UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 27, 2004
NATIONAL BUSINESS HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Florida 000-32563 650710392
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4878 Ronson Court, San Diego, CA 92111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (858) 243-2615
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(Former name or former address, if changed since last report.)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets.
Business
On December 27, 2004, the Company acquired both Union Dental Corp, a
Florida corporation ("Union Dental") and Direct Dental Services, Inc., a Florida
corporation ("DDS"), through a share exchange and reorganization (the
"Acquisition"), pursuant to which Union Dental and DDS became wholly-owned
subsidiaries of the Company, and acquired (i) all of the issued and outstanding
shares of common stock of Union Dental and DDS in exchange for an aggregate of
17,500,000 shares of authorized, but theretofore unissued, shares of common
stock, $0.0001 par value, of the Company and 1,000,000 shares of preferred stock
with each share of preferred stock providing voting rights equal to 15 shares of
the Company's common stock (there are no dividend, redemption, liquidation or
conversion rights applicable to these shares of preferred stock), (ii) all of
the issued and outstanding options to purchase Union Dental capital stock in
exchange for an aggregate of 3,452,250 options to purchase common stock of the
Company, constituting approximately 68% of the capital stock of the Company.
Prior to the closing of the Acquisition, the existing shareholders of the
Company surrendered 69% of the shares of common stock, thus reducing the issued
and outstanding shares of Common Stock of the Company from 32,284,831 shares to
10,000,000 shares.
Union Dental acquired substantially all of the assets (except the patient
list) of a dental practice referred to as George D. Green D.D.S., P.A. in Coral
Springs, Florida, where it employs twelve (12) full time employees and one part
time employee. The Coral Springs office is comprised of a licensed dentist, a
licensed associate dentist, two hygienists, four nurses, two office managers, a
Union Dental insurance specialist and a Union Dental administrative director.
DDS is a Florida corporation that operates a network of duly licensed
dental providers (the "Dental Referral") who provide dental services through the
network to union members in accordance with arrangements between UDC and various
unions. The Company currently has contracts with local unions, such as
Communications Workers of America ("CWA"), International Brotherhood of
Electrical Workers ("IBEW") and General Electric's International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers - Communications
Workers of America ("IUE-CWA"). Members of the Dental Network are assigned
"areas of exclusivity" established by DDS which grants the Dental Network
provider primary responsibility to provide for the general dentistry and
specialist services required by covered union members. DDS's Network dentists
accept as payment in full for covered services the scheduled amount payable by
the applicable union sponsored dental benefit plan together with a co-payment
from the covered union member. The co-payment to be paid by the union member is
generally substantially lower than the scheduled co-payment set forth in the
applicable dental benefit plan, resulting in significant savings to the union
member.
Item 4.01 Changes In Registrant's Certifying Accountant
(a) (i) Lawrence Scharfman ("Scharfman"), by letter dated January 3, 2005,
was dismissed as the independent registered public accounting firm for National
Business Holdings, Inc. (the "Company"). Scharfman had been the independent
registered public accounting firm for and audited the financial statements of
the Company as of May 31, 2004 for the seventeen months in the period ended May
31, 2004.
2
(ii) The reports of Scharfman on the financial statements of the Company
for the period of May 31, 2004 for the seventeen months in the period ended May
31, 2004 contained no adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
(iii) The decision to change accountants was approved unanimously by the
Board of Directors.
(iv) In connection with the audit for the period of May 31, 2004 for the
seventeen months in the period ended May 31, 2004 and in connection with
Scharfman's review of the subsequent interim periods preceding dismissal on
January 3, 2005, there have been no disagreements between the Company and
Scharfman on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of Scharfman, would have caused Scharfman to make reference
thereto in their report on the Company's financial statements for these fiscal
years. During the two most recent fiscal years and prior to the date hereof, the
Company had no reportable events (as defined in Item 304(a)(1) of Regulation
S-B).
(b) De Meo Young McGrath ("DYM"), by letter dated January 3, 2004, was
engaged as the independent registered public accounting firm for the Company.
(i) The Company has not consulted with DYM regarding the application of
accounting principles to any contemplated or completed transactions nor the type
of audit opinion that might be rendered on the Company's financial statements,
and neither written nor oral advice was provided that would be an important
factor considered by the Company in reaching a decision as to an accounting,
auditing or financial reporting issues.
Section 5 - Corporate Governance and Management
Item 5.01 Change in Control of Registrant.
With the issuance of 17,500,000 shares of Common Stock to holders of
capital stock of Union Dental and DDS upon the Company's Acquisition, the former
holders of capital stock of Union Dental and DDS became the holders of 63.6% of
the capital stock of the Company. The change of control of the Company was
effected solely by the issuance of newly issued shares of the Company to the
former shareholders of Union Dental and DDS upon the Acquisition without any
other consideration.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
(a) Effective on December 27, 2004 and upon the Acquisition, the then
officers and directors of the Company resigned and were replaced by persons who
have been officers and directors of Union Dental. See 5.02(c) of this report on
Form 8-K.
(b) See 5.02(c) of this report on Form 8-K.
(c) The following persons became the executive officers and directors of
the Company on December 27, 2004. Prior to the Acquisition, such persons had no
relationship with the Company.
3
Name Age Position
- ------------------- ----- -----------------------------------------------------
Dr. George D. Green 46 President, Chief Executive Officer and Chairman of the
Board of Directors
Dr. George D. Green 46, is Chairman of the Board of Directors, President
and Chief Executive Officer of Union Dental Corp. He graduated from the
University of Miami in 1983. He attended Georgetown University School of
Dentistry where he graduated in 1985 with his Doctor of Dental Surgery (DDS)
degree. Dr. Green started his general dentistry practice in Florida in 1986 and
currently maintains that office. He has been President of the Coral Springs
Business Club from 1993-96 and President of the Coral Springs/Parkland Rotary
Club from 1996-97. He is the Founder of Union Dental Corp., and has held the
management positions of the Company since inception. Dr. Green has been a Dental
Network participant since 1992 in General Dentistry, Endodontics and
Periodontics. In August 2000, he purchased 50% ownership of DDS and on December
31, 2003, he purchased the remaining 50% of DDS.
Executive Compensation Union Dental's Officers
The officers of Union Dental became the officers of the Company after the
closing of the Acquisition. The following table sets forth the compensation
earned during the years ended December 31, 2002 and 2003 by Union Dental's
officers. On December 28, 2004, Dr. George D. Green became the President and
Chief Executive Officer of the Company:
Long Term
Compensation
Annual Compensation Awards
- ---------------------------------------------------------------------------
Securities
Underlying
Name And Principal Position Salary($) Bonus($) Options
- ---------------------------------------------------------------------------
Dr. George D. Green,
President, Chief Executive 2003 $ 505,587(1) $ 0 0
Officer, and Director 2002 $ 542,572(2) 0 0
Dr. Melvyn Greenstein 2003 $ 270,259(3) 0 0
Former Director (a) 2002 $ 263,647(4) 0 0
- -----------------
(a) On January 5, 2004, Dr. Melvyn Greenstein resigned from DDS as a director,
president and registered agent. He was succeeded as president and
registered agent by Dr. George D. Green.
(1) In 2003 Dr. George Green received from DDS $235,464.00 and $270,123.00 from
George D. Green, DDS, PA.
(2) In 2002 Dr. George Green received from DDS $243,647.00 and $298,925.00 from
George D. Green, DDS, PA.
4
(3) In 2003 Dr. Melvyn Greenstein received from DDS $38,321.00 and his
management company (Gopher International) received $231,938.00 from DDS.
(4) In 2002 Dr. Melvyn Greenstein received from DDS $15,647.00 and his
management company (Gopher International) received $248,000.00 from DDS.
Related Party Transactions
Union Dental entered into an employment agreement with Dr. George D. Green
on December 22, 2004, pursuant to which Dr. Green is employed as the President,
Chief Executive Officer and Chairman of the Board of Directors of Union Dental
and became the Chief Executive Officer, President and Chairman of the Board of
the Company upon the closing of the Acquisition. The current term of the
agreement expires December 31, 2009 but will be automatically renewed for
one-year periods until either party gives the other party written notice of its
intent not to renew at least 30 days prior to the end of the term. Dr Green is
under contract to receive an annual base salary of $250,000. Dr. Green is
entitled to participate in the Company's bonus program which will be dependent
upon the achievement of certain milestones. Additionally, Union Dental granted
Dr. Green 750,000 options to purchase shares of common stock of Union Dental.
Upon the closing of the Acquisition, such options became options to purchase
shares of Common Stock of the Company.
Union Dental entered into an employment agreement with Dr. Leonard I.
Weinstein on October 26, 2004, pursuant to which Dr. Weinstein is employed as a
Director of Union Dental. In addition, upon the completion of Union Dental of
funding of $3,000,000, Dr. Weinstein would become the Chief Operating Officer.
The current term of the agreement expires on the second anniversary from the
date of funding but may be renewed for one-year periods by Union Dental unless
either party gives the other party written notice of its intent not to renew at
least 90 days prior to the end of the term. Upon becoming the Chief Operating
Officer, Dr Weinstein shall receive an annual base salary of $60,000 and shall
receive $500 per meeting as a director. Union Dental granted Dr. Weinstein
156,250 options to purchase shares at a 10% discount from the first quote after
the Acquisition. One third of these options vest immediately with the remaining
options dependent upon the achievement of certain milestones. Additionally,
Union Dental entered into a Shareholder's Agreement and Management Contract with
Tropical Medical Services, a company in which Dr. Weinstein is President whereby
upon the Company receiving debt or equity financing of $3,000,000 from an
introduction by Tropical Medical or dp Martin & Associates, Inc., Tropical
Medical shall receive 960,000 shares of the Issuer. Upon the closing of the
Acquisition, such options became options to purchase shares of Common Stock of
the Company.
Union Dental entered into an employment agreement with Robert Gene Smith on
February 15, 2004, pursuant to which Mr. Smith became a member of the Board of
Directors of Union Dental. The current term of the agreement expires February
15, 2006 and thereafter shall be voted on by Union Dental's shareholders at the
annual meeting and renewed for two-year periods unless either party gives the
other party written notice of its intent not to renew at least 90 days prior to
the end of the term. Mr. Smith has been receiving an annual stipend of $24,000.
Additionally, Union Dental granted Mr. Smith 250,000 options to purchase shares
of common stock of Union Dental at $0.50 per share and an additional 247,500
options dependent upon the achievement of certain milestones. Upon the closing
of the Acquisition, such options became options to purchase shares of Common
Stock of the Company.
Item 5.05 Amendment to the Registrant's Code of Ethics or Waiver of a Provision
of the Code of Ethics.
Effective on December 28, 2004, the Company adopted a Code of Ethics (filed
hereto as Exhibit 14.1). Prior thereto, the Company had no formal, written code
of ethics.
5
Section 8 - Other Events
Item 8.01 Other Events.
Certificate of Incorporation and By-laws.
As soon as practicable following the Acquisition, the articles of
incorporation of the Company will be amended and restated to: (i) change the
name of the Company to Union Dental Holdings, Inc. As soon as practicable
following the Acquisition, the bylaws of the Company will be amended and
restated in their entirety.
Section 9 - Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Direct Dental Services, Inc. and George D. Green, D.D.S., P.A., Inc.
Financial Statements for the years ended December 31, 2003 and December 31, 2002
with independent auditors report (including Balance Sheets, Statement of
Operations, Statements of Shareholders' Equity, Statement of Cash Flows, and
Notes to Consolidated Financial Statements) starting on page F-1.
INDEX TO DIRECT DENTAL SERVICES, INC. FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm..................F-1
Consolidated Balance Sheet...............................................F-2
Consolidated Income Statement............................................F-3
Consolidated Statement of Changes in Shareholder's Equity................F-4
Consolidated Statement of Cash Flows.....................................F-5
Notes to Consolidated Financial Statement...............................F-6
INDEX TO GEORGE D. GREEN, DDS, P.A., INC. FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm..................F-9
Consolidated Balance Sheet..............................................F-10
Consolidated Income Statement...........................................F-11
Consolidated Statement of Changes in Shareholder's Equity...............F-12
Consolidated Statement of Cash Flows....................................F-13
Notes to Consolidated Financial Statement..............................F-14
6
DE MEO, YOUNG, MCGRATH
A PROFESSIONAL SERVICES COMPANY
SUITE 517 SUITE 411
2400 EAST COMMERCIAL BOULEVARD 2424 NORTH FEDERAL HIGHWAY
FORT LAUDERDALE, FLORIDA 33308 BOCA RATON, FLORIDA 33431
(954) 351-9800 (561) 447-9800
FAX (954) 938-8683 FAX (561) 391-8856
www.dymco.net www.dymco.net
ANTHONY DE MEO, CPA*, ABV, PFS MICHAEL I. BLOOM, CPA
ROBERT E. MCGRATH, CPA LAWRENCE E. DEBRUNNER, CPA
DAVID I. STOCKWELL, CPA
BARRY E. WAITE, CPA ------------------
ROBERTA N. YOUNG, CPA *regulated by the State of Florida
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
of Direct Dental Services, Inc.
We have audited the accompanying balances of Direct Dental Services, Inc. (a
Florida corporation) as of December 31, 2003 and 2002, and the related
statements of income, changes in shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit of these statements in accordance with the standards of
the Public Company 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Direct Dental Services, Inc. as
of December 31, 2003 and 2002, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
De Meo, Young, McGrath
/s/De Meo, Young, McGrath
Fort Lauderdale, Florida
November 29, 2004
DYM
MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS: MANAGEMENT
CONSULTING SERVICES DIVISION; SEC PRACTICE SECTION; PRIVATE COMPANIES PRACTICE
SECTION; TAX DIVISION OF FLORIDA; INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS;
INSTITUTE OF BUSINESS APPRAISERS
F-1
DIRECT DENTAL SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
2003 2002
---------------- ------------------
ASSETS
Current Assets:
Cash $ 6,656 $ -
Accounts Receivable 24,500 42,876
Due from officer 232,467 240,036
---------------- ------------------
Total Current Assets 273,623 282,912
---------------- ------------------
Property and Equipment:
Furniture and Equipment 21,606 21,606
Accumulated Depreciation (21,606) (21,606)
---------------- ------------------
Total Property and Equipment - -
---------------- ------------------
Total Assets $ 273,623 $ 282,912
---------------- ------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 8,460 $ 1,419
Unearned Membership Fees 264,663 280,993
---------------- ------------------
Total Current Liabilities 273,123 282,412
---------------- ------------------
Total Liabilities 273,123 282,412
---------------- ------------------
Shareholders' Equity:
Common Stock, par value $1.00, 7,500 shares
authorized, 500 shares issued and outstanding 500 500
Retained Earnings - -
---------------- ------------------
Total Shareholders' Equity 500 500
---------------- ------------------
Total Liabilities and Shareholders' Equity $ 273,623 $ 282,912
================ ==================
See the accompanying accountant's report
and related notes to financial statements.
F-2
DIRECT DENTAL SERVICES, INC.
INCOME STATEMENT
DECEMBER 31, 2003 AND 2002
2003 2002
---------------- ------------------
Income
Fees $ 645,994 $ 576,324
---------------- ------------------
Operating Expenses
Advertising and Promotions - 1,100
General and administrative 58,877 53,797
Postage 21,608 31,874
Printing Brochures 32,534 21,209
Rent 42,800 40,038
---------------- ------------------
Total Operating Expenses 155,819 148,018
---------------- ------------------
Operating Income 490,175 428,306
---------------- ------------------
Other Income
Interest Income 930 1,632
---------------- ------------------
Net Income $ 491,105 $ 429,938
================ ==================
See the accompanying accountant's report
and related notes to financial statements.
F-3
DIRECT DENTAL SERVICES, INC.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
DECEMBER 31, 2003 AND 2002
TOTAL
COMMON RETAINED SHAREHOLDER'S
STOCK EARNINGS EQUITY
----------- --------------- -----------------
December 31, 2001 $ 500 $ (160,311) $ (159,811)
Net Income - 429,938 429,938
Distributions - (269,627) (269,627)
----------- --------------- -----------------
December 31, 2002 $ 500 $ - $ 500
Net Income - 491,105 491,105
Distributions - (491,105) (491,105)
----------- --------------- -----------------
December 31, 2003 $ 500 $ - $ 500
=========== =============== =================
See the accompanying accountant's report
and related notes to financial statements.
F-4
DIRECT DENTAL SERVICES, INC.
STATEMENT OF CASH FLOWS
DECEMBER 31, 2003 AND 2002
2003 2002
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 491,105 $ 429,938
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation - -
(Increase) Decrease in:
Accounts Receivable 18,376 (6,877)
Shareholders' loans (4,431) (247,588)
Increase (Decrease) in:
Accounts Payable 8,460 -
Deferred Revenue (16,330) 87,080
Net Cash Provided by Operating Activities 497,180 262,553
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans From Shareholders 12,000 -
Net Cash Provided by Investing Activities 12,000 -
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (491,105) (269,627)
Net Cash Used in Financing Activities (491,105) (269,627)
----------------- ----------------
NET INCREASE(DECREASE) IN CASH 18,075 (7,074)
CASH AT BEGINNING OF YEAR (1,419) 5,655
----------------- ----------------
CASH AT END OF YEAR $ 16,656 $ (1,419)
================= ================
SUPPLEMENTAL DISCLOSURE
Interest paid $ - $ -
================= ================
See the accompanying accountant's report
and related notes to financial statements.
F-5
DIRECT DENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Direct Dental Services, Inc (the Company) was formed under the laws of the State
of Florida in January 1988 and maintains a network of dentists who perform
dental services for union members in seventeen states. The Company has contracts
with dentists in Alabama, Arizona, California, Florida, Georgia, Hawaii,
Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Nevada, North Carolina,
Oklahoma, South Carolina, Tennessee and Texas.
Property and Equipment
Property and equipment are stated at cost. There is no depreciation provision
for 2003 or 2002 as assets were fully depreciated at December 31, 2001. The
assets were depreciated using the straight line method over their useful lives.
Assets are capitalized if they have a cost of $250 or greater and a useful life
greater than one year.
Revenue Recognition
The Company prepares their financial statements on the accrual basis of
accounting. Under this basis, revenues are recognized when earned and expenses
are recognized when incurred.
Allowance for Doubtful Accounts
The Company has no provision for doubtful accounts since accounts receivables
consist primarily of amounts recorded as unearned memberships. If a
participating dentist does not timely remit the amount due, the Company voids
their contract with the resulting write-off against unearned memberships.
Statement of Cash Flows
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents for purposes of the Statement of
Cash Flows.
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 of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-6
DIRECT DENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable result from contracts signed by dentists who join the
network and pay the contract fee in installments.
Accounts receivable consist of the following:
2003 2002
------------- ------------
Due from individual dentists $ 24,500 $ 42,876
============= ============
NOTE 3 - CONCENTRATIONS OF CREDIT RISK
All income is derived from dentist membership fees. However, the concentration
of credit risk associated with that is limited due to the large number of
dentists in the network and their dispersion throughout the many geographic
areas of the Company's network.
Concentration of credit risk associated with respect to accounts receivable are
limited due to the Company's large number of dentists and the fact that no
single dentist accounts for more than 2 percent of the company's fees.
NOTE 4 - PROPERTY AND EQUIPMENT
At December 31, 2003 and 2002, property and equipment consisted of the
following:
2003 2002
-------------- -------------
Furniture and equipment $ 21,606 $ 21,606
Less: accumulated depreciation (21,606) (21,606)
$ - $ -
============== =============
F-7
DIRECT DENTAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 5 -UNEARNED MEMBERSHIP FEES
Dentists enroll and renew their contracts with the Company every year or year
and a half at various times. Most of the dentist membership fees are paid at the
signing of the contracts. The revenue is recognized over the life of the
contracts.
Unearned membership fees at December 31, 2003 and 2002 is as follows:
2003 2002
------------- ------------
Unearned Membership fees $ 264,663 $ 280,993
============= ============
NOTE 6 -RELATED PARTY TRANSACTIONS
The Company reimburses the shareholders for certain expenses which they incur
personally on behalf of the Company. These expenses are primarily for office
overhead and insurance. The amounts reimbursed to the shareholders by the
Company were $57,835 and $63,682 for 2003 and 2002, respectively.
NOTE 7 -SHAREHOLDERS' LOANS
The shareholders' are obligated on loans made to them by the Company. The loans
have no stated interest rate or repayment terms. The loans are expected to be
repaid within the next year and therefore, are classified as current assets. The
amounts owed by the shareholders' to the Company are $232,467 and $240,036 for
2003 and 2002, respectively.
NOTE 8 -SUBSEQUENT EVENTS
Subsequent to December 31, 2003, the Company entered into a reorganzition
agreement with National Business Holdings, Inc., a Florida corporation. The
agreement is expected to be finalized by December 31, 2004.
The lease for the office space has expired and a new lease has yet to be signed.
F-8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
of George D. Green, D.D.S., P.A., Inc.
We have audited the accompanying balances of George D. Green, D.D.S., P.A., Inc.
(a Florida corporation) as of December 31, 2003 and 2002, and the related
statements of income, changes in shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit of these statements 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of George D. Green, D.D.S., P.A.,
Inc. as of December 31, 2003 and 2002, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
De Meo, Young, McGrath
/s/ De Meo, Young, McGrath
Fort Lauderdale, Florida
November 29, 2004
F-9
GEORGE D. GREEN, DDS, P.A.
BALANCE SHEET
DECEMBER 31, 2003 AND 2002
2003 2002
---------------- ----------------
ASSETS
Current Assets:
Cash $ - $ 6,624
Accounts receivable 248,273 281,274
Inventory, supplies 24,055 28,213
Prepaid expenses 13,809 634
Due from Officer 48,187 48,187
---------------- ----------------
Total Current Assets 334,324 364,932
---------------- ----------------
Property and Equipment:
Net of accumulated depreciation of $156,768 and
$149,238 for 2003 and 2002 respectively 46,753 50,546
---------------- ----------------
Total Assets $ 381,077 $ 415,478
================ ================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 23,542 $ 30,390
Notes payable - current portion 40,434 21,704
Customer deposits 26,613 30,577
---------------- ----------------
Total Current Liabilities 90,589 82,671
---------------- ----------------
Long Term Liabilities:
Notes payable - long-term portion 53,938 94,372
---------------- ----------------
Total Liabilities 144,527 177,043
---------------- ----------------
Shareholder's Equity:
Common Stock, $1.00 par value, 1,000 shares
authorized, 500 shares issued and outstanding 500 500
Retained earnings 236,050 237,935
---------------- ----------------
Total Shareholder's Equity 236,550 238,435
---------------- ----------------
Total Liabilities & Shareholder's Equity $ 381,077 $ 415,478
================ ================
See the accompanying accountant's report
and related notes to financial statements.
F-10
GEORGE D. GREEN, DDS, P.A.
INCOME STATEMENT
DECEMBER 31, 2003 AND 2002
2003 2002
---------------- ----------------
Income:
Fees $ 1,355,414 $ 1,348,882
Rental income 15,000 -
---------------- -----------------
Total Income 1,370,414 1,348,882
---------------- -----------------
Expenses:
Advertising and promotion 2,972 1,078
General and administrative costs 501,438 479,464
Depreciation 7,530 7,876
Wages and payroll tax expenses 587,411 513,272
---------------- -----------------
Total Operating Expense 1,099,351 1,001,690
---------------- -----------------
Net Income $ 271,063 $ 347,192
================ =================
See the accompanying accountant's report
and related notes to financial statements.
F-11
GEORGE D. GREEN, DDS, P.A.
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
DECEMBER 31, 2003 AND 2002
TOTAL
COMMON RETAINED SHAREHOLDER'S
STOCK EARNINGS EQUITY
----------- --------------- -----------------
December 31, 2001 $ 500 $ 288,669 $ 289,169
Net Income - 347,192 347,192
Distributions - (397,926) (397,926)
----------- --------------- -----------------
December 31, 2002 $ 500 $ 237,935 $ 238,435
----------- --------------- -----------------
Net income - 271,063 271,063
Distributions - (272,948) (272,948)
----------- --------------- -----------------
December 31, 2003 $ 500 $ 236,050 $ 236,550
=========== =============== =================
See the accompanying accountant's report
and related notes to financial statements.
F-12
GEORGE D. GREEN, DDS, P.A.
STATEMENT OF CASH FLOWS
DECEMBER 31, 2003 AND 2002
2003 2002
----------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 271,063 $ 347,192
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 7,530 7,876
(Increase) Decrease in:
Accounts Receivable 33,001 (52,643)
Inventory, supplies 4,158 1,814
Prepaid Expenses (13,175) 3,290
Increase (Decrease) in:
Accounts Payable and accrued expenses (977) 8,146
Customer Deposits (3,964) 16,177
Net Cash Provided by Operating Activities 297,636 331,852
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment: (3,738) (44,468)
Net Cash Provided (Used) by Investing Activities (3,738) (44,468)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on Borrowings (28,201) (36,671)
Repayment of Loan to Shareholder - 145,000
Distributions (272,948) (397,926)
Net Cash Used by Financing Activities (301,149) (289,597)
----------------- ----------------
NET DECREASE IN CASH (7,251) (2,213)
CASH AT BEGINNING OF YEAR 6,624 8,837
----------------- ----------------
CASH AT END OF YEAR $ (627) $ 6,624
================= ================
SUPPLEMENTAL DISCLOSURE
Interest Paid $ 45,057 $ 55,282
================= ================
See the accompanying accountant's report
and related notes to financial statements.
F-13
GEORGE D. GREEN, DDS, P.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
George D. Green, DDS, P.A. (the Company), was formed under the laws of the State
of Florida in August 1990 and performs general dentistry in South Florida.
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 of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Property and Equipment
Property and equipment are stated at cost. Depreciation is being provided for by
the use of the straight line method over the estimated useful lives of the
assets. Assets are capitalized if they have a cost of $250 or greater and a
useful life greater than one year.
Revenue Recognition
The Company prepares their financial statements on the accrual basis of
accounting. Under this basis, revenues are recognized when earned and expenses
are recognized when incurred.
The Company recognizes revenue in the period in which services are performed.
Net operating revenues consist primarily of net patient services that are
recorded based on established billing rates less estimated discounts for
contractual allowances. No provision for doubtful accounts has been established
because the Company primarily bills insurance companies under contractual
agreements and is reimbursed under established criteria for the services
performed.
Inventory, Supplies
The Company carries its inventory of dental supplies at the lower of cost or
market, using the specific unit cost method.
F-14
GEORGE D GREEN, DDS, P.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable result primarily from the performance of dental services to
patients and the billing to various insurance companies for reimbursement.
Accounts receivable consist of the following:
2003 2002
------------- -------------
Due from individual patients $ 248,273 $ 281,274
============= =============
NOTE 3 - PROPERTY AND EQUIPMENT
At December 31, 2003 and 2002, property and equipment consisted of the
following:
2003 2002
-------------- ------------
Dental & office equipment $ 118,288 $ 118,288
Furniture and fixtures 59,141 55,404
Leasehold Improvements 26,092 26,092
-------------- ------------
203,521 199,784
Less: accumulated depreciation 156,768 149,238
-------------- -------------
$ 46,753 $ 50,546
============== ============
Depreciation expense was $7,530 and $7,876 for the years ending December 31,
2003 and 2002 respectively.
NOTE 4 - INVENTORY, SUPPLIES
Inventory consists of dental supplies valued at the lower of cost or market. At
December 31, 2003 and 2002, inventory was valued at the following amounts:
2003 2002
------------ -----------
Dental Supplies $ 24,055 $ 28,213
============ ===========
F-15
GEORGE D GREEN, DDS, P.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 5 - LONG-TERM DEBT
At December 31, 2003 and 2002, long-term debt consisted of the following:
2003 2002
--------- ---------
Lease payable, equipment, collateralized by the equipment.
Monthly payments in the amount of $2,546 including interest.
Final payment of $2,546 is due August 2005. $ 45,335 $ 49,883
Lease payable, equipment, collateralized by the equipment.
Monthly payments in the amount of $3,386 including interest.
Final payment of $3,386 is due August 2005. 49,037 66,193
--------- ---------
94,372 116,076
Less current maturities (40,434) (21,704)
--------- ---------
Total long-term debt $ 53,938 $ 94,372
========= =========
The aggregate principal maturities on long-term debt and the other borrowings as
of December 31, 2003 are as follows:
Year Ended
December 31, Amount
------------- ---------
2004 $ 40,434
2005 $ 53,938
--------
$ 94,372
========
NOTE 6 - COMMITMENTS
The Company leases its office facility under a 5 year lease that expires in May
2007. The terms of the lease provide for monthly payments of approximately
$2,300.
The following is a schedule of the future minimum lease payments required under
long-term operating leases that have initial or remaining noncancelable lease
terms in excess of one year at December 31, 2003:
F-16
GEORGE D GREEN, DDS, P.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE 6 - COMMITMENTS (CONTINUED)
Year Ended
December 31,
-------------
2004 27,600
2005 27,600
2006 27,600
2007 11,500
--------
$ 94,300
Lease expense was approximately $48,100 for the year ended December 31, 2003
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to December 31, 2003, the Company entered into negotiations to sell
all of its assets to Union Dental Corp., a Florida corporation. The agreement
calls for Union Dental Corp to acquire all the assets of the Company in exchange
for a ten year installment note in the amount of approximately $1,000,000. The
agreement is expected to be finalized by December 31, 2004.
In addition, subsequent to December 31, 2003, Union Dental Corp. entered into a
reorganzition agreement with National Business Holdings, Inc., a Florida
corporation. The agreement is expected to be finalized by December 31, 2004.
F-17
(b) ProForma Financial Information
Unaudited Pro Forma Condensed Financial Statements of Union Dental and DDS
(including Balance Sheet, Statement of Operations and Notes to Financial
Statements) as of and for the quarter ended September 30, 2004.
INDEX TO PROFORMA FINANCIAL STATEMENTS
Proforma Consolidated Balance Sheet.........................................F-19
Proforma Consolidated Statements of Operations..............................F-20
Notes to Proforma Consolidated Financial Statement.........................F-21
National Business Holdings, Inc.
Proforma Consolidated Balance Sheet
(Unaudited)
September 30, 2004
National Direct George D.
Business Dental Green,
Holdings, Services DDS, PA Proforma
Inc. Inc. (UDC) Adjustments Proforma
------------- ------------ ------------- ------------ ----------------
ASSETS
CURRENT ASSETS
Cash $ 2,000 $ 5,610 $ 0 $ 7,610
Accounts receivable 0 71,791 234,514 306,305
Due from/to affiliate 0 150,749 (150,749) 0
Due from officer 0 293,345 48,187 341,532
Prepaid expenses and other current assets 0 0 29,347 29,347
------------- ------------ ------------- ----------------
Total current assets 2,000 521,495 161,299 684,794
------------- ------------ ------------- ----------------
PROPERTY, PLANT AND EQUIPMENT
(Net of accumulated depreciation) 0 8,324 43,625 51,949
------------- ------------ ------------- ----------------
Total property, plant and equipment 0 8,324 43,625 51,949
------------- ------------ ------------- ----------------
OTHER ASSETS
Investment in subsidiaries 0 0 0 a) (1,645,550)
d) 1,645,550 0
Other assets 0 11,013 0 11,013
Goodwill 7,750 0 0 7,750
------------- ------------ ------------- ----------------
Total other assets 7,750 11,013 0 18,763
------------- ------------ ------------- ----------------
Total Assets $ 9,750 $ 540,832 $ 204,924 $ 755,506
============= ============ ============= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 0 $ 11,799 $ 44,204 $ 56,003
Unearned Membership fees/customer deposits 0 293,533 26,339 319,872
Short-term note/s payable 18,124 235,000 53,818 306,942
------------- ------------ ------------- ----------------
Total current liabilities 18,124 540,332 124,361 682,817
------------- ------------ ------------- ----------------
LONG-TERM DEBT
Long-term debt 0 0 0 0
------------- ------------ ------------- ----------------
Total long-term debt 0 0 0 0
------------- ------------ ------------- ----------------
Total Liabilities 18,124 540,332 124,361 682,817
------------- ------------ ------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value;
25,000,000 shares authorized;
0 shares issued and outstanding 0 n/a n/a a) 1
Common stock, $.0001; $1.00 and $1.00
par value; 300,000,000, 7,500 and
1,000 shares authorized; 32,284,831;
500 and 500 shares issued and
outstanding 3,228 500 500 a) 1,250
b) 500
c) (2,228)
d) (1,000) 2,750
Additional paid-in capital 1,631,949 0 0 a) (1,644,300)
c) 2,228 (10,123)
Accumulated deficit (1,643,551) 0 80,063 d) 1,643,551 80,063
------------- ------------ ------------- ----------------
Total stockholders' equity (8,374) 500 80,563 72,691
------------- ------------ ------------- ----------------
Total Liabilities and Stockholders' Equity $ 9,750 $ 540,832 $ 204,924 $ 755,508
============= ============ ============= ================
The accompanying notes are an integral part of the proforma financial statements
F-19
National Business Holdings, Inc.
Proforma Consolidated Statements of Operations
(Unaudited)
Nine Months Ended September 30, 2004
National Direct George D.
Business Dental Green,
Holdings, Services DDS, PA Proforma
Inc. Inc. (UDC) Adjustments Proforma
--------------- --------------- ------------- ---------------- ----------------
REVENUES
Sales $ 0 $ 469,273 $ 1,020,391 $ 1,489,664
--------------- --------------- ------------- ----------------
Total revenues 0 469,273 1,020,391 1,489,664
OPERATING EXPENSES
General and administrative 18,800 255,221 944,160 1,218,181
Depreciation 0 1,415 5,992 7,407
--------------- --------------- ------------- ----------------
0
Total operating expenses 18,800 256,636 950,152 1,225,588
--------------- --------------- ------------- ----------------
Operating income (loss) (18,800) 212,637 70,239 264,076
--------------- --------------- ------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 0 13 0 13
Interest expense (312) 0 0 (312)
--------------- --------------- ------------- ----------------
Total other income (expense) (312) 13 0 (299)
--------------- --------------- ------------- ----------------
Net income (loss) $ (19,112)$ 212,650 $ 70,239 $ 263,777
=============== =============== ============= ================
The accompanying notes are an integral part of the proforma financial statements
F-20
National Business Holdings, Inc.
Notes to Proforma Consolidated Financial Statements
(Unaudited)
(1) Proforma Changes On December 28, 2004, the Company entered into a Share
Exchange Agreement with Direct Dental Services, Inc., (DDS), a Florida
corporation and Union Dental Corp., (successor to George D. Green, DDS,
PA), (UDC), also a Florida corporation . The business combination is a
reverse merger, accounted for as a recapitalization of DDS and UDC. The
Proforma statement of operations includes the six months ended November 30,
2004 for the Company and the nine months ended September 30, 2004 for DDS
and UDC. The Company issued 17,500,000 shares of common stock and 1,000,000
shares of preferred stock of the Company to complete this acquisition.
(2) Proforma Adjustments
a) 1,000,000 shares of preferred stock and 12,500,000 shares of common
stock of the Company in exchange for 500 shares of common stock of
Direct Dental Services, Inc.
b) 5,000,000 shares of common stock of the Company in exchange for 500
shares of common stock of Union Dental Corp. (as successor to George
D. Green, DDS, PA)
c) 22,284,831 shares of common stock of the Company returned to the
Company and cancelled.
Consolidation:
d) Eliminate investment in subsidiary, the Company's retained deficit and
common stock of subsidiary.
F-21
INDEX TO PROFORMA FINANCIAL STATEMENTS
Proforma Consolidated Statements of Operations..............................F-23
Notes to Proforma Consolidated Financial Statement.........................F-24
National Business Holdings, Inc.
Proforma Consolidated Statements of Operations
(Unaudited)
Year Ended December 31, 2003
National Direct George D.
Business Dental Green,
Holdings, Services DDS, PA Proforma
Inc. Inc. (UDC) Adjustments Proforma
--------------- --------------- ------------- ---------------- ----------------
REVENUES
Sales $ 0 $ 645,994 $ 1,370,414 $ 2,016,408
--------------- --------------- ------------- ----------------
Total revenues 0 645,994 1,370,414 2,016,408
OPERATING EXPENSES
General and administrative 23,000 155,819 1,091,821 1,270,640
Depreciation 0 0 7,530 7,530
--------------- --------------- ------------- ----------------
0
Total operating expenses 23,000 155,819 1,099,351 1,278,170
--------------- --------------- ------------- ----------------
Operating income (loss) (23,000) 490,175 271,063 738,238
--------------- --------------- ------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 0 930 0 930
Interest expense (520) 0 0 (520)
--------------- --------------- ------------- ----------------
Total other income (expense) (520) 930 0 410
--------------- --------------- ------------- ----------------
Net income (loss) $ (23,520)$ 491,105 $ 271,063 $ 738,648
= =======
=============== =============== ============= ================
The accompanying notes are an integral part of the proforma financial statements
F-23
National Business Holdings, Inc.
Notes to Proforma Consolidated Financial Statements
(Unaudited)
(1) Proforma Changes On December 28, 2004, the Company entered into a Share
Exchange Agreement with Direct Dental Services, Inc., (DDS), a Florida
corporation and Union Dental Corp., (successor to George D. Green, DDS,
PA), (UDC), also a Florida corporation . The business combination is a
reverse merger, accounted for as a recapitalization of DDS and UDC. The
Proforma statement of operations includes the year ended May 31, 2004 for
the Company and the year ended December 31, 2003 for DDS and UDC. The
Company issued 17,500,000 shares of common stock and 1,000,000 shares of
preferred stock of the Company to complete this acquisition.
F-24
(c) Exhibits.
Exhibit No. Description
- ----------------------------------------------------------------------
2.3 * Reorganization Agreement, dated December 28, 2004, by and among
the Company, Union Dental, DDS and the shareholders of Union
Dental and DDS.
2.4 * Asset Purchase Agreement dated October 15, 2004 by and among
Union Dental and George D. Green, DDS, P.A.
3(i).3 * Articles of Incorporation of Union Dental Corp.(to be provided
under seperate cover.)
3(i).4 * Articles of Incorporation of Direct Dental Services, Inc. (to be
provided under seperate cover.)
3(ii).2 * Bylaws of Union Dental Corp. (to be provided under
seperate cover.)
3(ii).3 * Bylaws of Direct Dental Services, Inc.(to be provided under
seperate cover.)
4.1 * Form of Option issued to Union Dental optionholders.
10.1 Business Associate Agreement dated October 15, 2004 by and among
Union Dental and George D. Green, DDS, P.A. (to be provided under
seperate cover.)
10.2 Management Services Agreement dated October 15, 2004 by and among
Union Dental and George D. Green, DDS, P.A. (to be provided under
seperate cover.)
10.3 * Employment Agreement dated March 20, 2004 by and among Union
Dental and Dr. George D. Green.
10.4 * Employment Agreement dated October 26, 2004 by and among Union
Dental and Dr. Leonard I. Weinstein.
10.5 * Shareholder's Agreement and Management Contract by and among
Union Dental and Tropical Medical Services.
10.6 * Employment Agreement dated February 15, 2004 by and among Union
Dental and Robert Gene Smith.
10.7 * 2004 Stock Option Plan for Union Dental.
14.1 * Code of Ethics.
16.1 * Letter from Lawrence Scharfman to the Securities and Exchange
Commission dated January 3, 2005.
17.1 * Letter of Resignation of Dr. Melvyn Greenstein.
17.2 * Letter of Resignation of Roger E. Pawson
- --------------------------------
* Filed herewith
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL BUSINESS HOLDINGS, Inc.
January 3, 2004 By: /s/ Dr. George D. Green
------------------------------------------
Name: George D. Green
Title: President and Chief Executive Officer
32