UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
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(Mark one)
XX ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------- EXCHANGE ACT OF 1934
For the annual period ended December 31, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
---------- EXCHANGE ACT OF 1934
For the transition period from____________ to____________
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Commission File Number: 2-90519
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ProHealth Laboratories, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 59-2262718
-------------------------- ---------------------------
(State of incorporation) (IRS Employer ID Number)
211 West Wall Street, Midland, TX 70701-4556
--------------------------------------------
(Address of principal executive offices)
(915) 682-1761
--------------
(Issuer's telephone number)
DCC Acquisition Corporation
1201 Chester Industrial Parkway, Avon, Ohio 44011-1081
------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
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Securities registered under Section 12 (b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock $0.0001 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No X
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended December 31, 1999 were $0.
As of April 30, 2001, the aggregate market value of the Company's common Stock
held by non-affiliates was: $-0-
As of April 30, 2001, there were 152,247 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes No X
--- ---
1
TABLE OF CONTENTS
Page
Number
------
Part I
Item 1 - Description of Business 3
Item 2 - Description of Property 4
Item 3 - Legal Proceedings 4
Item 4 - Submission of Matters to a Vote of Security Holders 4
Part II
Item 5 - Market for Company's Common Stock and
Related Stockholders Matters 5
Item 6 - Management's Discussion and Analysis or Plan of Operation 6
Item 7 - Index to Financial Statements F-1
Item 8 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 6
Part III
Item 9 - Officers and Directors 6
Item 10 - Executive Compensation 7
Item 11 - Security Ownership of Certain Beneficial Owners And Management 7
Item 12 - Certain Relationships and Related Transactions 8
Item 13 - Exhibits and Reports on 8-K 9
Signatures 10
2
Caution Regarding Forward-Looking Information
---------------------------------------------
This annual report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of the Company or
management as well as assumptions made by and information currently available to
the Company or management. When used in this document, the words "anticipate",
"believe", "estimate", "expect" and "intend" and similar expressions, as they
relate to the Company or its management, are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company regarding future events and are subject to certain risks, uncertainties
and assumptions, including the risks and uncertainties noted. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein
as anticipated, believed, estimated, expected or intended. In each instance,
forward-looking information should be considered in light of the accompanying
meaningful cautionary statements herein.
PART I
Item 1 - Description of Business
General
-------
Datalink Systems, Inc. (Datalink) filed a registration under The Securities Act
of 1933 on Form S-1 with the Securities and Exchange Commission with respect to
a public offering of its securities. The offering became effective on July 29,
1985 and completed October 29, 1985 and raised an aggregate of $300,000 from the
sale of 3,000,000 shares of common stock at $.10 per share.
The Company was engaged in the business of providing electronic information
processing services to the medical/health care industry. This venture was not
successful and management attempted to redirect the focus of the company through
merger with a viable private entity. Several Letters of Intent were signed but
later abandoned by all parties.
The corporate name was changed in April 29, 1987 to Datalink Capital Corporation
and the capital restated to 100,000,000 shares of $.0001 par value common stock.
The corporate charter was revoked on November 4, 1988 by the State of Florida
for failure to file required documents and pay associated fees.
A change in control of the majority stockholder resulted in a change in control
of the Company and the company's charter was reestablished on December 5, 1990.
The new management was unable to complete a merger with a private entity or
recapitalize the company and the company remained dormant. On April 26, 1991 the
corporate name was changed to Midland Capital Resources, Inc.
The corporate charter was revoked again on October 9, 1992 by the State of
Florida for failure to file required documents and pay associated fees. On July
30, 1997, the charter was reinstated by the State of Florida and on September
24, 1997 the name was changed to Datalink Capital Corporation.
On May 1, 1997 a stock purchase agreement was entered into between the then
majority stockholder and Glenn A. Little. In March 1998, this agreement was
renegotiated and effective control of the company was obtained by Mr. Little by
the purchase of 37.4% of the outstanding shares.
Effective December 29, 1998 the Company changed its state of incorporation from
Florida to Nevada, pursuant to a change-of-state-if-incorporation merger. In the
merger transaction, the Company's name was changed from "DataLink Capital
Corporation" to "DCC Acquisition Corporation".
On June 8, 1999, in a Current Report on Form 8-K, the Company announced its
acquisition of all of the issued and outstanding common shares of New Cinema
Partners Inc. (NCP) in consideration of and in exchange for common stock of the
Company issued from treasury (Acquisition Transaction), which transaction
constituted a change in control of the Company.
3
On August 15, 1999, the Company filed a Current Report on Form 8-K reporting
that the June 8, 1999 Form 8-K announcement of the Acquisition Transaction and
the filing of the June 8, 1999 Form 8-K Current Report in respect thereof was
premature. The Acquisition Transaction had not been, and will not be,
consummated. The Board of Directors of the Company did not approve, authorize or
ratify the Acquisition Transaction. Due to mis-communication between
representatives of NCP and its shareholders and the agent for the Company, NCP
and its shareholders were of the view that all requisite approvals and
authorizations in respect of the Acquisition Transaction had been obtained and
all other conditions precedent to the completion of the Acquisition Transaction
satisfied and, accordingly, the Jun e8, 1999 Current Report on Form 8-K was
filed in accordance with applicable law.
The Company continued its efforts to locate and combine with an existing,
privately-held company that is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged.
On November 17, 1999, in the Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999, the Company announced that on November 1, 1999, the
Company experienced a change in control and acquired a majority of the shares of
stock of two corporations, ProHealth Laboratories, Inc (ProHealth) and STL
Group, Inc. (STL) in exchange for shares of the Company's common stock. Although
discussed in the November 17, 1999 Form 10-QSB filing, the Company never filed
any required Current Report on Form 8-K which contained more detailed
information about the terms of the acquisitions of ProHealth and STL and their
business and financial information.
On January 11, 2001, the Company filed a Current Report on Form 8-K announcing
that the two Agreements and Plans of Reorganization (Agreements) disclosed and
discussed in the November 17, 1999 Form 10-QSB filing never closed and
prematurely announced as such.
In anticipation of the closing of these transaction and in accordance with the
Agreements, the Company convened a Board of Directors Meeting on October 22,
1999 and changed the name from DCC Acquisition Corp to ProHealth Medical
Technologies, Inc. and approved and enacted a 1:10 reverse split of its Common
Stock, $0.0001 par value, with fractional shares rounded up to the nearest whole
share. All share and per share amounts in this filing reflect the effect of the
reverse split as of the first day of the first period presented.
As a result of each of the private entity's inability to fulfill its obligations
under each Agreement with the Company, the closing of the acquisitions has never
taken place as planned and announced.
In January 2001, Glenn A. Little and Matthew Blair, the former officers and
directors of the Company, reached an agreement with the parties to the
Agreements to recognize the failure of the merger and agreed to return as
Management of the Company. All books and records were returned to the former
management of the Company and the various companies and parties to the
Agreements mutually released and discharged each other with regard to the failed
transaction.
Pursuant to the rescission agreement, any and all shares which may have been
issued pursuant to the Agreements were rescinded and returned to the Company's
treasury, and the Company appointed Glenn A. Little as President and Director
and Matthew Blair as Secretary and Director.
It is the intention of the current management to bring its SEC reporting to date
in order that the Company might be potentially attractive to a private business
that might be interested in becoming a publicly-held company, without the
expense and time delay involved in distributing its securities to the public.
Proposed Business
-----------------
The Company intends to locate and combine with an existing, privately-held
company which is profitable or, in management's view, has growth potential,
irrespective of the industry in which it is engaged. However, the Company does
not intend to combine with a private company which may be deemed to be an
investment company subject to the Investment Company Act of 1940. A combination
may be structured as a merger, consolidation, exchange of the Company's common
stock for stock or assets or any other form which will result in the combined
enterprise's becoming a publicly-held corporation.
4
Pending negotiation and consummation of a combination, the Company anticipates
that it will have, aside from carrying on its search for a combination partner,
no business activities, and, thus, will have no source of revenue. Should the
Company incur any significant liabilities prior to a combination with a private
company, it may not be able to satisfy such liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
Combination Suitability Standards
---------------------------------
In its pursuit for a combination partner, the Company's management intends to
consider only combination candidates which are profitable or, in management's
view, have growth potential. The Company's management does not intend to pursue
any combination proposal beyond the preliminary negotiation stage with any
combination candidate which does not furnish the Company with audited financial
statements for at least its most recent fiscal year and unaudited financial
statements for interim periods subsequent to the date of such audited financial
statements, or is in a position to provide such financial statements in a timely
manner. The Company will, if necessary funds are available, engage attorneys
and/or accountants in its efforts to investigate a combination candidate and to
consummate a business combination. The Company may require payment of fees by
such combination candidate to fund the investigation of such candidate. In the
event such a combination candidate is engaged in a high technology business, the
Company may also obtain reports from independent organizations of recognized
standing covering the technology being developed and/or used by the candidate.
The Company's limited financial resources may make the acquisition of such
reports difficult or even impossible to obtain and, thus, there can be no
assurance that the Company will have sufficient funds to obtain such reports
when considering combination proposals or candidates. To the extent the Company
is unable to obtain the advice or reports from experts, the risks of any
combined enterprise's being unsuccessful will be enhanced. Furthermore, to the
knowledge of the Company's officers and directors, neither the candidate nor any
of its directors, executive officers, principal shareholders or general
partners:
(1) will not have been convicted of securities fraud, mail fraud, tax fraud,
embezzlement, bribery, or a similar criminal offense involving
misappropriation or theft of funds, or be the subject of a pending
investigation or indictment involving any of those offenses;
(2) will not have been subject to a temporary or permanent injunction or
restraining order arising from unlawful transactions in securities,
whether as issuer, underwriter, broker, dealer, or investment advisor,
may be the subject of any pending investigation or a defendant in a
pending lawsuit arising from or based upon allegations of unlawful
transactions in securities; or
(3) will not have been a defendant in a civil action which resulted in a
final judgement against it or him awarding damages or rescission based
upon unlawful practices or sales of securities.
The Company's officers and directors will make these determinations by asking
pertinent questions of the management of prospective combination candidates.
Such persons will also ask pertinent questions of others who may be involved in
the combination proceedings. However, the officers and directors of the Company
will not generally take other steps to verify independently information obtained
in this manner which is favorable. Unless something comes to their attention
which puts them on notice of a possible disqualification which is being
concealed from them, such persons will rely on information received from the
management of the prospective combination candidate and from others who may be
involved in the combination proceedings.
Governmental Regulation
-----------------------
It is impossible to predict the government regulation, if any, to which the
Company may be subject. The use of assets and/or conduct of businesses that the
Company may operate within could subject it to environmental, public health and
safety, land use, trade, or other governmental regulations and state or local
taxation. Management will endeavor to ascertain and monitor the effects of such,
if any, government regulation on the business of the Company. In certain
circumstances, however, it may not be possible to predict with any degree of
accuracy the impact of government regulation. The inability to ascertain the
effect of government regulation on a particular business activity will make the
acquisition of an interest in such business a higher risk.
5
Competition
-----------
The Company may be involved in intense competition with other business entities,
many of which could have a competitive edge over the Company by virtue of their
stronger financial resources and prior experience in business. There is no
assurance that the Company will be successful in a competitive business
environment.
Employees
---------
The Company currently has no employees. The sole executive officer, who is not
compensated for his time contributed to the Company, devotes only such time to
the affairs of the Company, which is minimal at this time.
Item 2 - Description of Properties
The Company has no properties and has no requirement for property or offices at
this time. The Company's records require nominal space and are maintained in the
offices of it's President at 211 West Wall Street, Midland, Texas 79701 at no
charge.
Item 3 - Legal Proceedings
The Company is not a party to any material pending legal proceedings, and to the
best of its knowledge, no such proceedings by or against the Company have been
threatened.
Item 4 - Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders in the fiscal years ended
December 31, 1999 and 2000, respectively.
PART II
Item 5 - Market for Common Equity and Related Stockholder Matters
Market Information
------------------
The Company's common stock is not listed for trading on any electronic board or
other exchange.
As of April 30, 2000, there were approximately 400 holders on record of the
Company's common stock holding a total of 152,247 shares.
Dividend Policy
---------------
The Company has never paid any dividends on its common stock and does not have
any current plan to pay any dividends in the foreseeable future.
(Remainder of this page left blank intentionally)
6
Item 6 - Management's Discussion and Analysis of Financial Condition, Results of
Operations and Plan of Operation
Results of Operations
---------------------
Years Ended December 31, 1999 and 1998
--------------------------------------
The Company had no revenue for the years ended December 31, 1999 and 1998.
General and administrative expenses for the years ended December 31, 1999 and
1998 were approximately $3,350 and $1,580, respectively. General and
administrative expenses during these years consisted principally of fees
associated with the maintenance of the Company's shareholder ledger. The Company
realized a net loss of approximately $3,350 and $1,580 for the years ended
December 31, 1999 and 1998, respectively.
The Company does not expect to generate any meaningful revenue or incur
operating expenses unless and until such time that the Company's operating
subsidiary begins meaningful operations.
Liquidity and Capital Resources
-------------------------------
At December 31, 1999, and for all periods subsequent thereto, the Company had
working capital of $-0-.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.
Should this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
Item 7 - Financial Statements
The financial statements of the Company appear at the end of this report
beginning with the Index to Financial Statements on page F-1.
Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On December 15, 1999, the Company filed a Current Report on Form 8-K announcing
that S. W. Hatfield, C.P.A., formerly S. W. Hatfield & Associates, had resigned
as the Company's independent auditor as a result of the announced acquisitions
of ProHealth Laboratories, Inc (ProHealth) and STL Group, Inc. This document
announced the appointment of Wrabel & Company to be the successor firm. Although
interviews with Wrabel & Company took place, the Company never executed an
engagement letter with Wrabel & Company and the disclosure by former management
of the engagement of Wrabel & Company by the Company was premature. Wrabel &
Company never performed any services of any type for the Company between
December 15, 1999 and April 6, 2001.
On April 6, 2001, as a result of the change in control of the Company, S. W.
Hatfield CPA accepted reappointment as the Company's independent certified
public accounting firm to audit the Company's financial statements beginning
with the year ending December 31, 1999 and to review the Company's quarterly
filings beginning with the quarter ended March 31, 2000.
7
Between the period of December 15, 1999 and April 6, 2001, the Company held no
discussions with S. W. Hatfield, CPA on any matter of accounting principals or
practices, financial statement disclosure or accounting scope or procedure.
Additionally, there were and have been no changes in or disagreements with
accountants reporting on the financial statements of the Company for the period
between December 31, 1998 and the date of this filing.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(A) of The Securities Exchange Act of 1934
Directors and Officers
----------------------
The following table sets forth the names, ages, and positions with the Company
for the sole director and officer of the Company.
Name Age Position Held and Tenure
---- --- ------------------------
Glenn Little 47 President, Director
Matthew Blair 43 Secretary, Treasurer Director
The directors named above will serve until the next annual meeting of the
Company's stockholders or until their successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's affairs on an
as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely will fall within the range of five to ten hours per month. There are no
agreements or understandings for any officer or director to resign at the
request of another person, and none of the officers or directors are acting on
behalf of, or will act at the direction of, any other person.
Biographical Information
Glenn A. Little, is a graduate of The University of Florida, Gainesville
(Bachelor of Science in Business Administration) and the American Graduate
School of International Management (Master International Management) and has
been the principal of Little and Company Investment Securities (LITCO), a
Securities Broker/Dealer with offices in Midland, Texas since 1979. Mr. Little
currently serves as an officer of other inactive public corporations having the
same business purpose as the Company.
Before founding LITCO, Mr. Little was a stockbroker with Howard, Weil, Labouisse
Friedrich in New Orleans and Midland and worked for the First National Bank of
Commerce in New Orleans, Louisiana.
Matthew Blair was formerly a solo practitioner of law in Midland, Texas and is
presently a Title IV-D Master in Midland County Texas. Before opening his
practice he served in the Legal Department of the Federal Deposit Insurance
Corporation (FDIC), Midland, Texas where he gained exposure to corporate
structures and debt workouts. His employment before the FDIC appointment was
with Texas American Energy and Exxon Corporation. Mr. Blair received a Bachelor
of Arts in Government from The University of Texas at Austin (1975) and Juris
Doctor from Texas Tech University School of Law (1979). He is licensed in every
state court in Texas, United States District Court (Texas) and in The United
States Supreme Court.
8
Item 10 - Executive Compensation
There was no compensation paid during either of the years ended December 31,
1999 and 1998
None of the Company's current officers or directors receives or has received any
salary from Company during the preceding five years. The Company does not
anticipate entering into employment agreements with any of its officers or
directors in the near future. Directors do not receive compensation for their
services as directors and are not reimbursed for expenses incurred in attending
board meeting.
Item 11 - Security Ownership of Management, Certain Beneficial Owners and
Management
The following table sets forth as of April 30, 2001, the number and percentage
of the 152,247 outstanding shares of common stock that were beneficially owned
by (i) each person who is currently a director, (ii) each executive officer,
(iii) all current directors and executive officers as a group and (iv) each
person who, to the knowledge of the Company is the beneficial owner of more than
5% of the outstanding common stock. Except as otherwise indicated, the persons
named in the table have sole voting and dispositive power with respect to all
shares beneficially owned, subject to community property laws where applicable.
Name and Address Common Shares Percent of Class (1)
---------------- ------------- --------------------
Glenn A. Little 109,000 71.6%
211 W. Wall Street
Midland TX 79701
Matthew Blair 0 0.00%
211 W. Wall Street
Midland TX 79701
All officers and directors as a 109,000 71.6%
Group (2 persons)
(1) Based on 152,247 shares outstanding as of April 30, 2001.
Item 12 - Certain Relationships and Related Transactions
The Company's President, Glenn A. Little, has agreed to provide funds to the
Company sufficient to cover Company expenses relating to its SEC periodic
reporting and other minor corporate expenses.
Except for the transactions described above there are no proposed transactions
and no transactions during the past two years to which the Company was a party
and in which any officer, director, or principal stockholder, or their
affiliates or associates, was also a party.
Item 13 - Exhibits and Reports on Form 8-K
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
Exhibits
--------
3.1 Articles of Incorporation, as amended (1)
3.2 By-Laws (1)
(1) Incorporated herein by this reference to the Company's Current Report on
Form 8-K filed with the U. S. Securities and Exchange Commission on
December 29, 1998.
9
Form 8-K Filings
----------------
February 8, 1999 Announcement of a change of State of Incorporation from
Florida to Nevada and a change in corporate name from
DataLink Capital Corporation to DCC Acquisition
Corporation.
June 11, 1999 Announcement of the acquisition of all of the issued and
outstanding common shares of New Cinema Partners Inc.
("NCP") in consideration of and in exchange for common
stock of the Company issued from treasury (the
"Acquisition Transaction"), which transaction
constituted a change in control of the Company.
August 5, 1999 Announcement that the Acquisition Transaction filed on a
Current Report on Form 8-K on June 11, 1999and the
filing of the Form 8-K Current Report in respect thereof
were premature. The Acquisition Transaction has not
been, and will not be, consummated.
January 10, 2000 Announcement of the resignation of S. W. Hatfield, CPA
as the Company's independent certified public accounting
firm
April 12, 2001 Announcement of the premature announcement of the
acquisition of ProHealth Laboratories, Inc. and STL
Group, Inc. and the acceptance of reappointment as the
Company's independent certified public accounting firm
by S. W. Hatfield, CPA.
--------------------------------------------------------------------------------
SIGNATURES
In accord with Section 13 or 15(d) of the Securities Act of 1993, as amended,
the Company caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
ProHealth Laboratories, Inc.
Dated: April 30, 2001 By: /s/ Glenn A. Little
-------------- ---------------------------
Glenn A. Little
President, Director and
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date as indicated.
Dated: April 30, 2001 By: /s/ Glenn A. Little
-------------- ---------------------------
Glenn A. Little
President, Director and
Chief Executive Officer
Dated: April 30, 2001 By: /s/ Matthew Blair
-------------- -------------------------
Matthew Blair
Director
10
PROHEALTH
LABORATORIES, INC.
(formerly DCC Acquisition Corp.)
Financial Statements
and
Auditor's Report
December 31, 1999 and 1998
S. W. HATFIELD, CPA
certified public accountants
Use our past to assist your future sm
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Contents
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets
as of December 31, 1999 and1998 F-4
Statements of Operations
for the years ended December 31, 1999 and 1998 F-5
Statement of Changes in Shareholders' Equity
for the years ended December 31, 1999 and 1998 F-6
Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-7
Notes to Financial Statements F-8
F-2
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
We have audited the accompanying balance sheets of ProHealth Laboratories, Inc.
(a Nevada corporation) as of December 31, 1999 and 1998 and the related
statements of operations and comprehensive income, changes in shareholders'
equity and cash flows for the each of the two 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ProHealth Laboratories, Inc. as
of December 31, 1999 and 1998 and the related statements of operations and
comprehensive income, changes in shareholders' equity and cash flows for the
each of the two years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note A. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
S. W. HATFIELD, CPA
Dallas, Texas
April 20, 2001
Use our past to assist your future sm
(secure mailing address) (overnight delivery/shipping address)
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 SWHCPA@aol.com
F-3
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Balance Sheets
December 31, 1999 and 1998
1999 1998
--------- ---------
ASSETS
------
Current assets
Cash on hand and in bank $ -- $ --
--------- ---------
Total current assets -- --
--------- ---------
Total Assets $ -- $ --
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Current liabilities
Accounts payable - trade $ 963 $ 2,231
Due to shareholder -- 3,000
--------- ---------
Total current liabilities 963 5,231
--------- ---------
Commitments and contingencies
Shareholders' equity (deficit)
Common stock - $0.0001 par value
100,000,000 shares authorized
145,640 shares issued and
outstanding, respectively 15 15
Additional paid-in capital 805,782 798,160
Accumulated deficit (806,760) (803,406)
--------- ---------
Total Shareholders' Equity (Deficit) (963) (5,231)
--------- ---------
Total Liabilities and Shareholders' Equity $ -- $ --
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Statements of Operations and Comprehensive Income
Years ended December 31, 1999 and 1998
1999 1998
--------- ---------
Revenues $ -- $ --
--------- ---------
Expenses
General and administrative expenses 3,354 1,582
--------- ---------
Total operating expenses 3,354 1,582
--------- ---------
Income (Loss) from continuing operations
before provision for income taxes (3,354) (1,582)
Provision for income taxes -- --
--------- ---------
Net Income (Loss) (3,354) (1,582)
Other Comprehensive Income -- --
--------- ---------
Comprehensive Income (Loss) $ (3,354) $ (1,582)
========= =========
Earnings per share of common stock
outstanding computed on net loss -
basic and fully diluted $ (0.02) $ (0.01)
========= =========
Weighted-average number of shares
outstanding - basic and fully diluted 145,640 145,640
========= =========
The accompanying notes are an integral part of these financial statements.
F-5
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Statement of Changes in Shareholders' Equity
Years ended December 31, 1999 and 1998
Common Stock Additional
------------------------ paid-in Accumulated
Shares Amount capital deficit Total
---------- ---------- ---------- ---------- ----------
Balances at January 1, 1998 1,456,097 $ 146 $ 798,029 $ (801,824) $ (3,649)
Effect of November 1, 1999
1 for 10 reverse stock split,
including rounding (1,310,457) (131) 131 -- --
---------- ---------- ---------- ---------- ----------
Balances at January 1, 1998,
as restated 145,640 15 798,160 (801,824) (3,649)
Net loss for the year -- -- -- (1,582) (1,582)
---------- ---------- ---------- ---------- ----------
Balances at December 31, 1998 145,640 15 798,160 (803,406) (5,231)
Advances from shareholder
contributed as additional
paid-in capital -- -- 3,000 -- 3,000
Capital contributed to
support operations -- -- 4,622 -- 4,622
Net loss for the year -- -- -- (3,354) (3,354)
---------- ---------- ---------- ---------- ----------
Balances at December 31, 1999 145,640 $ 15 $ 805,782 $ (806,760) $ (963)
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Statements of Cash Flows
Years ended December 31, 1999 and 1998
1999 1998
------- -------
Cash Flows from Operating Activities
Net income (loss) for the period $(3,354) $(1,582)
Adjustments to reconcile net loss
to net cash provided by operating activities
Increase (Decrease) in
Accounts payable - trade (1,268) (1,418)
------- -------
Net cash used in operating activities (4,622) (3,000)
------- -------
Cash Flows from Investing Activities -- --
------- -------
Cash Flows from Financing Activities
Cash advanced by shareholder 4,622 3,000
------- -------
Net cash provided by financing activities 4,622 3,000
------- -------
Increase (Decrease) in Cash -- --
Cash at beginning of period -- --
------- -------
Cash at end of period $ -- $ --
======= =======
Supplemental Disclosure of Interest and Income Taxes Paid
Interest paid for the year $ -- $ --
======= =======
Income taxes paid for the year $ -- $ --
======= =======
The accompanying notes are an integral part of these financial statements.
F-7
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Notes to Financial Statements
Note A - Organization and Description of Business
ProHealth Laboratories, Inc. (Company) was originally incorporated on January
26, 1983 under the laws of the State of Florida as Datalink Systems, Inc. for
the purpose of marketing electronic information processing systems to the
medical and healthcare industries. As of December 31, 1986, the Company had
closed this business operation.
The Company changed its corporate name to Datalink Capital Corporation in April
1987 and to Midland Capital Resources, Inc. in April 1991. Subsequent thereto,
the Company forfeited its corporate charter in the State of Florida due to
non-payment of various taxes and fees. In July 1997, the Company's corporate
charter was reactivated with the State of Florida and changed its corporate name
to Datalink Capital Corporation, effective September 24, 1997.
On December 29, 1998, the Company changed its State of Incorporation from
Florida to Nevada by means of a merger with and into DCC Acquisition
Corporation, a Nevada corporation formed solely for the purpose of effecting the
reincorporation. The Articles of Incorporation and Bylaws of the Nevada
corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation did not change the capital structure
of the Company and effectively changed the corporate name to DCC Acquisition
Corporation.
In November 1999, in anticipation of a business combination transaction, the
Company experienced a change in control. As a result of the change in control
and the anticipated business combination transaction, the Company changed its
corporate name to ProHealth Laboratories, Inc. Subsequently, the anticipated
business combination transaction did not occur.
The Company has had no operations, assets or liabilities since 1989.
Accordingly, the Company is dependent upon management and/or significant
shareholders to provide sufficient working capital to preserve the integrity of
the corporate entity at this time. It is the intent of management and
significant shareholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity. Through December 31,
1999, various Company shareholders have advanced approximately $7,622 through
direct payments for operating expenses on behalf of the Company.
The Company follows the accrual basis of accounting in accordance with generally
accepted accounting principles and has a year-end of December 31.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.
F-8
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Notes to Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
2. Income Taxes
------------
At December 31, 1999, as a result of the November 1999 change in control,
the Company has a net operating loss carryforward for income tax purposes
of approximately $3,000. If this carryforward is not fully utilized, it
will begin to expire in 2019. As of December 31, 1999 and 1998,
respectively, the deferred tax asset related to the Company's net operating
loss carryforward is fully reserved.
3. Earnings (loss) per share
-------------------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1999 and 1998,
respectively, the Company had no warrants and/or options outstanding.
Note C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Note D - Income Taxes
The components of income tax (benefit) expense for the years ended December 31,
1999 and 1998, respectively, are as follows:
December 31, December 31,
1999 1999
------------ ------------
Federal:
Current $ - $ -
Deferred - -
------- -------
- -
------- -------
State:
Current - -
Deferred - -
------- -------
- -
------- -------
Total $ - $ -
======= =======
F-9
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Notes to Financial Statements - Continued
Note D - Income Taxes - Continued
As of December 31, 1999, as a result of the November 1999 change in control, the
Company has a net operating loss carryforward of approximately $3,000 to offset
future taxable income. Subject to current regulations, this carryforward will
begin to expire in 2019. The amount and availability of the net operating loss
carryforwards may be subject to limitations set forth by the Internal Revenue
Code. Factors such as the number of shares ultimately issued within a three year
look-back period; whether there is a deemed more than 50 percent change in
control; the applicable long-term tax exempt bond rate; continuity of historical
business; and subsequent income of the Company all enter into the annual
computation of allowable annual utilization of the carryforwards.
The Company's income tax expense for the years ended December 31, 1999 and 1998,
respectively, are as follows:
December 31, December 31,
1999 1998
------------ ------------
Statutory rate applied to loss before income taxes $ (1,140) $ (537)
Increase (decrease) in income taxes resulting from:
State income taxes - -
Other, including reserve for deferred tax asset 1,140 537
------------ ------------
Income tax expense $ - $ -
============ ============
Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities give rise to deferred tax assets and liabilities
as of December 31, 1999 and 1998, respectively:
December 31, December 31,
1999 1998
------------ ------------
Deferred tax assets
Net operating loss carryforwards $ 1,033 $ 1,131
Less valuation allowance (1,033) (1,131)
------------ ------------
Net Deferred Tax Asset $ - $ -
============ ============
Note E - Common Stock Transactions
On October 22, 1999, effective November 1, 1999, the Company's Board of
Directors approved and enacted a 1:10 reverse split of its Common Stock, $0.0001
par value, with fractional shares rounded up to the nearest whole share. The
accompanying financial statements reflect this action as of the first day of the
first period presented.
On August 10, 1998, the Company canceled 500,000 shares of its issued and
outstanding common stock . All of these shares had been issued illegally in
years prior to 1996 by former management, inasmuch as no corporate authorization
of the issuances existed and no monetary consideration was received by the
Company for the shares. The shares had previously been accounted for as a
nonmonetary transaction for services valued at an amount equal to the par value
of the shares issued, or approximately $50.
F-10
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Notes to Financial Statements - Continued
Note E - Common Stock Transactions - Continued
Specifically, the cancellations were as follows:
a) 275,000 shares issued to a former Director and President of the Company.
These shares were found to be illegally issued as (1) there was no
action by the Company's Board of Directors authorizing the issuance of
such shares; (2) at the time of issuance, the Company's charter in the
State of Florida had been revoked by the Secretary of State for failure
to make required filings and to pay associated fees; and (3) the
transfer agent issued such shares on the oral instructions of a person
not possessed with Company authority.
b) 25,000 shares issued to a former Director and Corporate Secretary. These
shares were found to be illegally issued as (1) there was no action by
the Company's Board of Directors authorizing the issuance of such
shares; (2) at the time of issuance, the Company's charter in the State
of Florida had been revoked by the Secretary of State for failure to
make required filings and to pay associated fees; and (3) the transfer
agent issued such shares on the oral instructions of a person not
possessed with Company authority.
c) 200,000 shares issued to individuals in anticipation of fees due for
investment banking activities. These shares were found to be illegally
issued as (1) there was no action by the Company's Board of Directors
authorizing the issuance of such shares; (2) at the time of issuance,
the Company's charter in the State of Florida had been revoked by the
Secretary of State for failure to make required filings and to pay
associated fees; and (3) the transfer agent issued such shares on the
oral instructions of a person not possessed with Company authority.
The effect of these cancellations has been reflected in the issued and
outstanding common stock as of the first day of the first period presented.
Note F - Selected Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 and 1998, respectively.
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31 June 30 September 30 December 31 December 31
------------- ------------- ------------- ------------- -----------
1999
----
Net revenues $ - $ - $ - $ - $ -
Gross profit - - - - -
Net loss from operations (159) (158) - (3,037) (3,354)
Basic and fully diluted
earnings per share nil nil nil nil nil
Weighted-average
number of shares
outstanding 145,640 145,640 145,640 145,640 145,640
F-11
ProHealth Laboratories, Inc.
(formerly DCC Acquisition Corp.)
Notes to Financial Statements - Continued
Note F - Selected Financial Data (Unaudited) - Continued
Quarter ended Quarter ended Quarter ended Quarter ended Year ended
March 31 June 30 September 30 December 31 December 31
------------- ------------- ------------- ------------- -----------
1998
----
Net revenues $ - $ - $ - $ - $ -
Gross profit - - - - -
Net loss from operations - - - (1,582) (1,582)
Basic and fully diluted
earnings per share nil nil nil nil nil
Weighted-average
number of shares
outstanding 145,640 145,640 145,640 145,640 145,640
F-12