SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
OR
|_| TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ___________ to ____________.
Commission File Number 01-28911
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NATIONAL HEALTHCARE TECHNOLOGY, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 91-1869677
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1660 Union Street, Suite 200, San Diego, California 92101
(Address of principal executive offices)
(619) 398-8470
(Issuer's telephone number)
20700 Ventura Boulevard, #227
Woodland Hills, California 91364
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes |X| No |_|
As of August 12, 2005, 18,413,546 shares of Common Stock of the issuer were
outstanding.
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Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
ITEM 1. FINANCIAL INFORMATION
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
June 30, 2005
(Unaudited)
Assets $ --
===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable:
Trade $ 72,394
Crown Partners, Inc. 131,016
---------------
Total current liabilities 203.410
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STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding --
Common stock, $.001 par value, 100,000,000 shares
authorized, 78,571 shares issued and outstanding 79
Additional paid in capital 1,245,215
Accumulated deficit (1,448,704)
---------------
Total Stockholders' Deficit (203.410)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ --
===============
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Three and Nine Months Ended June 30, 2005 and 2004 and
February 29, 1996 (Inception) through June 30, 2005
(Unaudited)
Inception
Three Months Ended Nine Months Ended through June
June 30, June 30, 30,
2005 2004 2005 2004 2005
--------------- --------------- --------------- --------------- ---------------
Revenue $ -- $ -- $ -- $ -- $ 9,578
Expenses:
Development costs -- -- -- -- 1,264,236
General and administrative 19,199 14,346 32,459 28,578 207,548
--------------- --------------- --------------- --------------- ---------------
19,199 14,346 32,459 28,578 1,471,784
--------------- --------------- --------------- --------------- ---------------
Net loss before income taxes (19,199) (14,346) (32,459) (28,578) (1,462,206)
Other Income 18,302
Income taxes -- -- -- -- (4,800)
--------------- --------------- --------------- --------------- ---------------
Net loss $ (19,199) $ (14,346) $ (32,459) $ (28,578) $ (1,448,704)
=============== =============== =============== =============== ===============
Basic net loss per common share $ (0.24) $ (0.18) $ (0.41) $ (0.36)
=============== ================ =============== ===============
Weighted average shares
outstanding 78,571 78,571 78,571 78,571
=============== =============== =============== ===============
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 2005 and 2004 and
February 29, 1996 (Inception) through June 30, 2005
(Unaudited)
Inception
Nine Months Ended through
June 30, June 30,
2005 2004 2005
------------ ------------ ------------
Cash flows from operating activities:
Net loss $ (32,459) $ (28,578) $ (1,448,704)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization -- -- 22,977
Common stock issued for settlement of interest
Expense -- -- 12,900
Common stock issued for services -- -- 217,900
Loss on abandoned assets -- -- 111,612
Gain on sale of assets -- -- (500)
Income from sale of abandoned assets -- -- (9,578)
Changes in operating assets and liabilities
Accounts payable 32,459 28,578 203,410
------------ ------------ ------------
Net cash used in operating activities -- -- (889,983)
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Cash flows from investing activities:
Purchase of property and equipment -- -- (87,314)
Proceeds from the sale of equipment -- -- 15,078
------------ ------------ ------------
Net cash used in investing activities -- -- (72,236)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable -- -- 217,200
Payments on notes payable -- -- (20,000)
Proceeds from the sale of common stock, net -- -- 755,441
------------ ------------ ------------
Net cash provided by financing activities -- -- 952,641
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents -- -- --
Cash at beginning of period -- -- --
------------ ------------ ------------
Cash at end of period $ -- $ -- $ --
============ ============ ============
NATIONAL HEALTHCARE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Note 1 - BASIS OF PRESENTATION
The balance sheet of the Company as of June 30, 2005, the related statements of
operations for the three months and nine months ended June 30, 2005 and 2004 and
the statements of cash flows for the nine months ended June 30, 2005 and 2004
included in the financial statements have been prepared by the Company without
audit. In the opinion of management, the accompanying financial statements
include all adjustments (consisting of normal, recurring adjustments) necessary
to summarize fairly the Company's financial position and results of operations.
The results of operations for the three months ended June 30, 2005 are not
necessarily indicative of the results of operations for the full year or any
other interim period. The information included in this Form 10-QSB should be
read in conjunction with Management's Discussion and Analysis and Financial
Statements and notes thereto included in the Company's September 30, 2004 Form
10-KSB.
NOTE 2 - SUBSEQUENT EVENT
On June 30, 2005, the Company entered into an Exchange Agreement with Special
Stone Surfaces, ES3, Inc. ("Es3") wherein the Company acquired Es3 in exchange
for the issuance of approximately 19,414,188 shares of the Company's common
stock to Es3's shareholders, Crown Partners, Inc. ("Crown") and certain
consultants. In addition, Es3 will pay a total of $500,000 to Crown in exchange
for Crown assuming all the debts and liabilities of the Company as well as in
satisfaction of debts owed by the Company to Crown. $200,000 was paid to Crown
on July 19, 2005. This transaction closed on July 19, 2005 and the then-current
Board of Directors resigned in favor of directors nominated by Es3.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This report contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. When used in this Form 10-QSB, the words
"anticipate", "estimate", "expect", "project" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks, uncertainties and assumptions including the possibility that the
Company's proposed plan of operation will fail to generate projected revenues.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected. The Company's actual results could
differ materially from those set forth on the forward looking statements as a
result of the risks set forth in the Company's filings with the Securities and
Exchange Commission, general economic conditions, and changes in the assumptions
used in making such forward looking statements.
GENERAL
National Healthcare Technology, Inc. (the "Company") was organized
February 29, 1996 as "Patriot Holding Corporation" and subsequently changed its
name to "National Healthcare Technology, Inc." on August 26, 1996. Between 1996
and 1999, the Company was unsuccessful in raising sufficient capital to begin
and complete a proposed double-blind study of an intravenous drug called
Magkelate. The Company did raise $1,000,000 which was used to pay its operating
expenses and general and administrative expenses as well as expenses related to
starting the double-blind study. Following its inability to raise capital and
needing to conserve its financial resources, the Company dismissed all of its
employees in early 1999. The developer of Magkelate passed away in the fall of
1999 and the Magkelate patent has expired. Since 1999, the Company has been
substantially inactive. The Company is in the development stage as defined in
Statement of Financial Accounting Standards No. 7.
On June 30, 2005, the Company entered into an Exchange Agreement (the
"Exchange Agreement") by and among the Company, Crown Partners, Inc., a Nevada
corporation and at such time, the largest stockholder of the Company ("Crown
Partners"), Special Stone Surfaces, Es3, Inc., a Nevada corporation ("Es3"), and
certain stockholders of Es3 (the "Es3 Stockholders"), wherein the Company was to
acquire Es3 in exchange for the issuance of approximately 19,414,188 shares of
the Company's common stock to the Es3 Stockholders, Crown Partners and certain
consultants (the "Share Exchange"). In addition, Es3 will pay a total of
$500,000 to Crown in exchange for Crown assuming all the debts and liabilities
of the Company as well as in satisfaction of debts owed by the Company to Crown.
On July 19, 2005, the Share Exchange transaction closed (the "Closing"),
pursuant to which the then current Board of Directors resigned in favor of
directors nominated by Es3.
Pursuant to the terms of the Exchange Agreement, the Company has now
acquired 17,029,537 shares of the outstanding capital stock of Es3 in exchange
for the Company's issuance to the Es3 Stockholders of 17,029,537 shares of the
Company's common stock. In connection with the Exchange Agreement the Company
also issued 905,438 shares to Crown Partners and 400,000 shares to two
individuals that provided consulting and advisory services to the Company (the
"Consultants"). The issuance of the Company's shares of common stock to the Es3
Stockholders, Crown Partners and the Consultants was exempt from registration
under the Securities Act of 1933, as amended ("Securities Act") pursuant to
Section 4(2) thereof. Following the Closing of the Share Exchange, the Company
has a total of 18,413,546 shares of common stock issued and outstanding, and
there remain 1,079,213 shares of Es3's outstanding common stock that have yet to
be exchanged for the Company's shares. Under the terms of the Exchange
Agreement, holders of those shares have 90 days following the Closing in which
to tender them for exchange.
PLAN OF OPERATIONS
Es3 is newly formed corporation that was established in February 2005
to engage in the business of manufacturing and distributing a range of
decorative stone veneers and finishes based on proprietary Liquid Stone
Coatings(TM) and Authentic Stone Veneers(TM). The coatings and veneers are
clean, cost efficient alternatives to traditional stone masonry.
Es3 holds the exclusive rights to manufacture, use and distribute
Liquid Stone(TM) coatings in North America, Central America and South America,
under an OEM License Agreement with Liquid Stone Manufacturing, Inc. a Nevada
corporation and an affiliate of Es3. Liquid Stone(TM) is a water-based polymeric
stone coating that can be applied to a variety of surfaces including wood,
stucco, metal, concrete or asphalt to create the appearance of natural stone.
Es3 also holds the excusive rights to manufacture, use and distribute
Authentic Stone Veneer(TM) panels in North America, Central America and South
America, under an OEM License Agreement with Stone Mountain Finishes, Inc. a
Nevada corporation and an affiliate of Es3. Authentic Stone Veneer(TM) panels
can be formulated in rough stone or smooth stone finishes. Authentic Stone
Veneer(TM) panels are made from proprietary materials and are molded to form the
detailed contours and profiles of natural stone surfaces. The rough stone
veneers are approximately 1/10th the weight of concrete, while the smooth stone
veneers are approximately 1/7th the weight of concrete.
During the next twelve months Es3 anticipates that it will incur some
research and development expenses. The company continues to evaluate changes in
its formula for Liquid Stone(TM) to enhance the appearance and durability of its
coatings. It is also continuing to evaluate formulas for Authentic Stone
Veneers(TM), and plans to continue testing and seek industry certification for
its products.
Es3 plans to market its coatings and veneers to both commercial and
residential markets. It is developing relationships with prospective dealers and
intends to employ a channel sales strategy. Es3 currently anticipates initial
sales of Liquid Stone(TM) will commence in November 2005, with sales of
Authentic Stone Veneers(TM) commencing in the second or third quarter of 2006.
A significant component of the Es3's intermediate term growth strategy
is the acquisition and integration of companies in related building materials
fields. Es3 expects to take advantage of synergies among related businesses to
increase revenues and take advantage of economies of scale to reduce operating
costs.
Es3 currently operates out of leased facilities in San Diego, and
presently has two full time employees. Any additional plant or equipment
expenditures, and any significant increase in employees will be dependent upon
the company's capital resources and the development of channel and market
activity for its products.
Es3 has not generated any revenues from operations and has incurred
approximately $458,000 in expenses from its inception through June 30, 2005 in
connection with its formation and initial operations. All of Es3's operations to
date have been funded by the sale of its common stock. As of June 30, 2005, Es3
had approximately $25,000 of cash and a related party receivable of $150,000.
Es3 anticipates that it will have to raise additional capital to fund
operations in the next 12 months. To the extent that the Company is required to
raise additional funds to cover the costs of operations, it intends to do so
through additional public or private offerings of debt or equity securities.
There are no commitments or arrangements for other offerings in place and no
guaranties that any such financings would be forthcoming, or as to the terms of
any such financings. Any future financing may involve substantial dilution to
existing investors.
New Accounting Pronouncements:
In December 2004, the FASB, issued a revision to SFAS 123, also known
as SFAS 123R, that amends existing accounting pronouncements for share-based
payment transactions in which an enterprise receives employee and certain
non-employee services in exchange for (a) equity instruments of the enterprise
or (b) liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS 123R eliminates the ability to account for share-based compensation
transactions using APB 25 and generally requires such transactions be accounted
for using a fair-value-based method. SFAS 123R's effective date would be
applicable for awards that are granted, modified, become vested, or settled in
cash in annual periods beginning after December 15, 2005. SFAS 123R includes
three transition methods: one that provides for prospective application and two
that provide for retrospective application. The Company intends to adopt SFAS
123R prospectively commencing in the first quarter of the fiscal year ending
December 31, 2006. It is expected that the adoption of SFAS 123R will cause the
company to record, as expense each quarter, a non-cash accounting charge
approximating the fair value of such share based compensation meeting the
criteria outlined in the provisions of SFAS 123R.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.
ITEM 3. CONTROLS AND PROCEDURES
We maintain controls and procedures designed to ensure that information required
to be disclosed in the reports that we file or submit under the Securities
Exchange Act of 1934, as amended is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. Based upon their evaluation of those controls and
procedures performed as of the end of the period covered by this report, our
chief executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the quarter
ended June 30, 2005.
During the quarter ended June 30, 2005 there were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
2.1 Exchange Agreement by and among National Healthcare Technology,
Inc., Special Stone Surfaces, Es3, Inc. and certain Stockholders
of each dated June 30, 2005 (without exhibits and schedules)
incorporated by reference to the Company's Current Report on Form
8-K, filed with the Securities and Exchange Commission on July 5,
2005.)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934.
32.1 Certification of Chief Executive Officer and Chief Executive
Officer pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NATIONAL HEALTHCARE TECHNOLOGY, INC.
Date: August 18, 2005 By: /s/ ROSS LYNDON-JAMES
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Ross Lyndon-James,
Cheif Executive Officer
Date: August 18, 2005 By: /s/ BRIAN HARCOURT
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Brian Harcourt,
Chief Financial Officer