UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
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(Mark one)
X Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
------- Act of 1934
For the quarterly period ended September 30, 2002
Transition Report Under Section 13 or 15(d) of the Securities Exchange
------- Act of 1934
For the transition period from ______________ to _____________
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Commission File Number: 2-90519
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ProHealth Medical Technologies, Inc
(Exact name of small business issuer as specified in its charter)
Nevada 59-2262718
-------------------------- ----------------------------
(State of incorporation) (IRS Employer ID Number)
211 West Wall Street, Midland, TX 70701-4556
(Address of principal executive offices)
(915) 682-1761
(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: October 10, 2002: 10,145,640
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Transitional Small Business Disclosure Format (check one): YES NO X
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ProHealth Medical Technologies, Inc.
Form 10-QSB for the Quarter ended September 30, 2002
Table of Contents
Page
----
Part I - Financial Information
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 10
Part II - Other Information
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
2
Item 1 - Part 1 - Financial Statements
ProHealth Medical Technologies, Inc.
Balance Sheets
September 30, 2002 and 2001
(Unaudited)
September 30, September 30,
2002 2001
------------- -------------
Assets
Current Assets
Cash in bank $ 135 $ 135
------------- -------------
Total Assets $ 135 $ 135
============= =============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable - trade $ -- $ --
------------- -------------
Total liabilities -- --
------------- -------------
Commitments and contingencies
Shareholders' Equity (Deficit)
Common stock - $0.0001 par value
100,000,000 shares authorized
10,145,640 shares issued and outstanding, respectively 1,015 1,015
Additional paid-in capital 815,182 815,182
Accumulated deficit (816,062) (816,062)
------------- -------------
Total Shareholders' Equity (Deficit) 135 135
------------- -------------
Total Liabilities and Shareholders' Equity $ 135 $ 135
============= =============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
ProHealth Medical Technologies, Inc.
Statements of Operations and Comprehensive Income
Nine and Three months ended September 30, 2002 and 2001
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenues $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
Expenses
General and administrative expenses -- 8,372 -- 8,162
------------- ------------- ------------- -------------
Loss before Income Taxes -- (8,372) -- (8,162)
Provision for Income Taxes -- -- -- --
------------- ------------- ------------- -------------
Net Loss -- (8,372) -- (8,162)
Other Comprehensive Income -- -- -- --
------------- ------------- ------------- -------------
Comprehensive Income $ -- $ (8,372) $ -- $ (8,162)
------------- ------------- ------------- -------------
Loss per weighted-average share
of common stock outstanding,
computed on Net Loss - basic
and fully diluted nil $ (0.01) nil $ (0.01)
============= ============= ============= =============
Weighted-average number of shares
of common stock outstanding 10,145,640 365,420 1 0,145,640 787,814
============= ============= ============= =============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
ProHealth Medical Technologies, Inc.
Statements of Cash Flows
Nine months ended September 30, 2002 and 2001
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
2001 2000
------------- -------------
Cash Flows from Operating Activities
Net Loss $ -- $ (8,372)
Adjustments to reconcile net income to net cash
provided by operating activities
Increase in Accounts payable - trade -- (1,493)
------------- -------------
Net cash used in operating activities -- (9,865)
------------- -------------
Cash Flows from Investing Activities -- --
------------- -------------
Cash Flows from Financing Activities
Proceeds from private placement of common stock -- 10,000
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Increase (Decrease) in Cash and Cash Equivalents -- 135
Cash at beginning of period 135 --
------------- -------------
Cash at end of period $ 135 $ 135
============= =============
Supplemental Disclosures of Interest and Income Taxes Paid
Interest paid during the period $ -- $ --
============= =============
Income taxes paid (refunded) $ -- $ --
============= =============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
ProHealth Medical Technologies, Inc.
Notes to Financial Statements
Note A - Organization and Description of Business
ProHealth Medical Technologies, Inc. (Company) was originally incorporated on
January 26, 1983 under the laws of the State of Florida as Datalink Systems,
Inc.
The Company has had no operations, assets or liabilities since 1989. The Company
intends to locate and combine with an existing, privately-held company which is
profitable or, in management's view, has growth potential, irrespective of the
industry in which it is engaged. However, the Company does not intend to combine
with a private company which may be deemed to be an investment company subject
to the Investment Company Act of 1940. A combination may be structured as a
merger, consolidation, exchange of the Company's common stock for stock or
assets or any other form which will result in the combined enterprise's becoming
a publicly-held corporation.
Note B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
adopted a year-end of December 31.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB for the year ended
December 31, 2001. The information presented within these interim financial
statements may not include all disclosures required by accounting principles
generally accepted in the United States of America and the users of financial
information provided for interim periods should refer to the annual financial
information and footnotes when reviewing the interim financial results presented
herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending December 31, 2002.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
For segment reporting purposes, the Company operated in only one industry
segment during the periods represented in the accompanying financial statements
and makes all operating decisions and allocates resources based on the best
benefit to the Company as a whole.
6
ProHealth Medical Technologies, Inc.
Notes to Financial Statements - Continued
Note C - Going Concern Uncertainty
The Company's majority stockholder maintains the corporate status of the Company
and provides all nominal working capital support on the Company's change in
control in November 1999.
In September 2001, the Company sold 10,000,000 restricted, unregistered shares
of common stock at $0.001 per share, for gross proceeds of $10,000, to the
Company's President to provide working capital to satisfy all debts incurred in
the maintenance of the corporate entity.
Because of the Company's lack of operating assets, the Company's continuance is
fully dependent either future sales of securities or upon its current management
and/or advances or loans from significant stockholders or corporate officers to
provide sufficient working capital to preserve the integrity of the corporate
entity.
There is no assurance that the Company will be able to obtain additional funding
through the sales of additional securities or, that such funding, if available,
will be obtained on terms favorable to or affordable by the Company.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Note D - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
2. Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. At September 30, 2002 and 2001, the deferred tax asset and deferred
tax liability accounts, as recorded when material to the financial
statements, are entirely the result of temporary differences. Temporary
differences represent differences in the recognition of assets and
liabilities for tax and financial reporting purposes, primarily accumulated
depreciation and amortization, allowance for doubtful accounts and vacation
accruals.
7
ProHealth Medical Technologies, Inc.
Notes to Financial Statements - Continued
Note D - Summary of Significant Accounting Policies - Continued
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 2002 and 2001,
respectively, the Company had no warrants and/or options outstanding.
Note E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
Note F - Income Taxes
The components of income tax (benefit) expense for the nine months ended
September 30, 2002 and 2001, respectively, are as follows:
Nine months Nine months
ended ended
September 30, September 30,
2002 2001
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Federal:
Current $ -- $ --
Deferred -- --
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-- --
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State:
Current -- --
Deferred -- --
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-- --
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Total $ -- $ --
============= =============
8
ProHealth Medical Technologies, Inc.
Notes to Financial Statements - Continued
Note F - Income Taxes - Continued
At September 30, 2002, as a result of a November 1999 change in control, the
Company has a net operating loss carryforward of approximately $12,700 to offset
future taxable income. Subject to current regulations, this carryforward will
begin to expire in 2019. The amount and availability of the net operating loss
carryforwards may be subject to limitations set forth by the Internal Revenue
Code. Factors such as the number of shares ultimately issued within a three year
look-back period; whether there is a deemed more than 50 percent change in
control; the applicable long-term tax exempt bond rate; continuity of historical
business; and subsequent income of the Company all enter into the annual
computation of allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for the nine months ended September
30, 2002 and 2001, respectively, differed from the statutory federal rate of 34
percent as follows:
Nine months Nine months
ended ended
September 30, September 30,
2002 2001
------------- -------------
Statutory rate applied to loss before income taxes $ -- $ (2,846)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset -- 2,846
------------- -------------
Income tax expense $ -- $ --
============= =============
Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities give rise to deferred tax assets and liabilities
as of September 30, 2001 and 2000, respectively:
September 30, September 30,
2002 2001
------------- -------------
Deferred tax assets
Net operating loss carryforwards $ 4,300 $ 4,080
Less valuation allowance (4,300) (4,080)
------------- -------------
Net Deferred Tax Asset $ -- $ --
============= =============
Note G - Common Stock Transactions
On September 25, 2001, the Company sold 10,000,000 shares of restricted,
unregistered common stock at $0.001 per share for gross proceeds of $10,000,
pursuant to a private placement memorandum to the Company's President and Chief
Executive Officer. These funds were used to support the working capital needs of
the Company. The Company relied upon Section 4(2) of The Securities Act of 1933,
as amended, for an exemption from registration on these shares.
9
Part I - Item 2
Management's Discussion and Analysis of Financial Condition and Plan of
Operation
(1) Caution Regarding Forward-Looking Information
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) Results of Operations, Liquidity and Capital Resources and Plan of Operation
Results of Operations
---------------------
The Company had no revenue for the respective nine and three month periods ended
September 30, 2002 and 2001, respectively.
General and administrative expenses for the nine months ended September 30, 2002
and 2001 were approximately $-0- and $8,372, respectively. General and
administrative expenses during these years consisted principally of fees
associated with the maintenance of the Company's shareholder ledger. The Company
realized a net loss of approximately $-0- and $8,372 for the nine months ended
September 30, 2002 and 2001, respectively.
The Company does not expect to generate any meaningful revenue or incur more
than nominal operating expenses unless and until such time that the Company
begins meaningful operations.
Liquidity and Capital Resources
-------------------------------
At September 30, 2002, and for all periods subsequent thereto, the Company had
working capital and cash on deposit of approximately $135.
On September 25, 2001, the Company sold 10,000,000 shares of restricted,
unregistered common stock at $0.001 per share for gross proceeds of $10,000,
pursuant to a private placement memorandum to Glenn A. Little, the Company's
President and Chief Executive Officer. These funds were used to support the
working capital needs of the Company. The Company relied upon Section 4(2) of
The Securities Act of 1933, as amended, for an exemption from registration on
these shares.
10
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Plan of Business
----------------
General
-------
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal shareholders or general
partners:
11
(1) will not have been convicted of securities fraud, mail fraud, tax
fraud, embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of
shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
--------
99.1 CEO/CFO Certification Pursuant to 18 USC, Section 1330, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Reports on Form 8-K
-------------------
None
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ProHealth Medical Technologies, Inc.
Dated: October 10, 2002 /s/ Glenn A. Little.
---------------- ------------------------------------
Glenn A. Little
President, Chief Executive Officer
Chief Financial Officer and Director
13