As filed with the Securities and Exchange Commission on December 19, 2005
Registration No. _________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MT ULTIMATE HEALTHCARE CORP.
(Exact name of Registrant as specified in its charter)
Nevada 8082 88-0477056
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
David Walters
MT Ultimate Healthcare Corp. MT Ultimate Healthcare Corp.
18301 Von Karman, Suite 205 18301 Von Karman, Suite 205
Irvine, CA 92612 Irvine, Ca 92612
(949) 260-0150 (949) 260-0150
(Address, and telephone number (Name, address and telephone number
of principal executive offices) of agent for service)
Copies to:
David M. Loev
Attorney at Law
2777 Allen Parkway, Suite 1000
Houston, Texas 77019
(713) 524-4110
_____________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
==============================================================================
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum
Title of Each Class Maximum Aggregate Amount of
of Securities To Be Amount to be Offering Price Offering Registration
Registered Registered (1) Per Security(2) Price Fee
- -------------------- ------------- -------------- ----------- ------------
Common Stock, $.001
par value(3) 5,692,307,692 $0.0025 $14,230,769 $1,522.69
Common Stock, $.001
par value(4) 30,000,000 $0.0025 $ 3,500 $ 0.37
Common Stock, $.001
par value(5) 1,400,000 $0.0025 $ 75,000 $ 8.03
- ------------------------------------------------------------------------------
TOTAL 5,723,707,692 $14,309,269 $1,531.09
==============================================================================
(1) In addition to the shares of Common Stock set forth in the table, the
amount to be registered also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion
of or otherwise pursuant to the Notes and exercise of the Warrants to
prevent dilution resulting from stock splits, stock dividends, or similar
transactions in accordance with Rule 416.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, using the
average of the bid and asked price as reported on the Over-the-Counter
Bulletin Board as of a recent date.
(3) Represents 200% of the shares issuable upon conversion of the Notes at
$0.0013 per share as of December 15, 2005.
(4) Represents 200% of the shares issuable upon exercise of the 2005 Warrants
at $0.10 per share.
(5) Represents 200% of the shares issuable upon exercise of the 2004 Warrants
at $0.45 per share.
_________________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 19, 2005
MT ULTIMATE HEALTHCARE CORP.
5,723,707,692 Shares of Common Stock
This Prospectus relates to the resale by the selling stockholders of up to
5,723,707,692 shares of our common stock, including up to 5,692,307,692
shares of common stock underlying secured convertible notes in a principal
amount of $3,700,000, and up to 15,700,000 shares of common stock issuable
upon the exercise of common stock purchase warrants. The secured convertible
notes are convertible into our common stock at the lower of $0.01 or 50% of
the average of the three lowest intraday trading prices for the common stock
on a principal market for the 20 trading days before but not including the
conversion date. The selling stockholders may sell common stock from time to
time in the principal market on which the stock is traded at the prevailing
market price or in negotiated transactions. The selling stockholders may be
deemed underwriters of the shares of common stock, which they are offering.
We will not receive any proceeds from the sale of the common stock. However,
we will receive the sale price of any common stock we sell to the selling
stockholders upon exercise of the warrants. We will pay the expenses of
registering these shares.
The Common Stock is quoted on the OTC Bulletin Board under the trading symbol
"MTHC". The last reported sale price of our Common Stock on the OTC Bulletin
Board as of December 15, 2005 was $0.003 per share.
An investment in these securities involves a high degree of risk. You should
purchase these securities only if you can afford to lose your entire
investment. We urge you to read the "RISK FACTORS" section beginning on page
8 along with the rest of this Prospectus before you make your investment
decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this Prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The information in this Prospectus is not complete and may be changed. This
Prospectus is included in the Registration Statement that was filed by MT
Ultimate Healthcare Corp. with the Securities and Exchange Commission. The
selling stockholders may not sell these securities until the Registration
Statement becomes effective. This Prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
The date of this Prospectus is ____________, 2005
TABLE OF CONTENTS
Page
About This Prospectus......................................................1
Prospectus Summary ........................................................7
Summary Financial Data.....................................................8
Risk Factors..............................................................19
Forward Looking Statements................................................19
Use of Proceeds...........................................................20
Dividend Policy...........................................................20
Selling Stockholders......................................................21
Plan of Distribution......................................................21
Legal Proceedings.........................................................22
Directors, Executive Officers, Promoters and Control Persons..............23
Security Ownership of Certain Beneficial Owners and Management............23
Description of Securities.................................................24
Legal Matters.............................................................29
Experts...................................................................29
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities..............................................30
Description of Business...................................................30
Management's Discussion and Analysis......................................36
Description of Property...................................................47
Certain Relationships and Related Transactions............................47
Market for Common equity and Related Stockholders Matters.................49
Executive Compensation....................................................50
Financial Statements.....................................................F-1
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................................52
ABOUT THIS PROSPECTUS
---------------------
You should only rely on the information contained in this Prospectus.
We have not authorized anyone to provide you with information different from
that contained in this Prospectus. The information contained in this
Prospectus is accurate only as of the date of this Prospectus, regardless of
the time of delivery of this Prospectus or of any sale of Common Stock.
All references to "we," "our," "us," or the "Company," refer to MT
Ultimate Healthcare Corp., a Nevada corporation, and its direct wholly owned
subsidiary, iTechexpress, Inc. and its indirect wholly owned subsidiary, Drug
Consultants, Inc., in each case, unless specifically stated otherwise.
Explanatory Note: We are in the process of obtaining stockholder approval:
(a) to change our corporate name to "Monarch Staffing, Inc.", (b) to effect a
one-for-ninety reverse stock split of our Common Stock, (c) to re-authorize
for issuance 400,000,000 shares of Common Stock, par value $.001 per share,
after giving effect to the reverse stock split and (d) authorize 5,000,000
shares of "blank check" preferred stock. Our Board of Directors has approved
each of these corporate actions and stockholders holding more than 50% of our
issued and outstanding shares of Common Stock have indicated their intention
to consent to these corporate actions in writing without a meeting of our
stockholders.
On December 9, 2005, we filed a preliminary information statement with the
Securities and Exchange Commission, notifying our stockholders of these and
other corporate actions. We have received notice that the Securities and
Exchange Commission intends to review and comment upon the preliminary
information statement. As a result, the timing of completion of these
corporate actions depends on the duration of the review by the Securities and
Exchange Commission and our ability to address their comments in a timely
manner. We currently expect to complete each of these corporate actions in
the first quarter of 2006.
The information contained in this Prospectus does not reflect the completion
of any of these corporate actions. Upon completion of these corporate
actions, our Prospectus will be updated to reflect such corporate actions.
1
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus. The securities offered
hereby are speculative and involve a high degree of risk. See "Risk Factors."
The Company
MT Ultimate Healthcare Corp. (the "Company") provides medical and
technical staffing services to both commercial and government sector
customers. We are focused on building a nationally recognized medical and
technical staffing company by growing our current customer bases, expanding
our service offerings, and acquiring and growing profitable staffing services
companies.
We operate our medical staffing services business through our indirect,
wholly owned subsidiary Drug Consultants, Inc. ("DCI"). DCI furnishes
personnel to perform a range of pharmacy technician, nursing and other health
care services in support of the operations of government and commercial
facilities, including its largest client, the State of California.
We operate our technical staffing services business through our direct,
wholly owned subsidiary iTechexpress, Inc. ("iTech"). iTech places
technicians into technical jobs on a national basis. iTech has performed
information technology and other technical staffing services for clients such
as Best Buy, Equant NV and Office Depot.
We are highly dependent on the operations of DCI and its largest client,
the State of California, for our revenues. We anticipate approximately 90% of
our revenues will come from DCI's medical staffing service business and
approximately 10% of our revenues will come from iTech's technical staffing
service business. Approximately 95% of DCI's revenue comes from the State of
California. DCI's agreements with the State of California do not provide for a
minimum purchase commitment of our services and can be terminated by the State
at any time on 30 days' notice. Our dependence on the State of California as
our major customer subjects us to significant financial risks in the operation
of our business if the State of California were to terminate or materially
reduce, for any reason, its business relationship with us. See "Risk
Factors--We are heavily dependent on the operations of DCI for our revenues,
which itself is highly dependent on the State of California as its major
customer".
Company Background and the iTech and DCI Transactions
Prior to August 2003, we were a development stage company. Although we
were incorporated only five years ago, we have undergone a number of changes
in our business strategy and organization.
The Company was originally incorporated in Nevada under the name
JavaJuice.net on September 13, 2000. The Company's business plan was to engage
in the operation of an Internet Cafe, in Reno, Nevada. On August 8, 2003, The
Company acquired M.T. Marketing Int. Corp.("MT"), and control of the Company
shifted to the former MT shareholders. MT operated a payroll nurse staffing
and homecare business. The Company was considered a "shell" at the time of
the acquisition; therefore, the transaction was treated as a reverse merger.
As a result of a change in business focus due to the acquisition, the Company
changed its name to MT Ultimate Healthcare Corp. The Company subsequently
attempted to expand its operations by acquiring B.P. Senior Care, Inc. (a
provider of healthcare services to senior citizens in New Jersey) in May 2004
and Abundant Healthcare, Inc. (a provider of medical staffing services in
Pennsylvania) in October 2004. The operations of B.P. Senior Care, Inc. were
terminated in 2005.
In November 2005, we determined to broaden our service offerings to
include medical and technical staffing and to focus our activities on growing
profitable operations.
2
On November 4, 2005, we acquired 100% of the issued and outstanding
shares of iTechexpress, Inc. in exchange for 305,000,000 newly issued shares
of our Common Stock and the promise to issue an additional 523,333,333 shares
of Common Stock at such time as we have available sufficient authorized
shares.
On November 7, 2005, iTech purchased all of the outstanding shares of
Drug Consultants, Inc. for a purchase price of $1,800,000, of which $1,600,000
was paid at the closing of the purchase and $200,000 will be paid pursuant to
a secured promissory note.
As part of our focus on growing profitable operations, we decided to
discontinue and dispose of certain operations which we determined did not
demonstrate suitable growth or profitability prospects. On December 15,
2005, we completed the disposition of all of the outstanding capital stock of
Marathon Healthcare Corporation, a newly formed holding company ("Marathon"),
to Macdonald Tudeme and Marguerite Tudeme, the former controlling shareholders
of the Company. At the time of the disposition, Marathon's assets included
substantially all of the corporate names, business, operations, assets,
properties, intellectual properties, trademarks, service marks, trade names,
uniform resource locators, telephone numbers, and good will of the Company and
its subsidiaries (other than iTech and DCI). These assets included all of
the operations of the Company's former operating subsidiaries MT and Abundant
Healthcare, Inc. In exchange for all of the outstanding capital stock of
Marathon and a cash payment to the Tudemes of $80,442.32, the Company received
from the Tudemes 35,691,200 shares of the Company's Common Stock. In
connection with the disposition of Marathon, we also (a) assumed and released
the Tudemes from certain liabilities and (b) pledged to Marathon 20,000,000
shares of our Common Stock as collateral to secure the performance and payment
of a promissory note in the amount of $257,038 payable to Lisa Stern
originally entered into as part of the Company's purchase of a former
operating subsidiary. If we fail to pay any principal of or interest on the
note when due, we will be in default of our obligations and Marathon will be
able to retain and sell the pledged Common Stock to satisfy our obligations.
August 2004 and November 2005 Secured Convertible Note Financings
On August 31, 2004, the Company entered into a securities purchase
agreement with four accredited investors for the sale of secured convertible
notes having an aggregate principal amount of $700,000, a 10% annual interest
rate payable quarterly, and a term of two years. We also agreed to sell
warrants to purchase up to an aggregate of 700,000 shares of our Common Stock
at $0.45 per share. We only sold $500,000 principal amount of secured
convertible notes under the 2004 agreement. The investors have agreed to
purchase the remaining $200,000 commitment under the terms of our 2005
securities purchase agreement with the investors.
On November 4, 2005, we entered into an additional securities purchase
agreement with the same accredited investors, for the sale of secured
convertible notes having an aggregate principal amount of $3,000,000, an 8%
annual interest rate (payable quarterly), and a term of three years. We also
agreed to sell warrants to purchase up to an aggregate of 15,000,000 shares of
our Common Stock at $0.10 per share. The four accredited investors, AJW
Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New
Millennium Partners II, LLC subscribed for 11.9%, 32.6%, 54.0% and 1.5%,
respectively, of the total offering. Each accredited investor purchased, or
will purchase, such percentage of each closing under the 2005 securities
purchase agreement.
As of December 15, 2005, we had issued under the two securities purchase
agreements:
. $1,800,000 aggregate principal amount of secured convertible notes,
. Warrants to purchase 700,000 shares of our Common Stock at $0.45 per
shares, and
. Warrants to purchase 6,500,000 shares of our Common Stock at $0.10
per share.
3
We will issue and sell an additional $850,000 principal amount of
secured convertible notes and warrants to purchase 4,250,000 shares of our
Common Stock at $0.10 per share to the investors five days following the
filing with the Securities and Exchange Commission of the registration
statement of which this Prospectus is a part. The investors are required to
purchase an additional $1,050,000 principal amount of secured convertible
notes and warrants to purchase 4,250,000 shares of our Common Stock at $0.10
per share five days following the date that the registration statement is
declared effective by the Securities and Exchange Commission and if other
conditions are satisfied, including: (i) the Company's representations and
warranties contained in the 2005 securities purchase agreement being true and
correct in all material respects on the date when made and as of the date of
such purchase; (ii) the Company having performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required
by the 2005 agreement; (iii) there being no litigation, statute, rule,
regulation, executive order, decree, ruling or injunction that has been
enacted, entered, promulgated or endorsed by or in any court or government
authority of competent jurisdiction or any self-regulatory organization having
requisite authority which prohibits the transactions contemplated by the 2005
agreement; (iv) no event having occurred which could reasonably be expected to
have a material adverse effect on the Company; and (v) the shares of Common
Stock issuable upon conversion of the secured convertible notes and exercise
of the warrants having been authorized for quotation on the OTC Bulletin Board
and trading in our Common Stock on the OTC Bulletin Board having not been
suspended by the Securities and Exchange Commission or the OTC Bulletin Board.
The secured convertible notes are convertible into our Common Stock, at
the selling stockholders' option, at the lower of (i) $0.01 or (ii) 50% of the
average of the three lowest intraday trading prices for the Common Stock on a
principal market for the 20 trading days before but not including the
conversion date. Accordingly, there is in fact no limit on the number of
shares into which the notes may be converted. As of December 15, 2005, the
average of the three lowest intraday trading prices for our Common Stock
during the preceding 20 trading days as reported on the OTC Bulletin Board was
$0.0026 and, therefore, the conversion price for the secured convertible notes
was $0.0013. Based on this conversion price, the $3,700,000 secured
convertible notes, excluding interest, were convertible into 2,846,153,846
shares of our Common Stock. AJW Partners, LLC, AJW Qualified Partners, LLC,
AJW Offshore, Ltd. and New Millennium Partners II, LLC have contractually
agreed to restrict their ability to convert or exercise their warrants and
receive shares of our Common Stock such that the number of shares of Common
Stock held by them and their affiliates after such conversion or exercise does
not exceed 4.99% of the then issued and outstanding shares of Common Stock.
In connection with the 2005 securities purchase agreement, the investors
agreed that, subject to the Company's compliance with the terms of the 2005
securities purchase agreement, the 2005 securities purchase agreement would
replace the 2004 securities purchase agreement and the investors would waive
all interest, penalties, fees, charges or other obligations accrued or owed by
the Company to the investors pursuant to the 2004 agreement. There are
various risks of default associated with the secured convertible notes,
including the fact that the secured convertible notes become immediately due
and payable upon failure to pay the principal and interest of the secured
convertible notes, the failure to convert the secured convertible notes to
Common Stock, the failure to obtain the effectiveness of the registration
statement of which this Prospectus is a part on or before April 3, 2006 (or
April 28, 2006 if the Company is making good faith efforts to respond to
Securities and Exchange Commission comments with respect to the registration
statement), an assignment for the benefit of the Company's or its
subsidiaries' creditors, an application for or consent to the appointment of a
receiver for the Company or its subsidiaries, any judgment against the Company
in excess of $50,000, and/or any bankruptcy, insolvency, reorganization or
liquidation proceedings instituted by or against the Company or its
subsidiaries. In addition, the Company would be required to pay the holders
of the secured convertible notes an amount equal to the greater of (x) 130%
times the sum of the outstanding amount of the secured convertible notes per
month plus accrued and unpaid interest on the secured convertible notes plus
any additional amounts owed to the holders of the secured convertible notes or
(y) the value of the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to the amount calculated under clause (x)
determined based upon the highest closing price of the Common Stock during the
period beginning on the date of default and ending on the date the payment
described herein. Additionally, we made certain representations and
warranties and agreed to certain covenants that are customary for securities
purchase agreements. In the event that we breach those representations,
warranties or covenants, we will be subject to liquidated damages in the
amount of 3% of the outstanding amount of the secured convertible notes per
month plus accrued and unpaid interest on the secured convertible notes for
breaches by us of certain representations, warranties and certain covenants.
If we are unable to pay these liquidated damages we may be forced to abandon
or curtail our business operations.
4
See the "Risk Factors" and "Description of Securities" sections for a
complete description of the secured convertible notes and their associated
material risks.
History of Losses and Dependence on Additional Financing.
We have historically lost money. As of September 30, 2005, the Company
had $3,869,219 in accumulated deficit. Our continuing operations have only
recently been acquired, and provide a limited history of sales. We face
strong competition in our markets, including from competitors who have
significantly greater name recognition as well as substantially greater
financial, service offerings and marketing resources than we do. As a result
of these factors and other described below under "Risk Factors", there is a
risk that our medical and technical staffing services businesses will fail.
We are dependent on obtaining additional financing to meet our current
obligations and to maintain our continuing operations. As a result, it is
imperative that we complete the transactions contemplated by the 2005
securities purchase agreement. Our ability to repay the secured convertible
notes and to execute our growth strategy is also dependent on our access to
the capital markets. There can be no assurance that capital from outside
sources will be available, or if such financing is available, that it will be
on terms that management deems sufficiently favorable. If we are unable to
obtain additional financing upon terms that management deems sufficiently
favorable, or at all, it would have a material adverse impact upon our ability
to continue our business operations and pursue our expansion strategy. In
the event we do not raise additional capital, it is likely that our growth
will be restricted and that we may be forced to scale back or curtail
implementing our business plan.
Our principal executive offices are located at 18301 Von Karman, Suite
250, Irvine, California 92612. Our telephone number is (949) 260-0150 and our
fax number is (815) 301-8756. The Company currently does not have a website.
The Offering
Common Stock offered by
Selling Stockholders.........................Up to 5,723,707,692
shares of Common Stock including:
i) up to 5,692,307,692 shares
issuable upon conversion of
secured convertible notes with an
aggregate principal amount of
$3,700,000 at a conversion price
of $0.0013 per share as of
December 15, 2005 (includes a
good faith estimate of the shares
underlying secured convertible
notes to account for market
fluctuations and antidilution
protection adjustments);
ii) up to 30,000,000 shares
issuable upon the exercise of
warrants at an exercise price of
$0.10 per share (includes a good
faith estimate of the shares
underlying the warrants to
account for antidilution
protection adjustments); and
5
iii) up to 1,400,000 shares
issuable upon the exercise of
warrants at an exercise price of
$0.45 per share (includes a good
faith estimate of the shares
underlying the warrants to
account for antidilution
protection adjustments);
Common Stock Outstanding
Before the Offering......................... 364,308,800 shares
Common Stock Outstanding After the
Offering (assuming full conversion of
the secured convertible notes as of the
date of this Prospectus and no exercise
of the warrants)............................. up to 3,210,462,646 shares
Use of Proceeds.............................. This Prospectus relates to
shares of our Common Stock that
may be offered and sold from
time to time by the selling
stockholders. We will not
receive any proceeds from the
resale of our Common Stock. We
will, however, receive proceeds
from the exercise of the
warrants. However, AJW
Partners, LLC, AJW Qualified
Partners, LLC, AJW Offshore,
Ltd., and New Millennium
Partners II, LLC will be
entitled to exercise the
warrants on a cashless basis if
the shares of common stock
underlying the warrants are not
then registered for resale
pursuant to an effective
registration statement. In the
event that AJW Partners, LLC,
AJW Qualified Partners, LLC, AJW
Offshore, Ltd., or New
Millennium Partners II, LLC
exercise the warrants on a
cashless basis, then we will not
receive any proceeds from the
exercise of those warrants. In
addition, we have received gross
proceeds of $1,800,000 from the
sale of the secured convertible
notes and the investors are
obligated to provide us with an
additional $850,000 within five
days following the filing of the
registration statement of which
this Prospectus is a part and
$1,050,000 within five days of
the registration statement being
declared effective. The
proceeds received from the sale
of the secured convertible notes
and from exercise of the
warrants, if any, will be used
for working capital in support
of growing its business
operations, which may include
the purchase of other companies,
similar to iTech or DCI, or
focusing the proceeds into
marketing and/or the hiring of
additional employees.
6
Market for our Common Stock.................. Our Common Stock is quoted on
the OTC Bulletin Board under the
trading symbol "MTHC". The
market for our Common Stock is
highly volatile as discussed in
more detail, below, under the
heading "Risk Factors". We can
provide no assurance that there
will be a market in the future
for our Common Stock.
SUMMARY FINANCIAL DATA
We derived the summary financial information from the financial
statements MT Ultimate Healthcare Corp. appearing in the section in this
Prospectus entitled "Financial Statements". You should read this summary
financial information in conjunction with the section entitled "Management's
Discussion and Analysis", our financial statements and related notes to the
financial statements.
Year Ended Nine Months Ended
December 31, 2004 September 30, 2005
----------------- ------------------
(Audited) (Unaudited)
Revenues $ 2,072,236 $ 1,395,955
Cost of Revenues $ 1,521,353 $ 1,108,733
------------------ ------------------
Gross Profit $ 550,883 $ 287,222
Total expenses 3,596,493 709,581
------------------ ------------------
Net Income (loss) from operations $ (3,045,610) $ (422,359)
Tax provisions - -
------------------ ------------------
Net Income (Loss) $ (3,045,610) $ (719,296)
------------------ ------------------
Earnings (loss) per share $ (0.06) $ (0.01)
------------------ ------------------
Total Assets $ 570,620 $ 357,069
Total Liabilities $ 1,114,981 $ 1,521,046
Stockholders' deficit $ 544,361 $ 1,163,977
7
RISK FACTORS
------------
Investing in our securities involves a high degree of risk. You should
carefully consider the below risk factors and warnings before making an
investment decision. If any of the risks described below actually occur, our
business, financial condition or future operating results could be materially
harmed. In that case, the price of our Common Stock could decline, and you
could lose all or part of your investment. You should also refer to the other
information set forth or incorporated by reference in this Prospectus.
Risks Relating to Our Business
We may continue to be unprofitable and may not generate profits to
continue our business plan.
We have historically lost money. As of September 30, 2005, the Company
had $3,869,219 in accumulated deficit. There is a risk that our medical and
technical staffing services businesses will fail. If our business plan is not
successful, we will likely be forced to curtail or abandon our business plan.
If this happens, you could lose your entire investment in our Common Stock.
Our auditors have expressed an opinion that there is substantial doubt
about our ability to continue as a going concern.
Our auditors have expressed an opinion that there is substantial doubt
about our ability to continue as a going concern primarily because we have yet
to generate sufficient working capital to support our operations and our
ability to pay outstanding employment taxes. Our most recent financial
statements have been prepared assuming that we will continue as a going
concern. The financial statements do not include any adjustments that might
result from our inability to continue as a going concern. If we are unable to
continue as a going concern, you will lose your entire investment in our
Common Stock.
Our operations are recently acquired which means that we have a limited
operating history upon which you can base your investment decision
Prior to August 2003, we were a development stage company. Although we
were incorporated only five years ago, we have undergone a number of changes
in our business strategy and organization. In August 2003, we entered the
payroll nurse staffing and homecare business. We adjusted our business
strategy again in November 2005 by broadening our service offerings to include
medical and technical staffing and to focus our activities on growing
profitable operations. We have begun to implement this strategy by acquiring
iTech and DCI.
The operations of iTech and DCI, which will represent our entire
business for the foreseeable future, were acquired in November 2005 and we
have not yet completed and made available audited financial statements with
respect to these operations. Accordingly, we have a limited operating history
upon which an evaluation of our prospects can be made. Our strategy is
unproven and the revenue and income potential from our strategy is unproven.
We may encounter risks and difficulties frequently encountered by companies
that have grown rapidly through acquisition, including the risks described
elsewhere in this section. Our business strategy may not be successful and we
may not be able to successfully address these risks. If we are unsuccessful
in the execution of our current strategic plan, we could be forced to reduce
or cease our operations. If this happens, you could lose your entire
investment in our Common Stock.
We will require significant additional capital to repay monies borrowed
by us, continue our business operations and pursue our growth strategy.
We have sold $1,800,000 in secured convertible notes and have agreed to
sell an additional $1,900,000 of secured convertible notes to the selling
stockholders. We do not currently have enough capital to repay any of these
amounts and we may never generate enough revenue to repay the amounts owed.
As a result, we could be forced to curtail or abandon our business plan,
making any investment in our Common Stock worthless.
8
Our continued operations and growth strategy depend on our ability to
access the capital markets. There can be no assurance that capital from
outside sources will be available, or if such financing is available, that it
will be on terms that management deems sufficiently favorable. If we are
unable to obtain additional financing upon terms that management deems
sufficiently favorable, or at all, it would have a material adverse impact
upon our ability to continue our business operations and pursue our growth
strategy. In the event we do not raise additional capital, it is likely that
our growth will be restricted and that we may be forced to scale back or
curtail implementing our business plan. If this happens, you as an investor
would likely experience a devaluing of your Common Stock.
We may be forced to sell shares of Common Stock and/or enter into
additional convertible note financing agreements in order to repay
amounts owed and continue our business plan.
Assuming the sale of all the secured convertible notes to the selling
stockholders, we will owe approximately $3,700,000 to the selling stockholders
(not including any accrued interest) and owe the former stockholders of DCI n
additional $200,000 in connection with the purchase of DCI, an aggregate of
approximately $112,228 to our Director, Keith Moore (pursuant to two working
capital lines of credit, described in further detail under "Certain
Relationships and Related Party Transactions"), $36,285 to David Walters, our
Chief Executive Officer and Director, and $36,285 to Mr. Moore for accrued but
unpaid salaries for those two individuals in connection with the operations of
iTech and $49,500 to Mr. Moore for accrued but unpaid salaries in connection
with the operations of a subsidiary of iTech. Additionally, we still owe
approximately $211,500 under a promissory note with Abundant Nursing, Inc.,
which we have agreed to guarantee as part of the disposition of Marathon, and
approximately $212,000 under a SBA loan and line of credit, which was assumed
by Marathon as part of the disposition of Marathon (but with respect to which
we will remain liable). We may be forced to raise additional funds to repay
these amounts through the issuance of equity, equity-related or convertible
debt securities. The issuance of additional common stock dilutes existing
stockholdings. Additionally, in furtherance of our transaction with the
selling stockholders, we may issue additional shares of common stock
throughout the term, and accordingly, our stockholders may experience
significant dilution. Further procurement of additional financing through the
issuance of equity, equity-related or convertible debt securities or preferred
stock may further dilute existing stock. The perceived risk of dilution may
cause the selling stockholders, as well as other holders, to sell their
shares, which would contribute to downward movement in the price of your
shares. Additionally, if such additional shares are issued, you as an
investor would likely experience a devaluing of your Common Stock.
We have pledged all of our assets to existing creditors
The secured convertible notes are secured by a lien on substantially all
of our assets, including our equipment, inventory, contract rights,
receivables, general intangibles, and intellectual property. A default by us
under the secured convertible notes would enable the holders of the notes to
take control of substantially all of our assets. The holders of the secured
convertible notes have no operating experience in our industry and if we were
to default and the note holders were to take over control of our Company, they
could force us to substantially curtail or cease our operations. If this
happens, you could lose your entire investment in our Common Stock.
iTech and DCI, our principal operating subsidiaries, have pledged
substantially all of their accounts receivable to secure the payment of
accounts receivable sold under a factoring agreement with Systran Financial
Services Corporation ("Systran"). The factoring agreement provides for iTech
and DCI to sell their accounts receivables to Systran at a discount of 1.5%.
If Systran is unable to collect our accounts receivable purchased from us,
they could take control of all of our accounts receivable, which would
substantially reduce our working capital and could force us to curtail or
abandon our business plan. If this happens, you could lose your entire
investment in our Common Stock.
In addition, the existence of these asset pledges to the holders of the
secured convertible notes and to Systran will make it more difficult for us to
obtain additional financing required to repay monies borrowed by us, continue
our business operations and pursue our growth strategy.
9
The secured convertible notes become immediately due and payable upon
default and we may be required to pay an amount in excess of the
outstanding amount due under of the secured convertible notes, and we
may be forced to sell all of our assets.
The secured convertible notes become immediately due and payable upon an
event of default including:
. failure to obtain effectiveness of the registration statement of
which this Prospectus is a part on or before April 3, 2006 (or
April 28, 2006 if the Company is making good faith efforts to respond
to Securities and Exchange Commission comments with respect to the
registration statement);
. failure to pay interest and principal payments when due;
. a breach by us of any material covenant or term or condition of the
secure convertible notes or any agreement made in connection
therewith;
. a breach by us of any material representation or warranty made in the
2005 securities purchase agreement or in any agreement made in
connection therewith;
. we make an assignment for the benefit of our creditors, or a receiver
or trustee is appointed for us;
. the entering of any money judgment, writ or similar process against
us or any of our subsidiaries or any of our property or other assets
for more than $50,000;
. any form of bankruptcy or insolvency proceeding is instituted by or
against us; and
. our failure to timely deliver shares of Common Stock when due upon
conversions of the secured convertible notes.
If we default on the secured convertible notes and the holders demand
all payments due and payable, we will be required to pay the holders of the
secured convertible notes an amount equal to the greater of (x) 130% times the
sum of the outstanding amount of the secured convertible notes per month plus
accrued and unpaid interest on the secured convertible notes plus additional
amounts owed to the holders of the notes under the 2004 securities purchase
agreement and the 2005 securities purchase agreement and related documents or
(y) the value of the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to the amount calculated under clause (x)
determined based on the highest closing price of the Common Stock during the
period beginning on the date of default and ending on the date of the payment
described herein. We do not currently have the cash on hand to repay this
amount. If we are unable to raise enough money to cover this amount we may be
forced to restructure, file for bankruptcy, sell assets or cease operations.
If any of these events happen, you could lose your entire investment in our
Common Stock.
We may be subject to liquidated damages in the amount of 3% of the
outstanding amount of the secured convertible notes per month plus
accrued and unpaid interest on the secured convertible notes for
breaches by us of our representations and warranties and certain
covenants under the 2005 securities purchase agreement.
In the 2005 securities purchase agreement, we made certain
representations and warranties and agreed to certain covenants that are
customary for securities purchase agreements. In the event that we breach
those representations, warranties or covenants, we will be subject to
liquidated damages in the amount of 3% of the outstanding amount of the
secured convertible notes, per month, plus accrued and unpaid interest on the
notes for such breaches. As of the December 15, 2005, the outstanding amount
of the secured convertible notes was $1,800,000. We have not previously been
required to pay any liquidated damages, however if we do breach the
representations, warranties or covenants, we will be forced to pay liquidated
damages to the note holders. If we do not have enough cash on hand to cover
the amount of the liquidated damages, we could be forced to sell part or all
of our assets, which could force us to scale back our business operations. .
If this happens, you as an investor would likely experience a devaluing of
your Common Stock.
10
We are heavily dependent on the operations of DCI for our revenues,
which itself is highly dependent on the State of California as its major
customer.
We anticipate approximately 90% of our revenues for the foreseeable
future will come from the operations of DCI, which we acquired in November,
2005. Approximately 95% of DCI's revenue comes from the State of California.
DCI's agreements with the State of California do not provide for a minimum
purchase commitment of our services and can be terminated by the State at any
time on 30 days' notice. Our dependence on the State of California as our
major customer subjects us to significant financial risks in the operation of
our business if the State of California were to terminate or materially
reduce, for any reason, its business relationship with us. Further, the State
of California is subject to unique political and budgetary constraints and has
special contracting requirements that may affect our ability to obtain
additional contacts. In addition, future sales to the State of California and
other governmental agencies, if any, will depend on our ability to meet
government contracting requirements, certain of which may be onerous or
impossible to meet, resulting in our inability to obtain a particular
contract. Common requirements in government contracts include bonding;
provisions permitting the purchasing agency to modify or terminate, at will,
the contract without penalty; and provisions permitting the agency to perform
investigations or audits of our business practices. If we are unable to
maintain our contracts in the State of California and/or gain new contracts in
California and elsewhere, we could be forced to curtail or abandon our
business plan. If this happens, you could lose your entire investment in our
Common Stock.
We face significant competition for our services and as a result, we may
be unable to compete in the medical and technical staffing industries.
We face significant competition for our staffing services. The markets
for our services are intensely competitive and we face significant competition
from a number of different sources. Several of our competitors have
significantly greater name recognition as well as substantially greater
financial, technical, service offerings, product development and marketing
resources than we do. Additionally, competitive pressures and other factors
may result in price or market share erosion that could have a material adverse
effect on our business, results of operations and financial condition.
There is a shortage of workers in the healthcare industry that may
impede our ability to acquire qualified healthcare professionals for our
continued growth.
Presently, the healthcare industry is experiencing a growing shortage of
healthcare professionals. As the operations of DCI are in part based on the
placement of healthcare professionals, there can be no assurance that we will
be able to acquire qualified healthcare professionals to meet our growing
needs. Any shortage in the number of professionals in the healthcare industry
could impede the Company's ability to place such healthcare professionals into
jobs and/or impede our growth rate. If we are unable to find qualified
healthcare professionals to place in jobs, it would prevent us from continuing
our current business strategy. If this happens, you as an investor would
likely experience a devaluing of your Common Stock.
We are actively seeking to acquire companies related to our business
operations, but our efforts may not materialize into definitive
agreements.
Our business model is dependent upon growth through acquisition of other
staffing service providers. We completed the acquisition of iTech and DCI in
November 2005. Although we currently have no commitments with respect any
other acquisitions, we expect to continue making acquisitions that will enable
us to expand our staffing services and build our customer base. There can be
no assurance that we will be successful in identifying suitable acquisition
candidates or in coming to definitive terms with respect to any negotiations
which we may enter into, or, assuming that we reach definitive agreements,
that we will close the acquisitions. In the event that we do not reach any
additional definitive agreements or close any additional acquisitions, our
expansion strategy will not proceed as intended which will have a material
adverse effect on our growth.
11
Our future acquisitions, if any, may be costly and may not realize the
benefits anticipated by us.
We may engage in future acquisitions, which may be expensive and
time-consuming and from which we may not realize anticipated benefits. We may
acquire additional businesses, technologies, products and services if we
determine that these additional businesses, technologies, products and
services are likely to serve our strategic goals. We currently have no
commitments or agreements with respect to any acquisitions. The specific risks
we may encounter in these types of transactions include the following:
. Potentially dilutive issuances of our securities, the incurrence of
debt and contingent liabilities and amortization expenses related to
intangible assets, which could adversely affect our results of
operations and financial conditions;
. The possible adverse impact of such acquisitions on existing
relationships with third-party partners and suppliers of services;
. The possibility that staff or customers of the acquired company might
not accept new ownership and may transition to different technologies
or attempt to renegotiate contract terms or relationships;
. The possibility that the due diligence process in any such
acquisition may not completely identify material issues associated
with product quality, intellectual property issues, key personnel
issues or legal and financial contingencies; and
. Difficulty in integrating acquired operations due to geographical
distance, and language and cultural differences; and
A failure to successfully integrate acquired businesses for any of these
reasons could have a material adverse effect on our results of operations.
We may be unable to manage our growth.
Any growth that we experience is expected to place a significant strain
on our managerial and administrative resources. We have limited employees who
perform management or administrative functions. Further, if our business
grows, we will be required to manage multiple relationships with various
clients, healthcare professionals and third parties. These requirements will
be exacerbated in the event of further growth. There can be no assurance that
our other resources such as our systems, procedures or controls will be
adequate to support our growing operations or that we will be able to achieve
the rapid execution necessary to successfully offer our services and implement
our business plan. Assuming that our business grows, our future success will
depend on our ability to add additional management and administrative
personnel to help compliment our current employees as well as other resources.
If we are unable to add additional managerial and administrative resources, it
will prevent us from continuing our business plan, which calls for expanding
our operations, and could have an adverse effect on the value of our Common
Stock.
We heavily depend on our Chief Executive Officer and Director, David
Walters and our Director Keith Moore.
The success of the Company heavily depends upon the personal efforts and
abilities of David Walters and Keith Moore. Mr. Walters serves as the
Company's Chief Executive Officer and Director and Keith Moore serves as our
Director and together they are primarily responsible for the operation of the
Company's wholly owned subsidiaries iTech and DCI. The Company has not entered
into an employment agreement with Mr. Walters or Mr. Moore, however the
Company's wholly owned subsidiary iTech, does have Independent Contractor
Agreements with Mr. Walters and Mr. Moore (described below under "Certain
Relationships and Related Transactions"). The Company also anticipates
entering into an agreement for executive management services with a yet to be
formed management company owned by Mr. Walters and Mr. Moore. If either were
to leave unexpectedly; we may not be able to execute our business plan. Our
future performance depends in significant part upon the continued service of
Mr. Walters and Mr. Moore as they have acquired specialized knowledge and
skills with respect to our business. Additionally, because we have a
relatively small number of employees when compared to other leading companies
in the same industry, our dependence on maintaining our relationship with Mr.
Walters and Mr. Moore is particularly significant. We cannot be certain that
we will be able to retain Mr. Walters or Mr. Moore in the future. The loss of
Mr. Walters or Mr. Moore could have a material adverse effect on our business
and operations and cause us to expend significant resources in finding a
replacement, which could cause the value of our Common Stock to decline or
become worthless.
12
David Walters and Keith Moore can vote an aggregate of 84.0% of our
Common Stock and can exercise control over corporate decisions including
the appointment of new Directors.
David Walters and Keith Moore can vote an aggregate of 745,500,000
shares (or 84.0%) of our outstanding Common Stock. Accordingly, Mr. Walters
and Mr. Moore will exercise control in determining the outcome of all
corporate transactions or other matters, including the election of directors,
mergers, consolidations, the sale of all or substantially all of our assets,
and also the power to prevent or cause a change in control. Any investors who
purchase shares pursuant to this Prospectus will be minority shareholders and
as such will have little to no say in the direction of the Company and the
election of Directors. Additionally, it will be difficult if not impossible
for investors to remove Mr. Walters and Mr. Moore as Directors of the Company,
which will mean they will remain in control of who serves as officers of the
Company as well as whether any changes are made in the Board of Directors. As
a potential investor in the Company, you should keep in mind that even if you
own shares of the Company's Common Stock and wish to vote them at annual or
special shareholder meetings, your shares will likely have little effect on
the outcome of corporate decisions.
Our results of operations have fluctuated in the past and as a result,
the results of one quarter may not be indicative of our yearly results,
making any investment in us speculative.
Our quarterly operating results and revenue has historically fluctuated
in the past and may do so in the future from quarter to quarter and period to
period, as a result of a number of factors including, without limitation:
. the size and timing of orders from clients;
. changes in pricing policies or price reductions by us or our
competitors;
. changes in revenue recognition or other accounting guidelines employed
by us and/or established by the Financial Accounting Standards Board
or other rule-making bodies;
. our success in expanding our sales and marketing programs;
. execution of or changes to Company strategy;
. personnel changes; and
. general market/economic factors.
Due to all of the foregoing factors, it is possible that our operating results
may be below the expectations of public market analysts and investors. In such
event, the price of our common stock would likely decline and any investment
in us could become worthless.
We face potential liability for security breaches relating to our
technology.
We face the possibility of damages resulting from internal and external
security breaches, and viruses. The systems with which we may interface, such
as the Internet and related systems may be vulnerable to security breaches,
viruses, programming errors, or similar disruptive problems. The effect of
these security breaches and related issues could reduce demand for our
services. Accordingly, we believe that it is critical that these facilities
and related infrastructures not only be secure, but also be viewed by our
customers as free from potential breach. Maintaining such standards,
protecting against breaches and curing security flaws, may require us to
expend significant capital.
13
Risks Relating to Our Current Financing Arrangement
If the registration statement of which this Prospectus is a part is not
declared effective before April 3, 2006, we may be forced to incur
substantial penalties.
The Company is subject to a $53,000 per month penalty payable to the
secured convertible note holders, if the registration statement of which this
Prospectus is a part fails to become effective on or before April 3, 2006 (or
April 28, 2006 if the Company is making good faith efforts to respond to
Securities and Exchange Commission comments with respect to the registration
statement). If this penalty becomes payable, the Company will likely be
forced to pay this amount out of the proceeds of the sale of the secured
convertible notes. This will likely have a materially adverse affect on the
Company's financial condition, and could force the Company to curtail its
business plan.
We cannot issue shares of Common Stock upon conversion of the secured
convertible notes until we complete our pending reverse stock split and
amendments to our Articles of Incorporation.
We are registering in this Prospectus up to 5,723,707,692 shares of
Common Stock issuable upon conversion of $3,700,000 of secured convertible
notes and related warrants. As of December 15, 2005, we had only 400,000,000
shares of our Common Stock authorized for issuance, of which 364,308,800
shares were issued and outstanding. As a result, we are currently unable to
issue shares of Common Stock upon conversion of the secured convertible notes.
We are in the process of obtaining stockholder approval to effect a
one-for-ninety reverse stock split of our Common Stock and to re-authorize for
issuance 400,000,000 shares of Common Stock after giving effect to the reverse
stock split. Our Board of Directors has approved each of these corporate
actions and stockholders holding more than 50% of our issued and outstanding
shares of Common Stock have indicated their intention to consent to these
corporate actions in writing without a meeting of our stockholders. On
December 9, 2005, we filed a preliminary information statement with the
Securities and Exchange Commission, notifying our stockholders of these and
other actions. We have received notice that the Securities and Exchange
Commission intends to review and comment upon the preliminary information
statement. As a result, the timing of completion of these corporate actions
depends on the duration of the review by the Securities and Exchange
Commission and our ability to address their comments in a timely manner. We
currently expect to complete each of these corporate actions in the first
quarter of 2006. Completion of these corporate actions would provide us with
a sufficient number of authorized shares of Common Stock to satisfy our
obligations under the secured convertible notes. Any issuance of shares of
Common Stock in excess of our authorized capital is contingent upon our
completing such corporate actions or otherwise increasing the number of our
authorized shares of Common Stock.
If we are unable to complete such corporate actions, or otherwise
increase the number of our authorized shares of Common Stock, we would be
unable to satisfy our obligations under the secured convertible notes. If we
default on the secured convertible notes, we may be forced to restructure,
file for bankruptcy, sell assets or cease operations. If any of these events
happen, you could lose your entire investment in our Common Stock. See "Risk
Factors-- The secured convertible notes become immediately due and payable
upon default and we may be required to pay an amount in excess of the
outstanding amount due under of the secured convertible notes, and we may be
forced to sell all of our assets."
The issuance and sale of Common Stock underlying the secured convertible
notes and the warrants may depress the market price of our Common Stock.
As of December 15, 2005, we had 364,308,800 shares of Common Stock
issued and outstanding. We are registering in this Prospectus up to
5,723,707,692 shares of Common Stock issuable upon conversion of $3,700,000 of
secured convertible notes and related warrants. As sequential conversions and
sales take place, the price of our Common Stock may decline, and as a result,
the holders of the secured convertible notes could be entitled to receive an
increasing number of shares, which could then be sold, triggering further
price declines and conversions for even larger numbers of shares, to the
detriment of the investors in this Offering. All of the shares issuable upon
conversion of the secured convertible notes and upon exercise of the warrants,
may be sold without restriction. The sale of these shares may adversely affect
the market price of our Common Stock.
14
The issuance and sale of Common Stock underlying the secured convertible
notes and the warrants represent overhang.
In addition, the Common Stock issuable upon conversion of the secured
convertible notes and exercise of the warrants may represent overhang that may
also adversely affect the market price of our Common Stock. Overhang occurs
when there is a greater supply of a company's stock in the market than there
is demand for that stock. When this happens the price of the company's Common
Stock will decrease, and any additional shares which shareholders attempt to
sell in the market will only decrease the share price even more. The secured
convertible notes may be converted at a conversion price of $0.0013 per share,
as of December 15, 2005. Warrants to purchase 700,000 shares of our Common
Stock may be exercised at a price of $0.45 per share and warrants to purchase
15,000,000 shares of our Common Stock may be exercised at a price of $0.10 per
share. As of December 15, 2005, the market price for one share of our Common
Stock was $0.003. Therefore, the secured convertible notes and warrants may
be converted into Common Stock at a discount to the market price, providing
holders with the ability to sell their Common Stock at or below market and
still make a profit. In the event of such overhang, holders will have an
incentive to sell their Common Stock as quickly as possible. If the share
volume of the Company's Common Stock cannot absorb the discounted shares, the
market price per share of our Common Stock will likely decrease.
The issuance of Common Stock underlying the secured convertible notes
and the warrants will cause immediate and substantial dilution.
The issuance of Common Stock upon conversion of the secured convertible
notes and exercise of the warrants by the selling stockholders will result in
immediate and substantial dilution to the interests of other stockholders
since the selling stockholders may ultimately receive and sell the full amount
issuable on conversion or exercise. Although the selling stockholders may not
convert their secured convertible notes and/or exercise their warrants if such
conversion or exercise would cause them to own more than 4.9% of our
outstanding Common Stock, this restriction does not prevent the selling
stockholders from converting and/or exercising some of their holdings, selling
those shares, and then converting the rest of their holdings, while still
staying below the 4.9% limit. In this way, the selling stockholders could
sell more than this limit while never actually holding more shares than this
limit allows. If the selling stockholders choose to do this it will cause
substantial dilution to the holders of our Common Stock.
The continuously adjustable conversion price feature of our secured
convertible notes could require us to issue a substantially greater
number of shares, which may adversely affect the market price of our
Common Stock and cause dilution to our existing stockholders.
Our existing stockholders will experience substantial dilution of their
investment upon conversion of the secured convertible notes and exercise of
the warrants by the selling stockholders. The secured convertible notes are
convertible into shares of our Common Stock at the lesser of $0.01 or 50% of
the average of the three lowest trading prices of our Common Stock during the
20 trading day period ending one trading day before the date that a holder
sends us a notice of conversion. If converted on December 15, 2005, the
secured convertible notes would be convertible into approximately
2,846,153,846 shares of Common Stock based upon a conversion price of $0.0013.
The number of shares issuable could prove to be significantly greater in the
event of a decrease in the trading price of our Common Stock that would cause
dilution to our existing stockholders. The sale of shares of Common Stock
issuable upon conversion of the secured convertible notes and exercise of the
warrants may adversely affect the market price of our Common Stock. As
sequential conversions and sales take place, the price of our Common Stock may
decline and if so, the holders of secured convertible notes would be entitled
to receive an increasing number of shares, which could then be sold,
triggering further price declines and conversions for even larger numbers of
shares, which would cause additional dilution to our existing stockholders.
Additionally, there are no provisions in the 2005 securities purchase
agreement, the secured convertible notes, the warrants, or any other document
which restrict the selling stockholders' ability to sell short our Common
Stock, which they could do to decrease the price of our Common Stock and
increase the number of shares they would receive upon conversion and thereby
further dilute other stockholders.
15
The following is an example of the amount of shares of our Common Stock
that are issuable upon conversion of the secured convertible notes based on
conversion prices that are 25%, 50% and 75% below the conversion price as of
December 15, 2005 of $0.0013.
Percentage Below Approximate % of
Conversion Price Estimated Number of Outstanding
as of the Filing Conversion Shares Common
Date Price Issuable (1) Stock (1)(2)
---------------- ---------- -------------- ------------
25% $0.000975 3,794,871,795 91.2%
50% $0.000650 5,692,307,692 94.0%
75% $0.000325 11,384,615,385 96.9%
(1) Includes shares of Common Stock issuable upon conversion of the secured
convertible notes and 15,700,000 shares of Common Stock issuable upon
exercise of outstanding warrants.
(2) As of December 15, 2005, we had 364,308,800 shares of Common Stock issued
and outstanding.
As illustrated, the number of shares of Common Stock issuable upon conversion
of the secured convertible notes will increase if the conversion price of our
Common Stock declines, which will cause dilution to our existing stockholders.
The continuously adjustable conversion price feature of the secured
convertible notes may encourage investors, including the selling
stockholders, to sell short our Common Stock, which could have a
depressive effect on the price of our Common Stock.
The secured convertible notes are convertible into shares of our Common
Stock at the lesser of $0.01 or 50% of the average of the three lowest trading
prices of our Common Stock during the 20 trading day period ending one trading
day before the date that a holder sends us notice of conversion. The
significant downward pressure on the price of our Common Stock as the selling
stockholders convert and sell material amounts of our Common Stock could
encourage investors, including the selling stockholders, to short sell our
Common Stock. This could place further downward pressure on the price of our
Common Stock. In addition, not only the sale of shares issued upon conversion
of the secured convertible notes or exercise of the warrants, but also the
mere perception that these sales could occur, may adversely affect the market
price of our Common Stock.
We must satisfy certain conditions before the investors are obligated to
purchase the remaining secured convertible notes and warrants.
As of December 15, 2005, we had issued to the selling stockholders
$1,800,000 aggregate principal amount of secured convertible notes, warrants
to purchase 700,000 shares of our Common Stock at $0.45 per share, and
warrants to purchase 6,500,000 shares of our Common Stock at $0.10 per share.
We will issue and sell an additional $850,000 principal amount of secured
convertible notes and warrants to purchase 4,250,000 shares of Common Stock at
$0.10 per share to the selling stockholders five days following the filing
with the Securities and Exchange Commission of the registration statement of
which this Prospectus is a part. The selling stockholders are required to
purchase an additional $1,050,000 principal amount of secured convertible
notes and warrants to purchase 4,250,000 shares of Common Stock at $0.10 per
share five days following the date that the registration statement is declared
effective by the Securities and Exchange Commission and conditioned upon
16
certain other conditions, including: (i) the Company's representations and
warranties contained in the 2005 securities purchase agreement being true and
correct in all material respects on the date when made and as of the date of
such purchase; (ii) the Company having performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required
by the 2005 agreement; (iii) there being no litigation, statute, rule,
regulation, executive order, decree, ruling or injunction that has been
enacted, entered, promulgated or endorsed by or in any court or government
authority of competent jurisdiction or any self-regulatory organization having
requisite authority which prohibits the transactions contemplated by the 2005
agreement; (iv) no event having occurred which could reasonably be expected to
have a material adverse effect on the Company; and (v) the shares of Common
Stock issuable upon conversion of the secured convertible notes and exercise
of the warrants having been authorized for quotation on the OTC Bulletin Board
and trading in our Common Stock on the OTC Bulletin Board having not been
suspended by the Securities and Commission or the OTC Bulletin Board.
If the registration statement is not declared effective within the
agreed-upon time frame or we fail to satisfy these additional conditions, the
selling stockholders have no obligation to purchase the remaining secured
convertible notes and warrants. If the selling stockholders do not purchase
the remaining secured convertible notes and warrants, the Company may be
required to curtail or abandon its business plan, which would decrease the
value of our Common Stock.
The selling stockholders may exploit a major announcement made by the
Company to convert the secured convertible notes at a price
substantially lower then the conversion price would be otherwise.
Under the terms of the secured convertible notes, the conversion price
which the selling stockholders must pay is changed after major announcements
by the Company, discussed below. In the event the Company makes a major
announcement, the conversion price of the secured convertible notes is equal
to the lower of the conversion price that would be in effect on the date the
announcement is made or the current conversion price at the time the selling
stockholders wish to convert. Therefore, if the Company's stock price was to
increase substantially after a major announcement the selling stockholders
could still convert the secured convertible notes the lower price which
applied before the announcement. In this way, the selling stockholders could
hold shares of Common Stock worth much more then the selling stockholders
originally paid for them. Therefore, the selling stockholders could sell the
shares at a price lower then the current market prices, still making a profit
on their investment which would drive down the price of the Common Stock.
If the Company wishes to merge or consolidate its assets with another
company prior to fully paying back the secured convertible notes, it
could lead to a default under the notes, making them immediately due.
Under the terms of the secured convertible notes, any sale, conveyance
or disposition of all or substantially all of the assets of the Company in
which more than 50% of the voting power of the Company is disposed of, or the
consolidation, merger or other business combination of the Company with or
into any other entity when the Company is not the survivor shall either:
(i) be deemed to be an event of default under the notes which could cause the
Company to pay substantial penalties, or (ii) require the Company to get
written approval by the successor entity that such successor entity assumes
the obligations of the secured convertible notes. Additionally, if the
Company makes any issuance of shares of Common Stock, options for shares of
Common Stock, or issuances any additional convertible notes for consideration
less than the conversion price then in effect, the conversion price of the
secured convertible notes will become the price the shares or options were
issued for or the price the additional convertible notes will be convertible
for. If the Company is forced to pay penalties under the secured convertible
notes or the conversion price of the notes is decreased substantially, the
Company could be forced to curtail its business operations or issue more
shares of Common Stock, which would have a dilutive effect on then
shareholders.
17
Risks Relating to Our Common Stock
The market price of our Common Stock historically has been volatile.
The market price of our Common Stock historically has fluctuated
significantly based on, but not limited to, such factors as: general stock
market trends, announcements of developments related to our business, actual
or anticipated variations in our operating results, our ability or inability
to generate new revenues, conditions and trends in the healthcare industry and
in the industries in which our customers are engaged.
Our Common Stock is traded on the OTC Bulletin Board. In recent years
the stock market in general has experienced extreme price fluctuations that
have oftentimes have been unrelated to the operating performance of the
affected companies. Similarly, the market price of our Common Stock may
fluctuate significantly based upon factors unrelated or disproportionate to
our operating performance. For example, the 52-week high for our Common Stock
was $0.17 on December 13, 2004, as compared to the 52-week low of $.002 on
December 15, 2005. These market fluctuations, as well as general economic,
political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of
our Common Stock.
Our Common Stock is subject to the "Penny Stock" rules of the Commission
which limits the trading market in our Common Stock, makes transactions
in our Common Stock cumbersome and may reduce the value of an investment
in our Common Stock.
Our Common Stock is considered a "penny stock" as defined in Rule
3a51-1 promulgated by Commission under the Securities Exchange Act of 1934.
In general, a security which is not quoted on NASDAQ or has a market price of
less than $5 per share where the issuer does not have in excess of $2,000,000
in net tangible assets (none of which conditions the Company meets) is
considered a penny stock. The Commission's Rule 15g-9 regarding penny stocks
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally persons with net worth in excess of $1,000,000 or an
annual income exceeding $200,000or $300,000 jointly with their spouse). For
transactions covered by the rules, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Thus, the rules
affect the ability of broker-dealers to sell our Common Stock should they wish
to do so, because of the adverse effect that the rules have upon liquidity of
penny stocks. Unless the transaction is exempt under the rules, under the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
broker-dealers effecting customer transactions in penny stocks are required
to provide their customers with (i) a risk disclosure document; (ii)
disclosure of current bid and ask quotations if any; (iii) disclosure of
the compensation of the broker-dealer and its sales personnel in the
transaction; and (iv) monthly account statements showing the market value of
each penny stock held in the customer's account. As a result of the "penny
stock" rules, the market liquidity for our Common Stock may be adversely
affected by limiting the ability of broker-dealers to sell our Common Stock
and the ability of purchasers to resell our Common Stock. Additionally, the
value of the Company's securities may be adversely affected by the "penny
stock" rules, because of the additional disclosures required by
broker-dealers, which take additional time and effort from broker-dealers,
decreasing the likelihood that broker-dealers will sell the Company's Common
Stock. This may in turn have an adverse effect on the liquidity of the
Company's securities which in turn could adversely affect the price of the
Company's securities.
In addition, various state securities laws impose restrictions on
transferring "penny stocks" and as a result, investors in the Common Stock may
have their ability to sell their shares of the Common Stock impaired.
The Company has not paid any cash dividends.
The Company has paid no cash dividends on its Common Stock to date and
it is not anticipated that any cash dividends will be paid to holders of the
Company's Common Stock in the foreseeable future. While the Company's
dividend policy will be based on the operating results and capital needs of
the business, it is anticipated that any earnings will be retained to finance
the future expansion of the Company.
18
FORWARD-LOOKING STATEMENTS
---------------------------
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act, and Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act"). We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may affect our
actual results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. These factors are discussed in
the section entitled "Risk Factors". In some cases you can identify
forward-looking statements by terminology such as "may", "should", "could",
"would", "expect", "plan", "anticipate", "believe", "estimate", "continue", or
the negative of such terms or other similar expressions. All forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the cautionary statements included in this
Prospectus. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions,
the forward-looking events discussed in this Prospectus might not occur.
USE OF PROCEEDS
---------------
This Prospectus relates to shares of Common Stock that the Company may
issue upon the conversion of $3,700,000 of secured convertible notes. The
Common Stock issuable upon the conversion of the Convertible Notes may be
offered and sold from time to time by the selling stockholders. We will not
receive any proceeds from the resale of such Common Stock by the selling
stockholders. As of the date of this Prospectus, the Company has sold
$1,800,000 of the secured convertible notes. The Company has agreed to sell
an additional $1,900,000 in secured convertible notes, subject to the
Company's satisfaction of certain conditions as described above under "Risk
Factors" including the filing and the effectiveness of the registration
statement of which this Prospectus is a part. Proceeds to the Company from
the sale of the additional secured convertible notes may be reduced if the
registration statement does not become effective on or before April 3, 2006,
and the holders of the secured convertible notes choose to enforce their
rights to penalties. See "Risk Factors--If the registration statement of
which this Prospectus is a part is not declared effective before April 3,
2006, we may be forced to incur substantial penalties".
This Prospectus also relates to shares of Common Stock that the Company
may issue upon exercise of warrants. As of the date of this Prospectus, the
Company has issued warrants to purchase 700,000 shares of its Common Stock at
an exercise price of $0.45 per share and warrants to purchase 6,500,000 shares
of its Common Stock at an exercise price of $0.10 per share. . The Company
has agreed to sell warrants to purchase an additional 8,500,000 shares of
Common Stock at an exercise price of $0.10 per share concurrently with the
sale of additional secured convertible notes describe above. The Common
Stock underlying the warrants may be offered and sold from time to time by the
selling stockholders. The Company will not receive any proceeds from the
resale of our Common Stock underlying the warrants, however the Company will
receive proceeds upon the exercise of the warrants. However, AJW Partners,
LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., and New Millennium
Partners II, LLC will be entitled to exercise the warrants on a cashless basis
if the shares of common stock underlying the warrants are not then registered
for resale pursuant to an effective registration statement. In the event that
AJW Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd., or New
Millennium Partners II, LLC exercise the warrants on a cashless basis, then we
will not receive any proceeds from the exercise of those warrants.
The Company will use the proceeds from the sale of additional secured
convertible notes and from the exercise of warrants, if any, for working
capital in support of growing its business operations, which may include the
purchase of other companies, similar to iTech or DCI, or focusing the proceeds
into marketing and/or the hiring of additional employees. The Company has
already used all of the proceeds which it received from the sale of the
secured convertible notes to complete the acquisition of DCI and prior
acquisitions of discontinued businesses, pay outstanding debts of the Company
and pay legal costs.
19
DIVIDEND POLICY
---------------
We have not in the past paid any dividends on our Common Stock. We do
not anticipate that any cash dividends will be paid to holders of the
Company's Common Stock in the foreseeable future. We anticipate that we will
retain any future earnings for use in the expansion and operation of our
business. Any determination to pay dividends will depend upon our financial
condition, results of operations and capital requirements.
SELLING STOCKHOLDERS
---------------------
On the date of this offering, the Company has 364,308,800 shares of
Common Stock outstanding. This Prospectus relates to the resale of
5,723,707,692 shares of Common Stock by the selling stockholders. The selling
stockholders are "underwriters" within the meaning of Section 2(a)(11) of the
Securities Act of 1933 (the "Securities Act" or the "1933 Act"). None of the
selling stockholders have held any position, office, or had any other material
relationship with the Company, its predecessors or affiliates within the past
three years. Upon the effectiveness of the registration statement of which
this Prospectus is a part, all 5,723,707,692 shares of Common Stock will be
freely tradable without restriction or further registration under the
Securities Act. Sales of a substantial number of shares of the Company's
Common Stock in the public market following this offering could adversely
affect the market price of the Common Stock.
The table below sets forth information with respect to the resale of
shares of Common Stock by the selling stockholders. We will not receive any
proceeds from the resale of Common Stock by the selling stockholders
Shares of
Common Stock Common Stock Beneficial Percentage
Beneficially Included Ownership Owned
Owned Before in this After the After the
Name (1) the Offering Prospectus(2) Offering (3) Offering (3)
- ------------------------ ----------------- --------------- ------------ ------------
<s> <c> <c> <c> <c>
AJW Partners, LLC (4) 681,121,215 (5) 681,121,215 0 -
AJW Offshore, Ltd. (6) 3,090,802,154 (7) 3,090,802,154 0 -
AJW Qualified Partners,
LLC (8) 1,865,928,708 (9) 1,865,928,708 0 -
New Millennium Capital
Partners II, LLC (10) 85,855,615 (11) 85,855,615 0 -
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rule, beneficial ownership includes any shares as
to which the selling security holder has sole or shared voting power or
investment power and also any shares, which the selling security holder has
the right to acquire within 60 days. Shares of Common Stock subject to a
secured convertible note or warrant currently convertible or exercisable, or
convertible or exercisable within 60 days are deemed outstanding for computing
the percentage of the selling security holder holding such secured convertible
note or warrant, but are not deemed outstanding for computing the percentage
of any other person.
(1) The selling stockholders do not hold any position or office, and have not
had any material relationship with the Company or any of its affiliates within
the past three (3) years.
(2) Includes 200% of the shares issuable upon conversion of the principal
amount of the secured convertible notes and exercise of the warrants to take
into account the conversion of accrued interest and changes in the conversion
price of the secured convertible notes due to the volatility of the trading
value of the Company's Common Stock. In addition to the shares of Common
Stock set forth in the table, the amount to be registered also covers such
indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of or otherwise pursuant to the secured convertible
notes and exercise of the warrants to prevent dilution resulting from stock
splits, stock dividends, or similar transactions in accordance with Rule 416.
Because the number of shares of Common Stock issuable upon conversion of the
secured convertible notes is dependent in part upon the market price of our
Common Stock prior to a conversion, the actual number of shares of Common
Stock that will be issued upon conversion will fluctuate daily. The Company
believes that 200% of the shares issuable upon conversion of the
20
secured convertible notes is a reasonable estimate of the shares which the
notes may be converted into considering the historical volatility of the
Company's Common Stock. However the selling stockholders have contractually
agreed to restrict their ability to convert their secured convertible notes or
exercise their warrants and receive shares of our Common Stock such that the
number of shares of Common Stock held by each of them individually and their
affiliates after such conversion or exercise does not exceed 4.9% of the then
issued and outstanding shares of Common Stock.
(3) Assumes that all Common Stock registered will be sold.
(4) AJW Partners, LLC is a private investment fund that is owned by its
investors and managed by SMS Group, LLC. SMS Group, LLC, of which Mr. Corey S.
Ribotsky is the fund manager and has voting and investment control over the
shares offered by AJW Partners, LLC.
(5) Includes 677,384,615 shares (or 200% of the shares) issuable upon
conversion of secured convertible notes, and 3,736,600 shares (or 200% of the
shares) issuable upon exercise of warrants.
(6) AJW Offshore, Ltd is a private investment fund that is owned by its
investors and managed by First Street Manager II, LLC. First Street Manager
II, LLC, of which Corey S. Ribotsky is the fund manager and has voting and
investment control over the shares offered by AJW Offshore, Ltd.
(7) Includes 3,073,846,154 shares (or 200% of the shares) issuable upon
conversion of secured convertible notes, and 16,956,000 shares (or 200% of the
shares) issuable upon exercise of warrants.
(8) AJW Qualified Partners, LLC is a private investment fund that is owned by
its investors and managed by AJW Manager, LLC, of which Corey S. Ribotsky and
Lloyd A. Groveman are the fund managers and have voting and investment control
over the shares offered by AJW Qualified Partners, LLC.
(9) Includes 1,855,692,308 shares (or 200% of the shares) issuable upon
conversion of secured convertible notes, and 10,236,400 shares (or 200% of the
shares) issuable upon exercise of warrants.
(10) New Millennium Capital Partners II, LLC is a private investment fund that
is owned by its investors and managed by First Street Manager II, LLP. First
Street Manager II, LLP, of which Corey S. Ribotsky is the fund manager and has
voting and investment control over the shares offered by New Millennium
Capital Partners II, LLC.
(11) Includes 85,394,615 shares (or 200% of the shares) issuable upon
conversion of secured convertible notes, and 471,000 shares (or 200% of the
shares) issuable upon exercise of warrants.
PLAN OF DISTRIBUTION
--------------------
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of our Common Stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed
or negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits the purchaser;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately-negotiated transactions;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
21
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this Prospectus.
The selling stockholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a selling stockholder
defaults on a margin loan, the broker may, from time to time, offer and sell
the pledged shares.
The selling stockholders may sell their shares of Common Stock short and
redeliver our Common Stock to close out such short positions; however, the
selling stockholders may not use shares of our Common Stock being registered
in the registration statement of which this Prospectus is a part to cover any
short positions entered into prior to the effectiveness of the registration
statement. As discussed above under "Risk Factors", if the selling
stockholders or others engage in short selling it may adversely affect the
market price of our Common Stock.
Broker-dealers engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
In addition, the selling stockholders should be aware that the
anti-manipulation provisions of Regulation M under the Securities Exchange Act
of 1934 will apply to purchases and sales of shares of Common Stock by the
selling stockholders and that there are restrictions on market-making
activities by persons engaged in the distribution of the shares. Under
Regulation M, the selling stockholders or their agents may not bid for,
purchase, or attempt to induce any person to bid for or purchase, shares of
our Common Stock while they are distributing shares covered by this
Prospectus. Accordingly, the selling stockholders are not permitted to cover
short sales by purchasing shares while the distribution is taking place. We
will advise the selling stockholders that if a particular offer of Common
Stock is to be made on terms materially different from the information set
forth in this Plan of Distribution, then a post-effective amendment to the
registration statement must be filed with the Securities and Exchange
Commission.
The selling stockholders will be deemed to be an "underwriter" within
the meaning of the Securities Act in connection with such sales. Therefore,
any commissions received by such broker-dealers or agents and any profit on
the resale of the shares purchased by them will be deemed to be underwriting
commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders, but excluding brokerage commissions or underwriter
discounts. We and the selling stockholders have agreed to indemnify each
other against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
LEGAL PROCEEDINGS
-----------------
As of December 15, 2005, the Company was not a party to any legal
proceedings involving the Company.
22
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
-----------------------------------------------------------
The Directors and Officers of the Company are as follows:
Name Age Position Since
- ---------------- -------- ----------------------------------- -------------
Keith Moore 44 Secretary and Director November 2005
David Walters 43 Chief Executive Officer, President, November 2005
Treasurer and Director
David Walters has served as Chief Executive Officer, President,
Treasurer and Director since December 15, 2005. He was Executive Vice
President and Director of the Company from November 4, 2005 to December 15,
2005. Since January 2005, he has served as Chairman and Chief Executive
Officer of iTechexpress, Inc., which since November 4, 2005, has been wholly
owned by the Company. Since November 7, 2005, he has served as Chief Executive
Officer of Drug Consultants, Inc., which has been a wholly owned subsidiary of
iTech since November 7, 2005. Since February 2000, he has served as a
managing member of Monarch Bay Capital Group, LLC, a consulting company. Mr.
Walters has extensive experience in investment management, corporate growth
development strategies and capital markets. Mr. Walters earned a B.S. in
Bioengineering from the University of California, San Diego in 1985.
Keith Moore has served as a Director of the Company since November 4,
2005 and has extensive experience in growing and financing technology and
service companies. Mr. Moore is Chairman and Chief Executive Officer of
DataLogic International, Inc., an information technology company, positions he
has held since January 2005. From April 1999 to January 2005, Mr. Moore
served as Chairman and Chief Executive Officer of iTechexpress, Inc. which
since November 4, 2005, has been wholly owned by the Company. Mr. Moore
received his Bachelors degree in Finance from Eastern Michigan University in
1982 and his Masters degree from Eastern Michigan University in Finance in
1984.
All Directors of the Company will hold office until the next annual
meeting of the shareholders, and until their successors have been elected and
qualified. Officers of the Company are elected by the Board of Directors and
hold office at the pleasure of the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------
The following table sets forth information as of December 15, 2005, with
respect to the beneficial ownership of the common stock by (i) each director
and officer of the Company, (ii) all directors and officers as a group and
(iii) each person known by the Company to own beneficially 5% or more of the
common stock:
Name and Address Shares of Common of Beneficially Owned (1)
of Beneficial Owners Number Percent
- ----------------------------- ------------------ ---------
David Walters 372,750,000 (2) 42.0%
18301 Von Karman, Suite 250
Irvine, CA 92612
Keith Moore 372,750,000 (3) 42.0%
18301 Von Karman, Suite 250
Irvine, CA 92612
Nite Capital, L.P. 82,833,333 (4) 9.3%
101 East Cook Avenue, Suite 201
Libertyville, IL 60048
All officers and directors 745,500,000 (2)(3) 84.0%
as a group (2 people)
* Less than 1%.
23
(1) The number of shares of common stock owned are those "beneficially owned"
as determined under the rules of the Securities and Exchange Commission,
including any shares of common stock as to which a person has sole or
shared voting or investment power and any shares of common stock which the
person has the right to acquire within 60 days through the exercise of any
option, warrant or right. Shares of common stock subject to a Convertible
Note or Warrant currently convertible or exercisable, or convertible or
exercisable within 60 days are deemed outstanding for computing the
percentage of the person holding such Convertible Note or Warrant, but are
not deemed outstanding for computing the percentage of any other person.
As of December 15, 2005 there were 364,308,800 shares of common stock
outstanding and an agreement to issue an additional 523,333,333 shares of
common stock in connection with the Company's acquisition of iTech. All
share numbers do not reflect the effect of the Company's proposed
one-for-ninety reverse stock split.
(2) This number includes 137,250,000 shares issued to Mr. Walters in
connection with the Company's acquisition of iTech, and an additional
235,500,000 shares which will be issued to Mr. Walters at such time as the
Company has available authorized shares. Mr. Walters beneficially owns
his shares through Monarch Bay Capital Group, LLC, of which he is the sole
member.
(3) This number includes 137,250,000 shares issued to Mr. Moore in connection
with the Company's acquisition of iTech, and an additional 235,500,000
shares which will be issued to Mr. Moore upon such time as the Company has
available authorized shares. Mr. Moore beneficially owns his shares
through MEL Enterprises, Ltd.
(4) This number includes 30,500,000 shares issued to Nite Capital, LP in
connection with the Company's acquisition of iTech, and an additional
52,333,333 shares which will be issued to Nite Capital, LP upon such time
as the Company has available authorized shares. The general partner of
Nite Capital, LP is Nite Capital LLC, a Delaware limited liability
company. Nite Capital LLC, in such capacity, has voting and investment
control with respect to the shares of Common Stock beneficially owned by
Nite Capital LP.
DESCRIPTION OF SECURITIES
-------------------------
Explanatory Note: We are in the process of obtaining stockholder approval:
(a) to effect a one-for-ninety reverse stock split of our Common Stock, (b) to
re-authorize for issuance 400,000,000 shares of Common Stock, par value $.001
per share, after giving effect to the reverse stock split and (c) authorize
5,000,000 shares of "blank check" preferred stock. Our Board of Directors has
approved each of these corporate actions and stockholders holding more than
50% of our issued and outstanding shares of Common Stock have indicated their
intention to consent to these corporate actions in writing without a meeting
of our stockholders.
On December 9, 2005, we filed a preliminary information statement with the
Securities and Exchange Commission, notifying our stockholders of these and
other actions. We have received notice that the Securities and Exchange
Commission intends to review and comment upon the preliminary information
statement. As a result, the timing of completion of these corporate actions
depends on the duration of the review by the Securities and Exchange
Commission and our ability to address their comments in a timely manner. We
currently expect to complete each of these corporate actions in the first
quarter of 2006.
24
Common Stock
Our Articles of Incorporation, as amended, authorize the issuance of
400,000,000 shares of Common Stock, $.001 par value per share. Holders of
shares of Common Stock are entitled to one vote for each share on all matters
to be voted on by the stockholders. Holders of Common Stock do not have
cumulative voting rights. Holders of shares of Common Stock are entitled to
share ratably in dividends, if any, as may be declared, from time to time by
the Board of Directors in its discretion, from funds legally available
therefor. In the event of a liquidation, dissolution, or winding up of the
Company, the holders of shares of Common Stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of
Common Stock have no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to
such shares.
Preferred Stock
Our Articles of Incorporation, as amended, currently do not authorize
the issuance of shares of preferred stock. Following completion of the
corporate action described in the Explanatory Note above, we will be
authorized to issue 5,000,000 shares of Preferred Stock, $.001 par value per
share. The Preferred Stock, or any series thereof, shall have such
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof as
shall be expressed in the resolution or resolutions providing for the issue of
such stock adopted by our board of directors and may be made dependent upon
facts ascertainable outside such resolution or resolutions of the board of
directors, provided that the matter in which such facts shall operate upon
such designations, preferences, rights and qualifications; limitations or
restrictions of such class or series of stock is clearly and expressly set
forth in the resolution or resolutions providing for the issuance of such
stock by the board of directors.
We currently have no plans to issue any shares of Preferred Stock.
Options
In December 2005, our Board of Directors approved our 2005 Stock
Incentive Plan under which we may award up to 100,000,000 shares of our Common
Stock in the form of (i) incentive stock options, (ii) nonqualified stock
options, (iii) restricted stock, (iv) stock awards, (v) performance shares; or
(vi) any combination of the foregoing.
As of December 15, 2005, we have not granted any options under the 2005
Stock Incentive Plan and there are currently no outstanding options to
purchase shares of our common stock that have been issued to our officers,
directors and employees.
Convertible Notes and Warrants
On August 31, 2004, the Company entered into a securities purchase
agreement with four accredited investors for the sale of secured convertible
notes having an aggregate principal amount of $700,000, a 10% annual interest
rate payable quarterly, and a term of two years. We also agreed to sell
warrants to purchase up to an aggregate of 700,000 shares of our Common Stock
at $0.45 per share. We only sold $500,000 principal amount of secured
convertible notes under the 2004 agreement. The investors have agreed to
purchase the remaining $200,000 commitment under the terms of our 2005
securities purchase agreement with the investors.
On November 4, 2005, we entered into an additional securities purchase
agreement with the same accredited investors, for the sale of secured
convertible notes having an aggregate principal amount of $3,000,000, an 8%
annual interest rate (payable quarterly), and a term of three years. We also
agreed to sell warrants to purchase up to an aggregate of 15,000,000 shares of
our Common Stock at $0.10 per share. The four accredited investors, AJW
Partners, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New
Millennium Partners II, LLC subscribed for 11.9%, 32.6%, 54.0% and 1.5%,
respectively, of the total offering. Each accredited investor purchased, or
will purchase, such percentage of each closing under the 2005 securities
purchase agreement.
25
As of December 15, 2005, we had issued under the two securities purchase
agreements:
. $1,800,000 aggregate principal amount of secured convertible notes,
. Warrants to purchase 700,000 shares of our Common Stock at $0.45 per
shares, and
. Warrants to purchase 6,500,000 shares of our Common Stock at $0.10
per share.
We will issue and sell an additional $850,000 principal amount of secured
convertible notes and warrants to purchase 4,250,000 shares of our Common
Stock at $0.10 per share to the investors five days following the filing with
the Securities and Exchange Commission of the registration statement of which
this Prospectus is a part. The investors are required to purchase an
additional $1,050,000 principal amount of secured convertible notes and
warrants to purchase 4,250,000 shares of our Common Stock at $0.10 per share
five days following the date that the registration statement is declared
effective by the Securities and Exchange Commission and if other conditions
are satisfied, including: (i) the Company's representations and warranties
contained in the 2005 securities purchase agreement being true and correct in
all material respects on the date when made and as of the date of such
purchase; (ii) the Company having performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
the 2005 agreement; (iii) there being no litigation, statute, rule,
regulation, executive order, decree, ruling or injunction that has been
enacted, entered, promulgated or endorsed by or in any court or government
authority of competent jurisdiction or any self-regulatory organization having
requisite authority which prohibits the transactions contemplated by the 2005
agreement; (iv) no event having occurred which could reasonably be expected to
have a material adverse effect on the Company; and (v) the shares of Common
Stock issuable upon conversion of the secured convertible notes and exercise
of the warrants having been authorized for quotation on the OTC Bulletin Board
and trading in our Common Stock on the OTC Bulletin Board having not been
suspended by the Securities and Exchange Commission or the OTC Bulletin Board.
In connection with the 2005 securities purchase agreement, we entered
into a security agreement, whereby we granted the investors a continuing,
first priority security interest in the Company's general assets including all
of the Company's:
. Goods, including without limitations, all machinery, equipment,
computers, motor vehicles, trucks, tanks, boats, ships, appliances,
furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and
wherever situated;
. Inventory (except that the proceeds of inventory and accounts
receivable;
. Contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities,
licenses, distribution and other agreements, computer software
development rights, leases, franchises, customer lists, quality
control procedures, grants and rights, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications,
copyrights, deposit accounts, and income tax refunds;
. Receivables including all insurance proceeds, and rights to refunds
or indemnification whatsoever owing, together with all instruments,
all documents of title representing any of the foregoing, all rights
in any merchandising, goods, equipment, motor vehicles and trucks
which any of the same may represent, and all right, title, security
and guaranties with respect to each receivable, including any right
of stoppage in transit; and
. Documents, instruments and chattel paper, files, records, books of
account, business papers, computer programs and the products and
proceeds of all of the foregoing and the Company's intellectual
property.
Additionally, we entered into an intellectual property security
agreement with the investors, whereby we granted them a security interest in
all of the Company's software programs, including source code and data files,
then owned or thereafter acquired, all computers and electronic processing
hardware, all related documentation, and all rights with respect to any
copyrights, copyright licenses, intellectual property, patents, patent
licenses, trademarks, trademark licenses or trade secrets.
26
Additional material terms of the 2005 securities purchase agreement, the
secured convertible notes and the warrants are described below:
Conversion and Conversion Price
- -------------------------------
The secured convertible notes are convertible into our Common Stock, at
the selling stockholders' option, at the lower of (i) $0.01 or (ii) 50% of the
average of the three lowest intraday trading prices for the Common Stock on a
principal market for the 20 trading days before but not including the
conversion date. Accordingly, there is in fact no limit on the number of
shares into which the notes may be converted.
The conversion price is adjusted after major announcements by the
Company. In the event the Company makes a public announcement that the
Company intends to consolidate or merge with any other corporation (other
than a merger in which the Company is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer all or
substantially all of the assets of the Company or any person, group or entity
(including the Company) publicly announces a tender offer to purchase 50% or
more of the Company's Common Stock (or any other takeover scheme) then the
conversion price will be equal to the lower of the conversion price that would
be effect on the date the announcement is made or the current conversion price
at the time the secured convertible note holders wish to convert
The secured convertible notes also provide anti-dilution rights, whereby
the conversion price shall be adjusted in the event that the Company issues or
sells any shares of Common Stock for no consideration or consideration less
than the average of the last reported sale prices for the shares of the Common
Stock on the OTC Bulletin Board for the five trading days immediately
preceding such date of issuance or sale. The conversion price is also
proportionately increased or decreased in the event of a reverse stock split
or forward stock split, respectively. The conversion price is also adjusted
in the event the Company effects a consolidation, merger or sale of
substantially all its assets (which may also be treated as an event of
default) or if the Company declares or makes any distribution of its assets
(including cash) to holders of its Common Stock, as provided in the secured
convertible notes.
If a selling stockholder gives the Company a notice of conversion
relating to the secured convertible notes and the Company is unable to issue
such selling stockholder the shares of Common Stock underlying the secured
convertible note within five days from the date of receipt of such notice, the
Company is obligated to pay the selling stockholder $2,000 for each day that
the Company is unable to deliver such Common Stock underlying the secured
convertible note.
The secured convertible notes contain a provision whereby no selling
stockholder is able to convert any part of the notes into shares of the
Company's Common Stock, if such conversion would result in beneficial
ownership by the selling stockholder and its affiliates of more than 4.99% of
the Company's then outstanding shares of Common Stock.
In addition, we have the right under certain circumstances described
below under "Company Call Option and Prepayment Rights" to prevent the selling
stockholders from exercising their conversion rights during any month after a
month in which we have exercised certain prepayment rights.
Company Call Option and Prepayment Rights
- -----------------------------------------
Each secured convertible note contains a call option in favor of the
Company, whereby as long as no event of default under the note has occurred,
the Company has a sufficient number of authorized shares reserved for issuance
upon full conversion of the secured convertible notes and our Common Stock is
trading at or below $0.01 per share (subject to adjustment in the secured
convertible note), the Company has the right to prepay all or a portion of the
note. The prepayment amount is equal to the total amount of principal and
accrued interest outstanding under the note, and any other amounts which may
be due to the selling stockholders, multiplied by either (i) 125% for
prepayments occurring on or before January 3, 2006, or (iii) 130% (for
prepayments occurring after January 3, 2006).
27
In the event that the average daily trading price of our Common Stock
for each day of any month is below $0.01, the Company may at its option prepay
a portion of the outstanding principal amount of the secured convertible notes
equal to 104% of the principal amount thereof divided by thirty-six plus one
month's interest on the secured convertible notes, or the amount of the
remaining principal and interest, whichever is less. No selling stockholder
is entitled to convert any portion of the secured convertible notes during any
month after the month on which the Company exercises this prepayment option.
Events of Default
- -----------------
Upon an event of default under the secured convertible notes, and in the
event the selling stockholders give the Company a written notice of default,
an amount equal to 130% of the amount of the outstanding secured convertible
notes and interest thereon shall become immediately due and payable or another
amount as otherwise provided in the notes. Events of default under the
secured convertible notes include the following:
. failure to pay any amount of principal or interest on the notes;
. failure to issue shares to the selling stockholders upon conversion
of the notes, and such failure continues for ten days after
notification by the selling stockholders;
. failure to obtain effectiveness of the registration statement of
which this Prospectus is a part on or before April 3, 2006 (or April
28, 2006 if the Company is making a good faith effort to respond to
the Securities and Exchange Commission's comments), or an effective
registration statement covering such shares ceases to be effective
for any ten consecutive days or any twenty days in any twelve month
period;
. breaches by the Company of any of the convents contained in the
notes;
. breaches by the Company of any representations and warranties made in
the 2005 securities purchase agreement or any related document;
. appointment by the Company of a receiver or trustee or makes an
assignment for the benefit of creditors;
. filing of any judgment against the Company for more than $50,000;
. bringing of bankruptcy proceedings against the Company and such
proceedings are not stayed within sixty days of such proceedings
being brought; or
. delisting of the Common Stock from the OTC Bulletin Board or
equivalent replacement exchange.
Stock Purchase Warrants
- -----------------------
The warrants expire five years from their date of issuance. The
warrants include anti-dilution rights, whereby the exercise price of the
warrants shall be adjusted in the event that the Company issues or sells any
shares of the Company's Common Stock for no consideration or consideration
less than the average of the last reported sale prices for the shares of the
Company's Common Stock on the OTC Bulletin Board for the five trading days
immediately preceding such date of issuance or sale. The exercise price of
the warrants are also proportionately increased or decreased in the event of a
reverse stock split or forward stock split, respectively. The exercise price
is also adjusted pursuant to the warrants in the event the Company effects a
consolidation, merger or sale of substantially all of its assets and/or if the
Company declares or makes any distribution of its assets (including cash) to
holders of its common stock as a partial liquidating dividend, as provided in
the warrants.
28
The warrants also contain a cashless exercise, whereby after February 2,
2006, and if a registration statement covering the warrants is not effective,
the selling stockholders may convert the warrants into shares of the Company's
restricted Common Stock. In the event of a cashless exercise under the
warrants, in lieu of paying the exercise price in cash, the selling
stockholders can surrender the warrant for the number of shares of Common
Stock determined by multiplying the number of warrant shares to which it would
otherwise be entitled by a fraction, the numerator of which is the difference
between (i) the average of the last reported sale prices for the Company's
Common Stock on the OTC Bulletin Board for the five trading days preceding
such date of exercise and (ii) the exercise price, and the denominator of
which is the average of the last reported sale prices for the Company's Common
Stock on the OTC Bulletin Board for the five trading days preceding such date
of exercise . For example, if the selling stockholder is exercising 100,000
warrants with a per warrant exercise price of $0.75 per share through a
cashless exercise when the average of the last reported sale prices for the
Company's Common Stock on the OTC Bulletin Board for the five trading days
preceding such date of exercise is $2.00 per share, then upon such cashless
exercise the selling stockholder will receive 62,500 shares of the Company's
Common Stock.
Registration Rights Agreement
- ------------------------------
We also entered into a registration rights agreement with the selling
stockholders that grants the selling stockholders demand registration rights
with respect to 200% of the Common Stock underlying the secured convertible
notes and 200% of the Common Stock underlying the warrants. The Company will
be subject to the payment of certain damages in the event that it does not
satisfy its obligations including its obligation to have a registration
statement with respect to the Common Stock underlying the secured convertible
notes and warrants declared effective by the Securities and Exchange
Commission on or prior to April 3, 2006; in the event that after the
registration statement is declared effective, sales of the Company's
securities cannot be made pursuant to the registration statement; and in the
event that the Company's Common Stock is not listed on the OTC Bulletin Board
or the NASDAQ, New York of American stock exchanges. The damages are equal to
0.02 times the number of months (prorated for partial months) that any such
event occurs (subject to adjustment as provided in the registration rights
agreement).
Side Letter Agreement
- ---------------------
We entered into a aide letter agreement with the selling stockholders on
November 10, 2005. The Side Letter Agreement provided that in consideration
for the November 2005 sale of the secured convertible notes, the selling
stockholders agreed that the face amount of the $500,000 of secured
convertible notes issued to the selling stockholders in August 2004 and the
$200,000 in secured convertible notes which remained to be issued under the
2004 securities purchase agreement upon the effectiveness of a registration
statement covering such secured convertible notes shall be included in the
amount advanced to the Company under the November 2005 secured convertible
notes. The side letter agreement also provided that the terms of the 2005
securities purchase agreement shall supercede the prior 2004 securities
purchase agreement and that all interest, penalties, fees, charges or other
obligations accrued or owed by the Company to the selling stockholders
pursuant to the 2004 securities purchase agreement are waived, provided that
in the event of any material breach of the 2005 securities purchase agreement
by the Company, which breach is not cured within five days of receipt by the
Company of written notice of such breach, the novation of the 2004 securities
purchase agreement and the waiver of the prior obligations thereunder shall be
revocable by the selling stockholders and all such prior obligations shall be
owed as if the 2004 securities purchase agreement was never superceded.
LEGAL MATTERS
--------------
David M. Loev, Attorney at Law, Houston, Texas, the Company's counsel,
will give an opinion on the validity of the shares of Common Stock being
registered and offered in this Prospectus.
EXPERTS
-------
The audited financial statements as of December 31, 2003 and 2004
included in this Prospectus have been included in reliance on the report of
Clyde Bailey, P.C., Certified Public Accountant, given as an expert in
accounting and auditing.
29
INTEREST OF NAMED EXPERTS AND COUNSEL
--------------------------------------
David M. Loev, Attorney at Law, who has assisted us in the preparation
of the Registration Statement of which this Prospectus is a part will become
the beneficial owner of 500,000 shares of our Common Stock following the
transfer of stock by one of our shareholders.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
----------------------------------------------------
Our Articles of Incorporation, as amended, and Bylaws, as amended,
provide for indemnification from liability of our officers and directors to
the fullest extent permitted by Nevada Law, including future amendments to
Nevada Law. Nevada Law generally provides that we may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed Proceeding by reason of the fact that the person is or
was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the Proceeding upon a determination by our stockholders, a
majority of our disinterested directors or independent legal counsel that
indemnification is proper in the circumstances, provided that: a) it is not
proven that the person's act or failure to act constituted a breach of the
person's fiduciary duties as an officer or director, and the person's breach
of those duties involved intentional misconduct, fraud or a knowing violation
of law; or b) the person acted in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, the person
had no reasonable cause to believe that the person's conduct was unlawful.
Nevada Law also generally limits the liability of our officers and directors
for any damages as a result of any act or failure to act in the officer's or
director's capacity as an officer or director provided that: a) it is not
proven that the person's act or failure to act constituted a breach of the
person's fiduciary duties as an officer or director, and the person's breach
of those duties involved intentional misconduct, fraud or a knowing violation
of law. Thus, the Company may be prevented from recovering damages for
certain alleged errors or omissions by the officers and directors for
liabilities incurred in connection with their good faith acts for the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
------------------------
Company Background and the iTech and DCI Transactions
Prior to August 2003, we were a development stage company. Although we
were incorporated only five years ago, we have undergone a number of changes
in our business strategy and organization.
The Company was originally incorporated in Nevada under the name
JavaJuice.net on September 13, 2000. The Company's business plan was to
engage in the operation of an Internet Cafe, in Reno, Nevada. On August 8,
2003, the Company acquired M.T. Marketing Int. Corp and control of the Company
shifted to the former MT shareholders. MT operated a payroll nurse staffing
and homecare business. JavaJuice was considered a "shell" at the time of the
acquisition; therefore, the transaction was treated as a reverse merger. As a
result of a change in business focus due to the acquisition, the Company
30
changed its name to MT Ultimate Healthcare Corp. The Company expanded its
operations through the acquisition of B.P. Senior Care, Inc. (a provider of
healthcare services to senior citizens in New Jersey), the operation of which
was terminated in June 2005, and Abundant Healthcare, Inc. (a provider of
medical staffing services in Pennsylvania). All of the business and
operations of MT and Abundant Healthcare, Inc. have been discontinued and
disposed of by the Company in connection with the disposition of Marathon
Healthcare Corporation described below.
On November 4, 2005, the Company acquired 100% of the issued and
outstanding shares of iTechexpress, Inc. in exchange for 305,000,000 newly
issued shares of the Company's Common Stock and the promise to issue an
additional 523,333,333 shares of the Company's Common Stock at such time as
the Company has available total authorized shares.
On November 7, 2005, iTech purchased all of the outstanding shares of
Drug Consultants, Inc. for a purchase price of $1,800,000, of which $1,600,000
was paid at closing and $200,000 shall be paid pursuant to a secured
promissory note.
As part of our focus on growing profitable operations, we decided to
discontinue and dispose of certain operations which we determined did not
demonstrate suitable growth or profitability prospects. On December 15, 2005,
we completed the disposition of all of the outstanding capital stock of
Marathon Healthcare Corporation, a newly formed holding company, to Macdonald
Tudeme and Marguerite Tudeme, the former controlling shareholders of the
Company. At the time of the disposition, Marathon's assets included
substantially all of the corporate names, business, operations, assets,
properties, intellectual properties, trademarks, service marks, trade names,
uniform resource locators, telephone numbers, and good will of the Company and
its subsidiaries (other than iTech and DCI). These assets included all of
the operations of the Company's former operating subsidiaries MT and Abundant
Healthcare, Inc. In exchange for all of the outstanding capital stock of
Marathon and a cash payment to the Tudemes of $80,442.32, the Company received
from the Tudemes 35,691,200 shares of the Company's Common Stock. In
connection with the disposition of Marathon, we also (a) assumed and released
the Tudemes from certain liabilities and (b) pledged to Marathon 20,000,000
shares of our Common Stock as collateral to secure the performance and payment
of a promissory note in the amount of $257,038 payable to Lisa Stern
originally entered into as part of the Company's purchase of a former
operating subsidiary. If we fail to pay any principal of or interest on the
note when due, we will be in default of our obligations and Marathon will be
able to retain and sell the pledged Common Stock to satisfy our obligations.
All of the our revenue for the year ended December 31, 2004, as well as
the first three quarters of 2005, came from the operations of MT, B.P. Senior
Care, Inc. and Abundant Nursing, Inc., each of which has since been
discontinued and disposed of. As a result of the disposition of Marathon,
all of our revenues are generated from the operations of iTech and DCI. We
anticipate approximately 90% of our revenues will come from DCI's medical
staffing services business and approximately 10% of our revenues will come
from iTech's technical staffing services business. Accordingly, the
description of our business in this Prospectus reflects only the operations of
iTech and DCI.
Investors are encouraged to view the Company's filings at www.sec.gov,
before making any investment in the Company. The Company currently does not
have a website.
Principal Products and Services
We provide medical and technical staffing services to both commercial
and government sector customers. We are focused on building a nationally
recognized medical and technical staffing company by growing our current
customer bases, expanding our service offerings, and acquiring and growing
profitable staffing services companies.
We operate our medical staffing services business through DCI. DCI
furnishes personnel to perform a range of pharmacy technician, nursing and
other health care services in support of the operations of government and
commercial facilities, including its largest client, the State of California
(which we anticipate will account for approximately 95% of DCI's 2005
revenue). DCI was formed in 1977 and is located in Irvine, California.
DCI has experience in providing its services in rural areas of California
where many state facilities are located and healthcare professionals are not
readily available. This experience and DCI's database of healthcare
professionals has allowed it to competitively price its services and expand
its business to meet these unique requirements of the State of California.
31
DCI currently operates under three master contracts with the State of
California. The master contracts are for terms of three years and currently
expire between June 30, 2006 and September 30, 2007. Historically, DCI has
been able to obtain replacement contracts for its services to the State of
California upon expiration of its master contracts. DCI's contracts with the
State of California do not provide for a minimum purchase commitment of our
services and can be terminated by the State at any time on 30 days' notice.
We operate our technical staffing services through iTech. iTech places
technicians into technical jobs on a national basis. iTech has performed IT
and staffing services for clients such as Best Buy, Equant NV and Office
Depot. iTech was formed in 1999 and is located in Irvine, California.
Growth Strategy
Our goal is to build a nationally recognized medical and technical
staffing company. The key components of our business strategy include:
. Increase Penetration of Existing Client Relationships. We have built
strong relationships with our existing clients, particularly the
State of California. We will seek to increase the penetration of our
services to agencies of the State which we do not currently serve.
. Leverage Processes and Experience to Enter New Markets. We have
experience in meeting the staffing needs of government entities,
particularly in rural areas. We will seek to leverage our experience
and associated processes and contacts to provide similar services to
government entities in other high-growth states such as Arizona,
Nevada, Oregon and Utah.
. Expand Service Offerings Through New Staffing Solutions. In order
to enhance the growth in our business and improve our competitive
position, we continue to explore new service offerings. As our
clients' needs change, we will explore what additional services we
can provide to better serve our clients.
. Expand Our Customer Base. We have experience in servicing the needs
of government entities that we will transfer to the commercial client
market.
. Capitalize on Acquisition Opportunities. The markets we serve are
highly fragmented. In order to enhance our competitive position, we
intend to aggregate multiple smaller staffing service providers. Our
general criteria for acquisition targets are: companies who provide
similar services to our own in other geographic areas, companies who
have strong client relationships, companies who offer vertical
services that complement our own, and companies that generate
positive cash flow and have the prospect for year-over-year revenue
growth.
. Build Our Management Team and Core Back-Office Functions. We intend
to expand our executive, sales and operations management teams to
support the growth of our business. In addition, we plan to build
centralized administrative support systems to support our business
model across business units.
Industry and Market Overview
In 2004, total healthcare expenditures in the United States were
estimated at $1.8 trillion, representing approximately 15.5% of the U.S. gross
domestic product, and grew approximately 7% over 2003 according to the Centers
for Medicare & Medicaid Services. Over the next decade, an aging U.S.
population and advances in medical technology are expected to drive increases
in hospital patient populations and the consumption of healthcare services.
32
The temporary healthcare staffing industry accounted for approximately
$9.8 billion in revenue in 2004 according to estimates by The Staffing
Industry Report. From 1996 through 2000, the temporary healthcare staffing
industry grew at a compound annual growth rate of 13%, and this growth
accelerated to a compound annual growth rate of approximately 21% from 2000 to
2002. While the market declined between 2002 and 2004 primarily due to
economic conditions and resulting pressures on healthcare facilities to reduce
outsourced staffing solutions, it is expected to achieve modest growth in
2005.
We believe that the demand for technical staffing is highly correlated
to economic conditions and overall employment trends and that demand will
increase with an improving economy. After contraction in the information
technology (IT) staffing industry from late 2000 to 2002 caused by corporate
overspending on IT initiatives during the late 1990s and subsequent poor
economic conditions, the industry has recently shown signs of growth. Staffing
Industry Analysts, Inc., an independent, industry-recognized research group,
noted in its March 2005 report that it expects the IT staffing industry to
grow from $15.8 billion in 2004 to $17.4 billion in 2005 and $19.2 billion in
2006, an increase of approximately 10% in each of 2005 and 2006.
Competition and Competitive Strategy
The medical staffing industry is both highly fragmented and highly
competitive. There are a large number of firms engaged in the provision of
medical personnel. A significant number of these companies are very small
competitors operating on a localized basis. There are however, a few larger
companies that operate on a national basis. Some of our larger competitors in
the temporary healthcare staffing sector include AMN Healthcare Services,
Cross Country, InteliStaf/StarMed, CompHealth Group/RN Network, Medical
Staffing Network and On Assignment.
We compete in the medical staffing industry based primarily on our
long-standing customer relationships, experience in meeting the needs of
government entities (particularly with rural facilities, as well as with
superior client service.
The technical staffing industry is fragmented and highly competitive.
Based on Staffing Industry Analysts, Inc data for 2004, no one company
accounted for more than 9% of total IT staffing industry revenues, and the top
five companies accounted for approximately 27% of total industry revenues.
We believe that key elements of successfully competing in the industry include
maintaining a strong base of qualified IT professionals to enable quick
responses to client requests and ensuring that the candidates are an
appropriate fit with the cultural and technical requirements of the
assignments. Other key success factors include accurate evaluation of
candidates' technical skills, strong account management to develop and
maintain client relationships and efficient and consistent administrative
processes to assist in the delivery of quality services.
We compete in the technical staffing industry based primarily on our
long-standing customer relationships, and proprietary database of staff
associates and field technicians.
Our Business Model
Recruitment
- -----------
DCI's recruitment methods include recruiting trained, experienced
medical staff from schools and universities from both within and outside of
the United States. Some of the Company's employees are independent
contractors, particularly Registered Nurses and Pharmacists due to their
requirement to hold specialized licenses. Additionally, because Registered
Nurses require specialized licenses, they are in high demand and often work
with more than one agency. As a result of being considered an independent
contractor, these individuals are required to pay their own federal, state and
local taxes.
iTech maintains a proprietary database of over 3,000 staff associates
and field technicians for servicing its clients.
33
Screening and Quality Management
- --------------------------------
We screen all candidates prior to placement, and we continue to evaluate
our temporary healthcare professionals and technicians after they are placed
to provide adequate performance and manage risk, as well as to determine
feasibility for future placements. Our internal processes are designed to
determine whether our temporary healthcare professionals and technicians have
the appropriate experience, credentials and skills for the assignments that
they accept. Our screening and quality management process includes three
principal stages:
Initial screening. Each new temporary healthcare professional or
technician candidate who submits an application with us must meet certain
criteria, including appropriate prior work experience and proper educational
and licensing credentials. We independently verify each applicant's work
history and references in an effort to improve the ability of our clients to
depend on our temporary healthcare professionals and technicians for
competency and personal reliability.
Assignment specific screening. Once an assignment is accepted by a
temporary healthcare professional or technician, we track the necessary
documentation and license verification required for the temporary healthcare
professional or technician to meet the requirements set forth by us, the
client and, when required, the applicable state licensing authorities.
Additionally, where state and federal laws apply with regard to the employment
of healthcare workers, we believe we have in place the necessary procedures to
comply with material requirements. These requirements may include obtaining
copies of specific health records, drug screening, criminal background checks
and certain certifications or continuing education courses.
Ongoing evaluation. We evaluate our temporary healthcare
professionals' and technicians' performance through a verbal and written
evaluation process. We receive these evaluations directly from our clients,
and use the feedback to determine appropriate future assignments.
Account Management and Placement
- --------------------------------
Our account managers are responsible for soliciting and receiving orders
from our clients and working with our recruiters to fill those orders with
qualified temporary healthcare professionals and technicians. As an example,
we operate under master contracts with the State of California to provide
temporary health professionals. We receive requests or "orders" from specific
state healthcare facilities for temporary healthcare professionals to fill
assignments. Depending upon their size and specific needs, one healthcare
facility client may have from one to over 50 open orders at one time.
Because clients often list their orders with multiple service providers, open
orders may also be listed with our competitors. An order will generally be
filled by the company that provides a suitable candidate first, highlighting
the need for a large network of temporary healthcare professionals and
technicians and responsive client service
Billing and Payroll
- -------------------
Our staffing services are generally provided on a time-and-materials
basis, meaning that we bill our clients for the number of hours worked in
providing services to the client. Hourly bill rates are typically determined
based on contractual rates or the level of skill and experience of the
temporary healthcare professional or technician assigned and the supply and
demand in the current market for those qualifications. Alternatively, the bill
rates for some assignments are based on a mark-up over compensation and other
direct and indirect costs.
We maintain a variable cost model in which we compensate most of our
temporary healthcare professionals and technicians only for those hours that
we bill to our clients. The temporary healthcare professionals and technicians
who perform services for our clients consist of our employees as well as
independent contractors and subcontractors. With respect to those temporary
healthcare professionals or technicians who are employees, we are responsible
for all employment-related costs, including medical and health care costs,
workers' compensation and federal social security and state unemployment taxes
34
Government Regulation
- ---------------------
The healthcare industry is subject to extensive and complex federal and
state laws and regulations related to professional licensure, conduct of
operations, payment for services and payment for referrals. Our business,
however, is not directly impacted by or subject to the extensive and complex
laws and regulations that generally govern the healthcare industry. The laws
and regulations that are applicable to our hospital and healthcare facility
clients could indirectly impact our business to a certain extent, but because
we provide services on a contract basis and are paid directly by our hospital
and healthcare facility clients, we do not have any direct Medicare or managed
care reimbursement risk.
Most of the temporary healthcare professionals that we employ are
required to be individually licensed or certified under applicable state laws.
We take prudent steps to ensure that our employees possess all necessary
licenses and certifications in all material respects.
With respect to our recruitment of international temporary healthcare
professionals, we must comply with certain United States immigration law
requirements, including the Illegal Immigration Reform and Immigrant
Responsibility Act of 1996. We primarily bring temporary healthcare
professionals to the United States as immigrants, or lawful permanent
residents (commonly referred to as "green card" holders). We screen foreign
temporary healthcare professionals and assist them in preparing for the
national nursing examination and subsequently obtaining a U.S. nursing
license. We file petitions with the United States Citizenship and Immigration
Service for a temporary healthcare professional to become a permanent resident
of the United States or obtain necessary work visas. Generally, such petitions
are accompanied by proof that the temporary healthcare professional has holds
a full and unrestricted state license to practice, as well as a contract
between us and the temporary healthcare professional demonstrating that there
is a bona fide job offer.
Technical staffing firms are generally subject to one or more of the
following types of government regulation: (1) regulation of the
employer/employee relationship between a firm and its employees, including tax
withholding or reporting, social security or retirement, benefits, workplace
compliance, wage and hour, anti-discrimination, immigration and workers'
compensation; (2) registration, licensing, record keeping and reporting
requirements; and (3) federal contractor compliance.
Employees
DCI employs approximately 36 total employees, with 26 of those full-time
and 10 part-time. iTech has 4 full-time employees.
None of our employees are covered by collective bargaining agreements,
and management believes that its relationships with its employees are good.
35
MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------
This report contains forward looking statements within the meaning of
Section 27a of the Securities Act of 1933 and Section 21e of the Securities
Exchange Act of 1934. These forward looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or anticipated results, including those set forth,
above, in the section entitled "Risk Factors" and elsewhere in this
Prospectus. The following discussion and analysis should be read in
conjunction with the Company's financial statements and notes thereto included
in the section entitled "Financial Statements" in this Prospectus.
On December 15, 2005, we completed the disposition of all of the
outstanding capital stock of Marathon Healthcare Corporation, a newly formed
holding company, to Macdonald Tudeme and Marguerite Tudeme, the former
controlling shareholders of the Company. At the time of the disposition,
Marathon's assets included substantially all of the corporate names, business,
operations, assets, properties, intellectual properties, trademarks, service
marks, trade names, uniform resource locators, telephone numbers, and good
will of the Company and its subsidiaries (other than iTech and DCI). These
assets included all of the operations of the Company's former operating
subsidiaries M.T. Marketing Int. Corp. and Abundant Healthcare, Inc. The
financial results discussed in this section relate to our former operations
and, as a result, are not indicative of our current operations (which are
exclusively those of iTech and DCI) or our future financial results.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 2003
Revenues increased $912,999 to $2,072,236 for the year ended December
31, 2004, from $1,159,237 for the year ended December 31, 2003. The increase
in revenues was due to new business development activities, notably in the
"high tech" nursing practice, and the increased revenues as a result of the
Company's acquisitions of B.P. Senior Care, Inc. ("BP") and Abundant
Healthcare, Inc. ("Abundant").
Cost of revenues increased $628,481 to $1,521,353 for the year ended
December 31, 2004, from $892,872 for the year ended December 31, 2003. The
increase in cost of revenues was attributable to an increase in the number of
nurses and other workers the Company employs as result of the BP and Abundant
acquisitions.
Gross profit increased $284,518 to $550,883 for the year ended December
31, 2004, from $266,365 for the year ended December 31, 2003. The increase in
gross profit was attributable to increased revenues in connection with the
Company's acquisitions of BP and Abundant as well as organic business growth
during the year ended December 31, 2004.
Gross profit as a percentage of sales ("gross profit margin") was 26.6%
for the year ended December 31, 2004, as compared to 23.0% for the year ended
December 31, 2003. The increase in gross profit margin was attributable to the
Company focusing on profitability of its operations rather than volume and
making corresponding adjustments in the allocation of resources to maximize
profitability.
The Company's total expenses increased $3,233,168 to $3,596,493 for the
year ended December 31, 2004, as compared to total expenses of $363,325 for
the year ended December 31, 2003. The increase in expenses for the year ended
December 31, 2004 consisted of increases in salaries and wages of $345,300, to
$420,429 for the year ended December 31, 2004, compared to $75,129 for the
year ended December 31, 2003, increases in professional fees of $111,187, to
$189,089 for the year ended December 31, 2004, compared to $77,902 for the
year ended December 31, 2003, increases in depreciation of $8,227, to $32,147
for the year ended December 31, 2004, compared to $23,920 for the year ended
December 31, 2003, increases in interest expense of $104,501, to $117,368 for
the year ended December 31, 2004, compared to $12,867 for the year ended
December 31, 2004, increases in operating expenses of $275,703, to $449,210
for the year ended December 31, 2004, compared to $173,507 for the year ended
December 31, 2003. The Company's total expenses also included $1,705,304 of
consulting expenses, $119,519 of bad debt expense, and $563,427 of impairment
loss for the year ended December 31, 2004, which were not represented in the
year ended December 31, 2003.
For the year ended December 31, 2004, the Company had a net loss from
operations of $3,045,610, as compared to a net loss from operations of $96,960
for the year ended December 31, 2003. The increase in net loss from operations
was due to expenses associated with the Company's acquisitions of BP and
Abundant and the costs of being a publicly traded company including legal fees
and accountant fees in connection with the Company's public reporting
requirements.
36
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 2004
Service revenues for the three months ended September 30, 2005 were
$293,468. This is a decrease of approximately 34.3 percent over the revenues
of $446,452 realized for the three month period ended September 30, 2004. This
decrease in service revenues is generally attributable to the termination of
the operations of BP in June 2005.
Direct costs of revenues for the three months ended September 30, 2005
were $210,789, which is a decrease of $141,182 or approximately 40.1 percent
over the $351,971 in direct costs of revenues for the same period in 2004.
This decrease is generally attributable to the termination of the operations
of BP and managements efforts to reduce direct costs of revenues.
Based on the above, the Company realized a gross profit for the three
months ended September 30, 2005 of $82,679, versus a gross profit for the same
period in 2004 of $94,481. This reflects a decline in gross profit of
approximately 12.5 percent as a result of the termination of the operations of
BP in June 2005.
General and Administrative (G&A) operating expenses for the three month
period ended September 30, 2005 were $359,662. This is a decrease in G&A
expenses from the same period in 2004 of $66,474 or a decrease of
approximately 15.6 percent. This reduction is primarily attributable to
certain reductions in G&A expenses for the period in 2005, notably relating to
our acquisition of Abundant Nursing during the three month period ending
September 30, 2004, and the termination of the operations of BP in June 2005,
prior to the three month period ending September 30, 2005. Management believes
that the proportion of G&A expenses to revenues is also higher than is
optimal.
As a result, the Company had a net operating loss for the three months
ended September 30, 2005 of $276,983 compared to the operating loss
experienced for the three month period ended September 30, 2004 of $331,655.
Sustaining this level is generally related to the reduction in G&A expenses
for the current period.
The Company had other expenses of $92,195 for the three month period
ended September 30, 2005, versus $7,562 of other expenses for the same period
in 2004. Other expense for both periods consisted solely of interest expense,
and the increase in other expense is related to the increase in interest
expense related to the beneficial conversion feature of the secured
convertible notes issued in August 2004.
As a result, the net loss for the three month period ended September 30,
2005 was $369,178 versus a net loss of $339,217 for the three month period
ended September 30, 2004.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2004
Service revenues for the nine months ended September 30, 2005 were
$1,395,955. This is an increase of approximately 5.1 percent over the revenues
of $1,327,783 realized for the nine month period ended September 30, 2004.
This increase in service revenues is also generally attributable to the
inclusion of revenue from Abundant, which was an acquisition made in the last
half of 2004 and certain marketing initiatives undertaken by the Company.
Direct costs of revenues for the nine month period ended September 30,
2005 were $1,108,733, which is an increase of approximately 9.1 percent over
the $1,016,580 in direct costs of revenues for the same period in 2004. Much
of this increase relates to the increase in revenues achieved and to
additional direct labor and overhead costs. Management also believes that the
proportion of direct costs of revenues to revenues is higher than is prudent
and is assessing various steps to reduce the portion of direct costs to
revenues.
Based on the above, the Company realized a gross profit for the nine
months ended September 30, 2005 of $287,222, versus a gross profit for the
same period in 2004 of $311,203. This reflects a decrease in gross profit of
approximately 7.7 percent. The decrease in gross profit was mainly
attributable to the termination of the operations of BP.
General and Administrative ("G&A") operating expenses for the nine
months ended September 30, 2005 were $709,581. This is a decrease in G&A
expenses from the same period in 2004 of $410,143 or a decrease of
approximately 36.6 percent. This reduction is primarily attributable to
significant reductions in G&A expenses during the nine month period ending
September 30, 2005, and higher than normal G&A expenses for the nine month
period ended September 30, 2004, relating to a series of one-time expenses and
due diligence relating to our acquisition of Abundant. Management believes
that the proportion of G&A expenses to revenues is also higher than is
optimal. As with direct costs of services, management is aggressively
assessing options for reducing this ratio, which we believe is a priority
item.
37
As a result, the Company had a net operating loss for the nine months
ended September 30, 2005 of $422,359. This is a significant reduction in net
operating loss from the same period in 2004, which operating loss was
$808,521. The primary reason for this reduction is the reduction realized in
G&A expenses between the periods, as described above.
The Company had other expenses of $296,937 for the nine month period
ending September 30, 2005, versus $12,756 of other expenses for the period in
2004. Other expenses for the nine month period ending September 30, 2005,
included $14,581 of loss on disposal of assets and $282,356 of interest
expense in connection with the August 2004 secured convertible notes.
As a result, the net loss for the nine month period ended September 30,
2005 was $719,296. This is an approximately 12.4 percent improvement over the
loss of $821,277 which we had for the nine month period ended September 30,
2004.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2005, the Company had total current assets of
$242,911, which consisted of accounts receivable net of $217,953 and other
current assets of $24,958. Total assets for September 30, 2005 were $357,069
and consisted of current assets of $242,911 and property and equipment, net of
$114,158. As of December 31, 2004, current assets were $455,466, and consisted
of accounts receivable, net of $404,778 and other current assets of $50,688,
and total assets were $570,620, which included property and equipment, net of
$115,154. Much of the reduction in assets from September 30, 2005 compared to
December 31, 2004, was due to a decrease in account receivable.
Current liabilities as of September 30, 2005 were $872,899 versus
$647,450 as of December 31, 2004. Current liabilities consisted of bank
overdraft of $11,152; accounts payable and accrued expenses of $473,078; notes
payable, current of $268,334; notes payable related parties of $116,335; and
leases payable, current of $4,000.
Total liabilities as of September 30, 2005 were $1,521,046, consisting
of the $872,899 of current liabilities and $648,147 of long term debt
consisting of $876,401 of notes payable and $912 of leases payable, offset by
beneficial conversion feature of ($229,166), versus total liabilities of
$1,114,981 as of December 31, 2004.
The Company had negative net working capital of $629,988 as of September
30, 2005 and a stockholder's deficit as of September 30, 2005 of $1,163,977
compared with negative net working capital of $191,984 and a stockholder's
deficit of $544,361 as of December 31, 2004.
Net cash provided by operating activities for the nine months ended
September 30, 2005 was $33,929, compared to net cash used in operations for
the same period in 2004 of $931,065. Net cash provided by operating
activities for the nine months ended September 30, 2005, consisted of $719,296
of net loss; $28,855 of depreciation; $14,581 of loss on disposal of assets;
$187,500 of beneficial conversion interest; $99,680 of common stock issued for
services rendered; accounts receivable of $186,825; other current assets of
$25,730; and accounts payable and accrued liabilities of $210,054.
Net cash used in financing activities for the nine months ended
September 30, 2005 was $33,929. Net cash provided by financing activities for
the nine months ended September 30, 2004 was $897,991. Net cash used in
financing activities for the nine months ended September 30, 2005 included
payments made on notes payable of ($37,303); payments made on capital leases
of ($7,348); and proceeds received on related party notes payable of $10,722.
The primary reason for the change from $897,991 in net cash provided by
financing activities to the ($33,929) net cash used in financing activities
was due to proceeds received in connection with the August 2004 secured
convertible notes.
38
The Company's consolidated financial statements are prepared using the
accrual method of accounting in accordance with GAAP, and have been prepared
on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. The Company has
an accumulated deficit of $3,869,219 at September 30, 2005. Management has
taken various steps to revise its operating and financial requirements, which
it believes will be sufficient to provide the Company with the ability to
continue its operations for the next twelve months.
In view of the matters described above, recoverability of a major
portion of the recorded asset amounts shown in the accompanying consolidated
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to raise additional capital,
obtain financing and to succeed in its future operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
On November 4, 2005, we entered into a securities purchase agreement
with the four accredited investors, for the sale of secured convertible notes
having an aggregate principal amount of $3,000,000, an 8% annual interest rate
(payable quarterly), and a term of three years. We also agreed to sell
warrants to purchase up to an aggregate of 15,000,000 shares of our Common
Stock at $0.10 per share. The four accredited investors, AJW Partners, LLC,
AJW Qualified Partners, LLC, AJW Offshore, Ltd. and New Millennium Partners
II, LLC subscribed for 11.9%, 32.6%, 54.0% and 1.5%, respectively, of the
total offering. Each accredited investor purchased, or will purchase, such
percentage of each closing under the 2005 securities purchase agreement.
As of December 15, 2005, we had issued under the 2005 securities
purchase agreement (and a August 2004 securities purchase agreement):
. $1,800,000 aggregate principal amount of secured convertible notes,
. Warrants to purchase 700,000 shares of our Common Stock at $0.45 per
shares, and
. Warrants to purchase 6,500,000 shares of our Common Stock at $0.10
per share.
We will issue and sell an additional $850,000 principal amount of secured
convertible notes and warrants to purchase 4,250,000 shares of our Common
Stock at $0.10 per share to the investors five days following the filing with
the Securities and Exchange Commission of the registration statement of which
this Prospectus is a part. The investors are required to purchase an
additional $1,050,000 principal amount of secured convertible notes and
warrants to purchase 4,250,000 shares of our Common Stock at $0.10 per share
five days following the date that the registration statement is declared
effective by the Securities and Exchange Commission and if other conditions
are satisfied, including: (i) the Company's representations and warranties
contained in the 2005 securities purchase agreement being true and correct in
all material respects on the date when made and as of the date of such
purchase; (ii) the Company having performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
the 2005 agreement; (iii) there being no litigation, statute, rule,
regulation, executive order, decree, ruling or injunction that has been
enacted, entered, promulgated or endorsed by or in any court or government
authority of competent jurisdiction or any self-regulatory organization having
requisite authority which prohibits the transactions contemplated by the 2005
agreement; (iv) no event having occurred which could reasonably be expected to
have a material adverse effect on the Company; and (v) the shares of Common
Stock issuable upon conversion of the secured convertible notes and exercise
of the warrants having been authorized for quotation on the OTC Bulletin Board
and trading in our Common Stock on the OTC Bulletin Board having not been
suspended by the Securities and Exchange Commission or the OTC Bulletin Board.
The secured convertible notes are convertible into our Common Stock, at
the selling stockholders' option, at the lower of (i) $0.01 or (ii) 50% of
the average of the three lowest intraday trading prices for the Common Stock
on a principal market for the 20 trading days before but not including the
conversion date. Accordingly, there is in fact no limit on the number of
shares into which the notes may be converted. As of December 15, 2005, the
average of the three lowest intraday trading prices for our Common Stock
during the preceding 20 trading days as reported on the OTC Bulletin Board was
$0.0026 and, therefore, the conversion price for the secured convertible notes
39
was $0.0013. Based on this conversion price, the $3,700,000 secured
convertible notes, excluding interest, were convertible into 2,846,153,846
shares of our Common Stock. AJW Partners, LLC, AJW Qualified Partners, LLC,
AJW Offshore, Ltd. and New Millennium Partners II, LLC have contractually
agreed to restrict their ability to convert or exercise their warrants and
receive shares of our Common Stock such that the number of shares of Common
Stock held by them and their affiliates after such conversion or exercise does
not exceed 4.99% of the then issued and outstanding shares of Common Stock.
Assuming the sale of all the secured convertible notes to the investors,
we will owe approximately $3,700,000 to such investors, not including any
accrued interest and owe the former shareholders of DCI an additional $200,000
in connection with the purchase of DCI, an aggregate of approximately $122,228
to our Director, Keith Moore (pursuant to two Working Capital Line of
Credits), $36,285 to David Walters our Chief Executive Officer and Director
and $36,285 to Mr. Moore for accrued but unpaid salaries for in connection
with the operations of iTech and $49,500 to Mr. Moore for accrued but unpaid
salaries in connection with the operations of a subsidiary of iTech.
Additionally, we still owe approximately $211,500 under a promissory note with
Abundant, which we have agreed to guarantee as part of the disposition of
Marathon, and approximately $212,000 under a SBA loan and line of credit,
which was assumed by Marathon.
On November 8, 2005, iTech and DCI entered into a factoring and security
agreement to sell accounts receivables to Systran Financial Services
Corporation. The purchase price for each account sold is the face amount of
the account less a discount of 1.5%. All accounts sold are with recourse by
Systran. Systran may defer making payment to iTech of a portion of the
purchase price payable for all accounts purchased which have not been paid up
to 10.0% of such accounts (reserve).
As part of our focus on growing profitable operations, we decided to
discontinue and dispose of certain operations which we determined did not
demonstrate suitable growth or profitability prospects. On December 15,
2005, we completed the disposition of all of the outstanding capital stock of
Marathon Healthcare Corporation, a newly formed holding company, to Macdonald
Tudeme and Marguerite Tudeme, the former controlling shareholders of the
Company. At the time of the disposition, Marathon's assets included
substantially all of the corporate names, business, operations, assets,
properties, intellectual properties, trademarks, service marks, trade names,
uniform resource locators, telephone numbers, and good will of the Company and
its subsidiaries (other than iTech and DCI). These assets included all of
the operations of the Company's former operating subsidiaries MT and Abundant.
In exchange for all of the outstanding capital stock of Marathon and a cash
payment to the Tudemes of $80,442.32, the Company received from the Tudemes
35,691,200 shares of the Company's Common Stock. In connection with the
disposition of Marathon, we also (a) assumed and released the Tudemes from
certain liabilities and (b) pledged to Marathon 20,000,000 shares of our
Common Stock as collateral to secure the performance and payment of a
promissory note in the amount of $257,038 payable to Lisa Stern originally
entered into as part of the Company's purchase of a former operating
subsidiary. If we fail to pay any principal of or interest on the note when
due, we will be in default of our obligations and Marathon will be able to
retain and sell the pledged Common Stock to satisfy our obligations.
We can make no assurances that will have sufficient funding to repay the
above amounts owed as they become due; however, we believe that because of the
sale of the secured convertible notes to the selling stockholders and the
factoring and security agreement with Systran our current cash position is
sufficient to meet our capital expenditures and working capital requirements
for the near term. Investors should keep in mind, however that the growth and
change of the market make it difficult for us to predict future liquidity
requirements with certainty and our forecast is based upon certain
assumptions, which may differ from actual future outcomes. Over the longer
term, we must successfully execute our plans to increase revenue and income
streams that will generate significant positive cash flow if we are to sustain
adequate liquidity without impairing growth or requiring the infusion of
additional funds from external sources. Additionally, a major expansion, such
as would occur with the acquisition of a major new subsidiary, might also
require external financing that could include additional debt or capital.
There can be no assurance that additional financing, if required, will be
available on acceptable terms, if at all.
The Company does not have any commitments or identified sources of
additional capital from third parties, other than the commitment from the
selling stockholders and Systran mentioned above, or from its officers,
directors or majority shareholders. There is no assurance that additional
financing will be available on favorable terms, if at all. If the Company is
unable to raise such additional financing, it would have a materially adverse
effect upon the Company's ability to implement its business plan and may cause
the Company to curtail or scale back its current operations.
We may elect to raise additional capital in the future, from time to
time, through equity or debt financings in order to capitalize on business
opportunities and market conditions and to insure the continued marketing of
current service offerings together with development of new services. There can
be no assurance that we can raise additional financing with favorable terms.
40
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES UNAUDITED PRO-FORMA CONSOLIDATED
FINANCIAL STATEMENTS
<CAPTIONS>
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES
Combined Pro Forma Balance Sheet
September 30, 2005
ASSETS
------
MT Ultimate
Healthcare
Corp. iTechexpress, Pro Forma
(Parent) Inc. DCI Adjustments
September 30, September 30, September 30, Increase Pro Forma
2005 2005 2005 (Decrease) Combined
------------- -------------- ------------- ------------- -------------
(Unaudited)
<s> <c> <c> <c> <c> <c>
CURRENT ASSETS
Cash and cash equivalents $ - $ 120 $ - $ - $ 120
Accounts receivable, net 217,953 48,017 1,145,912 - 1,411,882
Other current assets 24,958 - - - 24,958
------------- -------------- ------------- ------------- -------------
Total Current Assets 242,911 48,137 1,145,912 - 1,436,960
------------- -------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT, Net 114,158 1,474 - - 115,632
------------- -------------- ------------- ------------- -------------
OTHER ASSETS
Deferred income taxes - 141,879 6,032 - 147,911
Goodwill - - - 1,313,702 (2) 1,313,702
------------- -------------- ------------- ------------- -------------
Total Other Assets - 141,879 6,032 1,313,702 1,461,613
------------- -------------- ------------- ------------- -------------
TOTAL ASSETS $ 357,069 $ 191,490 $ 1,151,944 $ 1,313,702 $ 3,014,205
============= ============== ============= ============= =============
41
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES
Combined Pro Forma Balance Sheet (Continued)
September 30, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
MT Ultimate
Healthcare
Corp. iTechexpress, Pro Forma
(Parent) Inc. DCI Adjustments
September 30, September 30, September 30, Increase Pro Forma
2005 2005 2005 (Decrease) Combined
------------- -------------- ------------- ------------- -------------
(Unaudited)
<s> <c> <c> <c> <c> <c>
CURRENT LIABILITIES
Bank overdraft $ 11,152 $ - $ - $ - $ 11,152
Accounts payable and
accrued expenses 473,078 349,399 455,644 (65,000)(2) 1,213,121
Notes payable, related parties 116,335 - - - 116,335
Leases payable, current 4,000 - - - 4,000
Loans payable to shareholder - 23,300 - - 23,300
Notes payable, current 268,334 - 210,002 - 478,336
------------- -------------- ------------- ------------- -------------
Total Current Liabilities 872,899 372,699 665,646 (65,000) 1,846,244
------------- -------------- ------------- ------------- -------------
LONG-TERM LIABILITIES
Notes payable 876,401 - - 1,905,000 (2) 2,781,401
Beneficial conversion feature (229,166) - - - (229,166)
Leases payable 912 - - - 912
------------- -------------- ------------- ------------- -------------
Total Long-Term Liabilities 648,147 - - 1,905,000 2,553,147
------------- -------------- ------------- ------------- -------------
Total Liabilities 1,521,046 372,699 665,646 1,840,000 4,399,391
------------- -------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value
$0.001 per share; 898,333,333
shares issued and outstanding 70,000 1,000 200,000 627,333 (1,2) 898,333
Additional paid-in capital 2,635,242 - 182,944 (4,879,496)(1,2) (2,061,310)
Accumulated equity (deficit) (3,869,219) (182,209) 103,354 3,725,865 (1,2) (222,209)
------------- -------------- ------------- ------------- -------------
Total Stockholders'
Equity (Deficit) (1,163,977) (181,209) 486,298 (526,298) (2,283,519)
------------- -------------- ------------- ------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 357,069 $ 191,490 $ 1,151,944 $ 1,313,702 $ 3,014,205
============= ============== ============= ============= ==============
42
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES
Combined Pro Forma Statements of Operations
MT Ultimate
Healthcare
Corp. iTechexpress,
(Parent) Inc. DCI
For the For the For the Pro Forma
Period Ended Period Ended Period Ended Adjustments
September 30, September 30, September 30, Increase Pro Forma
2005 2005 2005 (Decrease) Combined
------------- -------------- ------------- ------------- -------------
(Unaudited)
<s> <c> <c> <c> <c> <c>
REVENUES
Service revenues $ 1,395,955 $ 302,144 $ 5,303,853 $ - $ 7,001,952
Management fee from affiliates - 47,422 - - 47,422
------------- -------------- ------------- ------------- -------------
Total Revenues 1,395,955 349,536 5,303,853 - 7,049,344
COST OF REVENUES 1,108,733 200,026 3,865,238 - 5,173,997
------------- -------------- ------------- ------------- -------------
GROSS MARGIN 287,222 149,510 1,438,615 - 1,875,347
------------- -------------- ------------- ------------- -------------
OPERATING EXPENSES
General and administrative 709,581 100,849 112,575 - 923,005
Bad debt expense - 10,318 - - 10,318
Compensation and fringe benefits - 302,456 805,140 - 1,107,596
Professional fees - - 45,099 40,000 (2) 85,099
Management fee - related party - - 94,500 - 94,500
Sales and marketing - - 900 - 900
------------- -------------- ------------- ------------- -------------
Total Operating Expenses 709,581 413,623 1,058,214 40,000 2,221,418
------------- -------------- ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (422,359) (264,113) 380,401 (40,000) (346,071)
------------- -------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (282,356) - (103,713) - (386,069)
Loss on disposal of assets (14,581) - - - (14,581)
------------- -------------- ------------- ------------- -------------
Total Other Income (Expense) (296,937) - (103,713) - (400,650)
------------- -------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (719,296) (264,113) 276,688 (40,000) (746,721)
------------- -------------- ------------- ------------- -------------
(BENEFIT) PROVISION FOR
INCOME TAXES - 110,927 (116,209) - (5,282)
------------- -------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (719,296) $ (153,186) $ 160,479 $ (40,000) $ (752,003)
============= ============== ============= ============= =============
BASIC LOSS PER COMMON SHARE
(Note 1) $ (0.01) N/A N/A $ (0.01)
============= ============== ============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 63,376,671 N/A N/A 63,376,671
============= ============== ============= =============
43
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES
Combined Pro Forma Statements of Operations
MT Ultimate
Healthcare
Corp. iTechexpress,
(Parent) Inc. DCI
For the For the For the Pro Forma
Year Ended Year Ended Year Ended Adjustments
December 31, December 31, December 31, Increase Pro Forma
2004 2004 2004 (Decrease) Combined
------------- -------------- ------------- ------------- -------------
(Unaudited)
<s> <c> <c> <c> <c> <c>
REVENUES
Service revenues $ 2,072,236 $ 391,412 $ 4,069,580 $ - $ 6,533,228
Management fee from affiliates - 113,825 - - 113,825
------------- -------------- ------------- ------------- -------------
Total Revenues 2,072,236 505,237 4,069,580 - 6,647,053
COST OF REVENUES 1,521,353 220,383 3,545,591 - 5,287,327
------------- -------------- ------------- ------------- -------------
GROSS MARGIN 550,883 284,854 523,989 - 1,359,726
------------- -------------- ------------- ------------- -------------
OPERATING EXPENSES
General and administrative 449,210 87,711 144,328 - 681,249
Bad debt expense 119,519 53,136 - - 172,655
Compensation and fringe benefits 420,429 96,745 - - 517,174
Depreciation and amortization 32,147 4,572 - - 36,719
Professional fees and consulting 1,894,393 6,807 - 40,000 (2) 1,941,198
Management fee - related party - - 99,000 - 99,000
------------- -------------- ------------- ------------- -------------
Total Operating Expenses 2,915,698 248,971 243,328 40,000 3,447,997
------------- -------------- ------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS (2,364,815) 35,883 280,661 (40,000) (2,088,271)
------------- -------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest expense (117,368) - (92,991) - (210,359)
Impairment loss (563,427) - - - (563,427)
Other income (expense) - (3,943) 2,321 - (1,622)
------------- -------------- ------------- ------------- -------------
Total Other Income (Expense) (680,795) (3,943) (90,670) - (775,408)
------------- -------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
INCOME TAXES (3,045,610) 31,940 189,991 (40,000) (2,863,679)
------------- -------------- ------------- ------------- -------------
(BENEFIT) PROVISION FOR
INCOME TAXES - (11,513) (79,944) - (91,457)
------------- -------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (3,045,610) $ 20,427 $ 110,047 $ (40,000) $ (2,955,136)
============= ============== ============= ============= =============
BASIC LOSS PER COMMON SHARE
(Note 1) $ (0.06) N/A N/A $ (0.05)
============= ============== ============= =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 53,153,166 N/A N/A 53,153,166
============= ============== ============= =============
44
MT ULTIMATE HEALTHCARE CORP. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
September 30, 2005
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The unaudited pro-forma consolidated financial statements give effect to the
acquisition by MT Ultimate Healthcare Corp. of iTechexpress, Inc. ("iTech"),
pursuant to a reverse takeover effective November 4, 2005, and the subsequent
acquisition of Drug Consultants, Inc. ("DCI") by iTech effective November 7,
2005. The unaudited pro forma consolidated financial statements have been
prepared by management using the accounting principles disclosed in the
consolidated financial statements of MT Ultimate Healthcare Corp. as of and
for the period ended September 30, 2005 as if the acquisition had occurred on
January 1, 2005. The unaudited pro forma consolidated statement of operations
for the year ended December 31, 2004 is based on the unaudited financial
statements as if the acquisition had occurred on January 1, 2004.
The unaudited pro forma combined financial statements are not necessarily
indicative of the results of operations that would have been realized for the
period presented, nor do they purport to project the results of operations for
any future periods. The unaudited pro forma financial statements should be
read in conjunction with the consolidated financial statements of MT Ultimate
Healthcare Corp. as of and for the periods ended December 31, 2004 and
September 30, 2005.
NOTE 2 - ASSUMPTIONS AND ADJUSTMENTS
Reverse Takeover - On November 4, 2005, MT Ultimate Healthcare Corp. and
iTechexpress, Inc. and the former iTech shareholders entered into a Share
Exchange and Reorganization Agreement whereby iTech became a wholly-owned
subsidiary of the Company. As part of the transaction, The Company acquired
100% of the issued and outstanding shares of iTech in exchange for 305,000,000
newly issued shares of the Company's Common Stock and the promise to issue an
additional 523,333,333 shares at such time as the Company has available
authorized shares, which is expected to occur in the first quarter of 2006.
As the number of shares issued represented approximately 92% of the
outstanding Common Stock of the Company after issuance, the transaction has
been accounted for as a reverse takeover of the Company by the shareholders of
iTech.
Purchase Transaction - On November 7, 2005, iTech entered into a Stock
Purchase Agreement with Drug Consultants, Inc., whereby DCI became a
wholly-owned subsidiary of iTech. As part of the transaction, iTech purchased
all of the outstanding shares of DCI from the former shareholder of DCI for a
purchase price of $1,800,000, of which $1,600,000 was paid at the closing and
$200,000 shall be paid pursuant to a Secured Promissory Note. The Secured
Promissory Note is due in one payment of principal together with accrued but
unpaid interest (accruing at the rate of seven percent (7%) per annum) on or
before January 6, 2006. The Secured Promissory Note is secured by a stock
pledge agreement, whereby iTech pledged to the former DCI shareholder 51% of
the stock of DCI held by iTech to secure the full and prompt payment and
performance by iTech of the Secured Promissory Note. Additionally, any unpaid
amount of the Secured Promissory Note if not paid when due, will bear interest
at 12% per annum.
NOTE 3 - PRO FORMA ADJUSTMENTS
The unaudited pro forma financial statements incorporate the following
adjustments:
45
Adjustment 1
------------
Additional Paid-in Capital 4,696,552
Common Stock 1,000
Common Stock 828,333
Accumulated Deficit 3,869,219
To record the issuance of 828,333,333 shares of MT Ultimate Healthcare
Corp. issued to acquire 100% of the outstanding common stock of iTechexpress,
Inc., effective November 4, 2005, to eliminate the common stock of
iTechexpress, Inc. and the accumulated deficit of MT Ultimate Healthcare Corp.
Adjustment 2
------------
Accounts Payable 65,000
Professional Fees 40,000
Common Stock 200,000
Additional Paid-in Capital 182,944
Accumulated Deficit 103,354
Goodwill 1,313,702
Note Payable 200,000
Note Payable 1,705,000
To record the purchase of Drug Consultants, Inc. for $1,800,000,
effective November 7, 2005.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared
in accordance with accounting principals generally accepted in the
United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of any contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to uncollectible receivables, investment values,
income taxes and contingencies. We base our estimates on various assumptions
that we believe to be reasonable under the circumstances, the results of
which form the basis for making judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements:
Federal Income Tax. The Company has adopted the provisions of Financial
Accounting Standards Board Statement No. 109, Accounting for Income Taxes. The
Company accounts for income taxes pursuant to the provisions of the Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes",
which requires an asset and liability approach to calculating deferred income
taxes. The asset and liability approach requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets
and liabilities. The Company has incurred an NOL, however, because there is
no assurance of recovery of the NOL, it has been fully offset and the Company
does not have a deferred tax asset with respect to any portion thereof. The
valuation allowance will be evaluated, considering positive and negative
evidence about whether the deferred tax asset will be realized. The allowance
will either be increased or reduced. A reduction could result in the complete
elimination of the allowance if positive evidence indicates that the value of
the deferred tax assets is no longer impaired and the allowance is no longer
required.
46
Use of Estimates. The 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 on 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.
Revenue. The Company's revenue is considered realized when the earnings
process is complete and an exchange takes place. In the Company's case, this
is when staffing and homecare services are rendered to its clients. The
volume of sales and revenues are comparatively small for the Company and
therefore, the matching of revenues and expenses in a given period can easily
be achieved without the need for estimates.
Accounting Method. The Company's financial statements are prepared
using the accrual method of accounting. Revenues are recognized when earned
and expenses when incurred. Fixed assets are stated at cost. Depreciation and
amortization using the straight-line method for financial reporting purposes
and accelerated methods for income tax purposes.
Cash and Cash Equivalents. The Company considers all highly liquid debt
instruments with a maturity of three months or less at the time of purchase to
be in cash equivalents. Cash and cash equivalents consist of checking accounts
and money market funds.
Fair Value of Financial Instruments. The carrying amounts of financial
instruments including cash and cash equivalents, accounts receivable and
payable, accrued and other current liabilities and current maturities of
long-term debt approximate fair value due to their short maturity.
DESCRIPTION OF PROPERTY
-----------------------
The Company's executive offices are located Irvine, California where the
Company, through iTech, subleases, on a month to month basis approximately 600
square feet of space. The Company has no written lease for this office space.
The current monthly lease commitment is $600.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
---------------------------------------------
On April 27, 1999, our Director, Keith Moore entered into a Working
Capital Line of Credit agreement, with iTech, on January 1, 2001, Mr. Moore
entered into a Working Capital Line of Credit agreement with iTech's wholly
owned subsidiary, Success Development Group, Inc., a Nevada corporation
("SDG"), and on February 1, 2005, our Chief Executive Officer and Director,
David Walters entered into a Working Capital Line of Credit agreement, with
iTech (each a "Line of Credit" and collectively the "Lines of Credit").
Mr. Moore's Line of Credit with iTech states that iTech shall pay him
the amount owing under the Line of Credit (up to $250,000) on December 31,
2005 plus any interest on the amounts outstanding as of the date the Line of
Credit was entered into at the rate of 10% per annum. Interest on the Line of
Credit is payable quarterly and becomes part of the principal amount of the
Line of Credit if unpaid at the end of each quarter. The total amount
outstanding under Mr. Moore's line of credit as of November 15, 2005 was
$82,728. In the event of default under the Line of Credit, which includes the
failure of iTech to pay the Line of Credit when due, iTech's filing for
bankruptcy, or the deterioration of the financial condition of iTech causing
Mr. Moore to deem iTech insecure, the amount of unpaid principal and interest
shall bear interest at the rate of 13% per annum until such time as it is
paid. The Line of Credit may be extended or renewed by the mutual agreement
of iTech and Mr. Moore for any reason at any time.
47
Mr. Moore's Line of Credit with SDG states that SDG shall pay him the
amount owing under the Line of Credit (up to $250,000) on December 31, 2005,
plus any interest on the amounts outstanding as of the date the Line of Credit
was entered into at the rate of 10% per annum. Interest on the Line of Credit
is payable quarterly and becomes part of the principal amount of the Line of
Credit if unpaid at the end of each quarter. The total amount outstanding
under Mr. Moore's line of credit as of November 15, 2005 was $29,500. In the
event of default under the Line of Credit, which includes the failure of SDG
to pay the Line of Credit when due, SDG's filing for bankruptcy, or the
deterioration of the financial condition of SDG causing Mr. Moore to deem SDG
insecure, the amount of unpaid principal and interest shall bear interest at
the rate of 13% per annum until such time as it is paid. The Line of Credit
may be extended or renewed by the mutual agreement of SDG and Mr. Moore for
any reason at any time.
Mr. Walters' Line of Credit with iTech states that iTech shall pay him
the amount owing under the Line of Credit (up to $250,000) on December 31,
2006, plus any interest on the amounts outstanding as of the date the Line of
Credit was entered into at the rate of 10% per annum. Interest on the Line of
Credit is payable quarterly and becomes part of the principal amount of the
Line of Credit if unpaid at the end of each quarter. The total amount
outstanding under Mr. Walters' Line of Credit as of the date of November 15,
2005 was $-0-. In the event of default under the Line of Credit, which
includes the failure of iTech to pay the Line of Credit when due, iTech's
filing for bankruptcy, or the deterioration of the financial condition of
iTech causing Mr. Walters to deem iTech insecure, the amount of unpaid
principal and interest shall bear interest at the rate of 13% per annum until
such time as it is paid. The Line of Credit may be extended or renewed by the
mutual agreement of iTech and Mr. Walters for any reason at any time.
Both Mr. Walters and Mr. Moore entered into Independent Contractor
Agreements with iTech on February 1, 2005 (each a "Contractor Agreement" and
collectively the "Contractor Agreements"). Mr. Moore's Contractor Agreement
provides for him to serve iTech in the capacity of Secretary and Director and
Mr. Walters' Contractor Agreement provides for him to serve iTech in the
capacity of Chief Executive Officer. The Contractor Agreements shall
terminate on February 1, 2007, unless renewed in writing by the parties.
Either of the Contractor Agreements may be terminated upon the breach of a
term of either Contractor Agreement, which breach remains uncured for thirty
(30) days or by either party, for any reason with thirty (30) days written
notice. The Contractor Agreements contain confidentiality clauses and work
for hire clauses. The Contractor Agreements provide that neither Mr. Walters
nor Mr. Moore are employees of iTech. Mr. Walters and Mr. Moore are entitled
to be paid $10,000 per month under the Contractor Agreements. As of December
5, 2005, both Mr. Walters and Mr. Moore have accrued $36,285 each of payments
under such Contractor Agreements.
The Company anticipates entering into an agreement with executive
management services with a management company owned by the Company's Chief
Executive Officer and Director, David Walters and its Director, Keith Moore.
In November 2005, the Company agreed to issue an aggregate of
745,500,000 shares of common stock, to two entities, 372,750,000 shares to MEL
Enterprises, Ltd., beneficially owned by Keith Moore, a Director of the
Company ("MEL") and 372,750,000 shares to Monarch Bay Capital Group, LLC,
beneficially owned by the Executive Vice President of the Company and a
Director, David Walters ("Monarch"), in connection with the Company's
acquisition of iTech. The Company will issue an aggregate of an additional
274,500,000 shares of common stock to the two entities, 137,250,000 to MEL and
137,250,000 to Monarch, with the remaining shares to be issued after such time
as the Company has available authorized common stock.
We have entered into an indemnification agreement with each of Mr.
Walters and Mr. Moore. We will indemnify them to the fullest extent permitted
by law if they become a party to or witness or other participant in, or are
threatened to be made a party to or witness or other participant in, any
threatened, pending or completed claim by reason of (or arising in part out
of) any event or occurrence related to the fact that they are or were a
director, officer, employee, agent or fiduciary of ours, or any subsidiary of
ours, or they are or were serving at our request as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise, or by reason of any action or inaction on
their part while serving in such capacity against any and all expenses,
judgments, fines, penalties and amounts paid in settlement and any federal,
state, local or foreign taxes imposed on them as a result of the actual or
deemed receipt of any indemnification payments made by us to or on their
behalf. We are entitled to reimbursement of any advance indemnification
payments that we make to or on their behalf if, when and to the extent that a
disinterested director, group of disinterested directors or independent legal
counsel determines that they would not be permitted to be so indemnified under
applicable law. We are not obligated to indemnify them for the following:
48
. Acts, omissions or transactions for which they are prohibited from
receiving indemnification under applicable law.
. Claims initiated or brought voluntarily by them and not by way of
defense, except for claims brought to establish or enforce a right to
indemnification or in specific cases if our Board of Directors has
approved the initiation or bringing of such claim, or as otherwise
required under the Nevada Revised Statutes, regardless of whether they
ultimately are determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
. Any proceeding instituted by them to enforce or interpret their
indemnification agreement, if a court of competent jurisdiction
determines that each of the material assertions made by either of them
in such proceeding was not made in good faith or was frivolous.
. Violations of Section 16(b) of the Exchange Act or any similar successor
statute.
As part of our focus on growing profitable operations, we decided to
discontinue and dispose of certain operations which we determined did not
demonstrate suitable growth or profitability prospects. On December 15,
2005, we completed the disposition of all of the outstanding capital stock of
Marathon Healthcare Corporation ("Marathon") to Macdonald Tudeme and
Marguerite Tudeme, the former controlling shareholders of the Company. At
the time of the disposition, Marathon's assets included substantially all of
the corporate names, business, operations, assets, properties, intellectual
properties, trademarks, service marks, trade names, uniform resource locators,
telephone numbers, and good will of the Company and its subsidiaries (other
than iTech and DCI). These assets included all of the operations of the
Company's former operating subsidiaries MT and Abundant Healthcare, Inc. In
exchange for all of the outstanding capital stock of Marathon and a cash
payment to the Tudemes of $80,442.32, the Company received from the Tudemes
35,691,200 shares of the Company's Common Stock. In connection with the
disposition of Marathon, we also (a) assumed and released the Tudemes from
certain liabilities and (b) pledged to Marathon 20,000,000 shares of our
Common Stock as collateral to secure the performance and payment of a
promissory note in the amount of $257,038 payable to Lisa Stern originally
entered into as part of the Company's purchase of a former operating
subsidiary. If we fail to pay any principal of or interest on the note when
due, we will be in default of our obligations and Marathon will be able to
retain and sell the pledged Common Stock to satisfy our obligations.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------
"Bid" and "asked" offers for the common stock are listed on the NASDAQ
OTC-Bulletin Board published by the National Quotation Bureau, Inc. The
Company's common stock began regular trading during the fiscal year ended
December 31, 2003. The trading symbol for the common stock was "JAVA" and was
changed to "MTUH" in connection with the Company's name change and an 80 to
one forward stock split in September 2003. As a result of a one to 4 reverse
stock split that also occurred in September 2003, the trading symbol was later
changed to the current symbol, "MTHC".
49
The following table sets forth the high and low bid prices for the
Company's common stock for the periods indicated as reported by the NASDAQ
OTC-Bulletin Board. The quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
Bid Prices
Quarter Ended High Low
------------------- ------ ------
September 30, 2005 $0.04 $0.005
June 30, 2005 $0.06 $0.003
March 31, 2005 $0.17 $0.01
December 31, 2004 $0.30 $0.16
September 30, 2004 $0.90 $0.28
June 30, 2004 $0.60 $0.51
March 31, 2004 $1.05 $0.88
December 31, 2003 $1.05 $1.05
September 30, 2003 $1.50 $1.43
There were 30 holders of record of the common stock as of December 15,
2005. The Company has never paid a cash dividend on its common stock and does
not anticipate the payment of a cash dividend in the foreseeable future. The
Company intends to reinvest in its business operations any funds that could be
used to pay a cash dividend. The Company's common stock is considered a
"penny stock" as defined in the Commission's rules promulgated under the
Exchange Act. In general, a security which is not quoted on NASDAQ or has a
market price of less than $5.00 per share where the issuer does not have in
excess of $2,000,000 in net tangible assets (none of which conditions the
Company meets) is considered a penny stock. The Commission's rules regarding
penny stocks impose additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors (generally persons with net worth in excess of $1,000,000
or an annual income exceeding $200,000 or $300,000 jointly with their spouse).
For transactions covered by the rules, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Thus the Rules affect
the ability of broker-dealers to sell the Company's shares should they wish to
do so because of the adverse effect that the Rules have upon liquidity of
penny stocks. Unless the transaction is exempt under the Rules, under the
Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
broker-dealers effecting customer transactions in penny stocks are required
to provide their customers with (i) a risk disclosure document; (ii)
disclosure of current bid and ask quotations if any; (iii) disclosure of the
compensation of the broker-dealer and its sales personnel in the transaction;
and (iv) monthly account statements showing the market value of each penny
stock held in the customer's account. As a result of the penny stock rules
the market liquidity for the Company's securities may be severely adversely
affected by limiting the ability of broker-dealers to sell the Company's
securities and the ability of purchasers of the securities to resell them.
EXECUTIVE COMPENSATION
----------------------
SUMMARY COMPENSATION TABLE(1)
Annual Compensation
--------------------
Other Annual
Name & Principal Position Year Salary ($) Bonus ($) Compensation
- ------------------------- ------- -------------- ----------- -------------
David Walters,(2) 2005 $ 65,000 $ - $ -
CEO, President,
Treasurer and Director
MacDonald S. Tudeme,(3) 2005 $ - $ - $ 10,800(4)
CEO, President, 2004 $ 66,344 $ - $ 10,800(4)
Treasurer and Director 2003 $ 8,654 $ - $ 10,800(4)
50
(1) Does not include perquisites and other personal benefits in amounts less
than 10% of the total annual salary and other compensation.
(2) David Walters became CEO, President and Treasurer of the Company effective
December 15, 2005. He had served as Executive Vice President of the
Company from November 4, 2005 to December 15, 2005. He has been a
Director of the Company since November 4, 2005.
(3) Macdonald S. Tudeme resigned from his position as CEO, President,
Treasurer and Director of the Company effective December 15, 2005.
(4) MacDonald S. Tudeme received a vehicle allowance of $10,800 during the
fiscal year ended December 31, 2005, a vehicle allowance of $10,800 during
the fiscal year ended December 31, 2004 and $10,800 during the fiscal year
ended December 31, 200 3.
51
FINANCIAL STATEMENTS
----------------------
The following financial statements required by Item 310 of Regulation
S-B are stated in U.S. dollars and are prepared in accordance with U.S.
Generally Accepted Accounting Principles.
MT ULTIMATE HEALTHCARE CORP.
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2005 2004
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ - $ -
Accounts receivable, net 217,953 404,778
Other current assets 24,958 50,688
------------ ------------
Total Current Assets 242,911 455,466
------------ ------------
PROPERTY AND EQUIPMENT, net 114,158 115,154
------------ ------------
TOTAL ASSETS $ 357,069 $ 570,620
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft $ 11,152 $ 40,804
Accounts payable and accrued expenses 473,078 233,372
Notes payable, current 268,334 241,955
Notes payable, related parties 116,335 123,063
Leases payable, current 4,000 8,256
------------ ------------
Total Current Liabilities 872,899 647,450
------------ ------------
LONG-TERM DEBT
Notes payable 876,401 880,193
Beneficial conversion feature (229,166) (416,666)
Leases payable 912 4,004
------------ ------------
Total Long-Term Debt 648,147 467,531
------------ ------------
Total Liabilities 1,521,046 1,114,981
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per share;
authorized 400,000,000 shares; 70,000,000 and
60,032,040 shares issued and outstanding 70,000 60,032
Additional paid-in capital 2,635,242 2,545,530
Accumulated deficit (3,869,219) (3,149,923)
------------ ------------
Total Stockholders' Equity (Deficit) (1,163,977) (544,361)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 357,069 $ 570,620
============ ============
The accompanying notes are an integral part of these financial statements.
F-1
MT ULTIMATE HEALTHCARE CORP.
Consolidated Statements of Operations
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
------------ ------------ ------------ ------------
<s> <c> <c> <c> <c>
SERVICE REVENUES $ 293,468 $ 446,452 $ 1,395,955 $ 1,327,783
DIRECT COSTS
OF SERVICE REVENUES 210,789 351,971 1,108,733 1,016,580
------------ ------------ ------------ ------------
GROSS PROFIT 82,679 94,481 287,222 311,203
------------ ------------ ------------ ------------
OTHER OPERATING EXPENSES
General and administrative 359,662 426,136 709,581 1,119,724
------------ ------------ ------------ ------------
NET OPERATING LOSS (276,983) (331,655) (422,359) (808,521)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss on disposal of assets - - (14,581) -
Interest expense (92,195) (7,562) (282,356) (12,756)
------------ ------------ ------------ ------------
Total Other Income (Expense) (92,195) (7,562) (296,937) (12,756)
------------ ------------ ------------ ------------
NET LOSS $ (369,178) $ (339,217) $ (719,296) $ (821,277)
============ ============ ============ ============
BASIC LOSS PER COMMON SHARE $ (0.01) $ (0.01) $ (0.01) $ (0.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 70,000,000 53,160,040 63,376,671 52,060,040
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-2
MT ULTIMATE HEALTHCARE CORP.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
2005 2004
------------ ------------
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (719,296) $ (821,277)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 28,855 29,765
Loss on disposal of assets 14,581 -
Beneficial conversion interest 187,500 -
Common stock issued for services rendered 99,680 465,000
Changes in operating assets and liabilities: 422,609 (604,553)
------------ ------------
Net Cash Provided by (Used in) Operating Activities 33,929 (931,065)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (21,684)
------------ ------------
Net Cash Used in Investing Activities - (21,684)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash - 200,000
Payments on notes payable (37,303) (83,904)
Payments made on capital leases (7,348) (5,521)
Proceeds received on notes payable - 594,802
Proceeds received on related party notes payable 10,722 192,614
------------ ------------
Net Cash Provided by (Used in) Financing Activities (33,929) 897,991
------------ ------------
NET DECREASE IN CASH - (54,758)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - 54,758
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ -
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 84,127 $ 12,756
Income taxes $ - $ -
F-3
MT ULTIMATE HEALTHCARE CORP.
Notes to the Consolidated Financial Statements
September 30, 2005 and December 31, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
Description of Business
MT Ultimate Healthcare Corp. (the "Company") was originally incorporated in
Nevada under the name JavaJuice.net ("JavaJuice") on September 13, 2000. The
Company's business plan was to engage in the operation of an Internet Cafe, in
Reno, Nevada. Prior to entering into an Exchange Agreement, discussed below,
and the consummation of the transactions thereunder, the Company was
considered a development stage enterprise, as defined in Financial Accounting
Standards Board No. 7.
On August 8, 2003, JavaJuice, M.T. Marketing Int. Corp., a Nevada corporation
("MT"), and the former MT shareholders entered into an Exchange Agreement (the
"MT Exchange Agreement" or "MT Acquisition") whereby MT became a wholly-owned
subsidiary of the Company.
The Company, through its wholly-owned Nevada subsidiary, MT, operates a
payroll nurse staffing and homecare business. The Company provides healthcare
professionals such as Certified Nursing Assistants, Nurse Technicians,
Licensed Practical Nurses and Registered Nurses to hospitals, nursing homes,
licensed home care services agencies ("LHCSA's"), other health-related
businesses, to the homes of the elderly, sick and incapacitated.
In January 2004, the Company received a license from the State of New York,
Department of Health, effective December 9, 2003, to operate as a LHCSA in the
five boroughs of New York City: the Bronx, Brooklyn, Manhattan, Queens and
Staten Island, as well as in Nassau County New York. As a result of a change
in business focus due to the acquisition of MT, the Company changed its name
to MT Ultimate Healthcare Corp.
On May 20, 2004, the Company entered into an Exchange Agreement to acquire all
of the issued and outstanding common stock of B.P. Senior Care, Inc., a New
Jersey corporation ("BP") from BP's sole shareholder, in exchange for 200,000
shares of the Company's Common Stock. As additional consideration, the Company
agreed to pay BP's sold shareholder an aggregate of $150,000 cash, payable as
follows: a) $25,000 upon closing the transaction; and b) $125,000 payable at
the beginning of the month in equal monthly installments of $4,808 over a
twenty-five month period beginning June 2004, and a final payment of $4,800 at
the beginning of the twenty-sixth month following June 2004. BP provides
24-hour healthcare services to senior citizens in the New Jersey metropolitan
area. In June, 2005 the Company terminated the operations of BP.
October 1, 2004, the Company entered into an Agreement and Plan of Acquisition
and Merger ("A&M Agreement") to acquire Abundant Nursing, Inc., a Pennsylvania
corporation ("Abundant") in exchange for $150,000 paid on October 1, 2004, and
a five-year promissory note in the principal amount of $295,000 that accrues
interest at a rate of seven percent (7%) per annum. Abundant may be merged
with and into the Company after the Company has fully-paid all amounts due
under the A&M Agreement. Until such time as the Company pays the full
consideration pursuant to the A&M Agreement, Abundant will be operated by the
Company as a stand alone subsidiary. Abundant is located in Mount Joy,
Pennsylvania and provides staffing in the central area of Pennsylvania and the
Lancaster area.
F-4
Basis of Presentation
The accompanying consolidated interim financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC") for the presentation of interim financial information.
These interim consolidated financial statements are unaudited and, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments and accruals) necessary to present fairly the consolidated balance
sheet, consolidated operating results and consolidated cash flows for the
periods presented in accordance with accounting principles generally accepted
in the United States of America ("GAAP"). Operating results for the three and
nine months ended September 30, 2005 are not necessarily indicative of the
results that may be achieved for the year ending December 31, 2005 or for any
other interim period during such year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been omitted in accordance with the rules and regulations of
the SEC. These interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto contained in the Company's Form 10-KSB for the year ended December 31,
2004.
Going Concern
The Company's consolidated financial statements are prepared using the accrual
method of accounting in accordance with GAAP, and have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. The Company has
an accumulated deficit of $3,869,219 at September 30, 2005. Management has
taken various steps to revise its operating and financial requirements, which
it believes will be sufficient to provide the Company with the ability to
continue its operations for the next twelve months. The Company has secured
additional funding as part of its change in business (described in more detail
under "Subsequent Events" below).
In view of the matters described above, recoverability of a major portion of
the recorded asset amounts shown in the accompanying consolidated balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.
NOTE 2 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements include the accounts and transactions of
MT Ultimate Healthcare Corp. and its subsidiaries. Intercompany transactions
and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, 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. Significant estimates include the
collectibility of accounts receivable, the realizability of inventories, the
recoverability of long-lived assets and the fair value of marketable
securities available for sale. Actual results could differ from those
estimates.
Accounts Receivable
The Company performs ongoing credit evaluations of customers and adjusts
credit limits based upon payment history and the customer current
creditworthiness, as determined by its review of their current credit
information. The Company continuously monitors collections and payments from
its customers and maintains a provision for estimated credit losses based upon
its historical experience and any customer-specific collection issues that it
has identified.
F-5
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. The
useful lives for the related assets range from five to seven years.
Maintenance and repairs are charged to expense as incurred. Renewals and
improvements of a major nature are capitalized. At the time of retirement or
other disposition of property and equipment, the cost and accumulated
depreciation are removed from the accounts and any resulting gains or losses
are reflected in the consolidated statement of operations.
Beneficial Conversion Feature
The convertible feature of the debt provides for a rate of conversion that is
below market value. This feature is normally characterized as a beneficial
conversion feature ("BCF"), which is recorded by the Company pursuant to
Emerging Issues Task Force ("EITF") Issue No. 98-5 ("EITF 98-05"), "Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios," and EITF Issue No. 00-27, "Application of EITF
Issue No. 98-5 to Certain Convertible Instruments."
The Company records the debt discount in proportion to principal advances and
amortizes the discount to interest expense over the life of the debt on a
straight-line basis, which approximates the effective interest method.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable, accrued expenses, notes payable and
convertible debt. Pursuant to SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," the Company is required to estimate the fair value of
all financial instruments at the balance sheet date. The Company considers
the carrying values of its financial instruments in the financial statements
to approximate their fair values.
Revenue Recognition
The Company applies the provisions of SEC Staff Accounting Bulletin ("SAB")
No. 104, Revenue Recognition in Financial Statements ("SAB 104"), which
provides guidance on the recognition, presentation and disclosure of revenue
in financial statements filed with the SEC. The SAB 104 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosure related to revenue recognition policies. In general, the Company
recognizes revenue related to monthly contracted amounts for services provided
when (i) persuasive evidence of an arrangement exists, (ii) delivery has
occurred or services have been rendered, (iii) the fee is fixed or
determinable and (iv) collectibility is reasonably assured.
Health care service revenues are recognized in the period in which fees are
fixed or determinable and the related services are provided to the subscriber.
Concentrations of Credit Risk
The Company extends credit to its customers based upon its assessment of their
credit worthiness and generally does not require collateral.
F-6
Recent Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued SFAS No. 123R,
"Share-Based Payment." The new rule requires that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements. That cost will be measured based on the fair value of the equity
or liability instruments issued. This statement precludes the recognition of
compensation expense under APB Opinion No. 25's intrinsic value method. Small
business issuers will be required to apply Statement 123R in the first annual
reporting period that begins after December 15, 2005. The Company has not yet
determined the effect the adoption of SFAS No. 123R will have on its
consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-Monetary
Assets," an amendment of APB Opinion No. 29, "Accounting for Non-Monetary
Assets." The amendments made by SFAS No. 153 are based on the principle that
exchanges of non-monetary assets should be measured based on the fair value of
the assets exchanged. Further, the amendments eliminate the narrow exception
for non-monetary exchanges of similar productive assets and replace it with a
broader exception for exchanges of non-monetary assets that do not have
"commercial substance." The provisions in SFAS No. 153 are effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. Early application is permitted and companies must apply the
standard prospectively. The Company does not believe the adoption of this
statement will result in a significant impact to the Company's consolidated
financial statements.
Earnings (Loss) per Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS"). SFAS No. 128 provides for the calculation of basic and diluted
earnings per share. Basic EPS includes no dilution and is computed by
dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the earnings
or losses of the entity. Such amounts include shares potentially issuable
pursuant to shares to be issued, convertible debentures and outstanding
options and warrants. Had such shares been included in diluted EPS, they
would have resulted in weighted-average common shares of 70,700,000. The
following is a reconciliation of the loss per share for the three months and
nine months ended September 30, 2005 and 2004:
For the
Three Months Ended
September 30,
2005 2004
------------ ------------
Net (loss) available to
common shareholders $ (369,178) $ (339,217)
============ ============
Weighted average shares 70,000,000 53,160,040
============ ============
Basic loss per share (based
on weighted average
shares) $ (0.01) $ (0.01)
============ ============
F-7
For the
Nine Months Ended
September
2005 2004
------------ ------------
Net (loss) available to
common shareholders $ (719,296) $ (821,277)
============ ============
Weighted average shares 63,376,671 52,060,040
============ ============
Basic loss per share (based
on weighted average
shares) $ (0.01) $ (0.02)
============ ============
NOTE 3 - SUBSEQUENT EVENTS
On November 4, 2005, the Company and iTechexpress, Inc., a Nevada corporation
("iTech") and the former iTech shareholders entered into a Share Exchange and
Reorganization Agreement (the "Exchange" or "Acquisition") whereby iTech
became a wholly-owned subsidiary of the Company. As part of the Exchange, the
Company acquired 100% of the issued and outstanding shares of iTech in
exchange for 305,000,000 newly issued shares of the Company's common stock and
the promise to issue an additional 523,333,333 shares of the Company's common
stock at such time as the Company is able to increase its total authorized
shares.
On November 4, 2005 Macdonald Tudeme and Marguerite Tudeme (collectively, the
"Tudemes"), the former controlling shareholders of the Company and the Company
entered into a Spinoff Agreement ("Spinoff") which provided for (1) the
transfer of the corporate names, business, operations, assets, properties,
intellectual properties, trademarks, service marks, trade names, uniform
resource locators, telephone numbers, and goodwill of the Company and its
subsidiaries (other than iTech), together with the operating business of
Abundant, to be placed into to a newly-formed Delaware corporation
wholly-owned by the Company ("Newco"), (2) the acquisition by the Company from
the Tudemes of their outstanding shares of capital stock of the Company, (3)
the assumption and release by the Company and its subsidiaries and the Tudemes
of certain liabilities, and (4) the sale to the Tudemes of all of the
outstanding capital stock of Newco, and the payment to the Tudemes of
$80,442.32 for amounts owed to the Tudemes and other creditors by the Company,
of which $50,000 has previously been paid.
The Company also entered into a Security Agreement ("Security Agreement") with
Newco, whereby the Company pledged to Newco 20,000,000 shares of its common
stock as collateral ("Collateral") to secure its performance and payment of
the promissory note payable to Lisa Stern ("Stern Note") originally entered
into as part of the Company's purchase of Abundant. The Company will be in
default under the Security Agreement upon the failure to pay any principal or
interest of the Stern Note when due. Upon default, Newco is able to retain
the Collateral and apply the consideration received from the Collateral
against any principal and interest due. The closing of the Spinoff is
scheduled to take place on or before December 16, 2005.
On November 4, 2005 (the "Closing"), the Company entered into a Securities
Purchase Agreement (the "Agreement") with AJW Partners, LLC ("Partners"), AJW
Offshore, Ltd. ("Offshore"), AJW Qualified Partners, LLC ("Qualified"), and
New Millennium Capital Partners II, LLC ("New Millennium") (Partners,
Offshore, Qualified and New Millennium are collectively referred to herein as
the "Buyers") to purchase callable secured convertible notes having an
aggregate principal amount of $3,000,000, a 8% annual interest rate payable
quarterly, provided that no interest shall be due and payable for any month in
which the trading price of the Company's common stock on the OTC Bulletin
Board is greater than $0.02 for each intraday trading day of the month, a term
F-8
of three (3) years, and a conversion price, as of Closing, of $0.01 per share
(the "Notes"). As of Closing, the $3,000,000 of Notes was convertible into
300,000,000 shares of Common Stock. The Company may call the notes at a
premium upon certain conditions. The Agreement also provided for the issuance
of warrants to purchase an aggregate of up to 15,000,000 shares of the
Company's Common Stock, with an exercise price of $0.10 per share (the
"Warrants"). As of the date of this Report, the Company had received
$1,300,000 in connection with the Agreement and had issued Warrants to
purchase 6,500,000 shares of Common Stock to the Buyers.
Pursuant to the Agreement, the Buyers agreed to purchase additional Notes in
an aggregate principal amount of $850,000 and additional warrants to purchase
an aggregate of 4,250,000 shares of common stock, for an aggregate purchase
price of $850,000, within five days of the Company's filing of a Registration
Statement covering the shares convertible in connection with the Notes and
that within five days of such Registration Statement being declared effective
by the SEC, that the Buyers would purchase additional Notes in an aggregate
amount of $850,000 and additional warrants to purchase an aggregate of
4,250,000 shares of the Company's common stock.
On November 7, 2005, iTech entered into a Stock Purchase Agreement
("Purchase") with Drug Consultants, Inc. ("DCI"), a California corporation
whereby DCI became a wholly-owned subsidiary of iTech. As part of the
Purchase, iTech purchased all of the outstanding shares of DCI from the former
shareholder of DCI for a purchase price of $1,800,000, of which $1,600,000 was
paid at the closing of the Purchase and $200,000 shall be paid pursuant to a
Secured Promissory Note ("Promissory Note"). The Promissory Note is due in
one payment of principal together with accrued but unpaid interest (accruing
at the rate of seven percent (7%) per annum) on or before the sixtieth (60th)
day following the closing of the Purchase, or January 6, 2006. The Promissory
Note is secured by a Stock Pledge Agreement ("Pledge Agreement"), whereby
iTech pledged to the former DCI shareholder 51% of the stock of DCI ("DCI
Stock") held by iTech to secure the full and prompt payment and performance by
iTech of the Promissory Note. Additionally, any unpaid amount of the
Promissory Note if not paid when due, will bear interest at 12% per annum.
On November 8, 2005, iTech and DCI, a California corporation, entered into a
Factoring and Security Agreement to sell accounts receivables to Systran
Financial Services Corporation ("Systran"). The purchase price for each
account sold is the face amount of the account less a discount of 1.5%. All
accounts sold are with recourse by Systran. Systran may defer making payment
to iTech of a portion of the purchase price payable for all accounts purchased
which have not been paid up to 10.0% of such accounts (reserve). All of
iTech's and DCI's accounts receivable are pledged as collateral under this
agreement. The initial term is for thirty six months and will automatically
renew for an additional twelve months at the end of the term, unless iTech
gives thirty days written notice of its intention to terminate the Factoring
Agreement.
The Company entered into a Side Letter Agreement on November 10, 2005, with
the Buyers (the "Side Letter"). The Side Letter provided that in
consideration for the sale of the new Notes, the Buyers agreed that the face
amount of the $500,000 of notes and 700,000 in warrants to purchase shares of
the Company's common stock at an exercise price of $0.45 per share, issued to
the Buyers in August 2004, pursuant to a Securities Purchase Agreement entered
into on August 31, 2004 (the "August 2004 Securities Purchase Agreement") and
the $200,000 in notes and 200,000 in warrants which remained to be issued upon
the effectiveness of a registration statement covering such notes
(collectively the "August 2004 Convertible Notes" and "August 2004 Warrants")
shall be included in the amount advanced to the Company under the new Notes.
The Side Letter also provided that the terms of the November 2005 Securities
Purchase Agreement (the "Agreement") shall supercede the prior August 2004
Securities Purchase Agreement and that all interest, penalties, fees, charges
or other obligations accrued or owed by the Company to the Buyers pursuant to
the August 2004 Securities Purchase Agreement ("Prior Obligations") are
waived, provided that in the event of any material breach of the November 2005
Agreement by the Company, which breach is not cured within five days of
receipt by the Company of written notice of such breach, the novation of the
August 2004 Securities Purchase Agreement and the waiver of the Prior
Obligations shall be revocable by the Buyers and all Prior Obligations shall
be owed as if the August 2004 Securities Purchase Agreement was never
superceded.
F-9
Description of the operations of iTech and DCI:
iTech, established in 1999 and located in Irvine, California, places
technicians into technical jobs in both commercial and government sectors on a
national basis. iTech has performed various IT and staffing services for
clients such as Best Buy, Equant NV and Office Depot. iTech maintains a
proprietary database of staff associates and field technicians for servicing
its clients.
iTech's wholly subsidiary, Success Development Group, Inc., a Nevada
corporation, established in April 2000 ("SDG"), provides management services
on behalf of iTech and other clients of iTech.
DCI, established in 1977 and located in Irvine, California, is engaged in
furnishing personnel to perform a range of pharmacy technician, nursing and
other health care services in support of the operations of government and
commercial facilities. DCI currently operates under three State of California
contracts, three years in length. DCI's largest client is the State of
California and DCI provides many of its services in rural areas of California
where health care professionals are not readily available.
As a result of these transactions, and upon the closing of the Spinoff, the
operations of the Company will be comprised of the operations of iTech, DCI
and SDG.
NOTE 4 - STOCK TRANSACTIONS
During the nine months ended September 30, 2005, the Company issued a total of
9,967,960 free-trading shares of its common stock, pursuant to an S-8
Registration, to a consultant for services rendered valued at $99,680. The
9,967,960 shares issued were valued at the market value of the shares on the
dates of issuance which was $0.01 per share.
F-10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
---------------------------------------------------------
Board of Directors
MT Ultimate Healthcare Corp
We have audited the accompanying balance sheet of MT Ultimate Healthcare
Corp("Company"), as of December 31, 2004 and the related statement of
operations, statement of stockholders' equity, and the statement of cash flows
for the twelve month period ended December 31, 2004 and 2003 These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on my audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December
31, 2004 and the results of its operations and its cash flows for the twelve
month period ended December 31, 2004 and 2003 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and negative working capital that raise substantial
doubt about its ability to continue as a going concern. This is further
explained in the notes to financial statements. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/S/ CLYDE BAILEY P.C.
Clyde Bailey P.C.
San Antonio, Texas
April 4, 2005
F-11
MT ULTIMATE HEALTHCARE CORP
CONSOLIDATED BALANCE SHEET
As of December 31, 2004
A S S E T S
Current Assets
Cash $ -
Accounts Receivable, net of allowance of $125,069 404,778
Other Current Assets 50,688
--------------
Total Current Assets 455,466
--------------
Property, plant and equipment, net of accumulated depreciation 115,154
--------------
Total Assets $ 570,620
==============
L I A B I L I T I E S
Current Liabilities
Cash Overdraft 40,804
Accounts Payable and accrued liabilities 233,372
Notes Payable - Current Portion 241,955
Notes Payable - Related Party 123,063
Current Portion Capital Lease 8,256
--------------
Total Current Liabilities 647,450
--------------
Long-Term Liabilities:
Notes Payable 880,193
Beneficial Conversion Feature (416,666)
Capital Leases 4,004
--------------
Total Long Term Liabilities 467,531
--------------
Total Liabilities 1,114,981
S T O C K H O L D E R S ' D E F I C I T
Common Stock 60,032
Additional Paid-in-Capital 2,545,530
Retained Deficit (3,149,923)
--------------
Total Stockholders' Deficit (544,361)
--------------
Total Liabilities and Stockholders' Deficit $ 570,620
==============
See accompanying notes to Financial Statements.
F-12
MT ULTIMATE HEALTHCARE CORP
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED
---------------------------
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- -----------------
Revenues $ 2,072,236 $ 1,159,237
Cost of Revenues 1,521,353 892,872
----------------- -----------------
Gross Profit 550,883 266,365
EXPENSES:
Salaries & Wages 420,429 75,129
Professional Fees 189,089 77,902
Consulting 1,705,304 -
Bad Debt Expense 119,519 -
Impairment Loss 563,427 -
Depreciation 32,147 23,920
Interest Expense 117,368 12,867
Operating Expenses 449,210 173,507
----------------- -----------------
Total Expenses 3,596,493 363,325
----------------- -----------------
Net loss from Operations (3,045,610) (96,960)
PROVISION FOR INCOME TAXES:
Income Tax Benefit - -
----------------- -----------------
Net Loss $ (3,045,610) $ (96,960)
================= =================
Basic and Diluted Loss Per
Common Share $ (0.06) $ (0.00)
----------------- -----------------
Weighted Average number of
Common Shares 53,153,166 39,383,333
================= ==================
See accompanying notes to Financial Statements.
F-13
MT ULTIMATE HEALTHCARE CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED
---------------------------
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- -----------------
<s> <c> <c>
Cash Flows from Operating Activities:
Net Income (Loss) $ (3,045,610) $ (96,960)
Adjustments to Reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 32,147 12,877
Stock Issued for Services 1,705,304 -
Impairment Loss 563,427 -
Beneficial Conversion Interest 83,333 -
Bad Debt Expense 119,519 -
Changes in operating assets and liabilities:
Accounts Receivable (327,263) (62,472)
Other Current Assets (30,516) (20,702)
Accounts Payable 173,506 14,094
----------------- -----------------
Net Cash Provided from Operating Activities (726,153) (153,163)
----------------- -----------------
Cash Flows from Investing Activities:
Property, plant and equipment (518,429) (44,775)
----------------- -----------------
Net Cash Used in Investing Activities (518,429) (44,775)
----------------- -----------------
Cash Flows from Financing Activities:
Note Payable 933,451 60,484
Note Payable - Related Party 123,063 -
Capital Leases (7,494) 8,522
Common Stock 100,000 150,000
----------------- -----------------
Net Cash Provided from Financing Activities 1,149,020 219,006
----------------- -----------------
Net Increase in Cash (95,562) 21,068
Cash Balance, Begin Period 54,758 33,690
----------------- -----------------
Cash Balance, End Period $ (40,804) $ 54,758
================== =================
Supplemental Disclosures:
Cash Paid for interest $ 12,532 $ 10,553
================== =================
Cash Paid for income taxes $ - $ -
================== =================
Non-Cash Transaction:
Issuance of common stock for debt $ 50,000 $ 150,000
================== =================
Stock Issued for Services $ 1,705,304 $ -
================== =================
See accompanying notes to Financial Statements.
F-14
MT ULTIMATE HEALTHCARE CORP
STATEMENT OF STOCKHOLDERS' EQUITY
$0.001 Paid-In Accumulated Stockholders'
Shares Par Value Capital Deficit Equity
------------ ------------- ----------- ------------- -------------
<s> <c> <c> <c> <c> <c>
Balance December 31, 2002 34,000,000 $ 34,000 $ 258 $ (7,353) $ 26,905
Acquisition of MT Marketing 16,000,000 16,000 - - 16,000
Stock Issued for Debt 600,000 600 149,400 - 150,000
Net Loss - - - (96,960) (96,960)
------------ ------------- ----------- ------------- -------------
Balance December 31, 2003 50,600,000 50,600 149,658 (104,313) 95,945
Stock Issued for Debt 200,000 200 49,800 - 50,000
Stock Issued for Acquisition 200,000 200 49,800 - 50,000
Stock Issued for Cash 400,000 400 99,600 - 100,000
Interest Cost Associated with - - 500,000 - 500,000
Beneficial Conversion Features of
Notes Payable
Stock Issued for Services 8,632,040 8,632 1,696,672 - 1,705,304
Net Loss - - - (3,045,610) (3,045,610)
------------ ------------- ----------- ------------- -------------
Balance December 31, 2004 60,032,040 $ 60,032 $2,545,530 $ (3,149,923) $ (544,361)
============ ============= =========== ============= =============
See accompanying notes to Financial Statements.
F-15
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
- ------------
The Company was originally incorporated under the laws of the State of Nevada
on September 13, 2001 for the purpose to promote and carry on any lawful
business for which a corporation may be incorporated under the laws of the
State of Nevada. The company has a total of 400,000,000 authorized shares with
a par value of $.001 per share and with 50,000,000 shares issued and
outstanding as of September 30, 2003. The Company filed an amended Articles of
Incorporation with the State of Nevada on August 15, 2003 to change the name
to MT Ultimate Healthcare Corp from Java Juice.net and to increase the
authorized shares to 400,000,000 common shares. Also, the Company agreed to an
80 to 1 forward split of the shares in this amended filing. On September 29,
2003, the Company agreed to a 1 for 4 reverse split. These financial
statements reflect these filings.
PRINCIPLES OF CONSOLIDATION
- ---------------------------
The accompanying consolidated financial statements include the accounts of MT
Ultimate Healthcare Corp and its wholly owned subsidiaries MT Marketing
International Inc, BP Senior Care Inc., and Abundant Nursing Inc. collectively
"the Company"). All significant inter-company transactions and balances have
been eliminated in consolidation.
FEDERAL INCOME TAX
- ------------------
The Company has adopted the provisions of Financial Accounting Standards Board
Statement No. 109, Accounting for Income Taxes. The Company accounts for
income taxes pursuant to the provisions of the Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes", which requires an
asset and liability approach to calculating deferred income taxes. The asset
and liability approach requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities.
USE OF ESTIMATES
- ----------------
The 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 on
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.
F-16
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)
ACCOUNTING METHOD
- -----------------
The Company's financial statements are prepared using the accrual method of
accounting. Revenues are recognized when earned and expenses when incurred.
Fixed assets are stated at cost. Depreciation and amortization using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. A total of $32,147 and $23,920 has been recorded in
the financial statements for the period ended December 31, 2004 and 2003.
EARNINGS PER COMMON SHARE
- -------------------------
The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share," which simplifies the computation of earnings per share requiring
the restatement of all prior periods.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares and dilutive securities outstanding. Dilutive
securities having an anti-dilutive effect on diluted earnings per share are
excluded from the calculation.
ADVERTISING
- -----------
The Company expensed Advertising and Marketing expenditures in the amount of
$16,799 and $9,131 for the years ended December 31, 2004 and 2003
CASH AND CASH EQUIVALENTS
- -------------------------
The Company considers all highly liquid debt instruments with a maturity of
three months or less at the time of purchase to be cash equivalents. Cash and
cash equivalents consist of checking accounts and money market funds.
FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and payable, accrued and other current
liabilities and current maturities of long-term debt approximate fair value
due to their short maturity.
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
In December 2004, the FASB issued FASB Staff Position No. 109-1 ("FSP FAS No.
109-1"), "Application of FASB Statement No.109, `Accounting for Income Taxes,'
to the Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004." The American Jobs Creation Act of 2004
introduces a special tax deduction of up to 9.0 percent when fully phased in,
of the lesser of "qualified production activities income" or taxable income.
FSP FAS 109-1 clarifies that this tax deduction should be accounted for as a
special tax deduction in accordance with SFAS No. 109. Although FSP FAS No.
109-1 was effective upon issuance, we are still evaluating the impact FSP FAS
No. 109-1 will have on our financial statements.
F-17
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON'T)
RECENT ACCOUNTING PRONOUNCEMENTS (CON'T)
- ----------------------------------------
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs", an
amendment of Accounting Research Bulletin No. 43, Chapter 4. SFAS No. 151
clarifies the accounting for abnormal amounts of idle facility expense,
freight, handling costs and wasted material. SFAS No. 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. We
do not believe adoption of SFAS No. 151 will have a material effect on our
financial position, results of operations or cash flows.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29." SFAS No. 153 is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. APB Opinion No. 29, "Accounting for
Nonmonetary Transactions," provided an exception to its basic measurement
principle (fair value) for exchanges of similar productive assets. Under APB
Opinion No. 29, an exchange of a productive asset for a similar productive
asset was based on the recorded amount of the asset relinquished. SFAS No. 153
eliminates this exception and replaces it with an exception of exchanges of
nonmonetary assets that do no have commercial substance. SFAS No. 153 is
effective for the Company as of January 1, 2005. The Company will apply the
requirements of SFAS No. 153 when such an exchange occurs.
NOTE 2 - EQUIPMENT
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
-------- ------------ ----------
Furniture and equipment $114,817 $49,966 $64,851
-------- ------------ ----------
Vehicle 9,000 3,074 5,926
Computer equipment 29,657 12,602 17,055
Leasehold Improvements software 38,607 11,283 27,324
$192,081 $76,925 $ 115,194
-------- ------------ ----------
A total of $32,147 and $23,920 has been recognized as depreciation expense for
the period ended December 31, 2004 and 2003.
F-18
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 3 - COMMON STOCK
In February 2004, the Company issued 1,260,000 shares of its common stock to
various employees for services. A total amount of $315,000 was recorded as
consulting expense in the statement of operations.
In February of 2004, the Company issued 200,000 shares of its common stock to
a company to convert $50,000 of debt to equity.
In June of 2004 a total of 400,000 shares of common stock were sold for
$100,000 in cash.
In May of 2004 a total of 200,000 shares of common stock were issued pursuant
to the acquisition to BP Senior Care that was recorded at $50,000.
In August of 2004, a total of 900,000 shares of common stock was issued for
services and recorded at $225,000 as consulting expense in the statement of
operations.
In October of 2004 a total of 472,000 shares of common stock was issued for
services and recorded in the statement of operations for $118,000.
In December of 2004 a total of 6,000,000 shares of common stock was issued to
an individual for services and recorded at $960,000 as consulting services in
the statement of operations. Although the Company has issued a "stop" order
with the transfer agent, the shares have not been surrendered as of the report
date.
On August 8, 2003 the Company acquired MT Marketing International Corp ("MT
Marketing") as an operating subsidiary for 16,000,000 shares of common stock
and accounted for the acquisition as a reverse merger or a recapitalization.
The total outstanding shares at the date of this transaction was 34,000,000,
as adjusted.
The Company agreed to an 80 to 1 forward split of the shares on August 15,
2003. On September 29, 2003, the Company agreed to a 1 for 4 reverse split.
These financial statements reflect these filings.
In December of 2003, the Company converted $150,000 of debt to equity by
issuing 600,000 shares of common stock to the debtor.
F-19
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 4 - FEDERAL INCOME TAX
The components of the provision for income tax (expense) benefits are as
follows:
Year Ended December 31,
-----------------------
2004 2003
----------- ----------
Deferred:
Federal $ 979,245 $ 32,966
State 135,713 4,363
Valuation Allowance (1,114,958) (37,329)
----------- ----------
Such income tax (expense) benefits are included in the accompanying
consolidated financial statements as follows:
Year Ended December 31,
-------------------------
2004 2003
------------ -----------
Income from operations $ 1,114,958 $ 37,329
Non-Deductible Expenses
and Non-Taxable Income -0- -0-
Valuation Allowance (1,114,958) ( 37,329)
------------ -----------
The above provision has been calculated based on Federal and State statutory
rates in the adjusted rates of 34% for Federal and 4.5% for State tax rates.
Temporary differences, which give rise to deferred tax assets and liabilities
are as follows:
Year Ended December 31,
-----------------------
2004 2003
------------ ----------
Deferred tax assets:
Net Operating Loss $ 1,152,287 $ 37,329
Valuation Allowance (1,152,287) (37,329)
------------ -----------
Net deferred tax assets
(liabilities) $ -0- $ -0-
============ ===========
F-20
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 4 - FEDERAL INCOME TAX (CON'T)
The valuation allowance offsets the net deferred tax asset for which there is
no assurance of recovery. The change in the valuation allowance for the years
ended December 31, 2004 and 2003 totaled $1,114,958 and $37,329, respectively.
The net operating loss carry- forward begins to expire in year 2022. The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax assets is no
longer impaired and the allowance is no longer required.
NOTE 5 - RELATED PARTIES
The Company has significant related party transactions and/or relationships
with the Company's President, MacDonald Tudeme. Mr. Tudeme has guaranteed the
Company's bank indebtedness up to $200,000 without charging a fee. The
Company entered into a flexible lease for office space in Brooklyn, New York
with its majority shareholders and Directors, MacDonald Tudeme and Marguerite
Tudeme, who own the leased property. The lease commitment was $550 per month
and was terminated October 31, 2003
During 2004, a total of 200,000 shares of common stock were issued to its CFO,
Wayne Richardson for services. A total of $50,000 has been recorded in the
statement of operations.
NOTE 6 - ACQUISITIONS
On the 1st of July 2004 the company acquired BP Senior Care with a financial
arrangement whereby the seller took a demand note without interest for
$150,000 and 200,000 shares of the Company's common stock plus an employment
contract with the Company as operations manger for the new incorporated
subsidiary BP Senior Care. Inc. The seller's starting salary was $60,000. The
net assets acquired were $80,994 with the balance or $119,006 being recorded
as goodwill. The operations of this acquisition are included in these
financial statements subsequent to the date of acquisition.
On the 1st of October 2004 the Company acquired Abundant Nursing, Inc. a
Pennsylvania corporation consisting of $150,000 in cash and entered into a
five year promissory note with the seller in the principal amount of $295,000
that accrues interest at a rate of 7% per annum on the outstanding
indebtedness The net assets acquired was $50,579 with the balance or $394,421
being recorded as goodwill. The operations of this acquisition are included in
these financial statements subsequent to the date of acquisition.
F-21
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 7 - NOTES PAYABLE AND CAPITAL LEASES
On August 31st, 2004 entered into a securities purchase agreement whereby
callable, secured convertible notes of $700,000 bearing interest at a rate of
10% per annum for outstanding indebtedness was sold to AJW Partners, LLC and
its associates. The term of the notes are two years at a conversion price of
$.124 which is and exercisable into 5,645,145 shares of common stock and
warrants to purchase 700,000 shares of common stock that are exercisable at a
price of $0.45 per share in a transaction that was registered under the
Securities Act of 1933 (the Act) for an aggregate of $500,000 as of September
30, 2004. The conversion price is determined at the time of conversion and is
calculated as the lesser of the Variable Conversion Price or $0.90. Generally,
the Variable Conversion Price is the average of the Three (3) lowest trading
prices of the Registrant's common stock, $.001 par value per share (the
"Common Stock") during the twenty (20) trading day period ending one trading
day before the date that a Buyer sends notice of conversion to the Registrant.
The warrants expire in 5 years. At the initial funding a total was $50,000 was
retained by the lender as advance interest. This amount is being amortized
over the initial twelve months with the balance being shown as prepaid
interest in the balance sheet. A beneficial conversion feature was recognized
at the time of issuance in the amount of $500,000 which is being amortized
over 24 months. As of December 31, 2004 a total of $500,000 had been advanced.
An amount of $83,333 was recognized as interest expense for the period ended
December 31, 2004 leaving the balance of $416,667.
The Company is indebted to the Community Capital Bank in Brooklyn NY for two
loans underwritten by the SBA Administration. One of the loans is a line of
credit granted on August 29, 2003 with a variable interest rate with the
Accounts Receivable of the Company as security for the loan. As of December
31, 2004, the balance of the line of credit is $74,884 and the rate of
interest is 6%. The loan matures on January 29, 2009.
The other loan has a balance outstanding as of December 31, 2004 of $130,193.
The note is a line of credit note that has a variable interest rate and as of
December 31, 2004 carried an interest rate of 5%. The note is secured by a
floating charge over all of the assets of the Company. The note matures on
January 1, 2005.
The note with the former owner of BP Senior Care was originally $150,000 with
a payment of $25,000 at closing and payments of $4808 over 25 months. The
balance of the note at December 31, 2004 is $106,488. The note is non interest
bearing.
The note with the former owner of Abundant Nursing Inc. was originally
$295,000 with payments of $5,841 over five years. The note carries an interest
rate of 7% and is secured with the stock of Abundant Nursing Inc. The balance
of the note as of December 31, 2004 is $286,735.
There are several leases for computers and telephone equipment that are being
capitalized. The balance of the notes as of December 31, 2004 is $12,260 with
various interest rates from 8% to 14% and matures in 36 to 48 months.
F-22
MT Ultimate Healthcare Corp
Notes to Financial Statements December 31, 2004
NOTE 8 - LEASES
The Company entered into a new office lease effective November 1, 2003. The
term of the lease is five year and expires October 31, 2008. The base monthly
rate is $3,500 per month and raises to $3,939 per month at the end of the term
of the lease. The Company placed a #11,918 deposit as security for the lease.
A second office lease is in effect for an office in the Bronx NY that started
November 1, 2002 and expires on November 1, 2007. The monthly rental rated
started at $650 to $850 per month at the expiration of the lease. The Company
has also signed a third lease in Baldwin NY effective January 1, 2004 that
expires November 30, 2008. The base monthly rental rate is $1,300.
Minimum lease payments under leases at December 31, 2004, are as follows:
2005 68,126
2006 70,033
2007 71,073
Future Years 53,692
NOTE 9 - IMPAIRMENT LOSS
Included in the statement of operations is an impairment loss of $563,427
which is the excess over identified assets or goodwill of the acquisitions
completed in 2004. A review of the future net cash flow revealed that there
was an impairment of these assets.
NOTE 10 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
principles of accounting applicable to a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course
of business. The Company's has yet to generate sufficient working capital to
support its operations. There is also a serious concern about the amount of
employment taxes outstanding and the Company's ability to pay these taxes. The
Company's ability to continue as a going concern is dependent, among other
things, on its ability to reduce certain costs, obtain new contracts and
additional financing and eventually, attaining a profitable level of
operations.
It is management's opinion that the going concern basis of reporting its
financial condition and results of operations is appropriate at this time. The
Company plans to increase cash flows, raising capital, and increase debt plus
taking steps towards achieving profitable operations through its business
plan.
F-23
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------
Effective July 31, 2003, the client auditor relationship between M.T.
Marketing Int. Corp. ("MT") and Wayne Richardson, CPA ("Richardson") as the
former accountant resigned, effective July 31, 2003, in connection with MT's
reverse merger transaction with JavaJuice.net ("JavaJuice"). Effective August
1, 2003, the Company engaged Clyde Bailey P.C. ("Bailey"), the former
independent auditor of JavaJuice as its principal independent public
accountant for the fiscal year ended December 31, 2003. The decision to change
accountants was recommended and approved by MT's Board of Directors on July
29, 2003.
Richardson's report on the financial statements of MT for the fiscal
years ended January 31, 2002 and January 31, 2003, and any later interim
period, including the interim period up to and including the date the
relationship with Richardson ceased, did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope or accounting principles except for concerns about MT's ability to
continue as a going concern.
In connection with the audit of MT's fiscal years ended January 31, 2002
and January 31, 2003, and any later interim period, including the interim
period up to and including the date the relationship with Richardson ceased,
there were no disagreements between Richardson and MT on a matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Richardson would have caused Richardson to make reference to
the subject matter of the disagreement in connection with its report on MT's
financial statements.
There were no reportable events as provided in Item 304(a)(iv)(B) of
Regulation S-B during MT's fiscal years ended January 31, 2002 and January 31,
2003, and any later interim period, including the interim period up to and
including the date the relationship with Richardson ceased.
MT has authorized Richardson to respond fully to any inquiries of any
new auditors hired by MT relating to their engagement as MT's independent
accountant. MT has requested that Richardson review the disclosure and
Richardson has been given an opportunity to furnish MT with a letter addressed
to the Commission containing any new information, clarification of MT's
expression of its views, or the respect in which it does not agree with the
statements made by MT herein. Such letter is incorporated by reference in this
Report on Form 10-KSB.
The Company had not previously consulted with Bailey regarding either
(i) the application of accounting principles to a specific completed or
contemplated transaction; (ii) the type of audit opinion that might be
rendered on the Company's financial statements; or (iii) a reportable event
(as provided in Item 304(a)(iv)(B) of Regulation S-B) during MT's fiscal years
ended January 31, 2002 and January 31, 2003, and any later interim period,
including the interim period up to and including the date the relationship
with Richardson ceased. Bailey has reviewed the disclosure required by Item
304 (a) before it was filed with the Commission and has been provided an
opportunity to furnish the Company with a letter addressed to the Commission
containing any new information, clarification of the Company's expression of
its views, or the respects in which it does not agree with the statements made
by the Company in response to Item 304 (a). Bailey did not furnish a letter to
the Commission.
52
On May 16, 2005, the Company's Board of Directors accepted the
resignation of Clyde Bailey P.C., its independent auditors, due to health and
other personal reasons; thus dismissing and terminating the engagement of
Clyde Bailey P.C. as its independent auditor.
Clyde Bailey P.C. submitted audit reports on the Company's financial
statements for the year ended December 31, 2004. The submitted audit reports
did not contain any adverse opinions, disclaimers of opinions or other
modifications or qualifications. Clyde Bailey P.C. did not, during the
applicable periods, advise the Company of any of the enumerated items
described in Item 304(a)(1) of Regulation S-K.
The decision to change accountants was recommended and approved by the
Board of Directors of the Company.
During the fiscal year ended December 31, 2004 and the period from
January 1, 2005 through the date of dismissal and termination of the
engagement of Clyde Bailey P.C., there were no disagreements with Clyde Bailey
P.C. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Clyde Bailey P.C., would have caused Clyde
Bailey P.C. to make reference thereto in, or in connection with, his reports
on financial statements for the years or such interim period.
On June 10, 2005 the Company's Board of Directors ratified the
engagement of Chisholm Bierwolf & Nilson, LLC, as its auditors. The Company
authorized Clyde Bailey P.C. to fully respond to any and all inquiries of
Chisholm Bierwolf & Nilson, LLC, concerning the finances and previously
performed audits of the Company.
During the two most recent fiscal years prior to the date of engagement,
and the subsequent interim period prior to engaging Chisholm Bierwolf &
Nilson, LLC, neither the Company (nor someone on the Company's behalf)
consulted the newly engaged accountant regarding any matter.
The Company engaged Corbin & Company LLP to act as its independent
auditors, effective November 8, 2005, for iTech and DCI. The Company
anticipates that its principal accountant, Chisholm, Bierwolf & Nilson, LLC,
will express reliance on Corbin & Company LLP in its report regarding iTech
and DCI.
During the Company's two most recent fiscal years and any subsequent
interim period prior to engaging Corbin & Company LLP, the Company has not
consulted Corbin & Company LLP regarding either: (i) the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
financial statements, and Corbin & Company LLP did not provide either a
written report or oral advice to the Company that Corbin & Company LLP
concluded was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issue; or (ii)
any matter that was either the subject of a disagreement or a reportable
event, each as defined in Item 304 of Regulation S-K. Corbin & Company LLP has
not provided due diligence services in connection with proposed and/or
consummated investment transactions by the Company and its affiliates.
53
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Our Articles of Incorporation, as amended, and Bylaws, as amended,
provide for indemnification from liability of our officers and directors to
the fullest extent permitted by Nevada General Corporation Law ("Nevada Law"),
including future amendments to Nevada Law. Nevada Law generally provides that
we may indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"Proceeding") by reason of the fact that the person is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
the Proceeding upon a determination by our stockholders, a majority of our
disinterested directors or independent legal counsel that indemnification is
proper in the circumstances, provided that: a) the it is not proven that the
person's act or failure to act constituted a breach of the person's fiduciary
duties as an officer or director, and the person's breach of those duties
involved intentional misconduct, fraud or a knowing violation of law (the
"Provision for Limited Liability"); or b) the person acted in good faith and
in a manner which the person reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, the person had no reasonable cause to believe that the person's
conduct was unlawful. Such an indemnification payment might deplete the
Company's assets. Nevada Law also generally limits the liability of our
officers and directors for any damages as a result of any act or failure to
act in the officer's or director's capacity as an officer or director subject
to the Provision for Limited Liability. Thus, the Company may be prevented
from recovering damages for certain alleged errors or omissions by the
officers and directors for liabilities incurred in connection with their good
faith acts for the Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered. The
expenses shall be paid by the Registrant.
SEC Registration Fee............... $ 1,531
Legal Fees and Expenses............ $ 10,000*
Accounting Fees and Expenses....... $ 5,000*
Miscellaneous...................... $ 5,000*
TOTAL.............................. $ 21,531*
* Estimated.
54
Recent Sales of Unregistered Securities
On December 4, 2003, the Company issued an aggregate of 600,000 shares
of Common Stock which were not registered under the Securities Act of 1933, as
amended (the "Act") to four entities in exchange for the cancellation of
$150,000 of indebtedness. The Company claims an exemption from registration
afforded by Section 4(2) of the Act since the foregoing issuances did not
involve a public offering, the recipient took the shares for investment and
not resale and the Company took appropriate measures to restrict transfer. No
underwriters or agents were involved in the foregoing issuances and no
underwriting discounts or commissions were paid by the Company.
On January 15, 2004, the Company issued 100,000 shares, and on February
10, 2004, the Company issued 400,000 shares (or an aggregate of 500,000
shares) of Common Stock which were not registered under the Act to an
individual as additional consideration for entering into a Consulting Services
Agreement with the Company. The Company claims an exemption from registration
afforded by Section 4(2) of the Act since the foregoing issuances did not
involve a public offering, the recipients took the shares for investment and
not resale and the Company took appropriate measures to restrict transfer. No
underwriters or agents were involved in the foregoing issuances and no
underwriting discounts or commissions were paid by the Company.
On February 10, 2004, the Company issued an aggregate of 760,000 shares
of Common Stock which were not registered under the Act to three individuals
consisting of 500,000 shares as additional consideration for an employment
agreement, 250,000 shares for consulting services, and 10,000 shares as an
incentive to join the Company as its first Director of Patient Services. The
Company claims an exemption from registration afforded by Section 4(2) of the
Act since the foregoing issuances did not involve a public offering, the
recipients took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or
commissions were paid by the Company.
On February 24, 2004, the Company issued 200,000 shares of Common Stock
which were not registered under the Act to an unrelated entity to convert
$50,000 of indebtedness that the Company owed to such entity into equity. The
Company claims an exemption from registration afforded by Section 4(2) of the
Act since the foregoing issuances did not involve a public offering, the
recipients took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or
commissions were paid by the Company.
In June 2004, the Company agreed to issue 400,000 shares of Common Stock
which were not registered under the Act to an entity in consideration for
$100,000. Subsequent to June 30, 2004, the shares were issued, but for
accounting purposes they were not treated as issued. The Company claims an
exemption from registration afforded by Section 4(2) of the Act since the
foregoing issuances did not involve a public offering, the recipients took the
shares for investment and not resale and the Company took appropriate measures
to restrict transfer. No underwriters or agents were involved in the
foregoing issuances and no underwriting discounts or commissions were paid by
the Company.
In July 2004, the Company issued 500,000 shares of Common Stock which
were not registered under the Act to an individual in consideration for
consulting services rendered from September 2003 to the present. The Company
claims an exemption from registration afforded by Section 4(2) of the Act
since the foregoing issuances did not involve a public offering, the
recipients took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or
commissions were paid by the Company.
In August 2004, the Company issued 200,000 shares of Common Stock which
were not registered under the Act to Wayne F. Richardson for his services as a
director of the Company and the Company's Chief Financial Officer. The
Company claims an exemption from registration afforded by Section 4(2) of the
Act since the foregoing issuance did not involve a public offering, the
recipient took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuance and no underwriting discounts or
commissions were paid by the Company.
55
In August 2004, the Company issued an aggregate of 400,000 shares of
Common Stock which were not registered under the Act consisting of 200,000
shares to the former shareholder of B.P. Senior Care, Inc. in exchange for
100% of the common stock of B.P. Senior Care, Inc., and 200,000 to an
individual unrelated to the Company as consideration for consulting services.
The Company claims an exemption from registration afforded by Section 4(2) of
the Act since the foregoing issuances did not involve a public offering, the
recipients took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or
commissions were paid by the Company.
In August 2004, we entered into a Securities Purchase Agreement with AJW
Partners, LLC , AJW Offshore, Ltd., AJW Qualified Partners, LLC and New
Millennium Capital Partners II, LLC for the sale of (i) an aggregate of
$700,000 of Convertible Notes that, as of December 15, 2005, could be
converted into approximately 538,461,539 shares of Common Stock at $0.0013 per
share; and (ii) Warrants to purchase 700,000 shares of Common Stock at $0.45
per share, in exchange for $500,000 at closing and an additional $200,000
upon satisfaction of certain conditions set forth in the securities purchase
agreement. The Company claims an exemption from registration afforded by
Section 4(2) of the Act since the foregoing issuances did not involve a public
offering, the recipients had access to information that would be included in a
registration statement, took the shares for investment and not resale and the
Company took appropriate measures to restrict transfer.
In October 2004, the Company issued an aggregate of 472,000 shares of
Common Stock which were not registered under the Act consisting of 172,000
shares to an entity in consideration for consulting services, and 300,000
shares to an entity in consideration for research conducted. The Company
claims an exemption from registration afforded by Section 4(2) of the Act
since the foregoing issuances did not involve a public offering, the
recipients took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or
commissions were paid by the Company.
In November 2005, the Company issued 25,000,000 shares of its common
stock in consideration for services rendered by RES Holdings Corp. The
Company claims an exemption from registration afforded by Section 4(2) of the
Act since the foregoing issuance did not involve a public offering, the
recipient took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuance and no underwriting discounts or
commissions were paid by the Company.
In November 2005, we entered into a Securities Purchase Agreement with
AJW Partners, LLC , AJW Offshore, Ltd., AJW Qualified Partners, LLC and New
Millennium Capital Partners II, LLC for the sale of (i) an aggregate of
$3,000,000 of Convertible Notes that, as of December 15, 2005, could be
converted into approximately 2,307,692,308 shares of Common Stock at $0.0013
per share; and (ii) Warrants to purchase 15,000,000 shares of Common Stock at
$0.10 per share, in exchange for $1,300,000 at closing and an additional
$1,700,000 upon satisfaction of certain conditions set forth in the securities
purchase agreement and described herein under "Risk Factors". The Company
claims an exemption from registration afforded by Section 4(2) of the Act
since the foregoing issuances did not involve a public offering, the
recipients had access to information that would be included in a registration
statement, took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer.
In November 2005, the Company agreed to issue an aggregate of
745,500,000 shares of common stock, to two entities, 372,750,000 shares to MEL
Enterprises, Ltd., beneficially owned by Keith Moore, a Director of the
Company ("MEL") and 372,750,000 shares to Monarch Bay Capital Group, LLC,
beneficially owned by the Executive Vice President of the Company and a
Director, David Walters ("Monarch"), in connection with the iTech Acquisition.
The Company issued an aggregate of an additional 274,500,000 shares of common
stock to the two entities, 137,250,000 to MEL and 137,250,000 to Monarch ,
with the remaining shares to be issued after such time as the Company is able
to increase its authorized common stock. The Registrant claims an exemption
from registration afforded by Section 4(2) of the Act since the foregoing
issuances did not involve a public offering, the recipients took the shares
for investment and not resale and the Company took appropriate measures to
restrict transfer. No underwriters or agents were involved in the foregoing
issuances and no underwriting discounts or commissions were paid by the
Company.
56
In November 2005, the Company agreed to issue 82,833,333 shares of its
common stock to Nite Capital ("Nite") in connection with a standby financing
commitment received on July 25, 2005. The Company issued an aggregate of
30,500,000 shares of restricted common stock to Nite, with the remaining
shares to be issued after such time as the Company is able to increase its
authorized common stock. The Company claims an exemption from registration
afforded by Section 4(2) of the Act since the foregoing issuances did not
involve a public offering, the recipients took the shares for investment and
not resale and the Company took appropriate measures to restrict transfer. No
underwriters or agents were involved in the foregoing issuances and no
underwriting discounts or commissions were paid by the Company.
57
Exhibits
INDEX TO EXHIBITS
------------------
Exhibit No. Identification of Exhibit
3.1(1) Articles of Incorporation
3.2(2) Articles of Amendment to Articles of Incorporation
3.3(3) Articles of Amendment to Articles of Incorporation
3.4(12) Articles of Amendment to Articles of Incorporation
3.5(12) Amended and Restated Bylaws
4.1(12) 2005 Stock Incentive Plan.
5.1(12) Opinion and consent of David M. Loev, Attorney at Law re: the
legality of the shares being registered
10.1(4) Securities Purchase Agreement dated August 31, 2004
10.2(4) Callable Secured Convertible Note with AJW Partners, LLC, dated
August 31, 2004
10.3(4) Callable Secured Convertible Note with AJW Offshore, Ltd., dated
August 31, 2004
10.4(4) Callable Secured Convertible Note with AJW Qualified Partners, LLC,
dated August 31, 2004
10.5(4) Callable Secured Convertible Note with New Millennium Capital
Partners II, LLC, dated August 31, 2004
10.6(4) Stock Purchase Warrant with AJW Partners, LLC, dated August 31, 2004
10.7(4) Stock Purchase Warrant with AJW Offshore, Ltd., dated August 31,
2004
10.8(4) Stock Purchase Warrant with AJW Qualified Partners, LLC, dated
August 31, 2004
10.9(4) Stock Purchase Warrant with New Millennium Capital Partners II, LLC,
dated August 31, 2004
10.10(4) Registration Rights Agreement dated August 31, 2004
10.11(4) Security Agreement dated August 31, 2004
10.12(4) Intellectual Property Security Agreement dated August 31, 2004
10.13(4) Guarantee and Pledge Agreement dated August 31, 2004
10.14(6) Modification of Loan Agreement with SBA
10.15(6) Amended and Restated Note with SBA
10.16(7) Share Exchange and Reorganization Agreement with iTech
10.17(7) Securities Purchase Agreement (November 4, 2005)
10.18(7) Callable Secured Convertible Note with AJW Partners, LLC, dated
November 4, 2005
10.19(7) Callable Secured Convertible Note with AJW Offshore, Ltd., dated
November 4, 2005
10.20(7) Callable Secured Convertible Note with AJW Qualified Partners, LLC,
dated November 4, 2005
10.21(7) Callable Secured Convertible Note with New Millennium Capital
Partners II, LLC, dated November 4, 2005
10.22(7) Stock Purchase Warrant with AJW Partners, LLC, dated November 4,
2005
10.23(7) Stock Purchase Warrant with AJW Offshore, Ltd., dated November 4,
2005
10.24(7) Stock Purchase Warrant with AJW Qualified Partners, LLC, dated
November 4, 2005
10.25(7) Stock Purchase Warrant with New Millennium Capital Partners II, LLC,
dated November 4, 2005
10.26(7) Registration Rights Agreement, dated November 4, 2005
10.27(7) Intellectual Property Security Agreement, dated November 4, 2005
10.28(7) Security Agreement, dated November 4, 2005
10.29(7) Spinoff Agreement
10.30(7) Security Agreement (with Marathon)
10.31(7) Stock Purchase Agreement (November 7, 2005 - with Drug Consultants,
Inc.)
10.32(7) Secured Promissory Note with Drug Consultants
10.33(7) Stock Pledge Agreement with Drug Consultants
10.34(7) Factoring and Security Agreement (to sell accounts receivables to
Systran Financial Services Corporation)
10.35(7) Letter Agreement (states that the Company is not in default under
2005 securities purchase agreement unless defaults under 2004
securities purchase agreement)
58
10.36(7) Working Capital Line of Credit (iTech) with David Walters
10.37(7) Working Capital Line of Credit (iTech) with Keith Moore
10.38(7) Working Capital Line of Credit (SDG) with Keith Moore
10.39(8) Agreement and Plan of Acquisition with Abundant Nursing, Inc.
10.40(6) Agreement with B.P. Senior Care, Inc.
10.41(12) Indemnification Agreement with David Walters
10.42(12) Indemnification Agreement with Keith Moore
16.1(9) Letter from Wayne Richardson, CPA
16.2(10) Letter from Clyde Bailey P.C. dated June 20, 2005
21.1(12) Subsidiaries of Registrant
23.1(11) Consent of Clyde Bailey, P.C.
23.2(12) Consent of David M. Loev, Attorney at Law (included in Exhibit 5.1)
(1) Filed as Exhibits 3(i) and 3(ii), respectively, to the registration
statement on Form 10-SB12G filed on July 15, 2002, and incorporated
herein by reference.
(2) Filed as Exhibit 3.1 to the report on Form 8-K filed on September 2,
2003, and incorporated herein by reference.
(3) Filed as Exhibit 3.1 to the report on Form 8-K filed on September 30,
2003, and incorporated herein by reference.
(4) Filed as an Exhibit to the SB-2 Registration Statement filed on October
5, 2004, and incorporated herein by reference.
(5) Contained in Exhibit 5.1.
(6) Filed as Exhibits to the Company's SB-2/A Registration Statement filed
with the Securities and Exchange Commission on January 21, 2005, and
incorporated herein by reference.
(7) Filed as Exhibits to the report on Form 8-K filed on November 14, 2005
and incorporated herein by reference.
(8) Filed as Exhibit 2.1 to the Form 8-K filed on October 5, 2004.
(9) Filed as an Exhibit to the report on Form 8-K filed on March 4, 2005 and
incorporated herein by reference.
(10) Filed as an Exhibit to the report on Form 8-K filed on June 21, 2005 and
incorporated herein by reference.
(11) Filed herewith.
(12) To be filed by amendment.
Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
i. Include any prospectus required by Section 10(a)(3) of the Securities
Act;
ii. Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
iii. Include any additional or changed material on the plan of
distribution.
(2) For determining any liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(5) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement relating to the securities offered in the
registration statement, and that offering of the securities at that time
as the initial bona fide offering of those securities.
59
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
60
SIGNATURES
In accordance with Requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Irvine, State of California on December 19, 2005.
MT ULTIMATE HEALTHCARE CORP.
By: /s/ David Walters
David Walters
Chief Executive Officer
This registration statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
--------- ------- -----
/s/ David Walters Chief Executive Officer, December 19, 2005
David Walters President, Treasurer, and
Director (Principal Financial and
Accounting Officer)
/s/ Keith Moore Secretary and Director December 19, 2005
Keith Moore
61