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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2004
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OR
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the transition period from to
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COMMISSION FILE NUMBER: 0-30351
True Health, Inc.
(Exact name of registrant as specified in its charter)
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Utah 75-2263732
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(State of other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
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Kelsey House, 77 High Street
Beckenham, Kent
UK BR3 1AN
(Address of principal executive offices)
+(44) (0) 208 658 9575
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of
July 31, 2004: 51,416,875
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TRUE HEALTH, INC.
CONSOLIDATED BALANCE SHEET
July 31, 2004
(unaudited)
ASSETS
Current Assets
Cash $ 48,181
Accounts receivable, net 980,197
Inventory 241,334
Other 98,110
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Total Current Assets 1,367,823
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Equipment, net of accumulated depreciation 253,535
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TOTAL ASSETS $ 1,621,358
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to factor $ 671,584
Current portion of notes payable 136,506
Accounts payable 195,045
Accrued expenses 314,371
Accounts payable to stockholder 127,174
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Total Current Liabilities 1,444,680
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Long-term portion of notes payable 135,223
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Total Liabilities 1,579,903
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Stockholders' Equity
Common stock, $.01 par value; 100,000,000 shares
authorized; 51,416,875 shares issued and outstanding 514,169
Additional paid in capital 1,592,088
Accumulated deficit (2,050,628)
Accumulated other comprehensive loss (14,174)
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Total Stockholders' Equity 41,455
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,621,358
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TRUE HEALTH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Six Months Ended July 31, 2004 and 2003
(unaudited)
Three Months Ended Six Months Ended
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenue
- Equipment rentals and sales $ 510,403 $ 281,350 $ 1,006,777 $ 597,650
- Radiographer services
and placement fees 1,095,665 571,495 2,246,740 815,562
- Other 10,624 8,720 20,763 16,596
---------- ---------- ---------- ----------
Total Revenues 1,616,692 861,565 3,274,281 1,429,808
Cost of sales 1,032,943 497,868 2,094,743 780,532
---------- ---------- ---------- ----------
Gross margin 583,749 363,697 1,179,538 649,276
---------- ---------- ---------- ----------
General and administrative
- Non-cash professional fees 600,000 499,448 600,000 499,448
- Other 749,322 411,541 1,405,340 767,868
Depreciation 35,465 30,251 61,238 58,173
---------- ---------- ---------- ----------
Total operating expenses 1,384,787 941,240 2,066,578 1,325,489
---------- ---------- ---------- ----------
Net Operating Loss (801,038) (577,543) (887,040) (676,213)
Interest income 0 0 0 19
Interest expense (21,147) (20,611) (24,164) (38,072)
---------- ---------- ---------- ----------
Net loss before taxes (822,185) (598,154) (911,204) (714,266)
Income tax expense (897) 0
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Net Loss $ (823,082) (598,154) $ (911,204) $ (714,266)
========== ========== ========== ==========
Basic and diluted loss
per share $ (0.02) $ (0.00) $ (0.02)$ (0.01)
Weighted average shares
outstanding 51,123,397 40,889,292 50,679,055 39,194,646
TRUE HEALTH, INC.
STATEMENTS OF CONSOLIDATED CASH FLOW
Six Months Ended July 31, 2004 and 2003
(unaudited)
2004 2003
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Cash Flows From Operating Activities
Net loss $(911,204) $(714,266)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 61,232 58,173
Stock issued for services 600,000 442,247
Stock warrants issued for services - 57,144
Imputed interest on shareholder notes payable 6,421 15,497
Changes in:
Accounts receivable (283,380) (161,325)
Inventory (136,425) 42,731
Other current assets (25,610) (12,516)
Accounts payable 76,020 20,981
Accrued expenses 57,242 54,436
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Net Cash Used in Operating Activities (555,704) (196,841)
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Cash Flows Used in Investing Activities
Purchase of equipment (69,312) (61,353)
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Cash Flows From Financing Activities
Proceeds from exercise of warrants for stock 475,000 -
Net change in note payable to factor 275,845 129,437
Net change in note payable to bank loan (197,332) 19,654
Net change in note payable to related party (160,405) 111,171
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Net Cash Provided By Financing Activities 393,108 260,262
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Currency translation adjustment 23,443 187
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Net change in cash (208,465) 2,255
Cash at beginning of period 256,646 255
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Cash at end of period $ 48,181 $ 2,510
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TRUE HEALTH INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of True Health Inc.
(True Health) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in True
Health, Inc.'s Annual Financial Statements filed with the SEC on Form 10-K and
in respect of the comparative period, the significant acquisition statement
filed with the SEC on Form 8-K. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially duplicate
the disclosure contained in the audited financial statements for the most recent
fiscal year ended to January,31 2004, as reported in the Form 10-KSB, have been
omitted.
NOTE 2 - COMMON STOCK
During the quarter ended July 31, 2004, 1,000,000 shares valued at $600,000 were
issued to consultants for services in 2004.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Important Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include indications regarding our intent, belief or current expectations,
including our plans with respect to the sourcing, manufacturing, marketing and
distribution of our products and services, the belief that current levels of
cash and cash equivalents together with cash from operations and existing credit
facilities will be sufficient to meet its working capital requirements for the
next twelve months, our expectations with respect to the performance of the
counterparties to its letter of credit agreements, our plans to invest in
derivative instruments and the collection of accounts receivable, our beliefs
and intent with respect to and the effect of changes in financial accounting
rules on its financial statements. Such statements are subject to a variety of
risks and uncertainties, many of which are beyond the our control, which could
cause actual results to differ materially from those contemplated in such
forward-looking statements, which include, among other things, (i) changes in
the marketplace for our products and services, (ii) the introduction of new
products or pricing changes by our competitors, (iii) changes in exchange rates,
and (iv) changes in the economy. Existing and prospective investors are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. We undertake no obligation to update or revise
the information contained in this Quarterly Report on Form 10-QSB, whether as a
result of new information, future events or circumstances or otherwise.
Critical accounting policies
We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results. The preparation of this Quarterly Report on Form 10-QSB
requires us to make estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of our financial statements, and the reported amounts of revenue and
expenses during the reporting period. There can be no assurance that actual
results will not differ from those estimates.
1) Allowance for doubtful accounts
We evaluate the adequacy of the allowance for doubtful accounts at the end of
each quarter. In performing this evaluation, we analyze the payment history of
significant past due accounts, subsequent cash collections on these accounts and
comparative accounts receivable aging statistics. Based on this information,
along with consideration of the general strength of the economy, we develop what
we consider to be a reasonable estimate of the uncollectible amounts included in
accounts receivable. This estimate involves our significant judgment. Actual
uncollectible amounts may differ from our estimate.
2) Provision for obsolete inventory
We estimate our provision for obsolete inventory based on customer orders sold
below cost, to be shipped in the following period and on the amount of similar
unsold inventory at period end. We analyze recent sales and gross margins on
unsold inventory in further estimating the inventory provision. The impact of
the inventory provision is reflected in cost of sales and the related gross
margins in the period that management deems that inventory has become obsolete.
This estimate involves our significant judgment. Actual gross margins on sales
of excess inventory may differ from our estimate.
Three Months Ended July 31, 2004 Compared to Three Months Ended July 31, 2003
Revenue
Total revenue for the three months ended July 31, 2004 was $1,616,692. This
represents an increase of $755,127 or 87.6%, when compared to revenue of
$861,565 for the three months ended July 31, 2003.
Revenue from the equipment rentals and sales segment increased by $229,053, or
81.4%, to $510,403 in the three months ended July 31, 2004 compared to $281,350
in the three months ended July 31, 2003. This increase reflects the continued
growth in the business over the past year which mainly arose from an increase in
the customer base and through our geographic expansion via our Distributor
Network.
Revenue from the recruitment services and placement of radiographers, socal
workers and nurses increased by $524,170 to $1,095,665 for the three months
ended July 31, 2004. This represents a 91.7% increase on the three months to
July 31, 2003.
Cost of sales
Cost of sales for the three months ended July 31, 2004, compared to the three
months ended July 31, 2003 are shown below:
Three months ended Three months ended
July 31, 2004 July 31, 2003
Equipment rentals and sales $137,180 26.8% $ 81,329 28.9%
Recruitment services and 895,763 81.8% $416,539 72.9%
- placement fees
Total $1,032,943 63.3% $497,868 57.8%
The total Gross Profit increased by $220,052 (60.5%) in the second quarter to
$583,749 compared with the three months ended July 31, 2003 of $363,697.
General and administrative overheads
General and administrative overheads, excluding consideration for professional
fees which was paid for by way of shares for the three months to July 31, 2004
rose to $749,322 from $411,541 for the same period last year. Total operating
expenses amounted to $1,384,787 compared to $941,240 for the three months to
July 31, 2003. The main reasons for this increase are as follows:
o An increase in the number of sales staff,to facilitate the growth in revenues
o An increase in experienced employees and senior staff in order to support the
expansion of business o An increase in other office related costs reflecting the
increase in staff and revenues o An increase in consultancy fees o Increase in
costs associated with additional warehousing and inventory storage facilities
Interest expense
Net Interest expense of $21,147 for the three months ended July 31, 2004, is
compared with $20,611 for the three months ended July 31, 2003.
Liquidity and Capital Resources
We have relied primarily on asset-based borrowings, internally generated funds,
stockholder investment and loans, together with trade credit to finance our
operations. Our capital requirements primarily result from working capital
needed to support operations, including increases in inventory and accounts
receivable. Our working capital position has improved from a deficit of $255,335
as of January 31, 2004 to a deficit of $76,857 as of July 31, 2004. This
improvement has been mainly due to the contribution of proceeds from
shareholders. As of July 31, 2004, we had cash and cash equivalents of $48,181
compared to $2,510 as of July 31, 2003.
Operating Cash Flow
Net cash used in operating activities for the six months ended July 31, 2004 was
$555,704 compared with net cash used of $196,841 for the six months ended July
31, 2003. This is primarily due to the rise in inventories in order to meet
future orders, accounts receivable and the loss for the period.
Credit Facilities
We have a loan agreement with bankers, HSBC, for a term loan that advanced
$237,000 in January 2003 and is due for repayment by November 2007. The loan
attracts a variable rate interest of 2% over UK base rate and there is a
floating charge over the assets of the Company (6.75% at July 31, 2004).
We also have an accounts receivable factoring arrangement with Venture Finance
which is secured by a floating charge over our assets. This facility has
attracts variable rate interest of 1.75% over UK base rate (6.5% at July 31,
2004).
We believe that current levels of cash and cash equivalents ($48,181 at July 31,
2004) together with cash from operations and funds available under our credit
facilities and additional funding exercises, will be sufficient to meet our
capital requirements for the next twelve months.
Six Months Ended July 31, 2004 Compared to Six Months Ended July 31, 2003
Revenue
Total revenue for the six months ended July 31, 2004 has increased to
$3,274,281, representing an increase of $1,844,473 or 129%, when compared to
revenue of $1,429,808 for the six months ended July 31, 2003.
Revenue from the equipment rentals and sales segment of $1,006,777 increased by
$409,127, or 68.5%, in the six months ended July 31, 2004, compared to $597,650
for the six months ended July 31, 2003. This increase reflects the growth in the
business over the past year, which mainly arose from an increase in the customer
base and through our geographic expansion via our Distributor Network.
Revenue from the recruitment services and placement segment increased by
$1,431,178 to $2,246,740 for the six months ended July 31, 2004. This represents
a 175.5% increase on the six months to July 31, 2003.
Cost of sales
Cost of sales for the six months ended July 31, 2004, compared to the six months
ended July 31, 2003 are as follows:
Six months ended Six months ended
July 31, 2004 July 31, 2003
Equipment rentals and sales $ 251,668 25.0% $184,800 30.9%
Recruitment services and 1,843,075 82.0% $595,732 73.0%
- placement fees
Total $2,094,743 64.0% $780,532 54.5%
The total Gross Profit increased by $530,262 (81.7%) in the first half of the
year to $1,179,538 compared with the six months ended July 31, 2003 of $649,276.
General and administrative overheads
General and administrative overhead increased to $2,066,578 for the six months
to July 31, 2004, compared to overheads of $1,325,489 for the six months to July
31, 2003. The main reasons for the increase in expenditure are as for the items
outlined in the discussion and analysis for the three months results.
Interest expense
Net Interest expense of $24,164 for the six months to July 31, 2004, has reduced
by $13,908, or 36.5%, compared with $38,072 for the six months to July 31, 2003.
This improvement has been mainly due to the investment from stockholders and
improved cash position during the last year.
(Following three paragraphs are redundant, please remove)
Liquidity and Capital Resources
We have relied primarily on asset-based borrowings, internally generated funds,
stockholder investment and loans, together with trade credit to finance our
operations. Our capital requirements primarily result from working capital
needed to support operations, including increases in inventory and accounts
receivable. Our working capital position has improved significantly from a
deficit of $255,335 as of January 31, 2004 to a deficit of $76,857 as of July
31, 2004. This improvement has been mainly due to the contribution of proceeds
from shareholders. As of July 31, 2004, we had cash and cash equivalents of
$48,181 compared to $2,510 as of July 31, 2003.
Operating Cash Flow
Net cash used in operating activities for the six months ended July 31, 2004 was
$555,740, compared with net cash used of $196,841 for the six months ended July
31, 2003. The increase is primarily due to the rise in inventories in order to
meet future orders, accounts receivable and the loss for the period.
Credit Facilities
We have a loan agreement with bankers, HSBC, for a term loan that advanced
(pound)130,000 in January 2003 and is due for repayment by November 2007. The
loan attracts variable rate interest of 2% over UK base rate and there is a
floating charge over the assets of the Company (6.75% at July 31, 2004).
We also have an accounts receivable factoring arrangement with Venture Finance
which is secured by a floating charge over our assets. This facility has
attracts variable rate interest of 1.75% over UK base rate (6.5% at July 31,
2004).
ITEM 3. CONTROLS AND PROCEDURES
At July 31, 2004, we carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-14 under the Securities
Exchange Act of 1934, as amended. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information relating to us required to be included in our periodic SEC filings.
There have been no significant changes in our internal controls or in other
factors that could significantly affect our controls subsequent to the date of
that evaluation, and no corrective actions with regard to significant
deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Item Description
31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Report on Form 10-KSB
On May 17, 2004, we filed a report on Form 10-KSB relating to our results for
the year ended January 31, 2004.
(c) Report on Form 10-QSB
On June 14, 2004, we filed a report on Form 10-QSB relating to our results for
the quarter ended April 30, 2004.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: September 20, 2004.
TRUE HEALTH, INC.
BY: David Francis
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David Francis, CEO
BY: Ian Wylie
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Ian Wylie, CFO
Exhibit 31.1
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, David Francis, certify that:
1. I have reviewed the quarterly report on Form 10-QSB of True Health,
Inc. for the period ended July 31, 2004 (this "Report");
2. Based on my knowledge, this Report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this Report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the
filing date of this Report (the "Evaluation Date"); and
(c) presented in this Report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: September 20, 2004
David Francis
--------------------------------------
David Francis, CEO
Exhibit 31.2
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Ian Wylie, certify that:
7. I have reviewed the quarterly report on Form 10-QSB of True Health, Inc.
for the period ended July 31, 2004 (this "Report");
8. Based on my knowledge, this Report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this Report;
9. Based on my knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Report;
10. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(d) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Report is being prepared;
(e) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this Report (the "Evaluation Date"); and
(f) presented in this Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
11. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors: (c) all significant
deficiencies in the design or operation of internal controls which could
adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(d) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
12. The registrant's other certifying officers and I have indicated in this
Report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: September 20, 2004
Ian Wylie
--------------------------------------
Ian Wylie, CFO
Exhibit 32
Certification Pursuant to 18U.S.C Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned hereby certifies, for the purposes of section 1350 of
chapter 63 of title 18 of the United States Code, in his capacity as an
officer of True Health, Inc. ("True Health"), that, to his knowledge, the
quarterly report on Form 10-QSB of True Health, Inc. for the period ended
July 31, 2004, fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934 and that the information contained in
such amendment to said report fairly presents, in all material respects,
the financial condition and results of operation of True Health.
Dated: September 20, 2004
David Francis
--------------------------------------
David Francis, CEO
Ian Wylie
--------------------------------------
Ian Wylie, CFO