UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the quarterly period ended October 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
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Commission File Number: 333-68942
CRITICAL CARE, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0490720
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6646 Indian School Road, N.E.,
Albuquerque, New Mexico 87110
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(Address, including zip code, of principal executive offices)
(505) 837-2020
(Registrant's telephone number, including area code)
LASIK AMERICA, INC.
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(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1)Yes No X
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(2)Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At March 20, 2006, the issuer had outstanding 11,616,043 shares of Common
Stock, no par value per share
CRITICAL CARE, INC.
(Formerly Lasik America, Inc.)
FORM 10-QSB
October 31, 2004
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. ----
Unaudited Condensed Consolidated Balance Sheet 3
Unaudited Condensed Consolidated Statements of Operations 4
Unaudited Condensed Consolidated Statement of Shareholders'
Deficiency 5
Unaudited Condensed Consolidated Statements of Cash Flows 6
Unaudited Notes to Condensed Consolidated Financial
Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults by the Company upon Its Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
CRITICAL CARE, INC. AND SUBSIDIARY
(f/k/a Lasik America, Inc.)
CONDENSED BALANCE SHEETS
October 31, July 31,
2004 2004
------------ ------------
ASSETS (Unaudited)
Current assets
Cash $ -- $ --
Accounts receivable -- --
Other current assets 5,294 5,044
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Total current assets 5,294 5,044
Property and equipment, at cost, net of accumulated depreciation
of $308,206 and 275,189, respectively 282,709 303,156
$ 288,003 $ 308,200
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Bank overdraft $ 853 $ 17,314
Accounts payable 184,632 329,721
Gross receipts and compensating use tax payable 241,668 229,170
Payroll taxes payable 305,243 306,078
Accrued penalties and interest on delinquent taxes 119,779 120,849
Other current liabilities 26,961 28,117
Current portion notes payable 51,640 51,640
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Total current liabilities 930,776 1,082,889
Loans payable to officers 12,194 17,494
Long term debt, net of current portion 280,985 80,985
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Total liabilities 1,223,955 1,181,368
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Stockholders' deficiency
Preferred stock $.001 par value, 100,000 shares authorized;
0 shares issued and outstanding -- --
Common stock $.001 par value, 25,000,000 shares authorized;
9,326,043 shares and 2,226,043 shares issued and
outstanding, respectively 9,326 2,226
Additional paid in capital 14,104,812 12,639,912
Accumulated deficit (15,050,090) (13,515,306)
Total stockholders' deficiency (935,952) (873,168)
------------ ------------
$ 288,003 $ 308,200
============ ============
See accompanying notes to condensed consolidated financial statements.
3
CRITICAL CARE, INC AND SUBSIDIARY
(f/k/a Lasik America, Inc.)
Condensed Statement of Operations (Unaudited)
three months ended October 31
-----------------------------
2004 2003
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Revenue $ 218,651 $ 275,856
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Costs and operating expenses
Operating costs 1,356,134 247,144
Depreciation 33,017 23,036
Interest 4,284 6,270
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Total costs and expenses 1,393,435 276,450
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Operating loss (1,174,784) (594)
Loss on investment due to abandonment (360,000) --
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Net loss $(1,534,784) $ (594)
=========== ===========
Basic and diluted net loss per share $ (0.30) $ (0.00)
=========== ===========
Shares used to compute basic and diluted
net loss per share 5,097,782 2,226,043
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
CRITICAL CARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED OCTOBER 31, 2004
Condensed Statement of Shareholders' Deficiency
Retained
Common Stock Additional Earnings
--------------------------- Paid-in (Accumulated
shares amount Capital Deficit) Total
------------ ------------ ------------ ------------ ------------
Balance, July 31, 2004 2,226,043 $ 2,226 $ 12,639,912 $(13,515,306) $ (873,168)
Common stock issued for investment 2,000,000 2,000 358,000 -- 360,000
Common stock issued for services 5,100,000 5,100 1,106,900 -- 1,112,000
Net loss for the period -- -- -- (1,534,784) (1,534,784)
------------ ------------ ------------ ------------ ------------
Balance October 31, 2004 9,326,043 $ 9,326 $ 14,104,812 $(15,050,090) $ (935,952)
============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
5
CRITICAL CARE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 2004 AND OCTOBER 31, 2003
Condensed Statement of Cash Flows (Unaudited)
three months ended October 31
-----------------------------
2004 2003
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Cash flows from operating activities
Net loss $(1,534,784) $ (594)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities
Depreciation 33,017 23,036
Noncash compensation 1,112,000 --
Loss on investment due to abandonment 360,000 --
Changes in operating assets and liabilities:
Decrease in:
Other current assets (250) (352)
Increase (decrease) in:
Accounts payable 54,912 (31,963)
Gross receipts and compensating use tax payable 12,498 16,028
Payroll taxes payable (836) 10,292
Other current liabilities (2,226) (778)
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Net cash (used in) provided by operating activities 34,331 15,669
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Cash flows from investing activities
Purchase of medical and equipment (12,570) --
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Net cash used in investing activities (12,570) --
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Cash flows from financing activities
Net decrease in bank overdraft (16,461) 9,236
Loans repayments to officers (5,300) (10,115)
Repayment of longterm debt -- (14,790)
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Net cash provided by (used in) financing activities (21,761) (15,669)
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Net decrease in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
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Supplemental disclosure of cash flow information
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Cash paid during the year for
Interest $ -- $ 741
=========== ===========
Income taxes $ -- $ --
=========== ===========
Schedule of Noncash Operating and Investing Transactions
Common stock issued for investment $ 360,000 $ --
=========== ===========
Common stock issued for services $ 1,112,000 $ --
=========== ===========
See accompanying notes to condensed consolidated financial statements.
6
CRITICAL CARE, INC. AND SUBSIDIARY
(FORMERLY LASIK AMERICA, INC.)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2004
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial statements in this report have been prepared by Critical Care, Inc
without audit, pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-QSB and do not include all of the information
and note disclosures required by accounting principals generally accepted in the
United States of America for annual financial statements. These financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended July 31, 2004, included in the Company's form 10-KSB
filed with the Securities and Exchange Commission on November 15, 2004.
In the opinion of management, information included in this report reflects all
adjustments, consisting of normal, recurring adjustments, necessary for fair
presentation of results for these interim periods.
The results of operation for the three months period ended October 31, 2004, are
not necessarily indicative of the results to be expected for the entire fiscal
year ending July 31, 2005
Critical Care, Inc. (the Company) was incorporated in the State of Nevada on
March 21, 2001. The Company operates an ophthalmic laser vision correction
center in Albuquerque, New Mexico. On October 26, 2004 the Company formally
changed its name from Lasik America, Inc. to Critical Care, Inc. The Company
contracted the services of consultants to assist in the expansion of the its
operations by either developing or acquiring a group of dialysis clinics in
Italy.
Principles of Consolidation
The consolidated financial statement include the accounts of the Company and its
wholly owned subsidiary. All significance inter-company transaction and the
balances have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America require management to make
estimates and assumptions that effect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several Statements
of Financial Accounting Standards.
In December 2004, the FASB issued FASB Statement No. 123 (revised 2004),
"Share-Based Payment" ("FAS 123(R)"). FAS 123(R) replaces FASB Statement No.
123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No.
25, "Accounting for Stock Issued to Employees". FAS 123(R) 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. The provisions of this Statement are
effective for the first interim or annual reporting period that begins after
December 15, 2005.
7
The Company does not expect that the adoption of these pronouncements will have
a material effect on the Company's financial position or results of operations.
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. The company had a net loss of $
$1,534,784 for the quarter ended October 31, 2004, and a working capital
deficiency of $925,482 and a shareholders' deficiency of $935,952 as of October
31, 2004 which raises substantial doubts about its ability to continue as a
going concern. The financial statements do not include adjustments that might
result from the outcome of this uncertainty.
Management believes that actions are presently being taken to revise the
Company's operating and financial requirements in order to improve the Company's
financial position and operating results. However, given the levels of its cash
resources and working capital deficiency, anticipated cash to be generated by
operation will be insufficient to meet anticipated cash requirements for
operation, working capital, and capital expenditures during the fiscal year
2005. Therefore, the Company is seeking additional equity or debt financing, but
there can be no assurance that sufficient additional financing will be
available.
NOTE 3: LONG-TERM DEBT
Long-term debt consists of the following as of October 31, 2004 and July 31,
2004:
October 31, July 31,
2004 2004
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The Company's former CEO had entered into a loan
agreement with the Estate of Rohan for the
acquisition of an excimer laser used in the
operations of the Company. During the year ended
July 31, 2004, the Company acquired the item and
the purchase price of the equipment was included
in the accounts payable due to the former CEO as
of July 31, 2004. Upon the resignation of the
former CEO, the loan was assumed by the Company.
The loan bears an interest at 8% per annum. Unpaid
interest on the loan as of October 31, 2004 was
$4,000 which is included in accrued expenses. $ 200,000 $ --
The former CEO made non-interest bearing loans to
the Company thru a series of cash advances in
fiscal years 2002, 2003 and 2004. The Internal
Revenue Service's applicable federal rate (AFR)
was used to compute the interest expense. 80,985 80,985
8
Capital lease obligation bearing interest at 5.22%
per annum with interest and principal payable in
monthly installments of $3,158. The obligation
expires in April 2005 with a $1 buyout. The lease
relates to an upgrade of laser equipment with net
book value of $35,006 and 41,570 at October 31,
2004 and July 31, 2004 respectively. 51,640 51,640
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332,625 132,625
Less: Current portion (51,640) (51,640)
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Total Long-term Debt $ 280,985 $ 80,985
=========== ===========
NOTE 4: SHAREHOLDERS' EQUITY
On October 29, 2004, the Company issued 100,000 shares of common stock to a
Director of the Company, for certain services beyond his responsibilities as a
Director that were provided to the Company. (See Note 7 for stock based
compensation to outside consultants).
NOTE 5: COMMITMENTS AND CONTINGENCIES
Delinquent Payroll and Gross Receipts Taxes
- -------------------------------------------
The Company is delinquent on employment taxes payable to the Internal Revenue
Service and on gross receipts taxes payable to the State of New Mexico. The
Liability for these taxes has been shown on the balance sheet as of October 31,
2004. The Company has negotiated with the Internal Revenue Service and the State
of New Mexico to establish payment plans and expects to payoff the entire amount
of taxes owed. As of July 31, 2004 the Internal Revenue Service filed a lien
against all the assets of the Company related to these delinquent payroll taxes.
Litigation
- ----------
On March 31, 2003, a former employee of the Company filed a complaint that she
was fired as an employee inspite of an employment contract that she had with the
Company. The Company has responded to the complaint stating that she violated
her contract through non-performance and dishonesty. (See subsequent event at
note 8).
NOTE 6: ACQUISITION OF SUBSIDIARY
- ---------------------------------
"On August 5, 2004, the Company consummated its merger with Salus Holding, Inc.
("Salus"). Pursuant to the merger agreement, the shareholder of Salus was issued
2,000,000 shares of common stock of the Company. The sole shareholder of Salus,
Homeland Security Technology, Inc., received 2,000,000 shares of the Company's
Common Stock having a fair value of $360,000 that approximated 43.7 percent of
the then outstanding shares of the Company calculated on a fully diluted basis
at the date of issuance.
Salus was the sole shareholder in Icon Salus S.r.l.("Icon Salus"), a company
formed under the laws of Italy. Salus was constructing a dialysis facility in
Amaseno, Italy. Following the Company's acquisition of Salus, the Company
experienced difficulties in the development of the Amaseno Clinic and was unable
to obtain the requisite permits and licenses from the Italian government,
provincial and local. Thus on October 31, 2004, the Company abandoned the
development of the Amaseno Clinic and recorded a $360,000 loss on this
investment.
9
NOTE 7: STOCK BASED COMPENSATION
On October 12, 2004, the Company issued 5,000,000 shares of common stock to five
(5) consultants pursuant to a consulting agreement with each of the consultants.
The shares were granted pursuant to the Company's Share Option Plan. The basis
of the valuation for the consulting agreements was $0.22, the fair market value
of the common stock.
NOTE 8: SUBSEQUENT EVENTS
On November 11, 2004, the Company issued 50,000 shares of common stock for legal
services.
On February 9, 2005, a complaint was settled in favor of a former employee. The
Company was obligated to pay $1,000 per month beginning March 1, 2005 for the
sum of $13,500, and to issue $10,000 worth of restricted stock at 10 cents based
on a share value date February 20, 2005.
On February 15, 2005, the Company issued 5,000,000 shares of common stock to a
consultant to the Company for services to be provided to the Company. Pursuant
to an oral agreement as of February 17, 2005, the stock was cancelled ab initio,
as if never issued.
On March 8, 2005, the Company issued 200,000 shares of common stock for services
provided to the Company.
On May 12, 2005, the Company issued 40,000 shares of common stock to the former
employee, pursuant to a final settlement agreement in connection with the
lawsuit settlement made in February 2005.
On October 3, 2005, the board authorized the issuance of 2,000,000 shares of
common stock to its Chief Executive Officer for certain services that were
provided for the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The following discussion and analysis should be read in conjunction with our
financial statements and the notes thereto appearing elsewhere in this report.
This report contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the use of forward-looking
terminology, such as "may", "will", "should", "expect", "anticipate",
"estimate", "project", "continue", "plans", "intends" or other similar
terminology. We caution you that forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and that actual
results may differ materially from the statements that constitute
forward-looking statements as a result of various factors.
Overview
We are a medical services company that focuses on delivering laser vision
correction surgical procedures to consumers. Our affiliated and employed doctors
provide medical care to our clients and we provide the necessary equipment,
technical staff, administrative services and the excimer laser, needed for the
delivery of laser eye surgery to our clients. We do not practice medicine,
rather our affiliated and employed doctors deliver medical care and treatment to
eye surgery patients.
10
We were incorporated on March 21, 2001 as LASIK America, Inc. In October 1995
and in March 1996, the United States Food and Drug Administration approved the
use of excimer lasers manufactured by Summit Technology, Inc. and VISX, Inc., to
treat low to moderate nearsightedness. In May 2001, we opened our first excimer
laser center in Albuquerque, New Mexico. On October 26, 2004 we formally changed
our name from Lasik America, Inc. to Critical Care, Inc.
Our doctors perform laser vision correction surgery procedures in our New Mexico
center office. We provide our ophthalmologist and optometrist with
state-of-the-art equipment and facilities as well as support services necessary
to perform vision correction procedures. At present we have one employed
ophthalmologist and one employed optometrist in our center. Although we have no
written agreements with these doctors, we have agreed to compensate our
ophthalmic surgeon at a rate of $125.00 per eye and our optometrist at $800 per
day.
Our doctors perform surgery on clients of our center, which includes delivery of
pre and post-operative care. Our doctors also perform surgery on clients at our
center where co-managing optometrists perform the pre and post-operative care.
To date, the supply of our VISX excimer laser and related equipment has come
through agreements that we have entered into with DVI Financial, Inc. and a
patent license with VISX, Incorporated. The Company also owns and operates a
Nidek laser. In the event that we would not be able to obtain additional excimer
lasers and related equipment from these providers, we believe that other
satisfactory sources of supply are available now that the FDA has approved
additional manufacturers of excimer lasers.
Our plan of operation
We believe that our New Mexico center now in operation can sustain its current
operations on current revenue and what we believe will be increased usage of our
center by new clients generated from our advertising and marketing efforts, as
well as general client awareness of the laser vision correction procedure. At
current levels, we are generating a net loss from operations. With current
revenues, we have experienced a continuing increase in the number of surgical
procedures performed in our center primarily, by advertising locally and through
the placement of kiosks in local shopping malls where high pedestrian traffic
exists. Our New Mexico center has the capacity to perform approximately 100 eye
surgery procedures each week and at present, we are performing approximately 20
eye surgeries each week.
We currently generate on average approximately $ 73,000 per month in gross
revenue and believe that we will require approximately $700,000 in gross revenue
during the next 12 months to maintain our existing operations. We believe that
our cash requirements during the next 12 months will be satisfied through a
private offering of our equity or debt securities.
On August 5, 2004, a subsidiary of the Company, Lasik Acquisition Corp.,
consummated its merger with Salus Holding, Inc. ("Salus"). Pursuant to the
merger agreement, the shareholders of Salus have been issued 2,000,000 shares of
common stock of the Company. The sole shareholder of Salus, Homeland Security
Technology, Inc., was issued 2,000,000 shares of Critical's Common Stock that
approximated 43.7 percent of the outstanding shares of Critical calculated on a
fully diluted basis at the date of issuance.
Salus was the sole shareholder in Icon Salus S.r.l.("Icon Salus"), a company
formed under the laws of Italy. Salus was constructing a dialysis facility in
Amaseno, Italy. Following the Company's acquisition of Salus, the Company
experienced difficulties in the development of the Amaseno Clinic and was unable
to obtain the requisite permits and licenses from the Italian government,
11
provincial and local. Thus on October 31, 2004, the Company abandoned the
development of the Amaseno Clinic. On or about November 2005, Homeland Security
Technology, Inc. transferred the 2,000,000 shares of Critical Common Stock to
Ernest Remo, Chief Executive Officer and Chairman of the Board of Critical,
pursuant to a settlement agreement in connection with a promissory note by
Homeland Security Technology, Inc. in favor of Mr. Remo.
On October 28, 2004, the Company entered into an agreement to purchase certain
rights to acquire a group of five dialysis clinics from Icon Veneto Srl, an
Italian company, pursuant to a rights purchase agreement. The rights purchased
consist of a binding letter of intent assigned to the Company pursuant to the
agreement. Pursuant to the rights purchase agreement the Company issued to Icon
Veneto 100,000 shares of preferred stock of the Company. The preferred stock was
convertible into 10,000,000 shares of common stock of the Company. The five
dialysis clinics which are the subject of the rights purchase agreement had
established revenues of over Euro 4,000,000 (US$5,250,000). On February 1, 2005,
the Company and Icon Veneto entered into a settlement agreement whereby the
rights purchase agreement was terminated ab initio, as if it never existed, as a
result of a dispute between Icon Veneto and the Company with respect to
representations of Icon Veneto with respect to the rights. Consequently, the
Company Preferred Stock issued to Icon Veneto was cancelled.
Management continues to believe that expanding into the dialysis business will
offer the Company a greater opportunity for growth and long term success.
Management believes that there is a worldwide growth in kidney disease worldwide
which creates a great and continually increasing demand for dialysis services.
Management has determined that the dialysis business offers greater return on
investment than the Lasik business. Thus the Company is currently seeking other
opportunities to expand into this business.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2004 AS COMPARED TO
THE THREE MONTHS ENDED OCTOBER 31, 2003:
The following table sets forth, for the three months ended October 31, 2004 and
2003, operating information expressed as a percentage of revenue. The results of
operations data for the three months ended October 31, 2004 and 2003 are not
necessarily indicative of the results to be expected for future periods.
Three Months Three Months
Ended Ended
October 31,2004 October 31,2003
Revenues 100% 100%
Operating Costs and non-cash compensations 620% 90%
Depreciation expense 15% 8%
Interest expense 2% 2%
Total Costs and Expenses 637% 100%
Net loss 702% 0%
Results of operations
- ---------------------
Revenues
We derive our revenues directly from the number of laser vision surgical
procedures performed at our center. Procedures performed by our affiliated
doctor generate revenue to us from the physician, who collects a fee from the
12
patient. Procedures performed by our employed doctor generate revenue directly
to us from the patient. Revenues for the three months ended October 31, 2004
totaled $218,861 as compared to $275,856 for the three months ended October 31,
2003. Total revenue is predicated on the number of procedures of laser vision
correction we performed during the period.
Operating Costs
Operating costs consist of doctor fees, royalty fees, medical supplies,
salaries, wages and related costs for general corporate functions. The total
operating costs for the three months ended October 31, 2004 was $1,356,134 as
compared to $247,144 for the three months ended October 31, 2003. As a
percentage of revenue, operating costs equaled 620% of total revenue during the
period as compared to 90% for the three months ended October 31, 2003. Royalty
fees are payable to the licensor of the VISX excimer laser we use for surgical
procedures and is currently $110.00 per eye. There is no royalty for use of the
Nidek laser, and the Company performs approximately 70% of the procedure with
the Nidek.
Non-cash compensation expense
Non-cash compensation expense consists of expenses related to common stock
issued in exchange for services. There was Non-cash compensation expense for the
three months ended October 31, 2004 in the amount of $1,112,000 and as compared
to no Non-cash compensation expense for the three months ended October 31, 2003.
Depreciation
Depreciation expense for the three months ended October 31, 2004 amounted to
$33,017 from the depreciation of capital items acquired for use in our
operations as compared to $23,036 for the three months ended October 31, 2003.
Interest expense
The Company incurred interest expense of $4,284 for the three months ended
October 31, 2004 as compared to $6,270 for the three months ended October 31,
2003. The interest results from our financing costs of some of our capital
equipment and interest accrued on delinquent payroll and gross receipt taxes.
Net loss
Our net loss for the three months ended October 31, 2004 was $1,534,784 as
compared to $594 for the three months ended October 31, 2003.
Liquidity and capital resources
Since our inception, we have financed our operations through revenues and
capital raised through the sale of our common stock. In order to effectuate our
business plan as structured we will need to raise significant capital from
external sources. In addition, we intend on raising capital internally through
the increase in the number of procedures we perform. We currently do not have a
credit facility or any commitments for additional financing. If we are unable to
obtain adequate financing from internal or external sources we may be unable to
fully implement our business plan and may be forced to modify our operations.
Cash flows provided by operating activities was $34,331 for the three months
ended October 31, 2004 as compared to $15,669 for the three months ended October
31, 2003. Net cash (used in) investing activities was ($12,570) for the three
13
months ended October 31, 2004. Net cash flows (used in) financing activities of
($21,761) in the three months ended October 31, 2004 as compared to ($15,669)
for the three months ended October 31, 2003.
Management believes that actions are presently being taken to revise the
Company's operating and financial requirements in order to improve the Company's
financial position and operating results. However, given the levels of its cash
resources and working capital deficiency at July 31, 2005, anticipated cash to
be generated by operations will be insufficient to meet anticipated cash
requirements for operations, working capital, and capital expenditures during
the fiscal year 2005. Therefore, the Company is seeking additional equity or
debt financing, but there can be no assurance that sufficient additional
financing will be available.
Delinquent Payroll and Gross Receipts Taxes
The Company is delinquent on employment taxes payable to the Internal Revenue
Service an on gross receipts taxes payable to the State of New Mexico. The
Liability for these taxes has been shown on the balance sheet as of October 31,
2004. The Company has negotiated with the Internal Revenue Service and the State
of New Mexico to establish payment plans and expects to payoff the entire amount
of taxes owed. As of July 31, 2004 the Internal Revenue Service filed a line
against all the assets of the Company related to these delinquent payroll taxes.
Recently issued accounting standards
In December 2004, the FASB issued FASB Statement No. 123 (revised 2004),
"Share-Based Payment" ("FAS 123(R)"). FAS 123(R) replaces FASB Statement No.
123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No.
25, "Accounting for Stock Issued to Employees". FAS 123(R) 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. The provisions of this Statement are
effective for the first interim or annual reporting period that begins after
December 15, 2005. The Company is currently evaluating the provisions of SFAS
No. 123 (R) and has not yet determined the impact, if any, that SFAS No. 123 (R)
will have on its financial statement presentation or disclosure.
.
The Company does not expect that the adoption of these pronouncements will have
a material effect on the Company's financial position or results of operations.
ITEM 3. CONTROLS AND PROCEDURES
-----------------------
(a) Evaluation of disclosure controls and procedures.
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the its Chief
Executive Officer/Chief Financial Officer, of the effectiveness of the Company's
disclosure controls and procedures. Disclosure controls and procedures are
designed to ensure that information required to be disclosed in the periodic
reports filed or submitted under the Securities and Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms. Based upon that
evaluation, the Chief Executive Officer/Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective in alerting them
on a timely basis to material information relating to the Company required to be
included in the Company's reports filed or submitted under the Exchange Act.
14
(b) Changes in internal controls.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
15
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
A complaint was filed against the Company on March 31, 2003 by Mary Ratchford, a
former employee. Ms. Ratchford contends that she was fired as an employee
inspite of an employment contract that she had with the Company. The Company has
responded to the charge stating that she violated her contract through
non-performance and dishonesty. In February 2005, the Company and Ms. Ratchford
entered into a settlement agreement with respect to the litigation. Pursuant to
the Settlement Agreement, the Company agreed to pay Ms. Ratchford $13,500 in the
aggregate which is payable in fourteen installments; and issue shares of the
Company's common stock that had a trading value of $10,000. On May 12, 2005, the
Company issued 40,000 shares of common stock to Ms. Ratchford pursuant to the
settlement agreement. Ms. Ratchford's complaint will be dismissed following her
receipt of the last payment pursuant to the Settlement Agreement.
The Company is delinquent on employment taxes payable to the Internal Revenue
Service an on gross receipts taxes payable to the State of New Mexico. The
Liability for these taxes has been shown on the balance sheet as of October 31,
2004. The Company has negotiated with the Internal Revenue Service and the State
of New Mexico to establish payment plans and expects to payoff the entire amount
of taxes owed. As of July 31, 2004 the Internal Revenue Service filed a line
against all the assets of the Company related to these delinquent payroll taxes.
The Company is involved in other various legal proceedings and claims incident
to the normal conduct of its business. The Company believes that such legal
proceedings and claims, individually and in the aggregate, are not likely to
have a material adverse effect on its financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
A total of 5,000,000 shares of common stock were reserved and available for
grant under the Company's 2004 Stock Award and Incentive Plan. As of February
28, 2006, 5,000,000 shares were issued pursuant to the plan.
On August 5, 2004, the Company, consummated its merger with Salus Holding, Inc.
("Salus"). Pursuant to the merger agreement, the shareholders of Salus were
issued 2,000,000 shares of common stock of the Company. The sole shareholder of
Salus, Homeland Security Technology, Inc., was issued 2,000,000 shares of the
Company's Common Stock that approximated 43.7 percent of then outstanding shares
of the Company calculated on a fully diluted basis at the date of issuance.
Salus was the sole shareholder in Icon Salus S.r.l. ("Icon Salus"), a company
formed under the laws of Italy. Salus was constructing a dialysis facility in
Amaseno, Italy. Following the Company's acquisition of Salus, the Company
experienced difficulties in the development of the Amaseno Clinic and was unable
to obtain the requisite permits and licenses from the Italian government,
provincial and local. Thus on October 31, 2004, the Company abandoned the
development of the Amaseno Clinic. On or about November 2005, Homeland Security
Technology, Inc. transferred the 2,000,000 shares of Critical Common Stock to
Ernest Remo, Chief Executive Officer and Chairman of the Board of Critical,
pursuant to a settlement agreement in connection with a promissory note by
Homeland Security Technology, Inc. in favor of Mr. Remo.
16
On October 12, 2004, the Company issued 5,000,000 shares of common stock to five
(5) consultants pursuant to a consulting agreement with each of the consultants.
The shares were granted pursuant to the Company's Share Option Plan.
On October 28, 2004, the Company entered into an agreement to purchase certain
rights to acquire a group of five dialysis clinics from Icon Veneto srl, an
Italian company, pursuant to a rights purchase agreement. The rights purchased
consist of a binding letter of intent assigned to the Company pursuant to the
agreement. Pursuant to the rights purchase agreement the Company issued to Icon
Veneto 100,000 shares of preferred stock of the Company. The preferred stock was
convertible into 10,000,000 shares of common stock of the Company. The five
dialysis clinics which are the subject of the rights purchase agreement had
established revenues of over Euro 4,000,000 (US$5,250,000). On February 1, 2005,
the Company and Icon Veneto entered into a settlement agreement whereby the
rights purchase agreement was terminated ab initio, as if it never existed, as a
result of a dispute between Icon Veneto and the Company with respect to
representations of Icon Veneto with respect to the rights. Consequently, the
Company Preferred Stock issued to Icon Veneto was cancelled.
On October 29, 2004, the Company issued 100,000 shares of common stock to Malcom
Bauer, a Director of the Company, for certain services that Mr. Bauer provided
to the Company.
On November 11, 2004, the Company issued 50,000 shares of common stock to
Stephen Czarnik, an attorney for the Company.
On February 15, 2005, the Company issued 5,000,000 shares of common stock to Les
Leger, a consultant to the Company for services to be provided to the Company.
Pursuant to an oral agreement between the Company and Mr. Ledger as of February
17, 2005, the stock was cancelled ab initio, as if never issued.
On March 8, 2005, the Company issued 200,000 shares of common stock to Jeffrey
Wasserstrom, a surgeon, for services provided to the Company.
On May 12, 2005, the Company issued 40,000 shares of common stock to Mary
Ratchford, a former employee, pursuant to a settlement agreement in connection
with a lawsuit brought by Ms. Ratchford.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES
--------------------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
-----------------
None.
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits
Exhibit 31.1 Certification of Ernest B. Remo pursuant to Rule 13-14(a)
and Item 307 of Regulation SB
Exhibit 32.1 Certification by Ernest B. Remo Pursuant to the 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
b) Reports on Form 8-K
On August 4, 2004, the Company filed Form 8-K with respect to the merger of
Salus Holdings.
On October 29, 2004, the Company filed Form 8-K with respect to the change of
the Company's name.
On November 15, 2004, the Company filed Form 8-K with respect to the change in
members of the Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRITICAL CARE, INC.
-------------------
(Registrant)
By: /s/ Ernest B.Remo
--------------------------------
Ernest B. Remo
Chairman and
Chief Executive Officer
(Principal Executive
Officer and Principal
Accounting and Financial
Officer)
Date: April 6, 2006
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