UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20654
HEALTHTECH INTERNATIONAL, INC.
Nevada 36-3797495
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1237 South Val Vista Drive
Mesa, Arizona 85204
(Address of principal executive offices)
602-396-0660
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 X No____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
As of April 30, 1996, Registrant has a total of 4,614,807 common stock
and 3,616,239 class A warrants outstanding.
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
March 31, 1996 and September 30, 1995
ASSETS
3/31/96 9/30/95
Current assets:
Cash and cash equivalents $ 32,600 $ 372,836
Accounts receivable - net 260,593 532,861
Inventory 96,753 100,930
Prepaid expenses and other 154,451 72,833
Total current assets 544,397 1,079,460
Property and equipment, at cost, net 12,187,476 12,202,751
Prepaid advertising credits and barter credits 7,356,401 7,394,948
Costs in excess of net assets acquired,
less applicable amortization of $18,934 and
$1,151 in fiscal 1996 and 1995, respectively 1,403,714 1,435,954
Deferred tax asset 785,274 528,956
Non-current marketable equity securities - -
Accounts receivable 184,000 184,000
Other assets, at cost, net 34,308 64,036
Total assets $22,495,571 $22,890,105
The accompanying notes are an integral part of these financial statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
March 31, 1996 and September 30, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
3/31/96 9/30/95
Current liabilities:
Current portion of notes payable and
capitalized lease obligations $ 2,025,253 $ 3,869,299
Accounts payable - trade 305,540 437,742
Accounts payable - related parties 109,526 302,343
Accrued expenses - other 8,642 261,019
Deferred membership revenues - 47,886
Other current liabilities 208,814 138,010
Total current liabilities 2,657,774 5,056,299
Notes payable and capitalized lease obligations,
less current installments 720,512 600,058
Total liabilities 3,378,286 5,656,357
Shareholders' equity
Series D Convertible Preferred Stock, $.001
par value, 10,000,000 shares authorized,
21,200 shares issued and 19,200 shares
outstanding 19 19
Common stock, $.001 par value, 500,000,000
shares authorized, 4,204,157 and 782,286
shares issued and outstanding for 1996 and
1995, respectively 4,204 3,167
Additional paid-in capital 27,312,882 24,630,838
Common stock subscribed - 418
Net unrealized loss on non-current marketable
equity securities (625,000) (625,000)
Accumulated deficit (7,574,820) (6,775,694)
Total shareholders' equity 19,117,285 17,233,748
Total liabilities and shareholders' equity $22,495,571 $22,890,105
The accompanying notes are an integral part of these financial statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
For the Periods ended March 31, 1996 and 1995
Quarter Year to Quarter Year to
Ended Date Ended Date
3/31/96 3/31/96 3/31/95 3/31/95
Revenues, net of returns
and refunds $1,204,101 $2,358,213 $ 138,063 $ 289,863
Costs and operating
expenses:
Cost of sales 321,856 618,031 41,030 139,885
Selling, general and
administrative 1,074,807 2,217,869 85,397 203,173
Depreciation and
Amortization 138,006 276,189 2,260 4,520
Total costs and
operating expenses 1,534,669 3,112,089 128,687 347,578
Income (Loss) from operations (330,568) (753,876) 9,376 (57,715)
Other income (expenses):
Other Income - - - -
Total other income 0 0 0 0
Income (Loss) before income taxes
and extraordinary items (330,568) (753,876) 9,376 (57,715)
Benefit (provision) for
income taxes 112,393 256,318 - 14,191
Net Income (Loss) Before
Extraordinary Item (218,175) (497,558) 9,376 (43,524)
Forgiveness of Debt 300,000 300,000 - -
Net Income (Loss) 81,825 (197,558) 9,376 (43,524)
Income (Loss) per Share
Net Income (Loss) $0.02 $(0.05) $0.01 $(0.07)
Weighted average shares
outstanding 3,748,671 3,748,671 631,952 631,952
The accompanying notes are an integral part of these financial statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
For the Periods ended March 31, 1996 and 1995
3/31/96 3/31/95
Cash flows from operating activities:
Net loss $(197,558) $(43,524)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 462,142 4,520
Issuance of common stock for consulting fees 290,536 239,801
Issuance of common stock for settlements and
debt payments 134,053 250,000
Change in operating assets and liabilities:
Increase(decrease)in deferred tax asset 256,318 -
Increase(decrease)in accounts receivable (322,268) 81,842
Increase (decrease) in cash overdrafts - (49,551)
(Increase) in prepaid expense and other (81,618) (49,900)
(Increase) decrease in deposits (6,381) -
(Increase) decrease in inventory 4,177 120,243
Increase (decrease) in accounts payable (132,203) (119,746)
Increase (decrease) in accrued expenses (252,377) (59,373)
Increase(decrease)in other current
liabilities 23,987 (166,307)
Increase (decrease) in deferred member
revenue (47,886) -
Net cash provided by (used in) operating
activities 130,923 (291,995)
Cash flows from investing activities:
Costs in excess of net assets acquired - -
Disposal (Acquisition) of property, plant and
equipment - 51,035
Net cash provided by (used in) investing
activities - 51,035
Cash flow from financing activities:
Retirements and payments of long-term debt (1,196,159) (51,648)
Forgiveness of debt 300,000 -
Proceeds from long- term debt - -
Issuance of common stock for cash 425,000 -
Net cash provided by (used in) financing
activities (471,159) (51,648)
Net increase (decrease) in cash (340,236) (292,608)
Cash and cash equivalents at beginning of year 372,836 301,313
Cash and cash equivalents at end of year $ 32,600 $ 8,705
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 44,548 -
Income tax - -
The accompanying notes are an integral part of these financial statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Unaudited
For the six months ended March 31, 1996
Supplemental schedule of non-cash and financing activities:
Issuance of 281,268 shares of free-trading common stock
(S-8) and 163,280 class A warrants for payment of
salaries and services. $ 696,306
Issuance of 400,000 shares of restricted (R-144) common
stock and 400,000 shares of restricted (R-144) class A
warrants in partial settlement of current note payable to
Freeway 405, Inc. $1,000,000
Issuance of 79,084 shares of restricted (R-144) common
stock in partial settlement of senior debentures $ 129,587
Issuance of 17,583 shares of restricted (R-144) common
stock and 17,583 restricted (R-144) class A warrants in
settlement of wholly owned subsidiary's current note
payable $ 64,980
Issuance of 1,400 shares of restricted (R-144) common
stock and 790 restricted (R-144) class A warrants in
settlement of current accounts payable of the parent $ 6,466
The accompanying notes are an integral part of these financial statements
HEALTHTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
NOTE 1. BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Business Organization -
HealthTech International, Inc. (the Company), a Nevada corporation is a
vertically integrated health and fitness organization. Currently
HealthTech International, Inc. and its wholly owned subsidiaries,
Results Sports and Fitness, Inc., IFM Investments, Inc. (d/b/a Results
Midland), Results Riverbend, Inc., and Fitness Performance, Inc.
(collectively, "the Company") develop and operate health and fitness
clubs and market and sell fitness equipment.
Per Share Information -
Primary income (loss) per common share has been computed based upon the
weighted average number of common shares outstanding. Dilutive common
stock equivalents are excluded from the calculation of loss per share as
the effect would be antidilutive. The number of common shares utilized
in the per share computations were 3,748,671 and 631,952 for March 31,
1996 and 1995, respectively.
Accounting Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. The unaudited financial statements
presented herein do, in the opinion of management, fairly represent the
results of operations of the Company for the periods presented.
Non-current Marketable Equity Securities -
Due to the restrictive nature of the marketable securities held by the
Company, the total carrying value of $625,000 is reflected as an
unrealized loss on non-current marketable equity securities as a
separate component in shareholder's equity.
Intangible Assets -
The purchase price in excess of the fair value of the net assets of the
acquired entities is being amortized on a straight-line basis over the
period of expected benefit of forty years. The rescission of the
USPORTmex, Inc. and USPORTex, Inc. (see note 2) recaptured the
previously recorded amortization expense associated with these
acquisitions which reduced expenses in the current quarter by $775.
Additionally, costs in excess of net assets acquired was reduced by
$124,051.
NOTE 2. CHANGES IN SUBSIDIARIES BEING CONSOLIDATED
The consolidated financial statements presented for the quarters ended
March 31, 1996 and 1995, included the results of operations of the
Company and its wholly owned subsidiaries. The following indicates the
subsidiaries which were consolidated for the appropriate periods:
March 31, 1996 March 31, 1995
Results Sports & Fitness, Inc. Healthcare USA, Inc.
IFM Investments, Inc. National Health Network, Inc.
Results Riverbend, Inc. Inch by Inch, Inc.
Fitness Performance, Inc.
Due to a complete change in consolidated subsidiaries and their
respective activities for each of the periods reported, the consolidated
financial statements are not comparable between periods.
The Company formed a new subsidiary during the recently completed
quarter, Results Riverbend, Inc. This subsidiary acquired 100% of the
assets and 100% of the liabilities of the Riverbend Athletic Club from
the Company in exchange for 100% of the issued and outstanding shares of
Results Riverbend, Inc.
As reported in the prior Form 10-K and Form 10-Q, the Company announced
the acquisition of USPORTmex, Inc. and USPORTex, Inc. through the
issuance of R-144 common stock and shares of the Company's marketable
equity securities. The total value of USPORTmex previously recorded as
costs in excess of net assets acquired was $14,459 based on the value of
the 2,833 shares of restricted units of the Company exchanged in the
acquisition. The total value of USPORTex previously recorded as costs
in excess of net assets acquired was $109,594 based on the value of
750,000 shares of the Company's marketable equity securities and 3,000
shares of restricted units of the Company which the Company exchanged in
the acquisition. These acquisitions were rescinded by mutual agreement.
All of the shares the Company exchanged in these acquisitions were
returned to the Company and these two acquisitions are accounted for as
though the transactions did not occur.
NOTE 3. INCENTIVE COMPENSATION PLANS
The Company has an Incentive Compensation Plan which provides awards to
officers, employees and consultants of the Company, who, individually or
as a group, contribute in a substantial degree to the success of the
Company. During the six months ended March 31, 1996, the Company issued
401,268 shares under this plan for a value of $1,129,306.
NOTE 4. NOTES PAYABLE
The Company negotiated and received an additional extension on the note
payable of IFM Investments through May 29, 1996. To obtain the
extension, the Company paid $100,000 which was applied to the principle
balance. The outstanding principle balance after this extension
agreement dated March 22, 1996 was $866,159. On May 29, 1996 the
principle payment due is approximately $849,237. The Company has a
verbal commitment to extend the note an additional sixty days with the
lender through an additional principle payment of $100,000.
NOTE 5. RELATED PARTY TRANSACTIONS
During the quarter, Freeway 405, Inc., a corporation substantially
controlled by the Chairman of the Company, elected to forego all of the
interest accrued on the note payable of the Company for the first six
months of the current fiscal year. This reduced expenses in the current
quarter by $35,783, the amount accrued in the first quarter. At the
same time, Freeway 405 forgave $300,000 of the principle. This debt
forgiveness is presented as an extraordinary item in the income
statement.
During the quarter, the Chairman of the Board and the President elected
to forego all salary owed for the first six months of the current fiscal
year. The accrual of this salary in the previous quarter was recaptured
as a reduction of expenses in the current quarter. This reduced
expenses in the current quarter by $112,500, the amount accrued in the
first quarter.
The Company leases office space from Freeway 405 for its corporate
administrative offices. Freeway 405, Inc. elected to forego all of the
lease payments of the Company for the first six months of the current
fiscal year. This reduced expenses in the current quarter by $15,195,
the amount accrued in the first quarter.
NOTE 6. SENIOR DEBENTURES
In February 1996, the Company negotiated a settlement on the remaining
debentures. The settlement included the issuance of 79,084 restricted
(R-144) shares of common stock and the payment of $229,000 in cash. At
the balance sheet date, the remaining unpaid cash portion of the
settlement was $54,000.
NOTE 7. PREPAID ADVERTISING CREDITS
The Company has acquired deferred advertising and broadcast air-time
credits, primarily in exchange for common stock, from related parties
aggregating $7,300,000. The advertising and broadcast credits were
recorded at net realizable value, based upon the seller's published rate
cards at the date of acquisition or the historical founder's cost as it
relates to related party transactions, whichever was lower. These
credits have expirations ranging from 5 to 10 years from date of
issuance of September 29, 1995, and January 1, 1994, respectively.
These credits can be traded for various goods and services and they can
be assigned, sold or transferred. However, they are not recognized as
currency in the United States although they can be traded as such. The
credits will be amortized at the time the advertising is utilized or the
exchange for goods or services received will be recorded at the lower of
fair market value of the goods or services received.
Management also intends to enter into joint venture arrangements to
market various products. It is their intention to market these products
over various television/radio networks by utilizing a portion of these
air-time credits. However, if management is not successful in
implementing the above strategies to realize the recorded values of the
credits and impairment of these assets are realized, the Company will
realize a significant and material reduction in its overall equity. To
date none of these air-time credits have been utilized.
NOTE 8. CONTINGENCIES
The fourth extension on the IFM Investments note assumed in the Results
Midland acquisition is due and payable on May 29, 1996 (see Note 4).
The Company has been actively seeking to refinance this note through a
different lender at more favorable terms.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview of HealthTech International, Inc.
HealthTech International, Inc., a vertically integrated health and
fitness corporation, currently owns and operates three multi-amenity
health and fitness clubs and one fitness equipment distribution company.
Operating under the name "Results Sports and Fitness", its three health
clubs are located in Tucson, Arizona, and in Midland and Fort Worth,
Texas, respectively. Its distribution company, Fitness Performance Inc.
offer management consulting and fitness equipment to health clubs and
health related companies throughout the United States, Mexico, Europe
and Asia. The management of the Company is headquartered in Mesa,
Arizona where it oversees the operations and accounting of all its
subsidiaries.
HealthTech's Philosophy for Growth
HealthTech's current goal is to increase its health clubs operations
through aggressive acquisitions of privately owned and often poorly
managed health and fitness clubs in North America. Armed with a
management team with extensive experience in owning and operating
successful health and fitness clubs, HealthTech International Inc. is
keenly postured for growth through consolidation in a notably fragmented
health and fitness industry.
Understanding that health club clientele often rate cleanliness, the
variety of activities and exercise equipment, and the availability to
immediately use their desired work out equipment as the most desired
factors within their health clubs, HealthTech has created a management
and operating philosophy of establishing and running its clubs as
"Category Killers". The Company's philosophy is to meet each of these
desired factors by renovating the space to accommodate and efficiently
manage peak work-out traffic, equip each of its health clubs with a
large amount of the most popular fitness equipment such as stair
climbers, tread mills, and free weights, and maintain the appearance and
aesthetics within each facility that is conducive for exercise and other
activities. During the quarter, Results Riverbend continued the
extensive renovations begun shortly after the club's acquisition which
will transform the club into a "Mega" health and fitness facility.
Results of Operations
The Company's philosophy is to provide growth and income to its
shareholders by acquiring health and fitness clubs that are poorly
managed and/or financially distressed that management believes still
contain characteristics that, once implemented with HealthTech's
management philosophy, will enable them to thrive, build their
membership base and begin to generate impressive income. However, such
an implementation, which often involves renovations, additional
equipment leasing and re-training existing staff, requires a period of
twelve to eighteen months before the health club is fully "turned
around". Each of the three health and fitness clubs acquired by the
Company during the past twelve months is undergoing this phase-in
period.
The Company experienced a change in operational management during the
recently completed quarter. Bill Hower left the Company due to
disagreements with senior management on operational and reporting
issues. His position was ably filled by the appointment of Mr. Perry
Dusch, a Director of the Company, as Director of Health & Fitness
Operations.
The Chairman and the President, in order to reduce operating expenses
for the six months ended March 31, 1996, elected to forego all salary
accrued to them for the six month period (see Note 5). Freeway 405 is a
major shareholder of the Company. Freeway 405 granted the Company rent-
free use of the office space leased by the Company for its corporate
office for the six month period ended March 31, 1996 (see Note 5).
Freeway 405 elected to forego all interest accrued on the note owed by
the Company for the six month period ended March 31, 1996 (see Note 5).
These items reduced operating expenses for the six month period ended
March 31, 1996 a total of $163,478.
During the quarter ended March 31, 1996, the Company benefited from the
partial forgiveness of its current note payable to Freeway 405, Inc.
(see Note 5). This forgiveness of debt allowed the Company to convert
its loss on operations into a modest gain after the extraordinary item.
Liquidity and Capital Resources
The Company's current obligations continue to be in the form of notes
payable on existing debt on its buildings and property as well as
monthly payments on capitalized lease obligations on fitness and other
equipment utilized at its three health clubs. The Company is actively
seeking to refinance the current debt at more favorable terms. On May
29, 1996 the fourth extension on the IFM Investments note assumed in the
acquisition of the Results Midland club is due and payable (see Note 8).
The Company has a verbal commitment to extend this note an additional
sixty days. The terms of the fifth extension would be the same as the
prior four; payment of an additional $100,000 applied towards the
principle of the note. Additionally, the Company has verbal commitments
to refinance this note which would provide more favorable terms and
additional operating capital. However, the Company has no assurance
that such financing can be secured prior to May 29, 1996. Although the
Company's year-to-date operating expenses exceeded its revenues, a
pursuant to the Company's existing employee stock incentive benefit
plan.
The Company has paid a substantial amount of cash (approximately
$220,000.00) in the six months ended March 31, 1996 for the settlement
and retirement of its outstanding asset backed debenture notes issued in
September 1994. The Company paid an additional $350,000 towards
principle to extend the note on the Results - Midland club in the seven
months ended March 31, 1996. Despite these material cash disbursements
of over $570,000, it is the opinion of management that the Company will
continue to meet its current cash obligations during the fiscal year.
However, the Company is not certain whether it will have sufficient
capital in the ensuing months to meet its current cash requirements
should the Company fail to refinance the note payable on Results -
Midland which has been extended until May 29, 1996.
During the quarter ended March 31, 1996 the Company issued stock
purchase options to various consultants which were exercised in the
aggregate amount of $425,000. These consultants have been hired to
assist the Company in the following areas:
A. To provide advice and to consult on furthering the Company's
growth by introducing investors with significant risk capital;
B. To assist in enhancing Client's financial public relations
communications;
C. To provide advice and expertise to the Company and introduce to
Company to mergers and acquisition candidates.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
On March 6, 1996 the Company extended the expiration date of the Company's
class A warrants to June 30, 1996.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Description
1.01 Consulting agreement between Brennan, Dyer & Company
and the Registrant dated 12/27/95
1.02 Consulting agreement between Barretto Pacific Corporation
and the Registrant dated 1/26/96
Exhibit number 1.01
CONSULTING AGREEMENT
This Consulting Agreement (" Agreement") is made effective this 27th day
December, 1995, by and between Brennan, Dyer & Company located at 735
Broad Street, #200, Chattanooga, TN, 37402 ("Consultant"),and HealthTech
International, Inc., a Nevada Corporation, with its principal place of
business at 1237 South Val Vista Drive, Mesa, Arizona. ("Client").
PREMISES
WHEREAS, Client desires to retain Consultant to provide advice and to
consult with Client's management concerning its growth strategy and its
financial public relations communication obligation, and to advise on
matters concerning Client's recent adverse press exposure.
WHEREAS, Client desires to retain Consultant to perform these services
on a continual basis.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreement contained herein, and for other good and valuable
consideration, the receipt and adequacy of which is expressly
acknowledged, Client and Consultant agree as follows:
1. Engagement of Consultant.
Client hereby retains Consultant to continue to assist Client in the
following areas:
A. To provide advice and to consult on furthering Client's
growth by introducing investors with significant risk
capital;
B. To assist in enhancing Client's financial public relations
communication;
C. To provide advice and expertise to Client and introduce Client
to mergers and acquisition candidates.
All of the foregoing services collectively are referred to herein as the
"Consulting Services".
2. Compensation.
Client shall pay Consultant by allowing Consultant to purchase an option
to buy Client's common stock. The right to buy said option or options
shall be deemed as the consideration for which Consultant shall perform
the Consulting Services. Consultant is fully aware and understands that
the value of Consultant's compensation as defined by this Agreement is
variable and may be altered by natural market forces of Client's free
trading stock. Consultant shall have the following options available to
him:
Option A
Consultant shall be accorded the right to purchase one indivisible
allotment of TWENTY-FIVE THOUSAND (25,000) free trading units
registered pursuant to an S-8 or similar registration statement, for the
price of three dollars and fifty cents ($3.50) per unit and an
additional TWENTY-FIVE THOUSAND (25,000) free trading units for the
price of six dollars ($6.00) per unit. Consultant shall not be allowed
to exercise any fractional amount of any 25,000 allotment. Consultant
shall have the right to exercise the first allotment of 25,000 until the
close of the NASDAQ trading market on March 27, 1996 and the second
allotment of 25,000 until the close of the NASDAQ trading market on May
27, 1996. The first Option to purchase the 25,000 allotment shall
expire if unexercised at 4:30 p.m. E.S.T. on March 27, 1996 and the
second Option to purchase the 25,000 allotment shall expire if
unexercised at 4:30 p.m. E.S.T. on May 27, 1996. Upon notice of
impending delivery of the certified funds to exercise the two
indivisible allotments, Client shall cause to be issued those free
trading shares in amounts commensurate with the number of allotments so
exercised and shall simultaneously exchange said free trading units for
certified funds at Client's office in Mesa, Arizona or at any other
mutually agreed upon location.
Client may provide periodic bonuses to Consultant commensurate with
Consultant's diligence and performance.
3. Term of Agreement, Extensions and Renewals.
This Consulting Agreement and Consultant's obligation to continue
providing Consulting Services, as defined herein, shall remain in full
force and effect until April 26, 1996. Client shall retain the
exclusive right to determine in its judgment whether any extension or
renewal shall be granted to Consultant.
4. Termination of Agreement by the Client.
Despite anything to the contrary contained in this Agreement hereunder,
Client may terminate this Agreement and Consultant's consulting
arrangement if any of the following events occur.
A. Breach of Consultant's Duties.
Client can terminate this Agreement if in the judgment of a third party,
disinterested and duly elected Mediator, Consultant's actions or conduct
would make it unreasonable to require Client to retain Consultant. Said
Mediator shall have been elected by mutual agreement of both Client and
Consultant. Such acts include, but are not limited to, dishonesty,
illegal activities, activities harmful to the reputation of the Client,
and/or activities which create civil or criminal liability for the
Client.
B. Sale of Clients Assets.
The sale of substantially all of Client's assets to a single purchaser
or group of associated purchasers.
5. Non-Disclosure of Confidential Information.
In consideration for the Client entering into this Agreement, Consultant
agrees that the following items used in the Client's business are
secret, confidential, unique, and valuable, were developed by Client at
great cost and over a long period of time, and disclosure of any of the
items to anyone other than Client's officers, agents, or authorized
employees will cause Client irreparable injury.
A. Non public financial information, accounting information,
plans of operation, possible mergers or acquisitions prior to
the public announcement;
B. Customer lists, call lists, and other confidential customer
data;
C. Memoranda, notes, records concerning the technical processes
conducted by Client;
D. Sketches, plans, drawings and other confidential research and
development data.
6. Due Diligence.
Client shall supply and deliver to Consultant all information relating
to its business, as may be reasonably requested by Consultant, to enable
Consultant to make such investigation of Client and its business
prospects. Client shall also make available to Consultant names,
addresses, and telephone numbers as Consultant may need to verify or
substantiate any such information provided.
7. Best Efforts Basis.
Consultant agrees that he will at all times faithfully and to the best
of his experience, ability and talents, perform all the duties that may
be required of and from Consultant pursuant to the terms of this
Agreement. Consultant does not guarantee that his efforts will have any
impact on Client's business or that any subsequent financial improvement
will result from of Consultant's efforts.
8. Client's Right to Approve Consultant's Actions.
Client expressly retains the right to approve, in its sole discretion,
each and every transaction entered into by Consultant that involves
Client as a party. Consultant and Client mutually agree that Consultant
is not authorized to enter into agreements on behalf of Client.
9. Client Under No Duty or Obligation to Accept or Close on Any
Transactions.
It is mutually understood and agreed that Client is not obligated to
accept or close any promotional proposal, acquisition, or merger
transactions submitted by Consultant.
10. Costs and Expenses.
Consultant shall be responsible for all out-of pocket expenses, travel
expenses, third party expenses, filing fees, copy and mailing expenses
that Consultant may incur in performing Consulting Services under this
Agreement.
11. Representations and Warranties of Consultant.
Consultant hereby represents and warrants to Client that:
A. Prior Experience. Consultant has extensive experience in the
areas of the services he is to perform hereunder and has
performed the services contemplated by this Agreement.
B. Information. No representation or warranty contained herein,
nor a statement in any document, certificate or schedule
furnished or to be furnished pursuant to this Agreement by
Consultant, or in connection with the transaction contemplated
hereby, contains or contained any untrue statement of material
fact.
C. Inside Information Securities Laws Violations. In the course
of the performance of his duties, Consultant may become aware
of information which may be considered "inside information"
within the meaning of the Federal Securities laws, rules, and
regulations. Consultant acknowledges that his use of such
information to purchase or sell securities of Client, or its
affiliates, or to transmit such information to any other party
with a view to buy, sell, or otherwise deal in Client's
securities is prohibited by law and would constitute a breach
of this Agreement and notwithstanding the provisions of this
Agreement, will result in the immediate termination of the
Agreement.
D. Prior Consent to Marketing Publications. Consultant agrees to
provide Client with a facsimile copy or original transcript of any
publication, writing, sound recording or any other media type
(collectively referred to herein as "Media") created by
Consultant or any agent or assign of Consultant, where such
Media is intended to be used for marketing of Client or Client's
business. Consultant shall provide and seek Client's approval
on the use of any such Media prior to disseminating Media to any
third parties.
12. Consultant is Not an Agent or Employee.
Consultant's obligations under this Agreement consist solely of the
Consulting Services described herein. In no event shall Consultant be
considered to act as the agent of Client or otherwise represent or bind
Client. For purposes of this Agreement, Consultant is an independent
contractor. All final decisions with respect to acts of Client or its
affiliates, whether or not made pursuant to or in reliance on information
or advice furnished by Consultant hereunder, shall be those of Client or
such ad by Client as a consequence of such action or decisions.
13. Miscellaneous.
A. Authority.
The execution and performance of this Agreement has been duly
authorized by all requisite corporate action. This Agreement
constitutes a valid and binding obligation of the parties hereto.
B. Amendment.
This Agreement may be amended or modified at any time and in any
manner but only by an instrument in writing executed by the parties
hereto.
C. Waiver.
All the rights and remedies of either party under this Agreement are
cumulative and not exclusive of any other rights and remedies
provided bylaw. No delay or failure on the part of either party in
the exercise of any right or remedy arising from a breach of this
Agreement shall operate as a waiver of any subsequent right or
remedy arising from a subsequent breach of this Agreement. The
consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other act or
occurrence.
D. Assignment:
Either party to this Agreement may assign any right or obligation
created by it without the prior written consent of the other;
E. Notices.
Any notice or other communication required or permitted by this
Agreement must be in writing and shall be deemed to be properly given
when delivered in person to an officer of the other party, when
deposited in the United States mails for transmittal by certified or
registered mail, postage prepaid, or when deposited with a public
telegraph company for transmittal or when sent by facsimile
transmission, charges prepared provided that the communication is
addressed:
(i)In the case of Client to: (ii)In the case of Consultant, to:
HealthTech International, Inc. Brennan, Dyer & Company
1237 South Val Vista Drive 735 Broad Street, Suite 200
Mesa, Arizona 85204 Chattanooga, TN 37402
or to such other person or address designated by the parties to receive
notice.
F. Headings and Captions.
The headings of paragraphs are included solely for convenience. If
a conflict exists between any heading and the text of this Agreement,
the text shall control.
G. Entire Agreement.
This instrument and the exhibits to this instrument contain the entire
Agreement between the parties with respect to the transaction
contemplated by the Agreement. It may be executed in any number of
counterparts but the aggregate of the counterparts together constitute
only one and the same instrument.
H. Effect of Partial Invalidity.
In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
Agreement, but this Agreement shall be constructed as if it never
contained any such invalid, illegal or unenforceable provisions.
I. Controlling Law.
The validity, interpretation, and performance of this Agreement shall
be controlled by and construed under the laws of the State of Arizona.
Any legal action brought hereunder shall be properly commenced and
venue shall lie only in a state or federal court of competent
jurisdiction in Maricopa County, Arizona.
J. Attorney's Fees.
If any action at law or in equity, including an action for declaratory
relief, is brought to enforce or interpret the provisions of this
Agreement, the prevailing party shall be entitled to recover actual
attorney's fees from the other party. The attorney's fees may be
ordered by the court in the trial of any action described in this
paragraph or may be enforced in a separate action brought for
determining attorney's fees.
K. Time is of the Essence.
Time is of the essence for each and every provision hereof this
Agreement and of each and every provision of this Agreement.
L. Mutual Cooperation.
The parties hereto shall cooperate with each other to achieve the
purpose of this Agreement and shall execute such other and further
documents and take such other and further actions as may be necessary
or convenient to effect the transactions described herein.
M. Further Actions.
At any time and from time to time, each party agrees, at its or their
expense, to take actions and to execute and deliver documents as may
be reasonably necessary to effectuate the purposes of this Agreement.
N. Indemnification.
Client and Consultant agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without
limitation, interest, penalties and attorneys' fees and expenses
asserted against or imposed or incurred by either party by reason of
or resulting from a breach of any representation, warranty, covenant
condition or agreement of the other party to this Agreement.
0. No Third Party Beneficiary.
Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties hereto and their successors,
any rights or remedies under or by reason of this Agreement, unless
this Agreement specifically states such intent.
P. Facsimile Counterparts.
If a party signs this Agreement and transmits an electronic facsimile
of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed
original of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement.
DATED this 27th day of December, 1995.
[Client]
HEALTHTECH INTERNATIONAL, INC.
By: /s/Gordon Hall
Name: Gordon Hall
Title: Chairman of the Board
[Consultant]
BRENNAN, DYER & COMPANY
By: /s/James Brennan III
Name: James Brennan
Title: Partner
Exhibit number 1.02
HealthTech International, Inc.
1237 S. Val Vista Dr.
Mesa, AZ 85204
Mr. Landon Barretto
Barretto Pacific Corporation
1111 Third Ave. Tower, 25th Fl.
Seattle, WA 98101 January 25, 1996
Dear Mr. Barretto:
This letter agreement (the "Agreement") will confirm the terms and
conditions of your engagement by HealthTech International, Inc. (the
"Company"), for the purpose of disseminating information regarding the
Company, its business and affairs, to members of the public in the
United States of America with a view to encouraging investment in the
Company and its securities.
We agree, each with the other, as follows:
1. The term of this Agreement shall be six months commencing on February
1, 1996 and expiring on July 31, 1996 (the "Term"). The term may be
extended for such periods of time and upon such terms and conditions
as may be mutually agreed upon, in writing, by the parties, and may
be canceled in writing by either party at the conclusion of the
second month of the term.
2. In consideration of the fee and the covenants herein contained, you shall
provide services (the "Services") to the Company which shall
consist of the following:
(a) The dissemination of information which we provide to you about
the Company, its business and affairs, in the United States of America
in jurisdictions where the company's securities are recognized for
manual exemption in Standard & Poors Corporation Manual and in other
exempt jurisdictions as well as dissemination through print and
electronic media outlets, as well as to your existing base of clients
and business associations.
(b) Communication on an ongoing basis with members of the
brokerage and investment community in jurisdictions within the United
States of America where the company's securities are recognized for
manual exemption in Standard & Poors Corporation Manual and other exempt
jurisdictions, directing any such persons to registered brokers and
dealers (including those specifically referred by the Company). Anything
to the contrary herein not withstanding, it is agreed that your services
will not include any services that constitute the rendering of legal
opinions or performance of services in the ordinary purview of a
registered broker or dealer.
(c) Providing the Company bi-weekly with a written record of the
results in consequence of your efforts hereunder the preceding two week
period.
(d) Providing introductions to brokerages, fund managers, trust
companies, media personnel and other investment professionals who are
likely to have interest in the Company's business and affairs.
3. You shall receive as your full compensation for your services as an
independent contractor hereunder a fee of $72,000 (Seventy Two Thousand
Dollars) in cash or cash equivalents which sum shall be payable on the
following dates indicated below. You will invoice the company for each
payment three business days prior to each due date. If the Company
chooses to pay the fee through the issuance of its common stock, the
amount issued will be based in the bid price of the Company's common
stock one day prior to the due date of each payment.
Date Amount
February 1, 1996 $12,000
March 1, 1996 12,000
April 1, 1996 12,000
May 1, 1996 12,000
June 1, 1996 12,000
July 1, 1996 12,000
Total:$72,000
4. The fee payable to you hereunder shall be your sole entitlement
against the Company for compensation for services rendered hereunder,
with the exception of an incentive bonus payable to Landon Barretto as
outlined in "Addendum A", and you shall not be entitled to claim
recompense for any of the expenses, out of pocket or otherwise, that you
may incur in the course of carrying out your duties hereunder. Without
limiting the generality of the foregoing, the Company agrees that your
services hereunder are not intended to include the printing and mailing
of any documentary material on behalf of the Company and that any
expenses that you may incur in that respect, with our authority, shall
be separately compensated by the Company.
5. You shall only engage in promotion of the Company regarding its
business and affairs. The Company reserves the right to contract other
firms to provide similar services and expressly acknowledges that,
subject to the following proviso, you shall be entitled to provide
similar services as provided hereunder to other public companies.
PROVIDED that is expressly agreed that in no event shall you represent a
public company during the term which is engaged in the business of
acquiring and operating health club operations throughout North America.
6. All payments hereunder will be made to your company as an independent
contractor, and your firm will be solely responsible for federal, state,
and city tax filings and remittances;
7. You represent and warrant that the services will be performed in a
competent and efficient manner and that they will at all times be
performed in compliance with all applicable laws and legal requirements.
8. You shall use your bona fide efforts to promote the interests of the
Company and shall, during the term of the Agreement, devote as much
time, attention and ability to the promotion of the business of the
Company as is necessary to provide effective promotion of the Company
and its affairs;
9. You are not hereby created an agent of the Company, and will have no
authority, express or implied, to commit or otherwise obligate the
Company in any manner whatsoever except to the extent specifically
provided herein or to the extent expressly authorized by the Company;
10. Notwithstanding anything herein to the contrary, it is acknowledged
and agreed that the relationship between us is not and will not become
that of employer-employee, joint ventures nor partnership and,
furthermore, that the relationship that exists between us is solely that
of independent contractors;
11. You shall not, either during the term or the Agreement or at any
time thereafter, directly or indirectly, divulge, publish or disclose
any information regarding the affairs or business of the company or its
affiliates other than that which is expressly authorized and provided by
the Company without the prior consent of the Company, and you shall not
use for your own purposes, or any purposes other than those of the
Company, any information you may acquire with respect to its affairs,
business, or projects. Upon the termination of this Agreement for any
reason, you shall promptly deliver all documents and other promotional
aids, correspondence and, contracts and all such documents and other
property shall be delivered in accordance with the direction of the
Company;
12. The Company hereby represents that the information as to its capital
structure and business affairs as set forth in its 1995 corporate
profile and SEC filings are accurate and complete.
13. Any notice required or permitted to be gives by this Agreement shall
be in writing and may be given by personal delivery or postage prepaid,
registered or certified mail. Such notices shall be addressed to the
receiving party at our respective addresses set forth above or at such
other addresses as either of us may, by notice, designate. Notices
personally given shall be deemed to be given as of the date of delivery
and mailed notices shall be deemed to be given as of the date of actual
receipt.
14. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns, as
the case may be.
15. Each provision and paragraph of this Agreement is declared to
constitute a separate and distinct covenant and to be severable from all
other such separate and distinct covenants under this Agreement. If any
covenant or provision herein contained is determined to be void or
unenforceable, in whole or in part, such determination shall not affect
or impair the validity or enforceability of any other covenant or
provision contained in this Agreement and the remaining provisions of
this Agreement shall be valid and enforceable to the fullest extent
provided by law;
16. This Agreement may not be assigned;
17. This Agreement replaces, supersedes, and cancels all prior
Agreements, representations, and understandings between the Company and
yourselves in respect of the subject matter of this Agreement;
18. The provisions of this Agreement and the relationship between the
parties shall be construed in accordance with and governed by the laws
of the State of Arizona. The parties hereby attorn to the jurisdiction
of the courts of the State of Arizona.
19. No amendment or waiver of any provision of this Agreement shall be
binding upon a party unless made in writing and signed by such party;
20. The parties will execute and deliver all such further documents and
instruments and do all such further acts and things as may be required
to carry out the full intent and meaning of this Agreement.
If the foregoing meets your approval, please sign a copy of this letter
agreement and return a copy thereof to us.
Yours truly, Agreed to by:
/s/Gordon Hall /s/ Landon Barretto
Gordon Hall Landon Barretto
Chairman & CEO President & CEO
- -Addendum A-
The following schedule provides Landon Barretto (herein referred
to as "Consultant") the opportunity to purchase shares of the Company's
common stock through the exercise of options. The right to purchase the
Company's common stock through the exercise of the options shall be
deemed as "bonus" compensation for services rendered to the Company by
Barretto Pacific Corporation of which Landon Barretto is the President.
Consultant is fully aware and understands that the value of the
compensation as defined in this Agreement is variable and may be altered
by natural market forces of the Company's free trading stock.
Consultant enters into said Agreement with the expectation that Barretto
Pacific Corporation's services rendered to the Company may have a
positive impact on the overall market value of the Company's stock and
that such an arrangement is acceptable. The following options and time
period available for exercise thereof are as follows:
Option A: Consultant shall be accorded the right to purchase an
indivisible block of Twenty Five Thousand (25,000) Shares of the
Company's free trading stock, registered pursuant to an S-8 or similar
registration statement, for the price of Four Dollars ($4.00) per share.
Consultant shall have the right to exercise this option to buy 25,000
free trading shares as a single block transaction and shall not be
allowed to exercise any fractional amount less than the total of 25,000
shares. Consultant shall have the right to exercise this Option A until
the close of the NASDAQ stock market on February 21, 1996. Option A
shall expire if unexercised at 4:30 PM EST on February 21, 1996. Upon
notice in writing by Consultant to the Company of impending delivery of
ONE HUNDRED THOUSDAND DOLLARS ($100,000), for the purchase of the 25,000
shares, the Company shall cause to be issued through its registered
transfer agent, the free trading shares and simultaneously exchange the
shares for certified funds through the facility of the Company's
registered Transfer Agent.
Option B: Consultant shall be accorded the right to purchase an
indivisible block of Twenty Five Thousand (25,000) Shares of the
Company's free trading stock, registered pursuant to an S-8 or similar
registration statement, for the price of Four Dollars and Fifty Cents
($4.50) per share. Consultant shall have the right to exercise this
option to buy 25,000 free trading shares Consultant shall have the right
to exercise this Option B until the close of the NASDAQ stock market on
February 28, 1996. Option B shall expire if unexercised as 4:30PM EST on
February 28, 1996. Upon notice in writing by the Consultant to the
Company of impending delivery of ONE HUNDRED TWELVE THOUSAND FIVE
HUNDRED DOLLARS ($112,500), for the purchase of the 25,000 shares, the
Company shall cause to be issued through its registered transfer agent,
the free trading shares and simultaneously exchange the shares for
certified funds through the facility of the Company's registered
Transfer Agent.
Option C: Consultant shall be accorded the right to purchase an
indivisible block of Twenty Five Thousand (25,000) Shares of the
Company's free trading stock, registered pursuant to an S-8 or similar
registration statement, for the price of Five Dollars ($5.00) per share.
Consultant shall have the right to exercise this option to buy 25,000
free trading shares as a single block transaction and shall not be
allowed to exercise any fractional amount less than the total 25,000
shares. Consultant shall have the right to exercise this Option B until
the close of the NASDAQ stock market on March 13, 1996. Option C shall
expire if unexercised by 4:30 PM EST on March 13, 1996. Upon notice in
writing by Consultant to the Company of impending delivery of ONE
HUNDRED TWENTY FIVE THOUSAND DILLARS ($125,000) for the purchase of
25,000 shares, the Company shall cause to be issued through its
registered transfer agent, the free trading shares and simultaneously
exchange the shares for certified funds through the facility of the
Company's registered Transfer Agent.
Option D: Consultant shall be accorded the right to purchase an
indivisible block of Twenty Five Thousand (25,000) Shares of the
Company's free trading stock, registered pursuant to an S-8 or similar
registration statement, for the price of Five Dollars and Fifty Cents
($5.50) per share. Consultant shall have the right to exercise this
option to buy 25,000 shares of free trading shares as a single block
transaction and shall not be allowed to exercise any fractional amount
less than the total of 25,000 shares. Consultant shall have the right
to exercise this Option D until the close of the NASDAQ stock market on
March 20, 1996. Option D shall expire if unexercised at 4:30 PM EST on
March 20, 1996. Upon notice in writing by Consultant to the Company of
impending delivery of ONE HUNDRED THIRTY SEVEN THOUSAND FIVE HUNDRED
DOLLARS ($137,500) for the purchase of 25,000 shares, the Company shall
cause to be issued through its registered transfer agent, the free
trading shares and simultaneously exchange the shares for certified
funds through the facility of the Company's registered Transfer Agent.
Option E: Consultant shall be accorded the right to purchase an
indivisible block of Twenty Five Thousand (25,000) Shares of free
trading stock, registered pursuant to an S-8 or similar registration
statement, for the price of Six Dollars ($6.00) per share. Consultant
shall have the right to exercise this option to buy 25,000 free trading
shares as a single block transaction and shall not be allowed to
exercise any fractional amount less than the total 25,000 shares.
Consultant shall have the right to exercise this Option E until the
close of the NASDAQ stock market on April 24, 1996. Option E shall
expire if unexercised at 4:30 PM EST on April 24, 1996. Upon notice in
writing by Consultant to the Company of impending delivery of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000) for the purchase of 25,000 shares,
the Company shall cause to be issued through its registered transfer agent,
the free trading shares and simultaneously exchange the shares for certified
funds through the facility of the Company's registered Transfer Agent.
Option F: Consultant shall be accorded the right to purchase an indivisible
block of Twenty Five Thousand (25,000) Shares of free trading stock,
registered pursuant to an S-8 or similar registration statement, for the
price of Six Dollars AND Fifty Cents ($6.50) per share. Consultant shall
have the right to exercise this option to buy 25,000 free trading shares as
a single block transaction and shall not be allowed to exercise any
fractional amount less than the total 25,000 shares. Consultant shall have
shall expire if unexercised at 4:30 PM EST on May 10, 1996. Upon notice in
writing by Consultant to the Company of impending delivery of ONE HUNDRED
SIXTY TWO THOUSAND DOLLARS ($162,000) for the purchase of 25,000 shares,
the Company shall cause to be issued through its registered transfer agent,
the free trading shares and simultaneously exchange the shares for certified
funds through the facility of the Company's registered Transfer Agent.
Right to Exercise: Consultant shall retain the right to exercise
any of the aforementioned options at any time prior to their respective
expirations. The Company and Consultant will enter into an additional
agreement with respect to this options agreement for the purpose of
allowing the Company's transfer agent and Consultant's designated stock
brokerage firm, to effectuate the options transactions. Said agreement
will be in a format acceptable to both the Company's transfer agent and
Consultant's stock brokerage firm.
Agreed to by: Agreed to by:
/s/Landon Barretto /s/Gordon Hall
Landon Barretto Gordon Hall
HealthTech International, Inc.
Signatures
Pursuant to the requirements of Section 13 or 15(d)of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HEALTHTECH INTERNATIONAL, INC.
Date: May 17, 1996 /s/ Gordon L. Hall
Gordon L. Hall
Chairman of the Board of Directors
Date: May 17, 1996 /s/ Timothy Williams
Timothy Williams
President and Director
Date: May 17, 1996 /s/ Perry Dusch
Perry Dusch
Director
28
