-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H7CWiM1bbK5KNfopcZ9Db7VU8XoljVc2rlMUR68qyk5sW6Gug6RR25bJ96axOk1v cisFuI7YkensWwB3VRd4SQ== 0001016843-99-000195.txt : 19990303 0001016843-99-000195.hdr.sgml : 19990303 ACCESSION NUMBER: 0001016843-99-000195 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19990302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNAMIC HEALTH PRODUCTS INC CENTRAL INDEX KEY: 0000949925 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 341711778 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-23031 FILM NUMBER: 99555230 BUSINESS ADDRESS: STREET 1: 6950 BRYAN DAIRY ROAD STREET 2: STE 325 CITY: LARGO STATE: FL ZIP: 33777 BUSINESS PHONE: 8136280804 MAIL ADDRESS: STREET 1: 5905-A HAMPTON OAKS PARKWAY CITY: TAMPA STATE: FL ZIP: 33610 FORMER COMPANY: FORMER CONFORMED NAME: NU WAVE HEALTH PRODUCTS INC DATE OF NAME CHANGE: 19980410 FORMER COMPANY: FORMER CONFORMED NAME: DIRECT RX INC DATE OF NAME CHANGE: 19970820 10QSB/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter Ended September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23031 DYNAMIC HEALTH PRODUCTS, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) STATE OF FLORIDA 34-1711778 - ---------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6950 BRYAN DAIRY ROAD, LARGO, FLORIDA 33777 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (727) 544-8866 Indicate by check mark whether the issuer (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. [X] Yes [ ] No The number of shares outstanding of the Issuer's common stock at $.01 par value as of November 13, 1998 was 3,074,515 (exclusive of Treasury Shares). DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) SEPTEMBER 30, SEPTEMBER 30, 1998 1997 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 35,973 $ 143,770 Accounts receivable, net 1,421,772 426,956 Inventory, net of allowance 1,811,800 263,435 Prepaids and other current assets 209,331 6,978 ----------- ----------- Total current assets 3,478,876 841,139 ----------- ----------- Property, plant and equipment, at cost, net 2,190,331 126,072 Deposits 104,801 16,467 Investment in LLC 5,000 -- Intangible assets, net 2,723,083 9,898 ----------- ----------- TOTAL ASSETS $ 8,502,091 $ 993,576 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,628,219 $ 673,814 Other payables 90,975 1,648 Interest payable 13,018 4,699 Notes payable 69,662 -- Credit line payable 630,000 -- Related party notes payable 553,700 143,324 Unearned revenue 97,102 36,643 Current portion of long-term liabilities 395,083 -- ----------- ----------- Total current liabilities 3,477,759 860,128 ----------- ----------- Long-term liabilities: Interest payable 12,687 -- Capital lease obligations 401,234 7,590 Notes payable 275,226 -- Mortgages payable 1,150,262 -- Minority interest in subsidiary 75,124 15,463 Current portion of long-term liabilities (395,083) -- ----------- ----------- Total long-term liabilities 1,519,450 23,053 ----------- ----------- TOTAL LIABILITIES 4,997,209 883,181 ----------- ----------- Shareholders' equity: Common stock, at par value 30,745 22,333 Series A Convertible Preferred stock, at face value 1,550,000 -- Series B 6% Cumulative Convertible Preferred stock, at face value 50,000 -- Additional paid-in capital 2,483,808 889,680 Accumulated deficit (859,783) (853,698) Net income 250,112 52,080 ----------- ----------- NET SHAREHOLDERS' EQUITY 3,504,882 110,395 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,502,091 $ 993,576 =========== =========== See notes to consolidated financial statements - 2 -
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenues: Distributor sales $ 6,912,297 $ 2,079,264 $ 12,712,200 $ 3,639,551 Manufacturing 1,144,279 397,865 2,058,823 782,191 Other revenues 58,632 -- 58,632 -- ------------ ------------ ------------ ------------ TOTAL REVENUES 8,115,208 2,477,129 14,829,655 4,421,742 ------------ ------------ ------------ ------------ Cost of goods sold: Distributor sales 6,697,668 2,010,507 12,254,398 3,529,953 Manufacturing 765,588 292,793 1,362,312 522,111 Other revenues 10,877 -- 10,877 -- ------------ ------------ ------------ ------------ TOTAL OF COST OF GOODS SOLD 7,474,133 2,303,300 13,627,587 4,052,064 ------------ ------------ ------------ ------------ GROSS PROFIT 641,075 173,829 1,202,068 369,678 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 627,592 165,705 934,096 327,081 ------------ ------------ ------------ ------------ OPERATING INCOME BEFORE OTHER INCOME AND EXPENSE 13,483 8,124 267,972 42,597 Other income (expense): Interest income 3,184 -- 6,443 -- Gain on involuntary conversion of land 81,192 -- 81,192 -- Other income and expenses, net 13,786 9,608 20,140 22,636 Interest expense (98,293) (7,749) (128,912) (13,153) ------------ ------------ ------------ ------------ TOTAL OTHER INCOME (EXPENSE) (131) 1,859 (21,136) 9,483 ------------ ------------ ------------ ------------ NET INCOME (LOSS) BEFORE MINORITY INTEREST 13,352 9,983 246,836 52,080 Loss attributable to minority interest 3,276 -- 3,276 -- ------------ ------------ ------------ ------------ NET INCOME (LOSS) 16,228 9,983 250,112 -- Accrued preferred share dividends 400 -- 400 -- ------------ ------------ ------------ ------------ NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 16,228 $ 9,983 $ 249,712 $ 52,080 ============ ============ ============ ============ Basic income per share $ -- $ 0.01 $ 0.12 $ 0.09 ============ ============ ============ ============ Basic weighted number of common shares outstanding 2,814,955 685,074 2,014,534 551,394 ============ ============ ============ ============ Diluted income per share $ -- $ 0.01 $ 0.11 $ 0.09 ============ ============ ============ ============ Diluted weighted number of common shares outstanding 3,094,715 685,074 2,200,927 551,394 ============ ============ ============ ============
See notes to consolidated financial statements - 3 - DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
SEPTEMBER 30, SEPTEMBER 30, 1998 1997 ----------- ----------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $ 250,112 $ 52,080 Minority interest in subsidiary (3,276) -- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 94,466 12,610 Changes in operating assets and liabilities: Accounts receivable (466,257) (262,359) Inventory (494,770) (116,408) Prepaid expenses (74,020) 8,450 Accounts payable and accrued expenses (479,637) 312,824 Unearned revenue (87,675) 4,454 ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,261,057) 11,651 ----------- ----------- Cash flows from investing activities: Deposits (64,672) (4,179) Purchases of property and equipment (159,946) (29,665) Involuntary conversion of land 17,908 -- Decrease (increase) in intangible assets (6,544) (325) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (213,254) (34,169) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 577,219 47,098 Proceeds from shareholder loans 223,000 -- Distributions to stockholders (108,503) -- Proceeds from issuance of common stock 550,000 -- Proceeds from issuance of preferred stock 50,000 -- Principal payments of debt and capital lease obligations (237,952) (100,638) ----------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,053,764 (53,540) ----------- ----------- NET INCREASE (DECREASE) IN CASH (420,547) (76,058) CASH AT BEGINNING OF PERIOD 456,520 219,828 ----------- ----------- CASH AT END OF PERIOD $ 35,973 $ 143,770 =========== ===========
See notes to consolidated financial statements -4-
DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1997(UNAUDITED) SEPTEMBER 30, SEPTEMBER 30, 1998 1997 ------------ ------------ Supplemental cash flow information: Cash paid during the period for interest $ 103,979 $ 5,166 Supplemental schedule of non-cash financing activities: Capital lease obligations incurred for purchase of property and equipment $ 56,147 $ 9,007 Acquisition of minority interest through issuance of common stock $ -- $ 10,000 Conversion of related party notes payable and accrued interest to common stock $ 81,331 $ 85,123 Acquisition of Energy Factors, Inc. through issuance of 310,000 shares of preferred stock $1,550,000 $ -- Acquisition of Becan Distributors, Inc. through issuance of 1,500,000 shares of common stock $2,250,000 $ -- Acquisition of J. Labs, Inc. through issuance of 100,000 shares of common stock $ 150,000 $ --
See notes to consolidated financial statements -5- Dynamic Health Products, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 1998 NOTE A-BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instruction to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended September 30, 1998 and 1997 are not necessarily indicative of the results that may be expected for the year ending March 31, 1999. For further information, refer to the consolidated financial statements and footnotes included in the Company's Form 10-KSB/A for the year ended March 31, 1998. NOTE B-ACQUISITIONS AND DISPOSITIONS On June 15, 1998, the Company acquired legal title to the net assets of Energy Factors, Inc. In exchange for the capital stock in Energy Factors, Inc., 310,000 shares of Series A Convertible Preferred Stock of the Company were issued to the shareholders of Energy Factors, Inc. The transaction was accounted for as a purchase. The aggregate cost of this acquisition was as follows: Assumption of liabilities $2,874,000 Issuance of preferred stock 1,550,000 ---------- $4,424,000 ========== The aggregate purchase price was allocated as follows: Accounts receivable $ 26,000 Inventory 575,000 Property, plant and equipment 1,925,000 Other assets 75,000 Goodwill 1,823,000 ---------- $4,424,000 ========== -6- On June 26, 1998, the Company acquired all of the issued and outstanding capital stock of Becan Distributors, Inc. in exchange for 1,500,000 new shares of common stock of the Company. The merger was accounted for as a combination of entities under common control and treated as if a "pooling of interests". The merger resulted in goodwill of approximately $700,000 due to the acquisition of the minority interest. The financial statements have been retroactively adjusted to reflect the results of Becan Distributors, Inc. for all periods presented. The Company also made other immaterial acquisitions during the three months ended September 30, 1998. The results of operations of the acquired companies are included in the accompanying consolidated financial statements since the respective date of acquisition. NOTE C-PRINCIPLES OF CONSOLIDATION The accompanying condensed consolidated financial statements include the accounts of Dynamic Health Products, Inc. ("DHP") and its subsidiaries, Innovative Health Products, Inc. ("IHP"), Becan Distributors, Inc. ("Becan") and its subsidiary Discount Rx, Inc. ("Discount"), Incredible Products of Florida, Inc. ("IP"), and J.Labs, Inc. ("JL") (collectively the "Company"). All intercompany balances and transactions have been eliminated. NOTE D-STOCKHOLDERS' EQUITY On August 11, 1998, upon the filing by the Company of Articles of Amendment to its Articles of Incorporation, a one-for-three reverse stock split of the Common Stock of the Company was effected. The accompanying unaudited condensed consolidated financial statements have been retroactively restated, as of September 30, 1997, to reflect the one-for-three reverse stock split. In conjunction with the reverse stock split, the effect of the elimination of fractional shares (which are being cashed out at $1.50 per new share) is not reflected in the accompanying condensed consolidated financial statements. The Company has adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per common share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share gives effect to convertible preferred shares which are considered to be dilutive common stock equivalents. Earnings per share was retroactively restated, as of September 30, 1997, to reflect FASB No. 128. Series B 6% Cumulative Convertible Preferred Stock shareholders are entitled to cumulative annual dividends, from the date of issuance, payable annually in arrears. The Company may make dividend payments on the Preferred Stock in cash or by delivery of fully paid nonassessable shares of common stock of the Company, or through a combination thereof. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Three Months and Six Months ended September 30, 1998 and September 30, 1997 Sales are recognized at the time the product is shipped. Net sales are net of discounts, allowances, and returns and credits. Distributor sales increased 232% and 249%, or $4,833,033 and $9,072,649, to $6,912,297 and $12,712,200 for the three months and six months ended September 30, 1998, as compared to $2,079,264 and $3,639,551 in the three months and six months ended September 30, 1997. The increase was due to increased sales with existing customers and expansion of the customer base resulting from increased marketing efforts. Manufacturing sales increased 188% and 163%, or $746,414 and $1,276,632, to $1,144,279 and $2,058,823, as compared to $397,865 and $782,191 in the corresponding period. The increase was primarily attributable to increased volume of the Company's private label sales resulting from continued expansion of marketing efforts and the introduction of new products. Other revenues of $58,632 were attributable to direct marketing efforts of Incredible Products of Florida, Inc., a 51% owned subsidiary of the Company, incorporated on August 20, 1998. Gross profit from distributor sales increased 212% and 318%, or $145,872 and $348,204, to $214,629 and $457,802 for the three months and six months ended September 30, 1998, as compared to $68,757 and $109,598 in the three months and six months ended September 30, 1997. Gross profit from manufacturing increased 260% and 168%, or $273,619 and $436,431, to $378,691 and $696,511, as compared to $105,072 and $260,080 in the corresponding period. Gross profit from other revenues was $47,755. Gross margin from distributor sales decreased to 3.11% for the three months ended September 30, 1998 from 3.31% for the three months ended September 30, 1997. The decline was primarily attributable to an increase in the mix of sales, which yields a lower gross margin. For the six months ended September 30, 1998, the gross margin from distributor sales increased to 3.60% from 3.01% in the corresponding period. Gross margin from manufacturing increased to 33.09% and 33.83% for the three months and six months ended September 30, 1998, from 26.41% and 33.25% in the corresponding period. Gross margin from other revenues was 81.45%. Selling, general and administrative expenses consist primarily of advertising and promotional expenses, personnel costs related to general management functions, finance, accounting and information systems, payroll expenses and sales commissions, professional fees related to legal, audit and tax matters, and depreciation and amortization expense. Selling, general and administrative expenses increased 279% and 186%, or $461,887 and $607,015, to $627,592 and $934,096 for the three months and six months ended September 30, 1998, as compared to $165,705 and $327,081 in the corresponding period. The increase was primarily due to additional advertising, promotional and payroll expenses to support increased net sales and the Company's growth, as well as additional amortization of goodwill and depreciation of fixed assets associated with the June 15, 1998 acquisition of IHP and the June 26, 1998 acquisition of Becan. As a percentage of net sales, selling, general and administrative expenses increased to 7.73% for the three months ended September 30, 1998 from 6.69% for the three months ended September 30, 1997, and decreased to 6.30% for the six months ended September 30, 1998 from 7.40% in the corresponding period. -8- Interest expense, net of interest income, increased $87,360 and $109,316, to $95,109 and $122,469 for the three months and six months ended September 30, 1998, from $7,749 and $13,153 for the three months and six months ended September 30, 1997. The increase was a result of increased borrowings to finance the purchase of additional machinery and equipment and to make necessary plant modifications, and for financing of additional working capital needs with the June 15, 1998 acquisition of IHP. The Company had no income tax expenses for the three months and six months ended September 30, 1998 and 1997. Management believes that there was no material effect on operations or the financial condition of the Company as a result of inflation for the three months and six months ended September 30, 1998 and 1997. Management also believes that its business is not seasonal; however, significant promotional activities can have a direct impact on sales volume in any given quarter. Although in the opinion of the management of the Company, the above data reflects positive information concerning the present operations of the Company, there can be no assurance that the Company's results of operations will continue to the same extent or in the same manner as reflected above. LIQUIDITY AND CAPITAL RESOURCES The Company historically has financed its operations through funds from operations and loans from within the Company. The Company had working capital of $1,117 at September 30, 1998, as compared to ($18,989) in working capital at September 30, 1997. The decrease was primarily due to an increase in related party notes payable and an increase in current portion of long-term liabilities as a result of the IHP acquisition. Net cash used in operating activities was ($1,261,057) for the six months ended September 30, 1998 as compared to net cash provided by operating activities of $11,652 for the six months ended September 30, 1997. The usage of cash is primarily attributable to an increase in accounts receivable ($466,257), as a result of increased sales by the Company during such period, and an increase in inventory ($494,770), an increase in prepaid expenses ($74,020), a decrease in accounts payable and accrued expenses ($479,637), and a decrease in unearned revenue ($87,675), primarily attributable to the acquisition of IHP. Net cash used in investing activities was ($213,254), representing the purchase of property and equipment, plant modifications, and the acquisition of other assets, offset by a decrease representing an involuntary conversion of land $17,908. Net cash provided by financing activities was $1,053,764 representing proceeds from issuance of common stock and preferred stock, proceeds of long-term debt, capital lease obligations, and borrowings on lines of credit, proceeds from shareholder loans, offset by repayments of debt and capital lease obligations ($237,952). Management is hopeful liquidity and capital difficulties will be resolved but provides no assurance. The Company expects to meet its cash requirements from operations, current cash reserves, and existing financial arrangements. In addition, the Company has initiated a Private Placement offering -9- of a maximum of 800,000 shares of Series B 6% Cumulative Convertible Preferred Stock, par value $.01 per share, for $2.50 per share, but provides no assurance as to the success of the offering. In March and April 1998, the Company received $250,000 from investors and issued non-negotiable promissory notes with stock warrants attached. The notes bear interest at 10% per annum, compounded annually. The due date shall be the earlier of (i) April 30, 1999, or (ii) the closing of a minimum of an additional $1,000,000 of equity financing, by private placement or other non-public offering. The note may be prepaid at any time by the Company to Payee without any penalty or premium. The attached stock warrant entitles the Payee to purchase common stock of the Company (based on one share for each one dollar amount of the principal amount reflected in the note) at a purchase price of $1.50 per new share. The stock warrant shall expire the earlier of, one year from the closing of an additional $1,000,000 of equity financing, or December 31, 1999. On March 16, 1998, Becan Distributors, Inc. established a bank line of credit. The principal amount of the note is $700,000. The note bears interest at 1% plus the Prime Rate of the Bank per annum on the unpaid outstanding principal of each advance payable monthly. The due date is March 1, 1999. The note or any portion thereof may be prepaid without penalty. This line of credit is secured by a blanket lien on all business assets of Becan and is also secured by personal guarantees from the Company's Chairman of the Board, and the Company's Chief Executive Officer. In May 1998, 100,000 shares of common stock of the Company were sold to a non-affiliated third party investor at $.50 per old share, for gross proceeds of $50,000. Proceeds were used for capital expenditures and plant modifications. On May 13, 1998, the Company loaned $100,000 to IHP, formerly Energy Factors, Inc. for the purpose of assisting Energy Factors with its working capital needs. The company has since acquired Energy Factors. On May 29, 1998, notes payable to related parties of $81,331.80, including principal and unpaid accrued interest were converted to 813,318 old shares of common stock of the Company. In June 1998, the Company established a bank line of credit. The principal amount of the note is $200,000. The note bears interest at 4.08% per annum on the unpaid outstanding principal of each advance, payable monthly. The due date is June 3, 1999. The note or any portion thereof may be prepaid without penalty. This line of credit is secured by $200,000 cash maintained in a Money Market account with the bank. Effective June 15, 1998, the Company acquired legal title to the net assets of IHP, formerly Energy Factors, Inc., in exchange for 310,000 shares of Series A Convertible Preferred Stock in the Company. Effective June 26, 1998, the Company acquired all of the issued and outstanding capital stock of Becan Distributors, Inc. in exchange for 1,500,000 new shares of common stock in the Company. -10- In August, 1998, 20,000 shares of Series B 6% Cumulative Preferred Stock of the Company were sold to a non-affiliated third party investor at $2.50 per share, for gross proceeds of $50,000. Proceeds were used for the initial capitalization of Discount, and for repayment of debt associated with IHP. In August, 1998, 200,000 shares of common stock of the Company were sold to a non-affiliated third party investor at $2.50 per new share, for gross proceeds of $500,000. Proceeds were used for the initial capitalization of IP, and for repayment of debt associated with IHP. Effective August 20, 1998, the Company caused the formation of Incredible Products of Florida, Inc., a Florida corporation. Pursuant to an Agreement to Fund Subsidiary, dated September 1, 1998, the Company agreed to contribute $160,000 in capital to IP in exchange for 51 shares of common stock of IP, representing 51% interest in IP. Effective September 30, 1998, the Company acquired all of the issued and outstanding capital stock of J.Labs, Inc. in exchange for 100,000 shares of common stock in the Company. On November 12, 1998, Becan and its subsidiary, Discount (collectively "BecanD") obtained a commitment for a $2,000,000 line of credit to provide additional working capital for BecanD to support its continued growth. The line of credit is to be secured by a blanket lien on all business assets of BecanD and is also secured by personal guarantee from the Company's Chairman of the Board. The Company is also in the process of negotiating a line of credit to refinance the building and equipment of the Company, and to provide for additional working capital in support of Inventory, Accounts Receivable, and general business growth, but provides no assurance as to the success of establishing the line of credit. -11- PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. From time to time the Company is subject to litigation incidental to its business. Such claims, if successful, could exceed applicable insurance coverage. The Company is not currently a party to any material legal proceedings. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. The Company filed Articles of Amendment to Articles of Incorporation of Nu-Wave Health Products, Inc. on August 11, 1998 to increase its authorized shares to 20,000,000 shares of common stock, $.01 par value and 2,000,000 shares of preferred stock, $.01 par value and to effectuate a one-for-three reverse stock split such that each three (3) shares of currently issued and outstanding common stock shall be converted into one (1) share of common stock, $.01 par value per share. In August, 1998, following the one-for-three reverse stock split, 1,500,000 shares of common stock of the Company were issued pursuant to the Agreement and Plan of Reorganization dated June 26, 1998, effective June 26, 1998 for the exchange of shares for the acquisition of Becan Distributors, Inc. In August, 1998, following the one-for-three reverse stock split, 310,000 shares of Series A Convertible Preferred Stock of the Company were issued pursuant to the Agreement and Plan of Reorganization dated June 12, 1998, effective June 15, 1998 for the acquisition of Energy Factors, Inc. In August, 1998, 20,000 shares of Series B 6% Cumulative Convertible Preferred Stock of the Company were sold to a non-affiliated third party investor at $2.50 per share, for gross proceeds of $50,000. Proceeds were used for the initial capitalization of Discount, and for repayment of debt associated with IHP. In August, 1998, 200,000 shares of common stock of the Company were sold to a non-affiliated third party investor at $2.50 per new share, for gross proceeds of $500,000. Proceeds were used for the initial capitalization of IP, and for repayment of debt associated with IHP. ITEM 3. - NOT APPLICABLE. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Nu-Wave Health Products, Inc., held a meeting of its shareholders on July 2, 1998, at the offices of the corporation, 5905-A Hampton Oaks Parkway, Tampa, FL 33610 for approval of amendment to its Articles Of Incorporation to increase its authorized shares, to authorize the one-for-three reverse stock split, and to amend its Articles of Incorporation to change the name of the Company to Dynamic Health Products, Inc. Present in person and/or by proxy were persons holding 2,278,553 shares of common stock of the corporation, which represented 59.6% of the issued and outstanding stock. There was therefore a quorum present. The amendment of Articles Of Incorporation of the Company was unanimously approved by all of the shareholders present holding 2,278,553 shares of the common stock of Nu-Wave Health Products, Inc. Pursuant to Section 607.0704 of the Florida Business Corporation Act, the Company gave notice to those shareholders who had not consented in writing to the matters described herein. -12- Pursuant to Articles of Amendment to Articles of Incorporation of Nu-Wave Health Products, Inc. filed August 11, 1998, the Articles of Incorporation were amended to authorize 20,000,000 shares of common stock, $.01 par value and 2,000,000 shares of preferred stock, $.01 par value and to effectuate a one-for-three reverse stock split, and to change the name of the Company to Dynamic Health Products, Inc. ITEM 5. OTHER INFORMATION. The Company has filed Form 15C211 with NASDAQ and is in the process of listing its outstanding common stock on Pink Sheets. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. The following exhibits are filed with this report: 2.1 Agreement and Plan of Reorganization dated June 12, 1998, effective June 15, 1998, by and among Nu-Wave Health Products, Inc., Nu-Wave Acquisition, Inc., Energy Factors, Inc., U.S. Diversified Technologies, Inc., Paul Santostasi, Chris Starkey, and Marvin Deutsch. (2) 2.2 Agreement and Plan of Reorganization dated June 26, 1998, effective June 26, 1998, by and between Nu-Wave Health Products, Inc., buyer, and Manju Taneja, Mihir K. Taneja, Mandeep K. Taneja, William LaGamba custodian for Anthony LaGamba, William LaGamba custodian for Nicholl LaGamba, William LaGamba custodian for Courtney LaGamba, Michele LaGamba, and Phillip J. Laird and William LaGamba, each individually a seller, each of which is a stockholder of Becan Distributors, Inc. (2) 2.3 Agreement to Fund Subsidiary dated September 1, 1998, by and between Dynamic Health Products, Inc., Incredible Products of Florida, Inc., and Gary A. Shawkey.(3) 2.4 Agreement and Plan of Reorganization dated September 1, 1998, by and between Incredible Products of Florida, Inc., buyer and Gary A.Shawkey, seller.(3) 2.5 Agreement to Exchange Shares dated September 1, 1998, by and between the Company and Gary A. Shawkey.(3) 2.6 Stock Purchase Agreement dated September 30, 1998, by and among Dynamic Health Products, Inc. and J. Labs, Inc.(3) 3.1 Articles of Incorporation of Nu-Wave Acquisition, Inc., dated June 11, 1998 and filed June 12, 1998. (2) 3.2 Articles of Amendment to Articles of Incorporation of Dynamic Health Products, Inc., dated July 22, 1998 and filed July 23, 1998. (2) 3.3 Articles of Amendment to Articles of Incorporation of Nu-Wave Health Products, Inc., dated August 10, 1998. (2) -13- 3.4 Articles of Incorporation of Incredible Products of Florida, Inc. dated August 20, 1998, filed August 20, 1998.(3) 10.1 Promissory Note in favor of the Company from Energy Factors, Inc. dated May 13, 1998.(1) 10.2 Revolving Line of Credit Agreement between Becan Distributors, Inc. and Mellon Bank dated March 16, 1998. (2) 10.3 Revolving Line of Credit Agreement between the Company and Republic Bank dated June 3, 1998. (1) 27.1 Financial Data Schedule (for SEC use only). (1) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998, file number 0-23031, filed in Washington, D.C. (2) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998, file number 0-23031, filed in Washington, D.C. (3) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998, file number 0-23031, filed in Washington, D.C. (b) REPORTS ON FORM 8-K. During the three months ended September 30, 1998, the Company filed no reports on Form 8-K. -14- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DYNAMIC HEALTH PRODUCTS, INC. Date: March 1, 1999 By: /s/ WILLIAM L. LAGAMBA ----------------------- William L. LaGamba Chief Executive Officer Date: March 1, 1999 By: /s/ CANI I. SHUMAN -------------------- Cani I. Shuman Chief Financial Officer -15- EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 27.1 Financial Data Schedule (for SEC use only). EX-27 2
5 This schedule contains summary financial information extracted from the financial statements and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-31-1998 SEP-30-1998 35,973 0 1,480,272 (58,500) 1,811,800 3,478,876 2,987,362 77,031 8,502,091 3,477,759 0 1,600,000 0 30,745 1,870,861 8,502,091 8,115,208 8,115,208 7,474,133 7,474,133 0 0 98,293 13,352 0 13,352 0 0 0 13,352 .00 .00
-----END PRIVACY-ENHANCED MESSAGE-----