UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 1
TO
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, 2003 Commission File Number 0-29057
------------------------------------------- -------
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________to __________________
ALTRIMEGA HEALTH CORPORATION
(Exact name of registrant as specified in charter)
Nevada 87-0631750
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. No.)
4702 Oleander Drive, Suite 200, Myrtle Beach, SC 29577
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(Address of principal executive offices) (Zip)
Issuer's telephone number, including area code (843) 497-7028
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Securities registered pursuant to section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
None None
---- ----
Securities registered pursuant to section 12 (g) of the Act:
Common Stock, par value $0.001 per share
(Title of Class)
Check whether the Issuer (1 ) filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 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.
(1) Yes |X| No |_| (2) Yes |X| No |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.|_|
State issuer's revenues for its most recent fiscal year: $ 904,918.
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within the past 60 days.
The market value of shares held by nonaffiliates is $245,700 based on the
bid price of $0.005 per share at May 10, 2004.
As of May 10, 2004, the Company had 49,139,950 shares of common stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
PART I....................................................................................................................1
Forward-Looking Statements.............................................................................................1
ITEM 1. DESCRIPTION OF BUSINESS.......................................................................................1
ITEM 2. DESCRIPTION OF PROPERTIES.....................................................................................4
ITEM 3. LEGAL PROCEEDINGS.............................................................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.........................................................5
PART II...................................................................................................................6
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................................6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....................................................7
ITEM 7. FINANCIAL STATEMENTS.........................................................................................12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........................12
ITEM 8A. CONTROLS AND PROCEDURES.....................................................................................12
PART III.................................................................................................................14
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT..........................................................................................................14
ITEM 10. EXECUTIVE COMPENSATION......................................................................................15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............................................16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................................17
PART IV..................................................................................................................19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................................................................19
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES......................................................................19
EXHIBIT 31.1..............................................................................................................1
EXHIBIT 31.2..............................................................................................................1
EXHIBIT 32.1..............................................................................................................1
FINANCIAL STATEMENTS....................................................................................................F-1
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PART I
INTRODUCTORY NOTE
Forward-Looking Statements
This Form 10-KSB contains "forward-looking statements" relating to
Altrimega Health Corporation ("Altrimega") which represent Altrimega's current
expectations or beliefs including, but not limited to, statements concerning
Altrimega's operations, performance, financial condition and growth. For this
purpose, any statements contained in this Form 10-KSB that are not statements of
historical fact are forward-looking statements. Without limiting the generality
of the foregoing, words such as "may", "anticipation", "intend", "could",
"estimate", or "continue" or the negative or other comparable terminology are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, such as losses, dependence
on management, variability of quarterly results, and the ability of Altrimega to
continue its growth strategy and competition, certain of which are beyond
Altrimega's control. Should one or more of these risks or uncertainties
materialize or should the underlying assumptions prove incorrect, actual
outcomes and results could differ materially from those indicated in the
forward-looking statements.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
Current Business Operations
As of December 31, 2003, the Company is a real estate development
business and strives to locate, evaluate and proceed to finance and develop
multiple projects located primarily in the Myrtle Beach, South Carolina, area
and the Carolinas area of the United States. Management believes that these
areas provide the population growth necessary to achieve profits from new
construction projects. The Company's business strategy includes a focus on
interval ownership, or time-share, properties that cater to this major tourism
industry. As well, the Company intends to develop projects in the medium price
ranges for the area's permanent service industry population. Management intends
to attempt to seek out low-risk projects throughout the Carolinas that do not
require large financing commitments. However, on December 17, 2004, Altrimega
Health Corporation, d/b/a Creative Holdings & Marketing Corporation signed a
definitive Share Exchange Agreement to acquire all of the outstanding shares of
common stock of Top Gun Sports & Entertainment, Inc., in exchange for the
issuance of 15,750,000 shares of the Altrimega Health Corporation common stock
to the current shareholders of Top Gun Sports & Entertainment, Inc. The closing
of the transaction is conditioned upon Altrimega's shareholders approving a
change of the Company's name to Top Gun Sports & Entertainment, Inc., a
1-for-1,000 reverse stock split, and Top Gun Sports receiving a minimum of
$750,000 through a private placement of convertible debt. The Company is in the
process of completing a preliminary information statement relating to the
shareholder approval issues relating to the Top Gun Sports transaction.
At present, the Company is developing one project, which is located in
the Myrtle Beach, South Carolina area.
Sea Garden Town Homes
The Company's only active real estate project is the Sea Garden Town
Home Community in North Myrtle Beach, South Carolina. The Company is developing
this project through its 80% interest in Sea Garden Funding, LLC, the owner and
developer of the remaining 59 units in a 175 unit, 2 bedroom, 2 bath town home
community approximately 3 blocks from the Atlantic shoreline. The Company
1
acquired the project from Sea Garden, LLC on November 13, 2002 for the payment
of $210,000 and the assumption of $1,071,344.66 in mortgages on the real
property held by Horry County State Bank. The remaining 20% interest in Sea
Garden Funding, LLC, is owned by an unaffiliated party, Maxine Roe, an
individual, of Myrtle Beach, South Carolina
The development consists of buildings that have either 4 or 5 town home
units per building. The community currently consists of 126 sold units. The
Company acts as the developer, and hires independent contractors to perform all
of the construction services. The Company is now building 4 and 5 unit town home
buildings and marketing these town homes in the $95,000 to $105,000 range. The
Company believes demand for new units is strong. Revenue is generated as units
are completed and delivered to the purchaser. These units are not time-share
units, but instead, traditional two-story townhouse units.
The Company completed construction on ten new units in the year ended
December 31, 2003. All ten of these units were sold in the year ended December
31, 2004. Since inception through January 10,2005, the Company has sold and
closed a total of 34 units of the Sea Garden project.
History And Organization
General
Altrimega was incorporated under the laws of the State of Nevada on
September 8, 1998 as Mega Health Corporation. On June 23, 1999 the name of the
corporation was changed to Altrimega Health Corporation.
On July 25, 2002, Altrimega entered into a non-binding letter of intent
with Creative Holdings, Inc., a South Carolina corporation. Pursuant to the
Letter of Intent and upon the consummation of a definitive agreement, Altrimega
would acquire Creative Holdings.
A Merger Agreement was executed on August 15, 2002, between Altrimega,
Altrimega Acquisition Company, a Nevada corporation, Creative Holdings, Inc., a
South Carolina corporation and the shareholders of Creative Holdings, Inc.
Pursuant to the Merger Agreement, Creative Holdings would be merged with and
into Altrimega Acquisition Co., which would be the surviving corporation and
continue its corporate existence under the laws of the State of Nevada as a
wholly-owned subsidiary of Altrimega.
In consideration of the merger, Altrimega would issue a total of
320,000,000 shares of common stock of Altrimega to the shareholders of Creative
Holdings in exchange for all of the common stock of Creative Holdings.
On September 2, 2002, Altrimega, Creative Holdings and the shareholders
of Creative Holdings amended the Merger Agreement and restructured the merger
into a stock exchange transaction, whereby Creative Holdings would become a
wholly-owned subsidiary of Altrimega.
Pursuant to the Share Exchange Agreement, effective as of August 15,
2002 by and among Altrimega, Creative Holdings and the shareholders of Creative
Holdings, the shareholders would exchange with, and deliver to, Altrimega 100%
of the issued and outstanding capital stock of Creative Holdings in exchange for
20,000,000 shares of common stock of Altrimega and 1,000,000 shares of Series A
Convertible Preferred Stock of Altrimega. Each share of Series A Convertible
Preferred Stock will be convertible into 300 shares of common stock of
Altrimega.
The share exchange was completed on October 17, 2002. At that time,
Creative Holdings became a wholly owned subsidiary of Altrimega. Ultimately,
after certain shares were cancelled, the former shareholders of Creative
Holdings received 13,619,950 shares of Altrimega's common stock. Under the terms
of the Share Exchange Agreement, Altrimega is obligated to seek shareholder
approval to increase its authorized capital stock to 800,000,000 shares of
common stock, which would allow for the conversion of the Series A preferred
stock.
Competition
There are a number of interval ownership and town home communities in
the greater Myrtle Beach area. Altrimega's projects and proposed projects in
this area are typically priced in the medium to upper ranges of current market
pricing. Both areas are now and have in the recent past enjoyed vibrant growth
of population which management believes has created demand for new housing. If
these growth trends continue, we believe that there should be adequate demand
for the Company's units for sale in the Sea Garden project, and in relation to
other new properties of similar design and pricing in the markets in which we
plan to participate.
2
In respect to how the Company's competitive position as compared to
other real estate development companies in this geographic region, management
believes that our position is considerably weaker than most other companies
because of our inability to raise funds or to find guarantors for mortgage loans
and the lack of a significant workforce. The lack of capital causes the Company
to not be able to participate in many projects that are identified. The
Company's President, John W. Gandy presents our major strength with his
significant ties to the real estate community and his access to many real estate
projects.
Employees
As of May 10, 2004, we have only one paid employee, our President and
Chief Executive Officer, John W. Gandy. While Mr. Gandy is a partner in a
certified public accounting firm, Mr. Gandy is an employee of the Company.
Altrimega has an employment agreement with Mr. Gandy, which started in 2003 that
provides for an annual salary of $100,000 with a 5% increase each year to a
maximum of $125,000, if Altrimega had a profit in the previous year. To date,
Mr. Gandy has only accrued a salary, and beginning July 1, 2003, he informed the
Board of Directors that he would forego any additional salary accruals until
such time as the Company improves its financial position. Our other officer, Ron
Hendrix, Chief Financial Officer, is not currently compensated and spends a
limited amount of time in the business. Because the Company has limited
financial resources, Mr. Hendrix has agreed to perform his services for no
compensation at the present time.
Risks Related To Our Business
We are subject to various risks that may materially harm our business,
financial condition and results of operations. You should carefully consider the
risks and uncertainties described below and the other information in this filing
before deciding to purchase our common stock. If any of these risks or
uncertainties actually occurs, our business, financial condition or operating
results could be materially harmed. In that case, the trading price of our
common stock could decline.
Altrimega Has Historically Lost Money And Losses May Continue In The Future
Since our inception we have not been profitable and have lost money on
both a cash and non-cash basis. For the year ended December 31, 2003, we lost
$132,822. Our accumulated deficit was $799,085 as of December 31, 2002. Future
losses are likely to occur, as we are dependent on spending money to evaluate
and pursue real estate projects. No assurances can be given that we will be
successful in reaching or maintaining profitable operations. Accordingly, we may
continue to experience liquidity and cash flow problems.
Altrimega Will Most Likely Need To Raise Additional Capital Or Debt Funding To
Sustain Operations
Unless Altrimega can become profitable with the existing sources of
funds, Altrimega will require additional capital to sustain operations and may
need access to additional capital or additional debt financing to grow. In
addition, to the extent that we have a working capital deficit and cannot offset
the deficit we may have to raise capital to repay the deficit and provide more
working capital to permit growth in revenues. We cannot assure you that
financing whether from external sources or related parties will be available if
needed or on favorable terms. Our inability to obtain adequate financing will
result in the need to reduce the pace of business operations. Any of these
events could be materially harmful to our business and may result in a lower
stock price.
We Have Been The Subject Of A Going Concern Opinion From December 31, 2003 From
Our Independent Auditors, Which Means That We May Not Be Able To Continue
Operations Unless We Can Become Profitable or Obtain Additional Funding
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with our financial statements for the year
ended December 31, 2003, which states that the financial statements raise
substantial doubt as to Altrimega' ability to continue as a going concern. Our
ability to make operations profitable or obtain additional funding will
determine our ability to continue as a going concern. Our financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
We Are Subject To A Working Capital Deficit, Which Means That Our Current Assets
On December 31, 2003 Were Not Sufficient To Satisfy Our Current Liabilities
We had a working capital deficit of $475,143 at December 31, 2003,
which means that our current liabilities as of that date exceeded our current
assets on December 31, 2003 by $475,143. Current assets are assets that are
3
expected to be converted to cash within one year and, therefore, may be used to
pay current liabilities as they become due. Our working capital deficit means
that our current assets on December 31, 2003 were not sufficient to satisfy all
of our current liabilities on that date. If our ongoing operations do not begin
to provide sufficient profitability to offset the working capital deficit we may
have to raise capital or debt to fund the deficit or cease operations.
Our Common Stock May Be Affected By Limited Trading Volume And May Fluctuate
Significantly
There has been a limited public market for our common stock and there
can be no assurance that a more active trading market for our common stock will
develop. An absence of an active trading market could adversely affect our
shareholders' ability to sell our common stock in short time periods, or
possibly at all. Our common stock has experienced, and is likely to experience
in the future, significant price and volume fluctuations, which could adversely
affect the market price of our common stock without regard to our operating
performance. In addition, we believe that factors such as changes in the overall
economy or the condition of the financial markets could cause the price of our
common stock to fluctuate substantially. These fluctuations may also cause short
sellers to enter the market from time to time in the belief that Altrimega will
have poor results in the future. We cannot predict the actions of market
participants and, therefore, can offer no assurances that the market for our
stock will be stable or appreciate over time.
Our Common Stock Is Deemed To Be "Penny Stock," Which May Make It More Difficult
For Investors To Sell Their Shares Due To Suitability Requirements
Our common stock is deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline. Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$10.0 million (if in continuous operation for less than three
years), or with average revenues of less than $6.0 million for the
last three years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor.
Our Limited Operating History Makes It Difficult Or Impossible To Evaluate Our
Performance And Make Predictions About Our Future
Altrimega has only acquired one real estate project, the Sea Garden
project. Based on this limited history with real estate projects, it is
difficult or impossible for us to evaluate our operational and financial
performance, or to make accurate predictions about our future performance.
ITEM 2. DESCRIPTION OF PROPERTIES
Altrimega owns an 80% share of Sea Garden Funding, LLC. The operating
agreement that governs the rights of the members of Sea Garden Funding, LLC,
Creative Holdings, with an 80% interest and Toe Roe, an unaffiliated party, with
the remaining 20% interest, was entered into on October 10, 2002. Sea Garden
Funding owns the remaining units under construction and sites for future
construction within the Sea Garden Town Home community in North Myrtle Beach,
South Carolina, Sea Garden consists of 126 sold units and 49 units to be
constructed by the developer, Sea Garden Funding, LLC. Horry County State Bank
holds a mortgage on this property in the principal amount of $620,000 as of May
10, 2004. The mortgages are satisfied by a $75,000 principal reduction as each
new building pad is taken down to develop. Upon sale and closing of each
townhouse located on that building pad, an additional $8,500 is paid to the
Bank. The terms of the mortgages on the property are for one year, with an
4
interest rate of prime plus one-half percent. Currently, that percentage
interest rate is 4.5%. Since January 1, 2004, three building pads have been
taken down for the start of construction. It is anticipated that these buildings
will be completed in June or early July of this year. The estimated cost to
complete the development of the project is $3,420,000. The project has adequate
insurance.
The Company pays $600 per month to lease a townhouse unit for its model
on a non-cancelable lease which expired in April 2004. The owner of the unit
agreed to a three-month extension of the lease for $2,400. The lease agreement
is with an unrelated couple from North Carolina, who intends to occupy the unit
for vacation use when the lease expires. The Company will then have a unit in
one of its other buildings currently under construction for use as a model.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters have been submitted to a vote of our shareholders during the
fiscal year ended December 31, 2003. However, the Exchange Agreement with
Creative Holdings, Inc. requires us to obtain approval of an increased
capitalization to 800 million shares and name change. Based on the cancellation
of the Series A Preferred Stock in December 2004 and January 2005, the Company
has withdrawn its Information Statement to increase its authorized shares of
common stock and change its name to Creative Holdings & Marketing Corporation.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock has been quoted on the NASD's OTC Bulletin Board since
November 1, 2000. Prior to such date management is not aware of the quotation or
trading of the Common Stock through any other medium. The table below sets
forth, for the respective periods indicated, the prices for our common stock in
the over-the-counter market as reported by the NASD's OTC Bulletin Board.
The bid prices represent inter-dealer quotations, without adjustments
for retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions.
Period Ended December 31, 2002 High Bid Low Bid
---------------------------------------------------- -------- --------
First Quarter $0.210 $0.030
Second Quarter $0.080 $0.020
Third Quarter $0.080 $0.020
Fourth Quarter $0.053 $0.020
Period Ended December 31, 2003 High Bid Low Bid
---------------------------------------------------- -------- --------
First Quarter $0.025 $0.003
Second Quarter $0.011 $0.002
Third Quarter $0.008 $0.004
Fourth Quarter $0.011 $0.002
Period Ended March 31, 2004 High Bid Low Bid
---------------------------------------------------- -------- --------
First Quarter $.010 $0.005
At May 10, 2004, our Common Stock was quoted on the OTC Bulletin Board
at a bid and asked price of $0.003 and $0.004, respectively. At December 31,
2003, we had approximately 83 shareholders of record. The Company has 49,139,950
shares of common stock and 1,000,000 shares of preferred stock outstanding as of
May 10, 2004. The Company's authorized capital stock consists of 50,000,000
shares of common stock and 10,000,000 shares of preferred stock.
Dividends
Altrimega has not declared or paid cash dividends on its Common Stock
since its inception and does not anticipate paying such dividends in the
foreseeable future. The payment of dividends may be made at the discretion of
the Board of Directors and will depend upon, among other factors, on Altrimega's
operations, its capital requirements, and its overall financial condition.
Changes In Securities
During the years ended December 31, 2001, December 31, 2002 and
December 31, 2003, Altrimega issued the following unregistered securities:
As a result of the share exchange agreement with Creative Holdings,
Altrimega issued the former stockholders of Creative Holdings 13,619,950 shares
of common stock and 1,000,000 shares of series A convertible preferred stock.
The Company issued 3,000,000 for accounts payable of $39,500 at $0.03
per share to Earl Ingarfield, an unaffiliated party in 2002.
The Company issued 3,200,000 for cash and services at $0.001 per share
to the Company's founders in 2002.
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Securities Authorized For Issuance Under Equity Compensation Plan
The following table sets forth the securities that have been authorized
under equity compensation plans as of December 31, 2003.
Number
Of Securities
Remaining
Available
Number For Future
Of Securities Issuance
To Be Issued Weighted-Average Under Equity
Upon Exercise Exercise Price Compensation Plans
Of Outstanding Of Outstanding (Excluding
Options, Options, Securities
Warrants And Warrants And Reflected
Rights Rights In Column (a))
-------------- -------------- ------------------
(a) (b) (c)
------------------------------------------------------------- -------------- -------------- ------------------
Equity compensation plans approved by security holders 0 -- 0
Equity compensation plans not approved by security holders 0 -- 0
TOTAL 0 -- 0
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements, and the Notes thereto included
herein. The information contained below includes statements of Altrimega's or
management's beliefs, expectations, hopes, goals and plans that, if not
historical, are forward-looking statements subject to certain risks and
uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements. For a discussion on
forward-looking statements, see the information set forth in the Introductory
Note to this Annual Report under the caption "Forward Looking Statements", which
information is incorporated herein by reference.
Going Concern
As reflected in Altrimega's financial statements for the twelve months
ended December 31, 2003, Altrimega's accumulated deficit of $799,085 and its
working capital deficiency of $475,143 raise substantial doubt about its ability
to continue as a going concern. The ability of Altrimega to continue as a going
concern is dependent on Altrimega's ability to raise additional debt or capital.
The financial statements for December 31, 2003 do not include any adjustments
that might be necessary if Altrimega is unable to continue as a going concern.
Critical Accounting Policies And Estimates
Management's discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires that we make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. At each balance
sheet date, management evaluates its estimates. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The estimates and critical
accounting policies that are most important in fully understanding and
evaluating our financial condition and results of operations include those
listed below.
Revenue Recognition
Gains from sales of operating properties and revenues from land sales
are recognized using the full accrual method provided that various criteria
relating to the terms of the transactions and any subsequent involvement by the
Company with the properties sold are met. Gains or revenues relating to
transactions which do not meet the established criteria are deferred and
recognized when the criteria are met or using the installment or cost recovery
methods, as appropriate in the circumstances. For land sale transactions under
terms in which the Company is required to perform additional services and incur
7
significant costs after title has passed, revenues and costs of sales are
recognized proportionately on a percentage of completion basis. Deposits
received prior to closing are recorded as a liability until the consummation of
the sale at which time such amounts are generally applied toward the purchase
price.
Cost of land sales is generally determined as a specific percentage of
land sales revenues recognized for each land development project. The cost
percentages used are based on estimates of development costs and sales revenues
to completion of each project and are revised periodically for changes in
estimates or development plans. The specific identification method is used to
determine cost of sales of certain parcels of land.
Properties
Properties under development are carried at cost reduced for impairment
losses, where appropriate. Properties held for sale are carried at cost reduced
for valuation allowances, where appropriate. Acquisition, development and
construction costs of properties in development and land development projects
are capitalized including, where applicable, salaries and related costs, real
estate taxes, interest and preconstruction costs. The pre-construction
development (or an expansion of an existing property) includes efforts and
related costs to secure land control and zoning, evaluate feasibility, and
complete other initial tasks, which are essential to development. Provisions are
made for potentially unsuccessful preconstruction efforts by charges to
operations.
Properties held for sale are carried at the lower of their carrying
values (i.e., cost less accumulated depreciation and any impairment loss
recognized, where applicable) or estimated fair values less costs to sell.
Generally, revenues and expenses related to property interests acquired with the
intention to resell are not recognized.
Stock-based compensation
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and Related Interpretations, in
accounting for stock options issued to employees. Under APB No. 25, employee
compensation cost is recognized when estimated fair value of the underlying
stock on date of the grant exceeds exercise price of the stock option. For stock
options and warrants issued to non-employees, the Company applies SFAS No. 123,
Accounting for Stock-Based Compensation, which requires the recognition of
compensation cost based upon the fair value of stock options at the grant date
using the Black-Scholes option pricing model.
In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. SFAS No. 148 amends the
transition and disclosure provisions of SFAS No. 123. The Company is currently
evaluating SFAS No. 148 to determine if it will adopt SFAS No. 123 to account
for employee stock options using the fair value method and, if so, when to begin
transition to that method.
Principals Of Consolidation
The consolidated financial statements shown in this report excludes the
historical operating information of the parent before September 30, 2002, and
includes the operating information of the subsidiary, Creative Holdings, Inc.,
from July 3, 2002 (date of inception of the subsidiary), and the operating
information of Sea Garden Funding, LLC from November 2002 ( the date of the
purchase of 80% of the LLC) to December 31, 2002.
All intercompany transactions have been eliminated.
Restatement Of Financial Statements For The Fiscal Year Ended December 31, 2002
Subsequent to the issuance of the Company's financial statements,
management became aware that those financial statements did not reflect account
balances properly for the period from July 3, 2002 (date of inception) through
December 31, 2002. Properly accounting of these items in the revised financial
statements has the following effect:
For the period from July 3, 2002 (date of inception) through December
31, 2002, the change in the statement of operations primarily related to the
accounting for the share exchange agreement between Altrimega and Creative
Holdings, which was not properly reported as a transaction identical to that
resulting from a reverse acquisition, except goodwill or other intangible assets
8
are not recorded. The net change of $171,756 increased the net loss from
$494,507 ($0.01 per weighted average common share outstanding) to $666,263
($0.06 per weighted average common share outstanding) for the period from July
3, 2002 (date of inception) through December 31, 2002. The Company is in the
process of preparing an amendment to its Form 10-KSB for fiscal year ended
December 31, 2002.
Results Of Operations For The Year Ended December 31, 2003, Compared To The Year
Ended December 31, 2002
Revenues
Revenue for the year ended December 31, 2003, was $904,908, an increase
of $904,918, as compared to no revenue for the year ended December 31, 2002. The
increase in revenues in 2003 was attributable to sales of units at the Sea
Garden project, where the Company sold 10 units in 2003. We anticipate revenues
for the fiscal year ending 2004 to consist mainly or completely of the sale of
units at the Sea Garden Project.
Cost of Revenue. Cost of revenue for the year ended December 31, 2003,
was $861,757, or 95.23% of revenue. The cost of revenue relates to construction
and other costs of units at the Sea Garden project. The Company had no revenue
or cost of revenue for 2002.
Gross profit. Gross profit for the year ended December 31, 2003, was
$43,161, or $4.77% of revenue. The gross profit relates to the sale of units at
the Sea Garden project
Operating Expenses. Operating expenses for the year ended December 31,
2003, were $101,025, or 11.16% of revenue, as compared to $661,384, for the year
ended December 31, 2002. Operating expenses in 2003 consisted of $69,500 in
consulting and professional fees and $31,525 in general and administrative
expenses. The decrease of $560,359 from 2002 to 2003 was almost entirely
attributable to a decrease in consulting and professional fees, which equaled
$631,756 in 2002.
Other Income (Expense). Other income (expense) for the year ended
December 31, 2003, was a net expense of $82,015, an increase of $73,995, as
compared to a net expense of $8,020 for the year ended December 31, 2002. The
increase in other expense in 2003 was primarily attributable to $88,038 in
interest expense from loans used in the construction of two buildings at Sea
Gardens and the two mortgages on the remaining land at the Sea Garden project.
Net Loss. Altrimega had a net loss of $132,822 for the fiscal year
ended December 31, 2003, as compared to a net loss of $666,263 for the fiscal
year ended December 31, 2002. The decrease of $533,441 was mostly attributable
to the $560,359 decrease in consulting and professional fees in 2003. In
addition, Altrimega generated revenue and minimal gross profit in 2003.
Liquidity And Capital Resources
Altrimega's financial statements have been prepared on a going concern
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. Altrimega incurred
a net loss of $132,822 and $666,263 for the years ended December 31, 2003 and
December 31, 2002, respectively, and has an accumulated deficit of $799,085 at
December 31, 2003. As of December 31, 2003, we had assets of $764,414 and
liabilities of $1,141,997, a difference of $377,583. Additionally, our current
assets were $666,854 and our current liabilities were $1,141,997, creating a
working capital deficit of $475,143. The majority of the assets, $659,515,
consist of building sites contained within the Sea Garden town home community.
Consequently, the majority of our liabilities, $845,000, are mortgage loans on
the Sea Garden assets. Accounts payable to related parties equal to $260,911 are
also included in our liabilities. Management recognizes that Altrimega must
generate or obtain additional capital to enable it to continue operations.
Management is planning to obtain additional capital principally through the sale
of equity securities. The realization of assets and satisfaction of liabilities
in the normal course of business is dependent upon Altrimega obtaining
additional equity capital and ultimately obtaining profitable operations.
However, no assurances can be given that Altrimega will be successful in these
activities. Should any of these events not occur, the accompanying consolidated
financial statements will be materially affected.
We had limited operations and revenues during the fiscal year ended
December 31, 2003. Our shortfall in working capital has been met through
advances from our president, John Gandy, and other shareholders who have
advanced funds to pay expenses incurred by the Company from time to time. At no
time during the fiscal year 2003 did these short term loans exceed $50,000.
9
We anticipate that we will require significant capital to maintain our
corporate viability and execute our plan to develop real estate projects. We
anticipate necessary funds will most likely be provided by our existing
shareholders, our officers and directors, and outside investors. We will require
significant loan guarantees to acquire properties for development and to
complete construction on any additional construction projects. We may be
required to pledge equity in the Company to induce individuals, officers or
directors or other shareholders to guarantee our loans when necessary.
Altrimega is at present meeting its current obligations from its
monthly cash flows, which during 2002, 2003, and to date in 2004 has included
cash from operations, investor capital, and loans from related parties. However,
due to insufficient cash generated from operations, Altrimega currently does not
have internally generated cash sufficient to pay all of its incurred expenses
and other liabilities. As a result, Altrimega is dependent on investor capital
and loans to meet its expenses and obligations. Although related party loans
have allowed Altrimega to meet its obligations in the recent past, there can be
no assurances that Altrimega's present methods of generating cash flow will be
sufficient to meet future obligations. There can be no assurances that Altrimega
will be able to raise sufficient additional capital in the future.
Cash provided by operating activities was $549,342 for the year ended
December 31, 2003, compared to cash used of $1,394,603 for 2002. The decrease in
cash used was due primarily to the sale of properties at the Sea Garden project
and the decreased loss from continuing operations.
Cash used by financing activities was $594,656 during fiscal year 2003,
compared to cash provided by financing activities of $1,441,656 during the same
period in 2002. This difference was mainly due to payments on notes payable of
$594,656 in 2003 and proceeds from notes payable of $1,493,656 in 2002.
We have incurred losses since inception. Management believes that it
will require approximately $150,000 in additional capital to fund overall
Company operations for the next twelve months. This amount does not include
monies necessary to construct new townhouse units at Sea Garden. Altrimega
currently has approximately $30,000 in cash and cash equivalents as of May 10,
2004.
Plan Of Operation for 2004
The Company derives it revenue from the sale of developed or
undeveloped real estate parcels. As of 2003 and 2004, the Company has one
project generating revenues, Sea Garden Town Homes, located in North Myrtle
Beach, South Carolina These Town Homes sell in the $95,000 to $105,000 range per
Town Home unit. The Company owns the building sites for an additional 49 units
and is under construction on 15 units.
It is important for the Company to raise capital funds through the sell
of its common stock in order to provide funding for additional projects. The
projected revenues and subsequent net earnings from the Sea Garden project are
not adequate to cover the Company's annual operating costs on an ongoing basis.
Altrimega intend to strive to locate, evaluate and proceed to finance
and develop multiple projects located primarily in the Myrtle Beach, South
Carolina area and the Carolinas area of the United States. Management believes
that these areas provide the population growth necessary to achieve profits from
new construction projects. For the last three years, Horry County, South
Carolina has been one of the top three fastest growing counties in the United
States. In 1997, Horry County showed a population of only 180,000. Based on
current projections and the 2000 census data, the county will have a permanent
population of 500,000. The principal industries of the area are tourism related.
Myrtle Beach is considered a drive-in market, where tourists will drive their
cars rather than fly to the destination. The tourism industry in Myrtle Beach
has developed three seasons, spring golf, summer beach vacations and fall golf.
The spring and fall golf seasons bring approximately 150,000 visitors per week
to play on the areas over 100 golf courses. The summer vacation season brings in
approximately 400,000 per week. The average tourist stay is one week.
Altrimega's business strategy includes a focus on interval ownership
properties, also known as time-share properties, that cater to this major
tourism industry. As well, we intend to develop projects in the medium price
ranges for the areas permanent service industry population.
Management intends to attempt to seek out low-risk projects that do not
require large financing commitments. In addition, we will continue to evaluate
projects throughout the Carolinas in high growth areas.
Our continuation as a going concern is dependent on our ability to meet
our obligations and obtain additional debt or equity financing required until
our current and proposed real estate projects are under way and generating
earnings. Until such time as these projects are generating earnings, we have
taken the following steps to revise our operating and financial requirements in
an effort to enable us to continue in existence:
10
o We have reduced administrative expenses to a minimum by
consolidating management responsibilities to our president and chief
executive officer.
o We intend to seek either equity or further debt funding.
o We intend to attempt to obtain the professional services of
third-parties through favorable financing arrangements or payment by
the issuance of our common stock.
We believe that the foregoing plan should enable us to generate
sufficient funds to continue its operations for the next twelve months.
Management has implemented this plan to overcome the Company's serious
going concern conditions. The first step is to reduce operating costs. To this
end the Company's President and Chief Executive Officer, John Gandy, has assumed
almost all of the Company's functions from sales and marketing, locating and
evaluating new real estate projects, most accounting functions, shareholder
relations and general administrative functions. Mr. Gandy has foregone any
compensation for the last half of 2003, and has committed to continue with no
compensation through at least the first six months of 2004. The Company's Chief
Financial Officer is receiving no compensation. The Company anticipates reduced
consulting expense in the next fiscal year. Only one consultant is on hand for
additional help in evaluating projects and working with the accounting and
reporting functions of the Company. Administrative expenses, including mostly
legal and accounting charges, will constitute the largest expense items for the
year. The Company has made arrangements with these outside professionals to work
more efficiently with them to help reduce the overall costs associated with
these services.
In addition, the Company has located some potential sources of equity
financing that could contribute to the Company's financial requirements in the
upcoming fiscal year. This element is especially critical to the Company's going
concern situation. Before these sources can be fully explored, the Company must
correct some of its prior filings with the Securities and Exchange Commission.
Management is in the process of correcting its prior 1934 Securities Act
filings, including its annual report of for 10-KSB for the fiscal year ended
December 31, 2002, and its quarterly reports on Forms 10-QSB for the quarters
ended March 31, 2003, June 30, 2003 and September 30, 2003.
For the next 12 months we anticipate that we will need $150,000 to
continue to fund basic operations, in addition to funding necessary to acquire
and develop real estate projects. The Company anticipates approximately $50,000
in consulting fees in the next fiscal year and only minor operating expenses.
Any new real estate projects will require debt financing. In summary, we expect
expenses to decline in the coming fiscal year due to a decrease in consulting
fees and no other increases in operating expenses.
The Company plans to continue operating with small administrative and
consulting fees in the next fiscal year in order to continue operations.
Continuing to work with its accounting and legal professionals more efficiently,
the Company plans to reduce its fees for such services. In addition, the Company
plans to utilize only one consultant for accounting services.
From time to time, Altrimega may evaluate potential acquisitions
involving complementary businesses, content, products or technologies. As of
2003, Altrimega had no agreements or understanding with respect to any such
acquisition. Altrimega's future capital requirements will depend on many
factors, including an increase in Altrimega's real estate projects, and other
factors including the results of future operations. However, on December 17,
2004, Altrimega Health Corporation, d/b/a Creative Holdings & Marketing
Corporation signed a definitive Share Exchange Agreement to acquire all of the
outstanding shares of common stock of Top Gun Sports & Entertainment, Inc., in
exchange for the issuance of 15,750,000 shares of the Altrimega Health
Corporation common stock to the current shareholders of Top Gun Sports &
Entertainment, Inc. The closing of the transaction is conditioned upon
Altrimega's shareholders approving a change of the Company's name to Top Gun
Sports & Entertainment, Inc., a 1-for-1,000 reverse stock split, and Top Gun
Sports receiving a minimum of $750,000 through a private placement of
convertible debt. The Company is in the process of completing a preliminary
information statement relating to the shareholder approval issues relating to
the Top Gun Sports transaction.
11
Current Accounting Pronouncements
New accounting pronouncements. In July 2001, the FASB issued SFAS No.
143, Accounting for Obligations Associated with the Retirement of Long-Lived
Assets. SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The adoption of SFAS No. 143 did not have a material impact on the
Company's financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 establishes a single
accounting model for the impairment or disposal of long-lived assets, including
discontinued operations. SFAS 144 superseded Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and APB Opinion No. 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. The provisions of SFAS No. 144 are effective in fiscal years
beginning after December 15, 2001, with early adoption permitted, and in general
are to be applied prospectively. The adoption of SFAS No. 144 did not have a
material impact on the Company's financial statements for the years ended
December 31, 2003 and 2002.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities,
such as restructurings, involuntarily terminating employees, and consolidating
facilities initiated after December 31, 2002. The implementation of SFAS No. 146
did not have a material effect on the Company's financial statements for the
years ended December 31, 2003 and 2002.
In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149
amends SFAS No. 133 for decisions made (1) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (2) in connection with other Board projects dealing with financial
instruments, and (3) in connection with implementation issues raised in relation
to the application of the definition of a derivative. The Statement clarifies
under what circumstances a contract with an initial net investment meets the
characteristics of a derivative discussed in paragraph 6(b) of SFAS No. 133,
clarifies when a derivative contains a financing component, amends the
definition of underlying to conform it to language used in FASB Interpretation
No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, and amends certain
other existing pronouncements. Those changes will result in more consistent
reporting of contracts as either derivatives or hybrid instruments. This
statement is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The
implementation of SFAS No. 149 did not have a material on the Company's
financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. In
addition, the Statement requires an issuer to classify certain instruments with
specific characteristics described in it as liabilities. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The implementation of SFAS No. 150 is not
expected to have a material effect on the Company's financial statements.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of Health Express required by
Regulation S-B are attached to this report. Reference is made to Item 13 below
for an index to the financial statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
To the Company's knowledge, the Company has had no disagreements with
its certified public accountants with respect to accounting practices or
procedures of financial disclosure. The Company had difficulty contacting its
former accountants, Sellers & Anderson, L.L.C., and ultimately on March 29,
2004, Altrimega changed its accountants to L. L. Bradford, LLC. The Company
filed a corresponding Form 8-K on April 14, 2004.
12
ITEM 8A. CONTROLS AND PROCEDURES
(A) Evaluation Of Disclosure Controls And Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. The Company's disclosure controls and procedures are designed to
provide a reasonable level of assurance of achieving the Company's disclosure
control objectives. The Company's Principal Executive Officer and Principal
Accounting Officer have concluded that the Company's disclosure controls and
procedures are, in fact, effective at this reasonable assurance level as of the
period covered.
(B) Changes In Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's fourth fiscal quarter ended December 31, 2003, the
Company's Principal Executive Officer and Principal Financial Officer have
determined that there are no changes to the Company's internal controls over
financial reporting that has materially affected, or is reasonably likely to
materially effect, the Company's internal controls over financial reporting.
13
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
General
The following table sets forth certain information regarding the
current directors and executive officers of the Company:
POSITION(S)
NAME AGE WITH THE COMPANY DIRECTOR SINCE
------------------------------- ------ ------------------------------ --------------
John W. Gandy 50 President, C.E.O. and Director September 2002
Ron Hendrix 59 Secretary and Director December 2002
John Smith III 42 Director December 2002
There are no family relationships among any of the directors or
executive officers of the Company. None of the Company's directors or executive
officers is a director of any company that files reports with the SEC. None of
the Company's directors have been involved in any bankruptcy or criminal
proceeding (excluding traffic an other minor offenses), nor has been enjoined
from engaging in any business.
Altrimega's directors were appointed in connection with the Share
Exchange Agreement between the Company Creative Holdings and hold office until
their successors are elected. Altrimega intends to elect new directors through
written consent during 2005. Altrimega's officers are appointed by the Board of
Directors and serve at the pleasure of the Board and are subject to employment
agreements, if any, approved and ratified by the Board.
Altrimega does not currently have an audit committee, and the Board of
Directors serves this function. Both John Gandy and Ron Hendrix qualify as audit
committee financial experts, as defined by Regulation S-B Item 401. Neither Mr.
Gandy, nor Mr. Hendrix are independent as that term is defined under the
Exchange Act.
The following information is furnished for each of the executive
officers and directors of the Company:
John W. Gandy serves as our President and Chief Executive Officer and
is the chairman of our board of directors starting in September 2002. Mr. Gandy
graduated from Wofford College in 1976 and received a Masters of Business
Administration degree from Wake Forest University. Mr. Gandy has worked on
numerous real estate development projects in the Carolinas including resort golf
course and ocean front developments. Mr. Gandy became a partner in the
accounting firm of Hendrix & Gandy in September 2000. Prior to that, Mr. Gandy
was a partner in the accounting firm of Rabon, Hendrix Gandy & Grimball,
starting in 1999. During 1996 through 1999, Mr. Gandy consulted with various
business entities. Mr. Gandy is a Certified Public Accountant with over twenty
years experience and is currently also a partner in the firm Hendrix and Gandy.
Ron Hendrix serves as our Chief Financial Officer and is a member of
our board of directors since December 2002. Mr. Hendrix is a certified public
accountant with over 25 years experience in real estate, accommodations and
recreation accounting and consulting. He is a partner in the firm of Hendrix &
Gandy located in Myrtle Beach, South Carolina, starting in September 2000. Prior
to that Mr. Hendrix was a partner in the accounting firm of Rabon, Hendrix,
Gandy & Grimball, starting in 1999. Prior to that, Mr. Hendrix was a partner in
the accounting firm of Hendrix, King & Godbold for over ten years. Mr. Hendrix
is a graduate of Coastal Carolina University.
John F. Smith III serves on our board of directors. Mr. Smith is the
sole owner of Strategic Marketing, an advertising and market positioning
consultant firm in the Myrtle Beach area since prior to 1997. Strategic
Marketing represents golf course operators, hotels, entertainment facilities and
restaurants in the Carolinas. Mr. Smith is a graduate of Coastal Carolina
University.
14
Compliance With Section 16(a) Of The Exchange Act
Our common stock is registered under Section 12(g) of the Exchange Act
and in connection therewith, directors, officers, and beneficial owners of more
than 10% of our common stock ("Reporting Persons") are required to file on a
timely basis certain reports under Section 16 of the Exchange Act as to their
beneficial ownership of our common stock. We believe that under the SEC's rules
for reporting of securities transactions by Reporting Persons, the required
reports have not been filed. The Company has been informed that these reports
are in the process of being filed.
Code Of Ethics
On May 10, 2004, the Board of Directors of the Company adopted a
written Code of Ethics designed to deter wrongdoing and promote honest and
ethical conduct, full, fair and accurate disclosure, compliance with laws,
prompt internal reporting and accountability to adherence to the Code of Ethics.
This Code of Ethics has been filed with the Securities and Exchange Commission
as an Exhibit to this Form 10-KSB.
ITEM 10. EXECUTIVE COMPENSATION
Cash Compensation
There was no cash compensation paid to any of our directors or
executive officers during the fiscal years ended December 31, 2003, 2002, and
2001.
Employment Agreements
Altrimega has an employment agreement with John Gandy, starting in
2003, which provides for an annual salary of $100,000 with a 5% increase each
year to a maximum of $125,000, if the Company had a profit in the previous year.
No amounts have been paid by the Company under this agreement. The Company has
accrued $50,000 for payments due Mr. Gandy for the first two quarters of 2003.
Mr. Gandy has agreed to no additional compensation from July 1, 2003 until such
time as the Company can show the ability to pay for his services.
Bonuses and Deferred Compensation
None.
Compensation Pursuant To Plans
None.
Pension Table
None.
Other Compensation
None.
Compensation Of Directors
None.
Termination Of Employment And Change Of Control Arrangement
We have no compensatory plans or arrangements, including payments to be
received from us, with respect to any persons which would in any way result in
payments to any person because of his resignation, retirement, or other
termination of such person's employment by us, or any change in our control, or
a change in the person's responsibilities following a changing in our control.
15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership Of Certain Beneficial Owners
The following table sets forth as of May 10, 2004, the name, address
and the number of shares of our common stock held of record or beneficially by
each person who was known by us to own beneficially, more than 5% of our
49,139,950 issued and outstanding shares of common stock. In addition, the table
sets forth the name and shareholdings of each director and of all officers and
directors as a group.
Security Ownership Of Certain Beneficial Owners (Common)
Amount and Nature
Name and Address of Beneficial Percentage of
Title of Class Beneficial Owner Ownership(1) Class(2)
-------------------------- ------------------------- ------------------ ----------------
Common Rio Investment Group, LLC 6,200,000 13.43%
25 Greystone Manor
Lewes, Delaware 19958
Common Quickstep, LLC 4,879,750 10.57%
2033 Main Street
Sarasota, FL 34231
Security Ownership Of Certain Beneficial Owners (Preferred)
Amount and Nature
Name and Address of Beneficial Percentage of
Title of Class Beneficial Owner Ownership(1) Class(2)
-------------------------- ------------------------- ------------------ ----------------
Preferred Great West, LLC 250,647 25.06%
1960 Stickney Point Road
Sarasota, FL 34231
Preferred Quickstep, LLC 250,647 25.06%
2033 Main Street
Sarasota, FL 34231
Security Ownership Of Management Of Altrimega (Common)
Amount and
Nature of
Name and Position Beneficial Percentage of
Title of Class of Officer and/or Director Ownership(1) Class(2)
-------------------------- --------------------------------------------- ------------------ ----------------
Common
Common John W. Gandy, President, C.E.O. and Director 2,554,750 5.19%
Common Chicora Beach Holiday** 14,825 0.02%
Common Wofford Capital*** 33,737 0.05%
Common Gandy Associates^ 625,000 1.28%
Common Gandy Family Investments^^ 750,000 1.54%
Common Ron Hendrix, C.F.O., Secretary 1,668,250 3.41%
Common Hendrix & Gandy* 21,000 0.03%
Common John Smith III, Director 348,400 0.72%
Common All Officers and Directors as a Group (3 Persons) 4,840,962 9.85%
Common Total Beneficial Ownership 6,015,962 12.24%
16
Amount and
Nature of
Name and Position Beneficial Percentage of
Title of Class of Officer and/or Director Ownership(1) Class(2)
-------------------------- --------------------------------------------- ------------------ ----------------
Preferred
Preferred John W. Gandy, President, C.E.O. and Director 62,730 6.27%
Preferred Chicora Beach Holiday** 4,355 .43%
Preferred Wofford Capital*** 1,687 .16%
Preferred Gandy Associates^ 31,250 3.12%
Preferred Gandy Family Investments^^ 37,500 3.75%
Preferred Ron Hendrix, C.F.O., Secretary 83,410 8.34%
Preferred Hendrix & Gandy* 1,055 .13%
Preferred John Smith, Director 17,422 1.74%
Preferred All Officers and Directors as a Group (3 Persons) 179,317 19.93%
Preferred Total Beneficial Ownership ----------------
239,409 23.94%
---------------
(1) Applicable percentage of ownership is based on 49,139,950 shares of
common stock and 1,000,000 shares of preferred stock, convertible into
300,000,000 shares of common stock, outstanding as of May 10, 2004 for
each stockholder. Beneficial ownership is determined in accordance
within the rules of the Commission and generally includes voting of
investment power with respect to securities. Shares of common stock
subject to securities exercisable or convertible into shares of common
stock that are currently exercisable or convertible within 60 days of
May 10, 2004 are deemed to be beneficially owned by the person holding
such preferred shares for the purpose of computing the percentage of
ownership of such persons, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) The percentage calculation has been rounded to the nearest
one-hundredth of a percent. (3) Ownership percentage based on officers
and directors' percentage ownership of entity, as set forth below. *
Hendrix & Gandy is owned 50% by John W. Gandy and 50% by Ron Hendrix.
** Chicora Beach Holiday is owned 25% by John W. Gandy.
*** Wofford Capital is owned 16.66% by John W. Gandy.
^ Gandy Associates is owned 50% by John W. Gandy.
^^ Gandy Family Investments is owned 30% by John W. Gandy.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions With Management And Others
Except as indicated below, and for the periods indicated, there were no
material transactions, or series of similar transactions, since the beginning of
the Company's last fiscal year, or any currently proposed transactions, or
series of similar transactions, to which we were or are a party, in which the
amount involved exceeds $60,000, and in which any director or executive officer,
or any security holder who is known by us to own of record or beneficially more
than 5% of any class of our common stock, or any member of the immediate family
of any of the foregoing persons, has an interest.
In 2003, Altrimega has accounts payable totaling $69,500 to officers -
directors, or their affiliate entitles for services rendered.
During the first quarter of 2003, the Company issued 3,000,000 shares
of common stock in satisfaction of accounts payable of $79,500 (including
interest of $39,500).
Accounts receivable - related party. The Company has made a
non-interest bearing, due on demand loan to the minority interest holder of Sea
Garden Funding LLC, which as of December 31, 2003 totaled $62,560.
17
Accounts payable - related parties. As of December 31, 2003,
officers-directors, and their controlled entities have made non-interest
bearing, due on demand loans to the Company totaling $260,911.
Indebtedness Of Management
There were no material transactions, or series of similar transactions,
since the beginning of our last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which we were or are a
party, in which the amount involved exceeds $60,000 and in which any director or
executive officer, or any security holder who is known to us to own of record or
beneficially more than 5% of any class of our common stock, or any member of the
immediate family of any of the foregoing persons, has an interest.
Transactions With Promoters
There have no material transactions between us and our promoters or
founders.
18
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1)Financial Statements. The audited financial statements for
2003 are attached to this report.
(a)(2)Exhibits. The following exhibits are included as part of this
report:
Exhibit Number Title of Document Location
---------------------- ----------------------------------------------- -------------------------------------------
2.01 SHARE EXCHANGE AGREEMENT among Altrimega Incorporated by reference to the Company's
Health Corporation, Creative Holdings, Inc. report on Form 8-K, dated October 2, 2002
and the Shareholders of Creative Holdings,
Inc., dated as of September 2, 2002
4.01 CERTIFICATE OF DESIGNATION AS OF SEPTEMBER 30, Incorporated by reference to Exhibit 4.01
2002 to the Company's Form 10-KSB filed on May
20, 2003
31.1 Certification by Chief Executive Officer Provided herewith
pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification by Chief Financial Officer Provided herewith
pursuant to 15 U.S.C. Section 7241, as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Certification by Chief Executive Officer Provided herewith
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
99.1 Sea Garden Agreement Provided herewith
(b)Reports on Form 8-K. During the last quarter of the fiscal
year ended December 31, 2003, the Company did not file any current reports on
Form 8-K with the Commission. On April 14, 2004, the Company filed a Form 8-K
reporting under Item 4 that the Company engaged L.L. Bradford & Company, LLC, as
its independent auditors, replacing Seller & Andersen, L.L.C.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Altrimega incurred the following principal accounting fees for the year
ended December 31, 2003 and December 31, 2002.
Audit Fees. The aggregate fees billed for professional services
rendered was $10,000 for the audits of the Altrimega's annual financial
statements for the fiscal years ended December 31, 2002, and the reviews of the
financial statements included in Altrimega's annual and quarterly reports for
those fiscal years.
19
Audit-Related Fees. No fees were billed in either of the last two
fiscal years for assurance and related services by the principal accountant.
Tax Fees. No fees were billed in either of the last two fiscal years
for tax compliance, tax advice of tax planning.
All Other Fees. No other fees were billed during the two fiscal years.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
January 10, 2005 ALTRIMEGA HEALTH CORPORATION
By: /s/ John Gandy
----------------------------------------------
John Gandy,
Chief Executive Officer and Director
January 10, 2005 By: /s/ Ron Hendrix
----------------------------------------------
Ron Hendrix,
Chief Financial Officer, Principal Accounting
Officer, Secretary and Director.
21
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
(With Report of Independent Certified Public Accountants Thereon)
F-1
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
PAGE NO.
Report of Independent Certified Public Accountants 1
Consolidated financial statements
Consolidated balance sheet 2
Consolidated statements of operations 3
Consolidated statement of stockholders' deficit 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Altrimega Health Corporation and Subsidiary
Myrtle Beach, South Carolina
We have audited the accompanying consolidated balance sheet of Altrimega Health
Corporation and Subsidiary as of December 31, 2003, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the year
then ended, for the period from July 3, 2002 (Date of Inception) through
December 31, 2002 (restated). 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 auditing standards generally accepted
in the United States of America. 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 Altrimega Health Corporation
and Subsidiary as of December 31, 2003, and the results of its activities and
cash flows for the year then ended, for the period from July 3, 2002 (Date of
Inception) through December 31, 2002 (restated) in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered losses from
operations and current liabilities exceed current assets, all of which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regards to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As more fully described in Note 5, subsequent to the issuance of the Company's
December 31, 2002 financial statements and audited report thereon dated May 20,
2003, the Company became aware that those financial statements did not reflect
account balances properly. In the original report, the auditor expressed an
unqualified opinion on the December 31, 2002 financial statements, and our
opinion on the revised statements, as expressed herein, remains unqualified.
L.L. Bradford & Company, LLC
April 12, 2004
Las Vegas, Nevada
F-3
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
ASSETS
Current assets
Cash $ 1,739
Properties held for development or sale 659,515
Prepaid expenses 5,600
-----------
Total current assets 666,854
Other assets
Accounts receivable - related party 62,560
Deposits 35,000
-----------
Total other assets 97,560
-----------
Total assets $ 764,414
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Notes payable $ 845,000
Accounts payable - related parties 260,911
Accounts payable 36,086
-----------
Total current liabilities 1,141,997
-----------
Total liabilities 1,141,997
Commitments and contingencies --
Minority interest (10,198)
Stockholders' deficit
Preferred stock; $0.001 par value; 10,000,000 shares
authorized, 1,000,000 shares issued and outstanding 1,000
Common stock; $0.001 par value; 50,000,000 shares
authorized, 49,139,950 shares issued and outstanding 49,140
Additional paid-in capital 381,560
Accumulated deficit (799,085)
-----------
Total stockholders' deficit (367,385)
-----------
Total liabilities and stockholders' deficit $ 764,414
===========
See Accompanying Notes to Financial Statements
F-4
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Period from
July 3, 2002
(Date of inception)
through
For the year ended December 31, 2002
December 31, 2003 (RESTATED)
---------------- ----------------
Revenue $ 904,918 $ --
Cost of revenue 861,757 --
---------------- ----------------
Gross profit 43,161 --
Operating expenses
Consulting and professional fees 69,500 631,756
General and administrative 31,525 29,628
---------------- ----------------
Total operating expenses 101,025 661,384
---------------- ----------------
Loss from operations (57,864) (661,384)
Other income (expense)
Interest expense (88,038) (8,020)
Other income 6,023 --
---------------- ----------------
Loss before minority interest (139,879) (669,404)
Minority interest (7,057) (3,141)
---------------- ----------------
Loss before provision for income taxes (132,822) (666,263)
Provision for income taxes -- --
---------------- ----------------
Net loss $ (132,822) $ (666,263)
================ ================
Basic and diluted loss per common share $ (0.00) $ (0.06)
================ ================
Basic and diluted weighted average
common shares outstanding 49,074,197 11,497,579
================ ================
See Accompanying Notes to Financial Statements
F-5
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Preferred Stock Common Stock
------------------------- --------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
Balance at July 3, 2002 (Inception) -- $ -- -- $ --
Issuance of common stock to founders for
cash and founder services, $0.001 -- -- 3,200,000 3,200
Issuance of common stock for acquisition of
Altrimega Health Corporation, $0.001 1,000,000 1,000 37,319,700 37,320
Cancellation of shares -- -- (4,879,750) (4,880)
Issuance of common stock for services,
weighted average price of $0.03 -- -- 10,500,000 10,500
Net loss -- -- -- --
----------- ----------- ----------- -----------
Balance at December 31, 2002 (RESTATED) 1,000,000 1,000 46,139,950 46,140
Issuance of common stock in satisfaction of
accounts payable (including interest of $39,500), $0.03 -- -- 3,000,000 3,000
Net loss -- -- -- --
----------- ----------- ----------- -----------
Balance at December 31, 2003 1,000,000 $ 1,000 49,139,950 $ 49,140
=========== =========== =========== ===========
Additional Total
Paid-In Accumulated Stockholders'
Capital Deficit Deficit
----------- ----------- -----------
Balance at July 3, 2002 (Inception) $ -- $ -- $ --
Issuance of common stock to founders for
cash and founder services, $0.001 -- -- 3,200
Issuance of common stock for acquisition of
Altrimega Health Corporation, $0.001 (38,320) -- --
Cancellation of shares 4,880 -- --
Issuance of common stock for services,
weighted average price of $0.03 338,500 -- 349,000
Net loss -- (666,263) (666,263)
----------- ----------- -----------
Balance at December 31, 2002 (RESTATED) 305,060 (666,263) (314,063)
Issuance of common stock in satisfaction of
accounts payable (including interest of $39,500), $0.03 76,500 -- 79,500
Net loss -- (132,822) (132,822)
----------- ----------- -----------
Balance at December 31, 2003 $ 381,560 $ (799,085) $ (367,385)
=========== =========== ===========
See Accompanying Notes to Financial Statements
F-6
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
Period from
July 3, 2002
(Date of inception)
through
Year Ended December 31, 2002
Cash flows from operating activities: December 31, 2003 (RESTATED)
--------------- ---------------
Net loss $ (132,822) $ (666,263)
Adjustments to reconcile net loss to
net cash provided (used) by operating activities:
Issuance of common stock for services 39,500 350,200
Minority interest (7,057) (3,141)
Changes in operating assets and liabilities
Properties held for development or sale 696,703 (1,356,218)
Accounts receivable - related parties (62,560) --
Advance deposits -- (35,000)
Prepaid commissions 800 (6,400)
Accounts payable- related parties 10,911 250,000
Accounts payable 3,867 72,219
--------------- ---------------
Net cash provided (used) by operating activities 549,342 (1,394,603)
Cash flows from financing activities
Proceeds from issuance of common stock for cash from founders -- 2,000
Proceeds from notes payable -- 1,439,656
Payments on notes payable (594,656) --
--------------- ---------------
Net cash provided (used) by financing activities (594,656) 1,441,656
--------------- ---------------
Net change in cash (45,314) 47,053
Beginning cash balance 47,053 --
--------------- ---------------
Ending cash balance $ 1,739 $ 47,053
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ -- $ --
=============== ===============
Cash paid for interest $ 45,717 $ --
=============== ===============
See Accompanying Notes to Financial Statements
F-7
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY, AND SUMMARY OF SIGNIFICANT POLICIES
Description of business - Altrimega Health Corporation (hereinafter referred to
as the "Company") was incorporated on July 3, 2002 under the laws of the state
of South Carolina. The business purpose of the Company is the development and
sale of residential real estate by the acquisition of a real estate development
company.
History - Altrimega Health Corporation (AHC) was incorporated under the state of
Nevada on September 8, 1998 with the name of Mega International Health
Corporation with authorized common stock of 50,000,000 shares with a par value
of $0.001 and preferred stock of 10,000,000 shares with a par value of $0.001.
The terms of the preferred includes conversion rights, at the option of the
stockholder of 300 shares of common stock for each share of preferred stock. On
June 23, 1999 the name was changed to Altrimega Health Corporation. AHC was
organized for the purpose of marketing nutritional products and during the year
2000 became inactive.
On August 15, 2002, AHC consummated an agreement to acquire all of the
outstanding capital stock of Creative Holdings, Inc., in exchange for 20,000,000
shares of the Company's common stock and 1,000,000 shares of the Company's
preferred stock ("AHC Transaction"). Prior to the AHC Transaction, AHC was a
non-operating public shell company with no operations, nominal assets and
22,020,000 shares of common stock issued and outstanding; and Creative Holdings,
Inc. was a real estate development company. The AHC Transaction is considered to
be a capital transaction in substance, rather than a business combination.
Inasmuch, the AHC Transaction is equivalent to the issuance of stock by Creative
Holdings, Inc. for the net monetary assets of a non-operational public shell
company (AHC), accompanied by a recapitalization. AHC issued 18,499,700 shares
of its common stock for all of the issued and outstanding common stock of
Creative Holdings, Inc. and another 1,500,300 shares will be issued subsequent
to an increase in the authorized common stock pursuant to an amendment to the
certificate of incorporation. A recipient of approximately 5,000,000 shares of
the common stock returned 4,879,750 shares to the Company, which were cancelled
accordingly.
The accounting for the AHC Transaction is identical to that resulting from a
reverse acquisition, except goodwill or other intangible assets will not be
recorded.
During November 2002, the Company acquired 80% of Sea Garden Funding, LLC by the
assumption of certain liabilities. Sea Garden Funding, LLC was organized in the
state of South Carolina on November 13, 2002 for the purpose of the development
and sale of residential real estate. (See Note 2)
Going concern - The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
incurred a net loss of approximately $133,000 for the year ended December 31,
2003, with an accumulated loss from inception of approximately $799,000. The
Company's current liabilities exceed its current assets by approximately
$475,000 as of December 31, 2003.
These conditions give rise to substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include
adjustments relating to the recoverability and classification of reported asset
amounts or the amount and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern is dependent upon its ability to obtain
additional financing or sale of its common stock as may be required and
ultimately to attain profitability.
Management's plan, in this regard, is to develop and sale real estate in order
to provide additional working capital for its future planned activity and to
service its debt, which will enable the Company to operate for the coming year.
Principles of consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.
F-8
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY, AND SUMMARY OF SIGNIFICANT POLICIES
(continued)
Use of estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising and marketing costs - The Company recognizes advertising and
marketing costs in accordance with Statement of Position 93-7 "Reporting on
Advertising Costs." Accordingly, the Company expenses the costs of producing
advertisements at the time production occurs, and expenses the costs of
communication advertising in the period in which the advertising space or
airtime is used. Advertising costs are charged to expense as incurred.
Advertising expenses was $6,790 and $- for the year ended December 31, 2003 and
for the period from July 3, 2002 (Date of Inception) through December 31, 2002,
respectively.
Fair value of financial instruments - The carrying amounts and estimated fair
values of the Company's financial instruments approximate their fair value due
to the short-term nature.
Earnings (loss) per share - Basic earnings (loss) per share excludes any
dilutive effects of options, warrants and convertible securities. Basic earnings
(loss) per share is computed using the weighted-average number of outstanding
common shares during the applicable period. Diluted earnings per share is
computed using the weighted average number of common and common stock equivalent
shares outstanding during the period. Common stock equivalent shares are
excluded from the computation if their effect is antidilutive.
Income taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, which requires recognition
of deferred tax assets and liabilities for future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
As of December 31 2003, the Company has available net operating loss carryovers
of approximately $800,000 that will expire in various periods through 2023. Such
losses may not be fully deductible due to the significant amounts of non-cash
service costs. The Company has established a valuation allowance for the full
tax benefit of the operating loss carryovers due to the uncertainty regarding
realization.
Accounting methods - The Company recognizes income and expenses based on the
accrual method of accounting.
Sales of property - Gains from sales of operating properties and revenues from
land sales are recognized using the full accrual method provided that various
criteria relating to the terms of the transactions and any subsequent
involvement by the Company with the properties sold are met. Gains or revenues
relating to transactions which do not meet the established criteria are deferred
and recognized when the criteria are met or using the installment or cost
recovery methods, as appropriate in the circumstances. For land sale
transactions under terms in which the Company is required to perform additional
services and incur significant costs after title has passed, revenues and costs
of sales are recognized proportionately on a percentage of completion basis.
Deposits received prior to closing are recorded as a liability until the
consummation of the sale at which time such amounts are generally applied toward
the purchase price.
Cost of land sales is generally determined as a specific percentage of land
sales revenues recognized for each land development project. The cost
percentages used are based on estimates of development costs and sales revenues
to completion of each project and are revised periodically for changes in
estimates or development plans. The specific identification method is used to
determine cost of sales of certain parcels of land.
F-9
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY, AND SUMMARY OF SIGNIFICANT POLICIES
(continued)
Properties - Properties under development are carried at cost reduced for
impairment losses, where appropriate. Properties held for sale are carried at
cost reduced for valuation allowances, where appropriate. Acquisition,
development and construction costs of properties in development and land
development projects are capitalized including, where applicable, salaries and
related costs, real estate taxes, interest and preconstruction costs. The
pre-construction development (or an expansion of an existing property) includes
efforts and related costs to secure land control and zoning, evaluate
feasibility, and complete other initial tasks, which are essential to
development. Provisions are made for potentially unsuccessful preconstruction
efforts by charges to operations.
Properties held for sale are carried at the lower of their carrying values
(i.e., cost less accumulated depreciation and any impairment loss recognized,
where applicable) or estimated fair values less costs to sell. Generally,
revenues and expenses related to property interests acquired with the intention
to resell are not recognized.
Dividend policy - The Company has not adopted a policy regarding payment of
dividends.
Comprehensive loss - The Company has no components of other comprehensive loss.
Accordingly, net loss equals comprehensive loss for all periods.
Segment information - The Company discloses segment information in accordance
with SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which uses the Management approach to determine reportable
segments. The Company operates under one segment.
Stock-based compensation - The Company applies Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and Related
Interpretations, in accounting for stock options issued to employees. Under APB
No. 25, employee compensation cost is recognized when estimated fair value of
the underlying stock on date of the grant exceeds exercise price of the stock
option. For stock options and warrants issued to non-employees, the Company
applies SFAS No. 123, Accounting for Stock-Based Compensation, which requires
the recognition of compensation cost based upon the fair value of stock options
at the grant date using the Black-Scholes option pricing model.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123. The Company is currently evaluating SFAS
No. 148 to determine if it will adopt SFAS No. 123 to account for employee stock
options using the fair value method and, if so, when to begin transition to that
method.
Net loss per common share - The Company computes net loss per share in
accordance with SFAS No. 128, Earnings per Share and SEC Staff Accounting
Bulletin No. 98. Under the provisions of SFAS 128 and SAB 98, basic net loss per
share is computed by dividing the net loss available to common stockholders for
the period by the weighted average number of shares of common stock outstanding
during the period. The calculation of diluted net loss per share gives effect to
common stock equivalents, however, potential common shares are excluded if their
effect is antidilutive. For the year ended December 31, 2003 and the period from
July 3, 2002 (Inception) through December 31, 2003, no shares were excluded from
the computation of diluted earnings per share because their effect would be
antidilutive.
New accounting pronouncements - In July 2001, the FASB issued SFAS No. 143,
Accounting for Obligations Associated with the Retirement of Long-Lived Assets.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The adoption of SFAS No. 143 did not have a material impact on the
Company's financial statements.
F-10
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, HISTORY, AND SUMMARY OF SIGNIFICANT POLICIES
(continued)
New accounting pronouncements (continued) - In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS
144 establishes a single accounting model for the impairment or disposal of
long-lived assets, including discontinued operations. SFAS 144 superseded
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and
APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. The provisions of SFAS No. 144
are effective in fiscal years beginning after December 15, 2001, with early
adoption permitted, and in general are to be applied prospectively. The adoption
of SFAS No. 144 did not have a material impact on the Company's financial
statements for the years ended December 31, 2003 and 2002.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities, such as
restructurings, involuntarily terminating employees, and consolidating
facilities initiated after December 31, 2002. The implementation of SFAS No. 146
did not have a material effect on the Company's financial statements for the
years ended December 31, 2003 and 2002.
In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149
amends SFAS No. 133 for decisions made (1) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS No.
133, (2) in connection with other Board projects dealing with financial
instruments, and (3) in connection with implementation issues raised in relation
to the application of the definition of a derivative. The Statement clarifies
under what circumstances a contract with an initial net investment meets the
characteristics of a derivative discussed in paragraph 6(b) of SFAS No. 133,
clarifies when a derivative contains a financing component, amends the
definition of underlying to conform it to language used in FASB Interpretation
No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, and amends certain
other existing pronouncements. Those changes will result in more consistent
reporting of contracts as either derivatives or hybrid instruments. This
statement is effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The
implementation of SFAS No. 149 did not have a material on the Company's
financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. In
addition, the Statement requires an issuer to classify certain instruments with
specific characteristics described in it as liabilities. This Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The implementation of SFAS No. 150 is not
expected to have a material effect on the Company's financial statements.
F-11
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATIONS AND ACQUISITIONS
Sea Garden Funding, LLC - In November 2001, the Company acquired 80% of Sea
Garden Funding, LLC (a South Carolina Limited Liability Company) in exchange for
the assumption of certain liabilities. The Company will account for its 80%
ownership interest in Sea Garden Funding, LLC using the purchase method of
accounting under APB No. 16. The results of operations for the acquired company
have been included in the consolidated financial results of the Company from the
date of such transaction forward. The Company acquired the project from Sea
Garden, LLC on October 21, 2002 for the payment of $210,000 and the assumption
of $1,071,344.66 in mortgages on the real property held by Horry County State
Bank. The remaining 20% interest in Sea Garden Funding, LLC, is owned by an
unaffiliated party, Tom Roe, an individual, of Myrtle Beach, South Carolina. The
acquisition was made by exercising an option that Creative Holdings, Inc., held
on the parcel. The option was not valued as no consideration was given by
Creative Holdings to hold the option. The real property held by Sea Garden, LLC
was acquired prior to Creative's acquisition of Sea Garden Funding, LLC.
In accordance with APB No. 16, all identifiable assets were assigned a portion
of the cost of the acquired company (purchase price) on the basis of their
respective fair values. Intangible assets were identified and valued by
considering the Company's intended use of the acquired assets and analysis of
data concerning products, technologies, markets, historical performance, and
underlying assumptions of future performance. The economic environments in which
the Company and the acquired company operate were also considered in the
valuation analysis.
3. NOTES PAYABLE
As of December 31, 2003, the Company has two notes payable totaling $445,000 and
$400,000. The outstanding balances are secured by real estate, payable in
quarterly installments of interest only at the prime lending rate plus 0.5%
(4.5% as of December 31, 2003), and maturity during March and February 2004,
respectively.
4. RELATED PARTY TRANSACTIONS
Accounts receivable - related party - The Company has made a non-interest
bearing, due on demand loan to the minority interest holder of Sea Garden
Funding LLC, which as of December 31, 2003 totaled $62,560.
Accounts payable - related parties - As of December 31, 2003,
officers-directors, and their controlled entities, have acquired 36% of the
outstanding stock of the Company, after the conversion of the preferred shares
to common shares, and have made non-interest bearing, due on demand loans to the
Company totaling $260,911.
Executive employment agreement - During 2003 the Company entered into an
employment agreement with an officer, which provides for an annual salary of
$100,000 with a 5% increase each year to a maximum of $125,000, provided the
Company has a profit in the previous year.
5. STOCKHOLDERS' DEFICIT
During 2002, the Company issued 10,500,000 shares of common stock at a weighted
average fair value of approximately $0.03 per share for services.
During 2002, the Company issued 18,499,700 shares of the Company's common stock
in consideration of the AHC Transaction, as discussed in Note 1. A recipient of
approximately 5,000,000 shares of the common stock returned 4,879,750 shares to
the Company which were cancelled accordingly.
During the first quarter of 2003, the Company issued 3,000,000 shares of common
stock in satisfaction of accounts payable of $79,500 (including interest of
$39,500).
F-12
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. RESTATED FINANCIAL STATEMENTS
Subsequent to the issuance of the Company's financial statements, management
became aware that those financial statements did not reflect account balances
properly for the period from July 3, 2002 (date of inception) through December
31, 2002. Properly accounting of these items in the revised financial statements
has the following effect:
Period from
Period from July 3, 2002
July 3, 2002 (Date of
(Date of inception) inception)
Through Through RESTATED
December 31, December 31, 2002 Increase
2002 (RESTATED) (Decrease)
----------------- ----------------- -----------
Revenue $ -- $ -- $ --
Operating expenses 497,648 661,384 163,736
Loss from operations (497,648) (661,384) (163,736)
Other expense -- 8,020 8,020
Loss before minority interest (497,648) (669,404) (171,756)
Minority interest 3,141 3,141 --
Loss before provision for income taxes (494,507) (666,263) (171,756)
Provision for income taxes -- -- --
Net loss (494,507) (666,263) (171,756)
Basic and diluted loss per common share $ (0.01) $ (0.06) $ (0.05)
Basic and diluted weighted average common shares outstanding 41,807,000 11,497,579 (30,309,421)
For the period from July 3, 2002 (date of inception) through December 31, 2002,
the change in the statement of operations primarily related to the accounting
for the AHC Transaction, which was not properly reported as a transaction
identical to that resulting from a reverse acquisition, except goodwill or other
intangible assets are not recorded. The net change of $171,756 increased the net
loss from $494,507 ($0.01 per weighted average common share outstanding) to
$666,263 ($0.06 per weighted average common share outstanding) for the period
from July 3, 2002 (date of inception) through December 31, 2002.
7. COMMITMENTS AND CONTINGENCIES
Leased facility - The Company pays $600 per month to lease a townhouse unit for
its model on a non-cancelable lease which expired in April 2004. The owner of
the unit agreed to a three-month extension of the lease for $2,400. The lease
agreement is with an unrelated couple from North Carolina, who intends to occupy
the unit for vacation use when the lease expires. The Company will then have a
unit in one of its other buildings currently under construction for use as a
model.
F-13