Item 3.02 Unregistered Sales of Equity Securities
On December 19, 2019, the Company entered into an amendment dated December 19,
2019 to the stock purchase agreement dated July 17, 2019 with Justin Anderson
and Stacey Anderson pursuant to which the Company agreed to purchase all of the
outstanding capital stock of JAS Practice Management, Inc., a Texas corporation
doing business as JAS Consulting, Inc. ("JAS"), and Center for Psychological
Development, Inc., an Oklahoma corporation doing business as CPD Integrated
Health Care ("CPD"). Pursuant to the amendment, the Company agreed to purchase,
and purchased contemporaneously with the execution of the amendment, all of the
capital stock of JAS from Justin Anderson and Stacey Anderson for a purchase
price consisting of (a) 3,500,000 shares of the Company's common stock, (b) a
payment of $250,000 and (c) the Company's 8% secured promissory note in the
principal amount of $250,000, which is due on December 31, 2020. Justin Anderson
is the Company's sole director and chief executive officer and Stacey Anderson
is his spouse.
Contemporaneously with the execution of the amendment, the Company borrowed
$135,000 from each of William R. Kruse and Zima World Holdings Corp. ("Zima").
Pursuant to note purchase agreements dated December 19, 2019 with Mr. Kruse and
Zima, the Company issued its 8% secured promissory notes in the aggregate
principal amount of $270,000. The Company used the proceeds from the sale of the
notes to make the $250,000 payment to Justin Anderson and Stacey Anderson and to
pay legal expenses.
Payment of the notes to Justin Anderson and Stacey Anderson, Mr. Kruse and Zima
is secured by a pledge of the stock of JAS pursuant to a pledge agreement dated
December 19, 2019, among the Company, Justin Anderson, Stacey Anderson, Mr.
Kruse and Zima.
During December 2019, the Company also issued (a) 250,000 shares of common stock
to Justin Anderson pursuant to his employment agreement dated October 31, 2019,
which provides that Mr. Anderson receives annual compensation of 250,000 shares
of common stock, and (b) 150,000 shares to Douglas W. Samuelson in satisfaction
of his invoice for $50,000 for services as chief financial officer through June
30, 2019.
In connection with the acquisition of JAS and the development and financing of
the Company's business following completion of the acquisition of JAS, the
Company's two former chief executive officers, Lawrence Biggs and Natalia
Lopera, each transferred 3,500,000 shares to us for no consideration and sold
500,000 to Mr. Kruse and Zima for nominal consideration. The transfer of the
7,000,000 shares to the Company, which shares will be cancelled, reduces the
Company's outstanding common stock to 12,460,417 shares after giving effect to
the issuance of 3,500,000 shares in connection with the acquisition of JAS and
the issuance of 400,000 shares to Mr. Anderson and Mr. Samuelson.
All of the foregoing issuances of securities are exempt from registration
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as
transactions not involving a public offering. The certificates for the shares
bear a restricted stock legend.
JAS Consulting provides practice management services, including billing and
coding, and office management, and it sells medical equipment and supplies to
medical practices in eleven states. JAS presently performs its services for 62
medical practices. Approximately 90% of JAS' revenues is derived from its
practice management services, and most of the balance is generated from sales of
medical equipment and supplies.
JAS' second largest client is CPD, which is owned by Justin Anderson and Stacey
Anderson and which through its physicians, offers primary care and outpatient
behavioral health service in seven locations in Oklahoma and Texas. The
agreement pursuant to which the Company acquired JAS also provides for the
acquisition by the Company of CPD. CPD accounted for approximately 9% to 10% of
JAS' revenue in the nine-months ended September 30, 2019 and approximately1.5%
of JAS' revenue in the year ended December 31, 2018.
Based on unaudited internally generated financial information, JAS expects to
report modest net income on revenue of approximately $1.9 million for both the
nine months ended September 30, 2019 and the year ended December 31, 2018. Such
information is derived from JAS' internal books and records does not constitute
information derived from financial statements prepared in accordance with
generally accepted accounting principles, and an audit of JAS' financial
statements may result in significantly different results of operations.
The Company's revenue for 2018 of $70,000 represented revenue generated from the
sale of five of its PC8B units to JAS approximately at cost. During the nine
months ended September 30, 2019, the Company sold two PC8B units to JAS for
$60,000, representing approximately 45% of the Company's revenue for the period.
In addition, the Company sold additional units to JAS for $148,500, which was
the Company's cost. Because the units were sold to a related party at cost,
under generally accepted accounting principles, the Company did not recognize
revenue on the sale. Accounts receivable from JAS of $30,000 accounted for 74%
of the Company's accounts receivable at September 30, 2019. The Company made the
sales to JAS at cost because the Company required the funds from JAS to enable
it to meet its commitment to the supplier of its equipment. In March 2019, the
Company borrowed $190,000 from JAS. The loan was unsecured, had an interest rate
of 8% and was paid during the nine months ended September 30, 2019. .JAS also
provides the Company with office space at $500 per month. On January 2, 2019,
the Company entered into an agreement with JAS pursuant to which JAS would
perform administrative billing services for the Company relating to service
agreements the Company would have with its customers. There have been no
services provided pursuant to this agreement through the date of this report.
This current report contains or may contain, among other things, certain
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
significant risks and uncertainties. Such statements may include, without
limitation, statements with respect to the Company's plans, objectives,
projections, expectations and intentions and other statements identified by
words such as "projects," "may," "could," "would," "should," "believes,"
"expects," "anticipates," "estimates," "intends," "plans" or similar
expressions. These statements are based upon the current beliefs and
expectations of the Company's management and are subject to significant risks
and uncertainties, including those detailed in the Company's filings with the
Securities and Exchange Commission. The financial information referred to in
this current report has been derived from the Company's internal accounting
software. Since JAS's financial statements have not been reviewed or audited by
an independent registered public accounting firm, actual results may differ
significantly from those set forth in the forward-looking statements, and
changes in JAS's financial information may result upon audit of its annual
financial statements and review of its interim financial statements. The
Company's operations following the acquisition of JAS will be materially
affected by its ability to develop JAS' business and generate cash flow from its
operations, which are subject to risks associated with small companies that are
primarily engaged in medical practice management, including its compliance with
all applicable regulations relating to management of medical practices. As a
private company, JAS does not have disclosure controls or internal controls over
financial reporting, and the Company may incur significant expenses in
developing such controls with no assurance that the Company will be able to
develop such controls. The failure to develop such controls may materially
affect the Company's operations and its ability to raise funds. These
forward-looking statements involve certain risks and uncertainties that are
subject to change based on various factors (many of which are beyond the
Company's control). The Company does not intend to publicly update any
forward-looking statements, whether as a result of new information, future
events, or otherwise, except as may be required under applicable securities
laws.
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Item 9.01. Financial Statements and Exhibits.
(a) The financial statements required by Rule 8-06 of Regulation S-X will be
filed not later than 71 days after December 26, 2019, the date this current
report on Form 8-K is required to be filed.
(d) Exhibits
99.1 Amendment dated December 19, 2019 to stock purchase agreement dated
July 17, 2019 between the Company and Justin Anderson and Stacey
Anderson.
99.2 Form of note issued to Justin Anderson and Stacey Anderson.
99.3 Form of note purchase agreement dated December 19, 2019, with the form
of note included as an exhibit.
99.4 Pledge agreement dated December 19, 2019, among the Company, Justin
Anderson, Stacey Anderson, William R. Kruse and Zima World Holdings
Corp.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 26, 2019 PreCheck Health Services, Inc.
By: /s/ Justin Anderson
Justin Anderson
Chief Executive Officer
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