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 June 30, 1997
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 BANKRUPTCY
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 June 30, 1997,
Registrant has a total of 9,276,134 common stock and 8,134,561 class A warrants
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - Financial Statements
HEALTHTECH INTERNATIONAL, INC.
CONSOLDIATED BALANCE SHEETS
Unaudited
June 30, 1997 and September 30, 1996
ASSETS
<TABLE>
<S> <C> <C>
6/30/97 9/30/96
Current assets:
Cash and cash equivalents .................................. $ 8,768 $ 9,018
Accounts receivable - net of allowance for doubtful accounts 3,484,253 1,176,244
Notes receivable ........................................... 27,036
Current portion of deferred tax asset ...................... 254,442
Prepaid expenses and deposits .............................. 337,116 133,573
----------- -----------
Total current assets .................................... 4,111,615 1,318,835
Property, plant and equipment at cost, net of accumulated
depreciation of $1,252,500 and $585,230 in 1997 and 1996,
respectively ................................................. 13,902,190 13,023,246
Land held for resale ............................................ 60,000 60,000
Prepaid expenses ................................................ 1,919,955 7,320,597
Costs in excess of net assets acquired, net of accumulated
amortization of $135,267 and $27,826 in 1997 and 1996,
respectively ................................................. 7,037,382 1,385,932
Long-term certificate of deposit ................................ 100,000 100,000
Non-current marketable equity securities
Deferred tax asset .............................................. 737,967 336,584
Notes receivable - long-term .................................... 750,000 750,000
Other assets, at cost, net ...................................... 219,696
----------- -----------
Total assets ............................................ $28,619,109 $24,514,890
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
June 30, 1997 and September 30, 1996
<TABLE>
LIABILITIES AND SHAREHOLDERS EQUITY
<S> <C> <C>
6/30/97 9/30/96
Current liabilities
Current portion of notes payable and capitalized lease
obligations ............................................................ $ 1,064,032 $ 1,526,017
Accounts payable trade .................................................... 606,895 769,573
Accounts payable related parties .......................................... 288,137 259,981
Accrued expenses - other .................................................. 124,765 135,089
Deferred revenues ......................................................... 1,363,172 871,755
Other current liabilities ................................................. 189,347 429,299
------------ ------------
Total current liabilities .............................................. 3,636,348 3,991,714
Notes payable and capitalized lease obligations, less
current maturities .......................................................... 1,335,587 1,686,330
------------ ------------
Total liabilities, commitments and contingencies ....................... 4,971,935 5,678,044
Shareholders' equity
Series D 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, 9,276,134 and
4,023,751 shares issued and outstanding for
6/30/97 and 9/30/96, respectively ........................................... 6,357 4,024
Additional paid in capital ..................................................... 30,177,148 25,860,070
Net unrealized loss on non-current marketable equity securities ................ (625,000) (625,000)
Accumulated deficit ............................................................ (5,908,350) (6,402,267)
------------ ------------
Total shareholders' equity ............................................. 23,647,174 18,836,846
------------ ------------
$ 28,619,109 $ 24,514,890
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
For the periods ended June 30, 1997 and 1996
<TABLE>
Quarter Year to Quarter Year to
Ended Date Ended Date
6/30/97 6/30/97 6/30/96 6/30/96
<S> <C> <C> <C> <C>
Revenues
Health center revenues ........................ $ 4,707,238 $ 11,447,154 $ 853,135 $ 2,456,253
Equipment sales ............................... 672,403 1,908,566 95,401 981,279
------------ ------------ ------------ ------------
Total revenues ............................. 5,379,641 13,355,720 948,536 3,437,532
Less reserves and allowances .............. (2,094,629) (4,917,101) (11,993) (170,947)
------------ ------------ ------------ ------------
Net revenues ............................ 3,285,012 8,438,619 936,543 3,266,585
Costs and operating expenses:
Cost of sales .................................... 469,691 1,320,770 74,737 692,768
Selling, general and administrative .............. 2,256,334 5,596,124 708,322 2,769,002
Depreciation and Amortization ................... 236,995 614,409 147,045 428,753
------------ ------------ ------------ ------------
Total costs and operating expenses .......... 2,963,020 7,531,303 930,104 3,890,523
Gain (loss) from operations ...................... 321,992 907,316 6,439 (623,938)
Other income (expenses):
Interest income ............................... 19,828 53,578 -- --
Interest expense .............................. (75,637) (212,536) (134,705) (260,433)
------------ ------------ ------------ ------------
Total other income (expense) ..................... (55,809) (158,958) (134,705) (260,433)
Gain (loss) before income taxes and
extraordinary items .......................... 266,183 748,358 (128,266) (884,371)
Provision (benefit) for income taxes ............. 90,502 254,442 (43,610) (300,686)
------------ ------------ ------------ ------------
Gain (loss) before extraordinary items, net of tax
175,681 493,916 (84,656) (583,685)
Debt forgiveness- related party, net of tax ...... -- -- 198,000 297,000
------------ ------------ ------------ ------------
Net gain (loss) .................................. $ 175,681 $ 493,916 $ 113,344 $ (286,685)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Unaudited
For the periods ended June 30, 1997 and 1996
<TABLE>
Quarter Year to Quarter Year to
Ended Date Ended Date
6/30/97 6/30/97 6/30/96 6/30/96
<S> <C> <C> <C> <C>
Primary earnings per common share and
common share equivalents
Gain (loss) from continuing operations $0.02 $0.07 $(0.02) $ (0.16)
Gain from extraordinary items - - $ 0.05 $ 0.08
Net gain (loss) $0.02 $0.07 $ 0.03 $ (0.08)
Weighted average number of common
shares outstanding 9,202,079 7,463,506 3,915,970 3,743,805
Fully diluted earnings per common share and
common share equivalents
Gain (loss) from continuing operations $0.02 $0.05 $(0.01) -
Gain from extraordinary items - - $ 0.03 -
Net gain $0.02 $0.05 $ 0.02 -
Weighted average number of fully diluted
common shares outstanding 11,172,079 9,433,506 5,835,970 -
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
For the periods ended June 30, 1997 and 1996
<TABLE>
<S> <C> <C>
Cash flows from operating activities:
Net gain (loss) ................................................ $ 493,916 $ (286,685)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization ........................... 614,409 428,753
Issuance of common stock for consulting fees and services 1,433,534 285,542
Change in operating assets and liabilities:
Increase in deferred tax asset ...................... 523,594 202,706
(Increase) in accounts receivable ................... (2,308,009) (126,768)
(Increase) in notes receivable ...................... (27,036) --
(Increase) decrease in prepaid expense and other .... 16,153 (487,915)
(Increase) in deposits .............................. (94,631) (6,381)
Increase (decrease) in accounts payable ............. (134,522) 159,420
(Decrease) in accrued expenses ...................... (10,324) (145,603)
Increase (decrease) in other current liabilities .... (239,952) 23,987
Increase in deferred member revenue ................. 491,417 224,935
Increase (decrease) in advance deposits ............. (23,004) 425,348
----------- -----------
Net cash provided by (used in) operating activities ................. 735,545 697,339
Cash flows from investing activities:
Disposal (Acquisition) of property, plant and equipment ........ (391,524) --
----------- -----------
Net cash provided by (used in) investing activities ................ (391,524) --
Cash flow from financing activities:
Retirements and payments of long-term debt ..................... (1,507,129) (1,410,567)
Forgiveness of debt ............................................ -- 450,000
Proceeds from borrowings ....................................... 85,191 --
Issuance of common stock for settlements & debt payments ....... 524,667 --
Issuance of common stock for cash .............................. 553,000 --
----------- -----------
Net cash provided by (used in) financing activities ................. (344,271) (960,567)
Net increase (decrease) in cash ..................................... (250) (263,228)
Cash and cash equivalents at beginning of year ...................... 9,018 372,836
----------- -----------
Cash and cash equivalents at end of year ............................ $ 8,768 $ 109,608
=========== ===========
Supplemental disclosure of cash flow information: Cash paid for:
Interest .................................................... $ 212,536 $ 260,433
Income tax .................................................. -- --
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Unaudited
For the periods ended June 30, 1997 and 1996
<TABLE>
<S> <C>
1997
Supplemental schedule of non-cash and financing activities:
Issuance of 615,999 shares of common stock in exchange for
services. $ 1,433,534
Issuance of 570,000 shares of common stock in exchange for
cash and other current assets. $ 553,000
Issuance of 2,778,871 shares of restricted (R-144) common stock
in settlement of debt. $ 524,667
Purchase of 100% of the outstanding shares of Primus Health
Care Systems, Incorporated and the payment of associated commissions
through the issuance of 1,000,000 shares of restricted (R-144)
common stock and 48,000 shares of free-trading common stock. $ 1,220,000
1996
Issuance of 16,817 shares of common stock (S-8) and 9,809
class A warrants in exchange for services. $ 87,677
Issuance of 67,037 shares of restricted (R-144) common stock in
partial settlement of senior debentures. $ 109,847
Issuance of 25,783 shares of restricted (R-144) common stock
and 25,783 class A warrants in settlement of debt. $ 117,518
Issuance of 227,500 shares of common stock and 192,500
class A warrants in exchange for cash and other current assets. $ 570,000
Issuance of 416,533 shares of restricted (R-144) common stock and
416,533 restricted (R-144) class A warrants to complete the
Riverbend acquisition. $ 1,568,438
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
HEALTHTECH INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 AND 1996
---------------------------------------------
NOTE 1. BUSINESS ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Organization -
HEALTHTECH INTERNATIONAL, INC. ("Company" or "HealthTech"), formerly known as
"USA Health Technologies, Inc." was incorporated in 1990 in the State of
Colorado, and then was redomiciled to the State of Nevada on February 8, 1995.
On October 4, 1995 the Company formally changed its name to "HealthTech
International, Inc." Currently HealthTech International, Inc. and its wholly
owned subsidiaries Results Sports and Fitness, Inc., IFM Investments, Inc.,
Fitness Performance, Inc., Results Riverbend, Inc., Results Stark Street, Inc.,
Results Bedford, Inc., Sherman Results, Inc., Arlington Results, Inc. and Primus
Health Care Systems, Inc. (collectively "the Company") develop and operate
health and fitness clubs, provide medical services through clinics within its
clubs, and market and sell fitness equipment.
Per Share Information -
Primary earnings or loss per common share has been computed based upon the
weighted average number of common equivalent shares outstanding. Primary and
fully diluted earnings per share have been presented separately for the period
ended June 30, 1997, whereas for June 30, 1996, primary and fully diluted
earnings per share have been only been presented for the quarter ended June 30,
1996. Primary and fully diluted earnings per share for the year to date as of
June 30, 1996 are the same since the Company experienced losses for that period;
dilutive common stock equivalents are excluded from the calculation of loss per
share as the effect would be antidilutive. The number of common and common
equivalent shares utilized in the per share computations were 7,463,506 and
3,743,805 for the years to date as of June 30, 1997 and 1996, 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 assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates. The Company made a
change in the estimate of the reserve account during the recently completed
quarter retroactively to the beginning of the fiscal year. The previous reserve
applied to medical billings of 38% was adjusted to 50% based on collection
information available to management during the quarter.
<PAGE>
Income Taxes -
The Company adopted the provisions of Financial Accounting Standards Board No.
109 (FAS 109) effective as of October 1, 1994. Under FAS 109, deferred income
taxes are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date. The deferred tax asset
has been adjusted in the current year to reflect loss carry forwards from prior
years. The portion which is available to offset current year tax liabilities has
been included in current assets. The application of FAS 109 did not have a
material effect on the Company's consolidated financial statements.
Non-current Marketable Equity Securities -
The non-current portfolio of marketable securities is stated at the lower of
aggregate cost or market at the balance sheet date and consists of common
stocks.
Realized gains or losses are determined on the specific identification method
and are reflected in income. Net unrealized losses on non-current marketable
securities are recorded directly in a separate shareholders' equity account
except those unrealized losses that are deemed to be other than temporary, which
losses are reflected in income.
On December 2, 1994, the Company acquired 5,000,000 shares of common stock of
the Equitas Group, a related party controlled by the Chairman of the Board.
Due to the restrictive nature of these securities and unavailability of market
quotes to determine the present market value, the Company has reflected the
total carrying value of $625,000 as unrealized loss on non-current marketable
equity securities as a separate component in shareholders' equity.
NOTE 2. CHANGES IN SUBSIDIARIES BEING CONSOLIDATED
The consolidated financial statements presented for the periods ended March 31,
1996 and 1997 included the results of operations of the Company and its wholly
owned subsidiaries. The following indicates which subsidiaries were consolidated
for the appropriate periods:
June 30, 1996
Subsidiaries: Results Sports and Fitness, Inc.
Fitness Performance, Inc.
IFM Investments, Inc.
Results Riverbend, Inc.
Results Stark Street, Inc.
<PAGE>
March 31, 1997
Subsidiaries: Results Sports and Fitness, Inc. (Tucson, Arizona club)
Fitness Performance, Inc. (seller of fitness equipment)
IFM Investments, Inc. (Midland, Texas club)
Results Riverbend, Inc. (Ft. Worth, Texas club)
Results Stark Street, Inc. (Portland, Oregon club)
Results Bedford, Inc. (Bedford, Texas club)
Arlington Results, Inc. (Arlington, Texas club)
Sherman Results, Inc. (Sherman, Texas club)
Primus Health Care Systems, Inc.
Due to a changes in consolidated subsidiaries and their respective activities
for each of the periods reported, the consolidated financial statements are not
comparable between periods.
NOTE 3. ACQUISITIONS
Effective January 1, 1997, the Company acquired Primus Health Care Systems, Inc.
(Primus). The acquisition consisted of the following consideration:
Common stock issued - $ 1,220,000
Transfer of prepaid advertising credits 5,400,000
-------------
$ 6,620,000
The acquisition was recorded using the purchase method of accounting and was
allocated to the assets acquired as follows:
Medical receivables $ 500,000
Equipment 330,000
Furniture and fixtures 40,000
Costs in excess of net assets acquired 5,750,000
-------------
$ 6,620,000
The following pro forma financial data presents the Company's unaudited, pro
forma statements of operations for the nine months ended June 30, 1997, giving
effect to the consummation of the Primus acquisition as if the transaction had
occurred on October 1, 1996. The unaudited pro forma condensed statement of
operations do not purport to represent what the Company's actual results of
operations would have been had such transaction in fact occurred on that date.
The unaudited pro forma condensed statements of operations also do not purport
to project the results of operations of the Company for any future period.
Revenue, less reserves and allowances $ 3,000,000
Net income 1,500,000
Primary earnings per share $ 0.20
Effective April 1, 1997 the Company acquired certain assets of Family Fitness
Exchange in Bedford, Texas. The asset purchase agreement was included as an
exhibit in the Company's Form 10-Q dated March 31, 1997, incorporated herein by
reference. The assets were acquired for the assumption of certain lease, service
and tax obligations. These assets were transferred from the Company to Results
Bedford, Inc. in exchange for all of the issued and outstanding shares of
Results Bedford, Inc.
<PAGE>
NOTE 4. PREPAID ADVERTISING CREDITS
The Company 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.
During the quarter ended March 31, 1997, the Company exchanged $5,400,000 of
these credits as part of the consideration in the Primus acquisition. The
details of the Primus acquisition were included in the previously filed Form
10-K/A, incorporated herein by reference. Management intends to utilize the
balance of these credits totaling $1,900,000 in similar acquisitions and joint
ventures.
NOTE 5. 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. The S-8
registration dated December 29, 1994, allowed for the designation of 25,000,000
units for awards pursuant to this plan. The S-8 registration dated June 1, 1996,
allowed for the designation of an additional 1,000,000 units for awards pursuant
to this plan. During the nine months ended June 30, 1997, the Company issued
1,375,449 shares for a value of $1,640,743.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Notes payable stock commitment -
Under terms of the loan agreement refinancing the Midland club, the Company
pledged, among other things, 50,000 fully paid and unrestricted shares of common
stock of HealthTech. If the value of these shares become less than $150,000 at
the end of any given calendar quarter, the Company is obligated to deposit with
the bank within 10 business days, additional fully paid and unrestricted shares
of common stock of HealthTech such that the value of all shares pledged is a
minimum of $150,000. During the second quarter of fiscal 1997, the Company
pledged an additional 51,351 shares to meet this requirement for the quarter
ended December 31, 1996. The Company is also a primary guarantor under terms of
the note which at June 30, 1997 was approximately $771,500.
Results - Stark Street, Inc. Loan -
As part of the acquisition of the Stark Street Club, the Company assumed a loan
originated through a local bank and the Small Business Administration. The loan
agreements contain a "due on sale" clause if the property is transferred without
prior written approval of the lending institution. Such approval was not
obtained in conjunction with the acquisition of the club. While the Company is
currently in substantial performance with other provisions and covenants
contained in the loan agreements, should the lending institution discover the
property was transferred without approval, the remaining unpaid balance could be
accelerated and become immediately due and payable. The remaining balance at
June 30, 1997, was approximately $396,000.
<PAGE>
NOTE 7. SUBSEQUENT EVENTS
In June, 1997, the Company negotiated a Settlement Agreement and Release (see
Exhibit 1) to sever ties with the clinic management group and dissolve any
profit participation and employment agreements between the Company and members
of the Kirkham Group as defined in the agreement. The agreement has an effective
date of July 1, 1997. As part of the agreement, a net of 650,000 restricted
common shares were returned to the treasury and canceled, 1,000,000 options to
purchase restricted common shares were canceled, the profit participation
detailed in the Ulti-Med license agreement was canceled and all employment
agreements with the Kirkham Group were canceled. The Company canceled its note
receivable from Ulti-Med of $750,000, returned its ownership interest in the
Sherman facility and agreed to continue a profit participation in the Arlington
facility for a period not to exceed 180 days.
NOTE 8. INDUSTRY SEGMENTS
The Company classifies its revenues into two divisions: Health center revenues
and Equipment sales. Health center revenues combine revenues from the medical
clinics and revenues from the fitness centers.
<PAGE>
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
OVERVIEW FOR REVIEW OF FINANCIAL STATEMENTS
GENERAL DISCUSSION AND HISTORY
The financial statements presented in Item I. of Part I hereof are incorporated
by this reference and the following discussion should be read in conjunction
therewith. When comparing the current operating results with operating results
of prior periods it must be noted that: (i) the Company made certain operational
divestitures prior to mid-fiscal 1995; (ii) the Company acquired three health
clubs in various periods in fiscal 1995; (iii.) the Company acquired a fourth
health club during the third quarter of fiscal 1996; (iv) the Company acquired
Primus Health Care Systems, Inc. in the first quarter of fiscal 1997 and its
operations were first recognized in the second quarter of fiscal 1997; (v) the
Company made an operational transition from health and fitness to health care by
providing medical services; (vi) the Company acquired its fifth health center in
the third quarter of fiscal 1997 which is anticipated will be fully operational
as a Health Care Center in the fourth quarter of fiscal 1997; and, (vii) a 50%
reserve has been recorded against medical clinic revenue (discussed below and
see Notes to the Financial Statements) as a result of management's review and
analysis of its first full quarter of the Primary Medical Care Clinics
operations and information which became available as a result of the Kirkham
Dispute and settlement .
RESERVES MADE AGAINST MEDICAL REVENUES
At June 30,1997, management adjusted the year to date reserve to 50% of the
revenues generated from medical operations, a 12% increase over the reserve
presented in the Company's previous Form 10-Q dated March 31, 1997. The previous
estimate of a 38% reserve rate was based upon: (i) the representations of Joseph
R. Kirkham and Mark Darner, D.C. who came to work for the Company in the first
quarter of 1997 through the acquisition of Primus Health Care Systems, Inc. and
were first affiliated with the Company in fiscal 1996 when the Company entered
into a license agreement with Ulti-Med; and (ii) the collection history of
Surety Bank and Providers Funding through which the receivables were factored.
The increase in the reserve for the third quarter is based upon: (a) current
historical data; (b) analysis and review of the billing structure formerly used;
(c) review and analysis of the former billing structure by MedQuest Services,
Inc. ("MedQuest")(On July 8, 1997, the Company contracted with MedQuest to
provide the Company's medical billing services); (d) MedQuest's actual
collection rate for receivables currently generated; and, (e) the age of certain
receivables received as part of the Primus Transaction and other older
receivables. The Company's management believes that in the fourth quarter of
fiscal 1997 the reserve rate should be significantly reduced and the Company
will reserve approximately 30% of the revenues generated by operations and that
such reserve will be conservative. Both the 50% current reserve rate and the
anticipated 30% reserve rate are speculative in that management still does not
have significant historical data and new facts are still being uncovered.
However, these reserves will enable the Company to recognize adequate income
from the medical operations without the uncertainty of future writedowns.
<PAGE>
COMPANY STRUCTURE
The Company's operations are centered around the formation and operation of
"Health Care Centers" which are comprised of "Primary Care Medical Clinics" and
"Fitness Centers" and offer comprehensive, primary care medical and health and
fitness services to their clientele. The Company's Fitness Centers offer state
of the art physical fitness equipment that is used by clientele for
rehabilitation and general strength, sports and fitness training. HealthTech's
Primary Care Medical clinics provide protocol based primary care medical and
chiropractic care, advanced diagnostic testing and therapeutic and post surgical
rehabilitation. Each of the clinics is situated within one of the Company's
Fitness Centers in approximately a 2,000 square foot clinic space.
HealthTech's expansion and acquisition strategy is to find management distressed
facilities and acquire such by using the Company's (R-144) stock and minimal
cash or no cash, lease or buy facilities or complexes on favorable lease terms
and convert those facilities into Health Care Centers and/or develop raw land
and place a Health Care Center in the development as the anchor tenant. In
addition to the foregoing, HealthTech aggressively pursues all reasonable
opportunities to improve or expand its business. During July, 1997 the Company
acquired approximately $250,000 (retail price) worth of equipment and a 1,000
person membership base from a competitor facility in the vicinity of the
Company's Bedford Health Care Center in exchange for 125,000 shares of the
Company's Rule-144 common stock. The Company also acquired approximately
$480,000 (retail price) worth of equipment in exchange for 100,000 shares of the
Company's Rule-144 common stock. The Company has signed four definitive
agreements contingent on various factors to acquire additional locations. The
Company expects to close on some or all of these acquisitions within the current
calendar year.
HEALTH CENTER OPERATIONS
HealthTech's operational plans and strategy for all of its present fitness
centers and to be acquired clubs/gyms/Health Centers is that they be converted
into Health Care Centers. At June 30, 1997 the Company's fitness center
operations division operated seven facilities. HealthTech has renovations
underway at the Bedford facility for conversion of the facility to a Health Care
Center. The clinic construction at the Bedford facility is anticipated to be
completed in the fourth quarter of fiscal 1997. Effective July 1, 1997 the
Company will cease to operate the facility at Sherman, Texas and for six months
a significant percentage of the net profit of the Arlington facility will be
distributed to Mr. J.R. Kirkham and his associates (see Subsequent Events).
MEDICAL OPERATIONS:
At June 30, 1997 the Company operated four "Primary Care Medical" clinics. The
clinics are located in Midland, Fort Worth, Arlington, and Sherman Texas. In the
first quarter of fiscal 1998, the operations of the new Bedford Health Care
Center are anticipated to replace the revenues lost from the Sherman facility
transfer.
<PAGE>
FINANCIAL ANALYSIS
EBITDA
The EBITDA analysis below is one method to measure the performance and status of
the Company at June 30, 1997. The EBITDA analysis should not be considered an
alternative to any measure of performance or liquidity promulgated under
generally accepted accounting principals (GAAP) nor should it be considered as
an indicator of the Company's overall financial performance.
EBITDA is calculated as follows:
Quarter Ended Year to Date
6/30/97 6/30/97
Net income $ 175,681 $ 493,917
Interest expense $ 75,637 $ 212,536
Provision for taxes $ 90,502 $ 254,442
Depreciation & amortization $ 236,995 $ 614,409
Earnings before interest, taxes
depreciation and amortization $ 578,815 $ 1,575,304
INCOME TAX CREDITS
The Company has sold those operations that previously created significant
operating losses. However, the Company was able to preserve certain tax credits
associated with the divestiture of these operations in the form of NOL ("net
operating losses") carry forwards. HealthTech's management believes that the
Company has approximately a six million dollar credit of which a portion will be
applied in this fiscal year and future years to reduce the tax owed by the
Company. The NOL carry forwards to be applied to the Company's current fiscal
year tax liability have the effect of increasing by $254,442 to $748,358 the
realizable profit from the currently reported $493,917. However, the Federal
Income Tax rules and guidelines for the application of the NOL carry forward are
complex and stringent and the application of all of the tax credits may or may
not be able to be used or fully used by the Company as a credit against tax
liability. (See notes to financial statement in the 1996 Form 10-K.)
LIQUIDITY
At June, 30, 1997, the Company's debt to equity ratio was 21%, and its current
ratio was 1.13. At September 30, 1996, the Company's current ratio was 0.33.
Management attributes the change in the current ratio to the net increase in
accounts receivable for medical services performed and the reduction of current
liabilities. As set forth in the Company's 1996 Form 10-K, the Company has
continued to successfully follow its plan to restructure short-term and long
term debt. Subsequent to June 30, 1997 the Company refinanced the Fort Worth,
Texas facility and plans to continue to reduce short and long-term debt to
improve its debt to equity and current ratios for fiscal 1997. In the second
quarter of fiscal 1997, the Company recognized $5.7 million Goodwill as an asset
in the Primus transaction and the income stream associated with Primus'
operations. Despite the Kirkham Dispute and settlement (discussed below), the
Company's management believes that the significant potential growth in revenues
which can be generated from operating Primary Medical Care Clinics within its
facilities from the business "know-how" acquired in the
<PAGE>
Primus transaction continues to justify the acquisition. At June 30, 1997
HealthTech's working capital position was approximately $475,000. Subsequent to
June 30, 1997 the refinancing of the Fort Worth, Texas facility has increased
the Company's cash position by approximately $220,000. As set forth in the 1996
Form 10-K., and the information disclosed in this Form 10-Q Report, the Company
believes its cash flows are sufficient to meet its short-term cash requirements.
During the past two fiscal years and year to date fiscal 1997, the Company has
satisfied some cash requirements through the issuance of the registrant's common
stock and securities in accordance with SEC regulations (see the Consolidated
Statement of Cash Flows, supplemental schedule of non-cash and financing
activities).
RESULTS OF OPERATIONS
The Company's revenues have grown substantially over the last two fiscal years
through the acquisition of existing health clubs. In the first quarter of fiscal
1997, the Company's revenues were significantly impacted by recognition of the
full operations of one "Primary Care Medical" clinic and the operations of the
Company's first Health Care Center. In the second quarter of fiscal 1997,
HealthTech added three Health Care Centers by integrating and adding the
operations of three additional "Primary Care Medical Clinics". In the third
quarter of fiscal 1997, the Company set a reserve against medical revenues of
50% which significantly impacted the Company's net revenue and net profit.
Despite this additional reserve, the gain from operations for the third quarter
increased significantly over the corresponding quarter in fiscal 1996. The year
to date net income, even with the increased reserves, of $493,917 is a
substantial improvement over the 1996 year to date loss in June 30, 1996 of
$(286,684). The Company's management believes that the results for fiscal 1997
year to date are in line with its operational projections set forth in the 1996
Form I0-K and that the current reserves against revenues will be reduced to 30%
in the fourth quarter of fiscal 1997. Further, the Company believes that the
Kirkham settlement and the return of 650,000 shares of common stock and the
return of the 1,000,000 options to purchase stock at $1.00 will allow for other
substantial acquisitions to be made. Based upon the current operations, the plan
to open three more "Primary Care Medical" clinics in the Company's existing
Health Centers as well as the acquisition of additional health facilities for
conversion into Health Care Centers will likely produce revenues in excess of
$15,000,000 for the twelve months of operation in fiscal 1997 as compared to
$5,598,000 for fiscal 1996. This projection is based upon management annualizing
the Company's current revenue, past performance, industry trends and
management's belief that its acquisition and expansion plans are reasonable and
achievable in fiscal 1997. Due to the change in clinic management, changes in
billing protocols and the subsequent reorganization of this significant area of
operations, the Company expects a decline in revenues for the fourth quarter of
fiscal 1997. Prior to acquiring the operational history of the last quarter and
without the knowledge that the Kirkham Dispute would arise, the Company
projected that gross revenues for fiscal 1997 would exceed $25,000,000. That
estimate has now been revised. However, as stated above, the return of the stock
and the options to purchase stock as part of the settlement of the Kirkham
Dispute is believed by management to be a substantial benefit to the Company in
the near future as it will allow the Company to find and purchase assets that
will replace the loss of prior projected income. It must, however, be emphasized
that such projections and planned acquisitions are speculative since many
factors outside the Company's control and/or other events may effect operational
performance.
Note - Debt to equity ratio is computed above by the formula - Debt to Equity
Ratio = Debt/Equity expressed as a percentage. Current ratio is computed above
by the formula - Current Ratio = Current Assets/Current Liabilities.
<PAGE>
SUBSEQUENT EVENTS
THE KIRKHAM DISPUTE.
On or about June 2, 1997, Joseph R. Kirkham, Ulti-Med, Primus LLC and
erroneously Primus Inc. ("Mr. J. R. Kirkham and the Plaintiffs" or along with
other associates "the Kirkham Group") commenced litigation in Tarrant County,
Texas against the Company, some of its subsidiaries and some of its officers
(the "Kirkham Dispute"). At the time of the Kirkham Dispute, Mr. J. R. Kirkham
was a director and officer of HealthTech but did not resign until approximately
10 days after the litigation had commenced and did not request the Company take
any actions with respect to the resignation. The Company did and still
steadfastly denies all claims made by Mr. J.R. Kirkham and the Plaintiffs and
took immediate action to protect the Company's assets. This course of action
resulted in a Settlement Agreement and Release and the cancellation of the
Ulti-Med License Agreement upon the following terms which the Company's
management believes are very favorable: (i) Primus L.L.C. will return 650,000
shares of (Rule l44) stock and 1,000,000 (Rule-144) options to purchase Company
stock at $1,00 per share; (ii) cancellation of an approximately $3,500,000
employment obligation over the next five years; (iii) cancellation of all
obligations under the Ulti-Med License Agreement which provided for profit
participation in all of the Company's clinics except Arlington and Sherman; (iv)
transfer of Ulti-Med's ownership interest in the clinic tenant improvements and
the clinic equipment at the Midland and Fort Worth clinics back to HealthTech;
(v) cancellation of the $750,000 promissory note from Ulti-Med to Primus, (vi)
transfer of the license agreement to operate the Sherman facility and all of the
equipment at the facility back to Primus L.L.C.; and (vii) a six month
management work out contract whereby the Kirkham Group will oversee the
management of the Arlington facility in return for profit participation. The
above terms are incorporated in a Settlement Agreement dated effective July 1,
1997 (see Exhibit 1) which also provides for among other things: (a) the
contingent return, on a cost basis, of an additional 100,000 shares of
HealthTech (Rule-144) stock in the event the Company agrees to proposed changes
in the Settlement Agreement arising from having the Ulti-Med portions of the
Settlement Agreement approved by the U.S. Bankruptcy Court (Note: in the
alternative, the Company has the option to not accept the terms imposed by the
Bankruptcy Court and have such severed from the Settlement Agreement); (b) that
Mr. J. R. Kirkham and the other Plaintiffs would dismiss the litigation they
commenced against the Company with prejudice; and, (e) the representations and
warranties made to HealthTech by Mr. J. R. Kirkham survive the Settlement
Agreement as does the liability of others associated with Mr. Kirkham and the
Plaintiffs. On August 10, 1997 the Company was informed that the order to so
dismiss the litigation was entered on July 29, 1997.
Note: In February of 1997 the Company reported the details of the acquisition of
Primus Health Care Systems, Inc. from Primus Health Care Systems, L.L.C. ( the
"Primus Transaction" a subsequent event) and the ULTI-MED Health Care Systems,
Inc. license or management agreement (the "Ulti-Med License Agreement") in its
annual report on Form 10-K for the fiscal year ending September 30, 1996 (the
1996 Form 10-K") which the Company hereby incorporates and makes a part of this
Quarterly Report on Form 10-Q for the Company's third quarter of operations
ending June 30,1997 (this "Form I0-Q Report").
<PAGE>
RESTRUCTURING OF MEDICAL OPERATIONS MANAGEMENT
Whereas the Settlement Agreement released the Company from the obligation to
continue to contact for the medical management services that were acquired in
the Primus transaction, the Company sought out highly experienced and quality
management for its medical operations. On July 11, 1997 the Company announced
that it had entered into a contract with Dr. William J. Kelly, D.C., D.A.C. I.
T. whereby Dr. Kelly became the Director of Clinical Operations for the Company
and assumed responsibility for: (i) quality assurance for the Primary Care
Medical Clinic's operations; (ii) medical protocols (including making sure that
services and charges are within industry standards); (iii) billing efficiencies
(including working with MedQuest Services, Inc., the Company's billing company,
and establishing the Company's billing procedures); (iii) medical staffing in
the Primary Care Medical Clinics; and (iv) the operations of the Company's new
School of Advanced Diagnostic and Clinical Procedures (the 'Medical Training
School" discussed below). Under the terms of the contract in addition to Dr.
Kelly receiving small percentages of the net operating profit of each Primary
Care Medical Clinic and another small percentage for his help in collecting some
of the Company's older accounts receivable, he will also receive forty percent
of the net operating profit of the Medical Training School.
SCHOOL OF ADVANCED DIAGNOSTIC AND CLINICAL PROCEDURES:
The School of Advanced Diagnostic and Clinical Procedures is a continuing
education and postgraduate school for doctors of chiropractic and other medical
professionals which will teach new techniques, medical ethics, practice
management, inter-disciplinary relations, marketing and other topics nationally.
Dr. Kelly previously operated the Physicians Academy School of Advanced
Diagnostic and Clinical Procedures which has trained thousands of doctors in
many aspects of their practice and both he and the Company's management believe
that HealthTech's new School of Advanced Diagnostic and Clinical Procedures will
not only enhance the Primary Care Medical Facilities operations but will become
a significant source of revenue for the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
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
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 1. Settlement Agreement and Release
<PAGE>
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.
By: /s/ Gordon L. Hall Date: July 20, 1997
----------------------
Gordon L. Hall, Chief Executive Officer and
Chairman of the Board of Directors
By: /s/ Tim Williams Date: July 20, 1997
-----------------------
Tim Williams, President
By: /s/ Stephen L. Smith Date: July 20, 1997
------------------------
Stephen L. Smith, Chief Financial Officer and
Vice President
<PAGE>
PART II
ITEM 6
EXHIBIT I
MATERIAL CONTRACTS
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE
This Agreement, effective as of the 1st day of July, 1997, is a full compromise
and settlement of claims pursuant to the terms and conditions set forth herein.
1.0 RECITALS
1.1 HealthTech International, Inc., a Nevada corporation, has its principal
place of business at 1237 South Val Vista Drive, Mesa, Arizona, 85204 and
is herein after referred to as "HealthTech".
1.2 Ulti-Med Health Centers, Inc., a Utah Corporation, herein after referred
to as "Ulti-Med", has its principal place of business at 2100 N. Hwy. 360,
Suite 1500B, Grand Prairie, Texas 75050.
1.3 Primus Health Care Systems, L.L.C., a Texas limited liability company,
herein after referred to as "Primus LLC", has its principal place of
business at 2017 East Lamar Blvd., Suite 100, Arlington, Texas 76006.
1.4 Primus Health Care Systems, Inc., a Texas corporation and the wholly owned
subsidiary of HealthTech has it's principal place of business at 1237 South
Val Vista Drive, Mesa, Arizona 85204, hereinafter referred to as "Primus
Inc.".
1.5 Metro Rehab, Inc., a Texas Corporation, herein after referred to as
"Metro Rehab" has its principal place of business at 2100 N Hwy. 360,
#1500B, Grand Prairie, Texas 75050.
1.6 Joseph R. Kirkham, whose principal place of business at 2017 East Lamar
Blvd. Suite 100, Arlington, Texas 76006, resigned as an officer, director,
employee, and agent of HealthTech International, Inc., as of June 6th, 1997
and who is the operating manager of Primus LLC, and the Chairman of the
Board of Ulti-Med.
1.7 Dr. Mark A. Darner, D.C., is an employee of Ulti-Med, and Primus,L.L.C.and
as of the date of this Agreement is no longer an employee of HealthTech.
1.8 David M. Kirkham, a former employee of HealthTech (terminated as of June
5, 1997) and currently an employee of Primus LLC and the Vice President,
Treasurer and Secretary of Ulti-Med.
1.9 Jeff Kirkham, a former employee of HealthTech (terminated as of June
5, 1997) and currently an employee of Primus LLC and Ulti-Med.
1.10 Kathy Kirkham, a former employee of HealthTech (terminated as of June 5,
1997) and currently an employee of Primus LLC and Ulti-Med.
1.11 The parties named in sections 1.5 through 1.10 refer to themselves and
are hereinafter collectively referred to as the "Kirkham Group".
1.12 T. Allen Owen, a lawyer and consultant to Joseph R. Kirkham, Primus
LLC, Primus Inc., Ulti-Med, HealthTech and others has his principal
place of business at 2017 East Lamar Blvd. Suite 100, Arlington, Texas
76006. Mr. Owen was engaged by HealthTech and Primus LLC to form
Primus Inc. Mr. Owen has represented to HealthTech that Primus Inc. is
chartered with the Texas Secretary of State as a corporation, however,
the first organizational meeting of the corporation has not yet been
held. In the Lawsuit, Mr. Joseph R. Kirkham caused Primus Inc. to
become a plaintiff, and he hereby acknowledges that such action was an
error; he and the Plaintiffs (defined below) further acknowledge that
HealthTech is the sole owner of Primus Inc.
1.13 In the fourth quarter of HealthTech's 1996 fiscal year, an agreement
between Ulti-Med and HealthTech was entered into, whereby HealthTech and
Ulti-Med would conduct certain joint ventures (the agreement is attached
hereto as Exhibit A and hereinafter referred to as the "Ulti-Med License
Agreement"). By way of the Ulti-Med License Agreement, Ulti-Med was to
perform certain services and receive profit participation of "primary
medical care clinics" operated in HealthTech facilities and HealthTech
would receive a license fee.
1.14 In the first quarter of HealthTech's 1997 fiscal year, a definitive
agreement between Primus LLC and HealthTech, was entered into whereby
HealthTech acquired certain of the operating assets and liabilities of
Primus LLC (the agreement is attached hereto as Exhibit B and hereafter
referred to as the "Primus Acquisition Agreement") through the purchase of
all the outstanding stock of Primus LLC's subsidiary Primus Inc., which
owned certain assets and liabilities of Primus LLC, including those
necessary to operate the clinics at Arlington and Sherman.
1.15 On or about June 2, 1997, Joseph R. Kirkham, Ulti-Med, Primus LLC and
erroneously Primus Inc. (hereinafter, with the exception of Primus
Inc., collectively referred to as the "Plaintiffs"), commenced
litigation in the Tarrant County, Texas, District Court, as cause no.
048-169289-97(hereinafter referred to as "The Lawsuit") against
HealthTech, Gordon L. Hall, Stephen Smith, Tim Williams, IFM
Investments, Inc. and Results Riverbend, Inc. (hereinafter
collectively referred to as the "Defendants" and/or the "HealthTech
Group").
1.16 The Defendants steadfastly deny the claims made in the lawsuit. The parties
hereto, without acknowledging the truth or falsity of any of the
allegations any of them may have against the other, are desirous of
settling the disputes between themselves under the terms and conditions set
forth herein.
2.0 AGREEMENT
Based on the foregoing Recitals, all of which are incorporated herein by
reference, each of the parties hereto hereby warrants, represents and agrees as
follows:
2.1 No claim, other than the claims made in the Lawsuit has been filed or is
presently pending before any court, administrative agency, arbitrator,
mediator, or any other governmental or nongovernmental tribunal,
administrative body, or other such organization as to the date of this
Agreement relating to any claim or grievance either party may have against
the other.
2.2 The Plaintiffs and/or the Kirkham Group agree to pay, transfer, give and/or
return, or cause to be paid, transferred, given and/or returned, to
HealthTech: (i) 750,000 shares of HealthTech Common Stock of the 750,000
shares issued in the Primus Acquisition (currently restricted under Rule
144); (ii) 1,000,000 options to purchase HealthTech Common Stock (which
would be restricted under Rule 144) issued in the Primus Acquisition; (iii)
a complete release (which release extends to and covers the defendants) of
any and all claims arising out of or in any way related to claims made by
the Plaintiffs and/or the Kirkham Group (and/or the individual members
thereof) in the Lawsuit or which could have been jointly or severally
asserted therein, or elsewhere, or which could be made by the Plaintiffs
and/or the Kirkham Group or their respective predecessors in interest of
any kind or nature whatsoever known or generally publicly available; (iv) a
full release from any and all obligations HealthTech and/or its
subsidiaries have or may have under the Ulti-Med License Agreement; (v)
certain assets and liabilities of Ulti-Med, Primus LLC and/or owned by the
Kirkham Group, individually or collectively, the Plaintiffs or any other
affiliated group or entity that solely relate to the Arlington facility,
located at 1001 NE Greenoaks Blvd., Suite 151, Arlington, Texas 76006,
shall be transferred to HealthTech's wholly owned subsidiary Arlington
Results, Inc., a Texas Corporation, including without limitation: (a) the
real property lease for the Arlington facility; and, (b) the leases for any
equipment used at the Arlington facility (collectively the "Arlington
Facility Assets") and further the parties agree that all of the clinic
equipment used in the Fort Worth facility and the Midland facility as among
the Kirkham Group, Plaintiffs and HealthTech is the sole property of
HealthTech (or its subsidiaries IFM Investments, Inc. and Results
Riverbend, Inc.) and that the Plaintiffs and the Kirkham Group have no
right or ownership in any of the clinic improvements (construction or
tenant improvements) at either the Fort Worth or Midland facilities; (vi)
cancellation of any and all agreements, written and/or oral, for services
(including, without limitation, employment contracts) between HealthTech
and any of its subsidiaries and/or affiliates and members of the Kirkham
Group, the officers, directors, employees, agents and or affiliates of the
Plaintiffs; and, (vii) dismissal and/or withdrawal with prejudice by
Plaintiffs all claims presently pending in the Lawsuit and each party to
the Lawsuit agrees to bear their own costs and attorneys' fees incurred
therein; and (viii) the transfer of a loan, collateralized by a Certificate
of Deposit, Primus Inc. has with Bank One to the Plaintiffs and/or the
Kirkham Group as such is their sole obligation. Items 2.2(i) through
2.2(viii) are collectively hereinafter referred to as the "Purchase
Consideration".
2.3 In exchange for the Purchase Consideration identified herein, HealthTech
agrees to: (i) transfer to Primus LLC, or any other entity designated by
the Plaintiffs and the Kirkham Group all of the rights HealthTech acquired
in the Primus acquisition to operate the Sherman primary medical care
clinic (attached as Exhibit C is a copy of the agreement between Primus LLC
and Ulti-Med that defines the rights of Primus LLC to operate the Arlington
and Sherman primary medical care clinics in the Ulti-Med facilities); (ii)
transfer to Primus LLC, or any other entity designated by the Plaintiffs
and Kirkham Group the title to the equipment HealthTech acquired in the
Primus acquisition which is used in the Sherman clinic operation (with the
exception of the credit card machine and printer, which shall be returned
to HealthTech in good working order, and the equipment installed by Vestar
Automation including but not limited to the Pentium computer, HP printer,
camera and accessories which shall either be returned to HealthTech in good
working condition); (iii) enter into a "Consulting Agreement", defined
below, with certain members of the Kirkham Group; (iv) pay the Plaintiffs
and/or the Kirkham Group an agreed to amount for the assets that HealthTech
does not already own that make up and are required and necessary to own and
operate the Arlington facility (the assets not acquired by HealthTech in
the Primus Acquisition), referred to hereafter as the "Arlington Buy-out"
and defined below; (v) release Ulti-Med from its obligation to pay a
license fee ($750,000) to HealthTech under the terms of the Ulti-Med
License agreement; (vi) issue 100,000 shares of common stock, restricted
under Rule 144, to the Kirkham Group, and (vii) return of the promissory
note executed by Ulti-Med, as part of the Ulti-Med License Agreement,
marked canceled and paid as of the date of this Agreement. Items 2.3 (i)
through 2.3 (vii) are hereinafter referred to as the "Settlement Package".
2.4 In exchange for the tender, payment and delivery of the Purchase
Consideration to HealthTech and/or the HealthTech Group and the tender,
payment and delivery of the Settlement Package to the Kirkham Group and the
Plaintiffs, the Kirkham Group and the Plaintiffs, including their agents,
heirs, successors, shareholders, partners, and assigns, hereby release and
forever discharge any and all liability, rights, claims, demands, actions
or causes of action arising between any of the parties, including all
shareholders, agents, employees, affiliates, and constituent partners of
the Defendants, hereto out of or related to any damage or injury in any way
resulting from any of the acts, occurrences, omissions or other events
identified herein relating to (i) the Lawsuit (or which may have been
asserted in the Lawsuit), (ii)any employment relationship, and (iii) and
any claim for recovery of costs, attorneys fees, expert witness fees or
other expenses of any kind or nature incurred in connection with the
filing, prosecution or settlement of the Lawsuit. The Plaintiffs and the
Kirkham Group, by this Agreement, hereby release all liability, rights,
claims, demands, action or causes of action of any kind whatsoever, save
and except the liabilities, rights and obligations set forth herein, which
they now or may in the future possess because new laws and or other basis
for causes of action may become retroactively viable because such are
connected with the above mentioned matters. Further, the Plaintiffs and the
Kirkham Group waive any and all laws which would toll any statutes of
limitation and thereby could create a cause of action in the future on
matters that are released hereunder. The Plaintiffs and the Kirkham Group
acknowledge and agree that part of the consideration set forth above is
intended to compensate the Plaintiffs and the Kirkham Group for any damages
alleged in the Lawsuit or defenses which may be raised in the Lawsuit were
counterclaims to be asserted therein, which may become known in the future.
2.5 The Plaintiffs and the Kirkham Group acknowledge and agree that the
consideration paid, in the form of a "Settlement Package," defined below,
and all other legal consideration provided under this Agreement is not to
be considered an admission of liability on the part of any person,
corporation, partnership, or entity, said liability being expressly denied,
by that said consideration is given in compromise and full settlement of a
disputed claim.
2.6 This Agreement shall be binding upon each of the parties hereto, including
their successors, heirs, executors, administrators, personal
representatives, assigns, receivers, and trustees as to each of the terms
and conditions set forth herein.
2.7 Certain portions of this Agreement may be or are under the jurisdiction of
the Bankruptcy court and may require the court's approval. This Agreement
shall be submitted to the Bankruptcy court and, in the event the Bankruptcy
court does not approve the portions of this Agreement over which it has
jurisdiction, this Agreement shall be modified to comply with the court's
requirements arising from Ulti-Med's bankruptcy filing. If the
modifications required by the court in any way increase HealthTech's
liability or obligations generally or under this Agreement the Plaintiffs
and/or the Kirkham Group shall transfer to HealthTech additional HealthTech
common stock proportionate to the additional obligation imposed by the
court (stock valued at the low bid price on the date of the courts ruling;
R-144 shall be valued the same as free trading). The Plaintiffs' and the
Kirkham Group's liability in the foregoing shall not exceed 100,000 shares
of HealthTech common stock. Notwithstanding, HealthTech has the sole option
to reject any or all of the requirements imposed by the Bankruptcy court
and the resulting modifications, such rejection to be made within two
business days. In such an event the portions of this Agreement that can not
be enforced because of the non-agreed to bankruptcy court requirements
shall be stricken and the remaining portions of this Agreement shall remain
in full force and effect.
2.8 In exchange for the Purchase Consideration, HealthTech and the HealthTech
Group agree to release the Plaintiffs and the Kirkham Group from all
liability, rights, claims, demands, action or causes of action of any kind
whatsoever , save and except the liabilities, rights and obligations set
forth herein. HealthTech specifically and expressly does not release the
Plaintiffs and/ or the Kirkham Group from the following: (i) any and all
representations (which singularly or in the aggregate are material or had a
material effect) made to the management of HealthTech and its shareholders
with respect to the assets and liabilities of the Plaintiffs and the
business operations of the Plaintiffs (HealthTech hereby acknowledges that
the value of the assets acquired in the Primus acquisition as to equipment,
fixtures and receivables are as presented on page 11 of HealthTech's Form
10-Q for the second quarter of fiscal 1997); (ii) having completed all
reasonable and prudent investigations, to the best of their knowledge,
information and belief, the Plaintiffs and the Kirkham Group represent that
the Plaintiffs and Primus Inc.'s relationship with medical insurance
providers, including but not limited to, the amount the Plaintiffs should
recover from such entities for services billed and/or the size of Ulti-Med
in relation to the market have been completely and accurately disclosed to
HealthTech and the medical insurance providers; (iii) having completed all
reasonable and prudent investigations, to the best of their knowledge,
information and belief, the Plaintiffs and the Kirkham Group represent and
warrant that the Plaintiffs and the Kirkham Group are and have been in full
compliance with the terms and conditions of all relevant contracts, any and
all laws, ordinances, etc. that govern the business operations of the
Plaintiffs and the operations of Ulti-Med, Primus LLC and Primus Inc.
while the Plaintiffs and the Kirkham Group were involved in such.
2.9 The terms of the Consulting Agreement are as follows: (i) HealthTech may at
its sole option engage, for up to twenty hours each, the services of either
or any of the following: Joseph R. Kirkham, Dr. Darner and/or David Kirkham
(the "Consultants") for a period of thirty days; (ii) the first thirty day
period is mandatory commencing July 1, 1997, and the agreement may be
extended for subsequent thirty day periods at HealthTech's sole option;
(iii) once engaged, services cannot be terminated upon less than 10 days
written notice. HealthTech shall pay to the Plaintiffs and/or the Kirkham
Group 15% of actual cash received, net of all costs of collection and
operating expenses, beginning July 30, 1997 as received (the 1st through
the 15th of each month shall be paid on the 30th of the same month, and the
16th through the end of the month of each month shall be paid on the 15th
of the following month) from the operation of HealthTech's clinic
operations (excluding the Arlington facility) for each 30 day period that
the Consultants were engaged. The duties of the Consultants under the
Consulting Agreement shall be mutually agreed according to each task.
2.10 The terms of the Arlington Buy-out are the following: (i) the Kirkham Group
shall manage the Arlington facility for HealthTech in the manner it was
operated prior to June 4, 1997; (ii) no act or omission of the Kirkham
Group shall violate any applicable state, local or federal laws,
ordinances, etc., or breach any of the terms and conditions of all the
contracts associated with the operation of the Arlington facility or cause
the Arlington facility to be in default thereunder; (iii) the period the
Arlington operations are managed by the Kirkham Group shall not exceed 180
days from the date of this Agreement (the "Operation Period"); and (iv) the
results of operations from the Arlington facility will be calculated in
relation to a Target Price as described below and the Plaintiffs and/or the
Kirkham Group will be paid the calculated amount as adjusted under Section
2.12 for the Arlington facility assets.
2.11 The adjusted Target Price or actual price paid for the Arlington Facility
Assets shall be calculated as follows: At the end of the sixth (6th) month
of operation, the average of the actual revenues generated in the fourth
(4th), fifth (5th) and sixth (6th) months of operation will be multiplied
by the actual average collection rate on services provided in months one
(1) and two (2) of the Operation Period. The product of the forgoing
calculation will have the mutually agreed to actual average expenses for
the six (6) month period subtracted and the result of that number will be
multiplied by eighteen (18) and the product of that calculation will be the
"Target Price". The Target Price will be adjusted by a dollar for dollar
credit for all payments made under Section 2.12. At the end of six (6)
months of operation of the Arlington facility, HealthTech may choose three
ways to pay or satisfy the Plaintiffs and/or the Kirkham group the adjusted
purchase price: (i) in cash; (ii) by executing a promissory note secured by
the Arlington facility; or (iii) by returning and transferring the
Arlington facility to the Plaintiffs and/or the Kirkham Group. In the event
HealthTech elects to return the Arlington facility (option iii above), all
equipment purchased during the period from April 1, 1997 through the end of
the Operating Period, inclusive, shall be returned to HealthTech in good
operating order or the Plaintiffs and/or the Kirkham Group may purchase
said equipment from HealthTech at a mutually agreeable price. In the event
HealthTech chooses to pay the adjusted Target Price by executing a
promissory note, the terms of the promissory note shall be simple interest
only for the term of five years at seven and one half percent (7.5%) on the
outstanding balance, payable monthly, with the mutually agreed option to
convert the note to HealthTech common stock. Within ten days of the
expiration of the Operation Period, HealthTech will notify the Kirkham
Group the option chosen to pay/satisfy the Target Price. If no option is
chosen within this time period, it shall be deemed that HealthTech will
transfer and return the Arlington facility (see section 2.11).
2.12 During the Operation Period, HealthTech will make "Interim Monthly
Payments" to the Plaintiffs and the Kirkham Group of the net cash from
operating activities of the Arlington facility as follows: (i) 35% to
Ulti-Med; (ii) 32.5% to the Kirkham Group; and, (iii) 32.5% retained by
HealthTech. However, in no event shall the Interim Monthly Payments to
Ulti-Med be less than of $2,000. The Plaintiffs and the Kirkham Group
represent and warrant that the Interim Monthly Payments are being paid so
that the Plaintiff's obligations to its creditors listed in its tentative
bankruptcy reorganization plan can be satisfied first. The parties agree
that once the Operation Period has expired and the adjusted Target Price
has been paid/satisfied, HealthTech will have no continuing obligation for
any Interim Monthly Payments or payments to satisfy the Plaintiffs' and/or
the Kirkham Groups' obligations in bankruptcy or otherwise. The parties
agree that all money paid as additional consideration hereunder shall
reduce the Arlington buy-out price dollar for dollar.
2.13 All of the revenue generated by HealthTech subsequent to the Primus
Acquisition is and shall remain HealthTech's and HealthTech will retain all
collections thereon. Pursuant to terms of the Primus Acquisition and the
terms of this Agreement, the Plaintiffs and the Kirkham Group agree and
acknowledge that they have no claim to any of the clinic revenue generated
by any of HealthTech clinics or facilities (now or in the future) and/or
the Primus clinics in the Arlington and/or Sherman facilities from January
1, 1997 through June 30, 1997, inclusive. Notwithstanding, HealthTech will
pay (or credit if all or partial payments have already been made) to the
Plaintiff's and/or the Kirkham Group as additional consideration hereunder
30% of the net cash received, of those receivables generated prior to July
1, 1997. "Lock-boxes" or functions normally associated with "lock-boxes"
shall be used, and the Plaintiffs and/or the Kirkham Group will be paid
from the lock-box arrangement. HealthTech shall provide monthly statements
on all receivable activity to the Kirkham Group and the Kirkham Group shall
provide monthly statements to HealthTech on all receivable activity
controlled by the Plaintiffs and/or the Kirkham Group or controlled by the
previous factoring relationship for all medical receivables generated prior
to July 1, 1997 (e.g., Providers and/or Surety Bank).
2.14 The parties agree not to compete by owning and/or operating a like kind
facility (health club and/or clinic) within five driving miles of the other
party's facilities owned as of the date of this Agreement and, further,
neither party shall own and operate a like kind facility within five
driving miles of the Arlington and Sherman facilities for a period of two
years from the date of this Agreement.
2.15 The parties agree that, until the adjusted Target Price has been fully
paid/satisfied, the Arlington facility as security for payment of the
adjusted Target Price shall not be burdened with debt during the Operation
Period other than in the ordinary course of business as determined through
mutual consent of the Kirkham Group and the HealthTech Group.
2.16 Notwithstanding Section 2.4, HealthTech hereby releases and holds Joseph R.
Kirkham harmless from any and all liability arising during the time Joseph
R. Kirkham was an officer, director, employee and agent of HealthTech to
the extent that he was not inv9olved in any aspect of the events forming
the basis of the liability and/or any vicarious liability created by the
action of others. HealthTech further releases Joseph R. Kirkham from any
and all contractual liability or obligations in the Ulti-Med and Primus
Acquisition that are not specifically preserved or otherwise addressed
hereunder or generally would conflict with the purpose of this Agreement.
3.0 MISCELLANEOUS PROVISIONS
3.1 This Agreement represents the entire understanding and agreement between
the parties, and any representations, discussions or negotiations between
the parties and/or their agents with respect to the subject matter hereof,
which have not been expressly addressed in this Agreement, are not relied
upon and shall not be used in construing the terms and conditions set forth
herein.
3.2 Each of the parties hereto have been represented by separate counsel and
have had the opportunity to seek advice as to the terms and conditions of
this Agreement, including its effect on any rights they may now or in the
future possess.
3.3 This Agreement shall not be changed, modified or terminated without the
written consent of each of the parties hereto.
3.4 This Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective permitted agents, heirs, shareholders,
partners, successors and assigns. Neither this Agreement nor any of the
rights, benefits, or obligations hereunder shall be voluntarily assigned,
by operation of law or otherwise, by any party hereto without the prior
written consent of the other parties, which consent shall not be
unreasonable withheld. With the exception of the provisions of Section 3.5
below, nothing in this Agreement, express or implied, is intended to confer
upon any person or entity other than the parties hereto and their
respective permitted agents, heirs, shareholders, partners, successors and
assigns, any rights, benefits or obligations hereunder.
3.5 This Agreement is expressly intended to benefit, as third party
Beneficiaries, the following persons and/or entities: all agents or
employees of any of the parties hereto and all other individuals and
entities who are the subject of the release provisions set forth in
sections 2.2 And 2.4 Of this agreement and the following lawyers only:
William W. Wilson, Shannon Gracy, et. al, Haynes and Boone, LLP,
Robert B. Scott and T. Gerald chilton, Jr.
3.6 In the event any suit or other legal proceeding is brought for the
enforcement of any provision of this Agreement, the parties hereto agree
that the prevailing party or parties shall be entitled to recover from the
other party or parties to such lawsuit upon final judgment on the merits,
reasonable attorney's fees (and sales taxes thereon, if any), including
attorney's fees for appeal and/or collection of any amount found to be due
and owing, and costs incurred in bringing such suit or proceeding.
3.7 This Agreement has been duly executed and delivered by each of the parties
identified below, who have the requisite power and legal capacity (i) to
execute and deliver this Agreement and all collateral agreements executed
and delivered hereby, (ii) to consummate the transaction contemplated
hereby, and (iii) to perform their obligations under this Agreement or any
other agreement identified herein. Upon the approval, the execution and
delivery of this Agreement, this Agreement will be duly and validly
authorized, and constitute all necessary action on behalf of all parties to
complete this Agreement. This Agreement and each collateral agreement
constitutes the legal, valid and binding obligation of each party,
enforceable in accordance with its terms, excepts as such enforcement may
be limited by general equitable principals, or applicable bankruptcy,
insolvency, moratorium or similar laws or judicial decisions from time to
time which effect creditors rights generally.
3.8 This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument. A fax transmission of a document bearing the
signature(s) of a party hereto shall be acted upon and be deemed and
treated to be an original document for all purposes. If a fax transmission
is so made, the original of the signed document shall be mailed or placed
with a courier for personal delivery or mailed within three (3) business
days of the fax transmission.
3.9 In the event HealthTech is notified of a default or breach of any
agreement, contract or lease which the Plaintiffs and/or the Kirkham Group
have an interest, HealthTech shall notify, in writing, the Plaintiffs
and/or the Kirkham Group within five days of such notice and cure any
default within 30 days that is the responsibility of HealthTech hereunder,
otherwise, the Plaintiffs and/or the Kirkham Group shall have the right to
exercise any and all rights available under Texas law including, but not
limited to, the repossession of any assets which are the object of the
breach or default.
3.10 All parties agree to cooperate with one another to effectuate the transfer
of the Arlington and Sherman facilities and to make available, upon written
demand, such books and records as may be reasonable necessary for
accounting, tax and reporting purposes.
3.11 If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term of
this Agreement, such provision shall be fully severable; this Agreement
shall be construed and enforced as if the severed provision had never
comprised a part of this Agreement; and the remainder of this Agreement
shall be in full force and effect by the severance of the offending
provision. The parties agree to replace the offending and severed provision
with a provision that is similar in terms but is not illegal, invalid or
unenforceable.
3.12 The parties agree that upon the request of any of the parties, they will
execute and deliver such further documents and undertake such further
actions as may reasonable be required to effect any of the provisions
contained in this Agreement.
3.13 Neither this Agreement, nor any agreement attached hereto, may be amended,
altered or changed except in writing signed by all the parties.
3.14 Either party hereunder agrees that nay amounts paid hereunder shall be paid
without the right to off set. In the event a party believes they are
entitled to an off set, such party will seek declaratory relief.
4.0 Conditions Precedent. The following terms and conditions must be met,
satisfied or performed before this Agreement is valid and enforceable.
4.1 The Kirkham Group and the Plaintiffs shall be in full compliance with any
and all aspects of the Temporary Restraining Order signed June 13, 1997 by
Judge Bob McCoy (Attached hereto as Exhibit D) exclusive of computers which
will be returned no later than July 3, 1997. Upon full and complete
satisfaction and performance of the terms and conditions set forth in this
Section 4 and the performance of and/or compliance with the terms and
conditions of the Court Order by the Plaintiffs and the Kirkham Group, the
parties shall cause the pending litigation to be dismissed in accordance
with the provisions of paragraph 2.2 above and the Court Order to be
terminated and of no further force or effect.
4.2 The Plaintiffs and the Kirkham Group will execute and attach lease
assignments and a general assignment of all of the assets and liabilities
associated with the Arlington Buy-out and Arlington Facility Assets and
such will be Attached hereto as Exhibit E. The Plaintiffs and the Kirkham
Group represent and warrant that everything listed in Exhibit F is what is
required to own/lease and operate the Arlington facility in the manner it
was operated prior to June 4, 1997, and that if any other asset, assignment
or obligation arises such shall be at the sole cost and expense of the
Plaintiffs and/or the Kirkham Group to obtain and/or satisfy. The clinic
equipment at HealthTech's Midland facility and Fort Worth facility shall be
listed in Exhibit G attached hereto, made a part of the exhibit and
incorporated herein by this reference, is a bill of sale for the equipment
that transfers any and all rights, interest or title the Plaintiffs and/or
the Kirkham Group have in said equipment. The Plaintiffs and the Kirkham
Group agree to execute any other documents necessary to effectuate the
intent of the parties under this Agreement forthwith upon request by
HealthTech ("Collateral Agreements").
4.3 The Plaintiff's and/or the Kirkham Group shall return to HealthTech three
checks that are payable to "Primus" (i.e., two in the amounts of $8,724.85
and $6,108.93 and one that has been marked NSF).
4.4 HealthTech shall deliver to the Plaintiffs and/or the Kirkham Group the
"Due Bills" for all prepaid television and radio time transferred to Primus
LLC in the Primus Acquisition. HealthTech represents and warrants that the
assets represented by the Due Bills are freely transferable.
4.5 HealthTech agrees to pay Joseph R. Kirkham, David Kirkham and Dr. Mark
Darner $3,333.33 each for services rendered to HealthTech between January
1`, 1997 and July 1, 1997 payable in either cash or S-8 stock (without
restriction and with the bid price as of June 25, 1997) within three days
of the effective date of this Agreement.
4.6 The parties hereto are executing and delivering this Agreement prior to the
preparation of all of the Exhibits listed in Section 5 below which shall be
provided on or before June 30, 1997.
5.0 Exhibits:
Exhibit A: Ulti-Med License Agreement
Exhibit B: Schedule of assets and liabilities purchased by Primus Inc. from
Primus LLC
Exhibit C: Agreement between Primus LLC and Ulti-Med for the rights to
operate clinics at Sherman and Arlington facilities
Exhibit D: Court Order signed June 13, 1997 by Judge Bob McCoy
Exhibit E: Lease assignments and general assignment associated with the
Arlington buy-out and Arlington facility assets
Exhibit F: List of all equipment and personal property required to own/lease
the Arlington facility prior to June 4, 1997
Exhibit G: List of equipment for the clinics at HealthTech's Midland facility
and Fort Worth facility
Exhibit H: Copy of public announcement concerning effects of Settlement
<PAGE>
HealthTech International, Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: Chairman and CEO
Primus Health Care Systems, Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: President
IFM Investments, Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: President
Results Riverbend, Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: President
Arlington, Results Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: President
<PAGE>
/s/ Gordon L. Hall
Gordon L. Hall, an individual
/s/ Stephen Smith
Stephen Smith, an individual
/s/ Tim Williams
Tim Williams, an individual
Ulti-Med Health Centers, Inc.
By:/s/ Joseph R. Kirkman
Joseph R. Kirkham
Its: Chairman
Primus Healthcare Systems, L.L.C.
By: /s/ Joseph R. Kirkman
Joseph R. Kirkham
Its: Manager
<PAGE>
/s/ Joseph R. Kirkham
Joseph R. Kirkham, an individual and
Member of the Kirkham Group
/s/ Mark A. Darner
Dr. Mark A. Darner, D.C., an individual and
Member of the Kirkham Group
/s/ David M. Kirkham
David M. Kirkham, an individual and
Member of the Kirkham Group
/s/ Jeff Kirkham
Jeff Kirkham, an individual and
Member of the Kirkham Group
/s/ Kathy Kirkham
Kathy Kirkham, an individual and
Member of the Kirkham Group
<PAGE>
EXHIBIT A
Ulti-Med License Agreement
<PAGE>
BUSINESS OPPORTUNITY AND MANAGEMENT AGREEMENT
AGREEMENT, dated and effective as of September 30, 1996 by and between
HealthTech International, Inc. ("HTI") a Nevada corporation and Ulti-Med
Health Centers, Inc. ("UHC").
THE PARTIES AGREEE AS FOLLOWS:
1. This agreement is for the granting of permission to do business at HTI
facilities as such exist or may exist in the future. HTI makes no
representations or warranties as to how many facilities it may own or
operate now or in the future. HTI as of the date first above written
grants UHC permission to do business at a total of seven HTI facilities.
2. Permission granted hereunder is given only in consideration upon payment
of the "Opportunity Fee" described herein.
3. UHC acknowledges that it does not rely on any representations made by
HTI with respect to entering into this agreement and that it has done
its own due diligence with respect to HTI and its operations. UHC
assumes any and all risk associated with the fact or eventuality that
HTI may or may not own or operate health club facilities and/or be in
business while UHC's Permission is still in effect and that this is an
acceptable risk for the opportunity to do business.
4. UHC acknowledges upon its acceptance of the business opportunity it has
continuing obligations under this agreement and that HTI has no further
obligations with respect to the Opportunity Fee. In addition to the
Opportunity Fee UHC grants to HTI the right and ownership of all revenue
generated by UHC's exploitation of the business opportunity granted
hereunder and to administer the distribution of the revenue as provided
for hereunder, however in no event is HTI obligated to perform such
function and HTI may assign or waive such right. Any such waiver shall
not diminish or change HTI's ownership of the revenue generated
hereunder and any waiver shall nor preclude HTI from later asserting its
right.
5. The opportunity fee shall be $750,000.00 payable upon execution of this
Agreement (the "Opportunity Fee"). HTI agrees that it will accept a
promissory note to be secured by the assets created and or generated by
UHC by its exploitation of its rights under this agreement. UHC
acknowledges and agrees that the Opportunity Fee is nonrefundable and
therefore UHC waives any and all
<PAGE>
right to recover all or any portion of the Opportunity Fee at any time
during which UHC's Permission is effective and releases HTI from any and
all obligations that could arise or do arise subsequent to the granting of
the UHC Permission; including without limitation UHC' waives any and all
laws, statutes, standing, etc., currently or in effect in effect in the
future, that would give UHC the right or would benefit UHC in trying to
recover all or part of the Opportunity Fee.
6. UHC acknowledges that HTI may but is not obligated to, build one clinic in
a facility it owns or operates and that UHC's permission includes the
right to operate that clinic. In the event HTI does build the one clinic
HTI will own the clinic I 00% (including without limitation all tenant
improvements, equipment, fixtures and furniture). UHC's Permission also
includes the right to build clinics in up to six HTI health clubs, if six
such facilities exist, if not up to the number of clubs that exist not to
exceed seven total clinics. In the event HTI does not build the first
clinic, UHC may build the clinic at its sole cost and expense and no cost
or expense to HTI.
7. As already agreed to above and subject to section 4 above, HTI shall own
and have sole right to all revenue generated by the exploitation of UHC of
the rights granted, hereunder, the parties agree that the such revenue
shall be deposited in a mutual/joint bank account (counter-signatures
required) at a financial institution of HTI's choice and that from that
bank account all expenses will be paid and profit distributions made (the
"Disbursement Account").
8. UHC agrees to prepare a quarterly expense budget which the parties shall
mutually agree, to. All payments for expenses in excess of the budgets
shall require HTI's Nvritten consent which shall not be unreasonably
withheld. After expenses the parties will create and maintain a reserve to
be determined and net of the expenses and reserve shall be distributed as
profit to the parties. HTI shall be entitled to 60% of the profits and UHC
shall receive 40% of the profits.
9. UHC shall deposit 50% of the profits it receives into a mutual/joint
account (counter-signatures required) in a bank of HTI's choice (the
"Construction Account"). The parties agree that Construction Account
funds shall only be used for the construction of clinics in HTI
facilities. In the event there are seven clinics constructed before
UHC's permission rights have expired the parties shall mutually agree on
the use of the Construction Account ftmds.
10. UHC agrees and acknowledges that the Construction Account and the
Disbursement Account are pledged as security for the Opportunity Fee
promissory note in the event UHC pays the Opportunity Fee by way of a
promissory note. UHC agrees to sign powers of attorney that shall become
effective upon a breach
<PAGE>
of said promissory note and acknowledge that such powers of attorney
shall allow HTI to recover as part of the liquidated damages set forth
herein.
II. In the event UHC constructs clinics, UHC agrees to manage the
construction such that; no liens are filed on any of HTI's facilities;
lien releases are obtained from all contractors, subcontractors and/or
material or service suppliers as a condition of payment and in the event
a lien or any claim (including assessments, lawsuits, etc.) is made
against the HTI's properties, any of its subsidiaries, officers,
employees, consultants or associates, UHC shall indemnify and hold HTI
harmless (including bonding around liens or complying with any other
reasonable request of HTI in seeking relief from the claim).
12. UHC acknowledges and agrees that HTI shall have a one half undivided
ownership interest in any clinic that UHC constructs. UHC further
acknowledges and agrees that HTI shall have an a security interest in
any and all clinics that UHC constructs hereunder and that the power of
attorney described herein shall authorize HTI to execute its security
interest such that the clinics entire ownership is transferred over to
HTI or sold at HTI's sole option and election upon UHC's breach of the
promissory note.
13. UHC represents and warrants that it has insurance or is the named
beneficiary of insurance policies that cover medical, chiropractic
general liability insumace that adequately covers UHC's current
operations and that will cover UHC's management of the first clinic and
subsequent clinics. UHC shall deliver to HTI certificates of insurance
that name HTI as an additional insured under all policies under which
UHC has coverage before the first and each subsequent clinic begins
operations.
14. In the event a claim, lawsuit or any other proceeding names, or seeks
costs, reimbursement, damages or any other recovery from HTI, any of its
subsidiaries, officers, employees, consultants, or associates that UHC
shall indemnify and hold HTI harmless for any and all costs, expenses
(including legal fees) or liabilities arising from UHC's operations and
management of the clinics.
15. The parties agree that the scope of this Agreement only goes to the
right of permission granted, hereunder and that in no way does this
agreement create any rights with respect to the other aspects of the
respective parties' assets or operations. The parties acknowledge the
physical proximity of each party's respective operation may create
marketing opportunities and the like, however, neither party makes any
representations or warranties as to the benefits that might accrue.
<PAGE>
16. UHC acknowledges that HTI business plan is to enter into like kind
arrangements with other businesses and that other operating entities may
be granted a business opportunity in the same facility that UHC is
exploiting its opportunity. UHC waives any and all claim for damages
against HTI in the event HTI engages in another like kind agreement.
17. UHC agrees and acknowledges that in the event it breaches this
agreement, the promissory note hereunder, the security agreement
hereunder and or any other agreement that HTI may reasonably require UHC
to execute hereunder that HTI will suffer damages. The parties agree
that at the time of this agreement it would be difficult to fix the
damages and that both parties believe that such damages would be in
excess of $750,000. The parties therefore agree that HTI shall be
entitled to the $750,000, as liquidated damages for any and all damages
arising from UHC's breach of this agreement, except for the costs
associated with enforcing the terms of this agreement.
18. This Agreement supersedes all previous agreements and all such
agreements, if any, are merged into this Agreement. This Agreement may
only be modified by a writing executed by both parties. The parties
shall execute any other documents necessary to carry our the intent of
the parties hereunder.
19. In the event any part of this Agreement is invalid, unenforceable and or
illegal such shall not affect the remainder of this Agreement and the
parties shall carry our the intent of this Agreement as if no such event
occurred.
20. This Agreement, shall be governed by and construed under the laws of
Arizona. Notwithstanding the location of property, where contracts were
or are entered into or any other fact or circumstance, any dispute
arising directly or indirectly from this Agreement shall be resolved in
the state of Arizona, Maricopa County or such other place solely
determined by HTI. At HTI's election any or all disputes arising
hereunder may be determined by binding arbitration and UHC hereby
consent to such
HealthTech International, Inc.
By: /s/ Gordon L. Hall
Gordon L. Hall
Its: Chairman of the Board and Chief
Chief Executive Officer
<PAGE>
Business Opportunity and Management Agreement
(Signature page to be incorporated and made a part of the agreement by this
reference)
Ulti-Med Health Centers
By: /s/ Joseph R. Kirkham
Joseph R. Kirkham
Its: Chairman of the Board
<PAGE>
EXHIBIT B
Schedule of assets and liabilities purchased by Primus Inc.
from Primus LLC
<PAGE>
FURNITURE, FIXTURES & EQUIPMENT ACQUIRED THROUGH THE PRIMUS
ACQUISITION
ARLINGTON CLUB:
7 PIECE HYDRA FITNESS $7,000.00
1 COMPUTER-$1,200.00
1 PHONE SYSTEM $1,700.00
1 REFRIDG. $400.00
2 COUCHES $700.00
1 COUCH $600.00
ARLINGTON CLINIC:
1 EMG (OKIDATA MODEL ADVAN) $6,750.00
1 GSX 190 PRINTER-DOS NETWORK $399.00
1 THUMPER $395.00
1 MEDX-1 CERVICAL $65,000.00
1 LUMBAR
1 PANASONIC COPIER $2,200.00
SHERMAN CLINIC:
1 VENOUS FLOW $4,000.00
1 VIBRATORY MASSAGER $395.00
1 ULTRASOUND $800.00
MIDLAND CLINIC:
1 MONITOR-KEYBOARD $299.00
4 P.T. TABLES $1,000.00 2 SMALL REFRIDG $300.00
1 OMNISOUND ULTRASOUND $5,000.00 11 REAM $1,650.00
2 DESKS $1,000.00
1 X-RAY MACHINE-DEVELOPER-CASSETTES- 1 CALCULATOR $47.00
MARKERS-MEASURING RULER $12,000.00 5 CERVICAL TERRYCLOTH
1 LARGE HYDROCULATOR-HOT PACKS 4 LUMBAR COVERS-$250.00
AND COVERS $1,100.00 1 VENOUS FLOW MACHINE $4,000
1 DOPPLER $12,000.00
1 3IN HOLEPUNCH/2 2IN HOLEPUNCH $30.00
1 CENTRIFUGE $800.00
1 MYOTEK-INCLUDING CHAIR $3,400.00
<PAGE>
1 MEDX-1 CERVICAL-1 LUMBAR $65,000.00 (X 2) 4 CERVICAL HOTPACKS
1 COMPUTER $1,100.00 4 LUMBAR HOTPACKS $300.00
1 MEDICAL WEIGHSCALE $250.00 1 STAPLER $20.00
6 CLIPBOARDS $20.00 1 TAPE DISPENSER $5.00
SHERMAN CLUB:
10 REEHOH STEPS $790.00
8 PHONES $4,000.00
1 FAX MACHINE $300.00
2 SODA COOLERS $1,400.00
2 STEREOS $1,000.00
2 T.V.'S $450.00
RIVERBEND CLINIC:
<PAGE>
EQUIPMENT LEASES
POLO CLUB LEASED FOR 84 MONTHS 36 MONTHS LEFT
MANAGEMENT APRIL 1, 1993 MARCH 31, 2000
$12,828.00 PER MONTH
EXCEL LEASING LEASED FOR 36 MONTHS 22 MONTHS LEFT
$164.96 PER MONTH OCT. 20, 1995 AUG. 24, 1998
X-RAY PROCESSOR TOTAL: $4013.69
BANKERS LEASING LEASED FOR 36 MONTHS 34 MONTHS LEFT
$792.00 PER MONTH JAN. 5, 1997 JAN. 5, 2000
SEE ATTACHED LIST TOTAL: $22,000.00
AT&T CAPITAL LEASED FOR 48 MONTHS 36 MONTHS LEFT
$839.95 PER MONTH APRIL 30, 1996 APRIL 30, 2000
SEE ATTACHED LIST TOTAL: $37,284.00
TRANS LEASING LEASED FOR 60 MONTHS 31 MONTHS LEFT
$259.20 PER MONTH JULY 5, 1994 FEB. 5, 2000
2 TROTTER 540 TREADMILLS TOTAL: $15,391.36
DEPOSIT $358.81
PREMIER LEASING
AMERUS LEASING LEASED FOR 60 MONTHS 14 MONTHS LEFT
$627.99 PER MONTH JULY 25, 1993 JULY 25, 1998
BENNETT X-RAY SYSTEM TOTAL: $34,149.20
<PAGE>
BANKERS LEASING
Exhibit "A"
1-Body Relaxer
1-Blk. Challenger Machine Treadmill Siderails
2-Trotter 460 Treadmills Reconditioned
2-Stairmaster Exercise System
3-Preference Stationary Bike - Upper Body - Grey, Polar Belt
1-Intertron 5000
1-Universal Stairstepper
1-Leander Table
2-Challenger Treadmills
<PAGE>
AT&T CAPITAL
INVOICE #09219301
September 21st, 1993
1 ea. Lifestep 9500 Stair Climber, SN#LS9500
1 ea. Powercise Model 156 Weight Scale, SN#PC156S
1 ea. Powercise Model 264 Chest Press, SN#PC264CP
1 ea. Powercise Model 210 Pec Dec, SNPC210PD
1 ea. Powercise Model 264 Shoulder Press, SN#PC264SP
1 ea. Powercise Model 244 Tricep Extension, SN#PC244TE
1 ea. Powercise Model 364 Inner/Outer Thigh, SN#PC364IOT
1 ea. Powercise Model 314 Leg Extension/Leg Curl, SN#PC314ELC
2 ea. Preference Stationary Bike, upper body -Grey Polar Belt
SN#HRT2500I with Transmitter
1 ea. Cyber Lat Pull Down, SN#43323
1 ea. Body Masters Tricep Press SN#MD411
Total Price $38,519.10
<PAGE>
POLO CLUB MANAGEMENT AMERUS LEASING
1517 JACKSONBORO HWY 611 FIFTH AVE.
FT. WORTH, TX. 76114 SECOND FLOOR
DES MOINES, IA 50309
EXCELL FINANCIAL LIBERTY LEASING
5236 80TH ST. 4201 WESTERN PARKWAY
LUBBOCK, TX. 76119 SUITE #320
W DES MOINES, IA 50266
BANKERS LEASING HEALTH CONCEPTS
5236 80TH ST P.O. BOX 203248
LUBBOCK, TX. 79424 AUSTIN, TX. 78720
AT & T CAPITAL SHIRLEY KIRKHAM
1505 LUNA RD. SUITE 134 1114 ROYALCREST DR.
CARROLLTON, TX. 75006 ARLINGTON, TX. 76017
TRANS LEASING
3000 DUNDEE RD.
NORTHBROOK, ILL. 60062
<PAGE>
EXHIBIT C
Agreement between Primus LLC and Ulti-Med for the rights
to operate clinics at Sherman and Arlington facilities
<PAGE>
MANAGEMENT AGREEMENT
This management Agreement (the "Agreement") is entered into by and
among Primus Health Care Systems, LLC. ("PHCS"), a Texas corporation, and
Ulti-Med Health Centers, Inc. ("UHC"), a Utah corporation.
RECITALS
WHEREAS, UHC desires to retain PHCS to act as the manager and operator
of its business activities; and
WHEREAS, PHCS desires to be employed by UHC to act as the manager and
operator of UHC's business activities.
NOW, THEREFORE, in consideration of the covenants, agreements, and
considerations set forth below, the parties agree as follows:
AGREEMENT
1. Services Performed by PHCS. PHCS hereby represents that it shall act as
the manager and operator of UHC's business operations and shall,
additionally, operate under the following conditions:
a) PHCS shall pay all of UHC's outstanding accounts payable as of
July 31, 1995, before any profit split (as set forth below) shall
occur;
b) PHCS and UHC shall have at least one director in common;
c) Any major acquisitions (for UHC) of any kind shall be approved
unanimously by UHC's Board of Directors; d) Any liquidations of
property of UHC must be approved unanimously by UHC's Board of
Directors; e) PHCS shall lease and maintain office space for UHC; f)
All funds collected by UHC shall be split as set forth below; g) PHCS
shall pay $15,000.00 to the U.S. Internal Revenue Service on behalf of
UHC; h) PHCS shall pay $5,000.00 toward aggregate accounts payable of
UHC; and i) PHCS shall assume responsibility for payment of all current
and future accounts payable in connection with the
operation of UHC's business.
2. Payment to PHCS. In consideration for PHCS acting in the capacity
described above, PHCS shall be paid 65% of all profits generated from
the operation of the business of UHC.
3. Prior Accounts Receivable. UHC shall own all accounts receivable in
existence prior to the effective date of this
Agreement.
4. Term. The term of this Agreement shall be five (5) years.
5. Termination. In the event that PHCS fails to properly perform its
duties as required under this Agreement, UHC shall give PHCS written
notice of such default. PHCS shall have thirty (30) days from receipt
of a default notice to cure such default. If PHCS fails to cure such
default as set forth in a notice sent to PHCS within such thirty (30)
day period, UHC shall have the right to terminate this Agreement, and
shall not be obligated for any further payment to PHCS following
termination of this Agreement. This Agreement may not be terminated by
UHC without cause. PHCS may terminate this Agreement at any time by
giving UHC thirty (30) days' written notice.
6. Right of First Refusal. UHC shall have an option to purchase the stock
and/or assets of PHCS on the same terms and conditions that PHCS's
shareholders and/or management agree(s) to accept from a third party.
If PHCS's shareholders and/or PHCS accept(s) such an offer from a third
party, PHCS shall notify UHC of the terms of such offer and UHC shall
have thirty (30) days to accept or reject such offer.
7. Notices. All notices to the parties hereto shall be at the following
addresses:
If to PHCS: Primus Health Care Systems, LLC
============================
----------------------------
If to UHC: Ulti-Med Health Centers, Inc.
============================
----------------------------
All notices to any party shall be in writing and delivered to such party of
deposited in the United States Mail in an envelope, registered of certified
mail, with postage prepaid, addressed to such party as set forth above or
at such other address as such party shall have previously designated in the
manner set forth herein. All notices shall be deemed given when delivered,
or, if mailed, on the third day after the mailing.
8. Governing Law: Venus. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
VENUE FOR ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT SHALL BE
EXCLUSIVELY DALLAS COUNTY, TEXAS.
9. Multiple Counterparts. This Agreement has been executed in multiple
counterparts, each copy of which is deemed to be an original and
constitute collectively one agreement.
10. Parties Bound. This Agreement and the terms and provisions hereof shall
inure to the benefit of and be binding on the parties hereto and their
respective heirs, executors, legal representatives, successors in
interest, and assigns.
11. Entire Agreement. This Agreement contains the entire agreement by and
among the parties, and no promise, representation, warranty, or
covenant not included in this Agreement or any such referenced
agreement has been or is relied upon by the parties.
EXECUTED to be effective as of the 31st day of July, 1995.
Primus Health Care Systems, LLC
a Texas Limited Liability Corporation
By: /s/ Joseph R. Kirkham
Joseph R. Kirkham, Manager
ULTI-MED HEALTH CENTER, INC.,
a Utah Corporation
By: /s/ David M. Kirkham
David M. Kirkham, Vice President
<PAGE>
EXHIBIT D
Court Order signed June 13, 1997 by Judge Bob McCoy
<PAGE>
NO. 48-169289-97
PRIMUS HEALTH CARE ss IN THE DISTRICT COURT
SYSTEMS, L.L.C., PRIMUS ss
HEALTH CARE SYSTEMS, INC., ss
ULTI-MED HEALTH CENTERS, ss
INC., and JOSEPH R. KIRKHAM ss
ss
VS. ss TARRANT COUNTY, TEXAS
ss
HEALTHTECH INTERNATIONAL, ss
INC., GORDON L. HALL, TIM ss
WILLIAMS, STEPHEN L. SMITH, ss
RESULTS RIVERBEND, INC., and ss
IFM INVESTMENTS, INC. ss 48TH JUDICIAL DISTRICT
AGREED ORDER
On June 9, 1997, Plaintiffs, Primus Health Care Systems, L.L.C., Primus
Health Care Systems, Inc., (collectively, "Primus"), and Joseph R. Kirkham
("Kirkham"), and Defendant, HealthTech International, Inc. ("HealthTech"),
appeared before this Court by and through their attorneys of record. The parties
announced to the Court that they had reached an agreement concerning certain
matters, which is reflected in this agreed temporary order:
It is ordered that the Application of HealthTech for a Temporary
Injunction is set for hearing before this Court on June 27, 1997, at 3:00
o'clock, P.M.
Until the time of said hearing, the Court orders as follows:
1. At of before 5:00 P.M., on Saturday, June 14, 1997, Primus and
Kirkham shall return all equipment used in the operation of the Results Sports &
Fitness Clubs (the "Clubs") and affiliated medical clinics (the "Clinics")
(other than computer equipment) to the location where said equipment was located
prior to June 4, 1997. In addition, the computer equipment and therapeutic
exercise equipment removed from the Midland and Fort Worth Clubs during May or
June, 1997, shall be returned to those respective locations. It is understood
that the Powercize equipment will not be operational until 5:00 P.M., Monday,
June 16. 1997.
2. Each party shall permit the other party access to all business and
financial records of the Clubs and Clinics, including bank accounts, billing,
collection, and patient account records. Representatives of each party may, upon
inspection of said financial records, obtain copies of any such records at the
expense of the requesting party, provided that they do not leave the location
where said records are maintained.
3. HealthTech may communicate directly with Med Quest Inc. to seek any
information concerning the financial affairs of Primus of the Clubs and Clinics,
and neither Primus nor Kirkham will interfere with the ability of HealthTech to
communicate directly with Med Quest Inc.
4. HelathTech, by and through its representative, Stephen Smith, may
communicate directly with Providers Inc.; provided, however, that Kirkham may
accompany Mr. Smith to all meetings with any representative of Providers Inc.
5. Primus and Kirkham shall continue to be responsible for payment of:
a.)the obligations of the Clinics; and b.) all other obligations(except payroll)
of the Arlington and Sherman Clubs. HealthTech will continue to be responsible
for payroll at all Clubs and all other obligations of Fort Worth and Midland
Clubs, except the obligations of the Medical Clinics. The parties shall promptly
provide to one another copies of all invoices paid and checks written, along
with copies of bank deposit slips indicating cash receipts generated by the
Clubs.
6. The payroll of the Clubs shall be maintained to include Kirkham,
David Kirkham, Jeff Kirkham and Kathy Kirkham, at the same level as it was on
June 4, 1997. However, pending further order of this Court, Kirkham shall not go
upon the premises of the Clubs, but shall render any services as may be
necessary from his personal office in Arlington, Texas. Kirkham will also ensure
that Jeff Kirkham and Kathy Kirkham, and David Kirkham will have no actual
physical presence at the Clubs other than the Sherman Club, pending further
order of this Court. Kirkham, Jeff Kirkham, and Kathy Kirkham will be permitted
to contact by telephone any doctor or other employee working in the Clinics.
7. Kirkham, Jeff Kirkham, Kathy Kirkham and David Kirkham will assume
complete control of the Sherman Club and Clinic beginning at 12:01 A.M., Monday,
June 16, 1997 and continuing until further order of this Court. Accordingly,
each of the Kirkhams will be allowed full access to the Sherman Club and Clinic.
Further Jeff Kirkham shall be allowed access to the Clubs and Clinics to the
extent necessary to re-install the Powercize equipment previously removed.
8. Each Party shall undertake reasonable efforts to ensure that all
clinics are at the same capacity to see patients as they had on June 4, 1997 by
Tuesday June 17, 1997 at 5:00 P.M., with the understanding that neither party
can ensure the presence of Clinic personnel at any given time.
9. All parties shall refrain from making disparaging comments about any
other party to Club of Clinic employees, patients, or any other third party.
Nothing in this order is to be construed as a waiver by any party of
any contention or position that party may have in the pending litigation.
These orders shall remain in effect until the above-referenced hearing
on HealthTech's Application for Temporary Injunction, or until further order of
this Court.
Signed this 13th day of June, 1997. /s/ Bob McCoy
JUDGE PRESIDING
AGREED AS TO FORM AND SUBSTANCE:
/s/ Daniel C. Steppick
Daniel C. Steppick
State Bar No. 00791732
Shannon, Gracey, Ratliff & Miller, L.L.P.
500 Throckmorton, Suite 1600
Fort Worth, Texas 76102
ATTORNEYS FOR PLAINTIFFS
/s/ Thomas J. Williams
Thomas J. Williams
State Bar No. 21578500
Haynes and Boone, L.L.P.
801 Cherry Street, Suite 1300
Fort Worth, Texas 79102
ATTORNEYS FOR DEFENDANTS
<PAGE>
EXHIBIT E
Lease assignments and general assignment associated with the
Arlington buy-out and Arlington facility assets
<PAGE>
BILL OF SALE
For and in consideration of the sum of Ten dollars ($10.00) and for
other good and valuable consideration, the receipt of all of which is hereby
acknowledged, Ulti-Med Health Centers, Inc., Metro Rehab, Inc., Primus Health
Care Systems, L.L.C., Joseph R. Kirkham, Dr. Mark A. Darner, D.C., David M.
Kirkham, Jeff Kirkham and Kathy Kirkham, respectively ("Sellers"), sell,
transfer and assign to HealthTech International, Inc. ("Buyer"), the equipment
listed in Exhibit A attached hereto and by this reference made a part hereof.
Sellers warrant that they are the owner of the above described property,
warrant good and marketable title to it, and warrant that the property is free
and clear of liens, charges and encumbrances except those liens, charges and
encumbrances listed on Exhibit B attached hereto and by this reference made a
part hereof.
Executed at Arlington, Texas as of the lst day of July, 1997.
Ulti-Med Health Centers, Metro Rehab, Inc.
Inc.
By: By:
Name: Name:
Title: Title:
Primus Health Care Systems,
Inc.
By: By:
Name: Joseph R. Kirkham
Title:
By: By:
Dr. Mark A. Darner David M. Kirkham
By: By:
Jeff Kirkham Kathy Kirkham
<PAGE>
GENERAL UNCONDITIONAL ASSIGNMENT
For value received, Ulti-Med Health Centers, Inc., Metro Rehab, Inc.,
Primus Health Care Systems, L.L.C., Joseph R. Kirkham, Dr. Mark A. Darner, D.C.,
David M. Kirkham, Jeff Kirkham and Kathy Kirkham hereby sell, assign and
transfer to HealthTech International, Inc., all their rights, title and interest
in and to that certain lease dated by and between
_____________________________________ ___________________________________, as
lessor, and ______________________________________
_________________________________, as lessee, and represent and warrant that
there have been no previous assignments or transfers of said lease and that it
is free and clear of liens, charges and encumbrances excepts the rights, title
and interests of the lessor therein.
Dated: July 1, 1997
Ulti-Med Health Centers, Metro Rehab, Inc.
Inc.
By: By:
Name: Name:
Title: Title:
Primus Health Care Systems, Inc.
By: By:
Name: Joseph R. Kirkham
Title:
By: By:
Dr. Mark A. Darner David M. Kirkham
By: By:
Jeff Kirkham Kathy Kirkham
<PAGE>
GENERAL UNCONDITIONAL ASSIGNMENT
For value received, Ulti-Med Health Centers, Inc., Metro Rehab, Inc.,
Primus Health Care Systems, L.L.C., Joseph R. Kirkham, Dr. Mark A. Darner, D.C.,
David M. Kirkham, Jef f Kirkham and Kathy Kirkham hereby sell, assign and
transfer to HealthTech International, Inc. , all their rights, title and
interest in and to that certain lease dated __________________by and between
_____________________as lessor, and __________________, as lessee, and represent
and warrant that there have been no previous assignments or transfers of said
lease and that it is free and clear of liens, charges and encumbrances excepts
the rights, title and interests of the lessor therein.
Dated: July 1, 1997
Ulti-Med Health Centers, Metro Rehab, Inc.
Inc.
By:______________________________________ By: _____________________________
Name: Name:
Title: Title:
Primus Health Care Systems, Inc.
By:______________________________________ By: _____________________________
Name: Joseph R. Kirkham
title:
By:______________________________________ By: _____________________________
Dr. Mark A. Darner David M. Kirkham
By:______________________________________ By: ____________________________
Jeff Kirkham Kathy Kirkham
<PAGE>
GENERAL UNCONDITIONAL ASSIGNMENT
For value received, Ulti-Med Health Centers, Inc., Metro Rehab, Inc.,
Primus Health Care Systems, L.L.C., Joseph R. Kirkham, Dr. Mark A. Darner, D.C.,
David M. Kirkham, Jeff Kirkham and Kathy Kirkham hereby sell, assign and
transfer to HealthTech International, Inc., all their rights, title and interest
in and to all of the assets associated with the acquisition of the Arlington
facility at 1001 NE Greenoaks Blvd. , Suite 151, Arlington, Texas 76006 by
HealthTech International, Inc., from Ulti-Med Health Centers, Inc., and Primus
Health Care Systems, L.L.C., and represent and warrant that there have been no
previous assignments or transfers of said assets and that they are free and
clear of liens, charges and encumbrances excepts the rights, title and interests
of the lessors thereof.
Dated: July 1, 1997
Ulti-Med Health Centers, Metro Rehab, Inc.
Inc.
By:______________________________________ By: _____________________________
Name: Name:
Title: Title:
Primus Health Care Systems, Inc.
By:______________________________________ By: _____________________________
Name: Joseph R. Kirkham
Title:
By:______________________________________ By: _____________________________
Dr. Mark A. Darner David M. Kirkham
By:______________________________________ By: ____________________________
Jeff Kirkham Kathy Kirkham
<PAGE>
EXHIBIT F
List of equipment and personal property required to
own/lease the Arlington facility prior to June 4, 1997
<PAGE>
Arlington Clinic Inventory:
4 Therapy tables (1 blue, 2 grey)
1 Therapy table -leander
1 Adjustment table
1 Dynatron Equaliern
1 EMG
1 GSX-190 Printer, DOS network
1 Dry spine
8 14 X 17 Cassettes
5 8 X 17 Cassettes
1 Black desk with chairs
1 X-ray machine with developer
3 Office desks with chairs
2 Large view boxes
2 Small view boxes
1 Thumper
1 Set SOT blocks
1 Blood centrifuge
1 AM REX (low volt)
1 Intertrow 5000
1 Intelect model 700 CUS/CANBAL
1 Hydrocollator
1 Matrix
1 MedX cervical
1 MedX lumbar
1 Panasonic copier
1 Panasonic fax machine
1 HP Printer
1 Computer
1 Actinator
1 Scale
1 Blood pressure cuff
1 Paraffin wax bath
<PAGE>
Arlington Club Inventory:
3 Lifecycle bikes
4 Preference bikes
3 Treadmills
2 Trotter treadmills
2 Startrac treadmills
1 Challenger treadmill
1 Universal stairmaster
1 Stairstepper
3 Stairmaster 4000 PT
3 Nordic Tracks (1 broken, 2 working)
1 7 pc. Hydra fitness
1 Bench press
1 Leg extension
1 Leg curl
1 Low back extension
1 Crunch machine
2 Pec decks
1 Cable tower station
1 Calf raise station
3 Port cable station
1 Bicep machine
1 Tricep machine
2 Row machines
4 Curl benches
3 Curl bars
2 T-bars
1 Chin bar/Dip station
2 Leg/Dip stations
1 Low back station
1 Military press
1 Hack squat
1 Leg press
1 P-Curl station
3 Free weight benches with bar rack
2 Incline free weight benches with bar rack
3 Standard free weight benches (raise/lower)
32 45 lb. plates
26 55 lb. plates
50 5 lb. plates
25 10 lb. plates
24 25 lb. plates
20 2.5 lb. plates
3 pr 3 lb. dumbbells
<PAGE>
Arlington Club Inventory (continued):
3 pr 12 lb. dumbbells
5 pr 8 lb. dumbbells
5 pr 5 lb. dumbbells
4 pr 10 lb. dumbbells
1 pr 15 lb. dumbbells
1 pr 20 lb. dumbbells
1 pr 25 lb. dumbbells
1 pr 30 lb. dumbbells
2 pr 35 lb. dumbbells
2 pr 40 lb. dumbbells
1 pr 45 lb. dumbbells
3 pr 50 lb. dumbbells
1 pr 55 lb. dumbbells
1 pr 60 lb. dumbbells
2 pr 65 lb. dumbbells
1 pr 70 lb. dumbbells
1 pr 75 lb. dumbbells
1 pr 80 lb. dumbbells
1 pr 85 lb. dumbbells
1 pr 90 lb. dumbbells
1 pr 95 lb. dumbbells
1 pr 100 lb. dumbbells
1 pr 105 lb. dumbbells
1 pr 110 lb. dumbbells
1 pr 115 lb. dumbbells
1 pr 120 lb. dumbbells
7 Straight 45 lb. bars
1 Roman chair
20 Step benches
6 pr Bar clips
2 Copy machine
1 Room divider
5 Desks
1 Time clock
6 Phones
2 Computers
3 CD-ROM towers
24 Chairs
1 Lamp
2 Electronic calculators
1 Credit card machine
3 Keyboards
3 File cabinets
<PAGE>
Arlington Club Inventory (continued):
2 Chiropractic tables
1 Fan
2 Refrigerators
1 Back table
1 Stereo
2 Couches
2 Tan rolling beds
1 Keyboard
1 Printer
1 Receipt printer
1 Small round table
1 Clothes closet
1 Scale
3 Silk plants
40 Wooden lockers
4 Benches
1 Vanity
1 Chair
<PAGE>
EXHIBIT G
List of equipment for the clinics at HealthTech's Midland
facility and Fort Worth facility
<PAGE>
Midland Clinic Inventory:
4 PT Tables
2 E-stem AMREX MS324A
2 E-stem AMREX M3322 low volt
1 Sonicator ultrasound 716
1 Omnisound ultrasound
1 X-ray machine, developer, cassettes, markers, measuring ruler
2 1st tables
1 Large hydroculator -hot packs and covers
1 Venous flow machine
1 Doppler
1 Centrifuge
2 Small refrigerators
17 Chairs
2 Desks
1 Calculator
5 Cervical terry cloth
4 Lumbar covers
1 Myotck including chair
1 MedX cervical
1 MedX lumbar
1 Computer
6 Complete sets of powercise with computer
1 Medical weight scale
1 EMG
6 Clipboards
1 3 Hole punch
2 2 Hole punch
4 Cervical hot packs
4 Lumbar hot packs
4 Cold packs
1 Laundry basket
1 1 Towels
1 Stapler
1 Tape dispenser
1 Monitor
1 Keyboard
1 Mouse
<PAGE>
Fort Worth Clinic Inventory:
1 Pelvic bench
2 Therapy benches
1 Roller table
1 Ultrasound
1 AMREX unit
1 Hydrocollator
2 Cervical Hydrocollator packs
2 Lumbar Hydrocollator packs
2 Cervical Hydrocollator covers
2 Lumbar Hydrocollator covers
1 Dynatron 1 00 with 4 pads
2 14 X 36 X-ray view boxes
1 Powerfingers massager
1 Whartenburg pen wheel
1 Reflex hammer
1 Plastic spirometer
1 Stethoscope
Belts for holding M/S pads
3 14 X 17 X-ray cassettes
4 1 0 X 12 X-ray cassettes
1 Computer screen
1 Keyboard
1 CD-ROM tower
1 Calculator
1 3 Hole punch
2 File cabinets
2 Powercise control units
6 Powercise exercise pieces
1 Drying rack for hydrocollator covers
1 Fischer X-ray unit
1 X-ray film holder
1 Computer printer
<PAGE>
EXHIBIT H
Copy of public announcement concerning effects of Settlement
<PAGE>
HealthTech International, Inc.
(NASDAQ: GYMM & GYMMW)
July 8, 1997
For Immediate Release
HealthTech International, Inc. Acquires 650,000 shares of its stock...
Mesa, Arizona.....HealthTech International, Inc. is pleased to announce the
acquisition of 650,000 shares of its common stock as well as 1 million
registered options at $1.00 in exchange for one of its health care operations
and a six month participation in another. The deal also release HealthTech
International, Inc. from Employment agreements of approximately $3.5 million
dollars over the next five (5) years.
The deal is as follows:
HEALTHTECH INTERNATIONAL, INC. acquires:
* 1 million options of HealthTech International, Inc. @ $1.00 per share.
* 650,000 shares of HealthTech International, Inc. common stock.
* Employment contracts of former medical operators.
* Profit participation detailed in the Ultimed license agreement
referenced in the 1996 10K.
* Certain assets of the clinic operations of Arlington facility.
* All assets of the clinic operation of Midland and Ft Worth facility
* The Ultimed share of the Tenant Improvements in build-outs in both
the Midland and Ft. Worth facilities.
* Ability to hire new Director of Clinical Operations.
In exchange for the above listed items, HealthTech International, Inc.
relinquishes the right to:
* Operate the Sherman facility.
* The Sherman facility equipment.
* Six months partial profit participation in Arlington.
1237 South Val Vista Drive . Mesa . Arizona . 85204 . Tel: (602) 396-0660
Web Address: www.gymm.com
HealthTech International, Inc.
(NASDAQ: GYMM & GYMMW)
July 8, 1997
For Immediate Release
HealthTech International, Inc..............continued...................
Although HealthTech International, Inc. expects the above to reduce revenues for
the short term, the addition of clinics in both the Bedford, Texas facility and
the Tucson, Arizona facility will more than replace the revenues lost in the
Sherman facility.
The buyout paved the way for the Company to acquire the services of Dr. William
Kelly and his contacts through Physicians' Academy. This new association will
allow HealthTech International, Inc. to grow its Medical and Clinic operations
at an accelerated pace due to the vast number of Medical Doctors and Doctors of
Chiropractic within Dr. Kelly's network.
HealthTech International, Inc. is a leading investor owned health care company.
The Company is traded on NASDAQ under the symbols GYMM for its common stock and
GYMMW for its Class A Warrants.
Contact: William A Young Sr.
Investor/Public Relations
(602) 396-0660
e-mail: [email protected]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF OPERATIONS OF HEALTHTECH
INTERNATIONAL, INC. FORM 10-Q DATED JUNE 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 8,768
<SECURITIES> 0
<RECEIVABLES> 3,484,253
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,111,615
<PP&E> 15,154,690
<DEPRECIATION> 1,252,500
<TOTAL-ASSETS> 28,619,109
<CURRENT-LIABILITIES> 3,636,348
<BONDS> 0
0
19
<COMMON> 6,357
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,619,109
<SALES> 13,355,720
<TOTAL-REVENUES> 13,355,720
<CGS> 1,320,770
<TOTAL-COSTS> 7,531,303
<OTHER-EXPENSES> 158,958
<LOSS-PROVISION> 4,917,101
<INTEREST-EXPENSE> 212,536
<INCOME-PRETAX> 748,358
<INCOME-TAX> 254,442
<INCOME-CONTINUING> 493,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 493,916
<EPS-PRIMARY> .07
<EPS-DILUTED> .05
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