FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: June 30, 2002
Commission file number 0-13215
-----------
LATINOCARE MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 30-0050402
-------- ---------------
(State of Incorporation) (I.R.S. Employer Identification No.)
4150 Long Beach Boulevard, Long Beach, California 90807
(Address of principal executive offices) (Zip Code)
(562) 997-4420
Registrant's telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- -------------------------
COMMON STOCK OTC
-----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
The aggregate market value of voting stock held by non-affiliates of
the registrant was $1,639,055 as of June 30, 2002 (computed by reference to the
last sale price of a share of the registrant's Common Stock on that date as
reported by the NASDAQ).
There were 14,557,100 shares outstanding of the registrant's Common
Stock as of June 30, 2002.
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS 2
Consolidated Balance Sheet as of June 30, 2002
(unaudited) and December 31, 2001 2
Consolidated Statement of Operations for the six months
ended June 30, 2002 and the six months ended June 30, 2001 3
Consolidated Statement of Changes in Stockholders'
Equity (Deficit) for the year ended December 31, 2001
and for the six months ended June 30, 2002 (unaudited) 4
Consolidated Statement of Cash Flow for the six months
ended June 30, 2002 and the six months ended June 30, 2001 5
Notes to Consolidated Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 20
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 23
SIGNATURES 24
Page 2
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 (UNAUDITED) AND DECEMBER 31, 2001 (AUDITED)
ASSETS
June 30, December 31,
2002 2001
--------- ------------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,388 $ 2,604
Accounts receivable 298 2,922
Prepaid expenses and other assets 119,970 49,291
--------- ---------
TOTAL CURRENT ASSETS 127,656 54,817
--------- ---------
PROPERTY AND EQUIPMENT:
Net of accumulated depreciation 191,100 218,600
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 191,100 218,600
--------- ---------
OTHER ASSETS:
Deposit 15,478 15,478
--------- ---------
TOTAL OTHER ASSETS 15,478 15,478
--------- ---------
$ 334,234 $ 288,895
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 263,212 $ 196,387
Accrued expenses 119,249 107,522
Accrued interest payable 98,564 46,034
Income tax payable 1,600 1,600
Sue to related party 496,485 437,756
Note payable - shareholder 1,750,000 1,750,000
--------- ---------
TOTAL CURRENT LIABILITIES 2,729,110 2,539,299
--------- ---------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, par value $.001; 50,000,000
shares authorized; 14,557,100 and
14,529,100 shares issued and outstanding,
respectively 997,680 997,652
Preferred stock, par value $.001;
2,000,000 Shares authorized, no shares
issued and outstanding 0 0
ADDITIONAL PAID-IN CAPITAL 34,972 0
ACCUMULATED DEFICIT (3,427,528) (3,248,056)
---------- ---------
TOTAL SHAREHOLDERS' DEFICIT (2,394,876) (2,250,404)
--------- ---------
$ 334,234 $ 288,895
========= =========
See accompanying notes and accountants' review report
which are integral parts of these consolidated financial statements
Page 3
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2002 AND 2001 (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
REVENUE:
Management fees- related party $ 974,812 $ 397,191 $ 1,330,368 $ 908,269
Management fees- others 4,024 17,525 20,845 60,475
--------- ------- --------- ---------
978,836 414,716 1,351,213 968,744
--------- ------- --------- ---------
COSTS AND EXPENSES:
Salaries and benefits 434,198 473,776 916,936 825,068
Professional and consulting fees 58,640 90,724 171,774 237,557
General and administrative 202,760 293,895 361,129 420,519
Depreciation 13,750 25,782 27,500 35,682
---------- ------- --------- ---------
709,348 884,177 1,477,339 1,518,826
---------- ------- --------- ---------
OPERATING INCOME (LOSS) 269,488 (469,461) (126,126) (550,082)
OTHER INCOME (EXPENSE):
Interest expense (26,275) (13,974) (52,545) (26,901)
---------- ------- --------- ---------
OTHER INCOME (LOSS) BEFORE INCOME TAXES 243,213 (483,435) (178,671) (576,983)
PROVISION FOR INCOME TAXES 0 0 800 800
---------- ------- --------- ---------
NET INCOME (LOSS) $ 243,213 $ (483,435) $ (179,471) $ (577,783)
========== ======= ========== =========
EARNINGS (LOSS) PER COMMON SHARE
BASIC 0.02 (0.03) (0.01) (0.04)
========== ======= ========== =========
DILUTED 0.02 (0.03) (0.01) (0.04)
========== ======= ========== =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 14,539,100 14,529,100 14,543,100 14,529,100
========== ========== ========== ==========
DILUTED 14,539,100 14,529,100 14,543,100 14,529,100
=========== ========== ========== ==========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REVIEW REPORT
WHICH ARE INTEGRAL PARTS OF THESE CONSOLIDATED FINANCIAL STATEMENTS
Page 4
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
JUNE 30, 2002
Retained Earnings Total
Common Stock Additional Accumulated Shareholders'
Shares Amount Paid-in Deficit Equity
---------- --------- -------- ------------ ------------
Balance at December
31, 2001 3,781,455 $ 952,727 $ $ (960,942) $ (8,215)
Retirement of common
stock (3,270,000)
Reissuance of new common
stock to existing
shareholders of the
acquiring company 13,471,645
Issuance of new shares of stock:
Common stock issued
as part of
cost of acquiring
JNS Marketing 260,000 26,000 (26,000) 0
Common stock issued
for services
rendered 100,000 10,000 10,000
Common stock issued
to private investors
prior to acquisition 186,000 8,925 (8,925) 0
Transfer of acquiring
company's accumulated
deficit 0 0 0 (1,671,685) (1,671,685)
Consolidated net loss
for period ended
December 31, 2001 0 0 0 (580,504) (580,504)
---------- --------- -------- ------------ ------------
Balance at December
31,2001 14,529,100 $ 997,652 (3,248,056) (2,250,404)
Private placement
Offering 28,000 28 34,972 35,000
Consolidated net income
for six months
Ended June 30, 2002 (179,471) (179,471)
---------- --------- -------- ------------ ------------
Balance at
June 30, 2002 14,557,100 $ 997,680 $ 34,972 $(3,427,528) $(2,394,876)
========== ========= ======== ============ ============
See accompanying notes and accountants review report which are
integral parts of these consolidated financial statements
Page 5
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR SIX MONTHS ENDED June 30, 2002 AND 2001 (UNAUDITED)
Six Months
June 30,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from operations $ (179,471) (577,783)
Adjustment to reconcile net income (loss) from
operations to cash provided (used) in operating
activities:
Depreciation 27,500 35,682
(Increase) decrease in:
Accounts receivable 2,624 (1,925)
Prepayments to private placement offering (70,680) (34,202)
Increase (decrease) in:
Due to related party 58,729 433,887
Accounts payable 66,825 79,752
Accrued expense 11,727 29,566
Accrued interest 52,530 (200,469)
Income tax 0 800
-------- ----------
Net cash used from operating activities (30,216) (234,692)
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment 0 (22,472)
-------- ----------
Net cash used from investing activities 0 (22,472)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Conversion of debt into equity 0 227,723
Private placement offering 35,000 0
--------- ----------
Net cash provided from financing activities 35,000 227,723
--------- ----------
Net increase (decrease) in cash 4,784 (29,441)
Cash, beginning of the year 2,604 65,532
--------- ----------
Cash, end of the year $ 7,388 $ 36,091
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest 0 0
========= ==========
Cash paid during the period for income taxes 987 0
========= ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Accrued interest on debt to equity conversion 0 $ 27,254
Accrued interest on the equity to debt conversion 52,530 0
========= ==========
Conversion of Debt to equity $ 0 $1,040,183
========= ==========
See accompanying notes and accountants review report which are
integral parts of these consolidated financial statements
Page 6
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(1) General Background and Nature of Operations:
a. General background:
Latinocare Management Corporation (the "Company") was
incorporated in the State of Nevada on January 22, 2002. The Company, a
management service organization, is in the business of providing
management and administrative services, and has developed a system of
operations, management and marketing for independent practice
associations engaged in providing health care services. The Company is
authorized to issue two classes of shares - Common Stock and Preferred
Stock. The total number of shares which the Company is authorized to
issue is 50,000,000 common shares at $ .001 par value and 2,000,000
preferred shares at $ .001 par value. The preferred stock may be issued
in such series as are designated by the Board of Directors. The Board
of Directors may fix the number of authorized shares of preferred stock
for each series, and the rights, preferences and privileges of each
series of preferred stock.
The Company was formed upon the reincorporation and change of
name of JNS Marketing, Inc. (JNS) which was originally incorporated in
Colorado in July 1983. Prior to JNS's acquisition of Latinocare
Management Corporation - California in 2001, JNS was a reporting public
shell company with no tangible assets, insignificant liabilities and no
revenue.
Latinocare Management Corporation - California (LMC) dba
Latino Health Care was founded and incorporated on February 23, 1995 as
a California for-profit stock corporation. Its sole purpose, when
originally organized, was to manage all operations of Latinocare
Network Medical Group (IPA), a related party who have common
shareholders who influence the activities of both entities.
LMC acquired JNS in November 2001 purchasing 3,270,000 or
approximately 86% of the issued and outstanding common stock of JNS
Marketing, Inc. in exchange for $300,000. There was a delay in the
planned acquisition date due to renegotiation of the acquisition cost
which resulted in the issuance of an additional 260,000 new shares of
common stock of the Company as part of the purchase price. The
3,270,000 shares common stock were subsequently retired and cancelled.
The members of the Board of Directors of the Company before the
purchase were replaced with the members of LMC's Board of Directors.
LMC and JNS entered into an Agreement and Plan of
Reorganization which will result in a share exchange between
shareholders of two companies, whereby LMC will become a wholly owned
subsidiary of the Company. JNS was renamed as Latinocare Management
Corporation, reincorporated in the State of Nevada on January 2002 and
which is referred in this report as the "Company".
See accountants' review report
Page 7
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(1) General Background and Nature of Operations (Cont'd):
a. General background (cont'd):
The Company has a total of 14,557,100 shares of its
outstanding common stock issued. 511,455 shares or 3% of the issued and
outstanding common stock consist of the original shareholders of the
acquired company; 13,471,645 shares or 93% of the outstanding common
stock were issued to two members of the Company's Board of Directors;
and new shares issued totaling 574,000 shares or 4% of the outstanding
common stock issued consists of 260,000 shares of common stock issued
to individuals as part of LMC's renegotiated cost of acquiring the
Company, 100,0000 shares of common stock issued for services rendered
and 214,000 shares of common stock issued to unaffiliated private
investors.
b. Nature of operations:
The Company is in the business of providing management,
administrative services and marketing for independent practice
associations engaged in providing health care services.
The Company has targeted and successfully reached four primary
groups: health plans, hospitals, health service recipients and
physicians with significant focus on the Latino market.
Latinocare Network Medical Group, Inc., an Independent
Physician Association (IPA), was incorporated on September 30, 1994, as
a licensed medical group able to accept physician services risk from
third-party payors and self-insured employers. The IPA was organized
for the purpose of meeting the comprehensive health care needs of the
Latino population and the lack to access to quality health care
services available to the Latino community. The IPA has a network of
private practicing physicians who provide quality health care services
that are accessible, friendly, affordable, and culturally sensitive. It
offers a wide range of comprehensive health care programs and services
to keep its members and families healthy and productive.
On November 1995, the Company has entered into a twenty-five
(25) year Management Services Agreement with Latinocare Network Medical
Group, Inc. to provide all management and administrative support,
allowing the IPA to focus its efforts on medical governance and patient
care management of services as required by health plans and
regulations. These services provided by the Company include, among
others, utilization management, quality improvement, claims processing,
case management and financial services management. Marketing and
business development are also provided as added services to the core
services included in the Management Services Agreement (collectively,
"Management Services"). The Company acts as the exclusive agent to the
IPA with regards to seeking, negotiating, renewing, and executing
managed care contracts.
See accountants' review report
Page 8
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(2) Summary of Significant Accounting Policies:
The Company has prepared interim financial statements that
include all adjustments, which, in the opinion of management, are
necessary to make the financial statements not misleading. The Company
believes that all adjustments of a normal recurring nature that are
necessary for a fair presentation of the results of the interim periods
presented in this report have been made.
The Company's cash and available credit are not sufficient to
support operations for the next year. A net loss of $3,248,056 was
incurred from inception on February 1995 until December 31, 2001. In
the first year of start-up, an operating deficit of $1,750,000 was
funded by debt capital provided by Cedars-Sinai Medical Center and was
converted to capital equity in 1997. An additional $750,000 deficit has
resulted from expenses for capital financing efforts beginning in the
fourth quarter of 2000, and subsequently, in 2001. In the third and
fourth quarters of 2001, the Company funded capital raising expenses
including the purchase and reverse merger with JNS Marketing, Inc.
For the six months ended June 30, 2002, the Company had an
additional net loss of $179,471. The Company also had negative working
capital and stockholders deficit at June 30, 2002.
Management plan is to raise enough equity through private
placements (see Note 13 - Subsequent Events) and individual investors;
finance the acquisition of enrollment membership; expand network
development; acquire networks to increase costs efficiencies. The
resulting revenue increases will finance the pay off of the note issued
to a related party; shareholder's equity interest; and to raise enough
working capital to pay off liabilities and sustain operations. These
consolidated financial statements have been prepared on the basis that
adequate equity financing will be obtained.
a. Principles of Consolidation:
The consolidated financial statements include the accounts of
the Company and its subsidiary. Inter-company accounts and transactions
have been eliminated in the consolidated financial statements.
b. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
c. Revenue Recognition:
Revenues from professional services, primarily from management
fees, are recognized on an accrual basis of accounting as services are
performed or the amounts earned (in compliance with SOP 00-2), based on
a percentage of capitation revenues received by the IPA, which is a
related party transaction.
See accountants' review report
Page 9
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(2) Summary of Significant Accounting Policies (cont'd):
c. Revenue Recognition (cont'd):
The IPA has managed care contracts with various Health
Maintenance Organizations (HMO) to provide medical services to
subscribing members. Under these agreements, the IPA receives monthly
capitation payments based on the number of each HMO's subscribing
members whether or not a member requests services to be performed by
the IPA. The Company receives 16% of all IPA capitated revenue.
Revenues are also generated from risk pool settlements and
management services rendered such as marketing, business development
and core operations. Revenues from Risk pool settlements (cash
received) are surpluses distributed by the IPA from the HMO.
Currently, two separate types of risk pools exist - specialty
risk pools and hospital (institutional) risk pools. Specialty risk pool
is reserved for specialist medical expenses whereas hospital risk pool
relate to reserves for hospital expenses. These reserves are held by
the HMO and surpluses are distributed, after year-end accounting of all
claims, to the related physicians at fifty percent (50%), IPA at
twenty-five percent (25%) and the Company at twenty-five percent (25%).
d. Cash and Cash Equivalents:
The Company considers all money market funds and highly liquid
debt instruments with maturities of three months or less when acquired
to be cash equivalents.
e. Accounts Receivable:
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required. If amounts become uncollectible, they will be charged to
operations when that determination is made.
f. Prepaid Private Placement Costs:
Specific incremental costs directly attributable to proposed
or actual offering of securities are deferred and charged against the
gross proceeds of the offering. Management salaries and other general
and administrative expenses are not allocated as costs of the offering.
In the event that the offering does not take place, the prepaid private
placement costs will be expensed immediately.
g. Property, Equipment and Related Depreciation:
Property and equipment are stated at cost. Maintenance,
repairs and minor renewals and betterment's are expensed; major
improvements are capitalized.
See accountants' review report
Page 10
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(2) Summary of Significant Accounting Policies (cont'd):
g. Property, Equipment and Related Depreciation (cont'd):
Depreciation of property and equipment is provided for using
the straight-line method over the estimated useful lives of the assets
as follows:
Estimated
Useful Lives
------------
Leasehold improvements Life of lease
Computer, equipment and office furniture 5 - 10 Years
Upon retirement, sale, or other disposition of property and
equipment, the costs and accumulated depreciation are eliminated from
the accounts, and any resulting gain or loss is included in operations.
h. Advertising Expenses:
All advertising expenses are expensed as incurred.
i. Income Taxes:
The Company is taxed at C Corporation income tax rates. The
Company recognizes deferred income tax under the asset and liability
method of accounting. This method requires the recognition of deferred
income taxes based upon the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statements carrying amounts and the
tax basis of existing assets and liabilities.
j. Adoption of Recent Accounting Standards:
Segment Reporting:
In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 131
("SFAS" No. 131"), "Disclosure About Segments of an Enterprise and
Related Information." SFAS No. 131 established standards for the way
companies report information about operating segments in annual
financial statement. It also established standards for related
disclosures about products and services, geographic areas and major
customers.
The disclosures prescribed in SFAS No. 131 became effective
for the year ended December 31, 1998. The Company has determined that
it operates as one business segment.
The Company is not affected by the adoption of new accounting
standards for Accounting for Derivative Instruments and Hedging
Activities as well as the Accounting for Comprehensive Income as these
activities did not occur in its operations.
See accountants' review report
Page 11
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(2) Summary of Significant Accounting Policies (cont'd):
j. Adoption of Recent Accounting Standards (cont'd):
Business Combination:
SFAS 142 and SFAS 141, Business Combinations, are designed to
improve reporting and disclosure with respect to goodwill and other
acquired tangible assets. SFAS 141 eliminated the pooling of interest
method as an accounting option for business combination while SFAS 142
modified the purchase method of accounting by eliminating the
amortization of goodwill and substituting an impairment test. The FASB
overcame several operation impediments to non-amortization including:
the reporting level at which to conduct impairment reviews, consistency
with SFAS 121 (Accounting for the impairment of long-lived assets) and
finite-lived goodwill. The emphasis will be on the fair value
measurements of assets and liabilities instead of amortization. An
impairment in the carrying value of an asset is recognized when the
fair value of the asset is less than its carrying value.
(3) Private Placement Offering and Prepaid expenses:
Prepaid expenses and other current assets consists of:
June 30 December 31
2002 2001
(unaudited) (audited)
Prepaid private placement costs $ 119,970 $ 46,896
Other current assets 2,395
--------- -------
$ 119,970 $ 49,291
On November 30, 2001, a Private Placement Memorandum was
issued for qualified investors in connection with the Company's offer
of sale of its common stock. This offering terminated on May 31, 2002
but was extended by management until August 31, 2002.
The above prepaid private placement costs consist of printing,
mailing and consulting fees that have been incurred from the offering
date to June 30, 2002. These costs directly attributable to the
offering of securities are deferred and will be charged against the
gross proceeds of the offering of securities when the offering ends or
is terminated. The gross proceeds received as of June 30, 2002 is
$35,000. New shares issued for this offering were 28,000 shares of
common stock.
(4) Property and Equipment:
Property and equipment consists of the following:
June 30, December 31,
2002 2001
(Unaudited) (Audited)
Furniture, fixtures and office equipment $ 83,786 $ 83,785
Leasehold improvement 77,157 77,157
Computers and software 171,013 204,058
------- -------
331,956 365,000
Less accumulated depreciation 140,856 146,400
------- -------
$ 191,100 $ 218,600
See accountants' review report
Page 12
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(4) Property and Equipment (cont'd):
Depreciation expense for the three months ended June 30, 2002 and 2001
was:
Three Months ended Six Months ended
June 30, June 30
2002 2001 2002 2001
------- ------- ------- -------
Depreciation $13,750 $ 24,104 $ 27,500 $ 35,682
======= ======= ======= =======
The Company periodically evaluates the net realizable value of
long-lived assets, including property and equipment, relying on a
number of factors including operating results, business plans, economic
projections and anticipated future cash flows.
(5) Notes Payable - Related Party:
Notes payable are all current and comprised of the following
amounts as of June 30, 2002 and December 31, 2001.
Cedars Sinai, due July 23, 2002
with interest at 6.0% per annum $ 1,750,000
=========
The notes for Cedars Sinai matures as follows:
$500,000 shall be paid on or before 120 days on or before the
date of the note; $500,000 shall be paid on or before 240 days on or
before the date of the note; and $750,000 and all accrued but unpaid
interest shall be paid on or before the expiration of 360 days from the
date of the note.
This note shall be secured and that in the event of a breach
by the Company, Cedars-Sinai's sole recourse shall be the repossession
of that portion, if any, of its shareholdings (28% of the outstanding
shares) from the Company pursuant to the following provision:
a. For the first seven hundred fifty thousand dollars ($750,000)
repaid by the Company, recourse shareholdings shall be reduced
from twenty-eight percent (28%) of the issued and outstanding
shares to not less than twenty percent (20%) of such issued
and outstanding shares, or the portion thereof;
b. For the next one million dollars repaid ($1,000,000) by the
Company, recourse shareholdings shall be reduced from twenty
percent (20%) of the issued and outstanding shares to zero
percent (0%) of such issued and outstanding shares, or the
portion thereof.
See accountants' review report
Page 13
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(5) Notes Payable - Related Party (cont'd):
If this note is not paid when due, the Company shall pay all
costs of collections, including attorney's fees and costs and all
expenses incurred on account of collection, whether or not suit is
filed.
As of June 30, 2002, no payments were made by the Company nor
any collection actions from Cedar Sinai. The Company plans to amend the
terms of the above agreement with Cedar Sinai but there is no assurance
that an amendment will be made. Cedar Sinai has not demanded a
conversion of its note and management believes that it may be receptive
to a modification.
(6) Provision for Income Taxes:
The provision for taxes consists of the following for periods
ended June 30, 2002 and 2001 (unaudited):
Federal State Total
------ ------ ------
Current $ 0 $ 800 $ 800
Deferred 0 0 0
------ ------ ------
$ 0 $ 800 $ 800
====== ====== ======
Other than the minimum tax due to the State of California, no
income tax accruals were recorded because the Company incurred a loss
for the previous and current years and has available net operating loss
(NOL) carry forwards at year ended December 31, 2001 of approximately
$2,212,504, available to offset future taxable income. These NOL carry
forwards expire beginning in 2010 and ending in 2014, fifteen years
from the year in which the losses were incurred.
Deferred tax assets and liabilities were not presented because
the amounts were insignificant.
(7) Advertising:
Advertising expense consists of the following:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
TOTAL $ 2,765 $ 0 $ 4,865 $ 1,096
===== ===== ===== =====
See accountants' review report
Page 14
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(8) Employee Savings Plan:
On August 1, 2000, the Company adopted a 401(K) Profit Sharing
Plan and Trust for the benefit of its employees and beneficiaries.
Eligible employees may contribute a portion of their pretax
annual compensation within specified limits. A discretionary matching
contribution will be provided by the employer which may or may not be
limited to its current accumulated net profit.
There are no employer contributions to the plan for the three
months ended June 30, 2002 and 2001.
(9) Commitments:
The Company has entered into various operating leases for
equipment and occupies its facility under a long-term lease agreement
expiring in March 31, 2010 with option to cancel after five (5) years
or extend. Future minimum lease payments under the non-cancelable
leases for the remaining years are as follows:
Period Ending
June 30, Office Space Equipment Total
-------------- ------------- ---------- ---------
2003 $ 250,620 $ 70,716 $ 321,336
2004 250,620 70,716 321,336
2005 250,620 70,716 321,336
2006 250,620 70,716 321,336
Thereafter 250,620 70,716 321,336
------------- ---------- ---------
Total $ 1,253,100 $ 353,580 $ 1,606,680
============= ========== =========
Total lease and rent expense consist of the following:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
Equipment lease $ 26,839 $ 12,248 $ 40,589 $ 22,030
Office Rent 61,810 32,351 124,098 95,975
------ ------ ------- -------
$ 88,649 $ 44,599 $164,687 $118,005
====== ====== ======= =======
(10) Related Party Transactions and Due to Related Parties:
Due from/(to) related party consists of:
June 30, December 31,
2002 2001
---- ----
(Unaudited) (Audited)
Due to IPA (net) $ ( 586,482) $ (496,211)
Due from JJ&M Management (net) 33,276 16,478
Due From Latino Family Care (Net) 56,721 41,977
--------- ---------
Due to Related Party (Net) $ (496,485) $ (437,756)
========= =========
a. Latinocare Network Medical Group, Inc./IPA:
The CEO/President of Latinocare Network Medical Group, Inc.
(IPA) is a member of the board of directors and a major stockholder
for both the IPA and the Company until his recent death in February
2002. In light of this shareholder's death, the Company has the
contractual right to acquire his shares of stock from the IPA and
the Company for $2.5 million contingent on the Company making some
milestone payments. The Company is in
See accountants' review report
Page 15
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(10) Related Party Transactions and Due to Related Parties (cont'd):
a.Latinocare Network Medical Group, Inc./IPA (cont'd):
discussions with the heirs of the shareholder to make the purchase
essentially on the same terms as previously agreed with the
shareholder before his death, subject to the availability of
capital.
The Company and the IPA, are bound by a twenty-five year
management services agreement. Under this agreement, the IPA has
effectively transferred total contract and management control to
the Company for the term of the agreement. In return for management
and administrative services provided under the management service
agreement, the Company receives management fees of sixteen percent
(16%) of monthly capitation payments (based on predetermined rates)
received by the IPA.
The Company has been charging the IPA a management fee
according to sliding scale based on enrollment. The management fee
percentage was charged against the total capitation the IPA
receives from members. The following matrix reflects this
management fee arrangement:
Rate Enrollment
----- ---------------
16% 0 - 20,000
15 20,000 - 30,000
14 30,000 - 40,000
12 40,000 - 50,000
In addition to management fees the Company is also entitled to
receive fifty percent (50%) of the IPA's share of hospital (with
hospital or HMO) and specialty risk pool settlements. Hospital and
risk pools are revenues estimated for hospital and specialist medical
expenses held in reserve until actual claims are adjudicated.
Surpluses are distributed accordingly after all financial obligations
are met.
See accountants' review report
Page 16
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(10) Related Party Transactions and Due to Related Parties (cont'd):
a.Latinocare Network Medical Group, Inc./IPA (cont'd):
The management fees from capitation; settlement fees;
management fees from marketing and business development; and
management fees for other services (operational core expenses) for
the management of the IPA, paid and due to the Company were
approximately:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
(Unaudited) (Unaudited)
Management fee-capitation $ 304,588 $ 375,879 $ 660,144 $ 771,876
Settlement fee 5,738 21,312 5,738 136,393
Management fee-
Business development 253,782 0 253,782 0
and marketing
Management fee-core
operations 410,704 0 410,704 0
------- ------- ------- -------
Total $ 974,812 $ 397,191 $1,330,368 $ 908,269
======= ======= ========= =======
The IPA accounts for more than ninety percent (90%) of the
Company's revenue. IPA has a concentration of customers of
approximately eight (8) customers, which are health maintenance
organizations.
Related party receivables and advances payable as of:
June 30, December 31,
2002 2001
---- ----
(Unaudited) (Audited)
Receivable from related party $ 180,652 $ 298,322
Payable to Related Party (767,134) (794,533)
-------- -------
Due to IPA (Net) $ (586,482) $(496,211)
======== =======
The above outstanding net payable to the IPA of approximately
$586,482 and $496,211 as of June 30, 2002 and December 31, 2001
respectively, was used as working capital.
b. Gonzales-D'Avila Enterprise dba JJ&M Management:
The JJ&M's CEO/President is a stockholder and a member of the
board of directors for JJ&M, the IPA and the Company. The related party
transactions involve the classification of life insurance expenses paid
by the Company for JJ&M.
See accountants' review report
Page 17
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(10) Related Party Transactions (cont'd):
b. Gonzales-D'Avila Enterprise dba JJ&M Management (cont'd):
The outstanding receivable from JJ&M for reimbursement of life
insurance paid by the Company is $33,276 and $16,478 as of June 30,2002
and December 31, 2001, respectively.
c. Latino Family Care
A shareholder of Latino Family Care is also a member of the
board of directors of the IPA. The related party transactions involve
reimbursement of health insurance advanced by the Company for Latino
Family Care.
The outstanding receivable from Latino Family Care for
reimbursement of health insurance and equipment expenses is $56,721 and
$41,977 as of June 30, 2002 and December 31, 2001 respectively.
d. Cedars Sinai Medical Center
Cedars Sinai Medical Center, the Company's strategic partner,
has been the largest single investor to the Company providing over $2
million including the accrued interest of approximately $290,000 that
was converted to equity in June 2001. Cedar Sinai's financial support
consisted of a convertible note payable of $1,000,000, issued November
30, 1996, and was converted into a twenty percent (20%) of the
Company's common stock in 1997. The $750,000 and $62,460 of notes
payable issued in 1996 and 1997 were converted into an additional eight
percent (8%) equity interest, including accrued interest, on June 12,
2001.
The Company has existing promissory notes to Cedars Sinai payable
on demand with the balance (including interest) as of December 31, 2000
of $812,460. These notes were converted to eight percent (8%) of the
outstanding common stock of Company in June 2001.
On July 23, 2001, the Company issued a convertible note to Cedars
Sinai in the amount of $1,750,000 bearing simple interest at the rate
of 6% per annum payable in full on or before July 23, 2002, to redeem
all shares issued to Cedars-Sinai. If the note is not repaid by that
time, Cedar Sinai has the right to convert it into 28% of the
outstanding common stock of the Company, subject to a pro-rata
adjustment if the note is partially repaid (see Note 5 Notes Payable -
Related Party). A full or partial conversion of the note would cause
dilution in the ownership of the Company by its existing shareholders.
See accountants' review report
Page 18
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(10) Related Party Transactions (cont'd):
d. Cedars Sinai Medical Center (cont'd)
Accordingly, capital stock is reduced for the redeemed value of
the stock. For accounting purposes, the stock redemption is treated as
a retirement of stock.
Client made no repayment for the above loan as of June 30, 2002.
The Company plans to amend the terms of the agreement subsequent to
this balance sheet date and the Company believes that Cedar Sinai may
be receptive to this amendment.
(11) Significant Management Investment:
The current management and directors as a group beneficially
owns approximately ninety three percent (93%) of the total shares
issued and outstanding. By virtue of such stock ownership, the current
management and directors as a group generally exercise control over the
affairs of the Company.
(12) Stock Option Plan:
On January 31, 2002, the Board of Directors of the Company
unanimously approved and the shareholders ratified the adoption of the
2002 Stock Option Plan. The Stock Option Plan consists of 1,200,000
stock options for directors, executive officers and key employees to
purchase 1,200,000 shares of the Company's Common Stock. As of June 30,
2002, the plan has not been implemented.
(13) Subsequent Events:
a. Management agreement with IPA:
The Company has recently changed the management agreement from
a sliding scale agreement to a "cost plus" agreement. In the cost-plus
model, the Company will charge the IPA, and all future acquired IPAs or
IPAs managed by the Company, the entire cost of managing the business
plus a fixed amount as profit margin. The cost component will vary
among IPAs depending on negotiated terms of management.
b. Acquisition
The Company has expanded its business plan objectives and will
seek to provide management services to other IPAs. This change in the
Company's business plan will enable the Company to expand its revenue
derivation sources as well as enhancing its revenue and future growth
potential.
See accountants' review report
Page 19
LATINOCARE MANAGEMENT CORPORATION
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001 (Audited) AND
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)
(13) Subsequent Events (cont'd):
c. Private Placement Offering:
On November 30, 2001, a new Private Placement Memorandum was
issued for qualified investors in connection with the Company's offer
of sale of its common stock. The Company has extended the offering to
August 31, 2002. The Company is offering 800,000 Units for a purchase
price of $1.25 per Unit (maximum gross proceeds of $1,000,000). Each
Unit includes one share of the Company's common stock and one Warrant
to purchase one share of the Company's common stock for a purchase
price of $2.00 per share at any time until one year after the date that
they are issued. The Company has the option to increase a total amount
of the offering by up to an additional $150,000 (120,000 shares). There
is no minimum amount of the offering and the maximum offering is
$1,150,000 (if the Company exercises its option to increase the maximum
amount of the offering). The purchase price for the shares will be
payable in full in cash upon subscriptions.
The net proceeds from the offering are expected to be
approximately $900,000 after the payment of offering costs including
printing, mailing, legal, and accounting costs, and potential selling
commissions and finder's or referral fees that may be incurred. The net
proceeds from this offering are estimated to be utilized to pay
marketing and promotion costs to obtain new enrollees; to finance
acquisitions of IPAs; and for working capital purposes.
The Company has incurred prepaid private placement costs as of
June 30, 2002 of $119,970. These costs are deferred and will be charged
against the gross proceeds of the offering of securities when the
offering ends or is terminated.
As of June 30, 2002, the Company has raised minimal capital of
$35,000 for which it has issued 28,000 shares of common stock in the
private placement. The Company is currently engaged in negotiations
with potential financial backers through its investment bank. The
Company may receive an equity cash infusion that will enable it to
execute its business plan and grow its operation.
See accountants' review report
Page 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CAUTIONARY STATEMENTS
This Form 10-QSB contains financial projections, synergy estimates and
other "forward-looking statements" as that term is used in federal securities
laws about Latinocare Management Corporation's financial condition, results of
operations and business. These statements include, among others:
- statements concerning the benefits that the Company expects will
result from its business activities and certain transactions the Company has
completed, such as the potential for increased revenues, decreased expenses and
avoided expenditures; and
- statements of the Company's expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not historical
facts. These statements may be made expressly in this Form 10-QSB. You can find
many of these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," or similar expressions used in this Form 10-QSB.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company's actual results to be materially
different from any future results expressed or implied by the Company in those
statements. The most important facts that could prevent the Company from
achieving its stated goals include, but are not limited to, the following:
(a) volatility and/or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) barriers to raising the additional capital or to obtaining the
financing needed to implement its full business plans;
(d) inadequate capital to continue business;
(e) changes in demand for the Company's products and services;
(f) rapid and significant changes in technology and markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenue to cover operating costs.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. The Company cautions you not to place undue reliance
on the statements, which speak only as of the date of this Form 10-QSB. The
cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that the Company or persons acting on its behalf may issue. The
Company does not undertake any obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this Form 10-QSB or to reflect the occurrence of unanticipated events.
Page 21
The Company has continued to support the marketing and business
development activities of LatinoCare Network Medical Group ("LCNMG") to increase
member lives and add physicians to the provider network. Resources needed to
provide this support have continued to be made available after certain
significant events (i.e. Tower Bankruptcy) negatively impacted LCNMG's
membership. The Company plans to continue to provide this support as it
endeavors to raise capital to acquire lives. In the event capital is not
available, the Company has examined its operations and that of LCNMG and plans
to implement the necessary reductions during the third quarter of fiscal 2002
that it believes will maintain the operations of the Company and return LCNMG to
profitability. LCNMG achieved profitability in the five months commencing
February 2002 through June 2002, following deficits in 2001 and January 2002.
The recent profitability of LCNMG was gained from the new management information
system installed, which is expected to allow the Company to provide services in
a more cost effective manner as membership increases.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2001
Total revenue for the six months ended June 30, 2002 increased by
$382,470 to $1,351,213 from $968,743 for the six months ended June 30, 2001. The
increase is due to additional management fees received by the Company from LNMG
related to marketing and business development and the management of the IPA.
These additional management fees were calculated and booked at year end for the
fiscal year ended December 31, 2001.
Operating and administrative expenses decreased by $80,916 during the
six months ended June 30, 2002 to $1,477,339 from $1,518,826 for the six months
ended June 30, 2001. Legal expenses decreased by $32,559 for the six months
ended June 30, 2002 as compared to the six months ended June 30, 2001.
Management fees and service expenses decreased by $72,000 for the six months
ended June 30, 2002 as compared to the six months ended June 30, 2001. Expenses
for outside consultants decreased by $104,960 for the six months ended June 30,
2002 as compared to the six months ended June 30, 2001.
Page 22
LIQUIDITY AND CAPITAL RESOURCES
The Company had consolidated net cash of $7,388 for the six months
ended June 30, 2002 as compared to net cash of $36,091 for the six months ended
of June 30, 2001. The Company had a net working capital deficit (i.e. the
difference between current assets and current liabilities) of $2,601,454 for the
six months ended June 30, 2002 of which $1,848,564 is a note payable to
Cedars-Sinai, as compared to a working capital deficit of $423,344 for the six
months ended June 30, 2001. Cash flow used for operating activities was $30,216
for the six months ended June 30, 2002 as compared to $234,692 for the six
months ended June 30, 2001. There was no cash used for investing activities
during the six months ended June 30, 2002, as compared to ($22,472) used during
the six months ended June 30, 2001. Net Cash provided by financing activities
was $35,000 during the six months ended June 30, 2002 as compared to ($227,723)
during the six months ended June 30, 2001.
The Company will have additional capital requirements during 2002 if
the Company continues with its plan of acquisition and incubation of new IPAs
and projects, and to pay operating costs. There is no assurance that the Company
will have sufficient capital to finance its growth and business operations or
that such capital will be available on terms that are favorable to the Company
or at all. The Company is currently incurring operating deficits which are
expected to continue until LNMG increases its patient enrollment, which depends
in part on the Company raising additional working capital for marketing and
acquisitions. The change is expected to be the result of adjustment to expenses
and by increased revenues due to acquisitions, provided that the Company raises
additional capital.
The Company expects to have material capital requirements during 2002
as it relates to acquisitions of membership by LNMG, the IPA. Subject to the
availability of capital, LNMG and the Company plan to acquire additional
membership through the acquisition of IPAs and from individual physicians. The
latter method is not the acquisition of physician's practices but rather the
transfer of these physicians' membership from other IPAs to LNMG. The funds to
make these acquisitions are expected to be generated from a private placement of
common stock and warrants currently being made by the Company to raise
approximately $1,000,000 of capital. The private placement commenced in late
2001 and involves the offer of 800,000 units at a price of $1.25 per unit. Each
unit consists of one share of common stock and one warrant to purchase one share
of common stock for a purchase price of $2.00 per share for a period of one year
from the date of issuance, subject to extension until the shares underlying the
warrants are registered with the Securities and Exchange Commission. The
warrantholders have registration rights after issuance of the warrants. To date,
approximately $35,000 has been raised in the private placement and a commitment
for $25,000 was to be received in the third quarter. There is no assurance that
the Company will raise additional capital.
Page 23
On July 23, 2001, the Cedars-Sinai Medical Center (CSMC) sold its
shares of the common stock of Latino Management Corporation, a California
corporation ("LMC") to LMC in consideration for a note in the amount of $1.75
million plus simple interest at the rate of 6% per annum. The note was payable
in three installments on or before July 23, 2002. The first installment was due
in January 2002 and was not paid. As a result, CSMC has the right to convert the
note into 28% of the outstanding common stock of the Company, or a pro rata
share if the promissory note is partially repaid. The Company expects to
negotiate an extension with CSMC on the promissory note.
LNMG was owned by Roberto Chiprut, M.D. who was a major shareholder and
director of the Company and LMC until his recent death. Prior to his death, the
Company and Dr. Chiprut had reached agreement and executed a contract for the
Company to acquire his IPA and Company stock for $2.5 million contingent on the
Company making certain milestone payments. The Company is in discussions with
the heirs of Dr. Chiprut to make the purchase on essentially the same terms as
previously agreed upon with Dr. Chiprut, subject to the availability of capital.
The Company currently does not have the funds to purchase Dr. Chipruts's stock
and there is no assurance that the Company will be able to obtain sufficient
capital to pay the purchase price for the stock.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(b) Reports on Form 8-K.
Report on Form 8-K, dated July 12, 2002, relating to the appointment of
Mountain Share Transfer Inc. as the company transfer agent.
Page 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 15, 2002
BY: /s/ Jose J. Gonzalez
-----------------------------------------------
Jose J. Gonzalez, Chairman of the Board,
Chief Executive Officer, President and Secretary
BY: /s/ Joseph Luevanos
------------------------------------------------
Joseph Luevanos, Director and Chief
Financial Officer