ZYNEX INC — Annual Report 1999

Jul 30, 1999

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-KSB [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No. 33-26787-D LIFE MEDICAL TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) UTAH 87-0403828 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6975 SOUTH UNION PARK CENTER #600, SALT LAKE CITY, UTAH 84054 (Address and zip code of principal executive offices) Registrant's telephone number, including area code: (801) 256-9600 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Revenue for the year ended 1998: $12,414 State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, of a specified date within the past 60 days. At July 21, 1999, the aggregate market value of the voting stock held by non-affiliates was 0. As of July 21, 1999, the registrant had 25,424,317 shares of common stock issued and outstanding. Documents incorporated by reference: None. TABLE OF CONTENTS PART I ITEM 1. DESCRIPTION OF BUSINESS ITEM 2. DESCRIPTION OF PROPERTIES ITEM 3. LEGAL PROCEEDINGS ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ITEM 7. FINANCIAL STATEMENTS ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ITEM 10. EXECUTIVE COMPENSATION ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL Life Medical Technologies was organized on December 26, 1991 in the state of Delaware. It was in the business of bringing simple, cost effective, new medical product technology to the health care market place. In 1995, the Company dramatically cut back its operations and cut back most staffing. From 1996 to 1998, the Company maintained a skeleton crew to maintain and ship existing orders for its inventory, but did not market or research and develop any additional products for its sales line. By mid 1997, all employees were laid off and part time help was maintained to handle existing sales and shipping of products. By 1998, sales had declined to minimal levels and all remaining assets were distributed to its wholly owned subsidiary (see below) and sold off to two of its former employees. The Company had acquired several subsidiaries in 1995, but had either sold off all entities by the end of 1998 or allowed the entities to lapse into nonexistence. At December 31, 1998, only the parent corporation, Life Medical Technologies, Inc. remains. The subsidiary corporations were: Omega Fiberoptic Technologies, Omega Laser Systems, Omega Endoscopic Technologies, Inc., Ridgeway Medical Enterprises, Inc. and Innovative Medical Development Corporation. All of the Omega companies were spun off in a stock transaction in 1997 to it former owners and Innovative Medical Development was sold off in September 1998 to two former employees of Life Medical Technologies. REORGANIZATION AND CHANGE OF DOMICILE In February 1994, the principal shareholders of Life Medical Technologies, Inc. entered into an Agreement and Plan of Reorganization (the "Plan"), with Media U.S.A., Inc. wherein the principal shareholders of Life Medical Technologies, Inc. became the controlling shareholders of Media U.S.A., Inc. The transaction was viewed as a "reverse acquisition" and was completed on March 1, 1994. The Plan was adopted, ratified and approved by shareholders owning a two-thirds majority of the outstanding common stock of the Company at a special meeting of shareholders held February 19, 1994. On August 29, 1994, the Company held a special meeting of shareholder to approve a change in domicile of incorporation to Delaware through the merger of Life Medical (Colorado) with and into a subsidiary organized in the state of Delaware under the name "Life Medical Technologies, Inc.", with the outstanding shares of Life Medical (Colorado) being converted into shares of the new Delaware corporation. Under the terms of the Plan of Merger, Life Medical (Delaware) became the surviving corporation; the separate corporate existence of Life Medial (Colorado) ceased; Life Medical (Delaware) succeeded to all of the business, properties, assets, and liabilities of the Company; the directors and officers of the Company remained the same; and each outstanding share of the Company's common stock was automatically converted into one share of the Life Medical (Delaware). ITEM 2. DESCRIPTION OF PROPERTIES The Company currently operates from the office of the Company's Attorney and pays no rent or expenses. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None - not applicable PART II ITEM 5. MARKET PRICE FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Because this report is being prepared in 1999, the Company has not been able to obtain any reliable trading history for the period reported. During the year ended December 31, 1998 there appeared to be little or no trading in the stock of the Company. As of July 21, 1999, the Company had approximately 111 shareholders of record. During the preceding two fiscal years the Company has not paid any dividends on its Common Stock, and the Company does not anticipate that it will pay dividends in the foreseeable future. The future payment of dividends, if any, on the common stock is within the discretion of the Board of Directors and will depend on the Company's earnings, its capital requirements, and financial condition and other relevant factors. At July 21, 1999, the Company had 111 shareholders of record based on information provided by the Company's transfer agent. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Life Medical Technologies was organized on December 26, 1991 in the state of Delaware. It was in the business of bringing simple, cost effective, new medical product technology to the health care market place. In 1995, the Company dramatically cut back its operations and cut back most staffing. From 1996 to 1998, the Company maintained a skeleton crew to maintain and ship existing orders for its inventory, but did not market or research and develop any additional products for its sales line. By mid 1997, all employees were laid off and part time help was maintained to handle existing sales and shipping of products. By 1998, sales had declined to minimal levels and all remaining assets were distributed to its wholly owned subsidiary (see below) and sold off to two of its former employees. The Company had acquired several subsidiaries in 1995, but had either sold off all entities by the end of 1998 or allowed the entities to lapse into nonexistence. At December 31, 1998, only the parent corporation, Life Medical Technologies, Inc. remains. The subsidiary corporations were: Omega Fiberoptic Technologies, Omega Laser Systems, Omega Endoscopic Technologies, Inc., Ridgeway Medical Enterprises, Inc. and Innovative Medical Development Corporation. All of the Omega companies were spun off in a stock transaction in 197 to it former owners and Innovative Medical Development was sold off in September 1998 to two former employees of Life Medical Technologies. FINANCIAL CONDITION The Company has very little revenue during the year ended December 31, 1998 ($12,414) compared to previous year (89,486). Total stockholders' equity was $122, as compared to $(72,658) at December 31, 1997. The Company has no operating capital for future operations. LIQUIDITY AND CAPITAL RESOURCES The Company has no liquid assets and is currently in the process of looking for business opportunities to merge with or acquire. At minimum, the Company will need to raise additional capital through private funding to meet the financial needs of being a reporting company. There is no guarantee that the Company will be successful in obtaining necessary funding to develop any business opportunities. ITEM 7. FINANCIAL STATEMENTS The financial statements of the Company are set forth immediately following the signature page to this form 10-KSB. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE David Thomson, PC was previously the principal accountant for Life Medical Technologies, Inc. On January 26, 1999, the Board of Directors approved the engagement of the firm of Crouch, Bierwolf & Chisholm to replace David Thomson, PC who declined to stand for reelection as the Certifying Accountant for the Company. In connection, with the audit of the previous fiscal year ended December 31, 1994 and subsequent periods to December 31, 1998, there were no disagreements with David Thomson, PC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to his satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement, and said firm has not advised the registrant of any reportable events. The accountant's report of David Thomson, PC on the financial statements of Life Medical Technologies, Inc. as of December 31, 1994 and for the year then ended did not contain any adverse opinion or disclaimer of opinion, nor were they qualified as to uncertainty, audit scope, or accounting principles. PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth as of December 31, 1998, the name, age, and position of each executive officer and director and the term of office of each director of the Company. DIRECTORS AND EXECUTIVE OFFICERS Age Director Name (1999) Since Position with the Company Robert Kroft 38 1998 President/Director Each director of the Company serves for a term of one year and until his or her successor is elected at the Company's annual shareholder's meeting and is qualified, subject to removal by the Company's shareholders. Each officer serves, at the pleasure of the board of directors, for a term of one year and until his or her successor is elected at the annual meeting of the board of directors and is qualified. Set forth below is certain biographical information regarding each of the Company's executive officers and directors. ITEM 10. EXECUTIVE COMPENSATION COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS None. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of July 21, 1999, the name and address and the number of shares of the Company's common stock, $0.001 per share, held of record or beneficially by each person who held of record, or was known by the Company to own beneficially, more than 5% of the 25,424,317 issued and outstanding shares of the Company's common stock, and the name and shareholdings of each director and of all officers and directors as a group: Amount and Nature Name and Address of Beneficial Percent of Title of Class of Beneficial Owner Ownership Class Common Robert Kroft 6975 South Union Park Center 25,000,000 98.3% Salt Lake City, Utah 84054 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS. The following financial statements are included in this report: Report of Crouch, Bierwolf & Chisholm, Certified Public Accountants Balance Sheet as of December 31, 1998. Statements of Operations - For the years ended December 31, 1998 and December 31, 1997. Statement of Stockholders' Equity - For the period from December 31, 1998 to December 31, 1997. Statement of Cash Flows - For the years ended December 31, 1998 and December 31, 1997. Notes to Financial Statements (a)(2) FINANCIAL STATEMENTS SCHEDULES. The following financial statement schedules are included as part of this report: None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Life Medical Technologies, Inc. By: /s/Robert Kroft Dated: July 21, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Robert Kroft President and Director (Principal Executive and Financial Officer) July 21, 1999 INDEX TO FINANCIAL STATEMENTS Report of Independent Certified Public Accountant Financial Statements: Balance Sheets - December 31, 1997. Statements of Operations - For the years ended December 31, 1997 and December 31, 1996 and from December 26, 1985 to December 31, 1997. Statement of Stockholders' Equity - For the period from (inception) December 26, 1985 to December 31, 1997. Statement of Cash Flows - For the years ended December 31, 1997 and December 31, 1996 and from December 26, 1985 to December 31, 1997. Notes to Financial Statements INDEPENDENT AUDITORS' REPORT Stockholders and Directors Life Medical Technologies, Inc. Salt Lake City, Utah We have audited the accompanying balance sheet of Life Medical Technologies, Inc. (a Delaware corporation) as of December 31, 1998 and the related statements of operations, stockholders' equity and cash flows for the years 1998 and 1997 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 audit. We conducted our audit 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 audit provides 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 Life Medical Technologies, Inc. as of December 31, 1998 and the results of its operations and cash flows for the years 1998 and 1997 then ended in conformity with generally accepted accounting principles. Salt Lake City, Utah February 11, 1999 LIFE MEDICAL TECHNOLOGIES, INC. Balance Sheet ASSETS December 31, 1998 Organization costs (Note 1) $ 122 TOTAL ASSETS $ 122 STOCKHOLDERS' EQUITY Preferred stock, 5,000,000 shares authorized at $.001 par value; 0 shares outstanding - Common stock, 150,000,000 shares authorized at $.001 par value; 132,440,488 shares issued and outstanding, respectively 132,440 Capital in Excess of Par Value 1,705,814 Retained Deficit (1,838,132 ) Total Stockholders' Equity 122 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 122 LIFE MEDICAL TECHNOLOGIES, INC. Statements of Operations For the Year Ended December 31, 1998 1997 REVENUE Sales $12,414 $89,486 EXPENSES Cost of sales (Note 1) 6,207 44,585 Amortization (Note 1) 366 389 Selling, general and administrative 17,183 47,403 Interest 5,850 17,752 Bad debt - 70,882 Total Expenses 29,606 181,011 OTHER INCOME/EXPENSES Interest 352 270 NET INCOME (LOSS) - Before Taxes $(16,840) $ (91,255) Taxes - - INCOME (LOSS) $(16,840) $ (91,255 ) Loss Per Common Share $ - $ - Average Outstanding Shares 72,866,321 38,116,157 LIFE MEDICAL TECHNOLOGIES, INC. Statements of Stockholders' Equity From January 1, 1997 to December 31, 1998 Capital in Common Common Excess of Retained Shares Stock Par Value Deficit Balance, January 1, 1997 31,390,094 $ 31,390 $1,515,575 $(1,730,037) Stock issued for conversion of Notes Payable at $.02 per share (Note 3) 11,530,394 11,530 190,139 - Loss for the Year - - - (91,255) Balance, December 31, 1997 42,920,488 42,920 1,705,714 (1,821,292) Cancellation of stock (Note 5) (1,130,000) (1,130) 1,130 - Stock issued for services rendered at $.001 per share (Note 6) 4,614,000 4,614 - - Stock issued for cancellation of debt for $.001 per share (Note 7) 86,336,000 86,336 - - Stock canceled for spinoff/sale of subsidiary to former employees at $.004 per share (Note 7) (300,000) (300) (1,030) - Loss for the Year - - - (16,840) Balance, December 31, 1998 132,440,488 $ 132,440 $ 1,705,81 $(1,838,132) LIFE MEDICAL TECHNOLOGIES, INC. Statements of Cash Flows For the Year Ended December 31, December 31, 1998 1997 CASH FLOW FROM OPERATING ACTIVITIES Net Income (Loss) $ (16,840) $(91,255) Amortization 366 389 Increase (decrease) In inventory & accounts receivable 6,785 43,674 In accounts payable 7,033 2,399 Expenses paid by stock issuance 10,464 8,509 Net Increase in Cash Flows From Operating Activities - 36,284 CASH FLOWS FROM INVESTING ACTIVITIES Cash Disbursed to Subsidiary (Note 7) (14,163 ) - (14,163) - CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Note Payable for Cash (Note 7) - 37,839 - 37,839 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,355) 1,555 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,355 4,800 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 6,355 CASH PAID DURING THE PERIOD FOR: Interest $ - $ - Income Taxes $ - $ - Supplemental Cash Flow Information: Stock Issued for Debt (Note 3 & 7) $86,336 $201,669 Stock Issued for Services (Note 6) $4,614 $- Stock Issued for Interest (Note 3 & 7) $5,850 $8,509 LIFE MEDICAL TECHNOLOGIES, INC. Notes to Financial Statements December 31, 1998 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES Background and History Life Medical Technologies was organized on December 26, 1991 in the State of Delaware. It was in the business of bringing simple, cost effective, new medical product technology to the health care market place. By 1998, sales and marketing had declined to non operations status and the remaining assets were spunoff to its wholly owned subsidiary and sold to two former employees of the Company. (Note 7). Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. Organization Costs Organization costs are being amortized over a sixty month period on a straight line basis. Amortization for 1998 and 1997 was $366 and $387, respectively. Inventory In 1995, the Company wrote off all assets under FASB 121. The value of all fixed assets and intangible assets were written down to their estimated fair market value or future estimated discounted cash flows, whichever is lower. The value of the inventory was written down to the lower of cost or their market value, whichever is lower. NOTE 2 - INCOME TAXES The Company adopted Statement of Financial Standards No. 109 "Accounting for Income Taxes" in the fiscal year ended December 31, 1998 and was applied retroactively. Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" requires an asset and liability approach for financial accounting and reporting for income tax purposes. This statement recognizes (a) the amount of taxes payable or refundable for the current year and (b) deferred tax liabilities and assets for future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred income taxes result from temporary differences in the recognition of accounting transactions for tax and financial purposes. There were no temporary differences at December 31, 1998 and earlier years; accordingly, no deferred tax liabilities have been recognized for all years. The Company has cumulative net operating loss carryforwards of over $1,000,000 at December 31, 1998. No effect has been shown in the financial statements for the netoperating loss carryforwards as the likelihood of future tax benefit from such net operating loss carryforwards is highly improbable. Accordingly, the potential tax benefits of the net operating loss carryforwards, estimated based upon current tax rates at December 31, 1998 have been offset by valuation reserves of the same amount. LIFE MEDICAL TECHNOLOGIES, INC. Notes to Financial Statements December 31, 1998 NOTE 3 - NOTE PAYABLE In 1997, the Company negotiated a settlement with several private individuals to convert their debt into equity. 11,530,394 shares were issued to satisfy $169,166 of debt and $32,503 of accrued interest. Interest expense on the debt, up to time of conversion, was $3,925 for 1995, $20,069 for 1996 and $8,509 for 1997. NOTE 4 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. In these financial statements, assets, liabilities and earnings involve extensive reliance on management's estimates. Actual results could differ from those estimates. NOTE 5 - CANCELLATION OF SHARES In June 1997, three of the Companies subsidiaries were sold off to their original owners by spinning out Omega Fiberoptic Technologies, Omega Laser Systems, and Omega Endoscopic Technologies, Inc. 1,130,000 shares were canceled in the transaction. NOTE 6 - STOCK FOR SERVICES In 1998, 4,614,000 shares were issued for services rendered for the Company by a former employee of the Company. The services were valued at $4,614 or $.001 per share. NOTE 7 - RELATED PARTY TRANSACTIONS Notes Payable In 1998, major stockholder/officer/director converted $86,336 in debt ($68,489 principle and $17,847 accrued interest) for 86,336,000 shares or $.001 per share. Interest accrued on this debt was $2,754 for 1996, $9,243 for 1997 and $5,850 for 1998. $30,650 was loaned in 1996 and $37,839 in 1997. Sale/Spinoff of Assets to Former Employee/Director On September 30, 1998, the remaining assets of the Company were spunoff to its sole subsidiary, Innovative Medical Development Corporation and then sold to a former employee and a former officer/director for cancellation of 300,000 shares of stock. The assets transferred/sold were cash ($14,163), receivables ($503), and accounts payable ($13,336). Other assets were transferred at the time included some fixed assets (estimated fair market value of less the $1,000; book value of $0) and inventory (fair market value and book value of $0). LIFE MEDICAL TECHNOLOGIES, INC. Notes to Financial Statements December 31, 1998 NOTE 8 - COMMON STOCK TRANSACTIONS In 1998, the shareholders approved a change in the capital structure of the Company to increase the authorized stock to 5,000,000 shares preferred $.001 par value and 150,000,000 common shares authorized $.001 par value. The change was made effective with the State of Delaware on June 7, 1999. We hereby consent to the use of our audit report of Life Medical Technologies, Inc. dated February 11, 1999 for the year ended December 31, 1998 in the Form 10KSB Annual Report for the year 1998. s/s Crouch, Bierwolf & Chisholm Salt Lake City, Utah July 21, 1999