10QSB 1 killq.txt QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (x) QUARTERLY REPORT UNDER SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 ------------------ Commission file number 0-30351 ------- TRUE HEALTH, INC. (Exact name of small business issuer as specified in its charter) Utah 75-2263732 (State or other jurisdiction of incorporation or (IRS Employer Identification No.) organization) 5 Tansey Circle, Mesquite, Texas 75149 (Address of principal executive offices) (972) 644-1200 (Issuer's telephone number) Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.01 Per Share 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______ As of September 30, 2002, there were outstanding 6,545,548 shares of True Health, Inc., Common Stock, par value $.01. Transitional Small Business Disclosure Format (Check one):Yes No x ------ -------- FORM 10-QSB TRUE HEALTH, INC. Index to Form 10-QSB PART I FINANCIAL INFORMATION (UNAUDITED) ITEM 1. FINANCIAL STATEMENTS Balance Sheets as of September 30, 2002 and December 31, 2001 Statements of Income (Loss) for the Nine Months Ended September 30, 2002 and 2001 Statements of Income (Loss) for the Quarters Ended September 30, 2002 and 2001 Statements of Cash flows for the Nine Months Ended September 30, 2002 and 2001 Statements of Cash flows for the Quarters Ended September 30, 2002 and 2001 Notes to Financial Statements ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II OTHER INFORMATION Item 1 SIGNATURES TRUE HEALTH, INC Balance Sheets September 30, 2002 (unaudited) and December 31, 2001
September 30, December 31, 2002 2001 ASSETS Current assets: Cash $207 $478 Accounts receivable, trade 209 120 Inventory 10,499 10,523 ---------- ---------- Total current assets 10,915 11,121 ---------- ---------- Office and computer equipment, net of accumulated depreciation of $1,952 and $1,766 183 369 ---------- ---------- Total assets $11,098 $11,490 ========== ========== LIABILITIES Current liabilities: Accounts payable and accrued expenses $44,369 $28,560 Due to related parties 82,876 84,463 ---------- ---------- Total current liabilities 127,245 113,023 ---------- ---------- Total liabilities 127,244 113,023 ---------- ---------- Commitments and contingencies - - STOCKHOLDERS' DEFICIT Common stock, $.01 par value, 100,000,000 shares authorized, 6,545,548 and 6,071,048 shares issued and outstanding 65,466 60,710 Capital in excess of par value 831,509 824,009 Accumulated deficit (1,013,111) (986,252) --------- --------- Total stockholders' deficit (116,147) (101,533) --------- --------- Total liabilities and stockholders' Deficit $11,098 $11,490 ========= =========
The accompanying notes are an integral part of these statements. TRUE HEALTH, INC. Statements of Loss For The Nine Months Ended September 30, 2002 and 2001 (Unaudited)
2001 2002 (Unaudited) (Unaudited) Sales $21,004 $24,397 Cost of sales 4,181 4,521 --------- --------- Gross profit 16,823 19,876 Selling, general and administrative Expenses 43,937 31,796 --------- --------- Loss from operations (27,114) (11,920) Other income 255 262 --------- --------- Income (loss) before taxes on income (26,859) (11,658) Provision for taxes on income - - --------- --------- Net income (loss) ($26,859) ($11,658) ========= ========= Income (loss) per common share, basic (0.00) (0.00) ========= ========= Weighted average number of shares Outstanding 6,362,968 6,071,048 ========= =========
The accompanying notes are an integral part of these statements. TRUE HEALTH, INC. Statements of Loss For The Quarters Ended September 30, 2002 and 2001 (Unaudited)
2001 2002 (Unaudited) (Unaudited) Sales $8,319 $6,660 Cost of sales 1,547 1,179 --------- --------- Gross profit 6,772 5,481 Selling, general and administrative Expenses 13,186 9,080 --------- --------- Loss from operations (6,414) (3,599) Other income 255 262 --------- --------- Income (loss) before taxes on income (6,159) (3,337) Provision for taxes on income - - --------- --------- Net income (loss) ($6,159) ($3,337) ========= ========= Income (loss) per common share, basic (0.00) (0.00) ========= ========= Weighted average number of shares Outstanding 6,502,505 6,071,048 ========= =========
The accompanying notes are an integral part of these statements. TRUE HEALTH, INC. Statements of Cash Flows For The Nine Months Ended September 30, 2002 and 2001 (Unaudited)
2001 2002 (Unaudited) (Unaudited) Cash flows from operating activities: Net income (loss) ($26,859) ($11,658) Adjustments to reconcile net income to cash provided (used) by operating activities: Depreciation 186 185 Changes in operating assets and liabilities: Accounts receivable, trade (89) - Inventory 24 (2,456) Accounts payable and accrued Expenses 15,809 7,358 Stock issued for services 12,500 - Return and cancellation of stock issued in prior years for services (255) - --------- --------- Cash flows from operating activities 1,316 (6,571) --------- --------- Cash flows from investing activities - - --------- --------- Cash flows from financing activities: Stock issued for services 12,500 - Less, Amount recognized as operating Expenses (12,500) - Advances from related parties (1,587) 5,559 --------- --------- Cash flows from financing activities (1,587) 5,559 --------- --------- Net increase (decrease) in cash and cash equivalents (271) (1,012) Cash and cash equivalents: Beginning of period 478 1,280 --------- --------- End of period $207 $268 ========= ========= Supplemental cash flow disclosures: Cash paid for interest - - Noncash investing and financing activities: Stock issued for services $12,500 -
The accompanying notes are an integral part of these statements. TRUE HEALTH, INC. Statements of Cash Flows For The Quarters Ended September 30, 2002 and 2001 (Unaudited)
2001 2002 (Unaudited) (Unaudited) Cash flows from operating activities: Net income (loss) ($6,159) ($3,337) Adjustments to reconcile net income to cash provided (used) by operating activities: Depreciation 62 61 Changes in operating assets and liabilities: Accounts receivable, trade - 294 Inventory 347 (532) Accounts payable and accrued Expenses 5,258 1,096 Stock issued for services 2,500 - Return and cancellation of stock issued in prior years for services (255) - --------- --------- Cash flows from operating activities 1,753 (1,354) --------- --------- Cash flows from investing activities - - --------- --------- Cash flows from financing activities: Stock issued for services 2,500 - Less, Amount recognized as operating Expenses (2,500) - Advances from related parties (1,800) 750 --------- --------- Cash flows from financing activities (1,800) 750 --------- --------- Net increase (decrease) in cash and cash equivalents (47) (604) Cash and cash equivalents: Beginning of period 254 872 --------- --------- End of period $207 $268 ========= ========= Supplemental cash flow disclosures: Cash paid for interest - - Noncash investing and financing activities: Stock issued for services $2,500 -
The accompanying notes are an integral part of these statements. TRUE HEALTH, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS Note 1 - Basis of presentation: The financial statements include the accounts of True Health, Inc. The Balance Sheets as of September 30, 2002 and December 31, 2001, the Statements of Loss for the nine months quarters ended September 30, 2002 and 2001, and the Statements of Cash Flows for the nine months and quarters ended September 30, 2002 and 2001 have been prepared by the Company without audit. In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows as of September 30, 2002 and 2001 and for the nine months and quarters then ended. All adjustments made have been of a normal recurring nature. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of financial position of operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company's Form 10-KSB for the year ended December 31, 2001 filed with the United States Securities and Exchange Commission (SEC) on or about April 15, 2002. Note 2 - The Company, nature of operations: True Health, Inc. (the Company) is a Utah corporation engaged in the marketing of nutrition supplement/meal replacement products under the brand name True Health. Substantially all of its revenues are derived from these products. The products are distributed from the Company's facilities in Texas to customers throughout the world. The accompanying financial statements have been prepared on the basis of U.S. generally accepted accounting principles. Note 3 - Agreement with Burkshire: In March, 2002, the Company issued 400,000 shares to stock to Burkshire Capital Group, a financial consulting firm, for services in connection with management, marketing, consulting, strategic planning, corporate organization and structure, expansion of services, acquisitions and business opportunities, and arranging equity financing. The consultant was expected to assist the Company in making private placements of its stock. The services were valued at $10,000, or $0.025 per share. Burkshire's efforts were unsuccessful. Therefore, amount of $10,000, which was originally recorded as prepaid expenses during the quarter ended March 31, 2002, was charged to expense during the quarter ended June 30, 2002. Note 4 - Going concern: The Company has experienced losses in eight of the previous ten years. Losses amount to more than $1,000,000 on a cumulative basis. At September 30, 2002, current liabilities exceeded current assets by approximately $116,000, resulting in a working capital deficiency; there is also a capital deficit of the same approximate amount. Management is currently investigating alternative marketing strategies, methods, and markets, and is seeking additional outside financing and/or equity investors, but there is no assurance that management's efforts in this regard will be successful. Moreover, substantially all revenues are derived from a single product or line of products, creating a concentration of business; should the Company be unable for any reason to continue sales of the products, it would have a severe impact on the Company's business. All of the above factors create substantial doubt about the Company's ability to continue as a going concern. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The company had year-to-date sales of $21,004 for the nine months ending September 30, 2002, versus $24,397 for the same period of 2001. During the quarter ended September 30, 2002, sales were down $1,659 from the preceding year. The decrease in sales resulted primarily from Company management's focus on raise additional equity capital and in negotiating agreements with a financial consulting firm (see below). Year-to-date selling, general, and administrative expenses increased to $43,937 from $31,796, primarily due to consulting fees paid to Burkshire Capital Group. Year-to-date net loss increased to $27,114 from $11,920, and the loss for the quarter ended September 30, 2002 increased to $6,414 from $3,599. The Company had total assets of $11,098 at June 30, 2002, compared to $11,490 at December 31, 2001, an insignificant change. In October 2001, the Company completed a reverse stock split whereby each ten (10) shares of the Corporation's $0.01 par value common stock outstanding were converted into one (1) share of the Corporation's $0.01 par value common stock. Concurrently therewith, the Company's ticker symbol changed from TEHI to TRHH. In March, 2002, the Company issued 400,000 shares to stock to Burkshire Capital Group, a financial consulting firm, for services in connection with management, marketing, consulting, strategic planning, corporate organization and structure, expansion of services, acquisitions and business opportunities, and arranging equity financing. The consultant was expected to assist the Company in making private placements of its stock. The services were valued at $10,000, or $0.025 per share. Burkshire's efforts were unsuccessful. Therefore, amount of $10,000, which was originally recorded as prepaid expenses during the quarter ended March 31, 2002, was charged to expense during the quarter ended June 30, 2002. During the quarter ended September 30, 2002 shareholders returned 25,500 shares of common stock which had been issued for services rendered. The shares were canceled. The transaction was recorded at the par value of the shares issued, or $ 255, and was credited to other income. Also during the third quarter the company issued common stock to one of the former directors of the company for services rendered. A total of 100,000 shares valued at $.025 per share, or $2,500, were issued, and charged to expense. Part II - Other Information ITEM 1 - Legal Proceedings: None. ITEM 2 - Changes in Securities: In March, 2002, the Company issued 400,000 shares to stock to Burkshire Capital Group, a financial consulting firm, for services in connection with management, marketing, consulting, strategic planning, corporate organization and structure, expansion of services, acquisitions and business opportunities, and arranging equity financing. The consultant was expected to assist the Company in making private placements of its stock. The services were valued at $10,000, or $0.025 per share. Burkshire's efforts were unsuccessful. Therefore, amount of $10,000, which was originally recorded as prepaid expenses during the quarter ended March 31, 2002, was charged to expense during the quarter ended June 30, 2002. During the quarter ended September 30, 2002 shareholders returned 25,500 shares of common stock which had been issued for services rendered. The shares were canceled. The transaction was recorded at the par value of the shares issued, 0r $ 255, and was credited to other income. Also during the third quarter the company issued common stock to one of the former directors of the company for services rendered. A total of 100,000 shares valued at $.025 per share, or $2,500, were issued, and charged to expense. ITEM 3 - Defaults Upon Senior Securities: None. ITEM 4 - Submission of Matters to a Vote of Security Holders: The Company had an annual shareholders meeting on August 1, 2002. A slate of officers was elected for the next year and a reverse stock split was approved. ITEM 5 - Other Information: This form 10-QSB includes or may include certain forward-looking statements concerning the Company's financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and other similar expressions. Although the Company believes its expectations reflected in such forward-looking statements are based on reasonable assumptions, readers are cautioned that no assurance can be given that such expectations will prove correct and that actual results and developments may differ materially from those conveyed in such forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements in the Form 10-SB include, among others, the pace of technological change, the Company's ability to manage growth, general business and economic conditions in the Company's operating regions, and competitive and other factors, all as more fully described in the Company's Report on Form 10-SB for the period ended December 31, 2001, under Management's Discussion and Analysis of Financial Condition and Results of Operations. "Assumptions Underlying Certain Forward-Looking Statements and Factors that May Affect Future Results" and elsewhere from time to time in the Company's other SEC reports. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-QSB. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company would make additional updates or corrections with respect thereto or with respect to other forward-looking statements. Actual results may vary materially. ITEM 6. Exhibits And Reports On Form 8-K: 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. True Health, Inc. ----------------- (Registrant) Date: November 19,200s By: /s/ Richard M. Stokley, President (Signature) Richard M. Stokley, President CERTIFICATION I, Richard M. Stokley, certify that: 1. I have reviewed this quarterly report on Form 10-Q of True Health, Inc., a. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 2. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 3. I am responsible for the establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to me, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 4. I have disclosed, based on my most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 5. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 19, 2002 By: /s/ Richard M. Stokley (signature) Richard M. Stokley President