UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14A
of the
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X]
Preliminary Proxy Statement
[ ]
Confidential, for Use of the Commission Only [as permitted by Rule 14a-6(e)(2)]
[ ]
Definitive Proxy Statement
[ ]
Definitive Additional Materials
[ ]
Soliciting Material Pursuant to Section 240.14a-12
HEALTHBRIDGE, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ]
No fee required.
[X]
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: common stock
2) Aggregate number of securities to which transaction applies:16,500,000
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): $1.165 (the average of the high and low price on May 30, 2006)
4) Proposed maximum aggregate value of transaction: 19,222,500
5) Total fee paid: $3,844.50
[ ]
Fee paid previously with preliminary materials.
[ ]
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
HEALTHBRIDGE, INC.
2610-1066 West Hastings Street,
Vancouver, British Columbia V6E 3X2 Canada
Telephone (604) 602-1717
June 9, 2006
Dear Stockholder:
Healthbridge, Inc., (“Corporation”) cordially invites you to attend a Special Meeting of Stockholders (“Special Meeting”) to be held at 10:00 a.m., Pacific Standard Time, on Friday the 30th of June, 2006, at 2610-1066 West Hastings Street, Vancouver, British Columbia, Canada. Please find enclosed a notice of special meeting, a proxy statement describing the business to be transacted at the meeting, and a proxy form for use in voting at the meeting.
At the Special Meeting, you will be asked to vote on the following matters: (i) changing the name of the Corporation; (ii) ratifying agreements to acquire Providence Exploration, LLC, as a wholly owned subsidiary; and (iii) increasing the number of authorized common stock of the Corporation.
In addition to these matters, we will report on our progress and provide an opportunity for questions of general interest to our stockholders.
Thank you.
Sincerely,
_________________
Nora Coccaro, Chief Executive Officer and Director
HEALTHBRIDGE, INC.
NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given from Healthbridge, Inc., (“Corporation”) that a Special Meeting of Stockholders (“Special Meeting”) will be held at 10:00 a.m., Pacific Standard Time, on Friday the 30th of June, 2006, at 2610-1066 West Hastings Street, Vancouver, British Columbia, Canada. At the Special Meeting, stockholders will vote on the following matters:
| (1) | A proposal to amend the Corporation’s Amended and Restated Articles of Incorporation by changing the name of the Corporation to “Providence Resources, Inc.”; |
| (2) | A proposal to acquire Providence Exploration, LLC, as a wholly owned subsidiary pursuant to the Securities Exchange Agreement and the Note Exchange Agreement; and |
| (3) | A proposal to amend the Corporation’s Amended and Restated Articles of Incorporation to increase the Corporation’s authorized common stock from fifty million (50,000,000) to one hundred million (100,000,000) shares. |
Information regarding the above matters is set forth in the proxy statement that accompanies this notice.
The board of directors of the Corporation has fixed the close of business on June 9, 2006, as the record date for determining stockholders entitled to notice of and to vote at the Special Meeting. A complete list of the stockholders entitled to notice of and to vote at the Special Meeting will be maintained at the Corporation’s principal executive offices during ordinary business hours for a period of ten days prior to the Special Meeting. The list will be open to the examination of any stockholder for any purpose germane to the Special Meeting during this time. The stockholders list will also be produced at the time and place of the Special Meeting and will be open during the whole time thereof.
By Order of the Board of Directors,
_________________
Nora Coccaro, Chief Executive Officer and Director
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN, DATE, AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE IN THE ENVELOPE PROVIDED. IF YOU DO ATTEND THE MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
NON-U.S. SHAREHOLERS, PLEASE RETURN YOUR EXECUTED PROXY BY FAX TO INTERWEST TRANSFER, ATTN: STACY BANKS, AT (801) 272-3147. MS. BANK’S PHONE NUMBER IS (801) 272-9294.
IF YOU HOLD YOUR SHARES IN “STREET-NAME,” PLEASE NOTE THAT ONLY YOUR BROKERAGE FIRM OR BANK CAN SIGN A PROXY ON YOUR BEHALF, AND ONLY UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. WE URGE YOU TO CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT TODAY, AND INSTRUCT THEM TO EXECUTE A PROXY IN FAVOR OF THE MATTERS PRESENTED IN THE PROXY STATEMENT.
TABLE OF CONTENTS
HEALTHBRIDGE, INC.
PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS
INTRODUCTION
This proxy statement is furnished by Healthbridge, Inc., in connection with the solicitation of proxies for use at the Special Meeting of Stockholders (“Special Meeting”) to be held on Friday the 30th of June, 2006, at 10:00 a.m., Pacific Standard Time, at 2610-1066 West Hastings Street, Vancouver, British Columbia, Canada, and at any and all adjournments thereof. This proxy statement is first being mailed to stockholders on or about June 9, 2006.
Healthbridge, Inc.‘s board of directors has proposed three matters and has solicited the proxy form attached hereto.
Unless we indicate otherwise or unless the context requires otherwise, all references in this proxy statement to “we,” “us,” “our,” or the “Corporation” are to Healthbridge, Inc., and all references to “Providence” mean Providence Exploration, LLC, and its subsidiaries.
QUESTIONS AND ANSWERS
Q. Why did I receive this proxy statement?
A. You received this proxy statement as notice of the Special Meeting pertaining to the following:
(i) changing the Corporation’s name to “Providence Resources, Inc.”;
| (ii) | ratifying the Securities Exchange Agreement and the Note Exchange Agreement to acquire Providence Exploration, LLC, as a wholly owned subsidiary; and |
| (iii) | increasing the Corporation’s authorized common stock from 50,000,000 to 100,000,000. |
Q. Why does the Corporation wish to change its name to “Providence Resources, Inc.”?
| A. | The Corporation proposes an amendment of our articles to change our name to more accurately reflect the Corporation’s business focus in connection with the proposed acquisition of Providence. |
| Q. | Why does the Corporation wish to acquire Providence? |
| A. | Since the discontinuation of medical waste sterilization operations, the Corporation has been searching for a business to acquire. We believe that Providence will make a suitable acquisition. |
| Q. | Why does the Corporation wish to increase the authorized common stock to 100,000,000? |
| A. | The Corporation proposes an amendment of our articles to increase the number of our authorized common stock to enable us to issue the shares required under the terms of the Securities Exchange Agreement and the Note Exchange Agreement in addition to providing us with sufficient authorized common stock to permit future equity financings, complete business acquisitions, build new business relationships or other corporate purposes. |
| Q. | When do you expect the amendments to become effective? |
| A. | If approved at the Special Meeting, the proposed amendments to our articles of incorporation will be effective upon filing with the Texas Secretary of State. The Corporation expects to file the amendments with the Texas Secretary of State as soon as practical after the Special Meeting. |
| Q. | When do you expect the acquisition to be consummated? |
| A. | If ratified at the Special Meeting, the Securities Exchange Agreement and the Note Exchange Agreement will close thereafter. Upon the closing of the agreements, the acquisition will be consummated. |
| Q. | What happens if additional matters are presented at the Special Meeting? |
| A. | No other business will be acted upon at the Special Meeting. |
| Q. | What do I need to do now? |
| A. | Vote, either in person or by proxy. |
Q: What is a proxy?
| A: | A proxy is your legal designation of another person to vote the stock you own. That other person is considered your proxy. If you designate someone as your proxy in a written document, that document also is called a proxy. The Corporation has designated Nora Coccaro, our chief executive officer and a director, to act as proxy for the Special Meeting. |
Q: Who may vote at the Special Meeting?
| A: | You may vote your common stock if the Corporation's records show that you owned your shares as of the close of business on June 9, 2006 (the "Record Date"). You may cast one vote for each share of common stock held by you on all matters presented. As of the Record Date, there were ___________ shares of common stock issued and outstanding. |
Q: What is the voting requirement to approve the proposals?
| A: | For each of the proposals, a simple majority of the quorum of outstanding shares of common stock must vote in favor for the proposal to be approved. Abstentions have the same effect as votes against the proposals. |
| If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute “broker non-votes.” Generally, broker non-votes occur when a beneficial owner fails to give voting instructions with respect to “non-routine” matters. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Therefore, although broker non-votes are counted for purposes of determining a quorum, broker non-votes will not otherwise affect the outcome of any matter being voted on at the meeting. |
| Q. | What is the quorum requirement for the Special Meeting? |
| A. | A majority of the Corporation’s outstanding shares as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum if you (i) are present and vote in person at the meeting, or (ii) have properly submitted a proxy card. |
| Q. | How does the board of directors recommend that I vote? |
| A. | The board of directors recommends that you vote "FOR" each of the proposals |
| Q. | How can I vote my shares in person at the Special Meeting? |
| A. | If your shares are registered directly in your name with the Corporation’s transfer agent, Interwest Transfer, you are considered the “stockholder of record” with respect to those shares the proxy materials and proxy card are being sent directly to you. As the stockholder of record, you have the right to vote in person at the meeting. If you choose to do so, you can bring the enclosed proxy card or vote using the ballot provided at the meeting. However, even if you plan to attend the Special Meeting, the board recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Special Meeting. |
Some of the Corporation’s stockholders hold their shares in street name through a stockbroker, bank, or other nominee rather than directly in their own name. In that case, you are considered the “beneficial owner” of shares held in street name, and the proxy materials are being forwarded to you together with a voting instruction card. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares, giving you the right to vote those shares at the meeting. If you wish to attend the Special Meeting and vote in person, you will need to contact your broker, trustee, or nominee to obtain a legal proxy. |
| Q. | How can I vote my shares without attending the Special Meeting? |
| A. | Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct your vote without attending the Special Meeting by completing and mailing your proxy card or voting instruction card in the enclosed pre-paid envelope. Please refer to the enclosed materials for details. |
| Q. | What happens if I do not give specific voting instructions? |
| A. | If you hold shares as a record holder, and you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our board of directors. If you do not return a proxy and do not vote at the Special Meeting in person, your shares will not be voted. If you hold your shares through a broker, bank, or other nominee and you do not provide instructions on how to vote, your broker or other nominee may have authority to vote your shares on your behalf on matters to be considered at the Special Meeting. |
Q: How can I change my vote after I return my proxy card?
| A: | You may revoke your proxy and change your vote at any time before the final vote at the meeting. You may do this by signing a new proxy card with a later date or by attending the meeting and voting in person. However, your attendance at the meeting will not automatically revoke your proxy unless you vote at the meeting or specifically request in writing that your prior proxy be revoked. |
Q: Does Texas have dissenters' rights of appraisal?
| A: | Stockholders of Texas domestic corporations have no rights of dissent and appraisal under Texas Business Corporations Act, Article 5.11, in connection with the proposals. |
Q: Is my vote confidential?
| A: | Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Corporation or to third parties, except: (i) as necessary to meet applicable legal requirements, (ii) to allow for the tabulation of votes and certification of the vote, and (iii) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy card, which may be forwarded to the Corporation’s management. |
Q: Where can I find the voting results of the Special Meeting?
| A: | The preliminary voting results will be announced at the meeting. The final voting results will be tallied by our transfer agent and published on Form 8-K and Form 10-QSB. |
Q: Why do you need stockholder approval for the proposals?
| A: | We are obligated to seek stockholder approval for Proposal 1 and Proposal 3 pursuant to Texas Business Corporations Act, Article 4.02, and Proposal 2 pursuant to the Texas Business Corporations Act, Article 5.02. |
| A: | We are submitting three separate proposals to our stockholders for their approval. We will not proceed with the name change, Proposal 1, unless the acquisition, Proposal 2, is approved. Proposal 2 is not contingent upon the approval of the other proposals. Proposal 3 will have an impact on future operations of the Corporation but is not contingent upon the approval of the other proposals. |
| A: | The Corporation will pay the costs of the solicitation of proxies (under $7,500). The Corporation may also reimburse brokerage firms and other persons representing beneficial owners of shares for expenses incurred in forwarding the voting materials to their customers who are beneficial owners and obtaining their voting instructions. In addition to soliciting proxies by mail, the Corporation’s board members, officers and employees may solicit proxies on the Corporation’s behalf, without additional compensation, personally or by telephone. |
| A: | A copy of the Corporation’s 2005 year end report on Form 10-KSB may be obtained at no charge by sending a written request to the Corporation’s corporate address. The Form 10-KSB is also available on the Securities and Exchange Commission’s website at www.sec.gov. |
| Q. | Whom can I contact with questions? |
| A. | If you have any questions about any of the actions to be taken by the Corporation, please contact the Corporation’s chief executive officer, Nora Coccaro, at (604) 838-9797. |
SUMMARY TERM SHEET FOR PROPOSAL 2
This summary highlights selected information from this proxy statement regarding the acquisition and may not contain all of the information that is important to you. To understand the acquisition fully, and for a more complete description of the legal terms of the acquisition, you should carefully read this entire proxy statement, including the Securities Exchange Agreement, dated as of April 10, 2006, attached hereto as Exhibit 1, and the Note Exchange Agreement, dated as of April 10, 2006, attached hereto as Exhibit 2. Further, we have attached a fairness opinion, dated March 27, 2006 as to the equity of the transaction, attached hereto as Exhibit 3. We have included page references in this summary to direct you to the appropriate place in this proxy statement and the exhibits for a more complete description of the topics presented.
CONTACT INFORMATION
Healthbridge, Inc.
2610-1066 West Hastings Street,
Vancouver, British Columbia V6E 3X2 Canada
Telephone (604) 838-9797
Attn: Nora Coccaro
Providence Exploration, LLC
100 Crescent Court, 7th Floor
Dallas, Texas 75201
Telephone: (214) 695-5848
Attn: Abe Janz
BUSINESS CONDUCTED
Healthbridge, Inc. (page 19)
The Corporation is a Texas corporation with executive offices located in Vancouver, British Columbia formally engaged in developing, manufacturing and marketing medical waste sterilization devices. Due to a lack of any significant commercial success with our medical waste sterilization technology the Corporation decided to abandon this business in the fourth quarter of 2005. We have since focused our efforts on locating a business with which to merge or to acquire. On April 10, 2006, the Corporation executed (i) a Securities and Exchange Agreement to acquire Providence, and its wholly owned subsidiaries Providence Resources, LLC, and PDX Drilling I, LLC, and (ii) a Note Exchange Agreement to satisfy the holders of certain promissory notes issued by Providence.
Providence Exploration, LLC (page 24)
Providence is a limited liability company organized in Texas and headquartered in Dallas, Texas, that is in the business of the exploring and developing oil and gas interests in Comanche, Hamilton, and Val Verde Counties, Texas. PDX Drilling I, LLC, a wholly owned subsidiary of Providence, owns and operates one drilling rig and two well service rigs located in Young County, Texas. Providence Resources, LLC, a wholly owned subsidiary of Providence, is without operations.
THE ACQUISITION (page 17)
Proposal 2 addresses the Corporation’s prospective acquisition of Providence as a wholly owned subsidiary pursuant to the Securities Exchange Agreement and the Note Exchange Agreement.
THE TRANSACTIONS
The Securities Exchange Agreement (page 17 and Exhibit 1)
Upon the terms and subject to the conditions of the Securities Exchange Agreement, dated April 10, 2006, the unit-holders of Providence’s membership units will exchange 1,250,000, or 100%, of the outstanding membership units for 4,286,330 shares of the Corporation, which shares will be distributed to Providence’s unit-holders on a pro rata basis on the closing date.
The Note Exchange Agreement (page 17 and Exhibit 2)
Upon the terms and subject to the conditions of the Note Exchange Agreement, dated April 10, 2006, the holders of the promissory notes issued by Providence will assign the notes to the Corporation for 12,213,670 shares of the Corporation, which shares will be distributed to promissory note holders according to their respective interests in the notes on the closing date.
Closing of the Transactions (page 17)
If ratified, the closing of the Securities Exchange Agreement and the Note Exchange Agreement shall take place on June 30, 2006, at the offices of the Corporation, following the Special Meeting.
Conditions Precedent to the Transactions (page 17)
The closing of the Securities Exchange Agreement and the Note Exchange Agreement depend on the satisfaction or waiver of a number of conditions, including conditions relating to:
|X| Stockholder approval of the Securities Exchange Agreement and the Note Exchange Agreement; |X| The concurrent closing of the Securities Exchange Agreement and the Note Exchange Agreement; and |X| The receipt and provision of closing documentation and securities.
Representations and Warranties within the Transactions (page 17)
The Corporation and Providence represent and warrant a number of conditions within the Securities Exchange Agreement and the Note Exchange Agreement, including the following:
|X| All of the parties have the requisite authority to execute the agreements;
|X| No parties have any legal conflicts; and
|X| The Corporation and Providence will go about their business in an ordinary fashion until the closing of the Securities
Exchange Agreement and the Note Exchange Agreement.
Interests of Our Executive Officer and Directors in the Transactions (page 18)
Our executive officer and directors may have interests in the acquisition that may be different from, or similar to, yours, including the following:
|X| Nora Coccaro, the executive officer and a director of the Corporation, owns 353,500 shares of the Corporation; and
|X| Marcus Muller, a director of the Corporation, owns 5,023,435 shares of the Corporation and will receive 2,160,949 additional
shares on the closing of the Note Exchange Agreement as Mr. Muller is a note holder.
The Consideration Offered To Stockholders (page 18)There is no consideration being offered to stockholders.
The Reasons For Engaging In The Transactions (page 18)We are intent upon executing the transactions and acquiring Providence to engage the Corporation in the exploration, development and prospectively the production of oil and gas.
The Vote Required For Approval Of The Transactions (page 18)
Approval of Proposal 2 requires the affirmative vote of a majority of the stockholders at the meeting, assuming a quorum is present.
Material Differences In The Rights Of Security Holders As A Result Of The Transactions (page 18)There will be no material differences in the rights of security holders as a result of the acquisition.
Accounting Treatment Of The Transactions (page 18)
The acquisition will be accounted for under the purchase method of accounting, in accordance with U.S. generally accepted accounting principles.
The Federal Income Tax Consequences Of The Transactions (page 18)
Our stockholders will not recognize a gain or loss as a result of the acquisition.
Neither the Corporation nor Providence will recognize any gain or loss as a result of the acquisition, which will be deemed by the parties to be tax free.
REGULATORY APPROVALS (page 19)
No material federal or state regulatory requirements must be complied with or approvals obtained in connection with this transaction.
REPORTS, OPINIONS, APPRAISALS (page 19 and Exhibit 3)
We have obtained a fairness opinion from a financial advisor in connection with the transactions.
PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
Promissory Note (page 23 and page 31 under “Liquidity and Capital Resources”)
On December 1, 2005, we executed a Secured Revolving Replacement Promissory Note with Providence to loan Providence up to $5,000,000 to acquire oil, gas and mineral leasehold interests and to fund exploration and development. We had advanced $4,207,320 to Providence pursuant to the Secured Revolving Replacement Note as of March 31, 2006.
Comanche and Hamilton Counties (page 24)
On October 1, 2005, Providence executed a Joint Exploration Agreement with Harding Company to purchase approximately 6,272 acres of oil and gas leases located in Comanche and Hamilton Counties, Texas, in exchange for $3,136,273 for the purpose of exploring, developing and producing oil and gas. Providence acquired a 90% working interest while its joint venture operating partner, Harding Company, retained a 10% working interest in the leases.
Val Verde County (page 25)
On March 30, 2006, Providence closed an Agreement for Purchase and Sale with Global Solutions, LLC., to purchase approximately 12,832 acres of oil and gas leases located in Val Verde County, Texas, in exchange for $3,849,600 for the purpose of exploring, developing and producing oil and gas.
PRO FORMA FINANCIAL DATA
The following is a summary of unaudited, pro forma, consolidated, financial data as of March 31, 2006 and December 31, 2005, for the Corporation and Providence. The pro forma financial data is based on pro forma financial data attached hereto as Exhibits E and F. The pro forma balance sheet and statement of operations data are presented as if the acquisition of Providence by the Corporation had occurred on March 31, 2006 and December 31, 2005. The pro forma financial data is presented for informational purposes and is not necessarily indicative of either the future results of operations or the results of operations that would have occurred if the acquisition had been consummated on any date. You should read the following pro forma financial data along with other financial information contained elsewhere in this proxy statement.
Combined Pro Forma Balance Sheet
March 31, December 31,
2006 2005
----------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 781,671 $ 2,057,498
Accounts receivable, net 82,322 72,833
Promissory note receivable (incl. interest) - 5,000
Prepaid expenses and deposits 31,098 34,449
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Total Current Assets 895,000 2,169,780
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----------------- ------------------
PROPERTY AND EQUIPMENT, Net 1,815,856 1,212,858
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OTHER ASSETS
Undeveloped reserves 8,274,438 6,178,787
Loan origination fees, net of amortization of $5,035 64,861 71,215
Notes receivable-long term 117,418 87,418
Deposits 2,266 2,266
----------------- ------------------
----------------- ------------------
Total Other Assets 8,458,983 6,339,686
TOTAL ASSETS 11,169,929 9,722,324
================= ==================
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities 811,225 $146,482
Accrued expenses 247,546 158,768
Related party payables 27,403 13,500
Note payable
- -
Current portion of L-T notes payable
352,178 341,919
----------------- ------------------
----------------- ------------------
Total Current Liabilities 1,438,352 660,669
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----------------- ------------------
LONG-TERM LIABILITIES
Convertible debentures 3,645,000 3,645,000
L-T notes payable 1,462,676 704,617
----------------- ------------------
----------------- ------------------
Total Long-Term Liabilities 5,107,676 4,349,617
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----------------- ------------------
Total Liabilities 6,546,028 5,010,286
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----------------- ------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; $0.0001 par value, 25,000,000 shares authorized,
no shares issued and outstanding - -
Common stock; $0.0001 par value, 50,000,000 shares authorized,
32,980,906 shares issued and outstanding 3,298 3,298
Additional paid-in capital 13,847,471 13,847,471
Accumulated other comprehensive income 18,219 14,370
Accumulated deficit (9,245,087) (9,153,101)
Member's equity - -
----------------- ------------------
----------------- ------------------
Total Stockholders' Equity (Deficit) 4,623,901 4,712,038
TOTAL LIABILITIES AND STOCKHOLDER' EQUITY (DEFICIT) $ 11,169,929 $ 9,722,324
Combined Pro Forma Statements of Operations
March 31, December 31,
2006 2005
REVENUES $ 348,142 $ 369,515
COST OF SALES 430,981 694,382
GROSS MARGIN (82,839) (324,867)
----------------- ------------------
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OPERATING EXPENSES
General and administrative 281,338 746,808
Total Operating Expenses 281,338 746,808
----------------- ------------------
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LOSS FROM OPERATIONS (364,177) (1,071,675)
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OTHER INCOME (EXPENSE)
Interest income 72,189 23,623
Interest expense (163,329) (286,590)
Note receivable write off - (89,731)
----------------- ------------------
----------------- ------------------
Total Other Income (Expense) (91,140) (352,698)
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LOSS BEFORE PROVISION FOR INCOME TAXES (455,317) (1,424,373)
Provision for income taxes - -
----------------- ------------------
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LOSS BEFORE DISCONTINUED OPERATIONS (455,317) (1,424,373)
Gain (loss) from discontinued operations, net of tax - (299,248)
----------------- ------------------
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NET LOSS (455,317) (1,723,621)
================= ==================
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment 3,849 9,057
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----------------- ------------------
NET COMPREHENSIVE INCOME (LOSS) (451,468) (1,714,564)
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RISK FACTORS
Before deciding how to vote on the proposals described in this proxy statement, you should carefully consider the risks relating to the acquisition and to our post-closing operations as described below, together with the other information in this proxy statement. Our business, financial condition and results of operations could be adversely affected by any of the following risks, which could cause the trading price of our common stock to decline. You should keep in mind that these risks are not the only risks that we face. Additional risks not presently known to us, or risks that we currently believe are not material, may also impair our business operations.
Risks Relating to the Acquisition of Providence
If we are unable to complete the acquisition, our business may be adversely affected.
If we do not complete the acquisition as we intend, our business and the market price of our stock price may be adversely affected, and we may be unable to find another way to grow our business. We must pay the costs related to the acquisition, such as legal, accounting and financial advisor fees, even if the acquisition does not close.
The acquisition will result in dilution to our current stockholders.
The issuance of shares of our capital stock in the acquisition will dilute the voting power, book value, and ownership percentage of our existing stockholders. We will issue a total of 16,500,000 shares of our common stock in the acquisition.
We may not realize the anticipated benefits from the acquisition.
We may not achieve the benefits we are seeking in the acquisition. There is no assurance that Providence will be successful in its exploration efforts or that, if successful, oil and gas prices will remain at their current levels. As a result, our operations and financial results may suffer and the market price of our common stock may decline.
Risks Relating to the Corporation after the Acquisition
We may not be successful in integrating the business operations of Providence into our business operations after the acquisition.
The acquisition involves the integration of companies that have previously operated independently. Successful integration of Providence’s operations with ours will depend on our ability to consolidate operations and procedures and to integrate Providence’s management team with our own. If we are unable to do so, we may not realize the anticipated potential benefits of the acquisition, and our business and results of operations could be adversely affected. Difficulties could include the loss of key employees, the disruption of Providence’s ongoing businesses, and possible inconsistencies in standards, controls, procedures and policies.
We may be unable to manage the growth of our business.
We believe that if our post-acquisition growth plan is successful, our business has the potential to grow in size and complexity. If our management is unable to manage growth effectively, our business, operating results and financial condition could be adversely affected. Any new sustained growth would be expected to place a significant strain on our management systems and operational resources. We anticipate that new sustained growth, if any, will require us to recruit, hire and retain new managerial, finance and support personnel. We cannot be certain that we will be successful in recruiting, hiring or retaining such personnel. Our ability to compete effectively and to manage our future growth, if any, will depend on our ability to maintain and improve operational, financial, and management information systems on a timely basis and to expand, train, motivate and manage our work force. If we begin to grow, we cannot be certain that our personnel, systems, procedures, and controls will be adequate to support our operations.
Risks Related to Providence’s Business
Oil and natural gas drilling and producing operations involve various risks.
Drilling activities are subject to many risks, including the risk that no commercially productive reservoirs will be discovered. There can be no assurance that any wells drilled by Providence will be productive or that Providence will recover all or any portion of its investment in such wells. Drilling for oil and natural gas may involve unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient net reserves to return a profit after deducting drilling, operating and other costs. The seismic data and other technologies Providence uses do not allow it to know conclusively prior to drilling a well that oil or natural gas is present or may be produced economically. The cost of drilling, completing and operating a well is often uncertain, and cost factors can adversely affect the economics of a project. Further, Providence’s drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including:
|X| unexpected drilling conditions; |X| title problems; |X| pressure or irregularities in formations; |X| equipment failures or accidents; |X| adverse weather conditions; |X| compliance with environmental and other governmental requirements; and |X| cost of, or shortages or delays in the availability of, drilling rigs, equipment and services.
Providence’s operations are subject to all the risks normally incident to the operation and development of oil and natural gas properties and the drilling of oil and natural gas wells, including:
|X| encountering well blowouts; |X| cratering and explosions; |X| pipe failure; |X| fires; |X| formations with abnormal pressures resulting in uncontrollable flows of oil and natural gas; |X| brine or well fluids; |X| release of contaminants into the environment; and |X| other environmental hazards and risks.
The nature of these risks is such that some liabilities including environmental fines and penalties could exceed Providence’s ability to pay for the damages. Providence could incur significant costs that could have a material adverse effect upon its financial condition due to these risks.
Providence is subject to complex federal, state and local laws and regulations that could adversely affect its business.
Exploration for and development, exploitation, production and sale of oil and natural gas in the United States is subject to extensive federal, state and local laws and regulations, including complex tax laws and environmental laws and regulations. Existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations could harm Providence’s business, results of operations and financial condition. Providence may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include oil and gas production and saltwater disposal operations and Providence’s processing, handling and disposal of hazardous materials, such as hydrocarbons and naturally occurring radioactive materials, discharge permits for drilling operations, spacing of wells, environmental protection, reports concerning operations, and taxation. Under these laws and regulations, Providence could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, reclamation costs, remediation, clean-up costs and other environmental damages.
Shortages of oil field equipment, services and qualified personnel could reduce Providence’s cash flow and adversely affect results of operations.
The demand for qualified and experienced field personnel to drill wells and conduct field operations, geologists, geophysicists, engineers and other professionals in the oil and natural gas industry can fluctuate significantly, often in correlation with oil and natural gas prices, causing periodic shortages. There have also been shortages of drilling rigs and other equipment, as demand for rigs and equipment has increased along with the number of wells being drilled. These factors also cause significant increases in costs for equipment, services and personnel. Higher oil and natural gas prices generally stimulate increased demand and result in increased prices for drilling rigs, crews and associated supplies, equipment and services. Providence cannot be certain when or if it will experience these issues and these types of shortages or price increases which could significantly decrease Providence’s profit margin, cash flow and operating results on any particular well or restrict its ability to drill additional wells.
The results of Providence’s operations depend on the production and maintenance efforts of Harding Company.
The operation of Providence’s oil and natural gas operations in Comanche, Hamilton and prospectively Val Verde Counties will be dependent on an independent local operator, Harding Company. The fact that Providence is dependent on operations of a third party to produce revenue from its oil and natural gas assets could restrict its ability to generate a net profit on operations.
Oil and natural gas prices are volatile, and any substantial decrease in prices could adversely affect Providence’s financial results.
Providence’s future financial condition, results of operations and the carrying value of its oil and natural gas properties will depend primarily upon the prices it receives for production. Oil and natural gas prices historically have been volatile and are likely to continue to be volatile in the future. Providence’s cash flow from operations will be highly dependent on the prices that it receives for oil and natural gas. This price volatility also affects the amount of Providence’s cash flow available for capital expenditures and its ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond the Corporation’s control. These factors include:
|X| the level of consumer demand; |X| the domestic supply; |X| domestic governmental regulations and taxes; |X| the price and availability of alternative fuel sources; |X| weather conditions; and |X| market uncertainty.
These factors and the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices would not only reduce future revenue, but could reduce the amount of oil and natural gas that Providence can produce economically and, as a result, could have a material adverse effect on its financial condition, results of operations and reserves. Should the oil and natural gas industry experience significant price declines, Providence may, among other things, be unable to meet its financial obligations.
FORWARD-LOOKING STATEMENTS
This proxy statement contains forward-looking statements. These statements relate to future events, future financial performance or projected business results and involve known and unknown risks and uncertainties. Actual results may differ materially from those expressed or implied by these statements. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will” or other similar words.
The following list identifies some of the factors that could cause actual results to differ from those expressed or implied from the forward-looking statements:
o our anticipated financial performance and business plan; o the sufficiency of existing capital resources; o our ability to raise additional capital to fund cash requirements for future operations; o uncertainties related to the Corporation's future business prospects with Providence; o uncertainties related to Providence's future business prospects; o the ability of the Corporation to generate revenues to fund future operations; o the volatility of the stock market and; o general economic conditions.
The Corporation’s and Providence’s forward-looking statements are based on their respective management’s beliefs and assumptions extracted from information available to management at the time the statements are made. Management cautions you that assumptions, beliefs, expectations, intentions and projections about future events may, and often do, vary materially from actual results. Therefore, actual results may differ materially from those expressed or implied by the forward-looking statements.
PROPOSAL 1
APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO CHANGE THE CORPORATION'S NAMEThe Corporation’s board of directors executed a written consent authorizing and recommending that stockholders approve a proposal to change the Corporation’s name from “Healthbridge, Inc.” to “Providence Resources, Inc.” believing that the new name will promote public recognition of the Corporation and more accurately reflect our post-acquisition business focus. We are planning to shift our focus, as per Proposal 2, to exploring and developing oil and gas in Texas. In adopting the new name, we believe that we will better represent the Corporation’s business plan within the oil and gas industry.
On April 10, 2006, the Corporation’s board of directors approved an amendment to Article One of the Amended and Restated Articles of Incorporation to change the name of the Corporation from “Healthbridge, Inc.” to “Providence Resources, Inc.” The directors also directed that the amendment be submitted for approval by the Corporation’s stockholders as required by Texas Business Corporation Act, Article 4.02. The full text of the proposed amendment to the first paragraph of Article One of the Amended and Restated Articles of Incorporation is as follows:
“ARTICLE ONE
The name of the corporation is Providence Resources, Inc.”
If this proposal and Proposal 2 are approved by the stockholders at the Special Meeting, the Corporation will file an amendment to the Amended and Restated Articles of Incorporation for the purpose of effecting the name change. This amendment will become effective upon the filing of a Certificate of Amendment with the Secretary of State of Texas, which is expected to take place shortly after the Special Meeting.
Required Vote
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote thereon at the meeting, assuming a quorum is present. Approval also requires the approval of Proposal 2. Broker non-votes are counted solely for the purpose of determining a quorum. Abstentions will have the same effect as a vote against this proposal.
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO CHANGE THE CORPORATION’S NAME FROM “HEALTHBRIDGE, INC.” TO“PROVIDENCE
RESOURCES, INC.”
PROPOSAL 2
RATIFICATION OF THE SECURITIES EXCHANGE AGREEMENT
AND THE NOTE EXCHANGE AGREEMENT
The Corporation’s board of directors executed a written consent authorizing and recommending that stockholders ratify the execution of both (i) the Securities Exchange Agreement dated April 10, 2006, between the Corporation, Providence, and the membership unit-holders of Providence, and (ii) the Note Exchange Agreement dated April 10, 2006, between the Corporation and the holders of certain promissory notes issued by Providence. The ratification of these agreements will cause the Corporation to acquire Providence. The acquisition of Providence will shift the Corporation’s focus to the exploration and development of oil and gas interests in Texas.
If this proposal is approved by the stockholders at the Special Meeting, the Corporation will thereafter (i) close the Securities Exchange Agreement issuing 4,286,330 shares to the membership unit-holders of Providence, on a pro rata basis, in exchange for the membership unit-holders transferring 1,250,000 membership units of Providence to the Corporation, and (ii) close the Note Exchange Agreement issuing 12,213,670 shares to the holders of the promissory notes issued by Providence, on a pro rata basis, in exchange for the holders of the promissory notes assigning, transferring and setting over their promissory notes to the Corporation. These actions will effectively make Providence a wholly owned subsidiary of the Corporation. The directors directed that the agreements be submitted for approval by the Corporation’s stockholders as required by Texas Business Corporation Act, Article 5.02.
Required Vote
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of common stock entitled to vote thereon at the meeting, assuming a quorum is present. Broker non-votes are counted solely for the purpose of determining a quorum. Abstentions will have the same effect as a vote against this proposal.
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFYING THE SECURITIES EXCHANGE AGREEMENT AND THE NOTE EXCHANGE AGREEMENT. |
FURTHER INFORMATION REGARDING PROPOSAL 2
ACQUISITION
Proposal 2 concerns the Corporation’s acquisition of Providence as a wholly owned subsidiary pursuant to two concurrent transactions: the Securities Exchange Agreement and the Note Exchange Agreement.
TERMS OF THE TRANSACTIONS
The Securities Exchange Agreement
Upon the terms and subject to the conditions of the Securities Exchange Agreement, dated April 10, 2006, the unit-holders of Providence’s membership units will exchange 1,250,000 or 100% of the outstanding membership units for 4,286,330 shares of the Corporation, which shares will be distributed to Providence’s unit-holders on a pro rata basis on the closing date.
The Note Exchange Agreement
Upon the terms and subject to the conditions of the Note Exchange Agreement, dated April 10, 2006, the holders of the promissory notes issued by Providence, valued in the aggregate of $2,535,262 plus accrued interest, will assign the notes to the Corporation for 12,213,670 shares of the Corporation, which shares will be distributed to promissory note holders according to their respective interests in the notes on the closing date.
Closing of the Transactions
If ratified, the closing of the Securities Exchange Agreement and the Note Exchange Agreement shall take place on June 30, 2006, at the offices of the Corporation, following the Special Meeting.
Conditions Precedent To The Transactions
The closing of the Securities Exchange Agreement and the Note Exchange Agreement depends on the satisfaction or waiver of a number of conditions, including conditions relating to:
|X| Stockholder approval of the Securities Exchange Agreement and the Note Exchange Agreement; |X| The concurrent consummation of the Securities Exchange Agreement and the Note Exchange Agreement; and |X| The receipt and provision of closing documentation and securities.
Representations and Warranties within the Transactions
The Corporation and Providence represent and warrant a number of conditions within the Securities Exchange Agreement and the Note Exchange Agreement, including the following:
|X| All of the parties have the requisite authority to execute the agreements; |X| No parties have any legal conflicts; and |X| The Corporation and Providence will go about their business in an ordinary fashion until the closing of the Agreements.
Our executive officer and directors may have interests in the acquisition that may be different from, or similar to, yours, including the following:
|X| Nora Coccaro, the executive officer and a director of the Corporation, owns 353,500 shares of the Corporation; and
|X| Marcus Muller, a director of the Corporation, owns 5,023,435 shares of the Corporation and will receive 2,160,949 additional
shares on the closing of the Note Exchange Agreement as Mr. Muller is a note holder.
The Consideration Offered to StockholdersThere is no consideration being offered to stockholders.
The Reasons for Engaging in the TransactionThe Corporation has been searching for a business with which to merge or acquire since the discontinuation of operations with regard to medical waste sterilization. Our search resulted in exploratory discussions with Providence which ultimately led to the execution of the Securities Exchange Agreement and the Note Exchange Agreement. We are intent upon acquiring Providence to engage the Corporation in the exploration, development and prospectively the production of oil and gas.
The Vote Required For Approval of the Transaction
Approval of this proposal requires the affirmative vote of the holders of a majority of the issued and outstanding shares of common stock present at the meeting, either in person or by proxy, assuming a quorum is present. The quorum for the Special Meeting will be the majority of the issued and outstanding shares of common at the record date of the meeting, June 9, 2006. Abstentions will have the same effect as a vote against this proposal.
Material Differences in the Rights of Security Holders as a Result Of the TransactionThere will be no material differences in the rights of security holders as a result of the acquisition.
Accounting Treatment of the Transaction
The acquisition will be accounted for under the purchase method of accounting, in accordance with U.S. generally accepted accounting principles.
The Federal Income Tax Consequences of the Transaction
Our stockholders will not recognize gain or loss as a result of the Securities Exchange Agreement because they will hold the same shares of our common stock after the exchange as they held before the acquisition. The acquisition will not affect the adjusted bases and holding periods of the shares of our common stock held by the Corporation’s stockholders.
In addition, neither the Corporation nor Providence will recognize any gain or loss as a result of the Securities Exchange Agreement as the valuation of the Providence membership units will be deemed equivalent to the valuation of the Corporation’s shares. Thus, the acquisition of Providence will be deemed by the parties to be a tax free.
REGULATORY APPROVALS
No material federal or state regulatory requirements must be complied with or approvals obtained in connection with this transaction.
REPORTS, OPINIONS, APPRAISALS
We have obtained a fairness opinion from financial advisor Bruce Lazier in connection with the transactions. He holds a degree in petroleum engineering and a Master of Business Administration from Stanford University and has worked as a petroleum engineer and as an investment banker. Mr. Lazier’s opinion states that prospective transaction is fair to the Corporation and the Corporation’s stockholders from a financial viewpoint. This fairness opinion is attached as Exhibit 3.
HEALTHBRIDGE
DESCRIPTION OF BUSINESS
Corporate History
The Corporation was incorporated under the laws of the State of Texas on February 17, 1993 as “GFB Alliance Services, Inc.” The Corporation has since undergone several name changes and on May 13, 1999, pursuant to an amendment to its articles of incorporation, adopted the name “Healthbridge, Inc.”
During early 2002 the Corporation acquired exclusive ownership of the Valides® Modular Infectious Waste Disposal System and the Medides System. Prior to year end 2005 we decided to discontinue all operations connected to the Valides® Modular Infectious Waste Disposal System and the Medides System due to our inability to successfully commercialize this technology.
The Corporation is determined to enter into the exploration, development and production of oil and gas resources with the acquisition of Providence. Should the Corporation’s stockholders reject our intended acquisition of Providence our plan of operation will be to seek alternative business combinations or acquisitions to create value for our stockholders.
Employees
The Corporation is a development stage company and currently has no employees. Our executive officer devotes as much time to the affairs of the Corporation as she deems necessary. Our management uses consultants, attorneys, and accountants to assist in the conduct of the Corporation’s business.
DESCRIPTION OF PROPERTY
The Corporation currently maintains limited office space for which we pay not rent. The address of the Corporation’s office is 1066 West Hastings Street Suite 2610, Vancouver, British Columbia, Canada V6E 3X2.
LEGAL PROCEEDINGS
The Corporation is currently not a party to any legal proceedings.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Corporation’s common stock is quoted on the Over the Counter Bulletin Board, a service maintained by the National Association of Securities Dealer, Inc. under the symbol, “HHBR”. Trading in the common stock in the over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions. These prices reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions. The high and low bid prices for the common stock for the quarter ended March 31, 2006, and each quarter of the years ended December 31, 2005 and 2004 are as follows:
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PERIOD HIGH LOW
YEAR
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2006 Quarter ended March 31 $0.96 $0.48
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2005 Quarter ended December 31 $0.85 $0.15
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2005 Quarter ended September 30 $0.25 $0.15
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2005 Quarter ended June 30 $0.23 $0.20
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2005 Quarter ended March 31 $0.26 $0.20
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2004 Quarter ended December 31 $0.20 $0.09
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2004 Quarter ended September 30 $0.12 $0.09
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2004 Quarter ended June 30 $0.32 $0.12
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2004 Quarter ended March 31 $0.75 $0.30
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Common Stock
As of June 9, 2006, there were approximately ____ stockholders of record holding a total of ____________ shares of common stock. The board of directors believes that the number of beneficial owners is substantially greater than the number of record holders because a portion of our outstanding common stock is held in broker “street names” for the benefit of individual investors. The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
The Corporation’s preferred stock may have such rights, preferences and designations and may be issued in such series as determined by the board of directors. No shares were issued and outstanding at June 9, 2006.
Dividends
The Corporation has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the board of directors and will depend on the Corporation’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Corporation’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.
MANAGEMENT’S PLAN OF OPERATION
The following discussion and analysis of the Corporation’s financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes and the other financial information appearing elsewhere in this proxy statement. Our fiscal year end is December 31.
The Corporation is currently involved in business opportunities related to the exploration, development and production of oil and gas resources and intends to acquire Providence pursuant to the terms and conditions of the Securities Exchange Agreement and the Note Exchange Agreement on obtaining stockholder approval.
Should the Corporation’s stockholders reject our intended acquisition of Providence our plan of operation will be to seek alternative business combinations or acquisitions to create value for our stockholders.
The Corporation’s short term plan of operations is to complete the acquisition of Providence and to explore and develop Providence’s oil and gas prospects. The Corporation’s long term plan of operations is to expand exploration and development efforts in Texas and to produce oil and gas from Providence’s leasehold interests.
Results of Operations
During the three month period ended March 31, 2006, we were involved in finalizing those agreements pertaining to the intended acquisition of Providence and in financing activities.
The following Results of Operations are based on our interim and annual financial statements prepared under US GAAP.
We expect to recognize revenues within the next twelve months of operation subject to the closing of the acquisition of Providence and the successful realization of oil and gas production from exploration and development activities. However, we can provide no assurance that our stockholders will approve the acquisition of Providence or that oil and gas exploration and development activities on the Providence leases will ever produce revenue.
The Corporation has historically not been able to generate sufficient cash flow from operations to sustain our business and there can be no assurance that we will ever be able to generate sufficient cash flows to sustain operations. The Corporation’s business development strategy is prone to significant risks and uncertainties certain of which can have an immediate impact on our efforts to realize positive net cash flow and deter any future prospect of growth. The Corporation’s financial condition and results of operations have depended historically on debt and equity financing from related parties.
Losses
Net losses for the three month period ended March 31, 2006, were $91,987. The net losses over the three month period can be attributed to general and administrative expenses and interest expenses. We did not generate any revenues during this period.
For the period from February 17, 1993 to December 31, 2005, the Corporation recorded an accumulated operating loss of $7,130,637. The Corporation’s losses during this period are primarily attributable to general and administrative expenses totaling $3,326,269 from current operations, as well as losses from discontinued operations totaling $3,407,279. General and administrative expenses include consulting fees, professional fees, accounting costs, and Exchange Act of 1934 disclosure documentation.
We may continue to operate at a loss through fiscal 2006 due to the nature of the Corporation’s prospective oil and gas exploration and development operations and cannot determine whether we will ever generate revenues from operations. We do, however, expect to generate revenues in the event that we acquire Providence, with the expectation that Providence is successful in producing oil and gas.
Expenses
General and administrative expenses for the three month period ended March 31, 2006 were $98,860. General and administrative expenses over the three month period can be attributed to legal, consulting and accounting costs. The Corporation expects that general and administrative expenses will increase as the Corporation expands its operations.
For the period from February 17, 1993 to December 31, 2005, the Corporation recorded general and administrative expenses totaling $3,326,269.
Depreciation expenses for the three month ended March 31, 2006 were $1,019.
Depreciation expenses for the twelve months ended December 31, 2005 were $419.
Capital Expenditures
The Corporation spent no amounts on capital expenditures for the period from February 17, 1993 (inception) to March 31, 2006.
Income Tax Expense (Benefit)
The Corporation has an income tax benefit resulting from net operating losses to offset any future operating profit. However, the Corporation has not recorded this benefit in the financial statements as it may not meet the accounting criteria to do so.
Impact of Inflation
The Corporation believes that inflation has had a negligible effect on operations over the past three years. The Corporation believes that it can offset inflationary increases by the continual improvement of operating efficiencies.
Liquidity and Capital Resources
The Corporation had current assets and total assets of $5,053,458 as of March 31, 2006. These assets consisted of cash on hand of $770,412, promissory notes receivable from Providence totaling $4,283,046 including accrued interest. Net stockholders equity in the Corporation was $1,200,150 at March 31, 2005.
The Corporation had current assets of $5,127,339 and total assets of $5,128,358 as of December 31, 2005. These assets consisted of cash on hand of $2,035,438, promissory notes receivable from Providence totaling $3,091,901, and property and equipment totaling $1,019. Net stockholders equity in the Corporation was $1,288,288 at December 31, 2005.
On November 28, 2005 the Corporation authorized the issuance of seven debentures for an aggregate amount of $3,320,000 bearing 7% interest due on November 30, 2010 convertible into our common stock at any time before the due date at $0.35 a share.
On November 28, 2005 the Corporation authorized the issuance of 6,270,000 shares of our common stock for an aggregate amount of $1,881,000 or $0.30 a share.
On December 1, 2005, we executed a Secured Revolving Replacement Promissory Note (“Note”) with Providence to loan Providence up to $5,000,000 to acquire oil, gas and mineral leasehold interests and to fund exploration and development. We have advanced $4,207,320 to Providence pursuant to the Note as of March 31, 2006. The Note bears interest at 7% per annum and is to be paid in full by December 1, 2006. As of March 31, 2006, the Note had accrued interest of $75,726.
On April 20, 2006, the Corporation commenced an equity financing of up to $10,000,000. The offering consisted of $6.00 units, each unit comprised of 10 common shares and 5 common share purchase warrants. The warrants are exercisable at $1.20 for a period of 3 years from the date of grant. We closed the offering as of June __, 2006 having raised an aggregate of $__________.
The Corporation had a working capital surplus of $4,845,151 as of March 31, 2006, as compared to a working capital surplus of $4,932,269 as of December 31, 2005. We have funded our cash needs from inception through revenues and a series of debt and equity transactions, including several private placements. The bulk of these transactions have taken place outside the United States.
The Corporation’s believes that our current assets are sufficient to conduct our plan of operation over the next twelve (12) months. No assurances can be given that additional funding, if needed to explore and develop the Providence lease interests will be available to the Corporation on acceptable terms or available at all. Our inability to obtain funding, as necessary, would have a material adverse affect on our plan of operation.
The Corporation has no current plans for the purchase or sale of any plant or equipment.
The Corporation has no current plans to make any changes in the number of employees.
Critical Accounting Policies
In the notes to the audited consolidated financial statements for the year ended December 31, 2005 included in the Corporation’ Form 10-KSB, the Corporation discusses those accounting policies that are considered to be significant in determining the results of operations and its financial position. The Corporation believes that the accounting principles utilized by it conform to accounting principles generally accepted in the United States of America.
The preparation of financial statements requires management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Corporation evaluates its estimates, including those related to bad debts, inventories, intangible assets, warranty obligations, product liability, revenue, and income taxes. The Corporation bases its estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.
Going Concern
The Corporation’s audit expressed substantial doubt as to our ability to continue as a going concern as a result of reoccurring losses, lack of revenue generating activities and an accumulated deficit of $9,153,101 as of December 31, 2005, which increased to $9,285,087 at March 31, 2006. The continuation of the Corporation’s operations is dependent upon the continuing financial support of creditors and stockholders, obtaining short and long term financing, and achieving profitability. These conditions and dependencies raise substantial doubt about our ability to continue as a going concern.
Management’s plan to address the Corporation’s ability to continue as a going concern, include: (i) acquiring the oil and gas exploration, development and prospective production operations of Providence; (ii) raising additional funds to capitalize the operations of Providence in the form of debt or equity; and (iii) converting outstanding debt to equity. The successful outcome of these activities cannot be determined at this time, and there is no assurance that, if achieved, the Corporation would then have sufficient funds to execute its intended business plan or generate positive operating results.
PROVIDENCE
DESCRIPTION OF BUSINESS
Oil and Gas Business
Providence was organized in Texas as a limited liability company on July 12, 2005, for the exploration and development of oil and natural gas.
Providence owns oil and gas lease hold interests in Comanche, Hamilton and Val Verde Counties, Texas. Exploration and development of certain of the leases located in Comanche and Hamilton Counties for the prospective production of natural gas is currently underway though no production has been realized to date. Providence also owns and operates one drilling rig and two well service rigs based in Young County, Texas, through its wholly owned subsidiary, PDX Drilling I, LLC (“PDX”). The equipment is used to service the oil and gas exploration industry in the surrounding area. Providence Resources, LLC, is a wholly owned subsidiary of Providence without operations.
Providence’s address is 100 Crescent Court, 7th Floor, Dallas, Texas, 75201. Providence’s telephone number is (214) 695-5848
Comanche and Hamilton Counties
On October 1, 2005, Providence executed a Joint Exploration Agreement with the 52 year old, Dallas-based Harding (www.hardingcompany.com) to purchase approximately 6,272 acres of oil and gas leases located in Comanche and Hamilton Counties, Texas, in exchange for $3,136,273. Providence intends to develop and produce oil and gas from the Marble Falls and Barnett Shale formations in prospect specific areas of the Fort Worth basin. The Barnett Shale is the largest producing natural gas opportunity in Texas. According to the American Association of Petroleum Geologists, over 1 trillion cubic feet (TCF) of gas has already been produced from the Fort Worth basin area of the Barnett Shale formation, and current well completions average over 1.5 million cubic feet (MMCF) of gas per day. Using a geology-based assessment methodology, the U.S. Geological Survey estimates that there are 26.7 trillion cubic feet (TCF) of natural gas yet to be produced from this formation. The formation underlies approximately sixteen counties including Comanche and Hamilton Counties. Providence acquired a 90% working interest while its joint venture operating partner, Harding Company, retained a 10% working interest in the leases. Providence has the right to earn a 68.4% net revenue interest by fulfilling their financial commitments.
Val Verde County
On March 30, 2006, Providence closed an Agreement for Purchase and with Sale Global Solutions, LLC., to purchase approximately 12,832 acres of oil and gas leases located in Val Verde County, Texas, in exchange for $3,849,600, of which $1,924,800 was paid in cash and $1,924,500 by a promissory note convertible into 3,500,000 shares of our common stock within 30 days of the Corporation’s acquisition of Providence. The Val Verde leases include multiple deep drilling targets for natural gas exploration, development and production within the Ellenberger carbonate, Strawn carbonate and Pennsylvanian-Wolfcamp sandstone reservoirs. Providence anticipates that Harding Company will participate as a joint venture operating partner and as a minority interest holder.
Competition
The oil and gas business in Texas is highly competitive. Providence competes with over 1,000 independent companies, many with greater financial resources and larger staffs than those available to Providence. Texas hosts approximately 40 significant independent operators including Marathon Oil, Houston Exploration Company and Newfield Exploration Company with over 950 smaller operations with no single producer dominating the area. Major operators such as Exxon, Shell Oil, ConocoPhillips, Mobil and others that are considered major players in the oil and gas industry retain significant interests in Texas. Providence believes it can successfully compete against the independent companies by focusing its efforts on the efficient development of its leases in Texas.
Marketability
The products to be sold by Providence, oil and natural gas, are commodities purchased by many distribution and retail companies. Crude oil can be sold whenever it is produced subject to transportation cost. Natural gas requires transportation from point of production to the purchaser by pipeline.
Government Regulation of Exploration and Production
Providence’s oil and gas exploration, including future production and related operations are subject to extensive rules and regulations promulgated by federal and state agencies. Failure to comply with such rules and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry adds to Providence’s cost of doing business and affects its profitability. Because such rules and regulations are frequently amended or interpreted differently by regulatory agencies, Providence is unable to accurately predict the future cost or impact of complying with such laws.
Providence’s oil and gas exploration and future production operations are and will be affected by state and federal regulation of gas production, federal regulation of gas sold in interstate and intrastate commerce, state and federal regulations governing environmental quality and pollution control, state limits on allowable rates of production by a well or pro-ration unit and the amount of gas available for sale, state and federal regulations governing the availability of adequate pipeline and other transportation and processing facilities, and state and federal regulation governing the marketing of competitive fuels. For example, a productive gas well may be “shut-in” because of an over-supply of gas or lack of an available gas pipeline in the areas in which Providence may conduct operations. State and federal regulations generally are intended to prevent waste of oil and gas, protect rights to produce oil and gas between owners in a common reservoir, control the amount of oil and gas produced by assigning allowable rates of production and control contamination of the environment. Pipelines are subject to the jurisdiction of various federal, state and local agencies.
Many state authorities require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration and production of oil and gas. Such states also have ordinances, statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of properties, the regulation of spacing, plugging and abandonment of wells, and limitations establishing maximum rates of production from wells. However, no Texas regulations provide such production limitations with respect to Providence’s operations.
Environmental Regulation
The recent trend in environmental legislation and regulation has been generally toward stricter standards, and this trend will likely continue. Providence does not presently anticipate that it will be required to expend amounts relating to future oil and gas production operations that are material in relation to its total capital expenditure program by reason of environmental laws and regulations, but because such laws and regulations are subject to interpretation by enforcement agencies and are frequently changed by legislative bodies, Providence is unable to accurately predict the ultimate cost of such compliance for 2006.
Providence is subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and areas containing threatened and endangered plant and wildlife species, and impose substantial liabilities for unauthorized pollution resulting from Providence’s operations.
The following environmental laws and regulatory programs appear to be the most significant to Providence’s operations in 2006:
Clean Water and Oil Pollution Regulatory Programs — The federal Clean Water Act (“CWA”) regulates discharges of pollutants to surface waters. The discharge of crude oil and petroleum products to surface waters also is precluded by the Oil Pollution Act (“OPA”). Providence’s operations are inherently subject to accidental spills and releases of crude oil and drilling fluids that may give rise to liability to governmental entities or private parties under federal, state or local environmental laws, as well as under common law. Minor spills may occur from time to time during the normal course of Providence’s future production operations. Providence will maintain spill prevention control and countermeasure plans (“SPCC plans”) for facilities that store large quantities of crude oil or petroleum products to prevent the accidental discharge of these potential pollutants to surface waters.
Clean Air Regulatory Programs — Providence’s operations are subject to the federal Clean Air Act (“CAA”), and state implementing regulations. Among other things, the CAA requires all major sources of hazardous air pollutants, as well as major sources of certain other criteria pollutants, to obtain operating permits, and in some cases, construction permits. The permits must contain applicable Federal and state emission limitations and standards as well as satisfy other statutory and regulatory requirements. The 1990 Amendments to the CAA also established new monitoring, reporting, and recordkeeping requirements to provide a reasonable assurance of compliance with emission limitations and standards. Providence currently obtains construction and operating permits for its compressor engines, and is not presently aware of any potential adverse claims in this regard.
Waste Disposal Regulatory Programs — Providence’s operations will generate and result in the transportation and disposal of large quantities of produced water and other wastes classified by EPA as “non-hazardous solid wastes”. The EPA is currently considering the adoption of stricter disposal and clean-up standards for non-hazardous solid wastes under the Resource Conservation and Recovery Act (“RCRA”). In some instances, EPA has already required the clean up of certain non-hazardous solid waste reclamation and disposal sites under standards similar to those typically found only for hazardous waste disposal sites. It also is possible that wastes that are currently classified as “non-hazardous” by EPA, including some wastes generated during Providence’s drilling and production operations, may in the future be reclassified as “hazardous wastes”. Because hazardous wastes require much more rigorous and costly treatment, storage, transportation and disposal requirements, such changes in the interpretation and enforcement of the current waste disposal regulations would result in significant increases in waste disposal expenditures.
The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) —
CERCLA, also known as the “Superfund” law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to have caused or contributed to the release or threatened release of a “hazardous substance” into the environment. These persons include the current or past owner or operator of the disposal site or sites where the release occurred and companies that transported disposed or arranged for the disposal of the hazardous substances under CERCLA. These persons may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources. Providence is not presently aware of any potential adverse claims in this regard.
Texas Railroad Commission — The State of Texas has promulgated certain legislative rules pertaining to exploration, development and production of oil and gas that are administered by the Texas Railroad Commission. The rules govern permitting for new drilling, inspection of wells, fiscal responsibility of operators, bonding wells, the disposal of solid waste, water discharge, spill prevention, liquid injection, waste disposal wells, schedules that determine the procedures for plugging and abandonment of wells, reclamation, annual reports and compliance with state and federal environmental protection laws. Providence believes that it will function in compliance with these rules.
Providence believes that all of its operations are in substantial compliance with current applicable U.S. federal, state and local environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse effect Providence’s financial position, cash flows or results of operations. There can be no assurance, however, that current regulatory requirements will not change, currently unforeseen environmental incidents will not occur or past non-compliance with environmental laws or regulations will not be discovered.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
Providence currently has no patents, trademarks, licenses, franchises, concessions, or labor contracts. However, the leases acquired for oil, gas and mineral interests do provide for the provision of royalty payments.
Employees
Providence has 1 employee. Providence uses an independent operator, Harding Company, to operate and manage its interests in oil and gas operations. Providence also uses consultants, attorneys, and accountants as necessary.
DESCRIPTION OF PROPERTY
Providence maintains office space at 100 Crescent Court, 7th Floor, Dallas, Texas, 75201, and a warehouse in Young County, Texas. Providence’s office and warehouse space are under operating leases which expire October 1, 2007. Providence paid rent of $7,753 for the three months ended March 31, 2006 and $6,429 for the year ended December 31, 2005. Providence believes that its office space and warehouse will be adequate for the foreseeable future.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no trading market for the membership units of Providence. There are two holders of membership units holding the 1,250,000 outstanding units. Providence has paid no dividends since its inception.
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following discussion and analysis of Providence’s financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes and the other financial information appearing elsewhere in this proxy statement. Providence’s fiscal year end is December 31.
Providence has not been able to generate sufficient cash flow from revenues to fund the necessary acquisition, exploration and development of oil and gas leases and as a result has entered into a series of debt transactions. Therefore, there can be no assurance that PDX’s revenue will provide sufficient cash flows in the near term to sustain operations. Additionally, there can be no assurance that exploration efforts will successfully produce oil and gas. Should Providence be unable to generate sufficient revenues, it will seek financing through alternative sources, though there is no assurance that such efforts, if necessary, would be successful.
Providence’s current financial condition and results of operations depend primarily on revenue generated from PDX’s operations and amounts loaned by the Corporation. Providence has a limited history of generating revenue that cannot be viewed as an indication of continued growth or a historical record of incurring losses. Should Providence be unable to consistently generate revenue to the point where it can realize net cash flow, such failure will have an immediate impact on its ability to continue its business operations.
Business Strategy
Providence, working with Harding Company intends:
o to seismically explore both the Marble Falls and Barnett Shale formations and the Val Verde basin; o to interpret the seismic data; o to develop the Marble Falls and Barnett Shale formation leases for oil and gas production; and o to develop the Val Verde basin leases which include multiple deep drilling targets for natural gas production.
Additionally, Providence plans to expand PDX’s services with local well operators.
Providence’s business development strategy is prone to significant risks and uncertainties that can have an immediate impact on efforts to realize net cash flow and deter future prospects of revenue growth.
Results of Operations
During the three month period ended March 31, 2006, Providence was involved with the oil and gas servicing operations of PDX, finalizing the Securities Exchange Agreement and the Note Exchange Agreement, and the purchase of the Val Verde leases. Providence has realized revenues from providing servicing operations.
The following Results of Operations are based on the interim and annual financial statements prepared under US GAAP.
Providence expects to increase revenues within the next twelve months of operation subject to the successful realization of oil and gas production from its leasehold properties. However, Providence can provide no assurance that oil and gas exploration and development activities will ever produce revenue. Should Providence be unable to realize increase revenues, it will most likely continue to operate at a loss.
In the near term, Providence will not be able to generate sufficient cash flow from operations to sustain its business as lease development expenses increase and there can be no assurance that Providence will ever be able to generate sufficient cash flows to sustain operations. Providence’s business development strategy is prone to significant risks and uncertainties certain of which can have an immediate impact on its efforts to realize positive net cash flow and deter the prospect of revenue growth. Providence’s financial condition and results of operations will, in the near term, continue to depend on debt and equity financing from the Corporation or other related parties.
Revenue
Revenue for the three month period ended March 31, 2006 was $348,142. Revenue for the year ended December 31, 2005 was $369,515. Revenue in both periods can be attributed to the provision of oil and gas services for third party operators in Texas.
Cost of Goods Sold
Cost of goods sold for the three month period ended March 31, 2006 was $430,981. Cost of goods sold for the year ended December 31, 2005 was $694,382. Cost of goods sold in both periods can be primarily attributed to expenses associated with Providence’s oil and gas services.
Losses
Net losses for the three month period ended March 31, 2006, were $363,332. Net losses for the year ended December 31, 2005, were $778,764. The net losses in both periods can be primarily attributed to a cost of sales which exceeded revenues, general and administrative expenses, and an interest expense.
Providence may continue to operate at a loss through fiscal 2006 due to the nature of oil and gas exploration and development operations and Providence cannot determine whether it will ever generate significant revenues from operations.
Expenses
General and administrative expenses for the three month period ended March 31, 2006, were $182,532 and general and administrative expenses for the year ended December 31, 2005, were $278,131. General and administrative expenses can be primarily attributed to professional fees, depreciation, insurance, travel, and automobile expenses. Providence expects that general and administrative expenses will increase as Providence expands its operations.
Depreciation expenses for the three months ended March 31, 2006 were $39,780.
Depreciation expenses for the year ended December 31, 2005 were $62,049.
Capital Expenditures
Providence spent $2,376,117 on property and equipment for the three months ended March 31, 2006 and $4,410,161 for the year ended December 31, 2005, which capital expenditures included oil and gas properties, drilling rigs and equipment, office furniture and equipment, and automotive equipment.
Income Tax Expense (Benefit)
Providence has an income tax benefit resulting from net operating losses to offset any future operating profit.
Impact of Inflation
Providence believes that inflation has had a negligible effect on operations since inception. Providence believes that it can offset inflationary increases by the continual improvement of operating efficiencies.
Liquidity and Capital Resources
Providence had current assets of $124,678 and total assets of $6,993,672 as of March 31, 2006. These assets included cash on hand of $11,259, promissory notes receivable totaling $82,322, oil and gas leases totaling $5,502,589, drilling rigs and equipment totaling $1,246,447, and other current, long term and other assets. Net member equity in Providence was $607,095 at March 31, 2006.
Providence had current assets of $134,342 and total assets of $4,643,353 as of December 31, 2005. These assets included cash on hand of $22,060, and oil and gas leases totaling $3,136,273, and drilling rigs and equipment totaling $1,236,647, and other current, long term and other assets. Net member equity in Providence was $243,764 at December 31, 2005.
Cash flows from operating activities were $494,678 as of March 31, 2006, which included an accounts payable of $730,728, offsetting the net losses in the period. Cash flows used in operating activities were $590,916 as of December 31, 2005, which included a net loss of $778,764.
Cash flows used in investing activities were $2,406,117 as of March 31, 2006, which included the purchase of property and equipment totaling $2,376,117. Cash flows used in investing activities were $4,592,310 as of December 31, 2005, which included the purchase of property and equipment totaling $4,410,161.
Cash flows from in financing activities were $1,900,638 as of March 31, 2006, which included notes payable of $1,982,320. Cash flows from financing activities were $5,205,286 as of December 31, 2005, which included notes payable of $4,825,000.
The Corporation is committed to loan Providence up to $5,000,000 on a Secured Revolving Replacement Promissory Note (“Note”) to acquire oil, gas and mineral leasehold interests for exploration and development. The Corporation has advanced $4,207,320 to Providence pursuant to the Note as of March 30, 2006. The Note bears interest at 7% per annum and is to be paid in full by December 1, 2006. As of March 31, 2006, the Note had accrued interest of $75,726. The advances to Providence against the Note have been used (a) to acquire leasehold interests in Comanche, Hamilton and Val Verde Counties, (b) to fund initial exploratory work carried out by Providence’s joint venture operating partner, Harding Company, on the Comanche and Hamilton county leases, and (c) for general working capital.
Providence believes its current assets are insufficient to conduct its minimum plan of operation over the next twelve (12) months. No assurances can be given that additional funding as needed to explore and develop Providence’s lease interests will be available on acceptable terms or available at all. Providence’s inability to obtain funding would have a material adverse affect on Providence’s plan of operation.
Providence has no current plans for the purchase or sale of any plant or equipment.
Providence has no current plans to make any changes in the number of employees.
Going Concern
Providence’s audit expressed substantial doubt as to Providence’s ability to continue as a going concern as a result of insufficient revenue generating activities and a working capital deficit of $4,048,158 as of December 31, 2005, which increased to $6,013,413 at March 31, 2006. The continuation of Providence’s operations is dependent upon the continuing financial support of creditors and stockholders, obtaining short and long term financing, and achieving profitability. These conditions and dependencies raise substantial doubt about our ability to continue as a going concern.
Management’s plan to address Providence’s ability to continue as a going concern, include: (i) successfully developing oil and gas leases; (ii) obtaining additional debt financing on an inter-company basis to continue the development of its oil and gas leases; and (iii) transferring outstanding debt obligations to the Corporation as provided by the Note Exchange Agreement. The successful outcome of these activities cannot be determined at this time, and there is no assurance that, if achieved, that Providence would then have sufficient funds to execute its intended business plan or generate positive operating results.
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED SHARES FROM 50,000,000 TO 100,000,000
Under our Amended and Restated Articles of Incorporation as currently in effect, there are 50,000,000 shares of common stock authorized for issuance. As of June 9, 2006, __________ shares of common stock were issued and outstanding. We will require additional shares pursuant to the Securities Exchange Agreement and the Note Exchange Agreement by which we will issue the following: (i) 12,213,670 shares of common stock to Providence’s promissory note holders on a pro rata basis; and (ii) 4,286,330 shares of common stock to Providence’s membership unit holders on a pro rata basis.
Additional shares of common stock may also be needed in connection with: (i) equity financings; (ii) acquisitions of other companies, businesses or assets; (iii) establishing strategic partnerships or other business relationships; or (iv) other corporate purposes.
On April 10, 2006, our Board of Directors approved an amendment to the first paragraph of Article Four of our Amended and Restated Articles of Incorporation to increase the shares of common stock that are authorized for issuance by 50,000,000 shares, bringing the total number of common shares authorized for issuance to 100,000,000. The directors also directed that the amendment be submitted for approval by the Corporation’s stockholders as required by Texas Business Corporation Act, Article 4.02. No change will be made to the number of shares of preferred stock that are authorized for issuance. The text of the proposed amendment to the first paragraph of Article IV of our Amended and Restated Articles of Incorporation is as follows:
“ARTICLE FOUR
| The total number of shares of stock which the corporation has authority to issue is One Hundred and Twenty Five Million (125,000,000) shares, of which One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.0001 per share (the “Common Stock) and Twenty-Five Million (25,000,000) shares shall be Preferred Stock, par value $.0001 per share (the “Preferred Stock”). The corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the corporation shall have notice thereof, except as expressly provided by applicable law. The shares of the Preferred Stock and Common Stock, respectively, shall have the following express terms:" |
If this proposal is approved by the stockholders at the Special Meeting, the Corporation will file an amendment to the Amended and Restated Articles of Incorporation for the purpose of increasing the authorized common stock. This amendment will become effective upon the filing of a Certificate of Amendment with the Secretary of State of Texas, which is expected to take place shortly after the Special Meeting.
The proposed increase in the authorized number of shares of common stock will not have any immediate effect on the rights of existing stockholders; however the issuance of a significant amount of common stock may, in the future, have a significant negative effect on the trading price of the common stock. Issuance of these shares may also substantially dilute the ownership interests of the Corporation’s existing stockholders.
Required Vote
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon at the meeting, assuming a quorum is present. Broker non-votes are counted solely for the purpose of determining a quorum. Abstentions will have the same effect as a vote against this proposal.
Board Recommendation
| THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” INCREASING THE AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO 100,000,000. |
ADDITIONAL GENERAL INFORMATION
VOTING SECURITIES
As of June 9, 2006, there were _________ shares of the common stock and no shares of preferred stock issued and outstanding. Each holder of common stock is entitled to one vote for each share held by such holder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the ownership of the Corporation’s common stock as of June 9, 2006, with respect to: (i) each person known to the Corporation to be the beneficial owner of more than five percent of the Corporation’s common stock; (ii) all directors; and (iii) directors and executive officers of the Corporation as a group.
- --------------------------------------------------------------------------------------------------
Title of Class Name and Address Number of Shares % of Class
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Common Nora Coccaro, chief executive officer,
chief financial officer, director
1066 - 2610 West Hastings St. 353,500 _____
Vancouver, British Columbia
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Common Markus Mueller, director 5,023,435 _____
Rossenweidstrasse 12 CH-8966 Zurich,
Switzerland
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Common Global Convertible Megatrend Ltd. 1,445,465 _____
Bleicherweg 66 CH-8002
Zurich Switzerland
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Common Nicolas Mathys
Weinberghohe 17 2,700,002 _____
6340 Baar, Switzerland
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Common Officer and Directors as a Group 5,376,935 _____
- --------------------------------------------------------------------------------------------------
WHERE YOU CAN FIND MORE INFORMATION
The Corporation is subject to the informational requirements of the Securities Exchange Act of 1934, as amended. The Corporation files reports, proxy statements and other information with the Commission. The public may read and copy any materials that we file with the Commission at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling 1-800-SEC-0330. The statements and forms we file with the Commission have been filed electronically and are available for viewing or copy on the Commission maintained Internet site that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the Commission. The Internet address for this site can be found at: www.sec.gov.
A copy of the Corporation’s yearly report on Form 10-KSB for the fiscal year ended December 31, 2005, can be found at the Commission’s Internet site. The yearly report does not form any part of the materials for the solicitation of proxies. Copies of the yearly report will be sent to any stockholder without charge upon written request addressed to: Healthbridge, Inc., 2610-1066 West Hastings Street, Vancouver, British Columbia V6E 3X2 Canada, attention: Corporate Secretary.
FINANCIAL STATEMENTS
The financial tables and notes that follow present the Corporation’s and Providence’s financial statements. The data hereto should be read together with the Corporation’s “Management’s Plan of Operation” and “Results of Operations” and Providence’s “Management’s Discussion and Analysis” and “Results of Operations” included in this proxy statement. The financial data for the years ended December 31, 2005 and 2004 are audited financial statements. The financial data for the three months ended March 31, 2006 and 2005 are unaudited, interim financial statements.
Description Page Healthbridge, Inc., Financial Statements for the periods ended March 31, 2006 and 2005 FA-1 Healthbridge, Inc., Financial Statements for the years ended December 31, 2005 and 2004 FB-1 Providence Exploration, LLC, Financial Statements for the period ended March 31, 2006 FC-1 Providence Exploration, LLC, Financial Statements for the year ended December 31, 2005 FD-1 Healthbridge, Inc., Pro Forma - the period ended March 31, 2006 FE-1 Healthbridge, Inc., Pro Forma - the period ended December 31, 2005 FF-1
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NON-U.S. SHAREHOLERS, PLEASE RETURN YOUR EXECUTED PROXY BY FAX TO INTERWEST TRANSFER, ATTN: STACY BANKS, AT (801) 272-3147. MS. BANK’S PHONE NUMBER IS (801) 272-9294.
HEALTHBRIDGE,
INC.
(A Development Stage Company)
INDEX
Page
Unaudited, Consolidated Balance Sheet as of March 31, 2006................................................FA-2
Unaudited, Consolidated Statement of Operations for the three month periods ended
March 31, 2006 and 2005 and the period from inception to March 31, 2006..............................FA-3
Unaudited, Consolidated Statement of Cash Flows for the three months ended March 31,
2006 and 2005 and the period from inception to March 31, 2006........................................FA-4
Notes to the Unaudited, Consolidated Financial Statements.................................................FA-5
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
March 31, 2006
ASSETS
Current assets:
Cash $ 770,412
Promissory note receivable (including interest) 4,283,046
---------------------
Total current assets 5,053,458
Property and equipment, net -
---------------------
Total assets $ 5,053,458
=====================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 53,884
Accrued expenses 127,020
Related party payables 27,403
---------------------
Total current liabilities 208,307
---------------------
Convertible debentures 3,645,000
---------------------
Total Liabilities 3,853,307
---------------------
Stockholders' deficit:
Preferred stock, $.0001 par value, 25,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.0001 par value, 50,000,000 shares
authorized,16,480,841 shares issued and outstanding 1,648
Additional paid-in capital 10,425,371
Accumulated other comprehensive income 18,219
Deficit accumulated during the development stage (9,245,087)
---------------------
Total stockholders' deficit 1,200,150
---------------------
Total liabilities and stockholders' deficit $ 5,053,458
=====================
The accompanying notes are an integral part of these financial statements.
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 2006 and 2005 and Cumulative Amounts
Three months ended March 31, Cumulative
2006 2005 Amounts
---------------- --------------- ----------------
General and administrative expenses $ 98,806 $ 36,029 $ 3,425,075
Loss from operations (98,806) (36,029) (3,425,075)
Other income (expense):
Interest expense (65,333) (8,049) (406,470)
Interest income 72,153 105 104,331
---------------- --------------- ----------------
Loss before provision for income taxes
and discontinued operations (91,987) (43,973) (3,727,215)
Provision for income taxes - - -
---------------- --------------- ----------------
Loss before discontinued operations (91,987) (43,973) (3,727,215)
Loss from discontinued operations, net of tax - (17,222) (3,407,279)
---------------- --------------- ----------------
Net loss before cumulative effect
of accounting change (91,987) (61,195) (7,134,494)
Cumulative effect of accounting change, net of tax - - (102,500)
---------------- --------------- ----------------
Net loss (91,987) $ (61,195) $ (7,236,994)
================ =============== ================
Other Comprehensive Income
Foreign currency translation adjustment 3,849 3,925 18,219
---------------- --------------- ----------------
$ (88,138) $ (57,270) $ (7,218,775)
Net Comprehensive Income (Loss)
================ =============== ================
Loss per share from Continuing Operations -
Basic and diluted $ (0.01) $ (0.01)
================ ===============
Net Loss per common share - basic and diluted $ (0.01) $ (0.01)
================ ===============
Weighted average common shares -
Basic and diluted 16,480,841 6,884,333
================ ===============
The accompanying notes are an integral part of these financial statements.
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2006 and 2005 and Cumulative Amounts
Three months ended March 31, Cumulative
2006 2005 Amounts
---------------- --------------- ---------------
Cash flows from operating activities:
Net loss $ (91,987) $ (61,195) $ (7,236,994)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock and stock option compensation expense - - 1,589,864
Depreciation and amortization 1,019 10,243 152,757
Discontinued operations - - 2,542,150
Gain on write-off of liabilities - - (96,270)
(Increase) decrease in:
Accounts receivable and prepaid expenses (58,825) (2,785) (69,922)
Increase (decrease) in:
Accounts payable (65,983) 11,371 553,123
Accrued expenses 65,317 7,259 358,544
Related party payables 13,903 (5,095) 127,715
---------------- --------------- ---------------
Net cash used in operating activities (136,555) (40,202) (2,079,033)
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds paid for promissory notes Receivable (1,132,320) - (4,207,320)
Acquisition of intangible assets - - (150,398)
Acquisition of property and equipment - - (3,740)
---------------- --------------- ---------------
Net cash used in investing activities (1,132,320) - (4,361,458)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable - - 692,999
Issuance of common stock - 75,000 3,081,233
Commissions paid to raise convertible debentures - - (41,673)
Proceeds from convertible debentures - - 3,654,173
Payments on notes payable - - (194,048)
---------------- --------------- ---------------
Net cash provided by financing activities - 75,000 7,192,684
---------------- --------------- ---------------
Change in accumulated other comprehensive income 3,849 3,925 18,219
---------------- --------------- ---------------
Net increase (decrease) in cash (1,265,026) 38,723 770,412
Cash, beginning of period 2,035,438 37,286 -
---------------- --------------- ---------------
Cash, end of period $ 770,412 $ 76,009 $ 770,412
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies
Organization
The consolidated financial statements consist of Healthbridge, Inc. (“Healthbridge”) and its wholly owned subsidiary, Healthbridge AG (“Healthbridge AG”) (collectively “the Company”). Healthbridge was organized on February 17, 1993 (date of inception) under the laws of the State of Texas. Healthbridge AG was formed as a German subsidiary during 2002.
On January 25, 2002, the Company acquired certain patents related to the infectious medical waste sterilization and disposal technologies developed in Germany. After the acquisition the Company’s operations consisted primarily of (1) developing a marketing philosophy and market strategy, (2) pursuing and assembling a management team, and (3) obtaining sufficient working capital through loans from stockholders and debt and equity financing.
In 2005, the Company decided to discontinue all operations connected to the Valides® Modular Infectious Waste Disposal System and the Medides System due to the unsatisfactory level of revenue generated to date.
The Company is considered a development stage company as defined in SFAS No. 7.
On November 21, 2005, the Company announced that it had executed a letter of intent to acquire Providence Exploration, LLC (“Providence”), as a wholly owned subsidiary. The Company intends to acquire Providence and its wholly owned subsidiaries in a stock for ownership exchange. The Securities Agreement requires the exchange of 4,286,330 shares of the Company’s common stock for all 1,250,000 of the issued and outstanding membership units of Providence. The Company expects to close this transaction, subject to stockholder approval, on June 30, 2006. The closing is further conditioned upon the concurrent closing a Note Exchange Agreement and upon the Company’s commitment to loan Providence up to $5,000,000 of which approximately $4,200,000 has been loaned to date.
Providence is a private company, headquartered in Dallas, Texas, that intends to explore, develop and produce oil and gas from the Marble Falls and Barnett Shale formations in prospect specific areas of the Fort Worth basin. The Barnett Shale is the largest producing natural gas opportunity in Texas with an estimated twenty six trillion cubic feet (TCF) of gas. The formation underlies approximately sixteen counties including Comanche and Hamilton counties, where Providence has signed an agreement to purchase approximately 6,330 acres (about ten square miles) of oil and gas leases. Providence will retain a 90% working interest and its joint venture operating partner, Dallas-based Harding Company, will retain a 10% working interest and operations. Providence also owns and operates one drilling rig and two well service rigs based in Young County, Texas, to service the increasing demand in the exploration industry.
Principles of Consolidation
The consolidated financial statements include the accounts of Healthbridge and Healthbridge AG. All significant intercompany balances and transactions have been eliminated.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Costs of major renewals or betterments are capitalized over the remaining useful lives of the related assets. Depreciation is computed by using the straight-line method. Equipment is depreciated over the assets estimated useful life which is determined to be five years. The cost of property disposed of and related accumulated depreciation is removed from the accounts at the time of disposal, and gain or loss is reflected in operations.
Intangible Assets
Costs associated with the acquisition of patents have been capitalized and are being amortized over their useful life of 10 years. These costs will also be reviewed quarterly by management for impairment and valuation. Such impairment will be reviewed from available information at the time such as projected cash flow analysis, sales orders and other information available to help management determine future realization of this asset. Management will write this intangible down to its net realizable value at the time of impairment appears to exist.
Long-Lived Assets
The Company evaluates its long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived Assets”. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets and is recorded in the period in which the determination was made.
Revenue Recognition
Revenue from product sales is generally recognized at the time the product is shipped and invoiced and collectibility is reasonably assured. The Company believes that revenue should be recognized at the time of shipment as title generally passes to the customer at the time of shipment. This policy meets the criteria of Staff Accounting Bulletin 101 in that there is persuasive evidence of an existing contract or arrangement, deliver has occurred, the price is fixed and determinable and the collectibility is reasonably assured.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies (continued)
Income Taxes
Deferred income taxes are provided in amounts sufficient to give effect to temporary differences between financial and tax reporting, principally related to deferred start-up cost. For income tax purposes start-up costs are deferred until the Company begins generating revenue, at which time the costs begin being amortized.
Earnings Per Share
The numerator for the earnings per share calculation is the net loss for the period. The denominator is the weighted average number of shares outstanding during the period.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise or conversion of warrants, options and convertible securities, if any, using the treasury stock method. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive.
Earnings Per Share computation for Continuing operations:
March 31,
--------------------------------
2006 2005
---------- ----------
Numerator - (loss from continuing operations) $ (91,987) (43,973)
Denominator - weighted average
number of shares outstanding 16,480,841 6,884,333
----------- ---------
Loss per share $ (0.01) $ (0.01)
=========== =========
Earnings Per Share computation from Discontinued Operations:
March 31,
--------------------------------
2006 2005
--------- ----------
Numerator - (loss from discontinued operations) $ (91,987) (61,195)
Denominator - weighted average
number of shares outstanding 16,480,841 6,884,333
----------- --------
Loss per share-discontinued operations $ (0.01) $ (0.01)
=========== ==========
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies (continued)
Earnings Per Share (continued)
Earnings Per Share computation for Net Income:
March 31,
--------------------------------
2006 2005
----------- -----------
Numerator - (Net Loss ) $ (91,987) (61,195)
Denominator - weighted average
number of shares outstanding 16,480,841 6,884,333
----------- ---------
Loss per share $ (0.01) $ (0.01)
=========== =========
Translation of Foreign Currencies
Assets and liabilities of the Company’s foreign subsidiary are translated into U.S. dollars at the applicable exchange rates at year-end. Net gains or losses resulting from the translation of the Company’s assets and liabilities are reflected as a separate component of stockholders’ equity. A negative translation impact on stockholders’ equity reflects a current relative U.S. dollar value higher than at the point in time that assets were actually acquired in a foreign currency. A positive translation impact would result from a U.S. Dollar weaker in value than at the point in time foreign assets were acquired.
Income and expense items are translated at the weighted average rate of exchange (based on when transactions actually occurred) during the year.
Stock-Based Compensation
At March 31, 2006, the Company has stock-based employee compensation plans, which are described in greater detail in Note 12. The Company accounts for those plans under the recognition and measurement principles of APB Opinion 25, “Accounting for Stock Issued to Employees”, and related Interpretations, and has adopted the disclosure provisions of SFAS 123 (R), “Share Based Payment.”
Had compensation cost for the Company’s stock option plan been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS 123 (R), the Company’s net loss and loss per share would have been reduced to the pro forma amounts indicated below:
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies (continued)
Stock-Based Compensation (continued)
Three months ended
------------------
March 31,
--------
2006 2005
---- ----
Net loss as reported $ (91,987) $ (61,195)
Deduct:
Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of related tax effects - -
-------- -------
Net loss pro forma $ (91,987) $ (61,195)
Loss per share - basic and diluted:
As reported $ (.01) $ (.01)
Pro forma $ (.01) $ (.01)
Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. At March 31, 2006, the Company had $770,412 in bank deposit accounts. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements in conformity with generally accepted accounting principles 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.
Reclassifications
Certain amounts in the 2005 financial statements may have been reclassified to conform to the 2006 presentation.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 2 — Going Concern
As of March 31, 2006, the Company’s revenue generating activities have not generated sufficient funds for profitable operations, and the Company has incurred losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management intends to seek additional equity funding to expand marketing efforts and product development. The continuation of the Company is dependent upon achieving a profitable level of operations as well as obtaining further long-term financing. At March 31, 2006 the Company had $770,412 remaining to fund its operational costs. Management plans to raise $10,000,000 in additional funds by way of common stock and debenture offerings over the next twelve months to finance the operations and capital requirements of the Company over the next year. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations. As a result, the Company may not be able to continue operations due to lack of funds to pay employees and vendors, and would not have the ability to repay loans to stockholders, officers, and other note holders. This could result in the notes becoming immediately due which could cause the company to discontinue operations due to liens or litigation.
Note 3 – Promissory Note Receivable
As of March 31, 2006, the Company has advanced $4,207,320 to Providence in exchange for a secured revolving promissory note. The note is secured by the assets of Providence including all of the debtor’s rights, titles and interests in certain leases of oil, gas and mineral interests located in the Comanche and Hamilton counties of Texas. The face value of the note increases to match the amounts advanced by the Company, to a maximum value of $5,000,000. The note bears interest at 7.0% per annum and is to be paid in full by December 1, 2006. As of March 31, 2006, the accrued interest was $75,726.
Note 4 – Patents
In 2002, patents were obtained pursuant to an agreement whereby the Company executed an Intellectual Property Assignment and Sale Agreement (“Agreement”) with B.I.M.E. GmBH, a German corporation, and Hermann Esser and Eduard Kneifel, both German residents (“Sellers”), to acquire certain infectious medical waste sterilization and disposal technologies developed in Germany. The Agreement transfers to the Company the exclusive ownership of both the Valides® Modular Infectious Medical Waste Disposal System and the Medides System together with all the intellectual property, including the patents, patents pending, proprietary software and licenses required to manufacture, operate and market these technologies worldwide. The patents are being amortized over a definite ten year life commencing at the date of acquisition in 2002.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 4 – Patents (continued)
As of December 31, 2004, the gross carrying value of the patents was $404,446 and accumulated amortization was $121,334. In the first six months of 2005, the company recognized a further $20,222 of amortization on the patents. On June 30, 2005 the Company reviewed the carrying value of its patents and determined that the prospect of sales this year and future expected cashflow from sales of the Valides system were unknown. Therefore the Company determined that there was sufficient evidence to indicate that the carrying value of the patent asset was impaired. Pursuant to the Company’s determination, it wrote off the remaining unamortized balance of $262,890 of its capitalized cost.
Total consideration for the transaction was $404,446, representing $179,446 in cash consideration through notes payable and $225,000 in non-cash consideration through the issuance of 750,000 shares restricted common stock valued at the fair market value on the date of issuance. As of December 31, 2004, the Company had paid cash to the Sellers totaling $150,398 and had issued 750,000 shares of restricted common stock. In 2005, the Company paid the outstanding balance of the note payable in cash. As of December 31, 2005, the Company had no further obligations with regards to the patents.
Note 5 — Property and Equipment
Property and equipment consist of the following at March 31, 2006:
Equipment $ 3,740
Less accumulated depreciation (3,740)
-------
Net Value $ -
Depreciation expense for the three months ended March 31, 2006 and 2005 was $1,019 and $10,243 respectively.
Note 6 – Convertible Debentures
Two convertible debentures were issued during 2002 (May 3, 2002-$75,000 and May 6, 2002-$250,000), bearing interest at 7.5% per annum, which mature in three years. The convertible debentures become immediately due and payable upon certain events of default unless waived by the lender. Interest on the principal amount was due annually on the anniversary date of the issue date. The conversion feature allowed the holder at any time to convert any unpaid amount of principal or interest at $5.00 per share for a period of three years from the date of issuance. In the event that the trading average price of the shares during 30 consecutive trading days is above 200% of the conversion price, conversion is enforced by the Company. Pursuant to the terms of the convertible debenture, the Company agrees to file a Registration Statement within 60 days of conversion with the U.S. Securities and Exchange Commission. The convertible debentures are secured by substantially all of the Company’s assets consisting of all tangible and intangible property, but not limited to procedures, instruments, devices, equipment, research, designs, registrations, licenses, trademarks, software, patents, patents pending, “know-how” expertise, all additions and replacements to such property and any other documentation related to the Valides® and Medides systems for sterilizing and disinfecting infectious waste.
On January 14, 2004, the conversion price of the two debentures was adjusted to $0.10 per share.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 6 – Convertible Debentures (continued)
The terms for these two convertible debentures were extended to May 3, 2008 and May 6, 2010, respectively pursuant to the terms of extension agreements dated March 31, 2005. The extension agreements require certain additional conditions related to the Company’s obligations as follows:
| 1. | The interest payable on the convertible debentures, as of May 4, 2005, accrues at a rate of ten percent (10%) per annum payable on a quarterly basis with the initial quarterly interest payments due on September 30, 2005 and at the end of each quarter thereafter until repayment or conversion. |
| 2. | The right to convert the whole part or any part of the principal amounts and accrued interest into shares of the Company extends until May 3, 2008 and May 6, 2010 respectively. |
| 3. | Upon conversion or repayment of the principal amounts and accrued interest, the holders of the convertible debentures are entitled to a ten percent (10%) bonus on the amount due as of such date. The market value of this bonus on the date of the extension was recorded as financing expense of $32,500. |
On October 3, 2005 the Company reached an agreement with the beneficiaries of these two outstanding debentures for payment of interest accrued to September 30, 2005. The Company issued 136,298 shares of common stock to Global Convertible Megatrend Ltd. for $13,629 owed, and 56,250 shares of common stock to Max Fugman for $5,625 owed. For the three months ended March 31, 2006, the Company recorded $8,014 as interest expense. Accrued interest and financing costs as at March 31, 2006 for these two debentures totaled $48,704.
On November 28, 2005, the company issued seven convertible debenture certificates for the total principal sum of $3,320,000 due in full with accrued and unpaid interest on November 30, 2010. The interest at a rate of 7.0% per annum is payable on a semi-annual basis with the initial payment due on June 1, 2006. The holders of the debentures has the right to convert all or part of the principal and accrued interest into common shares of the Company at $0.35 per share at any time prior to maturity. For the three months ended March 31, 2006, the Company recorded $57,304 as interest expense. Accrued interest as at March 31, 2006 for these seven debentures totaled $78,316.
The total value of the principal of the nine convertible debentures outstanding as of March 31, 2006 was $3,645,000. Repayment of this principle is due according to the following schedule:
Year Principal Repayment
2006 -
2007 -
2008 -
2009 -
2010 $ 3,645,000
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 7 — Income Taxes
The difference between income taxes at statutory rates and the amount presented in the financial statements is a result of the following:
Three Months Ended
March 31, Cumulative
2006 2005 Amounts
---- --- -------
Income tax benefit at statutory rate $ (318,000) $ (106,000) $ (2,422,000)
Change in valuation allowance 318,000 106,000 2,422,000
------------------------------------------------------
$ - $ - $ -
Deferred tax assets are as follows at March 31, 2006:
NOL Carry-forward $ 2,422,000
Valuation allowance (2,422,000)
----------
$ -
The Company has incurred Net Operating Losses of approximately $9,200,000. These losses will be carried forward to offset future taxable income and expire beginning in 2014. However, realization of the future tax benefit of these carry-forwards is contingent on the Company’s ability to generate positive net operations. A valuation allowance has been recorded for the full amount of the deferred tax asset because it is more likely than not that the deferred tax asset will not be realized.
Note 8 — Related Party Transactions
The Company has entered into an agreement with Markus Mueller, a director of the Company for consulting services. The agreement has an automatic renewal provision unless terminated by either party. During the three months ended March 31, 2006 and 2005, the Company recognized consulting expense of $10,500 each quarter.
The Company has entered into an agreement with Nora Coccaro, the Company’s President, for consulting services. The agreement has an automatic renewal provision unless terminated by either party. During the three months ended March 31, 2006 and 2005, the Company recognized consulting expense of approximately $10,500 and $8,025 respectively.
Note 9 — Supplemental Cash Flow Information
During the year ended December 31, 2005, the Company issued 1,250,000 shares of common stock at $0.10 per share for a total of $125,000. The Company also issued 6,270,000 shares of common stock at $0.30 per share for a total of $1,881,000.
In connection with the offering of 6,270,000 shares common stock and $3,320,000 of convertible debentures during the year, a sales commission totaling 5% was authorized for payment to two individuals, comprising of 3% in cash and 2% in warrants to purchase 348,000 shares of Company common stock at $0.30 per share. The warrants granted have a fair market value totaling $191,400.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 9 — Supplemental Cash Flow Information (continued)
During the year ended December 31, 2005, the Company issued 2,334,841 shares of common stock for accounts payable of $201,212, and accrued interest of $32,038. An amount of $116,742 was recorded as a financing cost due to the premium of the prevailing market price at the time of issuance over the stated price in the share for debt swap.
Note 10 — Preferred Stock
The Company’s preferred stock may have such rights, preferences and designations and may be issued in such series as determined by the Board of Directors. No shares were issued and outstanding at March 31, 2006.
Note 11— Warrants
During 2005, in connection with the offering of 6,270,000 shares common stock and $3,320,000 of convertible debentures during the year, a sales commission was partially paid in warrants. The warrants are exercisable in whole or in part allowing the holders to purchase 348,000 shares at an exercise price of $0.30 before the expiry date of December 1, 2010. On the date granted, the fair market value of these warrants, totaling $191,400, consisted of $68,970 for warrants issued in connection with the common stock offering, and $122,430 for warrants issued in connection with the debenture offering. The value of the warrants issued in connection with the debenture offering was recorded as a financing expense.
At March 31, 2006, the Company had 348,000 warrants outstanding.
Note 12 — Stock Based Compensation
The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (R), “Share Based Payment” as described in Note 1.
No stock options were granted in 2006 and 2005. No stock options were outstanding at March 31, 2006.
Note 13 — Reverse Common Stock Split
Effective August 25, 2003, the Company approved a 1-for-20 reverse common stock split. All common share amounts, common stock option amounts and per share information have been retroactively adjusted to reflect this common stock split in the accompanying financial statements.
Note 14 — Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The carrying amount of these items approximates fair value because of their short-term nature and the notes payable bear interest at the market interest rate.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 15 – Discontinued Operations
Effective December 31, 2000, the Company closed its offices in Dallas, Texas, and discontinued its operations relating to the marketing and distributing of its Redloc II waste disposal system because of its inability to generate revenues due to lack of successfully obtaining contracts for its product. The Company wrote off inventory in the amount of $40,395 in accordance with SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” During the fourth quarter of 2002, the Company wrote off approximately $103,000 in assumed liabilities and included in gain (loss) on discontinued operations for 2002 is a gain of $102,692, and included in cumulative amounts from inception to December 31, 2002, is a net loss of $2,893,157. There was no tax effect on this transaction due to the Company’s loss position.
Effective December 31, 2005, the Company discontinued all operations connected to the Valides® Modular Infectious Waste Disposal System and the Medides System due to the unsatisfactory level of revenue generated to date. In 2005, $299,248 was recorded as the loss on discontinued operations. Included in cumulative amounts from inception to December 31, 2005 is a net loss of $514,122. There was no tax effect on this transaction due to the Company’s loss position.
There was no impact of discontinued operations for the three months ended March 31, 2006.
Note 16 — Recent Accounting Pronouncements
In December 2004, FASB issued a revision to SFAS 123 (R) “Share-Based Payment”. This Statement is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 as originally issued and EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers’ Accounting for Employee Stock Ownership Plans. The Company does not believe adoption of this revision will have a material impact on the Company’s consolidated financial statements.
HEALTHBRIDGE, INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
Note 16 — Recent Accounting Pronouncements (continued)
In June 2005, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). The Statement applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. SFAS 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. SFAS 154 requires that a change in method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by a change in accounting principle. Opinion 20 previously required that such a change be reported as a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe this pronouncement will have a material impact in our financial results.
Note 17 – Subsequent Events
Subsequent to March 31, 2006, the Company plans to raise up to $10,000,000 through an equity financing. Units, comprised of ten common shares and five common share purchase warrants, will be sold for $6.00 each.
On April 10, 2006, the Company entered into a Securities Exchange Agreement (“Securities Agreement”) with Providence and the membership unit holders of Providence for the acquisition of Providence by the Company. On April 10, 2006, the Company entered into a Note Exchange Agreement (“Note Agreement”) with the holders of certain promissory notes issued by Providence whereby the Company intends to acquire the outstanding promissory notes from the note holders in exchange for 12,213,670 shares of the Company ‘s common stock, to be distributed to the note holders as detailed in the Note Agreement. The Company expects to close these transactions, subject to shareholder approval, on June 30, 2006. The closing is further conditioned upon simultaneous closing with the Securities Agreement.
On April 11, 2006, the Company issued 867,493 common shares to Max Fugman upon conversion of a debenture. The conversion extinguished $86,749 of debt consisting of $75,000 of principal repayment and $11,749 in accrued interest.
On April 26, the Company issued 300,000 common shares valued at $360,000 to Nora Coccaro for services rendered.
HEALTHBRIDGE,
INC.
(A Development Stage Company)
INDEX
Page
Report of Chisholm, Bierwolf Nilson, LLC..................................................................FB-2
Unaudited, Consolidated Balance Sheet as of December 31, 2005.............................................FB-3
Unaudited, Consolidated Statement of Operations for the years ended December 31,
2005 and 2004 and the period from....................................................................FB-4
Consolidated Statements of Stockholders' Equity (Deficit) for the period from
inception to December 31, 2005.......................................................................FB-5
Unaudited, Consolidated Statement of Cash Flows for the years ended December 31,
2005 and 2004 and the period from inception to December 31, 2005.....................................FB-9
Notes to the Unaudited, Consolidated Financial Statements.................................................FB-10
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Healthbridge, Inc.
Vancouver, BC Canada
We have audited the accompanying consolidated balance sheets of Healthbridge, Inc. as of December 31, 2005 and 2004 and the related consolidated statement of operations, stockholders’ equity and comprehensive income and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with standards of the PCAOB (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Healthbridge, Inc. as of December 31, 2005 and 2004. and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company’s recurring operating losses and lack of working capital raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to those matters are also described in Note 2. The financial statements do not include any adjustments that might result from outcome of this uncertainty.
/s/ Chisholm Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
February 8, 2006
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 2005
ASSETS
Current assets:
Cash $ 2,035,438
Promissory note receivable (including interest) 3,091,901
--------------------
Total current assets 5,127,339
Property and equipment, net 1,019
Patents, net of amortization -
--------------------
Total assets $ 5,128,358
====================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 119,867
Accrued expenses 61,703
Related party payables 13,500
Notes payable -
--------------------
Total current liabilities 195,070
--------------------
Convertible debentures 3,645,000
--------------------
Total Liabilities 3,840,070
--------------------
Stockholders' deficit:
Preferred stock, $.0001 par value, 25,000,000 shares
authorized, no shares issued and outstanding -
Common stock, $.0001 par value, 50,000,000 shares
authorized,16,480,906 shares issued and outstanding 1,648
Additional paid-in capital 10,425,371
Accumulated other comprehensive income 14,370
Deficit accumulated during the development stage (9,153,101)
--------------------
--------------------
Total stockholders' equity 1,288,288
--------------------
--------------------
Total liabilities and stockholders' deficit $ 5,128,358
====================
====================
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2005 and 2004 and Cumulative Amounts
Cumulative
2005 2004 Amounts
-------------- --------------- --------------
General and administrative expenses 468,677 167,714 3,326,269
Loss from operations (468,677) (167,714) (3,326,269)
Other income (expense):
Interest expense (200,517) (45,209) (341,137)
Interest income 23,585 - 32,178
-------------- --------------- --------------
Loss before provision for income taxes
and discontinued operations (645,609) (212,923) (3,635,228)
Provision for income taxes - - -
-------------- --------------- --------------
Loss before discontinued operations (645,609) (212,923) (3,635,228)
Gain (loss) from discontinued operations, net of tax (299,248) (98,835) (3,407,279)
-------------- --------------- --------------
Net loss before cumulative effect
of accounting change (944,857) (311,758) (7,042,507)
Cumulative effect of accounting change, net of tax - - (102,500)
-------------- --------------- --------------
Net loss (944,857) $ (311,758) $ (7,145,007)
============== =============== ==============
Other Comprehensive Income
Foreign currency translation adjustment 9,057 5,313 14,370
-------------- --------------- --------------
Net Comprehensive Income (Loss) $ (935,800) $ (306,445) $ (7,130,637)
============== =============== ==============
Loss per share from Continuing Operations -
basic/diluted $ (0.08) $ (0.07)
============== ===============
Net Loss per common share - basic and diluted $ (0.12) $ (0.10)
============== ===============
Weighted average common shares -
basic and diluted 8,032,000 3,238,086
============== ===============
============== ===============
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
February 17, 1993 ( Date of Inception) to December 31, 2004
Deficit
Accumulated Accumulated
Additional Other During the
Preferred Stock Common Stock Paid-in Comprehensive Development
-------------------------- ---------------------------
Shares Amount Shares Amount Capital Income Stage Total
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at February 17, 1993 (date of
inception) - $ - 60,000 $ 6 $ 1,194 $ - $ - $ 1,200
Net loss - - - - - - (200) (200)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1993 - - 60,000 6 1,194 - (200) 1,000
Net loss - - - - - - (240) (240)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1994 - - 60,000 6 1,194 - (440) 760
Net loss - - - - - - (240) (240)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1995 - - 60,000 6 1,194 - (680) 520
Net loss - - - - - - (240) (240)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1996 - - 60,000 6 1,194 - (920) 280
Issuance of common stock for cash - - 32,068 3 80,269 - - 80,272
Net loss - - - - - - (79,765) (79,765)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1997 - - 92,068 9 81,463 - (80,685) 787
Issuance of common stock for:
Services - - 6,500 1 12,999 - - 13,000
Cash - - 26,170 3 26,167 - - 26,170
Additional shares due to rounding
after stock split - - 300 1 (1) - - -
Net loss - - - - - - (36,896) (36,896)
----------- ---------- ------------ ----------- ---------- -------------- --------------- -----------
Balance at December 31, 1998 - - 125,038 14 120,628 - (117,581) 3,061
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (continued)
February 17, 1993 ( Date of Inception) to December 31, 2004
Balance forward, December 31, 1998 - - 125,038 14 120,628 - (117,581) 3,061
Rounding - - (38) - - - - -
Issuance of common stock for:
Cash - - 22,500 2 899,998 - - 900,000
Assets - - 128,012 13 1,020,452 - - 1,020,465
Net book value of Healthbridge, Inc. - - 20,500 2 (2) - - -
Dividends-in-kind - - 50,202 5 2,008,091 - (2,008,096) -
Debt - - 242,500 23 999,978 - - 1,000,001
Reverse acquisition with Healthbridge,
Inc.
and Wattmonitor, Inc. - - 147,500 15 798,046 - - 798,061
Common stock offering costs - - - - (105,000) - - (105,000)
Reverse acquisition, retirement of old
shares
of Wattmonitor, Inc. - - (147,500) (15) (915,627) - 117,581 (798,061)
Share adjustment for shares previously
issued - - 150 - - - - -
Net loss - - - - - - (3,196,076) (3,196,076)
------------ ----------- ---------- ------------ ----------- -------------- ---------------- --------------
Balance at December 31, 1999 - - 588,864 60 4,826,564 - (5,204,172) (377,549)
Issuance of common stock for:
Debt - - 34,950 4 349,496 - - 349,500
Services - - 11,000 1 71,199 - - 71,200
Cash - - 19,500 2 194,998 - - 195,000
Accounts payable - - 7,500 1 74,999 - - 75,000
Common stock offering costs - - - - (15,600) - - (15,600)
Stock option compensation expense - - - - 6,000 - - 6,000
Net loss - - - - - - (816,545) (816,545)
------------ ----------- ---------- ------------ ----------- -------------- ---------------- --------------
Balance at December 31, 2000 - - 661,814 67 5,507,656 - (6,020,717) (512,994)
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME(continued)
February 17, 1993 ( Date of Inception) to December 31, 2004
Balance forward at December 31, 2000 - - 661,814 67 5,507,656 - (6,020,717) (512,994)
Issuance of common stock for:
Services - - 84,400 9 258,941 - - 258,950
Accounts payable - - 13,750 1 59,999 - - 60,000
Debt - - 41,603 4 249,614 - - 249,618
Net loss - - - - - - (422,008) (422,008)
----------- ----------- ----------- ----------- ----------- ------------ --------------- -------------
Balance at December 31, 2001 - - 801,567 81 6,076,210 - (6,442,725) (366,434)
Comprehensive loss:
Net loss - Restated - - - - - - (1,221,203) (1,221,203)
Other comprehensive loss -
cumulative foreign currency translation
adjustment - - - - - 4,869 - 4,869
-------------
Total comprehensive loss - Restated (1,216,334)
=============
Issuance of common stock for:
Intellectual property - - 37,500 4 224,996 - - 225,000
Services - - 143,000 14 806,086 - - 806,100
Accounts payable and services - - 5,000 1 10,999 - - 11,000
Stock option compensation expense - - - - 12,500 - - 12,500
----------- ----------- ----------- ----------- ----------- ------------ --------------- -------------
Balance at December 31, 2002 - - 987,067 99 7,130,791 4,869 (7,663,928) (528,169)
Comprehensive loss:
Net loss - Restated - - - - - - (232,560) (232,560)
Other comprehensive loss -
cumulative foreign currency translation
adjustment - - - - - (806) - (806)
-------------
Total comprehensive loss - Restated (233,366)
=============
Issuance of common stock for:
Cash - - 314,165 32 102,801 - - 102,833
Services 2,100 - 3,888 - - 3,888
Debt 1,537,048 154 475,583 - - 475,737
Common stock offering costs - - - - (2,000) - - (2,000)
Issuance of common stock options for
services - - - - 15,000 - - 15,000
Additional shares due to rounding after
reverse split - - 65 - - - - -
----------- ----------- ----------- ----------- ----------- ------------ --------------- -------------
Balance at December 31, 2003 - - 2,840,445 285 7,726,063 4,063 (7,896,488) (166,077)
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Developmental Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME(continued)
February 17, 1993 ( Date of Inception) to December 31, 2004
Balance forward at December 31, 2003 - - 2,840,445 285 7,726,063 4,063 (7,896,488) (166,077)
Issuance of common stock for:
Debt conversion - - 2,735,555 273 197,673 - - 197,946
Services 1,050,000 105 80,395 80,500
Other comprehensive loss -
cumulative foreign currency
translation adjustment - - - - - 1,250 - 1,250
Net loss - - - - - - (311,757) (311,757)
------------ ----------- ---------- ----------- ----------- ------------- ---------------- -------------
Balance at December 31, 2004 - - 6,626,065 663 8,004,131 5,313 (8,208,245) (198,138)
Issuance of common stock for:
Cash - - 7,520,000 752 2,005,248 - - 2,006,000
Debt - - 2,334,841 233 349,992 - - 350,226
Issuance of warrants for finders fees - - - - 191,400 - - 191,400
Common stock offering costs - - - - (125,400) - - (125,400)
Other comprehensive loss -
cumulative foreign currency
translation adjustment - - - - - 9,057 - 9,057
Net loss for the period - - - - - - (944,857) (944,857)
------------ ----------- ---------- ----------- ----------- ------------- ---------------- -------------
Balance at December 31, 2005 - $ - 16,480,906 $ 1,649 $ 10,425,371 $ 14,370 $ (9,153,101) $ 1,288,288
See accompanying notes to financial statements
HEALTHBRIDGE, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2005 and 2004 and Cumulative Amounts
Cumulative
2005 2004 Amounts
---------------- ---------------- ----------------
Cash flows from operating activities:
Net loss $ (944,857) (311,757) (7,145,007)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock and stock option compensation expense 416,226 - 1,589,864
Depreciation and amortization 491 41,199 151,738
Discontinued operations 299,248 - 2,542,150
Gain on write-off of liabilities 6,422 - (96,270)
(Increase) decrease in:
Accounts receivable and prepaid expenses (16,901) 122 (11,097)
Increase (decrease) in:
Accounts payable 53,756 6,775 619,106
Accrued expenses 50,197 45,865 293,227
Related party payables (97,438) 246,583 113,812
---------------- ---------------- ----------------
Net cash used in operating activities (232,857) 28,786 (1,942,479)
---------------- ---------------- ----------------
Cash flows from investing activities:
Proceeds paid for promissory notes Receivable (3,075,000) - (3,075,000)
Acquisition of intangible assets - - (150,398)
Acquisition of property and equipment - - (3,740)
---------------- ---------------- ----------------
Net cash used in investing activities (3,075,000) - (3,229,138)
---------------- ---------------- ----------------
Cash flows from financing activities:
Proceeds from notes payable - - 692,999
Issuance of common stock 2,006,000 - 3,081,233
Commissions paid to raise convertible debentures - - (41,673)
Proceeds from convertible debentures 3,320,000 - 3,654,173
Payments on notes payable (29,048) - (194,048)
---------------- ---------------- ----------------
Net cash provided by financing activities 5,296,952 - 7,192,684
---------------- ---------------- ----------------
Change in accumulated other comprehensive income 9,057 1,250 14,370
---------------- ---------------- ----------------
Net increase (decrease) in cash 1,998,152 30,036 2,035,438
Cash, beginning of period 37,286 7,250 -
---------------- ---------------- ----------------
Cash, end of period $ 2,035,438 37,286 2,035,438
================ ================ ================
See accompanying notes to financial statements