U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-32195
AMERICAN HOSPITAL RESOURCES, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0319410
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1912 WEST BAY CREST
SANTA ANA, CA 92704
(Address of principal executive offices)
714-444-0223
(Issuer's telephone number)
NOT APPLICABLE
(Former name and address)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the issuer 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:
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of September 30, 2002: 20,414,000 shares of common stock, no par
value.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
AMERICAN HOSPITAL RESOURCES, INC.
INDEX
Page
PART I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements 3
Unaudited Condensed Consolidated Balance Sheets - September
30, 2002 and December 31, 2001 4
Unaudited Condensed Consolidated Statements of Operations for
the three and nine Months ended September 30, 2002 and 2001 6
Unaudited Condensed Consolidated Statements of Cash Flows for
the nine months Ended September 30, 2002 and 2001 7
Notes to Unaudited Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition or Plan of Operation 21
Item 3. Controls and Procedures 23
PART II. Other Information
Item 2. Changes in Securities 23
Item 5. Other Information: 24
Offer to Purchase 24
Related Party Transactions 24
Subsequent Events 24
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 25
(Inapplicable items have been omitted)
2
PART I.
FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
In the opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year.
3
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2002 2001
---------------- -------------
CURRENT ASSETS:
Cash. . . . . . . . . . . $ 2,274 $ 80
Accounts receivable . . . 225,900 -
---------------- -------------
Total Current Assets. . 228,174 80
---------------- -------------
PROPERTY AND EQUIPMENT, net 1,997 -
---------------- -------------
OTHER ASSETS:
Prepaid expenses. . . . . 65,554 -
Goodwill. . . . . . . . . 60,321 -
---------------- -------------
Total Other Assets. . . 125,875 -
---------------- -------------
$ 356,046 $ 80
================ =============
[Continued]
4
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
[CONTINUED]
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
2002 2001
----------------- --------------
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . $ 8,288 $ 11,086
Accrued expenses. . . . . . . . . . . . 90,000 948
Related party payable . . . . . . . . . 3,566 22,500
Notes payable . . . . . . . . . . . . . - 20,000
Income taxes payable. . . . . . . . . . 3,659 -
----------------- --------------
Total Current Liabilities . . . . . 105,513 54,534
----------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value,
10,000,000 shares authorized,
no shares issued and outstanding. . . - -
Common stock, no par value,
100,000,000 shares authorized,
20,414,000 and 3,656,863 shares
issued and outstanding, respectively. 7,614,522 7,284,483
Contributed capital . . . . . . . . . . 53,519 53,519
Retained earnings (deficit) . . . . . . (7,417,508) (7,392,456)
----------------- --------------
Total Stockholders' Equity (Deficit). 250,533 (54,454)
----------------- --------------
$ 356,046 $ 80
================= ==============
Note: The Balance Sheet of December 31, 2001 was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
5
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------- -----------------------
2002 2001 2002 2001
------------- ------------- ------------ -----------
REVENUES. . . . . . . . . . . $ 118,200 $ - $176,300 $ -
EXPENSES:
General and administrative. 110,714 9,118 196,571 36,039
------------- ------------- ------------ -----------
EARNINGS (LOSS) BEFORE
OTHER (EXPENSES). . . . . . 7,486 (9,118) (20,271) (36,039)
------------- ------------- ------------ -----------
OTHER (EXPENSES):
Interest expense. . . . . . - (444) (1,122) (444)
------------- ------------- ------------ -----------
Total Other Expenses. . . - (444) (1,122) (444)
------------- ------------- ------------ -----------
EARNINGS (LOSS) BEFORE
INCOME TAXES. . . . . . . . 7,486 (9,562) (21,393) (36,483)
CURRENT TAX EXPENSE . . . . . 3,659 - 3,659 -
DEFERRED TAX EXPENSE. . . . . - - - -
------------- ------------- ------------ -----------
NET INCOME (LOSS) . . . . . . $ 3,827 $(9,562) $(25,052) $(36,483)
============= ============== =========== ===========
EARNINGS (LOSS) PER
COMMON SHARE. . . . . . . . $ .00 $ (.00) $ (.00) $ (.01)
============= ============== =========== ===========
DILUTED EARNINGS (LOSS)
PER COMMON SHARE. . . . . . $ .00 $ N/A $ N/A $ N/A
============= ============== =========== ===========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
6
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
-------------------------
2002 2001
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . $ (25,052) $(36,483)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation . . . . . . . . . . . . . . . . . 120 -
Non-cash services for stock. . . . . . . . . . 82,049 -
Changes in assets and liabilities:
(Increase) in accounts receivable. . . . . . (108,660) -
Increase (decrease) in accounts payable. . . 1,815 (6,244)
Increase in accrued expenses . . . . . . . . 34,606 444
Increase in related party payable. . . . . . (3,599) -
Increase in income taxes payable . . . . . . 3,659 -
-------------- -----------
Net Cash (Used) by Operating Activities. . (15,062) (42,283)
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment. . . . . . . (941) -
Payments received on note receivable . . . . . . 30,000 -
Payments for goodwill. . . . . . . . . . . . . . (55,020) -
Cash (used) by acquisition . . . . . . . . . . . (17,283) -
-------------- -----------
Net Cash (Used) by Investing Activities. . (43,244) -
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable. . . . . . . . . . . 120,000 20,000
Proceeds from sale of common stock . . . . . . . 20,000 15,000
Payments to repurchase common stock. . . . . . . (79,500) -
-------------- -----------
Net Cash Provided by Financing Activities. 60,500 35,000
-------------- -----------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . 2,194 (7,283)
CASH AT BEGINNING OF THE PERIOD. . . . . . . . . . 80 7,909
-------------- -----------
CASH AT END OF THE PERIOD. . . . . . . . . . . . . $ 2,274 $ 626
============== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . $ - $ -
Income taxes . . . . . . . . . . . . . . . . . $ - $ -
[Continued]
7
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[CONTINUED]
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the nine months ended September 30, 2002:
In February 2002, the Company issued 11,500,000 shares of common stock
for debt relief of $21,281, to convert $80,000 in notes payable, and
for a $30,000 note receivable.
In February 2002, the Company issued 675,000 shares of common stock
for $7,500 in services rendered related to the acquisition of
Subsidiary.
In March 2002, the Company issued 1,600,000 shares of common stock as
payment of $30,397 in liabilities and $1,603 in services rendered.
In May 2002, the Company issued 500,000 shares of common stock to
convert $40,000 in notes payable and related accrued interest of $789.
In June 2002, the Company issued 3,196,873 shares of common stock to
acquire American Hospital Resources, Inc.
In August 2002, the Company issued 584,000 shares of common stock for
$146,000 in services, including $65,554 which have not yet been
rendered.
For the nine months ended September 30, 2001:
None
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
8
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - American Hospital Resources, Inc. ("Parent") was organized
under the laws of the state of Utah on May 9, 1972 as High-Line Investment
& Development Company. On May 18, 1977, Parent changed its name to Gayle
Industries, Inc. On January 11, 1978, Parent merged into Swing Bike. On
December 19, 1979, Parent changed its name to Horizon Energy Corporation.
On December 10, 1992, Parent changed its name to Millennium Entertainment
Corp. In 1993, Parent changed its name to New Horizon Education, Inc. Also
during 1993, Parent organized a wholly owned subsidiary with the sole
purpose of merging with Ruff Network Marketing, Inc. On December 31, 1997,
Parent sold its wholly owned subsidiary to Phoenix Ink, LLC, a company
controlled by Howard J. Ruff. On June 17, 2002, Parent changed its name to
American Hospital Resources, Inc. Prior to 2002, Parent was considered a
development stage company as defined in Statement of Financial Accounting
Standards No. 7.
American Hospital Resources, Inc. ("Subsidiary") was organized under the
laws of the State of Delaware on August 27, 1999 as Frozen Enterprises,
Inc. On February 16, 2002, Subsidiary changed its name to American Hospital
Resources, Inc.
American Hospital Resources, Inc. and Subsidiary ("the Company") provides
hospital consulting and management. The Company has, at the present time,
not paid any dividends and any dividends that may be paid in the future
will depend upon the financial requirements of the Company and other
relevant factors.
CONDENSED FINANCIAL STATEMENTS - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows at September 30, 2002 and 2001 and for the periods then ended have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's December 31, 2001 audited financial statements. The results of
operations for the periods ended September 30, 2002 and 2001 are not
necessarily indicative of the operating results for the full year.
CONSOLIDATION - The consolidated financial statements include the accounts
of Parent and its wholly-owned Subsidiary. All significant intercompany
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
9
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
ACCOUNTS AND LOANS RECEIVABLE - The Company records accounts and loans
receivable at the lower of cost or fair value. The Company determines the
lower of cost or fair value of nonmortgage loans on an individual asset
basis. The Company recognizes interest income on an account receivable
based on the stated interest rate for past-due accounts over the period
that the account is past-due. The Company recognizes interest income on a
loan receivable based on the stated interest rate over the term of the
loan. The Company accumulates and defers fees and costs associated with
establishing a receivable to be amortized over the estimated life of the
related receivable. The Company estimates allowances for doubtful accounts
and loan losses based on the aged receivable balance and historical losses.
The Company records interest income on delinquent accounts and loans
receivable only when payment is received. The Company first applies
payments received on delinquent accounts and loans receivable to eliminate
the outstanding principal. The Company charges off uncollectible accounts
and loans receivable when management estimates no possibility of collecting
the related receivable. The Company considers accounts and loans receivable
to be past-due or delinquent based on contractual terms.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to operating expense
as incurred. Expenditures for additions and betterments that extend the
useful lives of property and equipment are capitalized, upon being placed
in service. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation or amortization is removed from the
accounts and any resulting gain or loss is included in operations.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets of five years [See Note 3].
WEBSITE COSTS - The Company has adopted the provisions of Emerging Issues
Task Force 00-2, "Accounting for Web Site Development Costs." Costs
incurred in the planning stage of a website are expensed as research and
development while costs incurred in the development stage are capitalized
and amortized over the life of the asset, estimated to be two years. As of
September 30, 2002 the Company has capitalized a total of $1,541 of website
costs which are included in property and equipment. The Company did not
incur any planning costs and did not record any research and development
costs for the nine months ended September 30, 2002 and 2001.
INTANGIBLE ASSETS - The Company accounts for its intangible assets in
accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" [See Note 5].
REVENUE RECOGNITION - The Company's revenue comes from the management of
hospitals and from the sale of hospital property. Revenue from the
management of hospitals is recognized over the term of the managing
agreement. A portion of the managing services is subcontracted out by the
Company to third party vendors. These direct costs are recorded by the
Company as general and administrative expenses. Revenue from the sale of
hospital property is recorded when property is sold. The Company has
purchased the right to receive a portion of the revenues from a consulting
and asset sale agreement. Revenue derived from the purchased contract
rights is recorded on a net basis. On a net basis, only the share of
revenue belonging to the Company is recorded as revenue.
10
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
STOCK BASED COMPENSATION - The Company accounts for its stock based
compensation in accordance with Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation." This statement
establishes an accounting method based on the fair value of equity
instruments awarded to employees as compensation. However, companies are
permitted to continue applying previous accounting standards in the
determination of net income with disclosure in the notes to the financial
statements of the differences between previous accounting measurements and
those formulated by the new accounting standard. The Company has adopted
the disclosure only provisions of SFAS No. 123. Accordingly, the Company
has elected to determine net income using previous accounting standards.
EARNINGS (LOSS) PER SHARE - The computation of earnings (loss) per share of
common stock is based on the weighted average number of shares outstanding
during the periods presented, in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" [See Note 12].
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities, the disclosures
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimated by
management.
RECENTLY ENACTED ACCOUNTING STANDARDS - Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations", SFAS No. 142,
"Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
Retirement Obligations", SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections", SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities", and SFAS No. 147, "Acquisitions of Certain
Financial Institutions - an Amendment of FASB Statements No. 72 and 144 and
FASB Interpretation No. 9", were recently issued. SFAS No. 141, 142, 143,
144, 145, 146 and 147 have no current applicability to the Company or their
effect on the financial statements would not have been significant.
RESTATEMENT - In July 2000, the Company effected a 1 for 50 reverse stock
split. The financial statements have been restated, for all periods
presented, to reflect this stock split [See Note 8].
RECLASSIFICATION - The financial statements for periods prior to September
30, 2002 have been reclassified to conform to the headings and
classifications used in the September 30, 2002 financial statements.
11
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITION
On April 3, 2002, Parent signed an agreement and plan of reorganization
with Phase One, LLC and Subsidiary. The agreement provided for Parent to
issue 3,196,873 shares of its common stock for all 1,500 shares of
Subsidiary's common stock. In connection with the proposed reorganization,
Parent previously issued a total of 13,000,000 shares of its common stock
to Phase One, LLC for $130,000 in financing. The agreement calls for the
former shareholders of Subsidiary to receive up to 12,870,000 shares of the
common stock issued to Phase One, LLC based on the performance of the
Company. In connection with the agreement, Parent amended its articles of
incorporation to authorize 10,000,000 shares of preferred stock and to
change its name to American Hospital Resources, Inc. Also in connection
with the agreement, Parent and Subsidiary entered into a three-year
consulting agreement with Synergistic Connections, Inc. The Company will
pay $5,000 per month for consulting services. Also in connection with the
agreement, Parent and Subsidiary entered into a three-year finder agreement
with Corporate Dynamics, Inc. The Company will pay 5% of the first
$3,000,000, 4% of the next $3,000,000, 3% of the next $3,000,000, and 2% of
any additional funding provided through the efforts of Corporate Dynamics,
Inc. As a result of the agreement, the former officers of the Company
resigned and new officers were appointed. The acquisition closed June 17,
2002 and has been accounted for as a purchase of Subsidiary. The Company
recorded goodwill of $60,321 as a result of the acquisition.
The following is the unaudited condensed balance sheet of Subsidiary at
June 17, 2002, the date the acquisition closed.
June 17,
2002
---------
ASSETS:
Accounts receivable . . . . . . . . . . . . . $ 64,740
Related party receivable. . . . . . . . . . . 52,500
Property and equipment, net . . . . . . . . . 1,176
---------
$ 118,416
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Bank overdraft. . . . . . . . . . . . . . . . $ 17,283
Accounts payable. . . . . . . . . . . . . . . 3,784
Accrued expenses. . . . . . . . . . . . . . . 56,516
Related party payable . . . . . . . . . . . . 6,666
Common stock. . . . . . . . . . . . . . . . . 1,500
Retained earnings . . . . . . . . . . . . . . 32,667
---------
$ 118,416
=========
12
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - ACQUISITION [CONTINUED]
The following is an unaudited proforma condensed consolidated income
statement as if the acquisition had occurred on December 31, 2001:
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2002 2002
---------------- ---------------
Revenues. . . . . . . . . $ 118,200 $ 413,220
Expenses. . . . . . . . . (110,714) (399,114)
Other expenses. . . . . . - (1,122)
---------------- ---------------
Income from operations. . 7,486 12,984
Tax expense . . . . . . . (3,659) (11,399)
---------------- ---------------
Net Income. . . . . . . . $ 3,827 $ 1,585
================ ===============
Earnings per common share $ .00 $ .00
================ ===============
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
September 30, December 31,
2002 2001
----------------- -------------
Office equipment . . . . . . . $ 600 $ -
Website. . . . . . . . . . . . 1,541 -
----------------- -------------
2,141 -
Less: accumulated depreciation (144) -
----------------- -------------
Net property and equipment . . $ 1,997 $ -
================= =============
Depreciation expense for the nine months ended September 30, 2002 and 2001
was $120 and $0, respectively.
NOTE 4 - NOTE RECEIVABLE
On February 27, 2002, the Company received a $30,000 note receivable from
Phase One, LLC for the issuance of common stock [See Note 8]. The note was
due May 28, 2002 and accrued interest at 10% per annum. The note was paid
on March 31, 2002 with no interest being recognized on the note.
13
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - GOODWILL
The Company has no indefinite-life or definite-life intangible assets. The
following is a summary of the Company's goodwill.
Goodwill at December 31, 2001 $ -
Goodwill from acquisition of Subsidiary 60,321
-----------
Goodwill at September 30, 2002. . . . . $ 60,321
===========
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following at:
September 30, December 31,
2002 2001
---------------- -------------
Interest payable . . . . . . . . . . $ - $ 948
Accrued payroll and related expenses 90,000 -
---------------- -------------
Total accrued expenses . . . . . . . $ 90,000 $ 948
================ =============
NOTE 7 - NOTES PAYABLE
On February 27, 2002, the Company signed a $40,000 convertible note payable
to McKinley Enterprises, Inc. Profit Sharing Plan. The note was due
February 27, 2003, accrued interest at 8% per annum and was convertible
after 90 days to 500,000 shares of common stock. On May 30, 2002, the note
and the related accrued interest of $789 were converted to common stock
[See Note 8].
On January 25, 2002 the Company signed a $30,000 convertible note payable
to Phase One, LLC. The note was due January 25, 2003, accrued interest at
10% per annum and was convertible to 3,000,000 shares of common stock. On
February 27, 2002, the note was converted to common stock and, accordingly,
no interest was recognized on the note [See Note 8].
On February 11, 2002, the Company signed a $50,000 convertible note payable
to Phase One, LLC. The note was due February 11, 2003, accrued interest at
10% per annum and was convertible to 5,000,000 shares of common stock. On
February 27, 2002, the note was converted to common stock and, accordingly,
no interest was recognized on the note [See Note 8].
On July 11, 2001, the Company signed a $20,000 note payable to Growth
Ventures Inc., Pension Plan and Trust. The note was due October 9, 2001 but
was extended through February 11, 2002. The note accrued interest at 10%
per annum. On February 27, 2002, the Company issued 500,000 shares of
common stock as full payment of the $20,000 note payable and its accrued
interest of $1,281 [See Note 8].
14
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - CAPITAL STOCK
PREFERRED STOCK - The Company has authorized 10,000,000 shares of preferred
stock, no par value, with such rights, preferences and designations and to
be issued in such series as determined by the Board of Directors. No shares
were issued and outstanding at September 30, 2002 and December 31, 2001.
COMMON STOCK - The Company has authorized 100,000,000 shares of common
stock with no par value. In August 2002, the Company issued 584,000 shares
of common stock that had been registered on Form S-8 with 500,000 shares
going to consultants for services valued at $125,000, or $.25 per share,
and with 84,000 shares going to an attorney for services valued at $21,000,
or $.25 per share. At September 30, 2002, $65,554 of the combined services
have not yet been rendered and have been recorded as prepaid expenses.
In June 2002, in connection with a plan of reorganization, the Company
issued 3,196,873 shares of its previously authorized but unissued common
stock [See Note 2].
In May 2002, the Company issued 500,000 shares of restricted common stock
to convert a $40,000 note payable and the related accrued interest of $789,
or $.081578 per share.
In April 2002, the Company issued an additional 2,000,000 shares of
restricted common stock to Phase One, LLC for cash of $20,000, or $.01 per
share.
In March 2002, the Company issued 1,600,000 shares of common stock that had
been registered on Form S-8 with 1,100,000 shares going to the Company's
former president for services rendered valued at $22,000, or $.02 per
share, and with 500,000 shares going to an attorney for services rendered
valued at $10,000, or $.02 per share.
In February and March 2002, the Company repurchased and cancelled 3,198,736
shares of the Company's issued and outstanding common stock for cash in the
amount of $79,500. The Company had offered to repurchase the shares for an
amount up to the original sales price because the National Association of
Securities Dealers had imposed a special restriction on the trading of
these shares.
In February 2002, the Company issued 11,000,000 shares of restricted common
stock to Phase One, LLC for a $30,000 note receivable and to convert a
$30,000 note payable and a $50,000 note payable to common stock. Total
consideration amounted to $110,000, or $.01 per share. This issuance
resulted in a change in control of the Company.
In February 2002, the Company issued 125,000 shares of common stock that
had been registered on Form S-8 to Synergistic Connections, Inc. for
services rendered valued at $2,500, or $.02 per share.
In February 2002, the Company issued 450,000 shares of restricted common
stock to Synergistic Connections, Inc. for services rendered valued at
$5,000, or $.01 per share.
In February 2002, the Company issued 500,000 shares of common stock for
debt relief of $21,281, or $.04256 per share.
15
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - CAPITAL STOCK [CONTINUED]
In January 2001, the Company entered into a stock subscription agreement
with Jean Hullinger, a former director of the Company. The agreement was
originally for the sale of 7,500,000 shares of the Company's common stock
for $15,000, or $.002 per share. However, on August 3, 2001, the Company
renegotiated the stock transaction and both parties agree that only 750,000
shares should have been issued for $15,000 or $.02 per share. Accordingly,
the additional 6,750,000 shares have been cancelled. The financial
statements have been restated to reflect the issuance of 750,000 shares as
of February 2001.
In August 2000, the Company issued 1,500,000 shares of common stock to
Steve White, the Company's former president, for cash in the amount of
$30,000, or $.02 per share. This issuance resulted in a change in control
of the Company, the Company's officers and directors resigned and new
officers and directors were appointed.
In July 2000, the Company effected a 1 for 50 reverse stock split and
issued 1,300 shares of common stock as part of the stock split.
From February through July 2000, the Company issued 377,184 shares of
common stock for cash of $18,859, or $.05 per share.
STOCK OPTIONS - In March 2002, the Company granted 10,000 stock options
each to two of the Company's directors, totaling 20,000 options. The
options vested immediately and are exercisable at $.05 per share for two
years. The Company has adopted the disclosure only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." No Compensation cost has been recognized for the stock
options under APB 25 since the market value of the Company's common stock
was less than the exercise price of the options on the date of grant. Had
compensation cost for the Company's stock options been determined based on
the fair value at the grant date consistent with the provisions of SFAS No.
123, the Company's net income (loss) and earnings (loss) per share would
have been reduced to the pro forma amounts indicated below:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- -----------------------
2002 2001 2002 2001
---------- ---------- --------- ------------
Net Income (Loss). . As reported $ 3,827 $ (9,562) $(25,052) $(36,483)
Pro forma. . . . . $ 3,827 $ (9,562) $(25,089) $(36,483)
Earnings (loss) per
common share As reported $ .00 $ (.00) $ (.00) $ (.01)
Pro forma. . . . . $ .00 $ (.00) $ (.00) $ (.01)
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model, with the following
assumptions used for the grants during March 2002: risk-free interest rate
of 3.58%, expected dividend yield of zero, expected lives of 2 years and
expected volatility of 100%.
16
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
No. 109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards.
The Company has available at September 30, 2002 and December 31, 2001
unused operating loss carryforwards of approximately $139,000 and $92,000,
respectively, which may be applied against future taxable income and which
expire in various years through 2022. The amount of and ultimate
realization of the benefits from the deferred tax assets for income tax
purposes is dependent, in part, upon the tax laws in effect, the future
earnings of the Company, and other future events, the effects of which
cannot be determined. Because of the uncertainty surrounding the
realization of the deferred tax assets, the Company has established a
valuation allowance equal to the tax effect of the deferred tax assets and,
therefore, no deferred tax assets have been recognized. The net deferred
tax assets, which consist of accrued compensation and net operating loss
carryovers, are approximately $83,000 and $31,000 as of September 30, 2002
and December 31, 2001, respectively, with an offsetting valuation allowance
of the same amount resulting in a change in the valuation allowance of
approximately $52,000 during the nine months ended September 30, 2002. Due
to a change in control, the amount of the net operating loss carryforward
available to offset taxable income is subject to an annual limitation.
Because of this limitation, approximately $16,000 of taxable income could
not be offset, creating a tax expense of $3,659 for the nine months ended
September 30, 2002.
NOTE 10 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America,
which contemplate continuation of the Company as a going concern. However,
the Company has just recently commenced operations and all of their
revenues have been from one customer. These factors raise substantial doubt
about the ability of the Company to continue as a going concern. In this
regard, management is proposing to raise any necessary additional funds not
provided by operations through loans or through sales of their common stock
or through a possible business combination with another company. There is
no assurance that the Company will be successful in raising this additional
capital or achieving profitable operations. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
NOTE 11 - RELATED PARTY TRANSACTIONS
PAYABLE - An officer/shareholder of the Company has paid expenses on behalf
of the Company. At September 30, 2002, the Company owes $3,566 to the
officer/shareholder for non-reimbursed expenses.
MANAGEMENT COMPENSATION - During the nine months ended September 30, 2002
and 2001, the Company has expensed $37,500 and $17,500, respectively, as
salary expense to the Company's president. Total accrued salary payable at
September 30, 2002 amounted to $90,000 which includes amounts accrued prior
to the acquisition of Subsidiary.
17
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - RELATED PARTY TRANSACTIONS [CONTINUED]
In February 2002, the Company paid $500 to each of its three former
directors, totaling $1,500.
In March 2002, the Company granted 10,000 options to each of two of the
Company's directors [See Note 8].
OFFICE SPACE - The Company pays $100 per month on an as-needed,
month-to-month basis for office space. Total rents paid amounted to $300
and $400 for the nine months ended September 30, 2002 and 2001,
respectively.
PURCHASE AND SALE AGREEMENT - On September 15, 2002, the Company signed a
Purchase and Sale Agreement with Gaelic Capital Group ["Gaelic"], an entity
controlled by the Company's president. The agreement calls for the Company
to pay $94,500 to Gaelic for the right to receive all of the receipts that
were then owed to Gaelic as part of a February 11, 2002 agreement
["February Agreement"] between Gaelic and Parkview Community Hospital
Medical Center ["Parkview"]. The Company had made advances totaling $94,500
in anticipation of the agreement. Under the February Agreement, the Company
will receive 6% of the sales price for the sale of the peripheral assets of
Parkview. During the nine months ended September 30, 2002 and 2001, the
Company recognized $123,600 and $0, respectively, as part of this
agreement.
NOTE 12 - EARNINGS (LOSS) PER SHARE
The following data show the amounts used in computing earnings (loss) per
share for the periods:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ -------------------------
2002 2001 2002 2001
----------- ----------- ------------- -----------
Income (loss) from continuing
operations available to common
stockholders (numerator). . . . $ 3,827 $ (9,562) $ (25,052) $ (36,483)
----------- ----------- ------------- -----------
Weighted average number of
common shares outstanding
used in earnings (loss) per
common share (denominator). . . 20,077,565 3,656,863 14,771,449 3,494,775
----------- ----------- ------------- -----------
Weighted average number of
common shares outstanding
used in diluted earnings (loss)
per common share (denominator). 20,095,870 N/A N/A N/A
----------- ----------- ------------- -----------
For the nine months ended September 30, 2002, the Company had 20,000
outstanding options which were not used in the computation of loss per
share because their effect would be anti-dilutive.
18
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - COMMITMENTS AND AGREEMENTS
CONSULTING AGREEMENTS - On January 15, 2002, the Company entered into a
six-month consulting agreement with Synergistic Connections, Inc. to assist
the Company in selecting and negotiating the acquisition of potential
merger candidates. The Company paid $60,000 and issued stock valued at
$12,500 to Synergistic Connections, Inc. as part of this agreement.
On April 1, 2002, the Company signed a three-year Consulting Agreement with
Synergistic Connections, Inc. The agreement called for the Company to pay
$5,000 per month for consulting services. In August 2002, this agreement
was replaced by separate agreements with Darrell Fox.
On April 1, 2002, the Company signed a three-year Consulting Agreement with
Corporate Dynamics, Inc. The agreement called for the Company to pay $5,000
per month for consulting services. In August 2002, this agreement was
replaced by separate agreements with Jeffrey Dunster.
On August 22, 2002, the Company signed a three-year Consulting Agreement
with Darrell Fox to replace the Synergistic Connections Consulting
Agreement. The agreement calls for the Company to pay $5,000 per month for
consulting services. The agreement also provided for the issuance of
240,000 shares of the Company's common stock to pay for services valued at
$60,000.
On August 22, 2002, the Company signed a three-year Consulting Agreement
with Jeffrey Dunster to replace the Corporate Dynamics Consulting
Agreement. The agreement calls for the Company to pay $5,000 per month for
consulting services. The agreement also provided for the issuance of
240,000 shares of the Company's common stock to pay for services valued at
$60,000.
On August 22, 2002, the Company signed a Consulting Agreement with Cletha
A. Walstrand to provide consulting services to the Company as needed. The
agreement also provided for the issuance of 84,000 shares of the Company's
common stock to pay for services valued at $21,000.
COMPENSATION AGREEMENTS - On March 5, 2002, the Company signed a
compensation agreement with Steve White to act as the Company's Chief
Executive and Financial Officer. The agreement also provided for the
issuance of 1,100,000 shares of the Company's common stock to pay for Steve
White's accrued salary through December 31, 2001. This agreement was
terminated on March 15, 2002 when Steve White resigned.
On March 5, 2002, the Company signed a compensation agreement with Cletha
A. Walstrand, P.C. to act as the Company's general legal counsel. The
agreement also provided for the issuance of 500,000 shares of the Company's
common stock to pay for the services of Cletha A. Walstrand, P.C. through
February 28, 2002.
19
AMERICAN HOSPITAL RESOURCES, INC. AND SUBSIDIARY
(Formerly New Horizon Education, Inc.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - COMMITMENTS AND AGREEMENTS [CONTINUED]
OFFER TO PURCHASE - On September 17, 2002, the Company signed an Offer to
Purchase to acquire all of the assets of Quantum Pharmacy Alliance, Ltd
["Quantum"]. The offer calls for the Company to purchase all of the assets
of Quantum for one of two financing alternatives at Quantum's option. The
first alternative is $250,000 cash, $500,000 as a five-year, 6% note
payable and $400,000 as 6% convertible preferred stock. The second
alternative is $650,000 as a five-year, 6% note payable and $850,000 as 6%
convertible preferred stock. The offer was to expire on September 30, 2002
but has been extended through November 30, 2002.
NOTE 14 - CONCENTRATIONS OF CREDIT RISK
ACCOUNTS RECEIVABLE - At September 30, 2002, the Company has accounts
receivable of $225,900 which is owed by only one customer.
SIGNIFICANT CUSTOMER - During the nine months ended September 30, 2002, the
Company had one customer that accounted for all of the Company's revenues.
The loss of this significant customer could adversely affect the Company's
business and financial position.
NOTE 15 - SUBSEQUENT EVENTS
COMMON STOCK ISSUANCE - On October 31, 2002, the Company issued 200,000
shares of restricted common stock for cash of $50,000, or $.25 per share.
OFFERS TO PURCHASE - On October 31, 2002, the Company signed an Offer to
Purchase with Coastalmed Inc. and Coastalmed of Panama City, Inc. The offer
calls for the Company to purchase all of the assets of Coastalmed Inc. and
Coastalmed of Panama City, Inc. for $7,000,000 payable as $4,000,000 cash,
$1,375,000 as a five-year, 6.5% note payable with interest-only payment for
the first 18 months and $1,625,000 as 6% convertible preferred stock with
dividends payable quarterly.
On November 1, 2002, the Company signed an Offer to Purchase with National
Institutional Pharmacy Services, Inc. ["NIPS"]. The offer calls for the
Company to purchase all of the assets of NIPS for $1,330,000 payable as
$350,000 as assumption of accrued payroll and accounts payable, $300,000 as
assumption of lease obligations, $480,000 as assumption of debt owed to
AmerisourceBergen and $200,000 as a one-year, 6% note payable due in 12
monthly installments of $18,101. The offer also calls for the Company to
advance $200,000 to NIPS as a bridge loan secured by all the assets of
NIPS.
STOCK OPTIONS - On November 1, 2002, the Company granted 2,000,000 stock
options to Spice Island Products Corporation. The options vested
immediately and are exercisable at $.50 per share for three years.
EQUITY LINE OF CREDIT AGREEMENT - The Company has entered into an Equity
Line of Credit Agreement with Cornell Capital Partners, LP ["Cornell"]. The
agreement requires Cornell to purchase up to $10,000,000 of the Company's
common stock at approximately 90% of market price. The agreement allows the
Company to make requests for funds in $150,000 increments every seven
trading days over the next two years. The agreement also provides for a
commitment fee of approximately $290,000 of the Company's common stock and
other provisions.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
FORWARD-LOOKING STATEMENT NOTICE
When used in this report, the words "may," "will," "expect," "anticipate,"
"continue," "estimate," "project," "intend," and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934 regarding events, conditions, and financial trends that may affect the
Company's future plans of operations, business strategy, operating results, and
financial position. Persons reviewing this report are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Such factors are discussed under the "Item 2. Management's Discussion
and Analysis of Financial Condition or Plan of Operations," and also include
general economic factors and conditions that may directly or indirectly impact
the Company's financial condition or results of operations.
DESCRIPTION OF BUSINESS
GENERAL
American Hospital Resources, Inc. ("American Hospital Resources" or the
"Company") originally incorporated in the State of Utah on May 9, 1972, under
the name High-Line Investment & Development Company. In 1977, the Company
changed its name to Gayle Industries, Inc., and in 1978 the Company merged into
its subsidiary, Swing Bike, keeping the Swing Bike name. In 1979 the Company
changed its name from Swing Bike to Horizon Energy Corp. In 1992 the Company
changed its name to Millennium Entertainment Corp.
In 1993 the Company changed its name to New Horizon Education, Inc. and
implemented a business plan focusing on marketing computer education programs.
Later that year, the Company formed a new subsidiary, Sunset Horizon, Inc. for
the purpose of merging with Ruff Network Marketing, Inc. The subsidiary,
Sunset Horizon, Inc., owned the marketing rights to the computer education
programs and Ruff Network Marketing, Inc. provided the marketing network. The
Company was not successful in its marketing activities and in 1995 the Company
sold its assets and suspended operations. In 1997 the Company sold its
subsidiary and became essentially dormant from 1998 through 2000.
In 2001, the Company recommenced operations and in June of 2002, the Company
finalized an Agreement and Plan of Reorganization with American Hospital
Resources, Inc. Under the Agreement, American Hospital Resources Inc. became a
wholly owned subsidiary of the Company and the Company changed its name to
American Hospital Resources, Inc. The Company also authorized a class of
10,000,000 shares of Preferred Stock at no par value per share and changed its
business strategy to focus on providing health care services and management.
The Company's common stock is quoted on the OTCBB under the symbol "AMHR."
NATURE OF BUSINESS
American Hospital Resources is a healthcare services company that provides
hospital and acute care consulting and management services including crisis
management and financial re-structuring. The Company is currently focusing on
the acquisition and consolidation of profitable pharmacy outsourcing businesses.
21
These consolidated pharmacy outsourcing and materials management companies
provide pharmacy management services and pharmaceutical supplies to acute care
hospitals and long-term care facilities such as nursing homes and hospices. As
part of its business strategy, the Company has structured a program that allows
profitable regional pharmacy outsourcers to merge into a national team, allowing
them to benefit from the enhanced buying power and market presence of a
consolidated healthcare entity.
Since resuming operations, the Company has been actively engaged in identifying
pharmaceutical and healthcare companies to join its healthcare network. The
Company is currently negotiating to acquire two pharmaceutical outsourcing
companies based in Texas and another company based in Florida that provides
pharmaceutical outsourcing and consulting services. The Company intends to
continue seeking suitable healthcare and pharmaceutical companies for potential
acquisition, consulting or management opportunities.
THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
During the three months ended September 30, 2002, the Company generated revenue
of $118,200 and had general and administrative expenses of $110,714. These
expenses consisted of general administrative, legal and professional expenses,
and accrued deferred salaries. As a result, the Company had pre-tax earnings of
$7,486 for the quarter ended September 30, 2002. The Company also had tax
expense of $3,659 resulting in net income of $3,827 for the three months ended
September 30, 2002.
Total revenue for the nine months ended September 30, 2002 was $176,300.
General and administrative expenses for this period were $196,571 consisting of
administrative, consulting, legal and accounting costs as well as accrued unpaid
salaries. The Company also had tax expense of $3,659 and interest expense of
$1,122 during this period, resulting in a net loss of $25,052 through the first
nine months of 2002.
By comparison, the Company did not generate any revenue during the three and
nine month periods ended September 30, 2001. Increased revenue in 2002 is due to
the Company entering into an agreement and plan of reorganization in which the
Company acquired a subsidiary, retained new management and implemented its
current business strategy.
General and administrative expenses consisting of corporate administration,
legal and professional fees, accounting costs, and accrued compensation for the
three month and nine month periods ended September 30, 2001, were $9,118 and
$36,039, respectively. The Company also had interest expense of $444 during the
three and nine months ended September 30, 2001. As a result of the foregoing
factors, net loss was $9,562 and $36,483 for the three and nine months ended
September 30, 2001, respectively.
Higher general and administrative expenses in 2002 are partially attributable to
professional costs associated with the change in control of the Company and the
implementation of its business plan. The Company also had consulting fees
totaling $103,229 during the first nine months of 2002. In addition, a portion
of general and administrative expenses during the first nine months of 2002 and
2001 were the result of accrued unpaid salaries due to the Company's president
under a non-formalized employment agreement. Management compensation expense
for the nine months ended September 30, 2002 totaled $37,500, representing
approximately 19% of the Company's expenses for that period. By comparison,
management compensation expense for the first nine months of 2001 was $17,500,
representing approximately 49% of the Company's expenses for that period. Total
accrued salary payable at September 30, 2002 amounted to $90,000 which includes
amounts accrued prior to the acquisition of Subsidiary. The Company is
currently negotiating a formal compensation agreement with its president.
22
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had total assets of $356,046. Total current
assets consisted of $2,274 in cash and $225,900 in accounts receivable. Other
assets consisted of $1,997 in property and equipment, $65,554 in prepaid
expenses and $60,321 in goodwill. By comparison, at December 31, 2001 the
Company's assets consisted of $80 in cash.
Current liabilities at September 30, 2002 totaled $105,513 consisting of $8,288
in accounts payable, $90,000 in accrued expenses, $3,566 payable to a related
party and $3,659 in income taxes payable. Liabilities at December 31, 2001
totaled $54,534 consisting of $11,086 in accounts payable, $948 in accrued
expenses, $22,500 payable to a related party and $20,000 in notes payable.
The Company believes that its cash needs can be met for the next twelve months
with cash on hand, short and long-term investments, anticipated cash collections
from accounts receivable and continuing operations. Should it become necessary
to raise additional capital, the Company may consider securing loans from
officers and directors, selling common stock of the Company or entering into
debt financing.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90-day period prior to the date of this report, we evaluated the
effectiveness and operation of our disclosure controls and procedures pursuant
to Rule 13a-14 of the Securities Exchange Act of 1934. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective. There have
been no significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Subsequent to the date of this report, on November 1, 2002, the Company granted
a stock option to Spice Island Products Corp. The option allows Spice Island to
purchase up to 2,000,000 shares of the Company's common stock at $0.50 per share
at any time between November 1, 2002 and November 1, 2005. The securities were
offered in a private transaction without registration in reliance on the
exemption provided by Section 4(2) of the Securities Act. No broker was
involved and no commissions were paid in the transaction. No shares have been
purchased under the option as of the filing date of this Report.
Subsequent to the date of this report, on October 31, 2002, the Company issued
200,000 shares of restricted common stock for cash of $50,000, or $.25 per share
to two accredited investors. The securities were sold in a private transaction
without registration in reliance on the exemption provided by Section 4(2) of
the Securities Act. The investors had pre-existing relationships with American
Hospital Resources and had access to all material information pertaining to the
Company's financial condition. No broker was involved and no commissions were
paid in the transaction.
In August 2002, the Company issued 584,000 shares of common stock that had been
registered on Form S-8 as filed with the Securities and Exchange Commission on
August 27, 2002. Two individuals received 500,000 shares for consulting
services valued at $125,000, or $.25 per share, and an attorney received 84,000
shares for legal services valued at $21,000, or $.25 per share. At September
30, 2002, $65,554 of the combined services have not yet been rendered and have
been recorded as prepaid expenses.
23
ITEM 5. OTHER INFORMATION
OFFER TO PURCHASE
On September 17, 2002, the Company signed an Offer to Purchase to acquire all of
the assets of Quantum Pharmacy Alliance, Ltd. The offer calls for the Company
to purchase all of the assets of Quantum for one of two financing alternatives
at Quantum's option. The first alternative is $250,000 cash, $500,000 as a
five-year, 6% note payable and $400,000 as 6% convertible preferred stock. The
second alternative is $650,000 as a five-year, 6% note payable and $850,000 as
6% convertible preferred stock. The offer was to expire on September 30, 2002
but has been extended through November 30, 2002.
RELATED PARTY TRANSACTIONS
On September 15, 2002, the Company signed a Purchase and Sale Agreement with
Gaelic Capital Group, an entity controlled by the Company's president. The
agreement calls for the Company to pay $94,500 to Gaelic for the right to
receive all of the receipts that were then owed to Gaelic as part of a February
11, 2002 agreement between Gaelic and Parkview Community Hospital Medical
Center. The Company had made advances totaling $94,500 in anticipation of the
agreement. Under the February Agreement, the Company will receive 6% of the
sales price for the sale of the peripheral assets of Parkview. During the nine
months ended September 30, 2002 and 2001, the Company recognized $123,600 and
$0, respectively, as part of this agreement.
An officer and shareholder of the Company has paid expenses on behalf of the
Company. At September 30, 2002, the Company owed $3,566 to the officer and
shareholder for these non-reimbursed expenses.
SUBSEQUENT EVENTS
On October 31, 2002, the Company signed an Offer to Purchase with Coastalmed
Inc. and Coastalmed of Panama City, Inc. The offer calls for the Company to
purchase all of the assets of Coastalmed Inc. and Coastalmed of Panama City,
Inc. for $7,000,000 payable as $4,000,000 cash, $1,375,000 as a five-year, 6.5%
note payable with interest-only payment for the first 18 months and $1,625,000
as 6% convertible preferred stock with dividends payable quarterly.
On November 1, 2002, the Company signed an Offer to Purchase with National
Institutional Pharmacy Services, Inc. ("NIPS"). The offer calls for the Company
to purchase all of the assets of NIPS for $1,330,000 payable as $350,000 as
assumption of accrued payroll and accounts payable, $300,000 as assumption of
lease obligations, $480,000 as assumption of debt owed to AmerisourceBergen and
$200,000 as a one-year, 6% note payable due in 12 monthly installments of
$18,101. The offer also calls for the Company to advance $200,000 to NIPS as a
bridge loan secured by all the assets of NIPS.
The Company has entered into an Equity Line of Credit Agreement with Cornell
Capital Partners, LP. The agreement requires Cornell to purchase up to
$10,000,000 of the Company's common stock at approximately 90% of market price.
The agreement allows the Company to make requests for funds in $150,000
increments every seven trading days over the next two years. The agreement also
provides for a commitment fee of approximately $290,000 of the Company's common
stock and other provisions.
24
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
REPORTS ON FORM 8-K:
On July 8, 2002, the Company filed a report on Form 8-K with the Securities and
Exchange Commission finalizing the June 17, 2002 Agreement and Plan of
Reorganization with the Company's subsidiary and changing the Company's name to
American Hospital Resources, Inc.
EXHIBITS:
EXHIBIT NUMBER TITLE LOCATION
10.1 Gaelic Capital Group Purchase and Sale Agreement . . . . . . Attached
10.2 Gaelic Capital Group Engagement Agreement. . . . . . . . . . Attached
10.3 Spice Island Stock Purchase Option . . . . . . . . . . . . . Attached
99.1 Certification of Chief Executive Officer Pursuant to Section Attached
906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer Pursuant to Section Attached
906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN HOSPITAL RESOURCES, INC.
Date: November 22, 2002 By: /s/Antione Gedeon
-----------------------
Antione Gedeon
Chief Financial Officer
Date: November 21, 2002 By: /s/Christopher Wheeler
-----------------------------
Christopher Wheeler
President
25