U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Global Health Trax Inc.
(Exact name of registrant as specified in its charter)
Nevada 2834
- ------ ---- 91-1961408
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
2465 Ash Street, Vista, CA 92081-8424
(Address of registrant's principal executive offices) (Zip Code)
760-542-3000
(Registrant's Telephone Number, Including Area Code)
Kennan E. Kaeder
110 West "C" Street, Suite 1300
San Diego, California 92101
Telephone 619-232-6545
Facsimile 619-374-~277
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public:
From time to time after this
registration statement becomes
effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please 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(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. [ ]
1
CALCULATION OF REGISTRATION FEE
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of registered (1) offering price per aggregate offering registration fee
securities to be share price
registered
Common stock 7,699,649 $1.25 $9,624,561 $1,219.43
no par value
(1) Includes 3,699,649 shares offered by selling shareholders, and 4,000,000
shares offered by Global Health Trax, Inc. The offering price of $1.25 per share
for the selling shareholders was estimated for the purpose of calculating the
registration fee pursuant to Rule 457 of Regulation C.
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, as amended, or until this registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
2
Preliminary Prospectus
Global Health Trax, Inc., a Nevada corporation
7,699,649 Shares
Common Stock
Offering Price $1.25 per share
This prospectus relates to 7,699,649 shares of our common stock. We are offering
for sale 7,699,649 shares of our common stock in a direct public offering. The
purchase price is $1.25 per share. No underwriter is involved in the offering
and distribution of the shares. We are offering the shares without any
underwriting discounts or commissions. Of the shares being offered, selling
shareholders will sell 3,699,649shares of their own shares. If all of the shares
offered are purchased, the proceeds will be $9,624,561. Of that amount,
$4,499,559 will be received by the selling shareholders and $5,000,000 of the
proceeds will be received by us. No minimum amount is required to be sold in
this offering. This is our initial public offering and no public market
currently exists for shares of our common stock. This offering will terminate
six months following the effective date of this registration statement unless
Global Health Trax, Inc. determines to extend the offering for one additional
term of six months.
- --------------------- ------------------- -------------------- ----------------
Title of securities Number of offered Offering price Proceeds
to be offered shares per share
- --------------------- ------------------- -------------------- ----------------
Common Stock 7,699,649 $1.25 $9,624,561(1)
- --------------------- ------------------- -------------------- ----------------
(1) The selling security holders will sell at a price of $1.25 per share until
the shares are quoted on the OTC Bulletin Board and thereafter at prevailing
market prices or privately negotiated prices. We will not receive any of the
proceeds from the sale of those shares being offered by the selling
shareholders. We will receive $5,000,000 of the proceeds of the shares being
sold by us.
See "Risk Factors" for factors to be considered before purchasing shares of our
common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. We will
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is 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 or other jurisdiction where the offer or sale of these
securities is not permitted.
The date of this prospectus is___________,2004
Subject to completion.
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TABLE OF CONTENTS
Prospectus Summary ...........................................................6
Risk Factors..................................................................7
Use of Proceeds..............................................................13
Determination of Offering Price..............................................15
Dilution.....................................................................15
Capitalization...............................................................17
Selling Security Holders.....................................................18
Plan of Distribution.........................................................19
Legal Proceedings............................................................24
Directors, Executive Officers, Promoters and Control Persons.................24
Executive Compensation ......................................................25
Security Ownership of Certain Beneficial Owners and Management...............26
Description of Securities....................................................27
Interest of Named Experts and Counsel........................................29
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities..............................................................29
Description of Business .....................................................31
Management's Discussion and Analysis of Financial Condition and Results of
Operations...............................................................43
Description of Property......................................................51
Certain Relationships and Related Transactions...............................51
Market for Common Equity and Related Stockholder Matters.....................53
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.........................................................53
Experts......................................................................53
Legal Matters................................................................53
Additional Information.......................................................53
Financial Statements................................................F-1 to F-38
Indemnification of Directors and Officers..................................II-1
Other Expenses of Issuance and Distribution................................II-1
Recent Sales of Unregistered Securities....................................II-2
Exhibits...................................................................II-3
Undertakings...............................................................II-4
Signatures.................................................................II-5
4
Outside Back Cover Page
Dealer Prospectus Delivery Obligation
Until ___________, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligations to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
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Prospectus Summary
- ------------------
Our Business: Our principal business address is 2465
Ash Street, Vista, California 92081-8424
Our telephone number is 760-542-3000
We develop, manufacture and distribute our
own nutrition and other wellness products
through home-based business entrepreneurs
and other direct sales venues.
Our state of organization: We were incorporated in Nevada in 1999.
Summary financial information: The summary financial information set
forth below is derived from the more
detailed financial statements appearing
elsewhere in this Form SB-2. We have
prepared our financial statements
contained in this Form SB-2 in accordance
with accounting principles generally
accepted in the United States. All
information should be considered in
conjunction with our financial statements
and the notes contained elsewhere in this
prospectus.
Income Statement Period from
January 1, 2003 to December 31, 2003
Revenue $7,819,836
Net Income (Loss) $ (227,465)
Net Income (Loss) Per Share $ (0.01)
Balance Sheet December 31, 2003
Total Assets $2,279,246
Total Liabilities $1,628,919
Shareholders' Equity $ 650,327
Number of shares being offered: 7,699,649 shares
are being offered. Of these, selling
shareholders intend to sell 3,699,649 of
the shares being registered pursuant to
this registration statement and we intend
to sell 4,000,000 shares.
Number of shares outstanding 25,099,649 shares of our common stock are
after the offering: currently issued and outstanding. After
the offering, 29,099,649 shares of our
common stock will be issued and
outstanding.
Estimated use of proceeds: $5,000,000 for industrial plant
development, debt reduction and working
capital.
6
RISK FACTORS
In addition to the other information in this prospectus, the following
risk factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative in nature and involves a lot of risks. Any person who cannot afford
the loss of his or her entire purchase price for the offered shares should not
purchase the offered shares because such a purchase is highly speculative and
involves significant risks. Our business objectives must also be considered
speculative, and we cannot guaranty that we will satisfy those objectives.
Purchasers of the offered shares may not realize any return on their purchase of
the offered shares. Purchasers may lose their investments in us completely.
We may need additional financing. We may not be able to further
implement our business strategy unless sufficient funds are raised as a result
of this offering, business operations or subsequent public or private offerings,
which could prevent us from conducting marketing activities and becoming
profitable. We do not currently have any specific plans to conduct an additional
public or private offering. We have recently completed a private offering of
3,699,649 shares of common stock that resulted in $2,010,030 in proceeds to
Global, including the conversion of debt for stock and stock subscriptions
receivable in the amount of $187,500. In order to develop our business and fund
proposed manufacturing activities, we believe that the proceeds from this
offering will be sufficient to conduct our operations for the next 12 months
although there can be no assurance that this is in fact true.
Accordingly, in order to stay in business we must raise cash either
from the sale of our products or from other sources. Our only other source for
cash at this time is investments by others in our company. From June 1, 2003 to
June 30, 2004, we raised approximately $2,010,030 from the sale of
3,699,649shares of common stock. This amount includes the conversion of some of
our debt to stock by our creditors and stock subscriptions receivable in the
amount of $187,500. If these funds, together with our product sales are not
sufficient to support Global's operations during the next 12 months, then we may
have to raise cash through loans or equity financing in order to implement our
business plan. If we are unable to raise additional capital then you may lose
your entire investment.
We arbitrarily determined the offering price of the shares of common
stock being offered by the selling shareholders and the offering price of the
stock being offered by us. The price of the shares offered was arbitrarily
selected by us and is not related to any objective measure such as book value.
Investors may lose all or part of their investment if the offering price is
higher than the current market value of the offered shares. Additionally,
because we have not shown significant profitability, the price of the shares of
common stock is not based on past earnings, nor is the price of the shares
indicative of current market value for the assets owned by us. Investors could
lose all or a part of their investment if the offering price has been
arbitrarily set too high. Even if a public trading market develops for our
common stock, the shares may not attain market values commensurate with the
offering price.
We face intense competition in our industry that could severely impact
our results. Global's products are sold in domestic and foreign markets in
competition with other private label manufacturing and marketing companies. The
vitamin and nutritional supplement industry is highly competitive, and
competition continues to increase. The nutritional supplements category includes
vitamins, minerals, herbs, botanicals, sports supplements, food supplements and
homeopathic supplements. Competition for the sale of vitamins and supplements
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comes from many sources, including companies that sell supplements to
supermarkets, large chain discount retailers, drug store chains and independent
drug stores, health food stores, pharmaceutical companies and others who sell to
wholesalers, as well as mail order vendors, eCommerce and network marketing
companies. We do not believe it is possible to accurately estimate the number or
size of its many competitors since the supplement industry is largely privately
held and highly fragmented.
We believe that competition among manufacturers of vitamin and
supplement products is based, among other things, on price, timely delivery,
product quality, safety, availability, product innovation, marketing assistance
and customer service. The competitive position of Global will likely depend upon
continued acceptance of its products, its ability to attract and retain
qualified personnel, future governmental regulations affecting vitamins and
nutritional supplements, and publication of vitamin product safety and efficacy
studies by the government and authoritative health and medical authorities. In
addition, our operations are subject to the risks normally associated with
manufacturing vitamins and nutritional products, including shortage of certain
raw materials and damage to property or injury to persons.
Failure to abide by significant governmental regulation could halt our
operations. The formulation, manufacturing, packaging, labeling, advertising and
distribution of our products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration ("FDA"), the
Federal Trade Commission ("FTC"), the Consumer Product Safety Commission
("CPSC"), the United States Department of Agriculture ("USDA") and the
Environmental Protection Agency ("EPA"). Global's activities are also regulated
by various agencies of the states and localities in which Global's products are
sold, including without limitation the California Department of Health Services,
Food and Drug branch. The FDA in particular regulates the advertising, labeling
and sales of vitamin and mineral supplements and may take regulatory action
concerning medical claims, misleading or untruthful advertising, and product
safety issues. These regulations include the FDA's Good Manufacturing Practices
("GMP") for foods. Detailed dietary supplement GMP's have been proposed but no
regulations have been adopted. Additional dietary supplement regulations were
adopted by the FDA pursuant to the implementation of the Dietary Supplement
Health and Education Act of 1994 ("DSHEA").
We may also be subject, from time to time, to additional laws or
regulations administered by the FDA or other Federal, state or foreign
regulatory authorities, or to revised interpretations of current laws or
regulations. Global is unable to predict the nature of such future laws,
regulations, interpretations or their application to Global, nor can it predict
what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on its business in the future. They could,
however, by way of illustration and without limitation, require us to:
reformulate certain products to meet new standards; recall or discontinue
certain products not able to be reformulated; expand documentation of the
properties of certain products; expand or provide different labeling and
scientific substantiation; or, impose additional record keeping requirements.
Any or all such requirements could have a material adverse effect on our results
of operations and financial position.
Adverse publicity about our industry could have a negative impact on
Global. Our products consist primarily of dietary supplements (vitamins,
minerals, herbs and other ingredients). We regard these products as safe when
taken as suggested. In addition, various scientific studies have suggested the
ingredients in some of our products may involve health benefits. We believe the
growth in the dietary supplements business of the last several years may, in
part, be based on significant media attention and various scientific research
8
suggesting potential health benefits from the consumption of certain vitamin
products. We are indirectly dependent upon our customers' perception of the
overall integrity of our business, as well as the safety and quality of our
products and similar products distributed by other companies that may not adhere
to the same quality standards as ours. The business, operations, and financial
condition of Global could be adversely affected if any of our products or any
similar products distributed by other companies should prove or be asserted to
be harmful to consumers, or should scientific studies provide unfavorable
findings regarding the effect of products similar to those produced by us.
There are no clinical studies that corroborate that our products are
not dangerous to human consumption. Although many of the ingredients in our
products are vitamins, minerals, herbs and other substances for which there is a
long history of human consumption, some of these products contain innovative
ingredients or combinations of ingredients. Although we believe all of our
products to be safe when taken as directed, there is little long-term experience
with human consumption of certain of these innovative product ingredients or
combinations thereof in concentrated form. Although we perform research and/or
tests on the formulation and production of our products, we have not sponsored
any clinical studies.
If we cannot manufacture our own products our profitability would be
severely impacted. We currently manufacture many of our products at our
manufacturing facilities in Vista, California. Accordingly, any event resulting
in the slowdown or stoppage of these manufacturing operations or distribution
facilities in Southern California could have a material adverse affect on us. We
do not maintain business interruption insurance.
There is no assurance that our products will remain in demand. Although
our products are currently in demand, there can be no assurance that such demand
will continue or that we will be successful in obtaining a sufficient market
share to sustain our business or to achieve significant profitable operations.
We have a limited prior operating history and there can be no assurance that we
will continue to maintain and increase our revenues and be profitable.
Additionally, if either the demand for the particular products produced by us or
the consumer industry generally suffers a decline, or if general economic
conditions deteriorate significantly, our business could be impacted to a
substantial degree resulting in lower profitability or losses. Many of the
factors, which affect us are dictated by the marketplace and are beyond our
control.
Investors in our offering will suffer immediate substantial dilution.
This offering will result in immediate substantial dilution for investors
herein, which amount represents the difference between the net tangible book
value per share of common stock.
See "Dilution."
We intend to spend most of the proceeds of this offering on developing
our manufacturing facility, paying off debt and marketing so there will be no
funds to sustain operations if there is a downturn in sales. The continued
development and commercialization of our products will require a commitment of
substantial funds. Although, Global believes the net proceeds from the sale of
the 4,000,000 shares we are offering together with cash generated from
operations, will be sufficient to fund our operations for the next year, there
can be no assurance that this will actually occur. To the extent that the
proceeds from this offering and cash flow from operations are insufficient to
fund our activities, we will be required to raise additional capital through
equity or debt financing. Our actual capital requirements will depend on many
factors, including but not limited to, the costs and timing of our development
9
and launch activities, the success of our development efforts and the costs and
timing of the expansion of our plant and marketing activities. The extent to
which our existing and new products will gain market acceptance, will be based
upon our ability to maintain existing collaborative relationships and enter into
new collaborative relationships as well as dealing with competing product
developments. Our commercialization efforts and the commercialization efforts of
our competitors will depend upon relative costs involved in acquiring,
prosecuting, maintaining, enforcing and defending intellectual property claims,
developments related to regulatory issues, and other factors. We estimate that
it will require a substantial investment to launch additional products with
significant marketing efforts in its target market, and further additional funds
will be necessary to implement our business plan nationwide and internationally.
Furthermore, to satisfy these capital requirements, we may seek to raise
additional funds through public or private financing, collaborative
relationships or other arrangements. Any additional equity financing may be
dilutive to shareholders, and debt financing, if available, may involve
significant restrictive covenants. Collaborative arrangements, if necessary to
raise additional funds, may require us to relinquish our rights to certain of
our technologies, products or marketing territories. Any failure or inability to
raise capital when needed could have a material adverse effect on our business,
financial condition and results of operations. There can be no assurance that
such financing will be available on terms satisfactory to Global, if at all.
Because we may be subject to the "penny stock" rules, the level of
trading activity in our stock may be reduced which may make it difficult for
investors to sell their shares. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks, like shares of
our common stock, generally are equity securities with a price of less than
$5.00, other than securities registered on certain national securities exchanges
or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than established
customers and "accredited investors" must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. Consequently, these
requirements may have the effect of reducing the level of trading activity, if
any, in the secondary market for a security subject to the penny stock rules,
and investors in our common stock may find it difficult to sell their shares.
We lack a public market for shares of our common stock, which may make
it difficult for investors to sell their shares. There is no public market for
shares of our common stock. We cannot guaranty that an active public market will
develop or be sustained. Therefore, investors may not be able to find purchasers
for their shares of our common stock. Should there develop a significant market
for our shares, the market price for those shares may be significantly affected
by such factors as our financial results and introduction of new products and
services. Factors such as announcements of new services by us or our competitors
and quarter-to-quarter variations in our results of operations, as well as
market conditions in our sector may have a significant impact on the market
price of our shares. Further, the stock market has experienced extreme
volatility that has particularly affected the market prices of stock of many
10
companies and that often has been unrelated or disproportionate to the operating
performance of those companies.
We only have partial protection for our products from duplication by
others. We rely upon a combination of patents and patents pending, proprietary
technology and know-how, trademarks, copyrights, confidentiality agreements and
other contractual covenants to establish and protect its intellectual property
rights. There can be no assurance that steps taken by us to protect its
intellectual property will be adequate to prevent misappropriation of that
intellectual property, or that our competitors will not independently develop
products substantially equivalent or superior to our products. We believe our
business does not infringe upon the valid proprietary rights of others, but
there can be no assurance that third parties will not assert infringement claims
against us. In the event of an unfavorable ruling on any such claim, a license
or similar agreement to utilize the intellectual property rights in question
relied upon by Global in the conduct of its business will be available to us on
reasonable terms, if at all. The loss of such rights (or the failure by us to
obtain similar licenses or agreements) could have a material adverse effect on
our business, financial condition and results of operations.
We are using projections in this prospectus that may not be accurate.
The description of the business incorporated in this Offering contains detailed
financial projections, which are intended to be illustrative only. The financial
projections were prepared by, and are based solely upon, estimates and
assumptions made by Global and its officers. See "Assumptions Used in
Projections." Financial projections are inherently unreliable. There is no
assurance that the estimates and assumptions made by Global are or will be
correct and/or accurate. Any inaccuracies in such estimates and assumptions
could result in the financial projections being materially different from actual
performance or results of operations for any period. This prospectus also
contains a projection of future cash flows. The analysis of the financial
aspects of Global's business often is based on projected cash flow, as
distinguished from net operating income, as determined in accordance with
Generally Accepted Accounting Principles ("GAAP"). Such projections of cash flow
include not only cash flow generated by operations, but also tax benefits and
cash projected from assumed private placements and an initial public offering.
Numerous assumptions are necessarily made in projecting cash flow from
operations but cannot be predicted with assurance.
Investors should be aware of recent accounting pronouncements that
might affect what is presented in this prospectus.
In January 2003, the FASB issued Interpretation Number 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This Interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements," provides
guidance for identifying a controlling interest in a variable interest entity
("VIE") established by means other than voting interests. FIN No. 46 also
requires consolidation of a VIE by an enterprise that holds such a controlling
interest. In December 2003, FASB completed its deliberations regarding the
proposed modification to FIN No. 46 and issued Interpretation Number 46 (R)
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51"
("FIN No. 46 (R)"). The decisions reached included a deferral of the effective
date and provisions for additional scope exceptions for certain types of
variable interests. Application of FIN No. 46 (R) is required in financial
statements of public entities that have interests in VIEs or potential VIEs
commonly referred to as special-purpose entities for periods ending after
December 15, 2004. The adoption of FIN No. 46 (R) is not expected to have an
impact on the Company's consolidated financial position, results of operations
or cash flows.
11
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments embedded
in other contracts and for hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." It is effective for
contracts entered into or modified after June 30, 2003, except as stated within
the statement, and should be applied prospectively. Management believes the
provisions of this Standard currently have no effect on our financial position
or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after September 15, 2003. Management believes the provisions of
this Standard currently have no effect on our financial position or results of
operations.
If we are sued for product liability the business operations of the
company may be seriously impacted. Global, like any other retailer, distributor
and manufacturer of products that are designed to be ingested, faces an inherent
risk of exposure to product liability claims in the event that the use of its
products results in injury. With respect to product liability claims, Global has
$1.0 million per occurrence and $2.0 million in aggregate liability insurance
subject to a self-insurance retention of $25,000. However, there can be no
assurance that such insurance will continue to be available at a reasonable
cost, or, if available, will be adequate to cover liabilities. Global generally
does not obtain contractual indemnification from parties supplying raw materials
or marketing its products and, in any event, any such indemnification is limited
by its terms and, as a practical matter, to the creditworthiness of the
indemnifying party. In the event that Global does not have adequate insurance or
contractual indemnification, product liabilities relating to defective products
could have a material adverse effect on Global. The Company was named as a
defendant in a product liability lawsuit filed in the Superior Court of the
State of Arizona on June 18, 2002. On April 12, 2004, the Company obtained a
favorable court decision in the Superior Court case of the State of Arizona. In
the opinion of management, it is not anticipated that the plaintiffs will
appeal.
Our business may be adversely affected if we don't continue to develop
new products. Global believes its ability to grow in its existing markets is
partially dependent upon its ability to introduce new and innovative products
into such markets. Although Global seeks to introduce additional products each
year in its existing markets, the success of new products is subject to a number
of conditions, including developing products that will appeal to customers and
obtaining necessary regulatory approvals. There can be no assurance that
Global's efforts to develop innovative new products will be successful, that
customers will accept new products or that Global will obtain required
regulatory approvals of such new products. In addition, no assurance can be
given that new products currently experiencing strong popularity and rapid
growth will maintain their sales over time. See "Business -- Strategy."
Our officers and directors control nearly eighty-five percent of Global
and could take actions detrimental to your investment for which you would have
no remedy. Global's directors and executive officers beneficially own the
majority of the outstanding Common Stock as of the date of this filing.
Accordingly, these shareholders will continue to have the ability to
substantially influence the management, policies, and business operations of
12
Global. The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Certain provisions of California law, as well as the
issuance of preferred stock, and other "anti-takeover" provisions in Global's
Articles and Bylaws, could delay or inhibit the removal of incumbent directors
and could delay, defer, make more difficult or prevent a merger, tender offer or
proxy content, or any change in control involving Global, as well as the removal
of management, even if such events would be beneficial to the interests of
Global's shareholders, and may limit the price certain investors may be willing
to pay in the future for shares of Common Stock. See "Principal Stockholders"
and "Certain Relationships and Related Party Transactions."
Forward Looking Statements
Information in this prospectus contains "forward looking statements"
which can be identified by the use of forward-looking words such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Among the key factors that have a direct
bearing on our results of operations are the effects of various governmental
regulations, the fluctuation of our direct costs and the costs and effectiveness
of our operating strategy. Other factors could also cause actual results to vary
materially from the future results anticipated by those forward-looking
statements.
Use of Proceeds
We are registering 7,699,649 shares for sale by us and the selling
stockholders. Of those shares, the selling shareholders are offering 3,699,649
shares. We are offering the remaining 4,000,000 shares being registered.
Assuming all 4,000,000 of the shares we are offering are sold, we will
receive $5,000,000 in proceeds. The net proceeds to us from the sale of the
4,000,000 shares offered hereby at a public offering price of $1.25 per share
will vary depending upon the total number of shares sold. Regardless of the
number of shares sold, we expect to incur offering expenses estimated at
$100,000 for legal, accounting, printing and other costs in connection with the
offering. The table below shows how proceeds from this offering would be used
for scenarios where our company sells various amounts of the shares and the
priority of the use of net proceeds in the event actual proceeds are not
sufficient to accomplish the uses set forth. Pending use, we will invest the net
proceeds in investment-grade, short-term, interest bearing securities.
13
Percent of total shares offered 25% 50% 75% 100%
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
Shares sold 1,000,000 2,000,000 3,000,000 4,000,000
Gross proceeds from offering $1,250,000 $2,500,000 $3,750,000 $5,000,000
Less Offering Expenses $100,000 $100,000 $100,000 $100,000
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
Net Offering Proceeds $1,150,00 $2,400,000 $3,650,000 $4,900,000
Use of Net Proceeds
Development of manufacturing $250,000 $500,000 $750,000 $750,000
facility
Payment of Indebtedness $250,000 $750,000 $1,000,000 $1,000,000
Marketing and Public Relations $500,000 $1,000,000 $1,750,000 $3,000,000
Working Capital $150,000 $150,000 $150,000 $150,000
----------------- ---------------- ---------------- ----------------
----------------- ---------------- ---------------- ----------------
Total Use of Net Proceeds $1,150,000 $2,400,000 $3,650,000 $4,900,000
================= ================ ================ ================
14
Determination of Offering Price
There is no established public market for the shares of common stock
being registered. As a result, the offering price and other terms and conditions
relative to the shares of common stock offered hereby have been arbitrarily
determined by us and do not necessarily bear any relationship to assets,
earnings, book value or any other objective criteria of value. In addition, no
investment banker, appraiser or other independent, third party has been
consulted concerning the offering price for the shares or the fairness of the
price used for the shares.
Dilution
We are registering 3,699,649 shares for sale by the selling
stockholders. We are registering an additional 4,000,000 shares for sale by us.
We will receive no proceeds from the sale of the selling stockholder's shares.
Consequently, the sale by the selling stockholders of their shares will not
result in any dilution in the purchase price of your stock compared to the net
tangible book value per share immediately after the purchase.
However, the sale of 4,000,000 shares by us will result in substantial
immediate dilution. The net book value per share of Global's common stock as of
the date of Global's most recent audited financial statement, December 31, 2003,
is approximately $0.03 per share based upon 24,149,308 shares outstanding as of
December 31, 2003 after giving effect to a 4 for 1 reverse split of common stock
authorized on June 20, 2003 followed by a 2 for 1 forward split authorized on
November 15, 2003. Net book value per share is equal to total assets of Global
less total liabilities divided by the number of common shares outstanding as of
December 31, 2003 as adjusted for the share splits. Without taking into account
any other changes in net tangible book value other than to give effect to the
issuance of 4,000,000 shares of common stock hereby at an offering price of
$1.25 per share, and the receipt and application of $5,000,000 in anticipated
proceeds, including converted debt, in addition to 3,699,649 shares issued post
2 for 1 forward split in our recent private offering, the pro forma net book
value of Global would be approximately $5,650,327 or $0.19 per share, including
adjustments for shares issued since December 31, 2003. This represents an
immediate increase in pro forma net book value of $0.16 per share to existing
shareholders and an immediate dilution in net tangible book value of $1.09 per
share to investors in the Notes offered hereby. The following table illustrates
this per share dilution.
15
Assumed offering price................................................. $1.25
Pro forma net book value per share
Prior to Offering ................................................ $ 0.03
Increase per share attributable to new investors.................. $ 0.16
Pro forma net book value after Offering................................ $0.19
Dilution per share to new investors.................................... ($1.06)
All per share figures are rounded to the nearest penny.
The following table sets forth at December 31, 2003, the difference
between existing stockholders immediately prior to the Offerings and the
purchasers of shares in the Offering with respect to the number of shares
purchased from us, the total consideration paid, and the average price per share
paid. The calculations in the following table with respect to shares of Common
Stock to be purchased in the Offering reflect an initial public offering price
of $1.25:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PER SHARE
PRICE
------------------------- ----------------------------
------------- ----------- -------------- -------------
NUMBER % AMOUNT %
------------- ----------- -------------- ------------- --------------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Existing stockholders 24,149 83 % $1,560 23.8 % $0.07
New Stockholders 4,950 17 % 4,900 76.2 % 1.01
------------- ----------- -------------- ------------- --------------------
------------- ----------- -------------- ------------- --------------------
Total 29,099 100 % $6,460 100 % $0.23
16
Capitalization
The following table sets forth the capitalization of Global at December
31, 2003 and as adjusted to give effect to (i) the Exchange and (ii) the
Offerings (at an assumed initial public offering price of $1.25 per share and
application of a portion of the proceeds therefrom to reduce certain
indebtedness of Global. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and the financial statements and the notes thereto included
elsewhere in this Prospectus.
DECEMBER 31,2003
ACTUAL AS ADJUSTED
----------------- --------------
------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
Current portion of capital leases $ 42 $ -
Other short-term obligations 1,229 629
----------------- --------------
----------------- --------------
Total short-term obligations 1,271 629
Long-term debt:
Notes payable 264 -
Capital leases payable 94 -
----------------- --------------
----------------- --------------
Total long-term debt 358 -
Stockholders' equity:
Preferred stock, authorized 10,000,000 shares with no par value, none
issued and outstanding - -
Common stock, authorized 100,000,000 shares common stock with no par
value; issued and outstanding 24,149,308 at December 31, 2003. 1,560 6,460
Stock subscriptions receivable (125) (125)
Retained earnings (deficit) (785) (785)
----------------- --------------
----------------- --------------
Total stockholders' equity 650 5,550
----------------- --------------
----------------- --------------
Total capitalization $2,279 $6,179
================= ==============
(1) As of December 31, 2003 the date of our most recent audit, as adjusted.
(2) Assumes the sale of all 4,000,000 shares offered by Global.
17
Selling Security Holders
This prospectus relates to the offer and sale of 3,699,649 shares of
our common stock by the selling stockholders identified below. None of the
selling stockholders are or have been affiliates of ours. The selling
stockholders will determine when they will sell their shares. Although we have
agreed to pay the expenses related to the registration of the shares being
offered, we will not receive any proceeds from the sale of the shares by the
selling stockholders.
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of the date of this prospectus by
each of the selling stockholders:
- ------------------------------------------------ --------------------- ---------------------- ------------------------
Name (1) Number of shares Number of shares Number of shares owned
owned offered after the offering (1)
- ------------------------------------------------ --------------------- ---------------------- ------------------------
Baluyot, Julius 44,443 44,443 -
Beck, William 22,222 22,222 -
Britland, Lois 5,556 5,556 -
Bye, Duane 11,176 11,176 -
Chapman, Dean and Mary 22,306 22,306 -
Chika, Terry & Silva 44,444 44,444 -
Cobb, Mark & Alyson 16,684 16,684 -
Dempsey, Todd 10,084 10,084 -
Dunning, Sherry 3,708 3,708 -
Dy Ning, Marcelino 5,556 5,556 -
Dyrr, Diana 11,204 11,204 -
Elder, Bruce & Deeann 5,556 5,556 -
Harton, Sandy 11,184 11,184 -
Hausig, John 5,556 5,556 -
Hoffman, Robert 27,778 27,778 -
Hutchins, Janice 33,360 33,360 -
J. Vincent Construction Inc. 111,840 111,840 -
Jones, Janet 3,708 3,708 -
Lee, Connie 11,112 11,112 -
Leonard, Henry & Min 15,556 15,556 -
Lightfoot, Jr., Marshall & Kathryn 5,556 5,556 -
Lloyd C. Betker & Elizabeth Betker TTEES FBO
Lloyd C. Betker & Elizabeth Betker Revocable -
Inter-Vivos TR UOT 09/07/1984 5,556 5,556
Martinez, Samuel 5,556 5,556 -
McGinnis, Ted 10,084 10,084 -
Morgan, Jeff 11,112 11,112 -
Moss, Marilyn 3,708 3,708 -
Oien, Sheila 11,112 11,112 -
Okafor, Emmanuel 2,222 2,222 -
Olson, Stanley & Barbara 5,556 5,556 -
Ortiz, Amancio 111,111 111,111 -
Pierce, Mildred 5,556 5,556 -
Robar Enterprises Inc. 5,556 5,556 -
Schilcher, Ralph, Jr. & Catherine 5,556 5,556 -
Schofield, Christopher 7,000 7,000 -
So, Jennifer 5,556 5,556 -
Summers, Richard 22,222 22,222 -
Summers, Sharon 43,333 43,333 -
Summers, Susan 24,444 24,444 -
The Catherine M. Dockerty Trust 55,556 55,556 -
18
The Emil and Virginia Tritten Family Trust 222,224 222,224 -
The Everett Phillip Hale Family Trust 336,164 336,164 -
The Larry E Tritten Trust 100,756 100,756 -
The Summers Living Trust DTD 01/21/92 88,888 88,888 -
The Tom E. Dixson Trust 2,000,000 2,000,000 -
To The Rescue 100,000 100,000 -
Underwood, Jerry & Shirley 5,556 5,556 -
Valenko, Ronald 22,222 22,222 -
Vines, James 2,222 2,222 -
Wagner, Charlotte 5,556 5,556 -
Weisiger, Mary 11,120 11,120 -
Whistler, Fred & Belinda 5,556 5,556 -
Wood, James 20,000 20,000 -
Wood, James & Shirley 10,000 10,000 -
--------------------- ---------------------- ------------------------
3,699,649 3,699,649 -
--------------------- ---------------------- ------------------------
(1) Assumes all shares offered are sold.
Relationships Between Selling Shareholders.
Some of the selling shareholders are related. Diana Kristen Dyrr is the
daughter of Global officer and director Lorin Dyrr. Diana and Lorin Dyrr live in
the same household. Frances and E. Phillip Hale are the parents of Global
officer and director Everett Hale. Mr. Hale does not live in the same household
with his parents. Richard Summers and Rosa Summers are the parents of Sharon
Summers and Susan Summers. Virginia Tritten is the mother of Larry Tritten.
Henry Leonard is Global's Chief Financial Officer. Min Leonard is Henry
Leonard's wife. Tom Dixson, grantor of the Tom E. Dixson Trust, is Global's
landlord.
Plan of Distribution
Selling Shareholders. This prospectus covers the resale by selling
shareholders of shares of our common stock that they have already purchased from
us. Selling shareholders may sell their shares of common stock either directly
or through a broker-dealer in transactions between selling shareholders and
purchasers, or otherwise. The selling stockholders will not use the Internet for
the sale of their shares.
The selling stockholders and any of their pledgees, donees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of 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:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
19
o privately negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Broker-dealers
engaged by the selling stockholders may arrange for other brokers-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. Broker-dealers may
agree to sell a specified number of such shares at a stipulated price per share,
and, to the extent such broker-dealer is unable to do so acting as agent for us
or a selling shareholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment. Broker-dealers who
acquire shares as principal may thereafter resell such shares from time to time
in transactions, which may involve block transactions and sales to and through
other broker-dealers, including transactions of the nature described above, in
the over-the-counter markets or otherwise at pries and on terms then prevailing
at the time of sale, at prices than related to the then-current market price or
in negotiated transactions. In connection with such resales, broker-dealers may
pay to or receive from the purchasers such shares commissions as described
above.
The selling stockholder may from time to time pledge or grant a
security interest in some or all of the shares of common stock or warrants owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of common stock
from time to time under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933 amending the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
Broker-dealers may charge commissions to both selling shareholders
selling common stock, and purchasers buying shares sold by a selling
shareholder. Neither the selling shareholders nor Global can presently estimate
the amount of such compensation. We know of no existing arrangements between the
selling shareholders and any other shareholder, broker, dealer, underwriter or
agent relating to the sale or distribution of the shares.
To the extent required by laws, regulations or agreements we have made,
we will file a prospectus supplement during the time the selling shareholders
are offering or selling shares covered by this prospectus in order to add or
correct important information about the plan of distribution for the shares and
in accordance with our obligation to file post-effective amendments to the
prospectus as required by Item 512 of Regulation S-B. In addition to any other
applicable laws or regulations, selling shareholders must comply with
20
regulations relating to distributions by selling shareholders, including
Regulation M under the Securities Exchange Act of 1934. Regulation M prohibits
selling shareholders from offering to purchase and purchasing our common stock
at certain periods of time surrounding their sales of shares of our common stock
under this prospectus. Some states may require that registration, exemption from
registration or notification requirements be met before selling shareholders may
sell their common stock. Some states may also require selling shareholders to
sell their common stock only through broker-dealers.
We will not receive any proceeds from the sale of the shares by the
selling shareholders pursuant to this prospectus. We have agreed to bear the
expenses (other than broker's commissions and similar charges) of the
registration of the shares, including legal and accounting fees, which we expect
to total approximately $100,000. The selling shareholders may also use Rule 144
under the Securities Act of 1933 to sell the shares if they meet the criteria
and conform to the requirements of such Rule. Offers or sales of the shares have
not been registered or qualified under the laws of any country other than the
United States. To comply with certain states' securities laws, if applicable,
the shares will be offered or sold in such jurisdictions only through registered
or licensed brokers or dealers. There can be no assurance that the selling
shareholders will sell any or all of the shares offered by them hereunder.
The selling security holders and any broker-dealers participating in
the distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed the registration statement, of which this prospectus
forms a part, with respect to the sale of the shares by the selling security
holders. There can be no assurance that the selling security holders will sell
any or all of the offered shares.
Under the Securities Exchange Act of 1934 and the regulations
thereunder, any person engaged in a distribution of the shares of our common
stock offered by this prospectus may not simultaneously engage in market making
activities with respect to our common stock during the applicable "cooling off"
periods prior to the commencement of such distribution. Also, the selling
security holders are subject to applicable provisions that limit the timing of
purchases and sales of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as
they may be engaged in a distribution of any of the shares we are registering by
this registration statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, and any security which is the subject of the
distribution until the entire distribution is complete. Regulation M defines a
"distribution" as an offering of securities that is distinguished from ordinary
trading activities by the magnitude of the offering and the presence of special
selling efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
Regulation M prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security,
21
except as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
No stockholder may offer or sell shares of our common stock under this
prospectus unless such stockholder has notified us of his or her intention to
sell shares of our common stock and the registration statement of which this
prospectus is a part has been declared effective by the SEC, and remains
effective at the time such selling stockholder offers or sells such shares. We
are required to amend the registration statement of which this prospectus is a
part to reflect material developments in our business and current financial
information. Each time we file a post-effective amendment to our registration
statement with the SEC, it must first become effective prior to the offer or
sale of shares of our common stock by the selling stockholders.
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 this rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares that the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the exercise of
warrants is subject to adjustment. To provide for adjustments that may occur in
the future, the number of shares covered by this prospectus, and as shown in the
table below, has been calculated at 130% of the total number of shares issuable
upon exercise of the warrants, as such warrants have been originally issued.
Sale of shares by Global. The following discussion addresses the
material terms of Global's plan of distribution. We are offering up to 4,000,000
shares of our common stock at a price of $1.25 per share to be sold by Everett
Hale, our Chief Executive Officer and Chairman of our Board of Directors. This
will be the only method of distribution. Global does not intend to make any
distribution through an underwriter or on the Internet. The shares will be sold
through our principal executive officer and director, so no compensation will be
paid with respect to those sales, except for reimbursement of expenses actually
incurred on behalf of our company in connection with such activities. Since this
offering is conducted as a direct participation offering, there can be no
assurance that any of the shares will be sold. A subscription agreement, the
form of which is attached to this prospectus, will be required to be submitted
by all purchasers of the shares. The offering will not be sold to officers,
directors or affiliates of Global Health Trax Inc. The minimum purchase is 1,000
shares at $1.25 per share or $1,250.
There is currently no market for any of our shares and no assurances
are given that a public market for such securities will develop after the
closing of this offering or be sustained if developed. While we plan following
the closing of this offering to take affirmative steps to request or encourage
one or more broker/dealers to act as a market maker for our securities, no such
efforts have yet been undertaken and no assurances are given that any such
efforts will prove successful. As such, investors may not be able to readily
dispose of any shares purchased hereby.
Mr. Hale is an associated person of us as that term is defined in Rule
3a4-1 under the Exchange Act, shall conduct the offering. Mr. Hale is deemed not
to be a broker for the following reasons:
22
*He is not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Exchange Act at the time of his participation
in the sale of our securities.
*He will not be compensated for his participation in the sale of our
securities by the payment of commission or other remuneration based either
directly or indirectly on transactions in securities.
*He is not an associated person of a broker or dealers at the time of
his participation in the sale of our securities.
*He will restrict his participation to the following activities:
A. Preparing any written communication or delivering any communication
through the mails or other means that does not involve oral solicitation by him
of a potential purchaser;
B. Responding to inquiries of potential purchasers in a communication
initiated by the potential purchasers, provided however, that the content of
responses are limited to information contained in a registration statement filed
under the Securities Act or other offering document;
C. Performing ministerial and clerical work involved in effecting any
transaction.
The offering will remain open for a period of 180 days and an
additional 180 days in our sole discretion, unless the entire gross proceeds are
earlier received or we decide, in our sole discretion, to cease selling efforts.
No Escrow Of Proceeds
There is no escrow of any of the proceeds of this offering that will be
received by us or our selling shareholders. Accordingly, we will have use of the
funds to be received by us once we accept a subscription and funds have cleared.
Such funds shall be non-refundable to subscribers except as may be required by
applicable law.
Special Note Regarding Forward Looking Statements
Some of the statements under the "Prospectus Summary," "Risk Factors,"
"Management Discussion and Analysis or Plan of Operation," "Business" and
elsewhere in this prospectus constitute forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance, or achievements
to be materially different from any future results, levels of activity,
performance, or achievement expressed or implied by such forward-looking
statements. Such factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "could," "intend," "expects,"
"plan," "anticipates," "believes," "estimates," "predicts," "potential," or
"continue" or the negative of such terms or other comparable terminology.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. We have a duty to update any
23
of the forward-looking statements after the date of this prospectus if there is
a change of a material nature in the information provided.
Legal Proceedings
The Company was named as a defendant in a products liability lawsuit
filed in the Superior Court of the State of Arizona on June 18, 2002. On April
12, 2004, the Company obtained a favorable court decision in the Superior Court
case of the State of Arizona. In the opinion of management, it is not
anticipated that the plaintiffs will appeal.
Directors, Executive Officers, Promoters and Control Persons
The following table sets forth the directors and executive officers of
our company, their ages, term served and all offices and positions with our
company. A director is elected for a period of one year and thereafter serves
until his or her successor is duly elected by the stockholders and qualifies.
Officers serve under written contracts but all other employees serve at the will
of the Board of Directors.
There are no arrangements or understandings regarding the length of
time a director of our company is to serve in such a capacity. Our directors
hold no directorships in any other company subject to the reporting requirements
of the Securities Exchange Act of 1934.
NAME AGE TERM SERVED POSITION WITH COMPANY
- -------------------------- -------- -------------------------- --------------------------------------------------
- -------------------------- -------- -------------------------- --------------------------------------------------
Everett Hale 61 Since Inception Director, Chief Executive Officer & President
Lorin Dyrr 60 Since Inception Director, Executive Vice President
Russell Chaisson 57 Since January 1, 2004 Director, Vice President, Training & Marketing
Kennan Kaeder 50 Since June 1, 2003 Director, Legal Counsel
Henry S. Leonard 47 Since August 11, 2003 Chief Financial Officer
Everett Hale (Cofounder, CEO, President and Chairman of the Board of
Directors) is a 40-year veteran of owning, operating and managing businesses.
His varied background includes the entertainment, food service, real estate,
financial services, and nutrition industries promoting a variety of products. To
many, Mr. Hale is widely known for his pioneering work in introducing the first
commercially successful water-based ionic nutrition systems packaged for the
consumer's convenience.
Mr. Hale is popular with Multi-Level-Marketing (MLM, AKA "Network
Selling") participants, because of his outgoing, entertaining personality. In
the past six years, Mr. Hale has grown Global's affinity membership program into
a great national success story.
Lorin Dyrr (Cofounder, Executive Vice President and Director) has more
than twenty-five years of experience in operations and management, including:
rancher, organic farmer, family-owned health-food store operator, health
products distributor, and new health product developer. For over 12 years, she
developed and conducted the training programs for the representatives and
management of Avon Products.
24
Currently, in addition to her other responsibilities as an officer and
director of Global, she oversees Global's Quality Control, Research and
Development, Product Formulation and Acquisition and is responsible for Global's
Production facilities.
Russell Chiasson (Vice President Training and Marketing and Director) is
the solution to Global's need for state of the art and cost-effective training
on a nationwide and eventually worldwide scale. Having developed and implemented
the corporate training programs for companies such as North American Rockwell,
Northern Telecom, International Power Machines, Coca Cola, and TXE-Texas
Industries, he was also the driving force behind the first MLM Telecom Company
in the mid 1980's. That company became US Sprint.
Mr. Chiasson has developed a Fortune 500 type multimedia, multi-sensory
training video and manual for Global, the Team Trax Training System(TM)and is
overseeing the development and implementation of Global's infomercial programs.
He is a Director on Global's Board of Directors.
Henry S. Leonard (Chief Financial Officer) brings over fifteen years of
business experience and is a practicing Certified Public Accountant, licensed in
California, Hawaii and Florida. Mr. Leonard has served as Chief Financial
Officer to several companies including Nutri-Sport, Inc. in the nutritional
supplements industry and Hydroflush Corporation in manufacturing, business
acquisition and development. In addition to his private practice, he teaches
part-time with National University, DeVry University and the University of
Phoenix. Additionally, Mr. Leonard is near completion of a doctorate in
Accounting. Mr. Leonard is a Certified Management Accountant and holds a Masters
in Business Administration.
Kennan E. Kaeder has been an attorney licensed to practice law in the state
of California since 1982. He maintains a private law practice in San Diego,
California that emphasizes business formation, corporate governance and
securities law issues. He has extensive experience in advising new and
developing companies in all aspects of the law relating to formation, capital
raising and operating issues.
Executive Compensation
The following table sets forth all compensation awarded to, earned by,
or paid for services rendered to us in all capacities during the year ended
December 31, 2003, our executive officers and directors.
25
Summary Compensation Table Long-Term Compensation Awards
COMPENSATION 2003
NAME AND PRINCIPAL POSITION SALARY ($) BONUS / OTHER ($) NUMBER OF SHARES AND
UNDERLYING OPTIONS
Everett Hale 97,900 0 11,000,000
Lorin Dyrr 97,900 0 10,900,000
Kennan Kaeder 0 32,000 0
Russell Chaisson 0 110,383 1,000,000
Henry Leonard 27,415 0 15,556
COMPENSATION 2004(1)
NAME AND PRINCIPAL POSITION SALARY ($) BONUS / OTHER ($) NUMBER OF SHARES AND
UNDERLYING OPTIONS
Everett Hale 143,000 0 11,000,000
Lorin Dyrr 143,000 0 10,900,000
Kennan Kaeder 0 54,000 20,000
Russell Chaisson 92,000 93,600 1,000,000
Henry Leonard 92,800 0 590,556
(1) Estimated for the year ended December 31, 2004.
There are no orders, judgments, or decrees of any governmental agency
or administrator, or of any court of competent jurisdiction, revoking or
suspending for cause any license, permit or other authority to engage in the
securities business or in the sale of a particular security or temporarily or
permanently restraining any of our officers or directors from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting such person of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony. Nor are any of the officers or directors of any corporation or
entity affiliated with us so enjoined.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the
beneficial ownership of our company's common stock with respect to each named
director and executive officer of our company and each person known to our
company to be the beneficial owner of more than five percent (5%) of said
securities, and all directors and executive officers of our company as a group,
assuming the sale of all 4,000,000 shares offered by Global:
26
----------------------------------------- ----------------------- -------------------
Number of Shares
Shareholder Beneficially Owned Percentage Owned
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Everett Hale 10,000,000 39.8%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Lorin Dyrr 9,900,000 39.4%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Kennan Kaeder - 00.0%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Russell Chaisson 1,000,000 04.0%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Henry Leonard 500,000 01.9%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Tom Dixson 2,000,000 08.0%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
Selling shareholders 1,699,649 6.8%
----------------------------------------- ----------------------- -------------------
----------------------------------------- ----------------------- -------------------
All officers and directors as a group 21,400,000 85.30%
----------------------------------------- ----------------------- -------------------
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
Changes in Control. Our management is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
Description of Securities
The shares registered pursuant to the registration statement of which
this prospectus is a part are shares of common stock, all of the same class and
entitled to the same rights and privileges as all other shares of common stock.
Common Stock
Global Health Trax Inc. is presently authorized to issue 100,000,000
shares of no par value common stock. The holders of common stock, including the
27
shares offered hereby, are entitled to equal dividends and distributions, per
share, with respect to the common stock when, as and if declared by the Board of
Directors from funds legally available therefore. No holder of any shares of
common stock has a pre-emptive right to subscribe for any securities of our
company nor are any common shares subject to redemption or convertible into
other securities of our company. Upon liquidation, dissolution or winding up of
our company, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. All shares of common stock now outstanding are
fully paid, validly issued and non-assessable. Each share of common stock is
entitled to one vote with respect to the election of any director or any other
matter upon which shareholders are required or permitted to vote. Holders of our
company's common stock do not have cumulative voting rights, so that the holders
of more than 50% of the combined shares voting for the election of directors may
elect all of the directors, if they choose to do so and, in that event, the
holders of the remaining shares will not be able to elect any members to the
Board of Directors.
Preferred Stock.
Global Health Trax Inc. is also presently authorized to issue
10,000,000 shares of no par value preferred stock. No preferred stock has been
issued as of this date and management has no current plans to issue preferred
stock to any investor. Under our company's articles of incorporation, as
amended, the Board of Directors has the power, without further action by the
holders of the common stock, to designate the relative rights and preferences of
the preferred stock, and issue the preferred stock in such one or more series as
designated by the Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the common stock or the preferred stock of any
other series. The issuance of preferred stock may have the effect of delaying or
preventing a change in control of our company without further shareholder action
and may adversely effect the rights and powers, including voting rights, of the
holders of common stock. In certain circumstances, the issuance of preferred
stock could depress the market price of the common stock. The Board of Directors
effects a designation of each series of preferred stock by filing with the
California Secretary of State a Certificate of Designation defining the rights
and preferences of each such series. Documents so filed are matters of public
record and may be examined in accordance with procedures of the California
Secretary of State, or copies thereof may be obtained from our company.
Options and Warrants
The Board of Directors of Global has adopted a non-qualified 2003-2004
Employee Stock Option Plan. The Board of Directors administers the plan unless a
committee is appointed by the Board (the "Committee") to administer the plan.
The plan authorizes the Board/Committee to grant options to certain qualifying
key employees. Within certain limitations, both the selection of recipients and
the number of option shares to be allocated to each recipient is within the
discretion of the Board/Committee, but the aggregate number of option shares
granted under the Plan cannot exceed Three Million Shares (3,000,000). Under the
plan, optionees have the right to exercise the options no sooner than the second
anniversary date of hire by Global, or, if the optionee has at the time of the
grant of the option has been an employee of Global for over two years, then no
sooner than one year from the date of grant of the options. All options granted
expire 36 months from the date of this grant. 2,496,200 of incentive stock
options were granted in January 2004. Global Health Trax' Inc.'s non-qualified
stock option plan includes an incentive for certain key employees and
independent contractors who make significant contributions to Global's growth
28
and development. To date the Board of Directors has authorized 1,000,000 shares
for such purposes. Under this plan, optionees have the right to exercise no more
than on half of the total options granted no sooner than the first anniversary
date of the grant. Optionees have the right to exercise the remaining options
granted no sooner than the second anniversary date of the grant. All options
granted herein shall expire 36 months from the date of this Grant. The selection
of recipients, the exercise price and the number of option shares to be
allocated to each recipient is strictly within the discretion of the Board of
Directors.
Dividend Policy
We have not previously paid any cash dividends on our common stock and
do not anticipate or contemplate paying dividends on our common stock in the
foreseeable future. Our present intention is to utilize all available funds for
the development of our business. There is no assurance that we will ever have
excess funds available for the payment of dividends. The only legal restrictions
that limit the ability to pay dividends on common equity or that are likely to
do so in the future, are those restrictions imposed by state laws. Under
California corporate law, no dividends or other distributions may be made which
would render our company insolvent or reduce assets to less than the sum of its
liabilities plus the amount needed to satisfy any outstanding liquidation
preferences.
Transfer Agent
We intend to use U.S. Stock Transfer, 1745 Gardena Avenue, Glendale, CA
91204, as our transfer agent and registrar for the common stock upon completion
of the offering.
Interest of Named Experts and Counsel
Kennan Kaeder, our legal counsel and a director of Global, has been
granted an option to purchase 20,000 shares of common stock pursuant the terms
of our key employee and independent contractor stock option plan. These options
were granted to Mr. Kaeder on January 2, 2004. One half of these options become
exercisable on January 2, 2005 and the other half on January 2, 2006. The
options expire if not exercised by January 2, 2007. Mr. Kaeder was not hired on
a contingent basis. Further, no other expert was hired on a contingent basis.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Our Articles of Incorporation provides, among other things, that our
officers and directors shall not be personally liable to us or our shareholders
for monetary damages for breach of fiduciary duty as an officer or a director,
except for liability for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or for unlawful payments
of dividends or unlawful stock purchase or redemption by us.
Accordingly, our directors may have no liability to our shareholders
for any mistakes or errors of judgment or for any act of omission, unless the
act or omission involves intentional misconduct, fraud, or a knowing violation
of law or results in unlawful distributions to our shareholders.
Indemnification Agreements. We will enter into indemnification
agreements with each of our executive officers. We will agree to indemnify each
such person for all expenses and liabilities, including criminal monetary
judgments, penalties and fines, incurred by such person in connection with any
criminal or civil action brought or threatened against such person by reason of
such person being or having been our officer or director or employee. In order
29
to be entitled to indemnification by us, such person must have acted in good
faith and in a manner such person believed to be in our best interests. With
respect to criminal actions, such person must have had no reasonable cause to
believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that act and is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 29,099,649 shares of
common stock outstanding. Of these shares, the 7,699,649 shares to be sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act of 1933.
The remaining 21,400,000 shares of common stock held by the remaining
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act of 1933. Of these shares,
19,900,000 shares are held by two of our officers and directors, Everett Hale
and Lorin Dyrr, exclusive of options granted to acquire additional common stock.
These shares were initially issued more than two years ago and therefore are
currently eligible for sale subject to the limitations of Rule 144 for control
persons, otherwise known as "affiliates" under the Rule. We cannot predict the
effect, if any, that offers or sales of these shares would have on the market
price. Nevertheless, sales of significant amounts of restricted securities in
the public markets could adversely affect the fair market price of the shares,
as well as impair our ability to raise capital through the issuance of
additional equity shares.
In general, under Rule 144, a person who has beneficially owned shares
for at least one year is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (1) one percent of the then
outstanding shares of common stock or (2) the average weekly trading volume in
the common stock in the over-the-counter market during the four calendar weeks
preceding the date on which notice of the sale is filed, provided several
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, our affiliates must comply with the
restrictions and requirements of Rule 144, other than the one-year holding
period requirement, in order to sell shares of common stock which are not
restricted securities.
Under Rule 144(k), a person who is not an affiliate and has not been an
affiliate for at least three months prior to the sale and who has beneficially
owned shares for at least two years may resell their shares without compliance
with the foregoing requirements. In meeting the one- and two-year holding
periods described above, a holder of shares can include the holding periods of a
prior owner who was not an affiliate. The one- and two-year holding periods
described above do not begin to run until the full purchase price or other
consideration is paid by the person acquiring the shares from the issuer or an
affiliate.
There is presently no agreement by any holder, including our
"affiliates," of "restricted" shares not to sell their shares.
Penny Stock Regulation
Our shares will probably be subject to the Penny Stock Reform Act of
30
1990, which may potentially decrease your ability to easily transfer our shares.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated. Penny stocks generally are equity securities with a price of less
than $5.00. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. As our shares immediately following this offering will likely
be subject to such penny stock rules, investors in this offering will in all
likelihood find it more difficult to sell their securities.
Description of the Business
General
Global Health Trax, Inc. develops, manufactures, markets, distributes
and sells branded and private label vitamins, nutritional supplements, dietary
supplements and holistic technological products in the United States and
throughout the world. Our website address is www.globalhealthtrax.com. No part
of the website is to be considered part of this prospectus. We offer a broad
range of liquids, capsules and powdered products consisting of approximately 100
stock keeping units ("SKUs"). Our portfolio of recognized brands, Life
SupportTM, Nature's TurnTM and Smart MagnetsTM, are primarily marketed through
multi-level marketing, mass market, and health food store distribution channels.
We market our branded nutritional supplement products, both domestically and
internationally, in four principal categories:
1. specialty supplements;
2. vitamins and minerals;
3. non-traditional dietary supplements;
4. technological health products.
Our Life Support line of products and two Nature's Turn products are
produced internally, with certain powdered, encapsulated, cream and the Smart
Magnet line products by outside vendors.
Our principal executive offices are located at 2465 Ash Street, Vista,
California 92081-8424 and our telephone number is (760) 542-3000. We were
incorporated in Nevada in 1999. Our Internet website address is
www.globalhealthtrax.com. No part of the website is to be considered part of
this prospectus. Following the completion of this offering, we anticipate that
our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current
reports on Form 8-K, and all amendments thereto, along with other reports
required by the Securities Exchange Act of 1934, will be available free of
charge on our internet website. These reports will be posted on our website as
soon as reasonably practicable after such reports are electronically filed with
the Securities And Exchange Commission (SEC).
Recent Developments
On October 15, 2003, we secured the full patent rights to our flagship
31
product Oxygen Elements, United States Patent Office number 6,383,534 B1. This
patent covers two products, Oxygen Elements and Silica Plus, both of which are
leaders in the dietary supplements field of oxygenation.
At our 2003 San Diego, California Health and Wellness convention, we
introduced one primary product and a new product line: Super Sea Essentials and
Smart Magnets. The Super Sea Essentials fills a void in the market for a general
tonic that provides an abundance of natural antioxidants and minerals on a daily
basis. The Smart Magnets represent an individual programmable approach to health
magnet technology.
On November 15, 2003, a special stockholders' meeting was held in San
Diego, California and a two-for-one stock split was approved for stockholders of
record on that date.
Industry Overview
Global believes it is well positioned to capitalize on the growth of
the nutritional supplements market. Multi-Level Marketing of Nutrition Products
and related Natural Personal Care Products in the U.S. in 2000 was approximately
$4.760 billion, which represents approximately 16% of the total U.S. industry of
$29.9 billion in 2000 and is growing at a compound annual growth rate of
approximately 8% in 2001 and 2002. Global believes several factors account for
the steady growth of the nutritional supplement market, including increased
public awareness of the health benefits of nutritional supplements and favorable
demographic trends toward older Americans who are more likely to consume
nutritional supplements.
Over the past several years, public awareness of the positive effects
of nutritional supplements on health has been heightened by widely publicized
reports and medical research findings indicating a correlation between the
consumption of nutrients and the reduced incidence of certain diseases. Reports
have indicated that the United States government and universities generally have
increased sponsorship of research relating to nutritional supplements. In
addition, Congress has established the Office of Alternative Medicine within the
National Institutes of Health to foster research into alternative medical
treatment modalities, which may include natural remedies. Congress has also
recently established the Office of Dietary Supplements in the National
Institutes of Health to conduct and coordinate research into the role of dietary
supplements in maintaining health and preventing disease.
Global believes that the aging of the United States population,
together with a corresponding increased focus on preventative health care
measures, will continue to result in increased demand for certain nutritional
supplement products. According to Congressional findings that accompanied the
DSHEA, national surveys reveal that almost 43% of Americans regularly consume
vitamins, minerals and/or herbal supplements and 80% have consumed these
products at some time during their lives. The 35-and-older age group of
consumers, which is expected to continue to grow over the next two decades,
represents 78% of the regular users of vitamin and mineral supplements. Based on
data provided by the United States Bureau of the Census, from 1990 to 2010, the
35-and-older age group of the United States population is projected to increase
by 32%, a significantly greater increase than the 20% projected increase for the
United States population in general.
Global believes these and other trends have helped fuel the growth of
the nutritional supplement market. To meet the increased demand for nutritional
supplements, a number of successful nutritional supplement products have been
introduced over the past several years with several in the pipeline for future
introduction.
32
Although data from the fragmented international markets is not readily
available, we believe similar demographics, events, and other trends also
present certain future opportunities in international markets.
Brands, Products and Distribution
The following table shows comparative net sales results categorized by
business unit and as a percentage of net sales for quarter ending 03/31/2004,
and fiscal years 2003, 2002 and 2001 (dollars in thousands):
QE 03/31/2004 FYE 2003 FYE 2002 FYE 2001
---------------------- --------------------- ---------------------- -----------------------
------------ --------- ------------ -------- --------- ---------
Life Support 842,381 33.6% 3,555,151 45.5% 3,467,774 66.7% 4,824,527 74.8%
- --------------------- ------------ --------- ------------ -------- ------------ --------- ------------- ---------
- --------------------- ------------ --------- ------------ -------- ------------ --------- -------------
Nature's Turn 1,522,085 60.6% 3,731,202 47.7% 1,336,445 25.7% 935,646 14.5%
- --------------------- ------------ --------- ------------ -------- ------------ --------- ------------- ---------
- ---------------------
Technological 66,914 2.7% 131,683 1.7% 89,185 1.7% --- ---
- --------------------- ------------ --------- ------------ -------- ------------ --------- ------------- ---------
- ---------------------
Marketing Aids 14,876 .6% 68,917 .9% 92,634 1.8% 65,951 1.0%
- --------------------- ------------ --------- ------------ -------- ------------ --------- ------------- ---------
- ---------------------
Other 64,397 2.5% 332,883 4.2% 210,545 4.1% 622,371 9.7%
- --------------------- ------------ --------- ------------ -------- ------------ --------- ------------- ---------
- ---------------------
Total 2,510,653 100.% 7,819,836 100.% 5,196,583 100.% 6,448,495 100.%
============ ========= ============ ======== ============ ========= ============= =========
Global's products are distinguished by their:
|X| Scientific Basis
|X| Complete Approach to Wellness
|X| Superior Formulations
|X| FDA-Certified, State-Of-The-Art Production Facilities
|X| Quality Ingredients
|X| Patent & Trade Secrets
|X| Documented Success
In support of these business activities, Global performs the following
functions:
|X| Nutritional Product Development, sometimes with Patentability |X| Research
and FDA-certified Production.
|X| Infrastructure (telecommunications, computer networks,
paperless office environment, policies and procedures,
training, physical office space, product management systems,
state of the art shipping department, fully integrated
enterprise software, etc.)
|X| Multi-channel Distribution.
|X| Two free individual Member websites: a business-building site;
a retail sales site.
33
Life Support(TM)
Life Support(TM) products are liquid-based nutrition supplements that
improve, balance, and increase overall health, vitality, and immunity. They are
the nutritional foundation needed for wellness providing the body with the 40 or
so nutrients that the body does not make on its own. This line currently
consists of two patented products and three support products. With the wellness
and vitality of the human body dependent upon getting and absorbing over 40
well-known nutrients essential for good health, Life Support(TM) includes two
vitality factors not included in most nutrition programs: oxygen and silica. A
key technology feature of Life Support is that all products are in a very tasty
liquid form. Liquids have specific advantages over pills and tablets, including
better absorption rates in the body and ease of oral application.
Oxygen Elements Plus(TM) is our oxygen supplement flagship product
patented under United States Patent Number 6,383,534 B1. Silica Plus(TM) is a
parallel patented product with Silica Plus(TM) that provides benefits to hair,
skin and nails as well as nutritional support for the lungs, joints and
cardiovascular system. The Life Support(TM) product line also includes our Daily
Vita Plus(TM) (Vegetarian and regular) as well as Mega Minerals Plus(TM). The
Life Support(TM) product line is the starting point of Global's marketing
towards those interested in its products. The Life Support line represents the
core foundation of general daily nutrition as presented by Global Health Trax
Inc.
All of the Life Support products are produced internally by Global.
This insures the highest quality possible in the raw material selection, storage
and preparation and guarantees complete control over product quality assurance.
By providing the basic nutrients needed in the body, a foundation is
created to meet an individual's needs through more specific products that are
provided through the product line named Nature's Turn(TM).
Nature's Turn(TM)
The products available through Nature's Turn will grow much faster than
those of Life Support(TM). The reason is that this is a specialty category meant
to provide nutritional supplements to meet an individual's particular needs. The
Nature's Turn products are designed to assist the body in dealing with many
challenges including fungal infestation, enzyme support, temporary heart burn,
digestive disorders, immune system support, anti-aging help, sleep disorders,
the restoration of lean muscle mass through proper nutrition, help with joint
pain due to cartilage damage, and more. The product line currently consists of a
dozen products, some of which are produced internally and others outsourced. The
same standards of quality are applied to all products represented by Global
Health Trax Inc. whether produced internally or not.
Smart Magnets(TM)
The technological products produced for this line result from the
digital programming of electro-magnetic (EM) energy into health magnets. The
Smart Magnet is comes ready to use and provide EM support as soon as they are
applied to the body. By programming these magnets, we get a variety of EM
benefits as opposed to just one or two benefits with standard health magnets.
With ten different magnets currently, the line is expected to triple in 2005.
34
Other
As a multi-level marketing company, sales are generated through a
membership base. Currently there are over 70,000 members registered with Global
Health Trax, Inc. Sales to these members include marketing aids in addition to
the Life Support(TM), Nature's Turn(TM) and Smart MagnetsTM product lines.
Marketing aids include books, tapes, CDs, business development tools and plans,
brochures, flyers, pamphlets, sales training videos, catalogues, and much more.
The statements provided above and throughout Company marketing and
claims have not been evaluated by the Food and Drug Administration and the
products listed are not intended to diagnose, treat, cure or prevent any
disease. Regardless, Global has accumulated volumes of testimonials in support
of its products. As a result, Global believes that its brands will become
leaders in the direct selling nutritional supplement industry. The following
table identifies Global's 16 leading products and illustrates Global's
multi-brand, multi-channel strategy:
BRAND PRIMARY CHANNEL PRIMARY NUTRITIONAL SUPPORT
- ----- --------------- ----------------
Life Support Line
Oxygen Elements Plus Retail, Wholesale, Multi-Level Marketing Oxygenation, Trace Elements
Silica Plus Retail, Wholesale, Multi-Level Marketing Hair, Skin, Nails, Lungs, Joints
Daily Vita Plus Retail, Wholesale, Multi-Level Marketing Multivitamin Supplement
Daily Vita Plus (Vegetarian) Retail, Wholesale, Multi-Level Marketing Multivitamin Supplement
Mega Minerals Plus Retail, Wholesale, Multi-Level Marketing Multimineral Supplement
Nature's Turn Line
Threelac Retail, Wholesale, Multi-Level Marketing Fungal Defense
Super Sea Essentials Retail, Wholesale, Multi-Level Marketing Antioxidant and Energy Drink
L-H-B Retail, Wholesale, Multi-Level Marketing Enzyme Support
Active Enzymes Retail, Wholesale, Multi-Level Marketing Digestive Enzyme Support
Coral Complete Retail, Wholesale, Multi-Level Marketing Multimineral Supplement
Mineral Milk Powder Retail, Wholesale, Multi-Level Marketing Multimineral Supplement
Colostrum FM (Capsules) Retail, Wholesale, Multi-Level Marketing Immune Support
Colostrum FM (Powder) Retail, Wholesale, Multi-Level Marketing Immune Support
Gold Label Noni Juice Retail, Wholesale, Multi-Level Marketing Broad Nutritional Support
HGH at Night Retail, Wholesale, Multi-Level Marketing Collagen Protein Supplement
Start-Ups Retail, Wholesale, Multi-Level Marketing Herbal Cell Support
ProgestAroma Retail, Wholesale, Multi-Level Marketing Progesterone Cream
Smart Magnet Line
Life Support Retail, Wholesale, Multi-Level Marketing Partner to Oxygen Elements
Water Revive Retail, Wholesale, Multi-Level Marketing Wake Up the Taste of Water
Bedtime Retail, Wholesale, Multi-Level Marketing Partner to Mega Minerals Plus for
Rest
Ideal Beauty Retail, Wholesale, Multi-Level Marketing Partner to Silica Plus for Hair
and Skin
Comfort Retail, Wholesale, Multi-Level Marketing Assist in Pain Relief
Vital Move Retail, Wholesale, Multi-Level Marketing EM Support for Cleansing
Magflex Retail, Wholesale, Multi-Level Marketing Partner to Silica Plus for Joint
Stress
Smile Retail, Wholesale, Multi-Level Marketing For Stressful Times
Alert Retail, Wholesale, Multi-Level Marketing Help Increase General EM Support
Seasonal Best Retail, Wholesale, Multi-Level Marketing Extra EM Support for Seasonal
Changes
Marketing Aids Retail, Wholesale, Multi-Level Marketing Hardgoods
35
To support its multi-brand, multi-channel strategy, Global will
continue to invest in research and development and state-of-the-art
manufacturing and distribution facilities. Global's research and development
department is currently working on several new product innovations to be brought
to targeted markets in the next twelve months. Global believes its research and
development commitment and integrated manufacturing capabilities will continue
to provide a significant advantage in capturing an increasing share of the
growing nutritional supplement market.
Global intends to broaden its position in the nutritional supplement
industry by utilizing the multi-level marketing channels to strengthen brand
awareness and promote sales. Specifically, Global's strategy is to: (i) leverage
its portfolio of established brands to increase its share of the nutritional
supplement market; (ii) develop new brands and product line extensions through
its commitment to research and development; (iii) continue the growth of its
balanced distribution network; (iv) further penetrate international markets; and
(v) supplement internal growth through focused organizational development and
training through increased marketing development and support of the multi-level
marketing entrepreneurs. Global believes that its multiple distribution
channels, broad portfolio of leading brands and state-of-the-art manufacturing
and distribution capabilities position it to be the long-term competitive leader
in the nutritional supplement industry.
Global's strategy is to increase sales, profits and market share by
further enhancing its leadership position in the sale of vitamins, sports
nutrition products, weight management and other nutritional supplements to
health and natural food stores, mass market accounts and through certain direct
sales distribution channels. Global plans to implement this strategy by: (i)
capitalizing on the strength of its established brands; (ii) developing and
introducing new channel-specific products and product innovations; (iii)
increasing penetration of foreign markets; and (iv) improving manufacturing and
operational efficiencies.
We have grown from start-up to $1,000,000 in our first full year to
$5,200,000 in 2002, $7,800,000 in 2003 and we expect to generate between
$12,000,000 and $15,000,000 in 2004. Global strongly believes it will be able to
achieve sales of $3,000,000 to $4,000,000 per month, within 24-30 months of
completion of its securities offerings. To accomplish this goal, Global plans to
increase its marketing activities through a national regional rally program, to
open new sales regions both in North America, Australia and Europe, grow
existing multi-level marketing relationships with members, create a new
"Customer Care and Development" strategy, create and broadcast radio and
television infomercials and solicit contract manufacturing and fulfillment.
Global contemplates the creation of a wellness cable information and shopping
channel in the future. The ultimate goal of Global is to dramatically increase
sales by a factor of 5 to 6 within 4 years.
Global consolidated its operations under one roof in 2002 and opened
its state of the art product production facility in May 2003. We lease a single,
freestanding building of 47,550 square feet in Vista California, a northern San
Diego County suburb. The lease is triple net, expires in 2013 and contains a
cost of living increase as well as a cost of living decrease. Global's offices
are located at 2465 Ash Street, Vista, CA 92081; telephone: 760-542-3000;
facsimile: 760-542-3046 or 800-673-4883; e-mail:ght@globalhealthtrax.com;
website: www.globalhealthtrax.com; contact: Everett Hale, President or Lorin
Dyrr, Executive Vice-President. See "Related Party Transactions -- Certain
Acquisitions."
We are now in a position to deliver production capacity to match
36
Global's marketing and sales goals. Global has identified multiple qualified
providers of nutritional materials and finished nutritional products in the
U.S., Canada, and Europe.
In May 2003, Global shipped its first order to Indonesia under a
license agreement with a privately owned company, GHT-Indonesia. Neither Global
nor any of its current owners have any ownership interest in GHT-Indonesia. A
similar license agreement is currently being negotiated for Korea, Singapore and
Mexico.
Global has opened a wholly owned subsidiary in Canada, GHT-Canada and
is working on product approval for the Canadian market to work seamlessly in the
MLM division.
Global also plans to expand into Europe with pilot programs in 2005 and
expanded programs in 2006 and 2007 at which time Global may decide to strategic
partner with established firms. As currently envisioned Global would license its
brands and manufacturing rights to the licensee. The European licensee would
start with a country-specific license that would be expandable to exclusivity
throughout Europe if key performance milestones are met. Discussions are
underway with qualified distributors in Finland at this time regarding the
possibility of licensing the European market.
Production capabilities in Global's new facilities will be able to meet
demand for the foreseeable future with enough space for expansion should Global
sales exceed its plan. Production capabilities of outsourced products are
similarly situated.
Global closely monitors consumer trends and scientific research, and
has consistently introduced innovative products and programs in response
thereto. Global regularly studies scientific, health and nutrition periodicals,
including the New England Journal of Medicine and the Journal of the American
Medical Association, in order to generate ideas for new product formulations.
Global intends to continue developing new products and programs in the future.
Global plans to introduce new products within the next 12 to 24 months, which
may include: a Whole Food Greens Supplement, Skin Care line, Colon Cleanse, Bath
Products, Functional Foods and Bio-friendly cleaning agents
Global has additional products in various stages of planning. In
summary, Global anticipates an ongoing stream of new products that are
responsive to market demand and new technologies.
Historical Financial Data
The following selected consolidated financial data at December 31, 2003
and 2002, and for the years then ended have been derived from Global's
consolidated financial statements, which have been audited by Weinberg &
Company, P.A., an independent public accounting firm, whose report thereon is
included elsewhere in this prospectus. Also included is the following selected
consolidated financial data at March 31, 2003 and 2004 and for the three months
ended have been derived from the March 31, 2003 and March 31, 2004 unaudited
consolidated financial statements of Global. The selected consolidated financial
data as of and for the three months ended March 31, 2004 and 2003 are unaudited.
In the opinion of management, such consolidated financial data includes all
adjustments (consisting only of normal recurring adjustments) considered
necessary for the fair presentation of the consolidated financial position and
the consolidated results of operations for such periods
Selected unaudited consolidated financial data at December 31, 1997,
1998, 1999, 2000 and 2001 and audited 2002 and 2003 data are provided.
37
The financial data should be read in conjunction with, and are
qualified by, the consolidated financial statements and notes thereto included
elsewhere in this prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Fiscal Year Ended Three Months Ended
December 31, March 31
---------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2003 2004
---------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
Net Sales
22,241 995,372 3,087,134 5,541,063 6,448,495 5,196,583 7,819,836 1,558,790 2,510,653
Cost of goods sold
16,657 691,154 2,012,549 3,679,754 4,456,206 3,388,991 4,613,500 913,081 1,521,179
---------------------------------------------------------------------------------------------------
Gross Profit 5,584 304,218 1,074,585 1,861,309 1,992,289 1,807,592 3,206,336 645,709 989,474
Total operating expenses 16,867 463,607 1,060,900 1,690,433 2,087,855 2,123,084 3,362,619 573,259 952,592
---------------------------------------------------------------------------------------------------
Income (loss) from
operations (11,283) (159,389) 13,685 170,876 (95,566) (315,492) (156,283) 72,450 36,882
Other Income (Expenses)
Interest, net - - - (5,293) (22,007) (64,240) (91,085) (26,494) (14,426)
Other - - - - - 92,653 20,703 - -
---------------------------------------------------------------------------------------------------
Total - - - (5,293) (22,007) 28,413 (70,382) (26,494) (14,426)
I(L)BITP (11,283) (159,389) 13,685 165,583 (117,573) (287,079) (226,665) 45,956 22,456
Provision for income taxes - - - 27,414 (27,582) (800) (800) - -
---------------------------------------------------------------------------------------------------
Net Income (loss) (11,283) (159,389) 13,685 138,169 (89,991) (287,879) (227,465) 45,956 22,456
===================================================================================================
Pro forma net income
(loss) per Common and
common equivalent share (1)
Basic $ (56.42) (796.96) 45.62 0.00 (0.01) (0.01) (0.01) 0.00 0.00
Diluted $ (56.42) (796.96) 45.62 0.00 (0.01) (0.01) (0.01) 0.00 0.00
Pro forma weighted average
Common and
equivalent shares
Basic 200 200 300 40,000,000 10,000,000 20,000,000 21,267,956 20,000,000 24,199,308
Diluted 200 200 300 40,000,000 10,000,000 20,000,000 21,267,956 20,000,000 26,695,508
OTHER DATA
EBITDA(2) (10,529) (143,205) 40,057 261,327 (1,415) (81,085) 142,705 97,590 124,746
Capital expenditures 3,771 74,056 156,367 148,467 265,259 147,104 611,227 366,236 68,269
Net sales increase - 4375% 210% 79% 16% -19% 50% - 61%
Income from operations
increase - -1313% 109% 1149% -169% -168% 50% - -49%
Income from operations
margin -51% -16% 0% 3% -2% -6% -2% 5% 1%
BALANCE SHEET DATA:
Cash and cash equivalents,
net of cash overdraft 6,538 38,943 83,404 (98,892) (21,847) (45,641) 70,072 78,722 73,599
Working capital deficiency (6,434) (115,816) (220,457) (206,613) (256,756) (524,839) (281,571) (503,229) (171,126)
Total assets 34,221 272,655 492,240 555,513 852,461 1,179,320 2,279,246 1,568,366 2,366,989
Total debt (3) 45,504 397,341 635,095 637,568 1,006,272 1,713,721 1,628,919 1,940,140 1,649,206
Total stockholders' equity
(deficiency) (11,283) (124,686) (142,855) (82,055) (153,811) (534,401) 650,327 (371,775) 717,783
38
(1) Gives effect to stock splits but not to offerings.
(2) EBITDA is presented because it is a widely accepted financial indicator
used by certain investors and analysts to analyze and compare companies
on the basis of operating performance. EBITDA is not intended to
represent cash flows for the period, nor has it been presented as an
alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(3) Total debt represents long-term debt
( including current portion of long-term debt ) and short-term debt.
Distinguishing Market Characteristics
Although the health and nutrition industry remains intensely
competitive, Global believes it has a number distinguishing market
characteristics that place it at an advantage. What makes Global Health Trax
unique is an amalgam of business propositions that powerfully inter-relate.
Global has uniquely positioned itself in four critical areas that drive the
growth of our current distribution channel and will dramatically support its
expansion into other marketing channels. Each area strengthens the others, and
makes the Global Health Trax story even more compelling.
It is one thing to manufacture products. It is quite another to
understand how the body uses them and manufacture the products to science-based
specifications so the consumer gets the results they expect. Global Health Trax
has maintained its absolute commitment to using exacting science and results as
the basis for formulating all of the products it sells. This one unique feature
contributes as much as any other to repeat sales and repeat sales are the key to
success in this or any business. Other competitive advantages include:
o Unique Products - Useful, thoughtfully packaged, and "they work."
o Brand Loyalty - Affinity Membership consumption driven by scientifically
advanced products and results. o Product Delivery Diversification - Liquids,
tablets, capsules and powders. o Quality Control and Packaging - Quality control
is strictly maintained. Expanding into proprietary manufacturing will allow
Global to control the science even more strictly and reduce costs
simultaneously.
o New Product Stream - Proper science and a loyal following eager for new
products enlarges the marketing story and increases sales.
Patenting has allowed Global Health Trax to corner market share and
increase sales. In addition to its patent, Global Health Trax owns the formulas
of most formulated products marketed by Global. More than just good business,
this allows Global Health Trax to respond immediately to new science and improve
products without long delays or increased costs. By reducing costs, Global is
also able to offer products at more competitive prices, increasing brand
loyalty. Global also has the following additional competitive advantages:
o Patents - Global Health Trax has two patented oxygen-supplementation
products that are the only two products of their kind in the
marketplace today.
o Most Formulas and Names Proprietary - Global Controls its products.
o Competitive Pricing - The percentage of repeat sales continues to grow
each year because the costs are controlled and prices are competitive.
o Exclusive "ThreeLac" Contract - North American, Australian and New
39
Zealand excusive distribution rights from Japanese pharmaceutical firm.
o International Governmental Relationships - Approved to do business in
Malaysia, most of Canada, pending in Mexico, Australia and New Zealand,
and will be approved in all European Union countries with the
establishment of manufacturing and fulfillment facilities in Finland
where Global is already approved.
o Professional and Business Associations - Active membership in the
Direct Selling Association, the most prestigious organization in the
direct selling industry, and ongoing membership in the Better Business
Bureau.
Global Health Trax has built its reputation on proper science and
results, which has earned it the right to establish powerful relationships in
the world market. These exclusive marketing alliances and endorsements give
Global a unique marketing edge and add enormous credibility to the product
offering. This "Global Vision" will also accelerate Global's expansion
internationally.
It takes seasoned, conservative management to demand proper science, to
develop competitive proprietary products, and to build relationships that will
aid Global's expansion. Since its inception, the founders, who are deeply
committed to making this business work for all its customers, have guided the
growth of Global. Management is a group of seasoned professionals with diverse
skills, who are comfortable with their own abilities and with recruiting
additional talent for expansion.
Product Distribution Plan
The distribution plan is to maintain a strong multi-level marketing
division building Global's base throughout the United States and Canada.
Global has extensive experience in building new sales and distribution
territories. In going after new markets, Global may create new "sample" size
products, for example, chewable products for the youth market and one week
supplies of ThreeLac for the huge Candida market.
Through effective use of radio, television and Internet infomercials,
Global will expand its retail sales to end consumers. These infomercials will
also give Global's distributors the brand recognition to approach natural and
health food stores, specialty retail sales outlets, health care providers, and
conventional grocery, drug, mass merchandise, club and convenience stores with
point of sale information and retail displays for merchandising. The Internet is
already being used very successfully by Global Distributors in the distribution
of ThreeLac.
Global has invested significantly in dollars and human resources to
develop custom-tailored software programs to manage inventory, customer
inquiries, member inquiries, and other information. The information
infrastructure is proven, in use, and scalable to meet Global's growth
projections.
Global believes that its information infrastructure
(telecommunications, computer programs, database management, paperless document
maintenance, etc.) will provide important savings as a result of
economies-of-scale in response to increased sales volume.
Significant cost savings are being realized since Global combined all
of its resources under one roof. This is especially relevant in May 2003 when
Global fully manufactured its liquid products in its own facility. Estimated
savings of up to 40% in the manufacturing cost of some products will lower the
40
overall product Cost of Sales by up to 4% in 2004.
Global has three full time programmers and three part time programmers
on staff.
Marketing Plan
The marketing plan is based on the understanding that product sales are
predicated on consumers getting the information they need to make informed
purchase decisions through a "high tech-high touch" approach. A well-trained and
highly motivated national sales force is the key to getting information to the
ultimate consumer. These motivated salespeople are "products of the products"
and all have personal testimony to give to other consumers in meetings, in one
on one encounters, and on their individual websites provided by Global to them
at no cost.
The marketing plan includes several key points:
|X| Expanding the membership base through a revitalized national training
program, strong advertorials in industry and trade publications, radio and
television infomercials and regional rallies featuring the corporate
executives.
|X| Repositioning Global away from "illness" (existing testimonials) and toward
"wellness" (new testimonials, etc.). |X| Enrolling recognized "champions"
of Global's scientific/nutritional basis, including M.D.s and Ph.D.s who
can become spokespersons for Global, its science, and its products.
|X| Sponsoring nutrition events and related health events, including seminars,
conferences, exhibitions, fun-runs, and other health events.
|X| Videotaping the experts, and packaging the footage to support product
training sales videotapes, as well as incorporating the footage in
infomercials and streaming video on the member websites.
|X| Creation of a new Customer Care and Development Department designed to
create a "high touch" sales effort with all existing customers and members.
|X| Creation of a sales representative force targeting contract manufacturing
or O.E.M.
|X| Expanding direct mail and Internet prospecting.
Private label opportunities. Global believes that large chain store
retailers will also be receptive to private labeling their house brands, Global
is currently seeking private label opportunities, however not in competition
with its members or products.
Original Equipment Manufacturers" or O.E.M. services. Because Global
plans to operate under the guidelines of Over The Counter FDA-certified
laboratories and production facilities, Global is actively seeking additional
revenue-generating opportunities by selling manufacturing services to other
nutrition product providers.
41
Competition.
Global faces competition from other channels for product marketing and
distribution, as well as competition from other multi-level marketing firms and
organizations. In the following table is information provided to Global by
Direct Selling Associates, a major multi-level marketing trade association of
which Global is a member. Several firms are profiled that cumulatively have more
than $1.5 billion/year in MLM sales of nutrition products.
Competing MLM Marketing Firms with a Primary Focus on Nutrition
- ------------------------------ ----------- --------------- -------------- -------------------------------------
MLM Competitors 2002 2002 2002 Comments
Sales Distributors Employees
- ------------------------------ ----------- --------------- -------------- -------------------------------------
- ------------------------------ ----------- --------------- -------------- -------------------------------------
Herbalife $1.76 1,000,000+ 2,350 This California based company, was
founded in 1980 and is experiencing
most of its recent growth in
billion foreign markets.
- ------------------------------ ----------- --------------- -------------- -------------------------------------
- ------------------------------ ----------- --------------- -------------- -------------------------------------
Body Wise International $60 50,000 US 80 US Based in California, this private
million 5,000 Int'l 10 Int'l firm was founded in 1988.
- ------------------------------ ----------- --------------- -------------- -------------------------------------
- ------------------------------ ----------- --------------- -------------- -------------------------------------
A Florida based, public company
Changes International $42 60,000 US 75 US founded in 1993 with a similar
million 6,000 Int'l compensation plan
- ------------------------------ ----------- --------------- -------------- -------------------------------------
- ------------------------------ ----------- --------------- -------------- -------------------------------------
Founded in 1992, this public Utah
USANA Health Sciences $200 45,000 US 380 US company has seen recent sales
million 48,000 Int'l 80 Int'l growth in their foreign markets.
- ------------------------------ ----------- --------------- -------------- -------------------------------------
- ------------------------------ ----------- --------------- -------------- -------------------------------------
This public company, founded in
1985, produces, and sells granola
Reliv International $ 83 55,000 US 200 US bars, nutritional supplements,
million 5,000 Int'l 50 Int'l weight system, and soy-based
products.
- ------------------------------ ----------- --------------- -------------- -------------------------------------
The business of developing, manufacturing and selling vitamins,
minerals, herbs, sports nutrition products, nutritional supplements and other
nutraceuticals is highly competitive in all channels of distribution. There are
numerous companies selling products competitive to Global's products to mass
merchandisers, drug store chains, independent drug stores, supermarkets, health
and natural food stores, as well as through catalogs, the internet and network
marketing. Certain of Global's competitors are substantially larger and have
greater financial resources than Global.
Global believes that it can continue to compete effectively with these
and other nutritional product providers, in a rapidly growing and highly
fragmented marketplace by relying on liquid nutrition that combines technology
with science and by its current and future strategic alliances with national and
international companies.
42
Projections
The following table represents what management believes to be
reasonable projections for Global's revenue through the end of fiscal year 2006.
No assurances can be given that the future results anticipated by these
forward-looking statements will be achieved. These projections are qualified in
their entirety by certain factors, including certain risks and uncertainties
that could cause actual results to vary materially from the future results
anticipated by those forward-looking statements. Among the key factors that may
have a direct bearing on our results of operations are the effects of various
governmental regulations, the fluctuation of our direct costs and the costs and
effectiveness of our operating strategy. Other factors could also cause actual
results to vary materially from the future results anticipated by these
forward-looking statements.
2004 2005 2006
--------------------------- -------------------------- ---------------------------
--------------- ----------- --------------- ---------- ---------------- ----------
Revenue $14,864,288 $26,694,995 $47,941,243
Cost of sales 8,367,192 56.3% 14,010,195 52.4% 23,327,878 48.7%
Gross profit 6,497,096 43.7% 12,684,800 47.6% 24,613,365 51.3%
Operating expenses 6,086,219 40.9% 9,265,617 34.7% 13,586,791 28.3%
Net income before taxes 410,877 2.8% 3,419,183 12.8% 11,026,574 23.0%
Income tax provision * - 1,470,498 5.5% 4,741,677 9.9%
Net income 410,877 2.8% 1,948,685 7.3% 6,284,897 13.1%
Earnings before interest,
taxes, depreciation and
amortization 674,662 4.5% 3,686,359 13.8% 11,331,842 23.6%
* tax loss carry forward from prior years
Management's Discussion and Analysis Or Plan of Operations
The following discussion and analysis should be read in conjunction
with the consolidated financial statements, including the notes thereto,
appearing elsewhere in this prospectus.
Overview
Global experienced growth in sales over the past four fiscal years with
a small decrease in 2002 and a substantial growth in 2003. Increased sales were
due primarily to Global's increased penetration of the growing mass volume
retail distribution channel. In addition, Global's emphasis on research and
development and greater marketing efforts increased sales volumes, particularly
as a result of new product introductions. Global believes future sales growth
will depend upon the same factors which contributed to its recent growth.
The following table shows selected items expressed on an actual basis and
as a percentage of net sales for the fiscal years and three month periods
indicated:
43
FISCAL YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------ -----------------------------------
--------------- ------------- --------------- -------------- ------------
2001 2002 2003 2003 2004
Unaudited Unaudited Unaudited
--------------- ------------- --------------- -------------- ------------
(DOLLARS IN THOUSANDS)
Net Sales $ 6,448 100.0 % $ 5,196 100.0 % $ 7,819 100.0 % $ 1,558 100.0 % $ 2,510 100.0%
Cost of goods sold 4,456 69.1 3,388 65.2 4,613 59.0 913 58.6 1,521 60.6
------- ------- ------ ------ ------- ------- ------- ------ ----- ------
Gross profit 1,992 30.9 1,808 34.8 3,206 41.0 645 41.4 989 39.4
=======================
Total operating
expenses 2,088 32.4 2,123 40.9 3,363 43.0 573 36.8 953 38.0
------- ------- ------ ------ ------- ------- ------- ------ ----- ------
Income (loss) f rom
operations (96) (1.5) (315) (6.1) (156) (2.0) 72 4.6 36 1.4
=======================
Other income (expense) (22) (0.3) 28 0.5 (70) (0.9) (26) (1.7) (14) (0.6)
Provision for income
taxes 28 0.4 (1) - (1) - - - - -
------- ------- ------ ------ ------- ------- ------- ------ ----- ------
Net income (loss) $ (90) (1.4) % $ (288) (5.5) % $ (227) (2.9) % $ 46 3.0 % $ 22 0.9%
======= ======= ====== ====== ======= ======= ======= ====== ===== ======
Results of Operations
Three Months Ended March 31, 2004 Compared to the Three Months Ended March 31,
2003
Net Sales. The following table shows comparative net sales results
categorized by Product line on an actual basis and as a percentage of net sales
for the periods indicated:
44
THREE MONTHS ENDED MARCH 31,
----------------------- ----- --- -----------------------
2003 2004
----------------------- -----------------------
---------------------------------------------------------
(DOLLARS IN THOUSANDS)
Life Support $ 868 55.7 % $ 842 33.5 %
Nature's Turn 588 37.7 1,522 60.7
Technological 25 1.6 67 2.7
Marketing Aids 13 0.8 15 0.6
Other 64 4.2 64 2.5
----------- ----------- ----------- -----------
Total $ 1,558 100.0 % $ 2,510 100.0 %
=========== =========== =========== ===========
The 61% increase in sales during the first quarter of 2004 as compared
to the same period in 2003 is directly attributable to Global's internal
production and improved marketing efforts. Global is able to produce its
products with very little lead times involved. With the ability to manufacture
in-house, quality control is significantly enhanced. Concurrently, with a vastly
improved website presence in the nutritional supplements marketplace, Global
Health Trax, Inc. is better able to support its members and their efforts. The
Life Support product line has decreased as a percentage of overall sales due to
a well-rounded marketing philosophy of stressing a total wellness concept. To
further emphasize the oxygenation benefit of our flagship product, Hydroxygen
Plus has been officially renamed Oxygen Elements Plus. We feel the new name more
appropriately portrays the patented oxygenation process that is the cornerstone
of our Life Support product line. Where the Life Support products represent the
basic building blocks of the Global Health Trax, Inc. philosophy of health and
wellness, the Nature's Turn products provide specific and focused health related
supplemental treatments and maintenance regimens.
The Nature's Turn product line has continued to meet with acceptance
and vigorous repeat sales. With an increase of over 159% for the three-months
ended March 31, 2004 over the same period in 2003, the results of product
differentiation have taken hold. There are several new products under
development as well.
The Technological product line continues to evolve and grow. The
PolarWearZ has given way to the Smart Magnet line that was introduced late in
2003. The 172% increase in Global's Technological line has proven to management
and Global's members that the need for technologically advanced health and
wellness products is real and very much in demand. Consequently, the Smart
Magnet line is being developed along with supporting products within this area.
Global Health Trax, Inc. foresees the growth of its Technological product line
45
to potentially rival all other product lines in the near future. Marketing plans
are being developed to share the exciting technology of Smart Magnets
internationally.
Marketing Aids represent the level at which the members of Global
Health Trax, Inc. avail themselves of the tools provided by Global to attract
new members. The 15% increase in Marketing Aids products indicates to management
the continued effectiveness of existing Life Support and Nature's Turn marketing
products from past years. Aggressive marketing of Smart Magnets in conjunction
with new products, catalogues, packaging, flyers and website options should lead
to increased Marketing Aids sales over the ensuing year.
Other sales items include operating income from fees and charges not related to
the primary product or revenue generating lines. The .5% decrease in other sales
is interpreted by management as being directly related to the addition of new
membership and a related deferral of income.
Gross Profit. Global's gross profit has increased well over 53% for the
three months ended March 31, 2004 from the same time the previous year. Being
able to produce the Life Support product line in-house allows for more
controlled production costs. As sales for the Life Support product line
increase, desired economies of scale will see even better cost of goods sold per
production unit which should result in even more desirable gross profits.
Operating Expenses. Operating expenses have increased approximately 66%
for the three months ended March 31, 2004 from the same time period in the
previous year. Global Health Trax, Inc. moved to a new 47,500 square foot
facility in Vista, California, hired more than double the employees to handle
in-house production as well as increased sales volumes. Advertising decreased
nearly 17% due to the cost savings of internal internet, television and radio
marketing efforts. Global's purchase of in-house production equipment, its
purchase of computer hardware and software, along with other capital
acquisitions saw over a 211% increase in depreciation and amortization for the
first three months of 2004. With the larger facility and increased sales,
additional computer related investments have been made. Still, with in house
programming, the computer and programming expenses decreased over 16% during the
first quarter of 2004 from the same period in 2003. Global Health Trax, Inc. is
committed to maintaining efficient and state-of-the-art member support and
purchased most of its high tech equipment in late 2003. Consulting fees
increased about 401% as contracts were secured for ongoing marketing development
support. Equipment rental decreased over 14% as a result of Global's acquiring
equipment in late 2003. Legal expenses rose a strong 225% in direct proportion
to Global's efforts to become a public entity. Rent expense decreased over 19%
in the three months ended March 31, 2004 as compared to 2003 due to having only
one facility to pay rent on in 2004. In beginning in-house production, many
repairs and maintenance expenses were incurred in 2003 on equipment subsequently
replaced which led to a 64% decline in the repairs and maintenance category in
the three months ended March 31, 2004 as compared with the same period in 2003.
Being ever mindful of the need to find better products, research and development
increased 128%. With more personnel, there was a 113% increase in salaries and
wages along with health and product benefits for employees for the three months
ended March 31, 2004 from the same time period in the previous year.
Other Income (Expense). Our primary other expense consists of interest expense.
Interest expense decreased 45% for the three months ended March 31, 2004 from
the same time the previous year. This decrease is primarily attributed to the
notes payable to the landlord of the new facility being converted to equity
along with several other vendors.
46
Provision for Income Taxes. Global did not incur any income tax liability
for the three months ended March 31, 2004.or 2003.
Fiscal Year Ended December 31, 2002 Compared to Fiscal Year Ended December
31, 2003
Net Sales. The following table shows comparative net sales results
categorized by product line for the fiscal years indicated:
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
----------------------- ------ ---- -----------------------
2002 2003
----------------------- -----------------------
-----------------------------------------------------------
(DOLLARS IN THOUSANDS)
Life Support $ 3,468 66.8 % $ 3,555 45.5 %
Nature's Turn 1,336 25.7 3,731 47.6
Technological 89 1.7 132 1.7
Marketing Aids 93 1.8 69 0.9
Other 210 4.0 332 4.3
----------- ----------- ----------- -----------
Total $ 5,196 100.0 % $ 7,819 100.0 %
=========== =========== =========== ===========
Life Support product sales increased about 2.5% in 2003 from 2002. The
flagship products of Oxygen Elements Plus(TM) and Silica Plus(TM) grew in light
of increased marketing emphasis in the Natures Turn and technological lines of
products. Until early 2003, Global Health Trax, Inc. had been outsourcing the
production of its Life Support products. Seeing the decline in sales of both the
overall total and the Life Support mix of total sales, led management in 2002 to
consider implementing stringent quality control measures. It became apparent
that the only way to insure the highest level of quality possible was to
directly control the manufacturing processes. Consequently, towards the later
part of 2002, the management of Global Health Trax, Inc. made the decision to
manufacture its own Life Support and certain Nature's Turn products in-house.
The Nature's Turn product line increased in total sales by over 179% from 2002
to 2003. Its contribution to the total mix of products rose nearly 22% to 47.4%
of total sales in 2003.
Technological sales evidenced an increase in sales of 48% in 2003 over
2002. In the later half of 2003, the Smart Magnet line was introduced. Smart
Magnets are vitality and body support products that bring electro-magnetic
health properties to defined areas of need. Global's Smart Magnets are coated
47
with a metallic, holographic surface. This surface is then printed with a
micro-circuit board that is capable of holding an electro-magnetic program
defined for a specific purpose. The circuit board is carefully protected with a
special polymer that adds durability to this very advanced wellness support
product for longevity and ease of use. There are currently over twelve Smart
Magnets available with more being developed and tested for specific health and
wellness support. The Technological product line was developed in 2002 with the
introduction of PolarWearz. There were fifteen categories of PolarWearz products
from gloves and ankle supports to body wraps and water bottle holders.
PolarWearz was based on Complex Meridian Unit technology that conceptually
provides a means to control and manage pain relief using electro magnetic
therapy. That the launching of a new technologically innovative product met with
such immediate success was evidence of the public outcry for advanced health and
wellness products.
Sales of Marketing Aids decreased over 25% in 2003 from 2002. Flyers,
samples, videos and tape sales represented the majority of this decline. The
sales aids sold in the latter half of 2002 and those to new members in 2003
continue to provide the marketing tools necessary for members to market Global's
products. The illustrative effects of these sales aids continue to spread the
philosophy of health and wellness while providing financial and health returns
to our members.
Other sales items increased in volume by nearly 58%. The increase in
2003 in Life Support product sales carried over to related fees and charges and
is directly related to new member enrollment and associated deferred income. It
is anticipated that in 2004, all product sales and other related sales will
increase substantially.
The Gross Profit increase to 41.0% in 2003 over 2002's 34.8% as a
percentage of sales reflects increased marketing and management's continuing
efforts to negotiate lower costs of goods sold. Management's policy of proactive
cost controls is a routine. From constantly monitoring freight costs to sourcing
raw materials for production and packaging materials, Global Health Trax, Inc.
is always on the lookout for the most cost effective alternatives.
Operating Expenses as a percentage of sales increased approximately
58% in 2003 over 2002. The management of Global Health Trax, Inc. controlled
costs as much as possible in light of the costs anticipated in Global's move to
a new 47,500 square foot facility. Advertising decreased over 18%. Amortization
and depreciation saw over a 96% increase due to capital expenditures made during
2003. General computer and programming expenses increased around 289% as more
high tech equipment was purchased in 2003 for the increase in employees,
necessary to provide support to members. Consulting fees decreased over 23% due
to the hiring of personnel in-house. Equipment rental increased 5% partly in
response to moving into the new facility. Legal expenses increased 16% due to
actions taken by Global Health Trax, Inc. in relation to its efforts to become a
public entity. Rent expense rose about 58% with the higher rent costs of the new
facility. With the new facility, repairs and maintenance expenses rose 208%.
Research and development rose by 79% in 2003 over 2002. With the manufacturing
deficiencies and related efforts to correct them, the move to the new facility,
and the hiring of new research and development staff little time was available
the last few months of 2002 for research and development. Hiring new personnel
to handle manufacturing and customer support led to an increase in salaries and
wages of 56% in 2003.
Other Income (Expense) primarily consists of interest expense.
Interest expense increased nearly 42% for the year 2003 over 2002. This increase
is primarily attributed to the notes payable to the landlord of the new
facility. For the year ended December 31, 2003, $20,703 in debt was eliminated.
48
The debt extinguishment was the result of arbitration for a dispute resolution
with a vendor who had supplied the Company with unacceptable product during the
years 2002 and 2003. For the year ended December 31, 2002, $92,653 in debt was
eliminated. The debt extinguishment was the result of a protracted dispute
resolution process from improper billing by a telephone service provider during
1998 and 1999
Provision for Income Taxes. For the years ended 2003 and 2002, Global Health
Trax, Inc. did not incur any federal income tax liability. Net operating loss
carryforwards totaling approximately $566,000 federal and $307,000 state amounts
at December 31, 2003 are being carried forward. The net operating loss
carryforwards expire at various dates through 2024 for federal purposes and 2014
for state purposes.
Liquidity and Capital Resources.
Prior to our recent private offering, Global's operations and capital
requirements were financed through internally generated funds, and loans. For
fiscal years ended December 31, 2002 and 2003, and the three months ended March
31, 2004, Global's primary capital requirements were as follows:
YEAR ENDED DECEMBER 31, THREE MONTHS
ENDED MARCH
31,
----------- --- ----------- ---------------
2002 2003 2004
----------- --- ----------- ---------------
(DOLLARS IN THOUSANDS)
Working capital deficit $ 525 $ 282 $ 171
Capital expenditures 147 611 68
----------- ----------- ---------------
Total capital requirements $ 672 $ 893 $ 239
=========== =========== ===============
These capital requirements, which primarily reflect the growth of
Global, were satisfied through internally generated funds, and loans. These
proceeds were as follows:
YEAR ENDED DECEMBER 31, THREE MONTHS
ENDED MARCH 31,
---------- --- ----------- ----------------
2002 2003 2004
---------- --- ----------- ----------------
(DOLLARS IN THOUSANDS)
Cash from the sale of stock $ - $ 531 $ 45
Working capital provided by (used in) operations (243) 98 3
Proceeds from loans 525 400 50
---------- ----------- ----------------
Total $ 282 $ 1,029 $ 98
========== =========== ================
49
Global's cash requirements through the remainder of fiscal 2004 are
expected to include expenditures in connection with: (i) increasing investment
in research and development, (ii) hiring additional personnel, if and as
necessary, to support Global's marketing plan as sales of Global's nutritional
supplements increase; (iii) increasing advertising and promotional investments
to continue to educate consumers about Global's products; and (iv) implement an
integrated accounting, manufacturing, quality assurance and customer support
driven enterprise software package. Global expects that the net proceeds from
the Offerings, together with anticipated cash flows from operations will be
sufficient for the above purposes.
Global's long-term capital requirements are expected to include capital
expenditures to support continued growth of nutritional supplements sales.
Global may also enter into strategic acquisitions as the nutritional supplements
industry continues to consolidate. Global expects to fund its long-term capital
requirements including construction of capital projects such as a potential
enlargement of the manufacturing facility for the next twelve months and in the
foreseeable future, through the use of operating cash flow supplemented, if
necessary, through debt financings or the issuance of additional equity.
Impact of Inflations
Global has historically been able to pass inflationary increases for
raw materials and other costs onto its customers through price increases and
anticipates that it will be able to continue to do so in the future.
Government Regulation.
The formulation, manufacturing, packaging, labeling, advertising and
distribution of Global's products are subject to regulation by one or more
federal agencies, including the United States Food and Drug Administration
("FDA"), the Federal Trade Commission ("FTC"), the Consumer Product Safety
Commission ("CPSC"), the United States Department of Agriculture ("USDA") and
the Environmental Protection Agency ("EPA"). Global's activities are also
regulated by various agencies of the states and localities in which Global's
products are sold, including without limitation the California Department of
Health Services, Food and Drug branch. The FDA in particular regulates the
advertising, labeling and sales of vitamin and mineral supplements and may take
regulatory action concerning medical claims, misleading or untruthful
advertising, and product safety issues. These regulations include the FDA's Good
Manufacturing Practices ("GMP") for foods. Detailed dietary supplement GMPs have
been proposed but no regulations have been adopted. Additional dietary
supplement regulations were adopted by the FDA pursuant to the implementation of
the Dietary Supplement Health and Education Act of 1994 ("DSHEA").
Global may be subject, from time to time, to additional laws or
regulations administered by the FDA or other Federal, state or foreign
regulatory authorities, or to revised interpretations of current laws or
regulations. Global is unable to predict the nature of such future laws,
regulations, interpretations or their application to Global, nor can it predict
what effect additional governmental regulations or administrative orders, when
and if promulgated, would have on its business in the future. They could,
however, by way of illustration and without limitation, require Global to:
reformulate certain products to meet new standards; recall or discontinue
certain products not able to be reformulated; expand documentation of the
properties of certain products; expand or provide different labeling and
scientific substantiation; or, impose additional record keeping requirements.
Any or all such requirements could have a material adverse effect on Global's
results of operations and financial position.
50
Additionally, Internet access and online services are not subject to
direct regulation in the United States. Changes in the laws and regulations
relating to the telecommunications and media industry, however, could impact our
business. For example, the Federal Communications Commission could begin to
regulate the Internet and online services industry, which could result in
increased costs for us. The laws and regulations applicable to the Internet and
to our services are evolving and unclear and could damage our business. There
are currently few laws or regulations directly applicable to access to, or
commerce on, the Internet. Due to the increasing popularity and use of the
Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose us to substantial liability as well
as dampen the growth in use of the Internet, decrease the acceptance of the
Internet as a communications and commercial medium, or require us to incur
significant expenses in complying with any new regulations. The European Union
has recently adopted privacy and copyright directives that may impose additional
burdens and costs on international operations.
Research and Development.
Global's Research and Development Laboratory is currently attempting to
create even more powerful multi mineral and multi vitamin products at slightly
reduced costs to the consumer. Research is being done on a whole food greens
product. Testing of various new flavors to be developed for our liquid Mega
Minerals Plus, Daily Vita Plus, Daily Vita Plus Vegetarian, HGH at night and
Super Sea Essentials is ongoing. Additionally, a probiotic product to work in
conjunction with ThreeLac is in beginning stages with a product introduction
estimated at late 2004. A skin care line is being researched for introduction in
2005 with possible household cleaning products and functional foods in 2006.
Employees.
As of the date of this prospectus Global Health Trax, Inc. employed
approximately 77 persons, of whom approximately 15 were in management, 19 sales,
7 marketing, research and development, 8 warehouse, 3 manufacturing and 25
administration. Global is not party to, and does not expect to be a party to,
any collective bargaining arrangements.
Facilities.
Global leases a 47,500 square-foot, state-of-the-art distribution,
manufacturing and office facility in Vista, California, which it has occupied
since October 2002. This facility has served as Global's executive offices for
management, sales and administration. In addition, this facility is the
distribution center for manufactured and sourced products.
Description of Property
As of the date of this prospectus we did not own any property other
than office furnishings and fixtures, business machines, vehicles and inventory.
Certain Relationships and Related Transactions
In connection with the organization of Global, and prior to any stock
splits, Everett Hale, a founding shareholder of our company, provided labor and
services in exchange for which for he was issued 20,000,000 shares of common
stock. On June 15, 2003 Global conducted a 4 for 1 reverse split of its
outstanding common stock, which reduced Mr. Hale's ownership to 5,000,000
51
shares. On November 15, 2003 we conducted a 2 for 1 forward split of our common
stock, which increased Mr. Hale's ownership to 10,000,000 shares. Similarly, in
connection with the organization of Global, and prior to any stock splits, Lorin
Dyrr, a founding shareholder of our company, provided labor and services in
exchange for which for she was issued 20,000,000 shares of common stock. On June
15, 2003 Global conducted a 4 for 1 reverse split of its outstanding common
stock, which reduced Ms. Dyrr's ownership to 5,000,000 shares. Ms. Dyrr also
agreed at that time to sell 50,000 shares of her stock to the corporation in
exchange for the retirement of debt owed by her. On November 15, 2003 we
conducted a 2 for 1 forward split of our common stock, which increased Ms.
Dyrr's ownership to 9, 900,000 shares. In addition, Global officer and director
Russell Chaisson was issued 500,000 shares of common stock in September 2003 in
exchange for services and a promissory note in the amount of $125,000. On
November 15, 2003 we conducted a 2 for 1 forward split of our common stock,
which increased Mr. Chaisson's ownership to 1,000,000 shares. Global officer
Henry S. Leonard was issued 500,000 shares of common stock in June 2004 in
exchange for services and a promissory note in the amount of $62,500.
Further, we have recently completed our capitalization with a private
offering that resulted in $2,010,030 in proceeds to Global, including the
conversion of debt for stock. These proceeds were contributed by the selling
shareholders set forth elsewhere in this prospectus in exchange for an aggregate
of 3,699,649 shares of common stock.
The Board of Directors of Global has adopted a 2003-2004 Employee Stock
Option Plan. The Board of Directors administers the Plan unless a committee is
appointed by the Board (the "Committee") to administer the Plan. The Plan
authorizes the Board/Committee to grant options to certain qualifying key
employees. Within certain limitations, both the selection of recipients and the
number of option shares to be allocated to each recipient is within the
discretion of the Board/Committee, but the aggregate number of option shares
granted under the Plan cannot exceed Three Million Shares (3,000,000). 2,496,200
of incentive stock options were granted in January 2004, including 1,000,000 to
Everett Hale and 1,000,000 to Lorin Dyrr.
The Stock Option Plan includes incentives for certain key employees and
independent contractors who make significant contributions to Global's growth
and development. To date the Board of Directors has authorized 1,000,000 shares
for such purposes. The Board of Directors is authorized to grant options to
certain qualifying key employees. The selection of recipients, the exercise
price and the number of option shares to be allocated to each recipient is
strictly within the discretion of the Board of Directors.
Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. Our securities are not listed for trading
on any exchange or quotation service. We are not required to comply with the
timely disclosure policies of any exchange or quotation service. The
requirements to which we would be subject if our securities were so listed
typically include the timely disclosure of a material change or fact with
respect to our affairs and the making of required filings. Although we are not
required to deliver an annual report to security holders, we intend to provide
an annual report to our security holders, which will include audited financial
statements.
When we become a reporting company with the Securities and Exchange
Commission, the public may read and copy any materials filed with the Securities
and Exchange Commission at the Security and Exchange Commission's Public
52
Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may
also obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
As of the date of this prospectus, there were 51 record holders of our
common stock.
There are 21,400,000 outstanding shares of our common stock which can
be sold pursuant to Rule 144. There are also 4,000,000 options or warrants to
purchase, or securities convertible into, shares of our common stock.
There have been no cash dividends declared on our common stock.
Dividends are declared at the sole discretion of our Board of Directors in
accordance with California law.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
There have been no disagreements with our accountant since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by
us has been passed upon by Kennan E. Kaeder, Attorney at Law, 110 West C Street,
Suite 1300, San Diego, California.
EXPERTS
Our consolidated financial statements as of December 31, 2003 and 2002
and for the years then ended included in this prospectus and in the registration
statement of which this prospectus forms a part, have been audited by Weinberg &
Company, P.A., an independent registered public accounting firm, to the extent
and for the periods set forth in their report thereon, and are included in
reliance upon said report given upon the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 with the Securities
and Exchange Commission pursuant to the Securities Act of 1933. This prospectus
does not contain all of the information set forth in the registration statement
and the exhibits and schedules to the registration statement. For further
information regarding us and our common stock offered hereby, reference is made
to the registration statement and the exhibits and schedules filed as a part of
the registration statement.
53
PART FS
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONTENTS
PAGE F-1 INDEPENDENT AUDITORS' REPORT
PAGES F-2 - 3 CONSOLDIATED BALANCE SHEETS AS OF DECEMBER 31, 2003 AND 2002
PAGE F-4 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
PAGE F-5 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY) FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002
PAGES F-6 - 7 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
PAGES F-8 - 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Global Health Trax, Inc.:
We have audited the accompanying consolidated balance sheets of Global Health
Trax, Inc. and subsidiary (the "Company"), as of December 31, 2003 and 2002, and
the related consolidated statements of operations, changes in stockholders'
equity (deficiency), 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Global Health Trax,
Inc. and subsidiary as of December 30, 2003 and 2002, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
May 28, 2004
F-1
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2003 and 2002
ASSETS
2003 2002
---------------- ---------------
---------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 242,455 $ 160,034
Accounts receivable, net of allowance for doubtful accounts
of $7,742 and $12,525, respectively 24,977 33,868
Inventories 633,034 299,610
Prepaid expenses 87,097 182,622
Income taxes receivable - 27,582
Other 1,714 1,149
---------------- ---------------
Total Current Assets 989,277 704,865
---------------- ---------------
Plant and equipment, net of accumulated depreciation of
$385,061 and $237,083, respectively 881,790 202,680
---------------- ---------------
Intangible assets, net of accumulated amortization of $224,077 and
$83,070 respectively 309,805 192,170
---------------- ---------------
OTHER ASSETS
Deposits 63,030 47,632
Other receivable, related parties 33,782 31,973
Interest receivable 1,562 -
---------------- ---------------
Total Other Assets 98,374 79,605
---------------- ---------------
Total Assets $2,279,246 $1,179,320
================ ===============
The accompanying notes are an integral part of these financial statements.
F-2
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2003 and 2002
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Cash overdraft $ 172,383 $ 205,675
Accounts payable 642,501 445,354
Accrued expenses 63,864 17,706
Accrued commissions 244,462 208,517
Notes payable, related parties - 175,212
Notes payable, current portion - 94,402
Capital leases payable, current portion 42,202 18,891
Deferred income 105,436 63,947
----------------- ----------------
Total Current Liabilities 1,270,848 1,229,704
----------------- ----------------
LONG-TERM LIABILITIES:
Notes payable 263,970 484,017
Capital leases payable 91,401 -
Other payable 2,700 -
----------------- ----------------
Total Long-Term Liabilities 358,071 484,017
----------------- ----------------
Total Liabilities 1,628,919 1,713,721
----------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, authorized 10,000,000 shares with no par
value, none issued and outstanding - -
Common stock, authorized 100,000,000 shares common
stock with no par value; issued and outstanding
24,149,308 and 20,000,000, respectively 1,560,193 23,000
Stock subscription receivable (125,000) -
Retained earnings (Deficit) (784,866) (557,401)
----------------- ----------------
Total Stockholders' Equity (Deficiency) 650,327 (534,401)
----------------- ----------------
Total Liabilities and Stockholders' Equity (Deficiency) $ 2,279,246 $ 1,179,320
================= ================
The accompanying notes are an integral part of these financial statements.
F-3
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 2003 and 2002
2003 2002
---------------------- --------------------
Revenue
Net sales $ 7,819,836 $ 5,196,583
Cost of sales 4,613,500 3,388,991
---------------------- --------------------
Gross profit 3,206,336 1,807,592
---------------------- --------------------
Operating expenses
Amortization & depreciation 249,418 141,754
Other selling, general and administrative 3,113,201 1,981,330
---------------------- --------------------
Total Operating expenses 3,362,619 2,123,084
---------------------- --------------------
Loss from operations (156,283) (315,492)
---------------------- --------------------
Other income and (expense)
Interest expense (91,085) (64,240)
Gain on extinguishment of debt 20,703 92,653
---------------------- --------------------
Total other income and (expense) (70,382) 28,413
---------------------- --------------------
Loss before income tax provision (226,665) (287,079)
---------------------- --------------------
Current tax provision (800) (800)
---------------------- --------------------
Total tax provision (800) (800)
---------------------- --------------------
Net loss $ (227,465) $ (287,879)
====================== ====================
Loss per common share:
Basic and diluted $ (0.01) $ (0.01)
Weighted average common and dilutive common
equivalent shares outstanding:
Basic and diluted 21,267,956 20,000,000
The accompanying notes are an integral part of these financial statements.
F-4
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock Stock Retained
------------------------------------
Subscription Earnings
Number Amount Receivable (Deficit) Total
--------------- ---------------- ------------------ ------------------ ---------
Balance, January 1, 2002 20,000,000 $ 23,000 $ $ (269,522) $(246,522)
-
Net loss for the year - - - (287,879) (287,879)
--------------- ---------------- ------------------ ------------------ ---------
Balance, December 31, 2002
20,000,000 23,000 - (557,401) (534,401)
--------------- ---------------- ------------------ ------------------ ---------
Stock issued for cash 1,202,874 531,000 - - 531,000
Stock issued on
conversion of notes
payable 2,046,434 921,230 - - 921,230
Stock issued for note
receivable 1,000,000 125,000 (125,000) - -
Cancellation of stock (100,000) (40,037) - - (40,037)
Loss for the year - - - (227,465) (227,465)
--------------- ---------------- ------------------ ------------------ ---------
Balance, December 31, 2003
24,149,308 $ 1,560,193 $(125,000) $ (784,866) $ 650,327
=============== ================ ================== ================== =========
For The Years Ended December 31, 2003 and 2002
The accompanying notes are an integral part of these financial statements.
F-5
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 2003 and 2002
2003 2002
---------------- -----------------
Cash flows from operating activities:
Net loss for the year $ (227,465) $ (287,879)
Adjustments to reconcile net loss for the year to net cash
provided by (used in) operating activities:
Amortization and depreciation 278,285 141,754
Loss on disposal of plant and equipment - 1,393
Gain on extinguishment of debt (20,703) (92,653)
Decrease in accounts receivable 8,891 43,331
Increase in inventories (333,424) (29,784)
Decrease (increase) in prepaid expenses 10,525 (167,999)
Decrease in income tax receivable 27,582 27,634
Increase in other assets (566) (74)
Increase in deposits (15,398) (29,147)
Increase in interest receivable (1,562)
-
Increase in accounts payable 245,797 139,391
Increase in accrued expenses 46,158 15,705
Increase in accrued commissions 35,946 24,102
Increase(decrease) in deferred income 41,489 (28,766)
Increase in other payable 2,700
-
---------------- -----------------
Net cash provided by (used in) operating activities 98,255 (242,992)
---------------- -----------------
Cash flows from investing activities:
Proceeds on sales of plant and equipment - 5,200
Purchase of plant and equipment (611,227) (147,104)
Increase in related party loans (41,845) (31,973)
Purchases of intangible assets (173,642) (131,835)
---------------- -----------------
Net cash used in investing activities (826,714) (305,712)
---------------- -----------------
Cash flows from financing activities:
(Decrease) increase in cash overdraft (33,292) 31,976
Proceeds from notes payable 400,291 524,921
Principal payments on notes payable (21,670) -
Principal payments on capital leases payable (65,449) -
Proceeds from stock issuance 531,000 -
---------------- -----------------
Net cash provided by financing activities 810,880 556,897
---------------- -----------------
The accompanying notes are an integral part of these financial statements.
F-6
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For The Years Ended December 31, 2003 and 2002
2003 2002
Increase in cash and cash equivalents during the year $ 82,421 $ 8,193
Cash and cash equivalents, beginning of year 160,034 151,841
------------------ -----------------
Cash and cash equivalents, end of year $ 242,455 $ 160,034
================== =================
Supplemental disclosure of cash flow information: Cash paid for:
Interest $ 91,085 $ 64,240
================== =================
Income taxes $ 800 $ 800
================== =================
Non-cash investing and financing activities:
Stock issued for conversion of notes payable $ 921,230 $
-
Stock issued for note receivable 125,000 -
Stock cancelled for other receivable, related party 40,037 -
Acquisition of equipment through capital leases payable 180,161 -
Acquisition of equipment through notes payable 25,000 -
Acquisition of services through notes payable 10,000 -
Increase in intangible asset and decrease in prepaid expenses
-
85,000
Interest payable added to principal amount of converted notes
payable 17,947 -
The accompanying notes are an integral part of these financial statements.
F-7
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies consistently applied in the preparation of the
accompanying consolidated financial statements follow.
1. Financial statement presentation
The accounting and reporting policies of Global Health Trax, Inc. and Subsidiary
(the Company) conform with accounting principles generally accepted in the
United States of America (US GAAP) and general practices in the manufacturing
industry.
2. Principles of consolidation
The consolidated financial statements include the accounts and operations of
Global Health Trax, Inc. and its wholly owned subsidiary in Canada. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
3. Business activity
The Company is a Nevada corporation organized in 1997 and incorporated in 1999.
The Company is engaged in the development, manufacture, marketing and
distribution of its own nutrition and other wellness products through retail and
wholesale home-based business entrepreneurs (members) and other direct sales
venues. The Company is an international neutracutical manufacturing and
wholesale distributor of proprietary health and wellness products, some of which
are patented by the Company.
4. Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less, when purchased, to be cash equivalents.
5. Intangible assets
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets", in connection with intangible
assets. In accordance with SFAS No. 142, in addition to amortization, intangible
assets are tested at least annually for impairment. Intangible assets include
software development costs, patents and formulas, website development costs,
good manufacturing practices, and training system developments and are amortized
over periods ranging between three and five years.
6. Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out method. The Company is implementing a standard costing inventory
management system in 2004.
7. Plant and Equipment
F-8
Plant and equipment are stated at cost less accumulated depreciation. Cost
includes expenditures for major improvements and replacements and the net amount
of interest cost associated with significant capital additions. Depreciation is
provided in amounts sufficient to relate the cost of depreciable assets to
operations over the estimated useful lives. Leasehold improvements are amortized
over the shorter of the life of the respective lease or the service life of the
improvements. The straight-line method of depreciation and amortization is
followed for financial reporting purposes.
Assets are depreciated utilizing the straight-line method of depreciation over
the following estimated useful lives:
Computer and equipment 3 to 7 years
Furniture and fixtures 3 to 7 years
Vehicles 3 to 5 years
Leasehold Improvements 7 to 10 years
Maintenance, repairs, and renewals, which neither materially add to the value of
the property nor appreciably prolong its life, are charged to expense as
incurred. These long-lived assets are generally evaluated on an individual basis
in making a determination as to whether such assets are impaired. Periodically,
the Company reviews its long-lived assets for impairment based on estimated
future nondiscounted cash flows attributed to the assets. In the event such cash
flows are not expected to be sufficient to recover the recorded value of the
assets, the assets are written down to their estimated fair values. There has
been no impairment loss recorded for the years ended December 31, 2003 and 2002.
Gains or losses on dispositions of property and equipment are included in
earnings as they occur. The Company generally capitalizes assets with a cost in
excess of one thousand dollars.
8. Revenue recognition and deferred revenue
The Company receives payment, primarily via credit card for the sale of products
at the time members and customers place orders. Sales are recorded when the
product is shipped and title passes to the customer. Payments received for
unshipped products are recorded as deferred income and are included in current
liabilities. At December 31, 2003, there were no payments received for unshipped
products. At December 31, 2002, $1,356 of payments had been received for
unshipped products. Product returns are tracked for a potential reserve founded
on historical experience. Based on managements opinion, product returns in 2003
and 2002 were not material and a reserve for product returns and allowances was
not provided for. Additionally, the Company collects an annual renewal fee from
members that is recognized on a straight-line basis over a subsequent
twelve-month period. Annual renewal fees that the Company has received but which
have not been recognized in revenue are recorded as deferred income and are
included in current liabilities. At December 31, 2003 and 2002, annual renewal
fees received but which had not been recognized in revenue totaled $105,436 and
$62,591, respectively.
Under the guidelines of Emerging Issues Task Force No 01-09 ("EITF 01-09"),
certain sales incentives offered by a company to customers, including discounts,
coupons, and rebates, are generally presumed to be a reduction of the selling
prices of products, and, therefore, should be characterized as a reduction of
revenue when recognized in a company's income statement. Member incentives paid
under our compensation plan include commissions and bonuses that are paid based
on sales volume points assigned to products independent of the product's price
and do not include discounts, coupons, or rebates. Currently, member incentives
are classified as a component of operating expenses and we believe that this is
the appropriate treatment, given the guidelines pursuant to EITF 01-09. Members
and customers are generally charged for delivery of product. Net shipping and
F-9
handling fees are included in net sales.
9. Comprehensive Income
The Company has no items of other comprehensive income (loss) for the years
ended December 31, 2003 and 2002.
10. Income taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income tax assets and
liabilities are provided based on the difference between the financial statement
and tax bases of assets and liabilities as measured by the currently enacted tax
rates in effect for the years in which these differences are expected to
reverse. Deferred tax expense or benefit is the result of changes in deferred
tax assets and liabilities. An allowance against deferred tax assets is recorded
in whole or in part when it is more likely than not that such tax benefits will
not be realized.
11. Product return policy
All returned product within the first 60 days of purchase will be refunded at
100 percent of the sales price to all first-time purchasers. This 60 day return
policy is offered to members only on their first order of any given product
offered by the Company. Returned product that was damaged during shipment to the
customer is 100 percent refundable.
12. Research and development
Research and development costs are charged to expense as incurred. Research and
development expenses were $17,152 and $9,573 for the years ended December 31,
2003 and 2002, respectively.
13. Shipping and Handling Fees
The Company nets excess shipping and handling fees billed to customers over the
related costs to revenues. Such fees and costs are primarily comprised of
outbound freight. Included in revenues in the accompanying consolidated
statements of income are net shipping and handling fees of $70,315 and $23,980
for the years ended December 31, 2003 and 2002, respectively.
14. Advertising
Advertising costs are charged to expense as incurred. Advertising expenses
included in selling expenses were $78,181 and $95,873 for the years ended
December 31, 2003 and 2002, respectively.
15. Stock - based compensation
As described in Note I, the Company has elected to follow the accounting
provisions of Accounting Principles Board Opinion (APBO) No. 25, "Accounting for
Stock Issued to Employees," for stock-based compensation and to furnish the pro
forma disclosures required under SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure."
16. Earnings (loss) per share and stock split
Basic earnings (loss) per common share (EPS) are based on the weighted average
number of common shares outstanding during each period. Diluted earnings per
common share are based on shares outstanding (computed as under basic EPS) and
F-10
potentially dilutive common shares. Potential common shares included in the
diluted earnings per share calculation include in-the-money stock options that
have been granted but have not been exercised. Weighted average shares
outstanding for all years presented reflect the stock splits effective November
15, 2003 and June 30, 2003 (See Note H).
17. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents, accounts
receivable, payables, cash overdrafts and accrued liabilities approximate fair
values due to the short-term maturity of the instruments. The carrying value of
long-term obligations approximates the fair value based on the effective
interest rates compared to current market rates.
18. Concentrations of Credit Risk
At December 31, 2003 and 2002, the Company held cash and cash equivalents, in
the aggregate amount of $242,455 and $160,034, respectively, and most of these
amounts were deposited with one bank. The majority of the Company's sales are
made to members and retail customers. Consequently, the exposure to credit risks
relating to trade receivables is limited. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. An
appropriate allowance for doubtful accounts is included in trade accounts
receivable.
19. Reclassification
Certain 2002 balances have been reclassified to conform to the 2003
presentation.
20. Common stock
The Company follows the practice of recording amounts received upon the sale of
its stock by crediting its no par common stock. No stock options were authorized
as of December 31, 2003.
21. Use of estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and the related notes. Actual results
could differ from those estimates.
22. Recent Accounting Pronouncements
In January 2003, the FASB issued Interpretation Number 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This Interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements," provides
guidance for identifying a controlling interest in a variable interest entity
("VIE") established by means other than voting interests. FIN No. 46 also
requires consolidation of a VIE by an enterprise that holds such a controlling
interest. In December 2003, FASB completed its deliberations regarding the
proposed modification to FIN No. 46 and issued Interpretation Number 46 (R)
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51"
("FIN No. 46 (R)"). The decisions reached included a deferral of the effective
date and provisions for additional scope exceptions for certain types of
variable interests. Application of FIN No. 46 (R) is required in financial
statements of public entities that have interests in VIEs or potential VIEs
commonly referred to as special-purpose entities for periods ending after
December 15, 2004. The adoption of FIN No. 46 (R) is not expected to have an
F-11
impact on the Company's consolidated financial position, results of operations
or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments embedded
in other contracts and for hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." It is effective for
contracts entered into or modified after June 30, 2003, except as stated within
the statement, and should be applied prospectively. Management believes the
provisions of this Standard currently have no effect on our financial position
or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after September 15, 2003. Management believes the provisions of
this Standard currently have no effect on our financial position or results of
operations.
NOTE B - INVENTORIES
Inventories as of December 31, 2003 and 2002 consisted of the following:
12/31/2003 12/31/2002
--------------------- -----------------
--------------------- -----------------
Raw materials $ 64,510 $ 11
Work in progress 32,866 -
Finished goods 535,658 299,599
--------------------- -----------------
--------------------- -----------------
$ 633,034 $ 299,610
===================== =================
NOTE C - PLANT AND EQUIPMENT
Plant and equipment as of December 31, 2003 and 2002 consisted of the following:
Plant and Equipment (A) 2003 2002
----------------------------------------------------------- -- --------------- ------------------
----------------------------------------------------------- -- --------------- ------------------
Computer $ 391,143 $ 195,962
Equipment 389,453 51,959
Furniture and fixtures 69,463 42,266
Vehicles 70,441 74,380
Leasehold Improvements 346,351 75,196
--------------- ------------------
--------------- ------------------
Total 1,226,851 439,763
Accumulated Depreciation (385,061) (237,083)
--------------- ------------------
--------------- ------------------
Net Plant and Equipment $ 881,790 $ 202,680
=============== ==================
F-12
Depreciation expense for the years ended December 31, 2003 and 2002 was $137,278
and $67,336, respectively.
(A) Includes assets held under capital leases payable (See Note G).
NOTE D - INTANGIBLE ASSETS
Intangible assets as of December 31, 2003 and 2002 consisted of the following:
Intangible Assets 2003 2002
--------------------------------------------------------- -------------- ----------------
--------------------------------------------------------- -------------- ----------------
Software Development $ 110,186 $ 110,186
Patents and Formulas 159,139 54,139
Website Development 139,557 70,915
Good Manufacturing Practices 85,000 -
Training System Development 40,000 40,000
-------------- ----------------
-------------- ----------------
Total 533,882 275,240
Accumulated Amortization (224,077) (83,070)
-------------- ----------------
-------------- ----------------
Net Intangibles $ 309,805 $ 192,170
============== ================
Amortization expense for the years ended December 31, 2003 and 2002 was $141,007
and $74,418 , respectively.
NOTE E - LONG TERM DEBT
2003 2002
---------------- -- --------------
Notes payable to related parties, 10% interest maturing from
2003 through 2012. $155,042 of 2002 balances was converted to
stock in 2003. (See Note H). $ - $ 175,212
Notes payable at 10% interest, maturing at various dates.
$563,779 of 2002 balances was converted to stock in 2003.
(See Note H). 263,970 578,419
---------------- --------------
---------------- --------------
263,970 753,631
Less: current portion - (269,614)
---------------- --------------
$ 263,970 $ 484,017
================ ==============
Approximate principal repayments are as follows: 2003
--------------------------------------------------------------- ---------------
--------------------------------------------------------------- ---------------
2004 $
-
2005 263,970
---------------
$ 263,970
===============
F-13
NOTE F - INCOME TAXES
Significant components of the Company's deferred income tax assets at December
31, 2003 and 2002 are as follows:
2003 2002
-------------------- --------------------
-------------------- --------------------
Deferred income tax asset:
Net operating loss carry forward $ 219,000 $ 136,000
-------------------- --------------------
Total deferred income tax asset 219,000 136,000
Valuation allowance ( 219,000 ) ( 136,000 )
-------------------- --------------------
-------------------- --------------------
Net deferred income tax asset $ - $ -
==================== ====================
Reconciliation of the effective income tax rate to the U. S. statutory rate is as follows:
2003 2002
--------------- ---------------
--------------- ---------------
Tax expense at the U.S. statutory
income tax rate (34.0) % (34.0) %
Increase in the valuation allowance 34.0 34.0
--------------- ---------------
--------------- ---------------
Effective income tax rate - % - %
=============== ===============
The tax provision for the years ended December 31, 2003 and 2002 represents
minimum California state taxes. Deferred taxes are recorded to give recognition
to temporary differences between the tax bases of assets or liabilities and
their reported amounts in the financial statements. Deferred tax assets
generally represent items that can be used as a tax deduction or credit in
future years. Deferred tax liabilities generally represent items that we have
taken a tax deduction for, but have not yet recorded in the Consolidated
Statement of Operations.
Net operating loss carryforwards totaling approximately $566,000 federal and
$307,000 state amounts at December 31, 2003 are being carried forward. The net
operating loss carryforwards expire at various dates through 2024 for federal
purposes and 2014 for state purposes.
A full valuation allowance has been established due to the lack of earnings as
support for recognition of the deferred tax assets recorded.
NOTE G - CAPITAL LEASE OBLIGATIONS
The Company follows the provisions of Statement of Financial Accounting
Standards No. 13, Accounting for Leases (SFAS 13), in determining the criteria
for capital leases. Leases that do not meet such criteria are classified as
operating leases and related rentals are charged to expense in the year
incurred.
During 2003, the Company entered into four equipment leases of production
equipment that provided for bargain purchase options at the termination of the
lease. As a result of these bargain purchase options, the leases were classified
as capital leases. The present value of future minimum payments under these
F-14
capital leases totaled $123,583 and payments were scheduled through 2005, 2006
and 2008.
Two vehicles have been capitalized due to their extended leases exceeding 75% of
their economic life of five years. The present value of future minimum payments
under these capital leases totaled $10,721 and payments were scheduled into 2004
and 2005.
The following is a summary by year of future minimum rental payments for
capitalized leases that have initial or remaining noncancelable terms in excess
of one year as of December 31, 2003:
Fiscal Years Ending Amount
-------------------------------------------------------------------------------- ---------------
-------------------------------------------------------------------------------- ---------------
2004 $ 62,124
2005 59,488
2006 25,277
2007 21,695
2008 5,575
--------------
Total minimum lease payments 174,159
Less: Estimated amount representing interest (40,556)
--------------
--------------
Present value of net minimum capital lease payments 133,603
Less: Current portion (42,202)
--------------
--------------
Long-term obligations under capital leases at December 31, 2003
$ 91,401
==============
At the year ended December 31, 2003, capital lease assets as a component of net
property and equipment were as follows:
2003 2002
--------------------- -----------------
--------------------- -----------------
Capital lease assets $ 168,042 $ 79,259
Accumulated depreciation (17,988) (29,018)
--------------------- -----------------
--------------------- -----------------
Net capital lease assets $ 150,054 $ 50,241
===================== =================
(See Note K for operating lease disclosures).
F-15
NOTE H - STOCKHOLDERS' EQUITY
During the first and second quarters of 2003, $40,037 was advanced to the
Company's Co-founder, Director and Executive Vice President (the Executive Vice
President). In June 2003, the Company offset the advance in considerations of
100,000 shares of the Company's stock received from the Executive Vice
President. The transaction was recorded as the cancellation of stock.
During the second and third quarters of 2003, the Company issued 1,202,874
shares of its stock for $531,000 in cash pursuant to a limited private
placement.
During the fourth quarter of 2003, the Company issued 1,000,000 shares of its
stock to a Director and Vice President of Training of the Company (the Vice
President of Training) for a note receivable of $125,000. The note receivable
bears interest at 5%, is collateralized by the stock issued, and is due December
31, 2006.
During 2003, notes payable of $921,230, including accrued interest, were
converted into 2,046,434 shares of common stock.
On November 15, 2003, the Stockholders voted to initiate a two for one forward
common stock split.
Effective June 30, 2003 the Board of Directors initiated a four for one reverse
split of the common stock. It also increased the authorized number of common
stock shares from 50,000,000 to 100,000,000 and authorized the issuance of
10,000,000 shares of preferred stock.
Effective January 1, 2001, the Board of Directors initiated a forward stock
split on the basis of 200,000 new for 1 old share.
NOTE I - STOCK-BASED COMPENSATION
The Company has applied the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation --
Transition and Disclosure -- An Amendment of FASB Statement No. 123," for the
years ended December 31, 2003 and 2002. Issued in December 2002, SFAS No. 148
amends SFAS No. 123, "Accounting for Stock-Based Compensation" to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. As permitted by SFAS No. 148, the Company continues to
account for stock options under APB Opinion No. 25, under which no compensation
has been recognized. There were no stock options granted or exercised during
this reporting period. Had there been, the Company would have applied the fair
value recognition disclosure provisions of SFAS No. 123, as amended by SFAS No.
148, to stock-based compensation. As a result, no pro forma disclosures are
presented.
In 2003, the Company adopted a stock option plan, the 2003-2004 Employee Stock
Option Plan (the Plan), that provides for the granting of incentive stock
options or nonstatutory stock options, as defined.
F-16
The Plan authorizes the Board of Directors or a committee appointed by the Board
of Directors to grant incentive stock options to certain qualifying key
employees. The aggregate number shares of common stock that may be optioned and
sold under incentive stock options is 3 million shares. Optionees have the right
to exercise the incentive stock options no sooner than the second anniversary
date of hire by the Company, or, if the optionee has been an employee of the
Company for over two years, then no sooner than one year from the date of grant.
All incentive stock options granted expire 36 months from the date of grant. At
December 31, 2003, no incentive stock options had been granted under the Plan
(see Note N).
The Plan also authorizes the Board of Directors to grant nonstatutory stock
options to certain key employees and independent contractors who make
significant contributions to the Company's growth and development. The aggregate
number shares of common stock that may be optioned and sold under nonstatutory
stock options is 1 million shares. Optionees have the right to exercise no more
than one half of the total nonstatutory stock options granted no sooner than the
first anniversary date of the grant. Optionees have the right to exercise the
remaining nonstatutory stock options granted no sooner than the second
anniversary date of the grant. All nonstatutory options granted herein shall
expire 36 months from the date of this grant. The selection of recipients, the
exercise price and the number of nonstatutory option shares to be allocated to
each recipient is strictly within the discretion of the Board of Directors. At
December 31, 2003, no nonstatutory options had been granted under the Plan.
NOTE J - GAIN ON EXTINGUISHMENT OF DEBT
For the year ended December 31, 2003, $20,703 in debt was eliminated. The debt
extinguishment was the result of arbitration for a dispute resolution with a
vendor who had supplied the Company with unacceptable product during the years
2002 and 2003.
For the year ended December 31, 2002, $92,653 in debt was eliminated. The debt
extinguishment was the result of a protracted dispute resolution process from
improper billing by a telephone service provider during 1998 and 1999.
NOTE K - COMMITMENTS AND CONTINGENCIES
1. Operating leases
Operations are currently conducted in leased facilities. The facility lease
agreement is a non-cancelable operating lease and extends into 2012. The rent
lease provides that property taxes, insurance, and maintenance expenses are the
responsibility of the Company. The total rent expense for the years ended 2003
and 2002 was $266,250 and $139,245, respectively. The Company utilizes equipment
under non-cancelable operating leases, extending through 2008. The rental lease
expenses for the years ended December 31, 2003 and 2002 were $53,452 and
$50,888, respectively. The following amounts contain the assumption that, in the
normal course of business, any operating leases that expire within the time
frame represented will be renewed or replaced by leases on other properties,
assuming operations continue and will extend, at a maximum, through 2008.
F-17
Fiscal Years Ending Operating
--------------------------------------------------------------------------------- ---------------------
--------------------------------------------------------------------------------- ---------------------
2004 $ 497,126
2005 461,978
2006 423,617
2007 412,713
2008 380,541
Later years 692,296
---------------------
Total minimum lease payments $ 2,868,271
=====================
2. Contingencies
The Company is involved in a lawsuit arising in the normal course of business
regarding product liability. The Company, like any other retailer, distributor
and manufacturer of products that are designed to be ingested, faces an inherent
risk of exposure to product liability claims in the event that the use of its
products results in injury. With respect to product liability claims, the
Company has $1.0 million per occurrence and $2.0 million in aggregate liability
insurance subject to a self-insurance retention of $25,000. The Company was
named as a defendant in a products liability lawsuit, Gil v. Global Health Trax,
Inc., filed in the Superior Court of the State of Arizona on June 18, 2002. The
case went to trial on April 4, 2004. The Company's insurance carrier is
providing the defense. On April 12, 2004, the Company obtained a favorable court
decision in Gil v. Global Health Trax, Inc. In the opinion of management, it is
not anticipated that the plaintiffs will appeal.
NOTE L - EMPLOYEE BENEFIT PLAN
The Company has an employee benefit plan under Section 401(k) of the Internal
Revenue Code. This plan covers employees who are at least 18 years of age and
have been employed by the Company longer than three months. The Company is not
obligated to make matching contributions. The Company may make a discretionary
contribution based on earnings. The Company's discretionary contributions vest
at 25 percent per year beginning with the first year. Contributions made by the
Company to the plan in the United States for the years ended 2003, and 2002 were
$10,135, and $8,035 respectively.
NOTE M - RELATED PARTY TRANSACTIONS
The Company's Co-founder, Chairman of the Board, Chief Executive Officer and
President (the President) is the sole beneficial owner and single largest
shareholder of the Company owning 41.41% of the Company's issued and outstanding
shares as of December 31, 2003 and 50% in 2002. The President is a 50% owner of
Health Services International, Inc. (HSI).
The Executive Vice President is the sole beneficial owner and second largest
shareholder of the Company, owning 40.99% of the Company's issued and
outstanding shares as of December 31, 2003 and 50% in 2002. The Executive Vice
President is a 50% owner of HSI. The Company leases a residential unit for the
use of the Executive Vice President on a month-to-month basis. In 2003, the
F-18
Company advanced $40,037 to the Executive Vice President (See Note H).
The Company had one transaction with HSI for $35,000 in 2002. The amount
receivable from HSI was $32,097 at December 31, 2003. The amounts loaned were
for product purchases which were paid by the Company on behalf of HSI. The
Company anticipates full repayment from HSI.
The President and Executive Vice President are related to individuals who loaned
the Company $150,000 and $5,042, respectively, plus accrued interest, that was
converted into stock of the Company in 2003. (See Note H).
The Vice President of training received directly or through his wholly owned
corporation, $140,018 and $79,330 in 2003 and 2002, respectively, for services
rendered to the Company.
The Company's landlord through notes payable conversions and purchases of stock
has accumulated two million shares of the Company's common stock. This
represents 8.3% of the Company's outstanding common stock at December 31, 2003.
NOTE N - SUBSEQUENT EVENTS
2,496,200 of incentive stock options were granted in January 2004 under the
2003-2004 Employee Stock Option Plan.
F-19
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONTENTS
PAGES F-21 CONSOLDIATED BALANCE SHEETS AS OF MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003
PAGE F-22 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
PAGE F-23 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE THREE MONTHS ENDED MARCH
31, 2004 (UNAUDITED)
PAGES F-24 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
PAGES F-25-36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND
2003 (UNAUDITED)
F-20
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of March 31, 2004 and December 31, 2003
ASSETS
March 31, 2004 December 31, 2003
(Unaudited)
---------------- ------------------
---------------- ------------------
CURRENT ASSETS
Cash and cash equivalents $ 254,220 $ 242,455
Accounts receivable, net of allowance or doubtful accounts
of $7,086 and $7,742, respectively 36,140 24,977
Inventories 655,795 633,034
Prepaid expenses 128,095 87,097
Other 7,325 1,714
---------------- ------------------
Total current assets 1,081,575 989,277
---------------- ------------------
Plant and equipment, net of accumulated depreciation of
$440,048 and $385,061, respectively 895,072 881,790
---------------- ------------------
Intangible assets, net of accumulated amortization of $256,954
and $224,077 respectively 292,340 309,805
---------------- ------------------
OTHER ASSETS
Deposits 62,324 63,030
Other receivable, related parties 32,554 33,782
Interest receivable 3,124 1,562
---------------- ------------------
Total other assets 98,002 98,374
---------------- ------------------
Total assets $2,366,989 $2,279,246
================ ==================
The accompanying notes are an integral part of these financial statements.
F-21
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of March 31, 2004 and December 31, 2003
LIABILITIES & STOCKHOLDERS' EQUITY
March 31, 2004 December 31, 2003
(Unaudited)
---------------- ------------------
CURRENT LIABILITIES:
Cash overdraft $ 180,621 $ 172,383
Accounts payable 527,573 642,501
Accrued expenses 64,209 63,864
Accrued commissions 310,215 244,462
Capital leases payable, current portion 40,963 42,202
Deferred income 129,120 105,436
---------------- ------------------
---------------- ------------------
Total current liabilities 1,252,701 1,270,848
---------------- ------------------
LONG-TERM LIABILITIES:
Notes payable 312,821 263,970
Capital leases payable 82,069 91,401
Other payable 1,615 2,700
---------------- ------------------
Total long-term liabilities 396,505 358,071
---------------- ------------------
Total liabilities 1,649,206 1,628,919
---------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock, authorized 10,000,000 shares with no par value,
none issued and outstanding - -
Common stock, authorized 100,000,000 shares common stock
with no par value; issued and outstanding 24,249,308 and
24,149,308, respectively 1,605,193 1,560,193
Stock subscription receivable (125,000) (125,000)
Retained earnings (deficit) (762,410) (784,866)
---------------- ------------------
Total stockholders' equity 717,783 650,327
---------------- ------------------
Total liabilities and stockholders' equity $ 2,366,989 $ 2,279,246
================ ==================
The accompanying notes are an integral part of these financial statements.
F-22
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For The Three Months Ended March 31, 2004 and March 31, 2003
March 31, 2004 March 31, 2003
(Unaudited) (Unaudited)
------------------ ----------------
Revenue
Net sales $ 2,510,653 $ 1,558,790
Cost of sales 1,521,179 913,081
------------------ ----------------
Gross profit 989,474 645,709
------------------ ----------------
Operating expenses
Amortization & depreciation 78,288 25,140
Other selling, general and administrative 874,304 548,119
------------------ ----------------
Total operating expenses 952,592 573,259
------------------ ----------------
Income from operations 36,882 72,450
------------------ ----------------
Other income and (expense)
Interest expense (14,426) (26,494)
------------------ ----------------
Total other income and (expense) (14,426) (26,494)
------------------ ----------------
Income before income tax provision 22,456 45,956
------------------ ----------------
Current tax provision 8,983 18,382
Deferred tax provision (8,983) (18,382)
------------------ ----------------
Total tax provision - -
------------------ ----------------
Net income $ 22,456 $ 45,956
================== ================
Income per common share:
Basic $ 0.00 $ 0.00
= ======== ===============
Diluted $ 0.00 $ 0.00
= ======== ===============
Weighted average common and dilutive common equivalent shares outstanding:
Basic 24,199,308 20,000,000
================== ================
Diluted 26,695,508 20,000,000
================== ================
The accompanying notes are an integral part of these financial statements.
F-23
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 2004 (Unaudited)
---------------------------------- ----------------- -- ---------------- -- ----------
Common Stock Stock Retained
Subscription Earnings Total
Receivable (Deficit)
Number Amount
--------------- -------------- ----------------- ---------------- ----------
Balance, January 1, 2004 24,149,308 $1,560,193 $(125,000) $ (784,866) $ 650,327
Stock issued for cash 100,000 45,000 - - 45,000
Net income - - - 22,456
22,456
--------------- -------------- ----------------- ---------------- ----------
Balance, March 31, 2004 24,249,308 $1,605,193 $(125,000) $ (762,410) $ 717,783
=============== ============== ================= =============== ==========
The accompanying notes are an integral part of these financial statements.
F-24
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended March 31, 2004 and March 31, 2003
March 31, 2004 March 31, 2003
(Unaudited) (Unaudited)
------------------ -----------------
Cash flows from operating activities:
Net income for the period $ 22,456 $ 45,956
Adjustments to reconcile net income for the period to net cash provided
by operating activities:
Amortization and depreciation 87,864 25,140
Change in operating assets and liabilities
Accounts receivable (11,163) (31,245)
Inventories (22,761) (11,252)
Prepaid expenses (40,998) 89,099
Other assets (5,611) (589)
Deposits 706 (7,204)
Interest receivable (1,562) -
Accounts payable (114,578) 68,780
Accrued expenses 345 (2,706)
Accrued commissions 65,753 57,211
Deferred income 23,684 (14,335)
Other payables (1,084) 44,242
------------------ -----------------
Net cash provided by operating activities 3,051 263,097
------------------ -----------------
Cash flows from investing activities:
Purchase of plant and equipment (68,269) (336,236)
Related party loans 1,228 851
Purchases of intangible assets (15,412) (130,505)
------------------ -----------------
Net cash used in investing activities (82,453) (465,890)
------------------ -----------------
Cash flows from financing activities:
Cash overdraft 8,238 (54,977)
Proceeds from notes payable 50,000 327,158
Principal payments on notes payable (1,500)
-
Principal payments on capital leases payable (10,571)
-
Proceeds from stock issuance 45,000
-
------------------ -----------------
Net cash provided by financing activities 91,167 272,181
------------------ -----------------
Increase in cash and cash equivalents during the period 11,765 69,388
The accompanying notes are an integral part of these financial statements.
F-25
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued) For The Three Months Ended March 31,
2004 and March 31, 2003
Cash and cash equivalents, beginning of period 242,455 160,034
-------------------- -----------------
Cash and cash equivalents, end of period $ 254,220 $ 229,422
==================== =================
Supplemental disclosure of cash flow information: Cash paid for:
Interest $ 14,075 $ 26,494
==================== =================
Income taxes $ - $
-
==================== =================
Noncash investing and financing activities:
Interest payable added to principal amount of notes
payable $ 351 $ -
==================== =================
The accompanying notes are an integral part of these financial statements.
F-26
GLOBAL HEALTH TRAX, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation
The accounting and reporting policies of Global Health Trax, Inc. and Subsidiary
(the Company) conform with accounting principles generally accepted in the
United States of America (US GAAP) and general practices in the manufacturing
industry.
2. Principles of consolidation
The consolidated financial statements include the accounts and operations of
Global Health Trax, Inc. and its wholly owned subsidiary in Canada. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
3. Business activity
The Company is a Nevada corporation organized in 1997 and incorporated in 1999.
The Company is engaged in the development, manufacture, marketing and
distribution of its own nutrition and other wellness products through retail and
wholesale home-based business entrepreneurs (members) and other direct sales
venues. The Company is an international neutracutical manufacturing and
wholesale distributor of proprietary health and wellness products, some of which
are patented by the Company.
4. Use of estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and the related notes. Actual results
could differ from those estimates.
5. Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less, when purchased, to be cash equivalents.
6. Intangible assets
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets", in connection with intangible
assets. In accordance with SFAS No. 142, in addition to amortization, intangible
assets are tested at least annually for impairment. Intangible assets include
software development costs, patents and formulas, website development costs,
good manufacturing practices, and training system developments and are amortized
over periods ranging between three and five years.
7. Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out method. The Company is implementing a standard costing inventory
management system in 2004.
F-27
8. Plant, and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Cost includes expenditures for major improvements and replacements and the net
amount of interest cost associated with significant capital additions.
Depreciation is provided in amounts sufficient to relate the cost of depreciable
assets to operations over the estimated useful lives. Leasehold improvements are
amortized over the shorter of the life of the respective lease or the service
life of the improvements. The straight-line method of depreciation and
amortization is followed for financial reporting purposes.
Assets are depreciated utilizing the straight-line method of depreciation over
the following estimated useful lives:
Computer and equipment 3 to 7 years
Furniture and fixtures 3 to 7 years
Vehicles 3 to 5 years
Leasehold Improvements 7 to 10 years
Maintenance, repairs, and renewals, which neither materially add to the value of
the property nor appreciably prolong its life, are charged to expense as
incurred. These long-lived assets are generally evaluated on an individual basis
in making a determination as to whether such assets are impaired. Periodically,
the Company reviews its long-lived assets for impairment based on estimated
future nondiscounted cash flows attributed to the assets. In the event such cash
flows are not expected to be sufficient to recover the recorded value of the
assets, the assets are written down to their estimated fair values. There has
been no impairment loss recorded for the three months ended March 31, 2004 and
2003. Gains or losses on dispositions of property and equipment are included in
earnings as they occur. The Company generally capitalizes assets with a cost in
excess of one thousand dollars.
9. Revenue recognition and deferred revenue
Revenue recognition and deferred revenue
The Company receives payment, primarily via credit card for the sale of products
at the time members and customers place orders. Sales are recorded when the
product is shipped and title passes to the customer. Payments received for
unshipped products are recorded as deferred income and are included in current
liabilities. At March 31, 2004 and December 31, 2003, there were no payments
received for unshipped products. Product returns are tracked for a potential
reserve founded on historical experience. Based on managements opinion, product
returns in the three months ended March 31, 2004 and 2003 were not material and
a reserve for product returns and allowances was not provided for. Additionally,
the Company collects an annual renewal fee from members, that is recognized on a
straight-line basis over a subsequent twelve-month period. Annual renewal fees
that the Company has received but which have not been recognized in revenue are
recorded as deferred income and are included in current liabilities. At March
31, 2004 and December 31, 2003, annual renewal fees received but which had not
been recognized in revenue totaled $129,120 and $105,436, respectively.
Under the guidelines of Emerging Issues Task Force No 01-09 ("EITF 01-09"),
certain sales incentives offered by a company to customers, including discounts,
coupons, and rebates, are generally presumed to be a reduction of the selling
prices of products, and, therefore, should be characterized as a reduction of
revenue when recognized in a company's income statement. Member incentives paid
under our compensation plan include commissions and bonuses that are paid based
on sales volume points assigned to products independent of the product's price
F-28
and do not include discounts, coupons, or rebates. Currently, member incentives
are classified as a component of operating expenses and we believe that this is
the appropriate treatment, given the guidelines pursuant to EITF 01-09. Members
and customers are generally charged for delivery of product. Net shipping and
handling fees are included in net sales.
10. Comprehensive Income
The Company has no items of other comprehensive income (loss) for the three
months ended March 31, 2004 and 2003.
11. Income taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income tax assets and
liabilities are provided based on the difference between the financial statement
and tax bases of assets and liabilities as measured by the currently enacted tax
rates in effect for the years in which these differences are expected to
reverse. Deferred tax expense or benefit is the result of changes in deferred
tax assets and liabilities. An allowance against deferred tax assets is recorded
in whole or in part when it is more likely than not that such tax benefits will
not be realized.
12. Product return policy
All returned product within the first 60 days of purchase are refunded at 100
percent of the sales price to all first-time purchasers. This 60 day return
policy is offered to members only on their first order of any given product
offered by the Company. Returned product that was damaged during shipment to the
customer is 100 percent refundable.
13. Research and development
Research and development costs are charged to expense as incurred. Research and
development expenses were $11,471 and $5,011 for the three months ended March
31, 2004 and 2003, respectively.
14. Shipping and handling fees
The Company nets excess shipping and handling fees billed to customers over the
related costs to revenues. Such fees and costs are primarily comprised of
outbound freight. Included in revenues in the accompanying consolidated
statements of income are net shipping and handling fees of $15,123 and $21,276
for the three months ended March 31, 2004 and 2003, respectively.
15. Advertising
Advertising costs are charged to expense as incurred. Advertising expenses
included in selling expenses were $22,665 and $27,226 for the three months ended
March 31, 2004 and 2003, respectively.
16. Stock - based compensation
As described in Note C, the Company has elected to follow the accounting
provisions of Accounting Principles Board Opinion (APBO) No. 25, "Accounting for
Stock Issued to Employees," for stock-based compensation and to furnish the pro
forma disclosures required under SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure."
F-29
17. Earnings per share
Basic earnings (loss) per common share (EPS) are based on the weighted average
number of common shares outstanding during each period. Diluted earnings per
common share are based on shares outstanding (computed as under basic EPS) and
potentially dilutive common shares. As of March 31, 2004, the Company had
granted employee stock options for 2,496,200 shares of common stock that are
presented as potentially dilutive common shares. As of March 31, 2003, the
Company had no potentially dilutive securities that would effect the income per
share if they were dilutive.
18. Fair value of financial instruments
The carrying value of the Company's cash and cash equivalents, accounts
receivable, payables, cash overdrafts and accrued liabilities approximate fair
values due to the short-term maturity of the instruments. The carrying value of
long-term obligations approximates the fair value based on the effective
interest rates compared to current market rates.
19. Concentrations of credit risk
At March 31, 2004 and December 31, 2003, the Company held cash and cash
equivalents, in the aggregate amount of $254,220 and $242,455, respectively, and
most of these amounts were deposited with one bank. The majority of the
Company's sales are made to members and retail customers. Consequently, the
exposure to credit risks relating to trade receivables is limited. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. An appropriate allowance for doubtful accounts is included
in trade accounts receivable.
20. Reclassification
Certain 2003 balances have been reclassified to conform to the 2004
presentation.
21. Recent accounting pronouncements
In January 2003, the FASB issued Interpretation Number 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"). This Interpretation of Accounting
Research Bulletin ("ARB") No. 51, "Consolidated Financial Statements," provides
guidance for identifying a controlling interest in a variable interest entity
("VIE") established by means other than voting interests. FIN No. 46 also
requires consolidation of a VIE by an enterprise that holds such a controlling
interest. In December 2003, FASB completed its deliberations regarding the
proposed modification to FIN no. 46 and issued Interpretation Number 46 (R)
"Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51"
("FIN No. 46 (R)"). The decisions reached included a deferral of the effective
date and provisions for additional scope exceptions for certain types of
variable interests. Application of FIN No. 46 (R) is required in financial
statements of public entities that have interests in VIEs or potential VIEs
commonly referred to as special-purpose entities for periods ending after
December 15, 2004. The adoption of FIN No. 46 (R) is not expected to have an
impact on the Company's consolidated financial position, results of operations
or cash flows.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments embedded
F-30
in other contracts and for hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." It is effective for
contracts entered into or modified after June 30, 2003, except as stated within
the statement, and should be applied prospectively. Management believes the
provisions of this Standard currently have no effect on our financial position
or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after September 15, 2003. Management believes the provisions of
this Standard currently have no effect on our financial position or results of
operations.
22. Interim consolidated financial statements
The consolidated financial statements as of and for the three months ended March
31, 2004 and 2003 are unaudited. In the opinion of management, such consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) considered necessary for the fair presentation of the
consolidated financial position and the consolidated results of operations have
been included. The consolidated results of operations for the three months ended
March 31, 2004 and 2003 are not necessarily indicative of the results to be
expected for the full year. The consolidated balance sheet information as of
December 31, 2003 was derived from the audited consolidated financial statements
for the year ended December 31, 2003. The interim consolidated financial
statements should be read in conjunction with that report.
NOTE B - INVENTORY
Inventory consisted of the following:
March 31, 2004 December 31, 2003
------------------- -------------------
Raw materials $ 30,562 $ 64,510
Work in process 82,874 32,866
Finished goods 542,359 535,658
------------------- -------------------
$ 655,795 $ 633,034
=================== ===================
NOTE C - STOCK-BASED COMPENSATION
The Company has applied the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation --
Transition and Disclosure -- An Amendment of FASB Statement No. 123," for the
quarters ended March 31, 2004 and 2003. Issued in December 2002, SFAS No. 148
amends SFAS No. 123, "Accounting for Stock-Based Compensation" to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. As permitted by SFAS No. 148, the Company continues to
account for stock options under APB Opinion No. 25, under which no compensation
has been recognized. For the three month period ended March 31, 2004, the
F-31
2,496,200 of incentive stock options issued did not have any fair value using
the Black-Scholes valuation model and therefore there are no pro forma
compensation costs presented.
In 2003, the Company adopted a stock option plan, the 2003-2004 Employee Stock
Option Plan (the Plan), that provides for the granting of incentive stock
options or nonstatutory stock options, as defined.
The Plan authorizes the Board of Directors or a committee appointed by the Board
of Directors to grant incentive stock options to certain qualifying key
employees. The aggregate number shares of common stock that may be optioned and
sold under incentive stock options is 3 million shares. Optionees have the right
to exercise the incentive stock options no sooner than the second anniversary
date of hire by the Company, or, if the optionee has been an employee of the
Company for over two years, then no sooner than one year from the date of grant.
All incentive stock options granted expire 36 months from the date of grant.
2,496,200 of incentive stock options were granted in January 2004.
The Plan also authorizes the Board of Directors to grant nonstatutory stock
options to certain key employees and independent contractors who make
significant contributions to the Company's growth and development. The aggregate
number shares of common stock that may be optioned and sold under nonstatutory
stock options is 1 million shares. Optionees have the right to exercise no more
than one half of the total nonstatutory stock options granted no sooner than the
first anniversary date of the grant. Optionees have the right to exercise the
remaining nonstatutory stock options granted no sooner than the second
anniversary date of the grant. All nonstatutory options granted herein shall
expire 36 months from the date of this grant. The selection of recipients, the
exercise price and the number of nonstatutory option shares to be allocated to
each recipient is strictly within the discretion of the Board of Directors. At
March 31, 2004, no nonstatutory options had been granted under the Plan.
The following summarizes information about stock options of the Company granted
and outstanding at March 31, 2004:
Options Exercise Price
--- ----------------- --- -------------------
--- ----------------- --- -------------------
Outstanding at January 1, 2004 $ - $ -
Granted 2,496,200 0.25
Exercised - -
Expired - -
--- ----------------- --- -------------------
--- ----------------- --- -------------------
Outstanding at March 31, 2004 $ 2,496,200 $ 0.25
=== ================= === ===================
F-32
NOTE D - PLANT AND EQUIPMENT
Plant and equipment consisted of the following:
March 31, 2004 December 31, 2003
Plant and Equipment (A)
----------------------------------------------------------- -- ---------------- -------------------
----------------------------------------------------------- -- ---------------- -------------------
Computer $ 435,894 $ 391,143
Equipment 389,743 389,453
Furniture and fixtures 81,683 69,463
Vehicles 70,441 70,441
Leasehold improvements 357,359 346,351
---------------- -------------------
---------------- -------------------
Total 1,335,120 1,266,851
Accumulated depreciation (440,048) (385,061)
---------------- -------------------
---------------- -------------------
Net plant and equipment $ 895,072 $ 881,790
================ ===================
Depreciation expense for the three months ended March 31, 2004 and 2003 was
$54,984 and $18,840, respectively.
(A) Includes assets held under capital leases payable (See Note G).
NOTE E - INTANGIBLE ASSETS
Intangible assets consisted of the following:
March 31, December 31,
Intangible Assets 2004 2003
--------------------------------------------------------- -------------- ----------------
--------------------------------------------------------- -------------- ----------------
Software development $ 110,186 $ 110,186
Patents and formulas 159,139 159,139
Website development 154,969 139,557
Good manufacturing practices 85,000 85,000
Training system development 40,000 40,000
-------------- ----------------
-------------- ----------------
Total 549,294 533,882
Accumulated amortization (256,954) (224,077)
-------------- ----------------
-------------- ----------------
Net intangibles $ 292,340 $ 309,805
============== ================
Amortization expense for the three months ended March 31, 2004 and 2003 was
$32,880 and $6,300, respectively.
F-33
NOTE F - NOTES PAYABLE
During the first quarter of 2004, the Company entered into two additional notes
payable with an existing lender. The notes totaling $50,000, have a stated
interest rate of 10% and mature in 2005.
March 31, 2004 December 31,
2003
---------------- -- --------------
Notes payable at 10% interest, maturing at various dates in
2005. $ 312,821 $ 263,970
---------------- --------------
---------------- --------------
312,821 263,970
Less: current portion - -
---------------- --------------
$ 312,821 $ 263,970
================ ==============
Approximate principal repayments are as follows: March 31, 2004
--------------------------------------------------------------- ---------------
--------------------------------------------------------------- ---------------
2005 $
-
2006 312,821
---------------
$ 312,821
===============
NOTE G - CAPITAL LEASES PAYABLE
The Company follows the provisions of SFAS No. 13, "Accounting for Leases," in
determining the criteria for capital leases. Leases that do not meet such
criteria are classified as operating leases and related rentals are charged to
expense in the year incurred.
During 2003, the Company entered into four equipment leases of production
equipment that provided for bargain purchase options at the termination of the
lease. As a result of these bargain purchase options, the leases were classified
as capital leases. The present value of future minimum payments under these
capital leases totaled $113,423 and payments were scheduled through 2005, 2006
and 2008.
Two vehicles have been capitalized due to their extended leases exceeding 75% of
their economic life of five years. The present value of future minimum payments
under these capital leases totaled $9,609 and payments were scheduled into 2004
and 2005.
The following is a summary by year of future minimum rental payments for
capitalized leases that have initial or remaining noncancelable terms in excess
of one year as of March 31, 2004:
F-34
Year ending March 31, Amount
--------------------------------------------------------------------------------- ---------------------
--------------------------------------------------------------------------------- ---------------------
2005 $ 62,123
2006 54,019
2007 21,695
2008 7,716
2009 545
---------------------
Total minimum lease payments 146,098
Less: Estimated amount representing interest (23,066)
---------------------
---------------------
Present value of net minimum capital lease payments 123,032
Less: Current portion (40,963)
---------------------
---------------------
Long-term obligations under capital leases at March 31, 2004 $ 82,069
=====================
At March 31, 2004 and December 31, 2003, capital lease assets as a component of
net property and equipment were as follows:
March 31, 2004 December 31, 2003
--------------- -------------------
--------------- -------------------
Capital lease assets $168,042 $ 168,042
Accumulated depreciation (29,244) (17,988)
--------------- -------------------
--------------- -------------------
Net capital lease assets $138,798 $ 150,054
=============== ===================
(See Note I for operating lease disclosures).
NOTE H - INCOME TAXES
The provision for taxes for the three months ended March 31, 2004 and 2003
consist of the following:
March 31, 2004 March 31, 2003
-------------------- --------------------
-------------------- --------------------
Current:
Federal $ 7,635 $ 15,625
State 1,348 2,757
-------------------- --------------------
-------------------- --------------------
8,983 18,382
Deferred:
Federal (7,635) (15,625)
State (1,348) (2,757)
-------------------- --------------------
-------------------- --------------------
(8,983)
(18,382)
-------------------- --------------------
Total tax provision $ - $ -
==================== ====================
F-35
Significant components of the Company's deferred income tax assets at March 31,
2004 and December 31, 2003 are as follows:
March 31, 2004 December 31, 2003
-------------------- --------------------
-------------------- --------------------
Deferred income tax asset:
Net operating loss carry forward $ 210,000 $ 219,000
-------------------- --------------------
Total deferred income tax asset 210,000 219,000
Valuation allowance ( 210,000 ) ( 219,000 )
-------------------- --------------------
-------------------- --------------------
Net deferred income tax asset $ - $ -
==================== ====================
Reconciliation of the effective income tax rate to the U. S. statutory rate is
as follows:
March 31, 2004 December 31,
2003
--------------- ---------------
--------------- ---------------
Tax expense at the U.S. statutory
income tax rate (34.0) % (34.0) %
Utilization of net operating loss carryforwards
34.0 34.0
--------------- ---------------
--------------- ---------------
Effective income tax rate - % - %
=============== ===============
Deferred taxes are recorded to give recognition to temporary differences between
the tax bases of assets or liabilities and their reported amounts in the
financial statements. Deferred tax assets generally represent items that can be
used as a tax deduction or credit in future years. Deferred tax liabilities
generally represent items that we have taken a tax deduction for, but have not
yet recorded in the Consolidated Statement of Operations.
Net operating loss carryforwards totaling approximately $543,000 federal and
$293,000 state amounts at March 31, 2004 are being carried forward. The net
operating loss carryforwards expire at various dates through 2024 for federal
purposes and 2014 for state purposes.
A full valuation allowance has been established due to the lack of earnings as
support for recognition of the deferred tax assets recorded.
NOTE I - STOCKHOLDERS' EQUITY
During the first quarter of 2004, the Company issued 100,000 shares of its stock
for $45,000 in cash pursuant to a limited private placement.
F-36
NOTE J - COMMITMENTS AND CONTINGENCIES
1. Operating leases
Operations are currently conducted in leased facilities. The facility lease
agreement is a non-cancelable operating lease and extends into 2012. The rent
lease provides that property taxes, insurance, and maintenance expenses are the
responsibility of the Company. The total rent expense for the three months ended
March 31, 2004, and 2003 was $61,043 and $75,641, respectively. The Company
utilizes equipment under non-cancelable operating leases, extending through
2008. The equipment rental operating lease expense for the three months ended
March 31, 2004 and 2003 was $9,823 and $11,513, respectively. The following
amounts contain the assumption that, in the normal course of business, any
operating leases that expire within the time frame represented will be renewed
or replaced by leases on other properties, assuming operations continue and will
extend, at a maximum, through 2008.
Year Ending March 31, Operating
---------------------------------------- -----------------
---------------------------------------- -----------------
2005 $ 488,339
2006 452,388
2007 420,891
2008 404,670
2009 458,480
Later years 519,220
-----------------
-----------------
Total minimum lease payments $2,743,988
=================
F-37
2. Contingencies
The Company is involved in a lawsuit arising in the normal course of business
regarding product liability. The Company, like any other retailer, distributor
and manufacturer of products that are designed to be ingested, faces an inherent
risk of exposure to product liability claims in the event that the use of its
products results in injury. With respect to product liability claims, the
Company has $1.0 million per occurrence and $2.0 million in aggregate liability
insurance subject to a self-insurance retention of $25,000. The Company was
named as a defendant in a products liability lawsuit, Gil v. Global Health Trax,
Inc., filed in the Superior Court of the State of Arizona on June 18, 2002. The
case went to trial on April 4, 2004. The Company's insurance carrier is
providing the defense. On April 12, 2004, the Company obtained a favorable court
decision in Gil v. Global Health Trax, Inc. In the opinion of management, it is
not anticipated that the plaintiffs will appeal.
NOTE K - EMPLOYEE BENEFIT PLAN
The Company has an employee benefit plan under Section 401(k) of the Internal
Revenue Code. This plan covers employees who are at least 18 years of age and
have been employed by the Company longer than three months. The Company is not
obligated to make matching contributions. The Company may make a discretionary
contribution based on earnings. The Company's discretionary contributions vest
at 25 percent per year beginning with the first year. There were no
contributions made by the Company to the plan for the three months ended March
31, 2004 and 2003.
NOTE L - RELATED PARTY TRANSACTIONS
The Company's Co-founder, Chairman of the Board, Chief Executive Officer and
President (the President) is the sole beneficial owner and single largest
shareholder of the Company owning 41.2% of the Company's issued and outstanding
shares as of March 31, 2004 and 50% as of March 31, 2003. The President is a 50%
owner of Health Services International, Inc. (HSI).
The Executive Vice President is the sole beneficial owner and second largest
shareholder of the Company, owning 40.8% of the Company's issued and outstanding
shares as of March 31, 2004 and 50% as of March 31, 2003. The Executive Vice
President is a 50% owner of HSI. The Company leases a residential unit for the
use of the Executive Vice President on a month-to-month basis.
HSI owed the Company $32,554 at March 31, 2004.
The Vice President of Training received, directly or through his wholly owned
corporation, for the three months ended March 31, 2004 and 2003, $21,600 and
$32,000, respectively, for services rendered to the Company.
The Company's landlord through notes payable conversions and purchases of stock
has accumulated 2,000,000 shares of the Company's common stock. This represents
8.3% of the Company's outstanding common stock at March 31, 2004. The Company's
landlord did not own any of the Company's outstanding common stock as of March
31, 2003.
F-38
GLOBAL HEALTH TRAX, INC.
[A Development Stage Company]
7,699,649 Shares
Common Stock
$1.25 Per Share
PROSPECTUS
GLOBAL HEALTH TRAX, INC.
2465 Ash Street, Vista, CA 92083
Telephone: 760-542-3000
Facsimile: 800-673-4883
Email: ght@globalhealthtrax.com
Website: www.globalhealthtrax.com
______________________, 2004
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Article Twelve of our Articles of Incorporation provides, among other things,
that our officers and directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as an officer or
a director, except for liability:
For acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; or o for unlawful payments of dividends or
unlawful stock purchase or redemption by us. Accordingly, our directors may have
no liability to our shareholders for any mistakes or errors of judgment or for
any act of omission, unless the act or omission involves intentional misconduct,
fraud, or a knowing violation of law or results in unlawful distributions to our
shareholders.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Other Expenses of Issuance and Distribution
We will pay all expenses in connection with the registration and sale of our
common stock. None of the expenses will be paid by the selling security holders.
The estimated expenses of issuance and distribution are set forth below.
======================================== ==================== ===============
Registration Fees Approximately $ 1,219.43
- ---------------------------------------- -------------------- ---------------
Transfer Agent Fees Approximately $ 5,000.00
- ---------------------------------------- -------------------- ---------------
Legal Fees Approximately $ 50,000.00
- ---------------------------------------- -------------------- ---------------
Printing Fees Approximately $ 5,000.00
- ---------------------------------------- -------------------- ---------------
Accounting Fees Approximately $ 13,000.00
======================================== ==================== ===============
Recent Sales of Unregistered Securities
In connection with the organization of Global, and prior to any stock splits,
Everett Hale, a founding shareholder of our company, provided labor and services
in exchange for which for he was issued 20,000,000 shares of common stock. On
June 15, 2003 Global conducted a 4 for 1 reverse split of its outstanding common
stock which reduced Mr. Hale's ownership to 5,000,000 shares. On November 15,
2003 we conducted a 2 for 1 forward split of our common stock which increased
Mr. Hales's ownership to 10,000,000 shares. Similarly, in connection with the
organization of Global, and prior to any stock splits, Lorin Dyrr, a founding
shareholder of our company, provided labor and services in exchange for which
for she was issued 20,000,000 shares of common stock. On June 15, 2003 Global
conducted a 4 for 1 reverse split of its outstanding common stock which reduced
Ms. Dyrr's ownership to 5,000,000 shares. Ms. Dyrr also agreed at that time to
sell 50,000 shares of her stock to the corporation in exchange for the
II-1
retirement of debt owed by her. On November 15, 2003 we conducted a 2 for 1
forward split of our common stock which increased Mr. Hales's ownership to
10,000,000 shares and Ms. Dyrr's ownership to 9, 900,000 shares. In addition,
Global officer and director Russell Chaisson was issued 1,000,000 shares of
common stock in 2003 in exchange for services and a promissory note in the
amount of $125,000.
Further, we have recently completed our capitalization with a private offering
that resulted in $2,010,030 in proceeds to Global, including the conversion of
debt for stock. These proceeds were contributed by the selling shareholders set
forth elsewhere in this prospectus in exchange for an aggregate of 3,699,649
shares of common stock. We have also adopted a non-qualified employee and
independent contractor incentive stock option plan for which we have reserved a
total of 3,000,000 and 1,000,000 shares of common stock respectively. Mr. Hale
and Ms. Dyrr are eligible to participate in the employee incentive stock option
plan and were each issued 1,000,000 options under the plan on January 2, 2004.
II-2
Exhibits
- --------
Copies of the following documents are filed with this registration
statement, Form SB-2, as exhibits:
Exhibit No.
- ------------
3.1 Articles of Incorporation
3.2 Certificate of Amendment to Articles of Incorporation
3.3 Certificate of Amendment to Articles of Incorporation
3.4 Bylaws
4.0 Specimen Stock Certificate
5.0 Executed Opinion Re: Legality
23.1 Consent of Auditors
23.2 Consent of Counsel
Undertakings
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by us of expenses incurred or paid by
our director, officer or controlling person 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, we will, unless in
the opinion of our 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 of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) To specify in the prospectus any facts or events arising after the
effective date of the registration statement, or most recent post-effective
amendment thereof, which, individually or in the aggregate, represent a
fundamental change in the information set forth 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
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estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b),
Section 230.424(b) of Regulation S-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) To include any additional or changed material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on our behalf by the undersigned, in the city of San Diego, State
of California, on August 13, 2004
Global Health Trax, Inc.
/s/ Everett Hale August 13, 2004
Everett Hale
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Everett Hale
Chief Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
/s/ Everett Hale August 13, 2004
Everett Hale
- --------------------------------------------
Everett Hale
Chief Executive officer and Director
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Exhibits
Copies of the following documents are filed with this registration statement,
Form SB-2, as exhibits:
Exhibit No.
3.1 Articles of Incorporation
3.2 Certificate of Amendment to Articles of Incorporation
3.3 Certificate of Amendment to Articles of Incorporation
3.4 Bylaws
4.0 Specimen Stock Certificate
5.0 Executed Opinion Re: Legality
23.1 Consent of Auditors
23.2 Consent of Counsel
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Exhibit 3.1
ARTICLES OF INCORPORATION
OF
GLOBAL HEALTH TRAX, INC.
*****
The undersigned, acting as incorporator, pursuant to the provisions of
the laws of the State of Nevada relating to private corporations, hereby adopts
the following Articles of Incorporation:
FIRST: The name of this corporation is
------
GLOBAL HEALTH TRAX, INC.
SECOND: The registered office in the State of Nevada is located at 2533
North Carson Street, Carson City, Nevada 89706 and the corporation may maintain
such other offices within or without the State of Nevada as approved by the
Board of Directors. The purposes for which the corporation is organized are to
engage in any activity or business not in conflict with the laws of the State of
Nevada or the United States Of America.
THIRD: The objects for which this Corporation is formed are: To have to
exercise all the powers now or hereafter conferred by the laws of the State of
Nevada upon corporations organized pursuant to the laws under which the
corporation is organized and any and all acts amendatory thereof and
supplemental thereto. To conduct and carry on its business or any branch thereof
in any state or territory of the United States or in any foreign country in
conformity with the laws of such state, territory, or foreign country, and to
have and maintain in any state, territory, or foreign country a business office,
plan, store or other facility. The purposes specified herein shall be construed
both as purposes and powers and shall be in no wise limited or restricted by
reference to, or inference from, the terms of any other clause in this or any
other article, but the purposes and powers specified in each of the clauses
herein shall be regarded s independent purposes and powers, and the enumeration
of specific purposes and powers shall not be construed to limit or restrict in
any manner the meaning of general terms or of the general powers of the
corporation; nor shall the expression of one thing be deemed to exclude another,
although it be of like nature not expressed.
FOURTH: The corporation shall have authority to issue an aggregate of
TWENTY FIVE THOUSAND (25,000) shares of stock with nominal par value and no
other class of stock shall be authorized. All capital stock when issued shall be
fully paid and non-assessable. No holder of shares of capital stock of the
corporation shall be entitled as such to any pre-emptive or preferential rights
to subscribe to any unissued stock, or any other securities which the
corporation may now or hereafter be authorized to issue. The corporation's
capital stock may be issued and sold from time to time for such consideration as
may be fixed by the Board of Directors, provided that the consideration so fixed
is not less than par value. Holders of the corporation's Common Stock shall not
possess cumulative voting rights at any shareholders meetings called for the
purpose of electing a Board of Directors or on other matters brought before
stockholders meetings, whether they be annual or special.
FIFTH; The affairs of the corporation shall be governed by a Board of
Directors of not less than one (1) person. The names and addresses of the first
Board of Directors are:
NAME ADDRESS
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
SIXTH: The capital stock of the corporation, after the amount of the
subscription price or par value has been paid in, shall not be subject to pay
debts of the corporation, and no paid up stock and no stock issued as fully paid
up shall ever be assessable or assessed.
SEVENTH The name and address of the incorporator is as follows:
-------
NAME ADDRESS
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH: The resident agent for this corporation shall be:
-------
LAUGHLIN ASSOCIATES
2533 North Carson Street
Carson City, Nevada 89706
NINTH: The corporation is to have perpetual existence.
------
TENTH: The initial By-laws of the corporation shall be adopted by its
Board of Directors. The power to alter, amend, or repeal the By-laws, or to
adopt new By-law, shall be vested in the Board of Directors, except as otherwise
may be specifically provided in the By-laws.
ELEVENTH: Meetings of stockholders shall be held at such a place within
or without the State of Nevada as may be provided by the By-laws of the
corporation. Special meetings of the stockholders may be called by the President
or any other executive officer of the corporation, the Board of Directors, or
any member thereof, or by the record holder or holders of at lest ten percent
(10%) of all shares entitled to vote at the meeting. Any action otherwise
required to be taken at a meeting of the stockholders, except election of
directors, may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by stockholders having at least a majority
of the voting power.
TWELTH: No contract or other transaction between the corporation and
any other corporation, whether or not a majority of the shares of the capital
stock of such other corporation is owned by this corporation, and no act of this
corporation shall in any way be affected or invalidated by the fact that any of
the directors of this corporation are pecuniarily or otherwise interested in, or
are directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniarily or otherwise interested in any contract
or transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall been known to the Board
of Directors of this corporation, or a majority thereof; and any director of
this corporation who is also a director or office of such other corporation, or
who is so interested, may be counted in determining the existence of a quorum at
any meeting of the Board of Directors of this corporation that shall authorize
such contract or transaction, and may vote thereon to authorize such contract or
transaction, with like force and effect as if he were not such director or
officer of such other corporation or not so interested.
THIRTEENTH: No director or officer shall have any personal liability to
the corporation or its stockholders for damages for breach of fiduciary duty as
a director or officer, except that this Article Twelve shall no eliminate or
limit the liability of a director or officer for (1) acts or omissions which
involve intentional misconduct, fraud or knowing violation of the law, or (ii)
the payment of dividends in violation of the Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on March 26, 1999.
/s/Brent Buscay
Brent Buscay
STATE OF NEVADA )
) SS:
CARSON CITY )
On March 26, 1999 in Carson City Nevada,
Before me the undersigned, a Notary Public in and for Carson City, State of
Nevada, personally appeared: Brent Buscay Known to me to be the person whose
name is subscribed to the forgoing document And acknowledged that he executed
saem.
/s/ Terri L. Conetto
Terri L. Conetto
CORPORATE SEAL
Exhibit 3.2
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
GLOBAL HEALTH TRAX, INC.
We, the undersigned President and Secretary of Global Health Trax, Inc. do
hereby certify:
That the Board of Directors of said corporation at a meeting duly convened and
held on November 5, 2003 adopted a resolution to call for a special meeting of
the shareholders of the corporation on November 15, 2003 to amend the Articles
of Incorporation as follows:
The FOURTH article is hereby amended to read as follows:
Authorized Shares. The total number of shares of common stock which
this Corporation is authorized to issue is 100,000,000 shares of Common
Stock at no par value per share.
(a) The total number of shares of Common Stock which this
Corporation is authorized to issue is 100,000,000 shares at no
par value per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 10,000,000 shares at no
par value per share, which Preferred Stock may contain special
preferences as determined by the Board of Directors of the
Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
(c) The outstanding common stock shall be forward split 2 for 1
such that the 11,381,000 shares common stock currently issued
and outstanding become 22,762,000 shares of common stock
outstanding.
This amendment was also approved by a majority of the shareholders of the
Corporation at a special meeting conducted on November 15, 2003. The number of
shares outstanding and entitled to vote on the share authorization amendment to
the Articles of Incorporation was 11,381,000; said change and amendment was
voted on and approved unanimously by a majority of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
/s/ Everett Hale
Everett Hale, President
/s/ Everett Hale
Lorin Dyrr, Secretary
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
GLOBAL HEALTH TRAX, INC.
We, the undersigned President and Secretary of Global Health Trax, Inc. do
hereby certify:
That the Board of Directors of said corporation at a meeting duly convened and
held on June 20, 2002, adopted a resolution to amend the Articles of
Incorporation as follows:
The FOURTH article is hereby amended to read as follows:
Authorized Shares. The total number of shares of common stock which
this Corporation is authorized to issue is 100,000,000 shares of Common
Stock at no par value per share.
(a) The total number of shares of Common Stock which this
Corporation is authorized to issue is 100,000,000 shares at no
par value per share.
(b) The total number of shares of Preferred Stock which this
Corporation is authorized to issue is 10,000,000 shares at no
par value per share, which Preferred Stock may contain special
preferences as determined by the Board of Directors of the
Corporation, including, but not limited to, the bearing of
interest and convertibility into shares of Common Stock of the
Corporation.
(c) The outstanding common stock shall be reverse split 4 for 1
such that the 40,000,000 shares common stock currently issued
and outstanding become 10,000,000 shares of common stock
outstanding.
This amendment was also approved by a majority of the shareholders of the
Corporation at a special meeting conducted on June 20, 2003. The number of
shares outstanding and entitled to vote on the share authorization amendment to
the Articles of Incorporation is 40,000,000; said change and amendment was voted
on and approved unanimously by a majority of the stockholders holding at least a
majority of each class of stock outstanding and entitled to vote thereon.
/s/Everett Hale
Everett Hale, President
/s/ Lorin Dyrr, Secretary
Lorin Dyrr, Secretary
Exhibit 3.4
BYLAWS
OF
GLOBAL HEALTH TRAX, INC.
(A NEVADA CORPORATION)
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. TIME. An annual meeting for the election of directors and for the
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: Ten o'clock A.M.
Date of Meeting: The first day of May
SECTION 2. PLACE. Annual meetings and special meeting shall be held at such
place, within or without the State of Nevada, as the Directors may, from time to
time, fix. Whenever the Directors shall fail to fix such place, the meetings
shall be held at the principal executive office of the corporation.
SECTION 3. CALL. Annual meetings may be called by the Directors, by the Chairman
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
SECTION 4. NOTICE. Written notice stating the place, day and hour of each
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located.
Such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage therein prepaid, or sent by other
means of written communication addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of notice to be presented by management for election. At an
annual meeting of shareholders, any matter relating to the affairs of the
corporation, whether or not stated in the notice of the meeting, may be brought
up for action except matters which the General Corporation Law requires to be
stated in the notice of the meeting. The notice of any annual or special meeting
shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the General Corporation Law. When a
meeting is adjourned to another time or place, notice of the adjourned meeting
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided that, if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder. At the adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting.
SECTION 5. CONSENT. The transaction of any meeting, however called and noticed,
and wherever held, shall be as valid as though a meeting was duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
SECTION 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but, if neither the
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting.
SECTION 7. PROXY REPRESENTATION. Every shareholder may authorize another person
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
SECTION 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
SECTION 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
SECTION 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these Bylaws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
SECTION 11. BALLOT. Elections of directors at a meeting need not be by ballot
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
SECTION 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706, and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. FUNCTIONS. The business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
SECTION 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in section 300 (b). Said Agreement may
provide for the exercise of corporate powers and by the shareholders, provided
however such agreement shall, to the extent and so long as the discretion or
powers of the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
SECTION 3. QUALIFICATION AND NUMBER. A director need not be a shareholder of the
corporation, a citizen of the United States, or a resident of the State of
Nevada. The authorized number of directors constituting the Board of Directors
until further changed shall be one. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these Bylaws adopted by the shareholders. Any such amendment reducing the number
of directors to fewer than five cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in writing in the case of
action by written consent are equal to more than sixteen and two-thirds percent
of the outstanding shares. No decrease in the authorized number of directors
shall have the effect of shortening the term of any incumbent director.
SECTION 4. ELECTION AND TERM. The initial Board of Directors shall consist of
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a Bylaw adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President, the Secretary or the Board of Directors, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to the
office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
SECTION 5. LOANS, INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The corporation may indemnify any Director, Officer, agent or employee as to
those liabilities and on those terms and conditions as are specified by law. In
any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
The corporation shall also be permitted to extend loans to directors, officers,
employees and agents.
SECTION 6. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of Nevada, which has been designated in any notice of the meeting, or, if not
stated in said notice, or, if there is no notice given, at the place designated
by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
SECTION 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
only one director is required by the Bylaws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
SECTION 8. QUORUM AND ACTION. A majority of the authorized number of directors
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of the
authorized number of directors or at least two directors, whichever is larger,
or unless the authorized number of directors is only one. A majority of the
directors present, whether or not a quorum is present, may adjourn any meeting
to another time and place. If the meeting is adjourned for more than twenty-four
hours, notice of any adjournment to another time or place shall be given prior
to the time of the adjourned meeting to the directors, if any, who were not
present at the time of the adjournment. Except as the Articles of Incorporation,
these Bylaws and the General Corporation Law may otherwise provide, the act or
decision done or made by a majority of the Directors present at a meeting duly
held at which a quorum is present shall be the act of the Board of Directors.
Members of the Board of Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another, and participation by such
use shall be deemed to constitute presence in person at any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
SECTION 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the board, shall preside.
SECTION 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all directors
are so removed, new directors may be elected at the same meeting or by such
written consent. The Board of Directors may declare vacant the office of any
director who has been declared of unsound mind by an order of court or convicted
of a felony.
SECTION 11. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
SECTION 12. INFORMAL ACTION. The transactions of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 13. WRITTEN ACTION. Any action required or permitted to be taken may be
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a Chairman of the
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
SECTION 2. ELECTION. The officers of the corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from time to time
determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in the Bylaws for regular appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
Bylaws.
SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all
the standing committees, including the Executive Committee, if any, and shall
have the general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the Bylaws.
SECTION 8. VICE PRESIDENT. In the absence or disability of the President, the
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the Bylaws.
SECTION 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
Bylaws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the Bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
Bylaws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
SECTION 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of Nevada (the "General Corporation Law") and such other statements, as
applicable, which may be prescribed by the Corporate Securities Law of the State
of Nevada and any other applicable provision of the law. Each such certificate
issued shall be signed in the name of the corporation by the Chairman of the
Board of Directors, if any, or the Vice Chairman of the Board of Directors, if
any, the President, if any, or a Vice President, if any, and by the Chief
Financial Officer or an Assistant Treasurer or the Secretary or an Assistant
Secretary. Any or all of the signatures on a certificate for shares may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate for shares shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
SECTION 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to such issuance, the corporation may require any
such owner of the allegedly lost, stolen or destroyed certificate or any such
owner's legal representative to give the corporation a bond, or other adequate
security, sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made on the record of shareholders of the corporation by the registered holder
thereof, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
SECTION 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given; and the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
SECTION 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Share of other
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President of
any other person authorized by resolution of the Board of Directors.
SECTION 6. MEANING OF CERTAIN TERMS. As used in these Bylaws in respect of the
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights here there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may provide for more
than one class or series of shares, one or more of which are limited or denied
such rights there under.
SECTION 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
of this corporation, in the event it shall elect to becomes a close corporation,
shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these Bylaws if this corporation elects to
becomes a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports, 16 (Rights of Inspection),
18 (Involuntary Dissolution) or 2 (Crimes and Penalties). Any other provisions
of the Code or these Bylaws may be altered or waived thereby, but to the extent
they are not so altered or waived, these Bylaws shall be applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS - HOW EXECUTED
The Board of Directors, except as in the Bylaws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement to bind the
corporation by any contract or agreement, or to pledge its credit, or to render
it liable for any purposes or any amount, except as provided in Section 313 of
the Corporations Code.
ARTICLE VII
CONTROL OVER BYLAWS
After the initial Bylaws of the corporation shall have been adopted by
the incorporator or incorporators of the corporation, the Bylaws may be amended
or repealed or new Bylaws may be adopted by the shareholders entitled to
exercise a majority of the voting power or by the Board of Directors; provided,
however, that the Board of Directors shall have no control over any By-Law which
fixes or changes the authorized number of directors of the corporation;
provided, further, that any control over the Bylaws herein vested in the Board
of Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the Bylaws or to adopt new Bylaws; and provided further that any
By-Law amendment or new By-Law which changes the minimum number of directors to
fewer than five shall require authorization by the greater proportion of voting
power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS
SECTION 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
principal executive office in the State of Nevada, or, if its principal
executive office is not in the State of Nevada, the original or a copy of the
Bylaws as amended to date, which shall be open to inspection by the shareholders
at all reasonable times during office hours. If the principal executive office
of the corporation is outside the State of Nevada, and, if the corporation has
no principal business office in the State of Nevada, it shall upon request of
any shareholder furnish a copy of the Bylaws to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, and of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
SECTION 2. RECORD OF PAYMENTS. All checks, drafts or other orders or payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report unless it shall
determine that a useful purpose would be served by causing the same to be sent
or unless the Secretary of State, pursuant to the provisions of Nevada law,
shall direct the sending of the same.
CERTIFICATE OF ADOPTION OF BYLAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S)
The undersigned person(s) appointed in the Articles of Incorporation to
act as the Incorporator(s) or First Director(s) of the above-named corporation
hereby adopt the same as the Bylaws of said corporation.
Executed March 26, 1999
/s/Lorin Dyrr
Lorin Dyrr
Secretary
Exhibit 4.1
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
- -----------------------
- -----------------------
- -----------------------
No. Shares
- -----------------------
The State of Nevada
[LOGO]
Nevada, Inc.
One Hundred Million Common Shares Authorized, No Par Value
This Certifies That SPECIMEN is the owner of Common Shares no par value each of
the Capital Stock of
Global Health Trax, Inc.
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said corporation has caused this Certificate to
be signed by its duly authorized officers, and to be sealed with the Seal of the
Corporation this day of At
[SEAL]
President Secretary
- -------------------------------------------------------------------------------
SHARES $0.001 EACH
CERTIFICATE
FOR
SHARES
[SEAL APPEARS HERE]
OF THE
CAPITAL STOCK
GLOBAL HEALTH TRAX, INC.
ISSUED TO
DATED
For Value Received hereby sell, assign and transfer unto
Shares of the Capital Stock represented by the written Certificate and do hereby
irrevocably constitute and appoint to transfer the said Stock on the books of
the within named corporation with full power of substitution in the premises.
Dated
In presence of
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORESPOND WITH THE NAME AS WRITTEN
ON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR WITHOUT ALTERATION AND
ENLARGEMENTS OR ANY CHANGE WHATEVER
Exhibit 5.1
Kennan E. Kaeder
Attorney at Law
110 West C Street, Suite 1300
San Diego, California 92101
Telephone 619-232-6545
Facsimile 619-374-7277
August 13, 2004
Board of Directors
Global Health Trax, Inc.
2465 Ash Street,
Vista, CA 92081-8424
Re: Global Health Trax, Inc.
Registration Statement on Form SB-2
Dear Mssrs:
I have been retained by Global Health Trax, Inc. ("GLOBAL") in connection with
the Registration Statement (the "Registration Statement") on Form SB-2, to be
filed by GLOBAL with the Securities and Exchange Commission relating to the
offering of 7,699,649 shares of common stock of GLOBAL. You have requested that
I render my opinion as to whether or not the securities set forth in the
Registration Statement will be validly issued, fully paid, and nonassessable.
In connection with the request, we have examined the following:
1. Articles of Incorporation of GLOBAL;
2. Bylaws of GLOBAL;
3. The Registration Statement; and
4. Unanimous consent resolutions of GLOBAL's Board of Directors.
I have examined such other corporate records and documents and have made such
other examinations as we have deemed relevant. Based on the above examination, I
am of the opinion that the securities of GLOBAL to be registered pursuant to the
Registration Statement are validly authorized and, when issued in accordance
with the terms set forth in the Registration Statement, will be validly issued,
and fully paid, and non-assessable under the corporate laws of the State of
California.
I consent to the reference to this firm and this opinion being used in the
Registration Statement as an exhibit as having rendered the foregoing opinion
and as having represented GLOBAL in connection with the Registration Statement.
Sincerely,
/s/Kennan E. Kaeder
Kennan E. Kaeder
Exhibit 23.1
CONSENT OF WEINBERG & COMPANY, P.A
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 for Global Health Trax, Inc., of our report
dated May 28, 2004 relating to the December 31, 2003 financial statements of
Global Health Trax, Inc., which appears in such Prospectus.
/s/ Weinberg & Company, P.A.
Wienberg & Company, P.A.
Boca Raton, FL
August 10, 2004
Exhibit 23.2
Kennan E. Kaeder
Attorney at Law
110 West C Street, Suite 1300
San Diego, California 92101
Telephone 619-232-6545
Facsimile 619-374-7277
kkaeder@san.rr.com
August 13, 2004
CONSENT
I HEREBY CONSENT to the inclusion of my name in connection with the
Form SB-2 Registration Statement filed with the Securities and Exchange
Commission as attorney for the registrant, Southwest Charters, Inc.
Yours truly,
/s/Kennan E. Kaeder
Kennan E. Kaeder