
By: /s/ Bernard Artz
-----------------------------------------------
Bernard Artz, Chairman, Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Bernard Artz
- ---------------------------------------- February 22, 2000
Bernard Artz, Chairman, Chief Financial Officer ------------------
Date
/s/ Lawrence M. Artz
- ---------------------------------------- February 22, 2000
Lawrence M. Artz, Director, President -------------------
Date
/s/ Joseph M. Cerra
- ---------------------------------------- February 22, 2000
Joseph M. Cerra, Director -------------------
Date
9
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CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT........................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet............................. F-4
Consolidated Statements of Operations................ F-5
Consolidated Statements of Changes
In Stockholders' Equity (Deficit)................. F-6
Consolidated Statements of Cash Flows................ F-7
Notes to Consolidated Financial Statements........... F-9
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Neurotech Development Corporation
(formerly Neurotech Corporation)
Manhasset, New York
We have audited the accompanying consolidated balance sheet of Neurotech
Development Corporation (formerly Neurotech Corporation) and Subsidiaries (the
Company) as of June 30, 1999, and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for each of
the years in the three year period ended June 30, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
We have previously issued our report dated January 26, 2000, in which we
disclaimed an opinion on the statements of operations and cash flows for each of
the three years in the period ended June 30, 1999, because certain records
related to discontinued operations had not been located and the scope of our
procedures were not sufficient to enable us to express and we did not express an
opinion. Subsequent to that date, additional records have been found and
sufficient auditing procedures have been performed. Therefore, our opinion as
expressed herein is different from the opinion previously expressed.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Neurotech
Development Corporation and Subsidiaries at June 30, 1999, and the results of
their operations and their cash flows for each of the years in the three year
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
F-2
<PAGE>
To the Board of Directors
Neurotech Development Corporation
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2, the
Company has experienced recurring operating losses since inception and
liabilities exceeded assets by $2,289,742 at June 30, 1999. These issues raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties. In addition, as discussed in
Note 6, the Company is the defendant in a lawsuit alleging breeches of guarantee
agreements relating to two promissory notes. The ultimate outcome of the
lawsuit cannot presently be determined, but management is of the opinion that it
will not have a material impact on the Company's financial position.
Accordingly, no provision for any additional liability that may result has been
made in the consolidated financial statements as of June 30, 1999. Nevertheless,
due to uncertainties with the lawsuit, it is at least reasonably possible that
management's view of the outcome will change in the near future.
/S/ WEAVER AND TIDWELL, L.L.P.
- -------------------------------
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
February 21, 2000
3378
F-3
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(formerly Neurotech Corporation)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 335
Account receivable - related party 20,299
------------
Total current assets 20,634
------------
TOTAL ASSETS $ 20,634
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Convertible debenture $ 100,000
Accounts payable and accrued expenses 710,200
Accounts payable - related parties 140,981
Net liabilities of discontinued operations 1,359,195
------------
Total current liabilities 2,310,376
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; par value $0.01 per share;
authorized 40,000,000 shares; issued 33,917,244 339,173
Additional paid-in capital 5,467,123
Retained earnings (deficit) (7,946,038)
------------
(2,139,742)
Less 100,000 shares of Treasury stock, at cost ( 150,000)
------------
Total stockholders' equity (deficit) (2,289,742)
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 20,634
============
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of this statement. F-4
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(formerly Neurotech Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------
1999 1998 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
Costs and Expenses
Administrative (776,850) (599,243) (277,534)
Contract services (193,185) (78,575) (128,946)
Interest (13,305) (30,571) -
------------ ------------ -----------
Loss from continuing operations
before income tax benefit (983,340) (708,389) (406,480)
Income tax benefit - - -
------------ ------------ -----------
Loss from continuing operations (983,340) (708,389) (406,480)
Discontinued Operations
Loss from operations (561,699) (719,997) (224,680)
Gain on disposal 63,360 - -
------------ ------------ -----------
Loss from discontinued operations (498,339) (719,997) (224,680)
------------ ------------ -----------
Net loss ($1,481,679) ($1,428,386) ($631,160)
============ ============ ===========
Basic loss per share
Continuing operations ($0.03) ($0.03) ($0.02)
Discontinued operations (0.02) (0.03) (0.01)
------------ ------------ -----------
Net loss per share ($0.05) ($0.06) ($0.03)
============ ============ ===========
Weighted average number of
common shares outstanding 30,257,919 24,348,740 24,155,748
============= ============ ===========
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of these statements. F-5
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(formerly Neurotech Corporation)
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital (Deficit) Stock Total
---------------- ------------------ ------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1996 $ 241,558 $4,136,256 ($ 4,404,813) ($ 150,000) ($ 176,999)
Net loss - - ( 631,160) - ( 631,160)
---------------- ------------------ ------------------- ----------------- -------------------
Balance,
June 30, 1997 241,558 4,136,256 ( 5,035,973) ( 150,000) ( 808,159)
Stock options
granted - 18,000 - - 18,000
Common stock
issued for cash 15,000 60,000 - - 75,000
Common stock
issued for services 220 880 - - 1,100
Net loss - - ( 1,428,386) - ( 1,428,386)
---------------- ------------------ ------------------- ----------------- -------------------
Balance,
June 30, 1998 256,778 4,215,136 ( 6,464,359) ( 150,000) ( 2,142,445)
Common stock
issued for cash 22,458 245,224 267,682
Common stock
issued for services 59,937 1,006,763 - - 1,066,700
Net loss - - ( 1,481,679) - ( 1,481,679)
---------------- ------------------ ------------------- ----------------- -------------------
Balance,
June 30, 1999 $ 339,173 $5,467,123 ($ 7,946,038) ($ 150,000) ($2,289,742)
================ ================== =================== ================= ===================
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of these statements. F-6
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(formerly Neurotech Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------------------
1999 1998 1997
------------------- ------------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($1,481,679) ($1,428,386) ($ 631,160)
Adjustments to reconcile net loss to
net cash used in operating activities
Gain on disposal ( 63,360) - -
Depreciation and amortization 64,386 154,127 177,972
Stock issued for services 1,066,700 1,100 -
Stock options granted for services - 18,000 -
Changes in assets and liabilities
Accounts receivable - related party ( 20,299) - -
Accounts payable and accrued expenses ( 434,135) 610,059 334,826
Accounts payable - related parties ( 171) 729 59,712
Net liabilities of discontinued operations 462,386 447,087 ( 57,580)
------------------- ------------------- ------------------
Net cash used in operating activities ( 406,172) ( 197,284) ( 116,230)
CASH FLOWS FROM INVESTING ACTIVITIES - - -
------------------- ------------------- ------------------
Net cash used in investing activities - - -
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of these statements. F-7
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(formerly Neurotech Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible debenture 100,000 - -
Sale of common stock 267,682 75,000 -
----------- ---------- ----------
Net cash provided
by financing activities 367,682 75,000 -
----------- ---------- ----------
Net decrease in cash ( 38,490) ( 122,284) ( 116,230)
CASH, BEGINNING 38,825 161,109 277,339
----------- ---------- ----------
CASH, ENDING $ 335 $ 38,825 $ 161,109
=========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for
Interest $ 66,728 $ 177,390 $ 275,211
=========== ========== ==========
Taxes $ - $ - $ -
=========== ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Stock options issued for services $ - $ 18,000 $ -
=========== ========== ==========
Common stock issued for services $1,066,700 $ 1,100 $ -
=========== ========== ==========
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of these statements. F-8
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
ORGANIZATION
Neurotech Development Corporation (the Company) was incorporated in
Delaware on September 13, 1983 as Bellevue Medical Corporation. On
October 9, 1984, the Company changed its name to Neurotech Corporation and
on July 1, 1998, to Neurotech Development Corporation.
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries Neuroscientific Corporation
(dormant) and Global Health Enterprises, Inc. (Global). Global's wholly-
owned subsidiary, Health Systems Home Care, was sold effective July 1,
1998. The remaining operations of Global were discontinued on October 17,
1998 (see Note 4). All significant intercompany balances and transactions
have been eliminated upon consolidation.
NATURE OF OPERATIONS
Prior to 1996, the Company was engaged in the assembly, marketing and sale
of proprietary non-invasive medical research instruments and custom delay
lines, and the distribution of non-ozone depleting refrigerant products.
These businesses were discontinued in 1996. Effective June 1, 1996, the
Company, through its newly formed subsidiary, Global, acquired the real
property and operating assets and liabilities of Mary E. Dickerson Memorial
Hospital, a 49 bed acute care hospital in Jasper, Texas. The hospital was
doing business as Lakes Regional Medical Center. On October 17, 1998, the
hospital was closed and all operations were discontinued (see Note 4). The
operations of all previous businesses are reported as discontinued
operations for all years presented in these financial statements.
NOTE 2. GOING CONCERN
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
incurred significant losses since inception resulting in a shareholders'
deficit and working capital deficit at June 30, 1999 of $2,289,742. Effective
October 17, 1998, the Company has discontinued all of its previous operations
(see Note 4). The Company's subsidiary, Global, has defaulted on its
obligations and Global's secured
F-9
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. GOING CONCERN - CONTINUED
creditors have taken substantially all of Global's assets. In addition, one
secured creditor has filed a motion for partial summary judgment against the
Company and Global (see Note 6). The Company is exploring new business
ventures and sources of financing. The Company has continued to incur
operating losses for periods subsequent to June 30, 1999. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event the
Company cannot continue in existence.
In view of these matters, the continued existence of the Company is dependent
upon its ability to meet its financing requirements and, ultimately, the
success of its planned future operations. Management believes that actions
presently being taken to acquire an operating business and to develop a new
line of business constructing prefabricated hospitals in third world countries
provide the Company the opportunity to continue as a going concern. Management
has also entered into agreements with an accredited investor group to provide
financing of up to $6,000,000 for future acquisitions and business
development. Subsequent to June 30, 1999, the Company had drawn $1,100,000
against this credit facility before the agreement was terminated (see Note
10).
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include investments in highly liquid debt
instruments with a maturity of three months or less.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Net liabilities of discontinued
F-10
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
USE OF ESTIMATES - CONTINUED
operations include management's best estimate of the ultimate liability
that may result from the closing of the Company's hospital operations and
settlement of its obligations. The amounts the Company ultimately may be
required to pay could differ materially in the near term from the amounts
assumed in arriving at the net liability of discontinued operations at June
30, 1999.
INCOME TAXES
The Company records deferred tax assets and liabilities based on
differences between the financial reporting and tax basis of assets and
liabilities, using tax rates in effect when those differences are expected
to reverse. A valuation allowance is established for net deferred tax
assets when management determines that it is more likely than not that the
deferred tax asset will not be realized.
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed by dividing income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share
are computed after giving effect to all dilutive potential common shares
that were outstanding during the period. However, the computation of
diluted earnings (loss) per share shall not assume conversion of potential
common shares if conversion would have an antidilutive effect on earnings
(loss) per share. Therefore, diluted loss per share has not been presented
because the effect would have been antidilutive in all periods presented.
NOTE 4. DISCONTINUED OPERATIONS
Effective July 1, 1998, the Company discontinued and sold its home health care
business and incurred a loss on disposal of approximately $115,550. Effective
October 17, 1998, the Company discontinued and closed its hospital operations.
In connection with the closing of the hospital, the Company's secured
creditors assumed substantially all assets of Global, the Company's wholly-
owned subsidiary.
F-11
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. DISCONTINUED OPERATIONS - CONTINUED
Net liabilities of discontinued operations consist of the following at June
30, 1999:
Notes payable ($ 385,747)
Accounts payable and accrued expenses ( 973,448)
-----------
Net liabilities of discontinued operations ($1,359,195)
===========
The Company's subsidiary Global has been in default under the terms of one or
more of its notes payable agreements with secured creditors since 1996. When
the hospital closed in October 1998, DVI Business Credit Corp. foreclosed on
obligations due them of approximately $516,760, including principal and
interest, and assumed control of collateral consisting of cash, accounts
receivable and major movable equipment with a recorded value of approximately
$365,025. The remaining obligation to DVI, if any, is in dispute (see Note
6). The Company has included $151,735 in net liabilities of discontinued
operations related to this contingency. In January 1999, DT Investments, the
holder of two notes originally payable to the Bank of America National Trust
and Savings Association totaling approximately $2,098,760, including
principal, interest, and unpaid property taxes as of October 30, 1998, assumed
control of collateral consisting of land, land improvements, buildings, and
building improvements and other assets with a recorded value of approximately
$1,919,850. The settlement with DT Investments resulted in a gain to the
Company of approximately $178,910. The remaining net liabilities of
discontinued operations consist of amounts due to unsecured creditors of
Global. While the amounts for which the Company could ultimately be obligated
could differ from the amounts assumed in establishing the net liability at
June 30, 1999, management believes that the recorded amount will be sufficient
to cover all future obligations.
The results of operations of the discontinued business for each period
presented have been classified as loss from discontinued operations as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues $ 1,180,421 $ 5,839,181 $ 6,786,014
Costs and expenses ( 1,742,120) ( 6,559,178) ( 7,010,694)
------------ ------------ ------------
Loss before income tax benefit ( 561,699) ( 719,997) ( 224,680)
Income tax benefit - - -
------------ ------------ ------------
Loss from discontinued operations ($ 561,699) ($ 719,997) ($ 224,680)
============ ============ ============
</TABLE>
F-12
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. CONVERTIBLE DEBENTURE
At June 30, 1999, the Company had outstanding a $100,000 convertible debenture
which bears interest at 10%. The debenture is convertible into 1,000,000
shares of common stock of the Company. In July 1999, the holder of the
debenture requested conversion. The shares have not been issued.
NOTE 6. CONTINGENCIES
DVI Business Credit Corp., and DVI Financial Services, Inc. have filed claims
against the Company for alleged breaches of guarantee agreements relating to
two promissory notes made by Global and guaranteed by the Company. DVI
Business Credit Corp. has also filed a motion for partial summary judgment on
its claim relating to its loan against the accounts receivable of Global. The
Court found that the promissory note is valid and enforceable. However, the
amount owed is still in dispute. The Company contends that the collateral
assumed by DVI was sufficient to satisfy the Company's obligation. However,
should the Company be completely unsuccessful, the ultimate exposure could
range up to approximately $516,760 plus attorney's fees. At this point, it is
uncertain as to the ultimate resolution of this matter and it is uncertain as
to the amount, if any, that will finally be recovered by the Plaintiffs. The
Company believes that it has adequately provided for its future obligations
and that the ultimate resolution of this matter will not have a material
effect on its financial position.
In addition, the Securities and Exchange Commission (SEC) has issued an Order
Instituting Cease-and-Desist Proceedings against the Company, one of its
officers, and a financial consultant. In the notice, the SEC alleges that the
Company's officer and the financial consultant conducted a fraudulent internet
offering. The matter is set for an administrative hearing to determine
whether a cease-and-desist order should be issued. The Company and its
officers intend to vigorously contest all issues and expect that both will be
completely absolved in the matter.
F-13
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES
The provision for income taxes for the years ended June 30, 1999, 1998 and
1997 was computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Tax benefit at federal statutory rates ($ 334,336) ($ 240,852) ($ 138,203)
Losses not providing tax benefits 334,336 240,852 138,203
------------ ------------ ------------
Tax provision $ - $ - $ -
============ ============ ============
</TABLE>
The components of the Company's deferred tax assets and liabilities at June
30, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net operating loss carryforward $ 2,389,400 $ 1,572,630 $ 1,194,500
Officers' compensation 81,600 244,800 81,600
Allowance for doubtful accounts - 166,770 236,100
Reserves for losses 51,000 34,000 20,400
Research and development credits 61,600 61,600 61,600
------------ ------------ ------------
Net deferred tax asset 2,583,600 2,079,800 1,594,200
Valuation allowance ( 2,583,600) ( 2,079,800) ( 1,594,200)
------------ ------------ ------------
Net deferred taxes $ - $ - $ -
============ ============ ============
Change in valuation allowance $ 503,800 $ 485,600 $ 214,800
============ ============ ============
</TABLE>
The Company has a net operating loss carryforward of approximately $7,027,650
which expires in the years 2001 through 2014. In addition, the Company has
research and development credit carryforwards of approximately $61,600 which
ultimately expire in 2006.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company's related party transactions consist primarily of advances from
and repayments to entities owned by common shareholders. The amounts due from
or to these related entities are separately stated on the accompanying
consolidated balance sheets as accounts receivable - related parties or
accounts payable - related parties. Included in administrative expenses for
each of the three years in the period ended June 30, 1999 is $18,000 of office
rent to a company under common ownership.
F-14
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK OPTIONS
On December 5, 1997, the Company granted 2,250,000 stock options to officers
and directors and 200,000 stock options to nonemployees. On January 6, 1999,
the Company granted 2,250,000 stock options to officers and directors. The
Company applies APB Opinion 25 and related interpretations to account for its
stock options issued to employees. Accordingly, no compensation cost has been
recognized for the granting of options to employees. For the year ended June
30, 1998, $18,000 has been recognized as expense related to options granted to
nonemployees. The stock options may be exercised for five years from the
grant date at $.20 per share. No options have been exercised. A summary of
the status of the Company's stock options is as follows:
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
Weighted Weighted
Average Average
Shares Exercise Shares Exercise
(000) Price (000) Price
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding, beginning 2,450 $ - - $ -
Granted 2,250 .20 2,450 .20
Exercised - - - -
Forfeited - - - -
------ ------
Outstanding, ending 4,700 .20 2,450 .20
====== ======
Options exercisable at year end 4,700 .20 2,450 .20
====== ======
Weighted average fair value of
options granted during the year $ .13 $.09
====== ======
</TABLE>
At June 30, 1999, the 4,700,000 options outstanding have an exercise price of
$.20 per share and a weighted average remaining contractual life of 3.9 years.
Had compensation cost for the Company's stock options been determined based on
the fair value at the grant date the Company's net loss and loss per share for
1999 and 1998 would have been as follows:
1999 1998
-------------- --------------
Pro forma net loss
Continuing operations ($1,275,840) ($ 910,889)
Discontinued operations ( 498,339) ( 719,997)
----------- -----------
Pro forma net loss ($1,774,179) ($1,630,886)
=========== ===========
F-15
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK OPTIONS - CONTINUED
Pro forma basic loss per share
Continuing operations ($ .04) ($ .03)
Discontinued operations ( .02) ( .03)
------ ------
Pro forma net loss per share ($ .06) ($ .06)
====== ======
Compensation cost under the fair value method was estimated using the Black-
Scholes model with the following assumptions: dividend yield of 0%; expected
life of 3 years; expected volatility of 144.57% in 1999 and 81.67% in 1998,
and a risk-free interest rate of 6.0%.
NOTE 10. SUBSEQUENT EVENTS
On August 25, 1999, the Company entered into a financing agreement with Avalon
Financial Services, LLC (Avalon) for financing of up to $6,000,000 secured by
3.3 million shares of common stock of the Company owned by officers and
directors. As consideration for arranging the loans, the agreement also grants
Avalon warrants to purchase 500,000 shares of common stock of the Company
exercisable at $0.55 per share. As draws were made, the Company entered into a
series of 30 day renewable promissory notes bearing interest at 10%. The
Company had drawn $1.1 million under this financing agreement before it was
terminated. The Company disputes its obligation to issue the warrants. The
funds are being used to fund a potential acquisition and for working capital.
The Company has entered into a letter of understanding to acquire up to 60% of
the common stock of American International Medical Resources, Inc. (AIM) for
cash of $4,100,000 and notes of $3,900,000 which will in turn acquire 100% of
Residential Health Care, Inc. The Company then intends to purchase the
remaining 40% of AIM for 8,500,000 shares of the Company's common stock. The
Company intends to complete this acquisition in a series of transactions. To
date, the Company has invested $1,320,000 for 12.5% ownership interest in AIM.
The Company is negotiating with another lender to extend the Company a line of
credit to be secured by the Company's common stock owned by officers and
directors. This agreement is contingent on the Company being up to date on
all its SEC filings and that the collateral be registered. The agreement also
requires the Company to issue to the lender warrants to purchase 100,000
shares of common stock exercisable at $1.25 per share.
F-16
<PAGE>
NEUROTECH DEVELOPMENT CORPORATION
AND SUBSIDIARIES
(FORMERLY NEUROTECH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. SUBSEQUENT EVENTS - CONTINUED
On December 10, 1999, the Company amended its Certificate of Incorporation and
increased its authorized number of shares from 40,000,000 to 100,000,000.
In connection with the August 25, 1999 financing agreement with Avalon, 3.3
million shares of Company common stock owned by three individuals (officers
and/or directors of the Company) was pledged as collateral. In October 1999,
Avalon foreclosed on $1.1 million of 30 day notes plus accrued interest and
assumed the collateral as payment. In accordance with an agreement between
the three individuals and the Company, the Company is obligated to issue 1.2
times the number of shares lost in the foreclosure plus additional shares for
any tax consequences that may ensue to the individuals. In October 1999, the
Company agreed to issue 4,380,415 shares of common stock to the three
individuals as compensation for the shares lost in the foreclosure. The
shares have not been issued.
F-17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 335
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,634
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,634
<CURRENT-LIABILITIES> 2,310,376
<BONDS> 0
0
0
<COMMON> 339,173
<OTHER-SE> (2,628,915)
<TOTAL-LIABILITY-AND-EQUITY> 20,634
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 970,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,305
<INCOME-PRETAX> (983,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> (983,340)
<DISCONTINUED> (498,339)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,481,697)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
