As filed with the Securities and Exchange Commission on January __, 1997.
Registration No. _____________
__________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
XETAL, INC.
[Exact Name Of Registrant As Specified In Its Charter]
Utah 1040 11-2896311
[State or Other Jurisdiction [Primary Standard [IRS Employer
Of Incorporation or Industrial Identification
Organization] Classification number] Number]
3590 Oceanside Road, Oceanside, New York 11572; Tel: (516)-594-0005
[Address and Telephone Number of Principal Place of Business and Executive
Offices]
Att.: Dr. Jan Stahl, Chief Executive Officer
Xetal, Inc.
3590 Oceanside Road
Oceanside, New York 11572
(516) 594-0005
[Name, Address and Telephone Number of Agent for Service]
Copies to:
B. Bruce Freitag, Esq. Ronald J. Brescia, Esq.
39 Sackerman Avenue, Doros & Brescia, P.C.
North Haledon, New Jersey 07508 1140 Avenue of the Americas
Tel: (201) 238-1909 New York, New York 10036
Tel: (212) 921-0550
If any of the securities being registered on this Form are to be offered
on a delayed or continuing basis pursuant to Rule 415 of the Securities Act
of 1933 check the following box. [X]
<TABLE>
<C>
Approximate date of commencement of proposed sale to the public: As soon
as possible after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
<P> <C> <C> <C> <C>
_______________________________________________________________________________________________
Title of Amount being Proposed Proposed Amount of
Securities being Registered Maximum Maximum Registration
Registered Offering Aggregate Fee
Price Offering
Per Share Price(1)
Shares of Common Stock,
par value $0.001
(the "Common Stock") 450,000 $ 6.00(2) $ 2,700,000 $ 931.04
Warrants 900,000 $ 0.10 $ 90,000 $ 31.03
Shares of Common Stock
underlying the Warrants 900,000 $ 6.00 $ 5,400,000 $ 1,862.07
Underwriter's Warrants(3) 135,000 $ 0.0001 $ 13.50 $ --
Shares of Common Stock
Underlying the Under-
writer's's Warrants(4) 135,000 $ 6.00 $ 810,000 $ 279.31
Warrants Underlying
the Underwriter's
Warrants(3) 270,000 $ 0.10 $ 27,000 $ 9.31
Shares of Common Stock
underlying the Warrants
Underlying the Under-
writer's Warrants(4) 270,000 $ 6.00 $ 1,620,000 $ 558.62
Bridge Lender's Common
Stock(5) 200,000 $ -0- $ -0- $ -
Bridge Lender's
Warrants(6) 2,500,000 $ 0.0001 $ 250 $ 0.10
Shares of Common Stock
underlying Bridge Lenders
Warrants(7) 2,500,000 $ 6.00 $15,000,000 $ 5,172.42
Underwriter's Bridge
Warrants(8) 250,000 $ -0- $ 100 $ -
Shares of Common Stock
Underlying Underwriter's
Bridge Warrants(9) 250,000 $ 6.00 $ 1,500,000 $ 517.24
Consultant's Stock(10) 20,000 $ 6.00 $ 120,000 $ 41.38
--------
Total Fee $ 9,402.52
</TABLE>
_______________________________________________________
(Notes to the Foregoing Table)
(1) Estimated solely for purposes of calculating the Registration Fee
pursuant to Rule 457.
(2) Estimated for purpose of calculating the Registration Fee. The actual
per share offering price will be determined at the effective date of
this Registration Statement and shall be slightly below the closing bid
of the Company's common shares on such date.
(3) Represents warrants (the "Underwriter's Warrants) granted at a purchase
price of $0.0001 per Underwriter's Warrant to Worthington Capital Group,
Inc. (the "Underwriter") to acquire an aggregate of 135,000 shares of
Common Stock and 270,000 Warrants, entitling the holder to purchase
270,000 shares of Common Stock exercisable for a period of four years
commencing one year from the date of this Prospectus, at an exercise
price equal to 100% of the price of the Common Stock to the public in
this Offering, subject to adjustment in amount pro rate in the event all
of the Common Stock and/or Warrants are not sold in this Offering.
(4) Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to the anti-dilution provisions of
the Underwriter's Warrants.
(5) Represents shares of Common Stock being registered for the account of
certain lenders (the "Bridge Lenders") who loaned the Company funds
(the "Bridge Loan") and who received Common Stock (the "Selling
Shareholders").
(6) Represents warrants (the "Bridge Lenders' Warrants") granted to the
Bridge Lenders to acquire an aggregate of 2,500,000 shares of Common
Stock at a price equal to 100% of the price of the Common Stock to the
public in this Offering.
(7) Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to the anti-dilution provisions
of the Bridge Lenders' Warrants.
(8) Represents warrants (the "Underwriter's Bridge Warrants") granted at a
price of $0.0001 per Underwriter's Bridge Warrant to Worthington Capital
Group, Inc. as placement agent for the Bridge Loan to acquire 250,000
shares of Common Stock at an exercise price equal to 100% of the price of
the Common Stock to the public in this Offering.
(9) Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to the anti-dilution provisions of
the Underwriter's Bridge Warrants.
(10) Consists of 20,000 Shares of common stock issued to a Consultant for the
Company with respect to which the Company granted "piggy-back" registration
rights (also the "Selling Shareholders").
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
XETAL, INC.
Cross Reference Sheet Showing Location in Prospectus of Part 1 Items
of Form SB-2 Registration Statement and the Prospectus
Registration Statement Items and Headings Heading In The Prospectus
_________________________________________ _____________________________
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus Facing Page; Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of the Prospectus Cover Pages of Prospectus;
Additional Information
3. Summary Information and Risk Factors Prospectus Summary;
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page of Prospectus;
Risk Factors;
Underwriting
6. Dilution Dilution
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Cover Page of Prospectus
and Notes; Underwriting
9. Legal Proceedings Business of the Company -
Legal Proceedings
10. Directors, Executive Officers,
Promoters and Control Persons Management
11. Security Ownership of Certain
Beneficial Owners and Management Principal Shareholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Underwriting
15. Information With Respect to Registrant Prospectus Summary;
Risk Factors; Dilution;
Management; Business of
The Company;
Description of Securities;
Executive Compensation;
Financial Statements
16. Management's Discussion and Analysis Management's Discussion and
or Plan of Operations Analysis of Financial
Condition and Results of
Operations.
17. Description of Property Property
18. Certain Relationships and Related
Transactions Certain Transactions
19 Market For Common Equity and Related Cover Page of Prospectus;
Stockholder Matters Market For Common Stock and
Related Stockholder Matters
PRELIMINARY PROSPECTUS DATED ________, 1997 (SUBJECT TO COMPLETION)
A Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective.
Information contained herein is subject to completion or amendment.
These securities may not be sold nor may offers to buy be accepted prior to
the time the Registration Statement becomes effective. This Prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
PROSPECTUS
XETAL, INC.
450,000 Shares of Common Stock, $0.001 Par Value and
900,000 Redeemable Common Stock Purchase Warrants.
Xetal, Inc., a Utah corporation (the "Company"), is hereby offering
(the "Offering"), through Worthington Capital Group, Inc. as underwriter
(the "Underwriter"), on a best efforts basis, up to 450,000 shares
(the "Shares") of its common stock, $0.001 par value (the "Common Stock"),
and up to 900,000 Redeemable Common Stock Purchase Warrants (the "Warrants").
The shares of Common Stock and the Warrants (which are collectively referred
to as the "Securities") are being offered separately and are separately
tradeable immediately upon issuance. The minimum offering will consist of
250,000 shares of Common Stock (the "Minimum Offering") and the maximum
offering will consist of 450,000 shares of Common Stock and 900,000 Warrants
(the "Maximum Offering"). There is no minimum number of Warrants required to
be sold. Each Warrant expires on ___________, 2002, five years after the date
of this Prospectus, and entitles the holder, commencing one year after the date
of this Prospectus, to purchase one share of Common Stock for $6.00, the
assumed initial public Offering price, subject to adjustment in certain
events pursuant to the anti-dilution provisions thereof . The initial public
Offering price of the Warrants will be $0.10 per Warrant. The Warrants are
redeemable by the Company at a price of $0.05 per Warrant commencing two years
after the date of this Prospectus and prior to their expiration provided that
(I) prior notice of not less than 30 days is given to the holders of the
Warrants and (ii) the closing sale price of the Common Stock as reported on
the National Association of Securities Dealers, Inc. (the "NASD") Bulletin
Board (the "Bulletin Board") for 20 consecutive trading days, ending on the
tenth day prior to the date on which the Company gives notice of redemption,
has been at least $9.00, 150% of the initial public Offering price of the
Shares. The holders of the Warrants will have exercise rights until the close
of business receding the date fixed for redemption.
See, "DESCRIPTION OF SECURITIES - Warrants."
The Company's Shares are traded in the over-the-counter market on the
NASD Electronic "Bulletin Board" (the "Bulletin Board"), an electronic
quotation system maintained by the NASD, under the symbol "XETX." The Company
has made application for listing of the Shares and Warrants on the Bulletin
Board and the Boston Stock Exchange under the symbols "____" and "____."
On _______, 1997, the closing bid and asked prices for a shares of the Company's
Shares were $_____ and $_____, respectively. See "MARKET FOR THE COMPANY'S
SECURITIES AND RELATED MATTERS."
THESE SECURITIES INVOLVE SUBSTANTIAL RISKS AND DILUTION AND SHOULD ONLY
BE PURCHASED ONLY BY THOSE WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________________________________________________________________
Price to Underwriting Proceeds to
Public Commissions (1) Company (2)
Per Share $ 6.00 $ 0.60 $ 5.40
Per Warrant $ 0.10 $ 0.01 $ 0.09
Total Minimum $ 1,500,000 $ 150,000 $ 1,350,000
Total Maximum $ 2,700,000 $ 270,000 $ 2,430,000
____________________________________________________________________________
(footnotes on following page)
WORTHINGTON CAPITAL GROUP, INC.
The date of this Prospectus is , 1997
(footnotes from previous page)
(1) In addition, the Company has agreed to pay the Underwriter a
non-accountable expense allowance equal to 3% of the gross proceeds of
the Offering, of which $25,000 has been paid as of the date of this
Prospectus. The Company has also agreed to: (i) sell to the Underwriter
warrants (the "Underwriter's Warrants") at a purchase price of $0.0001
per Underwriter's Warrant, to acquire an aggregate of 135,000 shares of
Common Stock and 270,000 Warrants, entitling the holder to purchase
270,000 shares of Common Stock exercisable for a period of four years
commencing one year from the date of this Prospectus, at an exercise
price equal to 100% of the price of the Common Stock to the public in
this Offering, subject to adjustment in amount pro rata in the event all
of the Common Stock and/or Warrants are not sold in this Offering and
subject to the adjustment pursuant to the anti-dilution provisions
thereof; (ii) indemnify the Underwriter against certain liabilities
under the Securities Act of 1933, as amended (the "Act") and (iii)
engage the Underwriter as a financial consultant for a period of 24
months commencing on the date of this Prospectus, for which the
Underwriter will receive a consulting fee of $100,000 payable in full at
the closing of the Minimum Offering. See "DESCRIPTION OF SECURITIES" and
"UNDERWRITING."
(2) After deducting underwriting commissions but before payment of the
Underwriter's non-accountable expense allowance in the amount of $46,500,
if the Minimum Offering is sold, or $83,700 if the Maximum Offering is
sold, the Underwriter's consulting fee in the amount of $100,000 and other
expenses of the Offering (estimated at $100,000) payable by the Company.
See "UNDERWRITING."
The Securities are offered through the Underwriter named herein when, as
and if received and accepted by it, subject to prior sale, withdrawal,
cancellation or modification of this Offering without notice, and
approval of certain legal matters by Doros and Brescia, P. C., counsel
for the Underwriter, and the Underwriter. The Underwriter reserves the
right to reject any offer for the Securities, in whole or in part.
The Securities are being offered on a "best efforts all or none" basis
as to the first 250,000 shares of Common Stock and 500,000 Warrants
(the "Minimum Offering") and on a " best efforts " basis as to an
additional 200,000 shares of Common Stock and 400,000 Warrants (together
with the Minimum Offering, the "Maximum Offering"), during an offering
period commencing on the date hereof and expiring on _________ __, 1997,
unless extended by the mutual consent of the Company and the Underwriter
for up to an additional thirty (30) days (such period, as same may be
extended, being hereinafter referred to as the "Offering Period").
Pending the acceptance by the Company of the Minimum Offering, all
subscription proceeds will be deposited in a non-interest bearing account
(the "Escrow Account") at the ______________________ Bank ("Escrow Agent").
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY OF THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
A Registration Statement on Form SB-2 (the "Registration Statement") under
the Act relating to the securities offered hereby has been filed by the
Company with the United States Securities and Exchange Commission
(the "Commission") at its regional office in New, New York. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information
with respect to the Company and the securities offered hereby, reference is
made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other documents filed as
exhibits to the Registration Statement, each such statement being qualified
in all respects by such reference. A copy of the Registration Statement may
be inspected without charge at the Commissions principal offices in Washington
D. C., and copies may of all or any part thereof may be obtained from the
Commission upon payment of certain fees prescribed by the Commission.
Following this Offering, The Company will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file periodic reports
with the Commission. Such reports, proxy statements and other information
concerning the Company may be inspected and copied at the public reference
facilities maintained by the commission, Room 1024, 450 Fifth Street, N. W.,
Washington, D. C. 20549, and at the Commission's New York Regional Office
at 7 World Trade Center, 13th Floor, New York, NY 10048. Copies of such
material can be obtained from the public reference Section at prescribed rates.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by an independent public accounting
firm and may, at its discretion, furnish quarterly reports containing
unaudited financial statements.
SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in this
Prospectus. The term the "Company" refers to Xetal, Inc. and references to
"Companies" include Xetal, Inc. and its wholly owned subsidiaries APO Health,
Inc., Universal medical Distributors, Inc. and Dental Alternatives, Inc.,
unless otherwise indicated. All numbers referring to the Company's shares of
common stock are stated giving effect to a 1-for-10 reverse stock split
effected in August 1996, unless specifically indicated to the contrary.
THE COMPANY
The Company was incorporated in May, 1969 under the laws of the State
of Utah under the name "Apache Silver Oil Co., Inc." and was previously
engaged in the oil and gas business. Thereafter, in February, 1985, the
Company changed its name to "Insurance Kingdom Agency, Inc." and engaged in
the insurance business until 1992 when it ceased doing business. In September,
1994, the Company entered into an acquisition agreement with Xetal, Inc., a
New York corporation (for purposes herein referred as "APO Health"), pursuant
to which the stockholders of APO Health acquired approximately 83 % of the
issued and outstanding capital stock of the Company in exchange for all of
the capital stock of APO Health (the "Acquisition Agreement"). Prior to the
acquisition, Dr. Jan Stahl and Mr. Peter Steil owned 100% of the capital stock
of APO Health and served as its officers and directors. As a result of the
consummation of the transactions under the Acquisition Agreement, APO Health
became a wholly owned subsidiary of the Company. Additionally, Dr. Jan Stahl
and Mr. Peter Steil became the holders of approximately 62.3% of the issued
and outstanding capital stock of the Company and thereafter became officers
and directors of the Company. In January, 1995, the Company changed its name to
"Xetal, Inc." and APO Health thereafter changed its name to "APO Health, Inc."
In March 1996 the Company acquired 100% of the outstanding capital stock
of Universal Medical Distributors, Inc. ("Universal"), a company principally
engaged in the business of distributing veterinary supplies. During July 1996,
the Company also acquired 100% of the outstanding capital stock of Dental
Alternatives, Inc. ("Alternatives"), a corporation owned by Dr. Jan Stahl, the
Company's principal shareholder, in exchange for 400,000 shares of the Company's
Common Stock. Alternatives owned certain marketing rights and trademarks to
products developed by Dr. Stahl.
The present operations of the Company's predecessor commenced about 1987
and presently, through its subsidiaries, the Company is a distributor, supplier
and manufacturer of disposable medical products principally to dental, medical
and veterinary professionals. These products include protective garments such
as isolation gowns, face masks and gauze as well as other disposable items such
as latex gloves, needles, syringes, health and beauty aids and chemicals for
infection control.
Management has elected to concentrate the Company's efforts in
specialized markets for disposable dental, medical and veterinary products.
The Company currently distributes over 3,000 various products. Products are
marketed and sold primarily (i) to other distributors (accounting for
approximately 65% of revenues) (ii) directly to doctors, dentists and
veterinarians (accounting for approximately 30% of revenues) and (iii) to
others, including direct consumers, and through exporters to foreign countries
(accounting for approximately 5% of revenues).
In addition, the Company has introduced a complete line of dental
emergency products and first aid kits which are being marketed under the name
"Dr. Stahl's Emergency Dental Kits." These products are designed for consumer
use, for relief from common dental emergencies such as toothaches, broken
dentures, lost filings and loose crowns and bridges. Management plans to
expand its marketing of this product line to include catalogs, drug chains,
hotel stores and television sales. In addition, the Company plans to introduce
a consumer medical line including Dr Stahl's band-aids, gauze, toothbrushes and
medical first aid kits.
Universal, the Company's veterinary division, is a full service veterinary
supply company with sales in excess of $1 Million, generated through direct
marketing, trade shows and mail order.
The Company maintains its principal executive offices at 3590 Oceanside
Avenue, Oceanside, New York 11572. The Company's telephone number is
(516) 594-0005.
THE OFFERING
Securities Offered: 450,000 Shares of Common Stock, par value $0.001
and 900,000 Warrants.
Common Stock outstanding
prior to the Offering: 938,263 shares of Common Stock
Common Stock to be outstanding
after the Offering(1)(2): 1,188,263 shares of Common Stock, if only the
minimum Offering is sold or 1,388,263 shares
of Common Stock if all the Shares offered are
sold.
Proposed Boston Stock Exchange
symbols for Common Stock and
Warrants(3): __________ and ___________.
Exercise Terms of the
Warrants: Each Warrant is exercisable into one share of
Common Stock for a period of four years
commencing one year from the date of this
Prospectus at an exercise price of $6.00 per
share, 100% of the initial public Offering price.
Expiration Date of Warrants: _____________, 2002 (five years from the date of
this Prospectus)
Redemption of Warrants: The Warrants are redeemable by the Company after
two years from the date of this Prospectus at a
price of $.05 per Warrant upon not less than 30
days prior written notice to the holders of such
Warrants, provided that the closing sale price of
the Shares as reported on NASDAQ is at least
$9.00, 150% of the initial public Offering price
of the Shares, for twenty consecutive trading days
ending on the tenth day prior to the date the
Company gives notice of redemption. Warrant
holders may exercise the Warrants during such 30
day notice period.
Use of Proceeds: The proceeds of this Offering will be used by the
Company to repay two Bridge Financings in the
aggregate principal amount of $500,000, plus
accrued interest thereon, $250,000 of which was
incurred by the Company in anticipation of this
Offering; to acquire key-man life insurance to
protect against the loss of certain officers;
to provide for the expansion of the Company's
business through acquisition of compatible
existing business entities; to fund the Company's
operational and administrative costs and expenses;
and for working capital. See "USE OF PROCEEDS."
____________________________________
(1) Gives no effect to the possible exercise of the Warrants or to the
Underwriter's Warrants.
(2) Gives no effect to the possible exercise of the Pre-Bridge Warrants
(as that term is hereinafter defined) and Bridge Warrants previously issued to
certain Pre-Bridge Lenders (as that term is hereinafter defined) and Bridge
Lenders, which Warrants and underlying Common Shares are registered for future
sale as part of this Offering.
(3) The listing of the Company's Securities on the Bulletin Board and Boston
Stock Exchange is subject to the successful completion of this Offering and
the definitive approval of the listing by the NASD and the Boston Stock
Exchange, of which there can be no assurance. If the Company is successful in
obtaining listing there are no assurances that it will be able to maintain the
listing in the future.
SUMMARY FINANCIAL INFORMATION
The following summary financial data is qualified in its entirety by,
and should be read in conjunction with, the Company's Financial Statements
and the Notes thereto included elsewhere in this Prospectus and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS"
hereinafter set forth in this Prospectus. The summary financial data
presented below as of September 30, 1996 and 1995, and for each of the two
periods then ended, are derived from the Financial Statements of the Company
which have been audited by independent certified public accountants, and are
included elsewhere in this Prospectus.
Summary Balance Sheet Data:
September 30
1996 1995
Total Assets $ 3,365,256 $ 3,003,034
Total Current Assets 2,762,834 2,678,824
Total Liabilities 3,000,056 2,675,670
Retained Earnings (Deficit) ( 224,640) (258,376)
Stockholders' Equity 365,200 327,364
Summary Earnings Data:
Year Ended Nine Months Ended
9/30/96 9/30/95
Revenues $14,615,764 $ 9,635,770
Cost of Revenues 12,595,353 8,657,156
Gross Profit 2,020,411 978,614
Selling Expenses 911,336 544,732
General and Administrative Exp. 855,056 436,369
Income (Loss) from operations 254,019 (2,487)
Net Income (Loss) 33,736 (247,819)
Earnings (Loss) per Share $ 0.09 $ (0.92)
Weighted Average No. of Shares 394,800 269,733
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered carefully in evaluating the Company and an
investment in its Securities. An investment in the Securities offered hereby
is suitable only for those investors who can bear the risk of loss of their
entire investment.
1. Narrow Profit Margins.
Prior to its acquisition of APO Health in 1994, the Company was an
inactive corporation. The Company's sole business operations are through its
wholly-owned subsidiaries, APO Health (which commenced operations in October,
1987), Universal (acquired in 1996) and Alternatives (Also acquired in 1996).
Furthermore, although the Company's operations were profitable in fiscal 1996,
the Company's sales are typically of low profit margin items, with net profit
margins averaging between 1% and 2% of gross revenues. As such, any downturn
in sales could adversely affect the Company's ability to continue to operate
profitably and could result in operating losses in the future, as was the case
in fiscal 1995. See, "FINANCIAL STATEMENTS" and "BUSINESS OF THE COMPANY."
2. No Present Public Market for Securities of the Company.
Although the Company's Common Stock is currently traded on the
"OTC Bulletin Board" there is presently no active public market for the
Securities being offered hereby and no assurance can be given that a market
will develop subsequent to this Offering. Quotations for the Company's Common
Stock have been sporadic and in small volumes and, as a result, purchases or
sales of relatively small amounts of Common Stock can have a significant impact
upon the quoted prices. The Underwriter is not obligated to make a market in
any of the securities upon completion of this Offering and the Underwriter is
not approved by the NASD to make a market in securities.
3. Need for Additional Financing.
The Company's ability to implement its business plans is materially
dependent upon the Company's ability to raise additional capital through the
successful completion of this Offering. In contemplation of this Offering,
the Company obtained $250,000 in bridge financing through the sale to the
Bridge Lenders of certain notes (the "Bridge Notes"), including shares of
Common Stock and Bridge Lenders' Warrants, through a private placement to
certain accredited investors. Prior to that, the Company also obtained
$250,000 in bridge financing through the sale of certain notes
(the "Pre-Bridge Notes") including warrants (the "Pre-Bridge Lenders' Warrants")
as to which the Company is presently in default in the payment of principal and
interest. There can be no assurance that the Maximum Offering will be
completed, in which event the Company may not have adequate funds to fully
implement its expansion program after repayment of the Bridge Notes and
Pre-Bridge Notes without raising additional capital by some other means.
In such event, there can be no assurance that the Company's business activities
will result in sufficient ongoing revenues to provide profits to the Company,
or that additional financing, if needed, will be available to the Company or,
if available, that it can be obtained upon terms satisfactory to the Company.
See, "USE OF PROCEEDS" and "CERTAIN TRANSACTIONS."
4. Reliance Upon Management.
The Company is principally dependent upon the personal efforts and
abilities of Dr. Jan Stahl and Mr. Peter Steil, its principal operating
officers. The loss of either of these individuals could have a materially
adverse effect upon the Company's ability to successfully carry on its
business. In addition, although APO Health intends to obtain "key man" life
insurance upon the life of Dr. Stahl and Mr. Steil in the amount of not less
than $500,000 each (see "USE OF PROCEEDS"), if the Company were to lose the
services of either Dr. Stahl or Mr. Steil, its business could be adversely
affected and there can be no assurance that the proceeds of such insurance
would be adequate to secure an adequate replacement or to fully compensate
the Company for such loss. Furthermore, as the Company expands its present
operations, it will require the services of additional skilled personnel.
There can be no assurance that it will be able to attract persons with the
requisite skills and training to meet future needs or, even if suitable
persons are found that they will be available on terms acceptable to the
Company. Currently there are employment agreements in place between the
Company and each of Messrs Stahl and Steil. See "MANAGEMENT" and "EXECUTIVE
COMPENSATION."
5. Potential Impact of Changing Economic Factors in the Health Care Markets.
The health care market accounts for most of the demand for non-woven
disposable products, with hospitals accounting for approximately two-thirds of
the demand. The health care industry has been typified in recent years by
strict cost containment measures imposed by federal and state governments,
private insurers and other "third party" payors of medical costs. In response
to these pressures, virtually all segments of the health care market have
become extremely cost sensitive and in many cases hospitals and other health
care providers have become affiliated with purchasing consortiums which are
charged with obtaining large quantities of needed products at the lowest
possible cost. These factors in combination have had an adverse impact upon
smaller suppliers and manufacturers, such as the Company, who are either
unable to supply the large quantities sought by the purchasing consortiums or
which are unable to respond to the need for lower product pricing. Although
management believes that its planned expansion program will enable it to meet
the demand for large quantity orders, and despite management's belief that the
dramatic increased demand for safety oriented products, such as the disposable
products offered by the Company, will offset these factors, there can be no
assurance that the Company will be able to overcome the negative impact of
these conditions in the health care marketplace.
6. Potential Adverse Impact of Environmental Concerns.
At present, most disposable products are manufactured from fabrics which
are comprised of non-biodegradable plastic fibbers. In recent years concern
has grown over the effects of such products on the environment due to the
country's growing solid waste disposal "crisis," the declining landfill
capacity in major metropolitan areas able to handle such products and the much
publicized hazards of "medical wastes." These concerns have been highlighted
by suppliers of traditional reusable medical products in attempt to overcome
the growing demand for disposable products. Although the degree to which
disposable plastic products are responsible for the country's waste disposal
related problems is the subject of serious debate at the present time, should
it become the consensus that the costs and problems of disposal of such products
outweigh their benefits, such a development could have a materially adverse
impact upon the Company and the medical products industry in general, at least
until biodegradable non-woven products become a feasible alternative to the
materials now being used.
7. Potential Impact of FDA and Governmental Regulation.
Some of the Company's products may be regulated as medical devices by
the federal Food and Drug Administration (the "FDA") pursuant to the federal
Food and Drug Cosmetic Act (the "ACT") and are, or may be, subject to
regulation by other federal and state governmental agencies. The FDA has
comprehensive authority to regulate the development, production, distribution
and promotion of medical devices. Furthermore, certain states impose additional
requirements on the distribution of medical devices. The FDA may require
pre-market approval of some of the Company's proposed products, requiring
extensive testing and a lengthy review process. The cost of complying with
present and future regulations may be significant. Further, the regulatory
approval process and attendant costs may delay or prevent the marketing of
products developed by the Company in the future. The Mandatory Device
Reporting ("MDR") regulation obligates manufacturers including, in some cases,
distributors such as the Company, to provide information to the FDA on
injuries alleged to have been associated with the use of a product or certain
product failures which could cause injury. The FDA is empowered to take action
against manufacturers of regulated products including both civil and criminal
remedies, and may also prohibit or suspend the marketing of products if
circumstances so warrant. Any such action by the FDA could result in a
disruption of the Company's operations for an undetermined time.
8. Product Liability and Cost and Availability of Insurance.
Providers of medical products to hospitals and other health care
institutions may encounter liability for damages to patients in the event that
their products prove to be defective. Certain of the Company's products and
proposed products will be utilized in medical procedures where the Company
could be subject to claims for such injuries resulting from the use of its
products. Recent developments in the insurance industry have reduced the
availability and increased the cost of liability insurance coverage. At
present the Company maintains product liability insurance coverage in the
amount of $1,000,000. However, as a result of the continuing changes in
insurance coverage and premiums, no assurance can be given that such insurance
will be adequate to fully protect the Company in the future or that product
liability insurance can be maintained at a reasonable cost.
9. Lack of Patent Protection.
At present, the Company does not rely upon patent protection for any of
its products and such protection is not believed to be essential by management
because of the character of its products. Furthermore, there is little
likelihood that it will develop patentable products or processes in the
foreseeable future. In the absence of such protection, the Company will
primarily rely upon trade secrets and proprietary techniques to attain or
maintain any commercial advantage. There is no assurance that competitors will
not independently develop and market, or obtain patent protection for, products
similar to those designed or produced by the Company, and thus negate any
advantage of APO Health with respect to any such products. Even if patent
protection becomes available to the Company, there can be no assurance that
such protection will be commercially beneficial to it.
10. Competition.
The dental, medical and veterinary products supply business in an
intensely competitive one. At present, the Company estimates that there are
over 20 companies whose products compete with many of the Company's present
and proposed products. These companies range from major multinational companies
to enterprises which are smaller in size and financial ability than the Company.
The Company's present and prospective competitors also include the numerous
manufacturers and suppliers of reusable medical products and manufacturers of
raw materials used by the Company. Many of the Company's competitors have far
greater financial resources, larger staffs, and more established market
recognition in both the domestic and international markets than the Company.
See, "BUSINESS OF THE COMPANY - Competition."
11. Dependence Upon Third Party Manufacturers/Suppliers.
The Company does not directly manufacture any of the products its presently
sells. The products distributed by the Company are, for the most part,
manufactured by third parties in the United States, the Far East, Mexico and
Canada. In general, the Company does not have long-term contracts with its
manufacturers. Although the Company believes alternative sources for virtually
all of its products are readily available, there can be no assurance that the
available supply from such alternative sources would be adequate to meet the
increased demand for production that would most likely result from any
significant disruption in the Company's traditional manufacturers and suppliers
of its products. See, "BUSINESS OF THE COMPANY - Manufacturing."
12. Foreign Manufacturing.
Foreign manufacturing is subject to a number of risks, including
transportation delays and interruptions, political and economic disruptions,
the imposition of tariffs and similar import/export controls and changes in
governmental policies. Although, to date, the Company has not experienced any
material adverse effects due to such risks, there can be no assurance that such
events will not occur in the future with the result of possible increases in
product costs and/or delays in product delivery which would, in all likelihood,
result in the loss of revenues and good will by the Company.
13. Potentially Adverse Effect of Agreement to Pay Commissions to Management.
Under their employment agreements with the Company, Mr. Steil, President,
and Dr. Stahl, Chief Executive Officer, beginning with fiscal 1996, each
receive annual bonuses equal to one (1%) per cent of the Company's gross
revenues over an agreed base of $11 Million in addition to their base salaries,
which will be payable in cash within 30 days after completion of the Company's
audited annual financial statements (see "MANAGEMENT - Executive Compensation").
The payment of such commissions will reduce any net profits of the Company and,
given the low profit margins experienced by the Company from the sale of its
present products, such effect may be substantial in terms of the Company's
overall profitability. However, it is management's opinion that the overall,
long-term benefit to the Company and its Shareholders outweighs any short-term
negative impact upon the Company's earnings.
14. Dilution.
As of September 30, 1996, the end of fiscal 1996, the net tangible book
value of the Company's Shares was $0.495 per share. If all the Securities
being offered hereby are sold, the net tangible book value of the Shares will
be approximately $1.904. Consequently the purchasers of the securities being
offered hereby will suffer an immediate dilution of approximately $4.096 per
Share (approximately 68%). Conversely, present Shareholders of the Company
would receive an immediate benefit of approximately $1.409 per Share if all
the securities offered are sold. For detailed information concerning dilution,
see "DILUTION."
15. No Dividends.
The Company has not paid any dividends on its Shares since its inception
and does not expect to declare or pay any cash dividends in the future. The
Company anticipates that any profits from operations will be reinvested in the
Company.
16. Authorization of Preferred Stock; Anti-takeover Provisions.
The Company's Articles of Incorporation authorize the issuance of
2,000,000 shares of Preferred Stock with such designation, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without obtaining
shareholder approval, to issue Preferred Stock with preferred dividend,
liquidation, conversion, voting or other rights that could adversely affect
the voting power or other rights of the holders of the Shares. In the event
of issuance, the Preferred Stock could be utilized, under certain circumstances,
as a method of discouraging, delaying, or preventing a change in the control of
the Company. See "DESCRIPTION OF SECURITIES."
17. Escrow of Investor's Funds.
Pending the completion of this Offering, all subscriber funds will be held
in a non-interest bearing escrow account (the "Escrow Account")
with __________ Bank (the "Escrow Agent") until the Minimum Offering is
subscribed for and cleared funds are available in the Escrow Account.
As such, subscriber funds could be held for up to sixty days, subject to
extension for an additional thirty days by the Company and the Underwriter.
In the event the Minimum Offering is not subscribed for during such period,
all such amounts will be returned without interest thereon or deduction
therefrom. Therefore, subscribers for the Securities offered hereby may not
have the use of such funds or receive interest thereon pending the completion
of the Offering. See "THE OFFERING."
18. No Commitment to Purchase Securities.
The Securities offered herein are offered on a "best efforts, all or none "
basis with respect to the first 250,000 shares of Common Stock and 500,000
Warrants and thereafter on a "best efforts" basis only with respect to the
remaining 200,000 shares of Common Stock and 400,000 Warrants, by the Company
through the Underwriter. No commitment exists by anyone to purchase all or
any portion of such Securities. Consequently, there can be no assurance as to
how many shares of Common Stock and Warrants over the Minimum Offering, if any,
will be sold by the Company in this Offering.
19. Potentially Adverse Effect of Agreement to Pay Warrant Solicitation Fee.
At present, the Company has an arrangement with the Underwriter to pay a
Warrant solicitation fee in connection with the possible exercise of the
Warrants being offered hereby. However, unless granted an exemption by the
SEC from the provisions of Rule 10(b)(6) promulgated under the Securities
Exchange Act of 1934, as amended, any soliciting Broker/Dealers will be
prohibited from engaging in any market-making activities with regard to the
Company's securities for the period from two (2) business days prior to any
solicitation of the exercise of Warrants until the later of the termination of
such solicitation activities or the termination (by waiver or otherwise) of any
right that the soliciting Broker/Dealers may have to receive a fee for the
exercise of Warrants following such solicitation. As a result, soliciting
Broker/Dealers may be unable to continue to provide a market for the issuer's
securities during periods while the Warrants are exercisable.
20. Possible Effects of SEC Rules on Market For Common Stock and Warrants.
Prior to this Offering the Company's Shares have been traded on the NASD
Electronic Bulletin Board. The Company intends to apply for approval to have
the securities offered hereby (the Warrants and Shares) approved for inclusion
on the Bulletin Board. The Company's securities must continue to be registered
under Section 12(g) of the Exchange Act. If the Company's securities are traded
for less than $5 per security, then unless the Company's net tangible assets
exceed $2,000,000 or the Company has average revenues of at least $6,000,000
for the last three (3) years, the respective security (a "Low-Priced Security")
will be subject to SEC Rule 15g-9 concerning sales of low priced securities or
"penny stocks" unless the security is otherwise exempt from Rule 15g-9.
Pursuant to Rule 15g-9, prior to concluding a sale. a broker-dealer must make
a special suitability determination for the purchaser and receive the
purchaser's written representations and agreement concerning the transaction.
In addition, Rule 15g-9 generally requires broker-dealers to provide customers
for whom they are effecting transactions in a Low-Priced Security, before the
transaction, with a standard risk disclosure document describing the customer's
right to disclosures of the (i) current bid and asked quotations, if any, (ii)
compensation of the broker-dealer and the salesperson in the transaction, and
(iii) monthly account statements showing the market value of the such stock
held in the customer's account. If the Common Stock or Warrants individually
trade for more than $5 per security, then these rules will not apply to the
transactions in the respective security trading for over $5. To the extent
that the respective security becomes a Low-Priced Security, these rules will
apply and would be expected to have a negative effect on the desire of brokers
to sell the Company's Securities; would be expected to have a negative effect
on the brokers' ability to do so; and also would be expected to have a
negative effect on the ability of purchasers in this Offering to sell the
Company's securities in the secondary market.
21. Underwriter's Warrants and Registration Rights.
The Company has agreed to sell to the Underwriter warrants
(the "Underwriter's Warrants) at a purchase price of $0.0001 per Underwriter's
Warrant to acquire an aggregate of 135,000 shares of Common Stock and 270,000
Warrants, entitling the holder to purchase 270,000 shares of Common Stock
exercisable for a period of four years commencing one year from the date of
this Prospectus, at an exercise price equal to 100% of the price of the Common
Stock to the public in this Offering, subject to adjustment in amount pro rata
in the event all of the shares of Common Stock and/or Warrants are not sold in
this Offering. The Shares and Warrants issuable upon exercise of the
Underwriter's Warrants are identical to those offered hereby. The Underwriter's
Warrants are exercisable for a period of four years commencing one year from
the date of this Prospectus. The exercise of the Underwriter's Warrants will
dilute the value of the Shares and may adversely affect the market price of
the Shares. The Underwriter has been granted (i) certain "piggy-back"
registration rights for a period of seven years from the date of this
Prospectus and (ii) demand registration rights for a period of five years from
the date of the Prospectus with respect to the registration under the Act of
the securities issuable upon exercise of the Underwriter's Warrants.
22. Effect of Warrants.
The holders of Warrants and the Underwriter's Warrants will have an
opportunity to benefit from a rise in the market price of the Shares. During
the life of the Warrants, the terms upon which the Company could obtain
additional capital may be adversely affected. Holders of Warrants might be
expected to exercise them at a time when the market price of the Shares is in
excess of the exercise price of the Warrants. The issuance of Shares upon the
exercise of the Warrants, therefore, may result in a dilution of the equity
represented by the then outstanding Shares held by other shareholders. At such
a time the Company might be able to obtain capital, if needed, on terms more
favorable than those provided by the Warrants. See "DILUTION."
DILUTION
As of September 30, 1996, the net tangible book value of the Common Stock
of the Company was $0.495 per Share. Net tangible book value per share
represents the amount of the Company's tangible net worth (total tangible
assets less total liabilities) divided by the total number of Shares
outstanding. "Dilution" means the difference between the purchase price of
the Shares paid by an investor herein and the pro-forma net tangible book value
of the Shares after giving effect to this Offering. After giving effect to the
sale of the Shares offered hereby and receipt of the net proceeds thereof, the
pro forma net tangible book value of the Shares at September 30, 1996, would
have been $1.233 per Share, if only the minimum Offering is sold, or $1.904
per Share, if the maximum Offering is sold. This represents an immediate
increase in net tangible book value of $0.738 per Share, if the minimum Offering
is sold ($1.409 per Share if the maximum Offering is sold) to existing holders
of Shares and an immediate dilution of $4.767 per Share or 79% (minimum) or
$4.096 per Share or 68% (maximum) of the initial public offering price to
purchasers of the Shares offered hereby.
The following tables illustrate the dilution to the purchasers of the
Shares offered hereby both for the minimum and maximum Offerings:
I. Assuming Only The Minimum Offering is Sold:
Public Offering price per share (1)(2): $ 6.00
Net tangible book value at September 30, 1996
before Offering: $ 0.495
Increase per share attributable to new investors: $ 0.738
Pro forma net tangible book value at September 30, 1996
after Offering(3): $ 1.233
Per share dilution to new investors: $ 4.767
II. Assuming The Maximum Offering is Sold:
Public Offering price per share (1)(2): $ 6.00
Net tangible book value at September 30, 1996
before Offering: $ 0.495
Increase per share attributable to new investors: $ 1.409
Pro forma net tangible book value at September 30, 1996
after Offering(3): $ 1.904
Per share dilution to new investors: $ 4.096
________________________________
(1) Before deduction of underwriting commission and estimated expenses to be
paid by the Company.
(2) Assumes no value for the Warrants for the purpose of calculating
dilution.
(3) Assumes no exercise of the Underwriter's Warrants and does not include
the amount of Consulting Fees paid for a 24 month consulting agreement as a
prepaid expense.
(4) Id based upon 738,263 shares of Common Stock issued and outstanding at
September 30, 1996 and does not give effect to an additional 200,000 shares
of Common Stock issued after such date.
The following tables set forth, after giving effect to the assumed
completion of the Offering, at both the Minimum and Maximum Offering,
the total consideration paid and the average price per Share paid by existing
shareholders and by the public participating in this Offering:
I. Assuming Only The Minimum Offering is Sold:
Shares Owned Consideration Average Per
Number Percent Amount Percent Share Price
Present
Shareholders 938,263 79.0% $ 589,840 28.2% $ 0.80
New Investors 250,000 21.0% $1,500,000 71.8% $ 6.00
_______________________________________________________________________
Total(1) 1,188,263 100.0% $2,089,840 100.0%
II. Assuming The Maximum Offering is Sold:
Shares Owned Consideration Average Per
Number Percent Amount Percent Share Price
Present
Shareholders 938,263 67.6% $ 589,840 17.9% $0.80
New Investors 450,000 32.4% $2,700,000 82.1% $6.00
_______________________________________________________________________
Total(1) 1,388,263 100.0% $3,289,840 100.0%
___________________________
(1) Does not give effect to (i) the exercise of any of the Warrants offered
hereby; (ii) the exercise of any of the Underwriter's Warrants; (iii) the
exercise of any of the Warrants included in the Underwriter's Warrants;
or (iv) the exercise of any of the Bridge Warrants also registered herein.
USE OF PROCEEDS
The net proceeds from the sale of the Securities offered hereby, after
deducting underwriting commissions, other expenses and the cost of a pre-paid
consulting agreement, estimated in the aggregate at $449,000 if only the
minimum number of shares of Common Stock are sold, or $605,000 if all shares
of Common Stock and Warrants are sold, will be approximately $1,105,000 if
the Minimum Offering is sold and $2,095,000 if the Maximum Offering is sold.
These proceeds are intended to be applied approximately in the following manner:
Minimum Maximum
Percent- Percent-
Amount age(1) Amount age(1)
Repayment of Bridge Loan
Financing(2) $ 550,000 52.3% $ 550,000 26.3%
Expansion of Inventory(3) $ 100,000 9.5% $ 200,000 9.5%
Marketing(4) $ 50,000 4.8% $ 100,000 4.8%
Key-man Insurance(5) $ 25,000 2.4% $ 25,000 1.2%
Product Liability and
Officers & Directors
Insurance(6) $ 20,000 1.9% $ 20,000 0.9%
Expansion and Acquisition
Program(7) $ 200,000 19.0% $ 500,000 23.9%
Working Capital(8) $ 106,000 10.1% $ 700,000 33.4%
_________ ______ _________ ______
TOTALS $1,051,000 100.0% $2,095,000 100.0%
______________________________
(1) All percentages are rounded to the nearest tenth.
(2) Includes principal and estimated interest payments due on two previous
bridge financing transactions completed by the Company in anticipation of this
Offering.
(3) Includes an allocation for the expansion of the Company's existing
inventory in order to permit management to take advantage of available
volume discounts offered by suppliers and to establish initial inventories
of new products either developed by the Company or as to which distribution
rights have been negotiated.
(4) This allocation is intended to meet the anticipated costs of expanding
the Company's marketing and advertising program. Although the Company has not
yet finalized its long term marketing plans, management generally intends to
(I) investigate the feasibility of expanding its use of independent marketing
representatives and to promote its product lines, particularly its proprietary
products, to new markets, other than the traditional hospital and health care
markets, through the use of a combination of advertisements in specialized
trade magazines, attendance at trade shows and a direct mail program to
potential end-users; (ii) expand its use of print advertising (including the
expansion of current advertising in trade publications) and (iii) develop,
printing and distribute product brochures and literature, particularly for
the Company's proprietary products. This allocation is estimated to be
adequate to meet the cost of such activities for a period of at least one year
following the completion of this Offering even if only the minimum Offering is
sold.
(5) This allocation is intended to be used by the Company for the purchase of
key-man life insurance on the lives of Dr. Stahl and Mr. Steil. Based upon
quotations received by management, this allocation is deemed adequate by
management to meet the first year's cost for such insurance for both Dr. Stahl
and Mr. Steil.
(6) This allocation is intended to meet the cost of (I) acquiring product
liability insurance in a minimum amount of $1 million and (ii) acquiring
officers and directors insurance following the completion of this Offering,
which management believes to be essential in order to attract new officers
and directors with the skills and experience required to fully realize the
Company's growth potential. Based upon an investigation by management, this
allocation is expected to be adequate to cover the first year premium for such
insurance.
(7) This allocation is intended to meet the cost of implementing the Company's
expansion program (see, "BUSINESS OF THE COMPANY") and is expected to be
adequate for a period of at least one year following the completion of this
Offering.
(8) This allocation will be used as general "Working Capital" to pay various
routine administrative and operating expenses of the Company.
The foregoing categories indicate the allocation of funds in the order of
priority and relative percentage of the total proceeds which is expected to be
used by the Company for the purposes indicated. The amounts set forth
represents the Company's best estimates of its required allocation of funds
based upon the current state of its business operations, its current plans,
and current economic and industry conditions. The actual expenditures may vary
from the estimates set forth in the table above, depending upon a number of
factors beyond the control of the Company. Future events, including the
problems, expenses, complications and delays frequently encountered by growing
businesses, as well as changes in economic conditions or the regulatory
environment or the Company's operations, may make changes in the allocation of
funds necessary or desirable. It is anticipated that a sufficient reserve
has been allocated to "Working Capital" to provide adequate additional funds,
without affecting the allocations set forth in other categories. To the
extent amounts received are inadequate in any particular area of expenditure,
supplemental amounts may be drawn from operating revenues, if any, or from the
allocation for "Working Capital." Conversely, in the event that actual
expenditures in any particular category are less than the amounts allocated,
any amounts not expended will be added to the reserve for "Working Capital."
It is possible that all or a portion of the funds received in this Offering
may not be utilized immediately, in which case the Company may invest unused
funds in interest bearing accounts or securities, within limitations, until
expenditure of such funds becomes necessary. It must be noted that all funds
in the Working Capital category may be used for any purpose deemed appropriate
by management without any restriction or say whatsoever by the shareholders
including purchasers of Securities herein.
CAPITALIZATION
The following table sets forth the unaudited pro forma capitalization of the
Company as of September 30, 1996 as adjusted to give effect to the sale of (I)
the minimum and maximum number of Securities offered hereby and (ii) the
application of the estimated net proceeds therefrom. This table should be
read in conjunction with the Company's Financial Statements included
elsewhere in this Prospectus. See "FINANCIAL STATEMENTS."
<TABLE>
<P> <C> <C> <C>
As Adjusted Upon the As Adjusted Upon the
Sale of the Minimum Sale of the Maximum
Actual Number of Shares (1) Number of Shares (2)
Long term debt $ 248,038 $ 248,038 $ 248,038
Stockholders' Equity:
Preferred stock, $. 10 par - - -
value, no shares outstanding
Common Stock, $.001 par
value, 20,000,000 shares
authorized; 738,263 shares
issued and outstanding,
988,263 shares to be
outstanding upon sale of the
minimum, 1,188263 upon
sale of the maximum, Offering(3) 738 988 1,188
Additional paid-in capital 589,102 1,442,095 2,485,895
Retained Earnings (224,640) (224,640) (224,640)
Total stockholders' equity $ 365,200 $1,218,443 $ 2,262,443
Total Capitalization $ 613,238 $1,466,481 $ 2,510,481
</TABLE>
________________________________
(1) As adjusted to reflect the sale of the Minimum number of Securities
offered hereby and the application of the proceeds by the Company.
(2) As adjusted to reflect the sale of the Maximum number of Securities
offered hereby and the application of the proceeds by the Company.
(3) Does not give effect to (I) the exercise of any of the Warrants offered
hereby; (ii) the exercise of any of the Underwriter's Warrants; (iii) the
exercise of any of the Warrants included in the Underwriter's Warrants;
(iv) the exercise of any of the Pre-Bridge or Bridge Warrants; or (v) the
exercise of any of the Underwriter's Bridge Warrants.
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction.
The information described herein represents the financial condition and
results of operations of the Company's principal subsidiaries, since the
Company itself is and has been inactive for more than two years and the
acquisition of APO Health, Inc. ("APO") by the Company for accounting purposes
has been treated as a purchase by APO (i.e. a reverse acquisition) because of
the significance of the assets and operations of APO when compared to the
Company. Therefore the financial statements predominantly represent the
historical activities and assets of APO and the two other subsidiaries acquired
by the Company.
Except as otherwise indicated, the comparative information presented in
this discussion is based on the nine month period ended September 30, 1995 as
compared to the twelve months ended September 30, 1996. The reason for this
is that the Company's principal subsidiary, APO whose operations and financial
condition represent the principal part of the financial statements, was a
Subchapter S corporation until September, 1994 when it terminated that
election because of its intended acquisition by the Company. The Company
continued to report on a calendar year end basis until December 31, 1994.
Effective January 1, 1995, APO changed its year end to September 30th to
conform to the tax year end of the Company.
References to the Company's operations for the year ended
September 30, 1995 have been annualized based on the results of operations
for the nine months then ended.
I. Financial Condition and Liquidity.
(a) Financial Condition.
Assets:
Total assets of the Company increased by approximately twelve percent (12%)
in fiscal 1996 as compared with September 30, 1995
(i.e. total assets of $3,365,256 for 1996 and $ 3,003,034 for 1995).
The notable differences in these periods occurs because of substantially
increased inventory in 1996 (i.e. $1,288,278 in 1996 as compared to $772,722
in 1995, an increase of approximately 67%), increases in "Total Other Assets"
in 1996 and is also otherwise influenced by the two acquisitions made by the
Company during the fiscal year ended September 30, 1996.
These increases were more than sufficient to offset declining cash balances
at September 30, 1996, reductions in accounts receivable and other miscellaneous
reductions in total assets in 1996 compared with 1995, with the overall effect
of an increase in total assets for September 30, 1996 of approximately 12%
when compared to September 30, 1995.
Assets also increased by higher accounts receivable in 1996 and increases
in underwriting costs.
A comparison of certain significant tangible assets of the Company and
Stockholder's Equity for the years ended September 30, 1996 and December 31,
1994 and the nine months ended September 30, 1995 is as follows:
September 30, September 30, December 31,
1996 1995(1) 1994(1)
Cash $ 129,250 $ 247,856 $ 236,541
Receivables 1,162,602 1,357,114 976,068
Inventory 1,288,278 772,722 631,431
Net Property
& Equipment 78,078 76,875 39,358
__________ _________ __________
Total $ 2,658,208 $ 2,454,567 $ 1,883,390
Stockholders
Equity
(Deficit) $ 365,200(2) $ 327,364(2) $ (69,557)(2)
______________________
(1) Represents results of operations and financial condition for the nine
months ended September 30, 1995 and the year ended December 31, 1994.
Also see "Introduction" above.
(2) Does not include $248,038 in previously taxed profits due to the former
shareholders of APO (prior to its acquisition by the Company) in retained
earnings from operations as a Subchapter S corporation.
This comparison reveals an increase in tangible assets for each of the
periods ended September 30, 1996 and 1995 and December 31, 1994, and reflects
the growth of the Company's business in these periods in terms of tangible
assets. While the growth of the Company in terms of tangible assets is
evident from this comparison, there has been a significant cash decline since
September 30, 1995. This decline primarily results from increased inventory
purchases in 1996, the cost of reducing trade acceptances in 1996, the cost of
operating at higher levels, underwriting expenses, and the cost of making two
acquisitions during that period.
The Company generated cash flow from operations of $157,520 in the year
ended September 30, 1996, compared with a cash utilization of $586,081 for the
nine months ended September 30, 1995. The Company had a cash balance of
$129,250 at September 30, 1996 which was a decline of $118,605 compared to
September 30, 1995.
At the same time, a comparison of Stockholder's Equity for the period
reveals the impact of net losses incurred by the Company for the nine months
ended September 30, 1995 and for the year ended December 31, 1994
(i.e. $(247,819) for the nine months ended September 30, 1995 and $(10,557)
for the year ended December 31, 1994) and shows slight improvement in 1996
when compared to 1995 because of the small net income from operations in 1996.
Liabilities:
Liabilities for 1996 reflect an increase of $234,663 in the Company's
bank line of credit when compared to 1995, the use of which was required for
the increase in business which the Company did during the 1996 fiscal year
and to cover other costs as indicated above and reductions in cash and
liquidity during 1996. The Company's total credit line at September 30, 1996
was $2,000,000 and is primarily for working capital and purchases of inventory.
In addition, one of the Company's subsidiaries, Universal Medical Distribution,
Inc. ("Universal"), has a credit line of approximately $50,000. Therefore,
The Company had available approximately $1,000,337 in its credit line at
September 30, 1996, taking into account the $50,000 availability of Universal.
Similarly, reflecting the additional operating activity during the period,
accounts payable increased during 1996 by approximately $138,203
compared to 1995.
The "Loans Payable" account reflects the Company's recent borrowing to
meet increased cash needs in anticipation of this Offering. It is expected
that these loans will be repaid from the proceeds of the Offering.
See "Use of Proceeds."
Total liabilities of $3,000,056 in 1996 compares with $2,427,632 for the
nine month period ended September 30, 1995 which management feels is
consistent with the Company's growth in the period and the acquisition of two
companies during 1996. It should also be remembered that total liabilities
for 1996 and 1995 include $248,038 due former shareholders (i.e. the
shareholders prior to the acquisition of APO by the Company) which represents
undistributed income due to them as a result of APO's operations as a
Subchapter S corporation.
While there were changes in the components of assets and liabilities for
fiscal 1996 when compared with 1995 and December 31, 1994 as indicated above,
management believes that all of those changes are consistent with the Company's
activity, growth and performance in 1996 and show an improvement in the
Company's overall financial condition in fiscal 1996 when compared to 1995.
See "Results of Operations" for additional information. For information
regarding liquidity, see Subparagraph (b) "Liquidity" below. For additional
information relating to the financial condition of the Company, also see
"Inflation" and "Trends Affecting Liquidity, Capital Resources and Operations."
(b) Liquidity:
Although working capital at September 30, 1996 was only $10,816 (compared
with working capital of $251,192 at September 30, 1995), the Company had
sufficient liquid assets to meet its obligations at the end of fiscal 1996.
Principal sources of working capital in 1996 were cash, accounts receivable
(i.e. $1,162,602) and inventory ($1,288,278) and, it should be remembered,
that the Company still has other adequate alternative credit resources in its
bank credit line to meet any additional foreseeable requirements for current
payments.
Management believes that the decline in liquidity is consistent with its
expansion during 1996, the repayment of debt during the period, underwriting
costs and the cost of operating at a higher level in that year. The decline
was partially reduced and offset by bridge loans made during the period.
The principal source of funds for the Company's operations during fiscal
1996 has been from the Company's credit line and borrowings in anticipation
of this Offering (i.e. bridge loans), as reflected in the Company's financial
statements.
Considering the increased business of the Company, management believes
that there have been no substantial, adverse changes in liquidity in 1996 when
compared to 1995.
In combination, management believes that the Company will have adequate
working capital and sufficient credit alternatives to fund the Company's
operations during the next fiscal year, including support for any planned
expansion of sales.
II. Results of Operations.
In fiscal 1996 the Company had net revenues of $14,615,764 compared to
$9,657,770 for the nine months ended September 30, 1995. Upon annualizing the
results of operations for the nine months ended September 30, 1995, revenues
would have been approximately $13,480,000 which includes revenues from the
Company's newly acquired subsidiaries. The increase in revenues in 1996 from
the nine months ended September 30, 1995 was $4,957,994 or approximately 51.5%.
Upon annualizing the results of operations for 1995, revenues would have been
approximately $13,480,000 or an increase in 1996 of $1,135,764 or
approximately 8.4%.
While there were slight increases in prices for certain of the Company's
products during the year, which in management's opinion did not materially
account for the increase in revenues in 1996, the principal reason for this
increase results from the Company's offering of additional new products
consistent with its plans to become a full-line supplier to the industries
served by the Company and, because of its acquisition of two new subsidiaries
during 1996 whose results of operations are included in 1996.
Other efficiencies were also established in 1996 with respect to overall
operations. These efficiencies included:
(a) The cost of revenues in 1996 was approximately 86% of total revenues
while at September 30, 1995, the cost of revenues was approximately 89% of
total revenues.
(b) Gross profit for 1996 was approximately 13% of revenues while gross
profit for 1995 was approximately 10% of revenues.
Income from operations for 1996 was approximately 1.7% of revenues
(i.e. $254,019) compared with a loss from operations in 1995 of $(2,487).
The following other costs of operations either remained essentially the
same or declined in the period ended September 30, 1996 when compared
with 1995:
(a) Selling expenses in 1996 were only slightly reduced to approximately
6.2% of total revenues in 1996 compared with 5.6% in 1995.
(b) Total Operating expenses increased from approximately 10% in 1995 to
approximately 12% in 1996.
For information with respect to the possible effect of future trends on
operations, see the discussion under the caption "Trends Affecting Liquidity,
Capital Resources and Operations."
III. Capital Resources.
Property and equipment remained essentially the same at September 30, 1996
when compared with September 30, 1995 except for a slight increase of
approximately $15,000 in the new acquisition of machinery and equipment.
There were no material commitments for capital expenditures at the end of
fiscal 1996 and management does not foresee any increases in these requirements
during the next fiscal year.
Since the Company is not in the business of manufacturing the products it
sells, The Company does not presently anticipate the allocation of significant
resources for machinery and equipment purchases or plant acquisition. Any such
commitments in the future will be dependent on product demand, additional
inventory acquisition and the necessity for further control of delivery of
products under new or increased orders. If any change in capital purchase
requirements occur in the near future, the Company is likely to arrange
financing for such acquisitions from sources which will not require a
substantial outlay of cash and will be in proportion to its expansion program.
IV. Inflation.
Management anticipates that inflation will not have a material effect on
the Company's operations in the future. This is principally due to two factors.
First, if orders increase due to inflation the Company will have adequate
capacity to support not only its present level of operations but, with the
addition of personnel, use of its credit line or the successful completion of
this financing, it will be able to support an increase in operating levels.
Second, although product pricing would be affected by inflation due to higher
costs, management believes that public health and safety concerns would
outweigh any negative impact of price increases and such increases would not
adversely affect the Company's projected sales. Additionally, the
pharmaceutical, hospital and health care markets have historically been best
able to pass on increased costs which are typically paid by insurance coverage.
V. Trends Affecting Liquidity, Capital Resources and Operations.
A number of factors are expected to impact upon the Company's liquidity,
capital resources and future operations. Included among these are (I)
environmental concerns; (ii) economic factors generally affecting the health
care industry; (iii) governmental regulation of the Company's products and
(iv) the growing concern in many industries about controlling the spread of
infectious disease.
Some products offered by the Company are made from plastic-based materials
which have raised concern among environmental groups over their proper
disposal. Although management believes that such concerns are, in many cases,
valid, it is also believed that these concerns must be balanced with safety
provided by these products against infectious diseases such as AIDS,
hepatitis and others. This belief has recently been reinforced by the
comprehensive safety regulations issued by the Occupational Safety and Health
Administration (OSHA) which require extensive new measures to combat the spread
of infection and disease in many industries which had not previously required
such measures. Most importantly, from the point of view of the Company, are
the requirements for protective apparel such as that distributed by the
Company. Management also believes that the regulations, which are now fully
implemented, will increase demand for the Company's products and significantly
expand the Company's markets. Based upon recent increased orders, management
believes that most significant among these new markets for its products will
be the industry looking to comply with the new OSHA regulations.
Nevertheless, the requirements relating to proper disposal of plastic-based
garments are still in question and the Company cannot predict the outcome of any
future regulations relating to these matters. Any changes in manufacturing or
disposal requirements could result in higher manufacturing costs and less
profitability for the Company or, perhaps, complete elimination, which could
have a substantially negative impact on liquidity and capital resources in the
future.
Management also believes that the most significant adverse impact upon its
liquidity, capital resources and future operations may result from economic
pressures to keep the costs of its products low. Spearheaded by health care
insurers and now the federal government, the entire health care industry in
the United States has come under increasing pressure and scrutiny to reduce
unnecessary and wasteful costs. To meet the criticism in recent years over
the higher cost of disposable products, the industry has introduced new lines
of limited reusable products. These products are designed to be washed and
reused from between 25 and 100 times before being replaced. Management believes
that such products will not only address the economic concerns but also the
environmental issues by reducing the amount of products which are being
discarded. However, as already mentioned, in situations where there is a
high risk of spreading infection, management believes that the disposable
products will continue to have strong appeal and demand in the marketplace.
Also, as new Company products are introduced, management believes that
sales revenues will increase and, over the long term, will result in higher
profit margins for the Company. In addition, the existence of the Occupational
Safety and Health Administration (OSHA) regulations are expected to have a
positive influence on the demand for the Company's products.
In short, the above factors may each have a significant impact upon the
Company's future operations. At present, management believes that safety
concerns over the spread of infectious diseases such as AIDS and hepatitis
will, at least for the foreseeable future, outweigh economic and environmental
concerns. Consequently, management does not anticipate any adverse impact upon
its future operations for the foreseeable future. Apart from these factors,
management knows of no trends or demands that would adversely affect the
financial condition of the Company.
BUSINESS OF THE COMPANY
General
The Company is a multi-faceted distributor of medical, dental and
veterinary supplies which are manufactured by others. These products include
protective garments such as disposable isolation gowns, face masks and gauzes
as well as other medical disposable items such as latex gloves, needles,
syringes and health and beauty aids. Products are marketed and sold primarily
(i) on a wholesale basis to other distributors (approximately 65% of total
revenues) (ii) directly to doctors, dentists and veterinarians (approximately
30 % of total revenues) (iii) to others including to consumers and through
export to foreign countries (approximately 5% of total revenues).
Recently, the Company expanded its product lines in two important ways:
(i) Through the introduction of proprietary products designed and
produced according to the Company's specifications; and
(ii) Through expanded sales of additional third party products
marketed via tele-marketing and other methods of direct sales to physicians,
veterinarians dentists and other wholesalers.
Significant Developments and the Company's Markets.
Perhaps the single most significant event affecting the disposable medical
apparel/products industry (i.e. materials which are designed for single
use only) occurred on December 6, 1991 when The Department of Labor,
Occupational Safety and Health Administration (OSHA), reported the passing of
29 CFR PART 1910.1030, "Occupational Exposure to Blood borne Pathogens; Final
Rule." The mandatory regulations have significantly expanded the requirements
for protective apparel not only in the traditional medical/dental fields but
also in many industries and organizations where there exists a risk of
spreading of infectious diseases such as AIDS and Hepatitis. Management believes
that these regulations have had a positive impact upon the Company's sales and
earnings and will continue to do so for the foreseeable future because the
Company offers products which comply with OSHA's requirements.
Management believes that since the inception of Xetal, Inc., competitive
pricing has been achieved due to opportunistic inventory purchases and a strong
sense of anticipating market demands by management. Management believes that
the Company has the marketing strength necessary to increase its sales
internally, provided it has an increased availability of funds required to
support this growth. Its banking lines have grown consistently since its
inception; however, these lines are limited and no longer provide the Company
with the needed availability of funds to accommodate its potential demand.
Management also believes that the new OSHA regulations, which were fully
implemented as of May, 1992, will continue to increase demand for the Company's
products and expand the Company's potential new markets. Based upon the most
recent inquiries received by the Company, management believes that most
significant among these new markets for its products will be hospitals,
doctors' and dentists' offices, the emergency service industries, including
police, fire, ambulance services and mortician services, which routinely are
exposed to unusually high risk of infectious diseases. In addition, its newly
acquired veterinary division is expected to increase sales.
Business Strategy
The Company's primary business strategy is to attain a share of the medical,
dental and veterinary supply business for its merchandise while also developing
a new proprietary line of products which it will be able to produce at a low
cost. The Company seeks to implement its business strategy as follows:
Expand Product Distribution. Many of the Company's existing customers
purchase only a portion of its full line of products. Management seeks to
increase the number of its products sold to existing customers both by
displacing competitors and by encouraging the adoption by retailers of
additional product lines offered by the Company through increased solicitation
for related product sales. The Company attempts to offer retailers the cost
savings and ease of administration which results from dealing with one supplier
for many diverse products and believes that this approach enhances its
relationship with retailers by minimizing their costs. Additionally, the
Company seeks to expand its level of contract manufacturing for new
proprietary products, thereby providing management a greater level of control
over pricing of its products.
Introduction of New Products. The Company seeks to develop new
proprietary products which will either be comparable to newly introduced
nationally advertised "brand-name" products or which will be completely new
to the market. Management also plans to attempt to secure distribution rights
to new products introduced by other manufacturers. During fiscal 1995 the
Company introduced several new products including GobbleTM
(an organic cleaner); FloamTM (an APF fluoride treatment) and ZAP, a topical
anaesthetic. Following the acquisition of Dental Alternatives, Inc. from Dr.
Stahl in July 1996 (see, "CERTAIN TRANSACTIONS"), management has formulated
plans to introduce during the first quarter of fiscal 1997, two new
proprietary products, the "EDK Emergency Dental Kit" and "Dr. Stahl's Dental
First Aid Center."
Pursue Strategic Acquisitions. Management believes that the medical,
dental and veterinary products distribution market, which is presently
typified by a large number of small distributors, suppliers and manufacturers,
will undergo additional consolidation as these companies are required to grow
in order to meet the demands of the marketplace for flexible manufacturing
and sales support services to what is already a consolidating retail market.
Based upon this belief, the Company seeks to acquire companies which can
strengthen its market share of existing products or which can add private
label product lines compatible with the Company's present distribution channels.
One such strategic acquisition was the Company's recent acquisition of
Universal Medical Distributors, Inc. which was completed in April, 1996.
Management continues to evaluate other potential acquisition candidates,
although as of the date of this Prospectus no additional viable acquisition
candidates have been identified by management. While a portion of the
proceeds from this Offering has been allocated for this purpose, management
believes that it can utilize its own securities to make acquisitions, either
in whole or in part, in the future thereby preserving cash for the expansion
of its operations.
Emphasize Customer Service. The Company seeks to build and maintain
strong relationships with its customers by providing improved product pricing,
consistently high quality control and an improved responsiveness to customer
needs through the reliable, timely processing and shipment of orders.
In todays highly competitive market, customers demand quality products with
dependable and expeditious service at the lowest possible price. A portion of
the proceeds from this Offering has been allocated to the expansion of the
Company's inventory, including both existing products and new, proprietary
products. Management believes that by increasing inventories, it will be
better able to meet two key factors in satisfying customer demands in the
future. First, by being able to buy in quantity management believes it will
be able to take advantage of volume discounts from its suppliers thereby
allowing it to pass on a part of the savings in the form of lower prices to
customers. Second, by expanding inventories of fast moving items, management
believes it can improve shipping and delivery time by reducing, or possibly
eliminating, those occasions when popular items are out of stock and customers
are forced to endure delays while product stocks are replenished.
Ensure Product Quality. Management considers its commitment to
quality to be one of the most important factors in acquiring and maintaining
customers. For this reason management seeks to distribute products manufactured
by reliable and quality conscious manufacturers with proven safety and quality
control records. Further, with respect to its own private label products,
management plans to establish a quality control and testing procedure utilizing
both internal controls and outside testing by independent laboratories in an
attempt to meet quality levels of nationally recognized products.
Products.
Currently, the Company distributes approximately 3,000 different products
within the medical, dental and veterinary markets. Several of the principal
products are described below.
Dental: The Company markets and distributes protective gloves, needles,
prophy angles, barrier protection products, gowns, face masks, gauze products,
topical anaesthetics and infection control chemicals to the dental industry.
Included among such products are the following proprietary products:
FloamTM: This product is a topical fluoride treatment in a foam format
which is offered in four flavors and is marketed as a dental hygiene product
for direct consumer use.
Prophy Jet Powder: This product, marketed and distributed to the dental
industry, is used primarily to prevent clogging and insure even flow through
prophy jet units.
GobbleTM: This product, also marketed and distributed to the dental
industry, is a bacterial product which forms a potent biofilm that adheres to
evacuation in dental equipment which causes organic waste to be reduced to
carbon dioxide and water.
Medical: The Company markets and distributes protective gloves, tapes, syringes,
needles, protective barrier gowns and gauze products to the medical and health
care industry.
Veterinarian: The Company markets and distributes protective gloves, needles,
gowns, tapes and a full line of veterinary products to the veterinary industry.
Dr. Stahl's Dental First Aid Center: This is a new proprietary product which
the Company plans to market and distribute for direct consumer use. This kit
is designed to allow the consumer to perform limited emergency dental functions
such as replacing lost fillings and repairing broken dentures.
In addition to the foregoing, which represent the most popular product lines,
the Company distributes a wide range of other medical, dental and veterinary
supplies and products. The Company does not have any contractual agreements
with its suppliers except for a Purchasing Agreement with Johnson & Johnson
Medical Inc. ("J&J"), pursuant to which the Company has secured the purchase of
$2,847,500 in J&J products during the one-year period from June 1, 1996 through
May 31, 1997.
The Company also obtains certain of its products through third party
manufacturers. Although the Company does not have contractual arrangements
with its manufacturers, except as noted above, the Company believes that
there are adequate alternative manufacturers which would be able to provide
adequate manufacturing capabilities in the event its present manufacturers
were unable, or unwilling, to continue to provide the Company with manufacturing
services.
Sales and Marketing.
The Company's products are sold directly by Company employees, through
mail order and by outside, independent sales representatives. The Company's
sales organization presently consists of two persons, including Dr. Stahl, the
Company's Chief Executive Officer, who oversees a combination of direct
salespersons and independent sales representatives. Typically, independent
sales representatives who have undertaken to sell the Company's products will
agree not to sell similar or competitive products during the time when they
represent the Company.
The Company has recently modified its marketing approach by attempting to
capitalize on its wide array of product lines in order to offer mass
merchandisers, buying consortiums, drug store and supermarket chains a
"package" approach to its private label program. This not only provides
customers with attractive and competitive pricing but, in management's opinion,
provides the Company with a competitive advantage by offering its customers
the ease of administration and cost savings which come with using a single
supplier for many of their product needs.
Although the Company has not yet finalized its long term marketing plans,
management generally plans to (i) investigate the feasibility of expanding its
use of independent sales marketing representatives and to promote its product
lines, particularly its proprietary products, to new markets, other than the
traditional hospital and health care markets, through the use of a combination
of advertisements in specialized trade magazines, attendance at trade shows
and a direct mail program to potential end-users; (ii) expand its use of print
advertising (including the expansion of current advertising in trade
publications); (iii) develop, print and distribute product brochures and
literature, particularly for the Company's proprietary products; and (iv)
establish a tele-marketing network to achieve greater market penetration.
A portion of the proceeds of this Offering has been allocated to meet the costs
of the Company's expanded sales and marketing program during the coming fiscal
year.
Government Regulation.
Approval from the Food and Drug Administration (the "FDA") is not required
for marketing or distribution of most of the Company's products. However,
certain of the products marketed or being developed and manufactured by the
Company are, or will be, subject to regulation as medical devices by the FDA,
which has comprehensive authority to regulate the development, production,
distribution and promotion of medical devices. Various states and foreign
countries in which the Company's products are, or in the future may be sold,
may also impose certain additional regulatory requirements. The Company is
registered with the FDA as a distributor of various medical devices.
Pursuant to the federal Food, Drug and Cosmetic Act, and the regulation
promulgated thereunder, a medical device is ultimately classified by the FDA
as either a Class I, Class II or Class III device. Class I devices are subject
to general controls which are applicable to all devices. Such controls
include regulations regarding FDA inspection of facilities,
"Good Manufacturing Practices," labelling, maintenance of records and filings
with the FDA. Class II devices must meet general performance standards
established by the FDA before they can be marketed and must adhere to such
standards once on the market. Each manufacturer of medical devices is required
to register with the FDA and also to file a "510(k) Notification" before
initially marketing a new device intended for humans. The manufacturer may
not market such new device until 90 days following the filing of such
Notification unless the FDA permits an early marketing date. The FDA, prior
to the expiration of the 90-day period, may notify the manufacturer that it
objects to the marketing of the proposed device and thereby may delay or
preclude the manufacturer's ability to market that device. The FDA may also
require further data from, or testing by, the manufacturer. The FDA permits
the marketing of some medical devices, subject to the general controls under the
Act, if the devices are "substan- tially equivalent" to devices marketed in
interstate commerce before May 28, 1976 (the effective date of the Medical
Device Amendment to the Act).
Manufacturing and Distribution.
The Company does not manufacture any of the products it distributes. All of
the products distributed by the Company are either purchased from various
third-party manufacturers or suppliers as finished products, or are
manufactured for the Company according to its specifications directly by
various contract manufacturers. The Company stores its inventory of products
at its own warehouse facility in Oceanside New York and subsequently
distributes them to its customers in fulfilment of customer orders. Except
for its Purchasing Agreement with J&J discussed above, the Company has no
written contracts with any of its manufacturers or suppliers.
Manufacturers are selected by the Company on the basis of price,
availability of payment terms, quality, reliability and the ability of a
particular manufacturer to meet the production and delivery requirements of
the Company. The utilization of third party manufacturers enables the Company
to avoid incurring fixed manufacturing costs and substantial capital
expenditures in order to establish in-house manufacturing facilities. However,
such use of third party manufacturers does reduce the Company's ability to
control the timing and quality of the manufacturing process. Delays in
shipments to the Company or defects in products shipped could result in a
loss of sales, which could have a materially adverse effect upon the Company's
operating results. Manufacturing services performed overseas are typically
paid for by letter of credit, with payment being made only upon the proper
fulfilment of the express terms of the letter of credit as established by the
Company and proper documentation relating thereto. To date, the Company has
not experienced any material delays in the delivery of its products or any
material quality defect in the products manufactured for it by third party
manufacturers.
The Company's present facility provides the Company with adequate
warehousing and storage capacity for the foreseeable future. Although several
of the Company's customers take delivery of their products at the Company's
facility, typically, the Company will ship its products nationwide using either
independent contract carriers or common carriers.
As the Company continues to develop new proprietary products, management
expects that its reliance upon third party contract manufacturers may increase
substantially. However, to date the Company has not experienced any
difficulties in finding suitable contract manufacturers to meet its needs and
management does not expect to have any such difficulty in the future, even
considering its potentially increased needs.
Competition.
The hospital supply and medical products business is intensely competitive.
At present, the Company estimates that there are over 20 disposable product
companies whose products compete with the Company's present and proposed
products. These companies range from major multinational companies to
enterprises which are smaller in size and financial strength than the Company.
The Company's present and prospective competitors also include the numerous
manufacturers and suppliers of reusable medical products. Many of the Company's
competitors have far greater financial resources, larger staffs, and more
established market recognition in both the domestic and international markets
than the Company.
The consumer health and personal care products markets are also highly
competitive. Competition in these markets is based principally on price,
quality of products and customer service. Although the Company believes that
it currently competes favorably as to these factors, due to the high costs
associated with quality control and customer service, and the low profit
margins typical for these products, no assurance can be given that the Company
will be able to sustain its competitive position in these markets.
Several of the consumer markets in which the Company competes are dominated
by nationally advertised brand name products marketed by established consumer
packaged goods companies. The Company seeks to provide private label products
with quality equivalent to nationally advertised brand name products at
substantial cost savings to consumers and increased profit potential to
retailers. The Company believes that it presently offers one of the broadest
lines of such private label products available when compared to its private
label competitors. In the opinion of management, this breadth of product line
provides the Company with a competitive advantage by offering the Company's
customers the ease of administration resulting from a single supplier for many
of their product needs.
The Company's primary competition in consumer retail products is generally
product specific. Although some crossover does exist, the Company faces a
different set of primary competitors in each product line it offers.
The Company's position in the industry is insignificant and it competes based
primarily on the basis of service and price.
Trademarks, Patents and Licenses.
At present, the Company does not rely upon any patent protection for any
of its products and such protection is not believed to be essential by
management because of the character of its products. Further, there is little
likelihood that the Company will develop patentable products or processes in
the foreseeable future. In the absence of such protection, the Company will
primarily rely upon trade secrets and proprietary techniques to attain or
maintain any commercial advantage. There is no assurance that competitors
will not independently develop and market, or obtain patent protection for
products similar to those designed or produced by the Company, and thus
negate any advantage of the Company with respect to any such products.
Even if patent protection should become available to the Company in the
future, there is no assurance that such protection will be commercially
beneficial to the Company because of the nature of the industry.
In connection with the Company's recent acquisition of Dental Alternatives,
Inc. from Dr. Jan Stahl, the Company's Chief Executive Officer, the Company
also acquired the exclusive right to use the registered trademark "EDKTM" in
connection with the marketing of its planned emergency dental kit.
See, "CERTAIN TRANSACTIONS."
Credit Line.
APO Health, one of the Company's wholly owned subsidiaries, has secured
an inventory and accounts receivable credit line from Marine Midland Bank which
allows it to borrow up to $2 Million, subject to bank approval. Borrowings are
repayable at "prime plus 1 1/2%" on a revolving basis. The bank may terminate
the credit line at any time and may refuse to authorize additional borrowing
at its discretion. The line of credit is secured by personal guarantees of
Dr. Jan Stahl and Peter Steil, officers and directors of the Company.
Additionally, the Company has granted Marine Midland Bank a first priority
security interest in all of its accounts receivable and inventory.
Customer Base.
The Company current has approximately 7000 customers nationwide.
Two customers represent approximately 15% of the Company's gross sales.
Management does not believe that the loss of any particular customer would have
any measurable impact upon the Company's overall revenues or profits from
operations.
Recent Developments.
APO Health and Trans Medical International Corporation ("Trans Medical")
formed a joint venture to export medical and dental products similar to those
distributed by APO Health primarily to South America. During 1994, APO Health
advanced Trans Medical cash and merchandise amounting to $135,000 (the "Loan").
As collateral for this Loan, APO Health obtained a 25% interest in Trans
Medical and Messrs. Stahl and Steil were elected to the Board of Directors of
Trans Medical. The Loan, originally repayable in full in May, 1996, was
extended to December 31, 1996 based upon the request of TransMedical who has
informed the Company that TransMedical has experienced significant operating
losses and decreases in revenue during the past year. The Loan was not repaid
by Trans Medical on the extended December 31, 1996 due date and is presently in
default. As a result, there can be no assurance that the Loan due to be repaid
to the Company by TransMedical by December 31, 1996, will ever be paid, or that
the Company's ownership interest in TransMedical will be a valuable asset in the
future.
Employees
The Company, including its two subsidiaries APO Health and Universal,
currently employs a total of 13 persons, of which four (4) persons are
executive personnel; two (2) persons are sales persons; four (4) persons are
clerical/administrative and three (3) persons are warehousemen. The Company
believes its relations with its employees are excellent. None of its employees
are members of a labor union.
Facilities
The Company's offices are located at 3590 Oceanside Avenue, Oceanside
New York. The premises contain approximately 9800 square feet under a five
year lease (the "Lease") which expires in December 31, 1999 (the "Lease Term").
These premises are occupied under a Lease between the landlord, who is an
unaffiliated third party, and an affiliated company PJS Trading Inc.,
a New York corporation ("PJS") owned by Dr. Stahl and Mr. Steil, which was
originally formed by them for the express purpose of entering into this Lease
agreement. The Company occupies these premises under an oral agreement with
PJS and Messrs. Stahl and Steil whereby the Company has agreed to discharge
all of the Lease obligations with the landlord. Management believe that the
terms and provisions of this lease agreement, including the rental payments
due, are fair and reasonable for similar lease agreements within the same
geographic area for similar space. The annual lease payment is approximately
$45,080 for the period ended May 1997 and approximately $51,450 per year
thereafter. Neither PJS nor Messrs. Stahl or Steil derive any profit from
the Lease nor will they during the balance of the Lease Term. Management of
the Company believes the current facility is adequate for its current
operations.
MANAGEMENT
The officers and directors of the Company, and further information
concerning them, are as follows:
Name Age Position
Dr. Jan Stahl 48 Chairman, Chief Executive Officer
Secretary, Director
Peter Steil 48 President, Director
Kenneth Levanthal 41 Director
Messrs. Stahl and Steil may be deemed to be "Parents" and organizers of
the Company, as that term is defined in the Securities Act of 1933.
There are no committees of the Board of Directors. The Board of Directors
meets once each year following its shareholder's meeting and at other times
at the call of the President. Each of the Directors has been present at all
of the Company's meetings during the past year.
Profile of Officers and Directors:
DR. JAN STAHL is a New York State licensed dentist. Dr. Stahl founded APO
Health, the Company's wholly owned subsidiary, in 1987 and has been its
Chairman, Chief Executive Officer, Secretary and a Director since such time.
Dr. Stahl's primary responsibilities for the Company are in the area of sales
and marketing. Prior to founding the Company, Dr. Stahl was a practising
dentist in the state of New York. Dr. Stahl received his DDS Degree from
New York University in 1974.
PETER STEIL co-founded the Company along with Dr. Stahl in 1987 and has
been its President and Chief Financial Officer since such time. Mr. Steil is
also President of Prophy Perfect, Inc., a manufacturer of dental products.
From 1981 to 1987 Mr. Steil was President of LBS Interdent, Inc. a company
engaged in dental product sales. From 1974 to 1981 Mr. Steil was employed
as Director of International Technical Support and Sales by Degussa,
a European based manufacturer and distributor of dental and medical supplies.
Subsequently (from 1984 to 1986) he was employed by Orbident International,
the international sales division of Darby Drugs. Mr. Steil's training is in
mechanical engineering having received his Technical Degree from Tuebingen
University, Germany, in 1974.
KENNETH LEVENTHAL founded Universal Medical Distributors, Inc.
("Universal"), in 1985 and has served as its president since such time.
Universal is a recently acquired subsidiary of the Company. Prior to founding
Universal, Mr. Levanthal had been employed as Executive Vice President of
Medarco Corp., a division of Omnicare, Inc., having been employed by Medarco
Corp. since 1977, prior to and following its acquisition by W.R. Grace & Co.
(the parent company of Omnicare Inc.). Omnicare consisted of various health
care companies, with Medarco specializing in the sale of veterinary products
as part of its Veratex Group which sold medical products to physicians,
dentists and veterinarians. Mr. Levanthal graduated from Boston University
in 1977 receiving his Bachelors Degree.
EXECUTIVE COMPENSATION
The following table sets forth information relating to remuneration
received by officers and directors as of September 30, 1996, the end of the
Company's most recent fiscal year compared with the previous year, as well
as indicating the compensation agreements made for fiscal 1997:
<TABLE>
<C>
Name and Principal Annual Compensation(1) Long Term Compensation All Other
Position Year Salary Bonus Restricted Stock Awards Compensation
<P> <C> <C> <C> <C> <C>
Jan Stahl, CEO(1) 1996 $96,200 n/a $ -0-
1995 $90,700 n/a $ -0-
Peter Steil, President(1) 1996 $70,200 n/a $ -0-
1995 $70,200 n/a $ -0-
Kenneth Levanthal(2) 1996 $45,000 n/a $ -0-
</TABLE>
___________________________________________________
(1) The Company has written compensation arrangements with each of Dr. Stahl
and Mr. Steil as more particularly described below. It should be noted that
the figures listed as "salary" include both base salary and earned commissions,
but do not included annual bonus amounts, if any, which are listed separately
under the "bonus" column. Dr. Stahl and Mr. Steil have waived any additional
compensation regarding salary or bonuses for the period ended
September 30, 1996.
(2) Mr. Levanthal was not employed by the Company prior to fiscal 1996.
In January, 1996, the Company entered into employment agreements with
Dr. Stahl and Mr. Steil. The agreements provide that each will be employed
by the Company for a three-year term expiring December 31, 1999. Each shall
receive an annual base salary of $125,000, subject to increases tied to
changes in the consumer price index, and car lease and expense allowances
totaling $600 per month and health and medical benefits. In addition, each
of Dr. Stahl and Mr. Steil will receive a bonus equivalent to 1% of gross
revenues of the Company in excess of $11,000,000 in any given fiscal year
period. Dr. Stahl and Mr. Steil have waived any additional compensation
regarding salary or bonuses for the period ended September 30, 1996.
Except as herein above described, the Company has no other employment
contracts, or any retirement, pension, profit sharing or insurance plan
covering its officers or directors.
CERTAIN TRANSACTIONS
1. In September, 1994, the Company entered into an agreement with Xetal,
Inc. a New York corporation operating under the name "APO Health"' pursuant
to which the Company acquired all of the capital stock of APO Health in a
stock-for-stock exchange. As a result, APO Health became a subsidiary of the
Company and management of APO Health became principal shareholders of the
Company. In connection with the transaction, the Company changed its name
from "Insurance Kingdom Agency, Inc." to its present name. Thereafter,
APO Health formally changed its name to APO Health, Inc. Prior to its
acquisition, APO Health was a privately owned company all of whose capital
stock was owned by Dr. Jan Stahl and Peter Steil. In consideration for their
shares of APO Health, the Company issued to each of Dr. Stahl and Mr. Steil
100,000 shares of its Common Stock, as adjusted for the Company 1-for-10
reverse stock split. Dr. Stahl and Mr. Steil became the officers and directors
of the Company.
2. In January 1996 the Company issued an aggregate of $250,000 principal
amount of promissory notes (the "Pre-Bridge Notes') to certain investors
(the "Pre-Bridge Lenders") who provided interim financing (the "Pre-Bridge
Financing") for the Company and who are selling security holders in this
Offering. The net proceeds of the Pre-Bridge Financing, after deducting
commissions, legal and miscellaneous expenses (including legal, accounting
and printing expenses) of the Pre-Bridge Financing were $190,000, all of
which was used for working capital. The Pre-Bridge Notes bear interest at
10% per annum and are due and payable, upon the earlier of (i)
December 15, 1996 or (ii) the consummation of this Offering. Interest on the
Pre-Bridge Notes is payable semi-annually on June 15,1996 and
December 15, 1996. Payment of the principal amount of the Pre-Bridge Notes
and accrued interest for the December 15, 1996 semi-annual period are
presently in default. From the proceeds of this Offering, $250,000 plus
accrued interest thereon will be used to repay the Pre-Bridge Notes.
Additionally, the Pre-Bridge Lenders received warrants (the "Pre-Bridge Lenders
Warrants") to purchase an aggregate of 25,000 shares (as reduced after the
Company's 1-for-10 reverse stock split) of Common Stock of the Company at a
price of $7.50 per share. The Pre-Bridge Lenders Warrants are exercisable
for a period of seven (7) years ending January 3, 2003. The Company also
granted the Pre-Bridge Lenders certain demand and "piggy-back" registration
rights with respect to the shares of Common Stock underlying the Pre-Bridge
Lenders Warrants. Under the terms of the Pre-Bridge Lenders Warrants, the
underlying shares of Common Stock are deemed to be part of the same class of
securities as the Shares offered in this Offering.
3. In connection with the Pre-Bridge Financing, the Company issued
to Janssen-Meyers Associates, L.P., for its services as placement agent in
the Pre-Bridge Financing, warrants to purchase 12,500 shares of Common Stock
(as reduced after a 1-for-10 reverse stock split), also at an adjusted
exercise price of $7.50 per share. The warrants are exercisable for a period
of seven (7) years ending January 3, 2003. The Company also granted
Janssen-Meyers Associates certain demand and "piggy-back" registration rights
similar to those granted to the Pre-Bridge Lenders with respect to the shares
of common Stock underlying the Warrants.
4. In October, 1996 the Company, through the Underwriter herein,
offered an aggregate of $250,000 principal amount of promissory notes
(the "Bridge Notes') to certain investors (the "Bridge Lenders") who, through
the purchase of such securities provided interim financing (the "Bridge
Financing") for the Company and who are selling security holders in this
Offering. The net proceeds of the Bridge Financing, after deducting
commissions, legal and miscellaneous expenses (including legal, accounting and
printing expenses) of the Bridge Financing were $207,500, all of which was used
for working capital. The Bridge Notes bear interest at 8% per annum and are
due and payable, upon the earlier of (i) twelve months from the date of their
issuance or (ii) the consummation of this Offering. Interest on the Bridge Notes
is payable monthly commencing one month from the date of their issuance.
From the proceeds of this Offering, $250,000 will be used to repay the Bridge
Notes, plus accrued interest thereon. Additionally for each unit of $25,000
of Bridge Notes purchased, the Bridge Lenders received (a) 20,000 Shares plus
(b) warrants (the "Bridge Lenders Warrants") to purchase an aggregate of
250,000 Shares at a price of $6.00 per share if this Offering is consummated
or, if it is not consummated, then at $5.00 per share. The Bridge Lenders
Warrants are exercisable for a period of four (4) years commencing one year
from the date of their issuance. The Company also granted the Bridge Lenders
certain demand and "piggy-back" registration rights with respect to the
Shares, the Bridge Lenders Warrants and the Shares underlying the Bridge
Lenders Warrants. Under the terms of the Bridge Lenders Warrants, the
underlying shares of Common Stock are deemed to be part of the same class of
securities as the Shares offered in this Offering. In connection with the
sale of the Bridge Notes, the Underwriter received a commission with respect
thereto equal to ten (10%) per cent of the total amount raised, or $25,000.
In addition, the Underwriter also received an unaccountable expense allowance
equal to three (3%) per cent of the total amount raised, or $7,500. Also, in
connection with the Bridge Financing, the Company issued to Worthington Capital
Group, Inc. ("Worthington") for its services as placement agent in the Bridge
Financing, warrants (the Underwriter's Bridge Warrants") to purchase 250,000
shares of Common Stock at a price of $6.00 per share if this Offering is
consummated or, if it is not consummated, then at $5.00 per share.
The Underwriter's Bridge Warrants are exercisable for a period of four (4) years
commencing one year from the date of their issuance. The Company also granted
Worthington certain demand and "piggy-back" registration rights with respect
to the Underwriter's Bridge Warrants and Shares underlying the Underwriter's
Bridge Warrants.
5. In July 1996, the Company entered into an agreement with
Dental Alternatives, Inc., a New York corporation wholly owned by Dr. Stahl,
pursuant to which the Company acquired all of the capital stock of Dental
Alternatives, Inc. in a stock for stock exchange. As a result, Dental
Alternatives became a subsidiary of the Company. In consideration for his
shares of Dental Alternatives, Inc., the Company issued to Dr. Stahl 400,000
Shares, as adjusted for the Company's 1-for-10 reverse stock split.
6. In March 1994 the Company entered into a Consulting Agreement
(the "Agreement") with Ameristar Group Incorporated ("Ameristar") whereby
Ameristar was engaged to assist the Company and its management in finding and
evaluating potential business projects and generally to assist in the
implementation of its business and financial plan. This Agreement has been
ongoing and subject to termination upon 30 days prior notice by either party.
In addition to monthly fees payable to Ameristar for its services, by an
amendment to the Agreement dated September 23, 1994 Ameristar was issued
20,000 shares of Common Stock, as adjusted for the Company's 1-for-10 reverse
stock split. Ameristar was also granted certain "piggy-back" registration
rights with respect to these shares and, by reason thereof, Ameristar's shares
have been included herein and Ameristar is a Selling Shareholder as listed in
this Prospectus.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Shares of the Company's common stock commenced trading on
February 28, 1995. The principal market on which the Company's securities
are traded is the over-the-counter market on the NASD Electronic "Bulletin
Board" and is currently traded under the symbol "XETX." Since trading
commenced, the Shares "bid" price has ranged from a low of $_____ to a high
of $_____ as reflected in the following table which indicates the range of
high and low bid quotations for the Company's Common Stock which were listed
for the Company's Common Stock for the periods indicated:
PERIOD HIGH LOW
____________________________________________________________________________
The above quotations, reported by the National Quotation Bureau,
represent prices between dealers and do not include retail mark-ups,
mark-downs or commissions. such quotations do not necessarily represent
actual transactions. Prior to this Offering there has been only a limited
public market for the Common Shares. Quotations for the Common Shares have
been by dealers appearing as market makers on the OTC Bulletin Board, and
such quotations have generally been by inquiry. Furthermore, trading of the
Common Shares has been sporadic and in relatively small volumes and, as a
result, purchases or sales of relatively small amounts of Common Shares can
significantly impact quoted prices. The Company believe that the actual
Bulletin Board quotations as set forth above are not reflective of an
established market for the shares of the Company's Common Stock in which such
shares of Common Stock trade freely.
On _______ __,1997 the reported bid price for the shares of the
Company's Common Stock was $______ per share; there were _____ record holders
of the Company's common Stock; and there were ________ (__) market makers for
the Company's securities.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the date of this Prospectus
certain information regarding the beneficial ownership of the Company's
Common Stock by (i) each person who is known by the Company to own beneficially
10% of the Company's outstanding Common Stock; (ii) each of the Company's
officers and directors; and (iii) all directors and officers of the Company
as a group.
<TABLE>
<P> <C> <C> <C> <C> <C>
Number Percent Percent
of Shares Owned Before Owned After
Owned Offering Offering (2)(3)
Name (1) Minimum Maximum
Dr. Jan Stahl 500,000 53.3% 43.9% 36.0%
3141 Ann Street
Baldwin, NY 11510
Peter Steil
430 East Olive
Long Beach, NY 11561 75,000 8.0% 6.6% 5.4%
Kenneth Levanthal
24 Meadowbrook Road
Huntington Station
New York 11725 10,000 1.1% 0.9% 0.7%
All Directors and
Officers as a Group
(3 Persons) 585,000 62.4% 51.4% 42.1%
</TABLE>
________________________
(1) Based upon 938,263 Shares being issued and outstanding as of the date
of this Prospectus as adjusted for the Company's 1-for-10 reverse split.
(2) Does not give effect to the possible exercise of any of the Warrants
included in the Units offered hereby.
(3) Does not give effect to the possible exercise of any of the
Underwriter's Warrants or the Pre-Bridge and Bridge Warrants.
See "CERTAIN TRANSACTIONS" for additional information with respect to the
holdings of selling security holders.
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
In addition to the Securities being sold by the Company hereunder,
220,000 shares of Common Stock will also be sold by the Selling SHAREHOLDERS
set forth below ("Selling Shareholders"). Also being registered hereby are
2,500,000 Bridge Warrants and 2,500,000 Shares underlying the Bridge Warrants.
The Shares being sold by the Selling Shareholders are not part of the offering
by the Company and the Company will not receive any proceeds from the sale of
the Shares by the Selling Shareholders. These Shares were originally issued
by the Company in transactions not involving any public offering.
All purchasers of the Shares and Bridge Lenders' Warrants were accredited
investors as that term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
register these securities under the Act concurrently with this Offering and
to pay the expenses in connection therewith (exclusive of commissions and the
fees and expenses of counsel for Selling Shareholders).
The Shares, Bridge Lenders' Warrants and Shares underlying the Bridge Lenders'
Warrants to be offered by the Selling Shareholders are identical to the
Shares and Warrants offered herein by the Company and have been included in
the Registration Statement of which this Prospectus forms a part. None of the
Selling Shareholders has any material relationship with the Company.
<TABLE>
<P> <C> <C> <C> <C> <C>
Name and address Shares Warrants Approximate %(3) Approximate %(3)
Owned(1) Owned(2) Before Offering After Offering
Minimum Maximum
________________________________________________________________________________________________________________
Glen Nortman 10,000 125,000 3.93% 3.66% 3.47%
88 Foxwood Drive
Jericho, NY 11753
Gary Lyle Brustein 20,000 250,000 7.85% 7.31% 6.94%
201 Brookville Road
Brookville, NY 11545
Ameristar Group Incorporated 20,000 - 0.58% 0.54% 0.51%
444 Madison Avenue, Suite 1710
New York, NY 10022
Capital Planning Holding Corp. 10,000 125,000 3.93% 3.66% 3.47%
3 Asccot Ridge
Great Neck, NY 11021
Elull Development 20,000 250,000 7.85% 7.31% 6.94%
155 Westwood Drive
Westbury, NY 11590
Abbey S. Freiberg 20,000 250,000 7.85% 7.31% 6.94%
6 Woodstock Court
Muttontown, NY 11590
Jay G. Goldman 10,000 125,000 3.93% 3.66% 3.47%
745 Fifth Avenue
New York, NY 10151
Jay Goldman,
Master Limited Partnership 10,000 125,000 3.93% 3.66% 3.47%
745 Fifth Avenue
New York, NY 10151
Christopher Mackie 10,000 125,000 3.93% 3.66% 3.47%
50 Pummick Street
Bluepoint, NY 11715
Wainscott Capital, Ltd. 40,000 500,000 15.71% 14.64% 13.88%
Seaton House
17-19 Seaton Place, Suite 2
St. Healier, Jersey
Channel Islands
Neil Jeffrey Weisman 10,000 125,000 3.93% 3.66% 3.47%
3 Piper Drive
Searington, NY 11507
Harry Zarin 20,000 250,000 7.85% 7.31% 6.94%
73-79 Park Drive East
Flushing, NY 11367
Robert Zarin 20,000 250,000 7.85% 7.31% 6.94%
9 Stewart Lane
Kings Point, NY 11024
</TABLE>
_____________________________________
(1) Represents the total number of shares of Common Stock owned by the
Selling Shareholder which are being registered hereunder for sale to the
public.
(2) Represents the total number of Bridge Lender Warrants outstanding
prior to this Offering. The Company has, prior to this Offering issued
warrants in connection with its Bridge Financing (see, "CERTAIN TRANSACTIONS").
(3) In determining the percentages represented by the holding of each
Selling Shareholder, it has been assumed that all warrants listed in the
above table have been exercised, but that none of the Warrants which are
being offered hereby, or any of the Underwriter's Warrants, have been exercised.
Consequently, the above stated percentages are based upon a total assumed
capitalization equal to the sum of 938,263 Shares presently issued and
outstanding, plus 2,500,000 Shares to be issued upon exercise of the
Bridge Warrants. Consequently, it is assumed for purposes of the above chart
that the number of Shares outstanding prior to this Offering was 3,438,263;
the number of Shares to be outstanding following the minimum Offering herein
will be 3,688,263; and the number of Shares to be outstanding following the
maximum Offering herein will be 3,888,263.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, which is filed as an exhibit to this Registration Statement,
the Company is offering a minimum of 250,000 shares of Common Stock and
500,000 Warrants (or a total of $1,550,000), the "Minimum Offering,
and a maximum of 450,000 shares of Common Stock and 900,000 Warrants
(or a total of $2,790,000), the "Maximum Offering, at a purchase price of
$6.00 per share of Common Stock and $0.10 per Warrant. The Company has
agreed to pay Worthington Capital Group, Inc. (the "Underwriter") a commission
of ten (10%) per cent of the gross sale price of all Securities sold in this
Offering ($155,000 if only the Minimum Offering is sold and $279,000 if the
Maximum Offering is sold). The Underwriter has made no commitment to sell
any of the Securities offered hereby and no assurance is given that any of
the Securities will be sold. The Underwriter has agreed to use its
"best efforts" to sell the Securities.
The Underwriter has the option to utilize other broker-dealers
who are members of the National Association of Securities Dealers, Inc.
(the "Selected Participating Dealers") to assist in the sale of these
Securities. At the date hereof, the Underwriter has not reached any agreement
with any Selected Participating Dealers to conduct selling efforts with
respect to the Company's Securities offered hereby. In the event that any
agreement is reached between the Underwriter and any Selected Participating
Dealers, the Underwriter intends to reallow to such participating broker-dealers
up to ___% of the full 10% underwriting commission.
The proceeds from the sale of the Securities will be held in an escrow
account at ____________ Bank, __________, New York (the "Escrow Account"),
until a minimum of 250,000 shares of Common Stock and 500,000 Warrants have
been sold and $1,550,000 is deposited in the Escrow Account. If at least
250,000 shares of Common Stock and 500,000 Warrants are not sold by 60 days
from the date of this Prospectus, which date may be extended for an additional
period of 30 days by the Company and the Underwriter, the proceeds received
from investors will be promptly refunded to the investors in full without
interest thereon and or deduction of any kind therefrom. Until the proceeds
from the sale of at least 250,000 shares of Common Stock and 500,000 Warrants
are deposited in escrow, investors will not be securities holders nor able to
demand the return of their subscription proceeds.
All purchasers' checks should be made payable to
"Xetal, Inc.- Escrow Account." Certificates evidencing the Shares and Warrants
will be issued to purchasers only if the proceeds from the sale of at least
250,000 shares of Common Stock and 500,000 Warrants are actually deposited in
the Escrow Account and released to the Company pursuant to the Escrow Agreement.
Until such time as the proceeds are actually received by the Company and the
certificates delivered to the purchasers thereof, such purchasers will be
deemed subscribers and not security holders of the Company. During the
selling period, purchasers will have no right to demand the return of their
subscription proceeds. If the minimum proceeds are successfully obtained,
the Offering will continue until completed, until the maximum period of the
Offering has elapsed or until the Offering is terminated by the Company and
the Underwriter, whichever occurs first.
The Company has also agreed to sell to the Underwriter warrants
(the "Underwriter's Warrants) at a purchase price of $0.0001 per Underwriter's
Warrant to acquire an aggregate of 135,000 shares of Common Stock and 270,000
Warrants, entitling the holder to purchase 270,000 shares of Common Stock
exercisable for a period of four years commencing one year from the date of
this Prospectus, at an exercise price equal to 100% of the price of the Common
Stock to the public in this Offering, subject to adjustment in amount pro rata
in the event all of the Common Stock and/or Warrants are not sold in this
Offering. The Underwriter's Warrants grant to the holder thereof certain demand
and "piggy-back" registration rights for a period of five years from the date
of this Prospectus with respect to the registration under the Act of the
securities issuable upon the exercise of the Underwriter's Warrants.
See, "DESCRIPTION OF SECURITIES - Underwriter's Warrants."
In accordance with the Underwriting Agreement, the Underwriter has
been granted the option of designating an individual to serve on the Company's
Board of Directors for a period of at least three years after completion of
this Offering. The Underwriter has not advised the Company whether it will
exercise such Option, or, if so, who it will designate.
The Underwriting Agreement provides that the Company will pay a
non-accountable expense allowance equal to three (3%) per cent of the gross
proceeds of this Offering to the Underwriter ($46,500 if only the Minimum
Offering is sold or $83,700 if the Maximum Offering is sold) of which $25,000
has been paid as of the date of this Prospectus. The Company has also agreed
to pay all expenses in connection with qualifying the Securities offered hereby
for sale under the laws of such states as the Underwriter may designate,
including fees and expenses of counsel retained for such purposes, certain
costs of investigatory searches of the Company's executive officers and other
expenses in connection with the Offering.
The Underwriter has informed the Company that it does not intend to
confirm sales to any accounts over which it exercises discretionary authority.
Certain of the Company's shareholders, constituting in the aggregate
________ shares of Common Stock, and all its officers and directors,
constituting in the aggregate 585,000 shares of Common Stock
(___________ in the aggregate), have agreed not to sell their shares without
the consent of the Underwriter for a period of 24 months from the date of
this Prospectus. The Underwriting Agreement provides that the Company will
not offer any shares of Common Stock, preferred stock, options to purchase
Common Stock, warrants or any other securities convertible into shares of
Common Stock within three years after the date this Prospectus without the
consent of Underwriter, except that the Company may issue up to 250,000 shares
of Common Stock in connection with an employee stock option plan.
The Underwriting Agreement provides that the Underwriter will have a right of
first refusal for any sale of securities to be made by the Company for a period
of five years after the date of this Prospectus.
The Underwriting Agreement provides that the Company will neither
solicit the exercise of the Warrants which are part of the Units offered hereby,
nor authorize any dealer to engage in such solicitation without the consent of
the Underwriter. Upon the exercise of the Warrants, the Company has agreed
to pay to the Underwriter a commission equal to seven (7%) per cent of the
aggregate exercise price. The commission will be payable only if (i) the
Warrant is exercised at least 12 months after the date of this Prospectus;
(ii) the market price of the Common Stock on the date that the Warrant is
exercised is greater than the exercise price of the Warrants; (iii) the
exercise of the Warrant was solicited by a member of the National Association
of Securities Dealers, Inc.; (iv) the Warrant is not held in a discretionary
account; (v) disclosure of the compensation arrangement is made at the time of
the exercise of the Warrant; (vi) the holder of the Warrant has stated in
writing that the exercise was solicited and designated in writing the
soliciting broker/dealer; and (vii) solicitation and exercise of the Warrant
was not in violation of Rule 10b-6 promulgated under the Exchange Act.
However, no fee will be payable to the Underwriter in connection with the
Warrants voluntarily exercised without solicitation by the Underwriter.
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriter against certain liabilities in
connection with the Registration Statement, including liabilities under the
Act. To the extent that the Underwriting Agreement may purport to provide
exculpation from possible liabilities arising under the federal securities
laws, it is the opinion of the Commission that such indemnification is
contrary to public policy and unenforceable.
The Company has engaged the Underwriter or its designee as its
financial consultant for a period of 24 months commencing on the date of this
Prospectus, for which the Underwriter will receive in advance a consulting fee
of $100,000, payable in full at the closing of the Minimum Offering.
The Underwriter may elect not to proceed with the Offering at anytime
without penalty if, in its sole discretion and acting in good faith, it
believes that no favorable public market exists for the sale of the Securities.
The Underwriting Agreement may also be terminated by the Underwriter if, among
other things, at any time prior to the closing of this Offering, there shall
have occurred a material adverse change in the conditions or obligations of
the Company or which change, in the sole judgment of the Underwriter, will
have adversely affected the marketability of the securities offered hereby and
will have made it impracticable or inadvisable to proceed with this Offering.
The foregoing does not purport to be a complete statement of the terms
and conditions of the Underwriting Agreement, copies of which are on file at the
offices of the Underwriter and the Company and which are filed as an exhibit
to the Registration Statement. See "ADDITIONAL INFORMATION."
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.001 par value per share, of which 938,263 shares are presently issued and
outstanding, including 200,000 shares of Common Stock in the aggregate issued
to the Bridge Lenders. Each outstanding share of Common Stock is entitled to
one vote, either in person or by proxy, on all matters that may be voted upon
by the owners thereof at meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefore, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock
upon liquidation, dissolution or winding up of the affairs of the Company;
(iii) do not have preemptive, subscription or conversion rights, or redemption
or sinking fund provisions applicable thereto; and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote
at all meetings of stockholders.
All Shares which are the subject of this Offering, when issued, will
be fully paid for and non-assessable, with no personal liability attaching to
the ownership thereof. The holders of shares of Common Stock of the Company
do not have cumulative voting rights, which means that the holders of more
than 50% of such outstanding shares, voting for the election of directors,
can elect all directors of the Company if they so choose and, in such event,
the holders of the remaining shares will not be able to elect any of the
Company's directors. Even if all Shares offered are subscribed for, present
management will continue to own over 50% of the Company's issued and
outstanding shares and will, therefore, be able to elect all of the Company's
Directors, appoint all of its officers and control its operations.
Common Stock Purchase Warrants
The Common Stock Purchase Warrants ("Warrants") will be issued in
registered form under and subject to the terms of a warrant agreement dated
as of the date of this Prospectus (the "Warrant Agreement"). The following
statements are a brief summary of certain provisions of the warrant agreement
and are subject to the detailed provisions thereof, to which reference is made
for a complete statement of such provisions. Copies of the Warrant Agreement
may be obtained from the Company and have been filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement of which this
Prospectus is a part.
The Warrants are offered separately and each Warrant entitles the
holder thereof to purchase one additional share of Common Stock during the
four (4) year period commencing one year after the date of this Prospectus,
as herein defined, at a price of $6.00. The initial Offering price of the
Warrants will be $0.10 per Warrant.
Bridge Warrants
Each Bridge Lenders' Warrants entitles the holder thereof to purchase
up to 250,000 shares of Common Stock at a price of $6.00 per share, 100% of the
proposed public Offering price herein, during the four year period commencing
one year after the date of issuance of such Bridge Lenders' Warrants. There are
issued and outstanding an aggregate of 2,500,000 Bridge Lenders' Warrants
entitling the holders thereof to purchase an aggregate of 2,500,000 shares of
Common Stock. In the event that this Offering is not consummated at $6.00 per
Share, then the Bridge Lenders' Warrant exercise price shall be 100% of the
public Offering price of the Common Stock in this Offering. Pursuant to the
terms of the Bridge Lenders' Warrants, the holders thereof were granted certain
demand and "piggy-back" registration rights with respect to the Shares
underlying the Bridge Lenders' Warrants. Consequently, all 2,500,000 Shares
underlying the 10 Bridge Lenders' Warrants issued by the Company have been
included in the Registration Statement of which this Prospectus forms a part
and, following the closing date of this Offering, may be sold publicly, subject
to the conditions set forth in this Prospectus, upon the exercise of the Bridge
Lenders' Warrants and subject to an agreement whereby the Bridge Lenders agreed
not to sell, assign or transfer the Common Stock, Bridge Lenders' Warrants or
Common Stock underlying their Bridge Lenders' Warrants without the prior
consent of Worthington for a period of 24 months from the date of their issuance
or 18 months from the effective date of the Registration Statement of which this
Prospectus is a part, whichever is earlier.
General Terms Applicable to Warrants and Bridge Warrants
Holders of the Warrants and Bridge Lenders' Warrants will not have any
rights, privileges or liabilities as Stockholders of the company prior to the
exercise thereof. The Warrants and Bridge Lenders' Warrants contain certain
provisions that protect the holders thereof against dilution. The exercise
price of, and the number of Shares issuable upon exercise of the Warrants and
Bridge Lenders' Warrants will be subject to adjustment in certain circumstances
including, but not limited to, stock dividends, stock splits, mergers,
acquisitions and recapitalization. Upon such an adjustment, the Company shall
cause to be promptly mailed by first class mail, postage prepaid to each Warrant
and Bridge Lenders' Warrant Holder notice of such adjustment.
The Warrants and Bridge Lenders' Warrants may be exercised upon the
surrender of the warrant certificate on or prior to the expiration date at the
office of the Company, with the exercise form on the reverse side of the warrant
certificate completed and executed as indicated, accompanied by full payment of
the exercise price (by check payable to the Company) for the number of warrants
being exercised.
The Warrants and Bridge Lenders' Warrants are redeemable by the Company
at any time after two years after the date of this Prospectus and prior to their
expiration at a price of $0.05 per Warrant, upon 30 days prior written notice,
provided that the closing sale price of the Common Stock on the Bulletin Board
shall have been at least 150% of the initial Offering price of the Shares
herein on each of the 20 consecutive trading days ending on the tenth day prior
to the day on which the notice of redemption is given. The Warrants and Bridge
Lenders' Warrants may be exercised during the 30 day redemption notice.
In determining whether to redeem either of the warrants, management of the
Company will take into consideration the market price of the Shares and the
Company's ability to raise capital other than through the exercise of the
warrants. The Company may elect to redeem either the Warrants or Bridge
Warrants or both in its sole discretion.
No Warrant or Bridge Lenders' Warrant will be exercised unless at the
time of exercise the Company has filed with the Securities and Exchange
Commission a current prospectus covering the Shares issuable upon exercise of
such warrants and such Shares have been registered or qualified or deemed to
be exempt under the securities laws of the state of residence of the holder of
such warrants. The Company will use its best efforts to have all warrants so
registered or qualified on or before the exercise date and to maintain a
current prospectus relating thereto until expiration of the warrants. Further,
a current prospectus covering the Shares issuable upon exercise of the warrants
must be in effect before the Company may accept warrant exercises. There can
be no assurance that the Company will be able to have a prospectus in effect
when this Prospectus is no longer current, notwithstanding the Company's
commitment to use its best efforts to do so.
No fractional Shares will be issued upon exercise of the Warrants or
Bridge Lenders' Warrants. However, if a warrant holder exercises all warrants
then owned of record by him, in lieu of the issuance of any fractional Share
which is otherwise issuable, an amount in cash based upon the market value of
the Shares on the last trading day prior to the exercise date.
Warrants are generally more speculative than Shares which are purchased upon
the exercise thereof. Historically, the percentage increase or decrease in
the market price of a warrant has tended to be greater than the percentage
increase or decrease in the market price of the underlying common stock.
A warrant may become valueless, or of reduced value, if the market price of
the common stock decreases, or increases only modestly, over the term of the
warrant.
Underwriter's Warrants
Upon the completion of this Offering, the Company has agreed to sell
to the Underwriter for a nominal consideration, Underwriter's Warrants to
acquire shares of Common Stock and Warrants identical to the Securities being
offered hereby, on the basis of one share of Common Stock for each ten (10)
shares sold in this Offering and one Warrant for each ten (10) Warrants sold
in this Offering and 100% of each component thereof. The Underwriter's Warrants
are exercisable at a price of $6.00 per Unit for a period of four years
commencing one year from the date of this Prospectus.
The Underwriter's Warrant may not be sold, hypothecated, exercised,
assigned, or transferred, except to individuals who are officers of partners
of the members of the Underwriter or participating selected dealers who are
members of the National Association of Securities Dealers, Inc., or pursuant
to the laws of descent and distribution, for a period of twelve months from
the effective date of this Prospectus, and, in no event will such Underwriter's
Warrants (or the underlying securities issuable upon exercise thereof) be
offered or sold except in compliance with the Act. Any profits realized by
the Underwriter upon the sale of the Underwriter's Warrant or the underlying
securities may be deemed to be additional compensation.
The Company has agreed that it will, upon request of the Underwriter
or its specific duly authorized designee, or at the request of the holders of
not less than 50% of the Underwriter's Warrant and/or underlying securities,
with the consent of the Underwriter or its duly authorized designee, within the
period commencing one year from the effective date of this Offering, and for a
period of four years thereafter, on one occasion at the sole expense of the
Company cause the Underwriter's Warrant and/or underlying securities issuable
upon exercise of the Underwriter's Warrant to be the subject of a
post-effective amendment or a new registration statement so as to enable the
Underwriter and its assigns to offer publicly the Underwriter's Warrant and/or
underlying securities. In addition if during the five year period commencing
one year from the effective date of this Offering, the Company shall register
any of its securities for sale pursuant to a registration statement under the
Act, the Company shall be required to offer the holders of the Underwriter's
Warrant and/or underlying securities the opportunity to register such
underlying securities, without cost to the holders thereof. The registration
requirement shall not apply to Registration Statements filed by the Company
pursuant to Form S-8 or Form S-4 or similar forms.
The Underwriter's Warrant contains anti-dilution provisions regarding
certain events, including but not limited to. stock dividends, split-ups, and
reclassification. Holders of the Underwriter's Warrant will have no voting
power and will not be entitled to any dividends. In the event of any
dissolution or winding up of the Company, the holders of the Underwriter's
Warrant will not be entitled to participate in a distribution of the Company's
assets.
For the life of the Underwriter's Warrant, the Underwriter is given,
at a nominal cost, the opportunity to profit from a resulting dilution in the
interest of existing security holders. The terms upon which the Company could
obtain additional capital during that period may be adversely affected.
The Underwriter might be expected to exercise the Underwriter's Warrant at a
time when the Company would, in all likelihood, be able to obtain any needed
capital by a new offering of securities on terms more favorable than those
provided for by the Underwriter's Warrant.
Dividend Policy
The Company has not paid any dividends and there are presently no plans
to pay any such dividends in the foreseeable future. The declaration and payment
of dividends in the future will be determined by the Board of Directors in
light of conditions then existing, including earning, financial condition,
capital requirements and other factors. There are no contractual restrictions
on the Company's present or future ability to pay dividends. Further, there are
no restrictions on any of the Company's subsidiaries which would, in the future,
adversely affect the Company's ability to pay dividends to its shareholders.
Transfer Agent
The Transfer Agent for the Company's Common Stock is American Stock
Transfer & Trust Co., 40 Wall Street, New York, New York 10005.
LEGAL PROCEEDINGS
Neither the Company nor any of its officers or directors, in their
capacity as such, are presently a party to any litigation. To the knowledge
of management and the Company there is no litigation threatened against the
Company which may materially affect its assets or business operations.
However, as mentioned above, the Company is currently in default with respect
to its obligation to pay the principal and accrued interest pursuant to the
terms of the Pre-Bridge Notes. Such default could, at the option of the
Pre-Bridge Note holders result in litigation against the Company.
No agreement has been reached with the Pre-Bridge Note holders to extend the
time of payment thereof or to otherwise refrain from instituting litigation
against the Company in connection therewith.
LEGAL MATTERS
The validity of the Shares and Warrants offered hereby as part of the
Units will be passed upon for the Company by B. Bruce Freitag, Esq.,
39 Sackerman Avenue, North Haledon, New Jersey 70508. Certain legal matters
in connection with this Offering will be passed upon for the Underwriter by
Doros & Brescia, P.C.
EXPERTS
The financial statements of the Company as of September 30, 1996 and
1995 included in the Prospectus, have been audited by Linder & Linder,
Certified Public Accountants, Dix hills, New York, as stated in their opinion
and upon the authority of that firm as experts in accounting and auditing.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders
Xetal, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Xetal, Inc.
and Subsidiaries as of September 30, 1996 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the year ended September 30, 1996 and the nine month period ended September 30,
1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Xetal, Inc.
and Subsidiaries at September 30, 1996 and the results of their operations and
their cash flows for the year ended September 30, 1996 and the nine month period
ended September 30, 1995 in conformity with generally accepted accounting
principles.
Linder & Linder
Certified Public Accountant
Dix Hills, New York
December 6, 1996
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,1996
ASSETS
Current Assets
Cash $ 129,250
Accounts receivable,
less allowance for doubtful
accounts of $41,000 1,162,602
Inventory 1,288,278
Advances to joint ventures 28,047
Due from officers 66,079
Prepaid and other receivables 88,578
Total Current Assets 2,762,834
Property and Equipment - at cost,
less accumulated depreciation of
$65,969 78,078
Other Assets
Goodwill 177,261
Registration fees 342,126
Security deposits 4,957
Total Other Assets 524,344
Total Assets $3,365,256
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of credit - bank $ 1,049,663
Note payable, current portion 12,500
Bankers acceptances 124,658
Accounts payable 1,064,591
Accrued expenses 250,606
Loans payable 250,000
Total Current Liabilities 2,752,018
Loans Payable - former shareholders 248,038
Stockholders' Equity
Preferred stock, $.01 par value,
2,000,000 shares authorized,
-0- shares issued -
Common stock, $.001 par value,
20,000,000 shares authorized 738
Additional paid in capital 589,102
Retained earnings (deficit) (224,640)
Total Stockholders' Equity 365,200
Total Liabilities and
Stockholders' Equity $3,365,256
See accompanying auditors' report and notes to financial statements.
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months
Year Ended Ended
September 30 September 30
1996 1995
Revenues $ 14,615,764 $ 9,635,770
Cost of Revenues 12,595,353 8,657,156
Gross Profit 2,020,411 978,614
Operating Expenses
Selling expenses 911,336 544,732
General and administrative expenses 855,056 436,369
Total Operating Expenses 1,766,392 981,101
Income (Loss) from Operations 254,019 (2,487)
Other Expenses
Consulting and business acquisition costs 45,000 155,675
Interest expense - net 175,283 89,657
Total Other Expenses 220,283 245,332
Net Income (Loss) 33,736 (247,819)
Earnings Per Common Share $ 0.09 $ (0.92)
Weighted Average Number of
Shares Outstanding 394,800 269,733
See accompanying auditors' report and notes to financial statements.
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
Additional
Common Stock Paid In Retained
Shares Amount Capital Earnings
Balance, December 31, 1994 2,600,330 $ 2,600 $(61,600) $ (10,557)
Transaction in connection
with reverse acquisition - - (10,000) -
Issuance of stock for
payment of accrued expenses 582,000 582 654,158 -
Net loss - nine months - - - (247,819)
Balance, September 30, 1995 3,182,330 3,182 582,558 (258,376)
Acquisition of Universal
Medical Distributors, Inc. 100,000 100 - -
Acquisition of Dental
Alternatives, Inc. 4,000,000 4,000 - -
Transfer - reverse stock
split (6,544,067) (6,544) 6,544 -
Net income - year ended - - - 33,736
Balance, September 30, 1996 738,263 $ 738 $589,102 $(224,640)
See accompanying auditors' report and notes to financial statements.
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Year Ended Ended
September 30 September 30
1996 1995
Cash Flows From Operating Activities
Net income (loss) $ 33,736 $ (247,819)
Adjustment to reconcile net income to net
cash flows from operating activities
Depreciation 11,661 6 618
Amortization 8,141 6,474
Bad debts 84,140
Changes in operating assets and liabilities
(Increase) decrease in assets
Accounts receivable 194,512 (381,046)
Inventories (515,556) (141,291)
Advances to joint ventures 145,185 (115,172)
Prepaids (58,318) (5,905)
Increase (decrease) in liabilities
Accounts payable 138,203 91,335
Accrued expenses 115,816 200,725
Cash Flows Provided By (Used By)
Operating Activities 157,520 (586,081)
Cash Flows From Investing Activities
Acquisition of property (12,863) (44,135)
Registration costs (53,740) (50,000)
Acquisition of goodwill (156,300) -
Due from officers (52,579) (13,500)
Cash Flows Used By Investing
Activities (275,482) (107,635)
Cash Flows From Financing Activities
Borrowings under line of credit - net 234,663 515,000
Borrowings from acceptances payable - net (447,807) 155,256
Payment of note payable (50,000) (15,225)
Loans payable 262,500 50,000
Cash Flows Provided By (Used By)
Financing Activities (644) 705,031
Net (Decrease) Increase In Cash (118,606) 11,315
Cash, Beginning 247,856 236,541
-------- -------
Cash, End $ 129,250 $ 247,856
======= =======
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Year Ended Months
September 30 September 30
1996 1995
Supplemental Disclosure:
Cash paid during the year for:
Interest $155,954 $ 89,657
Taxes - -
Non-cash investing and financing transactions
Recapitalization in connection with
the reverse acquisition - 10,000
Acquisition and registration costs
accrued as current liabiltities 71,010 200,225
Issuance of common stock in lieu of
payment of accrued expenses - 654,740
Issuance of common stock to acquire
subsidiaries 4,100 -
Transfer to additional paid in
capital - recapitalization
reverse stock split 6,544 -
See accompanying auditors' report and notes to financial statements.
XETAL, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - Summary of Significant Accounting Policies
Nature of Business
Insurance Kingdom Agency, Inc. ("IKA"), an inactive company, was organized
under the laws of the State of Utah. Effective September, 1994, IKA acquired
Xetal, Inc. ("APO Health"), an operating company. IKA changed its name to
Xetal, Inc., a Utah Corporation, (collectively the "Company"). APO Health is
a wholesale distributor of medical supplies and sells predominantly to medical
distributors, dentists and doctors throughout the United States.
The acquisition has been accounted for by the purchase method under business
combinations and treated as a reverse acquisition. Such transaction treats
the acquisition as if APO Health acquired IKA and reflects the fair market value
of IKA's net assets on the date of acquisition.
Effective to the acquisition, previously taxed profits, amounting to $248,038
due to the former shareholders and included in retained earnings, were
transferred to loans payable to former shareholders.
Effective January 1, 1995, Xetal, Inc., the operating company, changed its
name to APO Health, Inc. In addition, APO Health changed its year end to
September 30th. The 1995 statement of operations is presented for the nine
month period ended September 30, 1995.
Inventory
Merchandise inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for on
the straight-line method over the estimated useful life.
Reclassification
Certain items in the 1995 statement of operations have been reclassified to
conform with the 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results may differ from those estimates.
Income Taxes
APO Health had elected to be treated as a Subchapter "S" Corporation for both
Federal and State income tax purposes, whereby, the individual stockholders of
APO Health include the income on their individual income tax returns.
During September 1994, APO Health terminated its "S" Corporation election
effective to the date it was acquired by IKA.
Intangibles
Customer lists acquired are being amortized over a three year period and have
been fully amortized for the year ended September 30, 1996. Registration costs
associated with future private placements or public offerings will be offset
against the proceeds received. Costs associated with the companies acquired
are capitalized and included in the purchase price of such acquisition.
Costs associated with unsuccessful acquisitions are expensed.
Goodwill represents the excess of the cost of companies acquired over the fair
value of their net assets at the date of acquisition and is being amortized
on the straight line method over 15 years.
Earnings Per Share
Earnings per share amounts are based on the weighted average number of shares
outstanding. The assumed conversion of warrants do not result in material
dilution.
Presentation
All material intercompany transactions and balances have been eliminated in
consolidation.
NOTE 2 - Advances to Joint Ventures
APO Health advanced Trans Medical International Corporation,("Trans Medical"),
cash and merchandise to be distributed by Trans Medical to South America.
As collateral for this advance, APO Health obtained 25% of Trans Medical's
common stock. During the year ended September 30, 1996, APO Health has
provided an allowance of $84,140 on such advance.
NOTE 3 - Business Combinations
Universal Medical Distributors, Inc.
On March 31, 1996, IKA acquired Universal Medical Distributors, Inc.,
("Universal"), in a business combination accounted for as a purchase.
Universal is primarily engaged in the business of distributing veterinary
supplies. The results of operations of Universal is included in the
accompanying financial statements since the date of acquisition. The total
cost of the acquisition was $179,340, which exceeded the fair value of the net
asset of Universal.
Dental Alternatives, Inc.
During July, 1996, IKA acquired Dental Alternatives, Inc., ("Alternatives"),
an inactive company owned by a major shareholder of IKA. The acquisition was
accounted for in a business combination as a purchase. IKA acquired the
marketing rights of products developed by Alternatives for 4,000,000 shares of
common stock.
NOTE 4 - Note Payable
During 1993, APO Health entered into an agreement with an individual to sell
him 8% of the business. APO Health received a deposit of $25,900 and the
individual's customer list. The sale was never consummated and APO Health
agreed to return the deposit payable in 24 monthly installments of $1,000
with an additional payment of $1,900 prior to November 1, 1994 and commencing
September 15, 1994.
NOTE 5 - Loans Payable
In conjunction with financing a private placement or public offering,
APO Health borrowed $50,000 from two individuals. Such borrowing is
non-interest bearing and will be repaid from the proceeds of the placement or
offering.
In January, 1996, IKA issued an aggregate of $250,000 principal amount of
promissory notes to certain investors to provide interim working capital to
the Company and repaid the $50,000 borrowed from the two individuals.
The notes bear interest at 10% per annum and are due and payable, upon the
earlier of (i) December 15, 1996 or (ii) the consummation of an offering.
In addition, the investors received warrants to purchase an aggregate of
25,000 post split shares of common stock at a price of $7.50 exercisable
through January 3, 2003.
In connection with the financing, IKA retained the services of an underwriter
to obtain additional financing through a public offering. Costs associated
with the offering of $243,617 are included in registration fees at
September 30, 1996. Effective May 10, 1996, IKA and the underwriter terminated
their agreement. As part of the termination agreement, the underwriter was
issued warrants to purchase an aggregate of 12,500 post split shares of common
stock at a price of $7.50 exercisable through January 3, 2003.
In June, 1996, IKA retained the services of a new underwriter to facilitate
a public offering to provide the Company with working capital.
During November, 1996, the Company issued an aggregate of $250,000 principal
amount of 8% promissory notes to certain investors to provide the Company with
interim working capital.
NOTE 6 - Credit Facility
At September 30, 1996, APO Health has a $2,000,000 credit facility with a
financial institution. The facility is for working capital and the purchase
of inventory. The credit facility provides the following:
a) Documentary sight letters of credit up to a maximum of 120 days
per annum taken at the same time of payment,
b) Bankers acceptances of up to 180 days priced at the bankers
acceptance rate plus 250 basis points, and
c) $300,000 sublimit on direct borrowing at 10% per annum.
The credit facility is secured by substantially all of the Company's assets
and personally guaranteed by its stockholders.
Universal has a line of credit with a bank in the amount of $50,000 which
expires on November 30, 1996. Borrowings against this line bear interest,
at the prime rate plus 2.75% and are collateralized by a lien on substantially
all assets and are guaranteed by the stockholders.
As of September 30, 1996, the Company has lines of credit outstanding
of $1,049,663.
NOTE 7 - Income Taxes
Deferred income taxes arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. The principal source of temporary differences is the use
of the allowance method for bad debts for financial accounting and direct
write-off method for tax purposes. In addition, the Company has a net operating
loss carryover of approximately $150,000 that can be used to offset future
taxable income through the year 2010. The Company has provided for a valuation
allowance amounting to the deferred tax asset since it can not be determine
whether it can more likely than not be utilized.
The Company's provision for income taxes currently payable has been offset by
the utilization of a net operating loss carryover.
NOTE 8 - Common Stock
On August 5, 1996, the Board of Directors authorized an 1-for-10 stock split
of the Company's $0.001 par value common stock. As a result of the split,
existing shares outstanding was reduced by 6,544,067, and additional paid in
capital was increased by $6,544. All references in the accompanying financial
statements to the number of common shares and per-share amounts for 1995 have
been restated to reflect the reverse stock split.
NOTE 9 - Commitments and Contingency
Defined Contribution Pension Plan
January , 1993, APO Health established a profit sharing plan. All full time
employees, as defined in the plan, are eligible. Contributions to the plan
are discretionary. Pension expense for the periods ended September 30, 1996
and 1995 amounted to $22,136 and $-0-, respectively.
Leases
Effective November 15, 1994, an affiliated company, whose shareholders are
the officers of the Company, entered into a 5 year agreement to lease a 9800
square foot facility to house its operations. Under the terms of the new lease,
the Company will pay for all real estate tax increases and any repairs to the
property. The Company has a month to month lease with similar terms with this
affiliate.
Future minimum rental payments are as follows:
Year Ending
September 30,
1997 $ 48,800
1998 51,450
1999 51,450
For the periods ended September 30, 1996 and 1995, rent expense was $45,392
and $27,759, respectively.
Letter of Credits
The Company has letters of credit outstanding of $277,455 for purchases to be
delivered after September 30, 1996.
Concentration of Credit Risk
APO Health maintains bank accounts in several financial institutions.
Each financial institution is insured up to $100,000 by the Federal Depository
Insurance Corporation. At September 30, 1995, the Company has uninsured cash
of approximately $98,000.
Employment Agreements
The Company has entered into employment agreements with its principal officers
through December 31, 1998. The agreements will automatically be renewed and
extended for up to five consecutive one year periods. The terms provide for
a minimum annual salary of $125,000 with adjustments for cost-of-living changes
and incentives based on gross revenues and development of new products.
In addition, the agreement provides for warrants to be issued based on the
incentives. At September 30, 1996, the officers waived their rights to any
additional compensation based on salary and incentives.
NOTE 10 - Restatement of Financial Statements
Subsequent to the issuance of the Company's 1995 financial statements,
management became aware that certain costs associated the its acquisition,
promotional expenses, professional fees and consulting fees were not properly
recorded. The effect of these omissions to the financial statements for the
period then ended and as of September 30, 1995 were to overstate assets by
approximately $650,000 and overstate net income by $270,000.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant has no provisions in its Articles of Incorporation or By-Laws
providing for indemnification of its officers and directors except for the
general provisions of the laws of the State of Utah. Additionally, management
is investigating the possibility of officers and directors liability insurance,
and anticipates that a policy of insurance covering the acts of officers and
directors in their capacity as such will be acquired shortly after the
conclusion of this Offering provided adequate funds are available.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers or
persons controlling the registrant, the registrant has been informed that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses payable by Registrant, other than underwriting commissions
payable to the Underwriter, in connection with the registration and
distribution of the Common Stock and Warrants registered hereby are as follows:
Registration Fee: $ 8,861
NASD Filing Fees: 770
Cost of Printing 7,500*
Accountants' Services and Expenses 12,500*
Legal Services and Expenses 50,000*
Blue Sky Fees and Expenses 30,000*
Miscellaneous 145,000*
Total Expenses $ 254,631*
* Estimated.
Item 26. Recent Sales of Unregistered Securities.
No securities of the registrant under the Securities Act of 1933 have been
issued or sold by the registrant during the past three years except as follows:
a) Sales of Common Stock in which no underwriter participated:
Common Stock of Registrant Issued in Exchange for Common Stock of Universal
Medical Distributors, Inc. :
Name Of Purchaser Number Of Shares Consideration
Kenneth Levanthal 10,000 Exchange of Universal Shares
Common Stock of Registrant Issued in Exchange for Common Stock of
Dental Alternatives Inc. :
Name Of Purchaser Number Of Shares Consideration
Dr. Jan Stahl 400,000 Exchange of Dental Alternative Shares
Common Stock Issued For Past Services and Services Rendered Pursuant to
Private Placement of Registrants Securities on August, 1995:
Name Of Purchaser Number Of Shares Consideration
Jeff R. Pearlman 5,700 Services valued at $64,125
Sachs Mortgage Group, Inc. 7,500 Services valued at $84,375
Wilmont Holding Corp. 8,750 Services valued at $98,437
Remsen Group Ltd. 8,750 Services valued at $98,437
Neal Weisman 11,250 Services valued at $126,562
Susan Ferro 11,250 Services valued at $126,562
Vincent J. Fallica 2,500 Services valued at $28,125
Steve Thomas 2,500 Services valued at $28,125
Common Stock, Notes and Warrants Issued to Pre-Bridge Lenders by
Registrant in January, 1996:
Name Of Purchaser Securities Purchased Consideration
Ernest Milchman $ 50,000 of Notes and $ 50,000
Warrants to purchase
5,000 Shares
Glen Nortman* $ 25,000 of Notes and $ 25,000
Warrants to purchase
2,500 Shares
Jeffrey Nortman $ 25,000 of Notes and $ 25,000
Warrants to purchase
2,500 Shares
Daniel Horowitz $ 25,000 of Notes and $ 25,000
Warrants to purchase
2,500 Shares
Joseph Perri $100,000 of Notes and $100,000
Warrants to purchase
10,000 Shares
Gary Brustein* $ 25,000 of Notes and $ 25,000
Warrants to purchase
2,500 Shares
Common Stock, Notes and Warrants Issued to Bridge Lenders by Registrant
in October, 1996:
Name Of Purchaser Amount of Securities Consideration
Gary Brustein* $ 25,000 of Notes and $ 25,000
Warrants to purchase
250,000 Shares
Capital Planning Holding Corp. $ 12,500 of Notes and $ 12,500
Warrants to purchase
250,000 Shares
Elull Development $ 25,000 of Notes and $ 25,000
Warrants to purchase
250,000 Shares
Abbey S. Freiberg $ 25,000 of Notes and $ 25,000
Warrants to purchase
250,000 Shares
Jay G. Goldman $ 12,500 of Notes and $ 12,500
Warrants to purchase
125,000 Shares
Jay Goldman,
Master Limited Partnership $ 12,500 of Notes and $ 12,500
Warrants to purchase
125,000 Shares
Glen Nortman* $ 12,00 of Notes and $ 12,500
Warrants to purchase
125,000 Shares
Christopher Machie $ 12,500 of Notes and $ 12,500
Warrants to purchase
125,000 Shares
Wainscott Capital, Ltd. $ 50,000 of Notes and $ 50,000
Warrants to purchase
500,000 Shares
Neil Jeffrey Weisman $ 12,500 of Notes and $ 12,500
Warrants to purchase
125,000 Shares
Harry Zarin $ 25,000 of Notes and $ 25,000
Warrants to purchase
250,000 Shares
Robert Zarin $ 25,000 of Notes and $ 25,000
Warrants to purchase
250,000 Shares
_______________________________
* Denotes same Purchaser named in more than one transaction.
The above transactions were exempt from registration pursuant to Section 4(2)
and Rule 504 and 505 of Regulation D promulgated under the Securities Act
of 1933, as amended. All of the securities sold by Registrant sold was
acquired for investment only and not with a view to distribution, and the
sale thereof did not constitute a public offering.
See, Prospectus- "CERTAIN TRANSACTIONS."
(b) Common Stock in which underwriters participated: NONE
Item 27. Financial Statements and Exhibits.
(a) Financial Statements included in the Prospectus:
1. Auditors Report of Linder & Linder dated December 6, 1996
together with;
2. Consolidated Balance Sheet as at September 30, 1996;
3. Consolidated Statement of Operations for the Periods Ended
September 30, 1996 and September 30, 1995;
4. Consolidated Statement of Changes in Stockholders' Equity for the
Periods Ended September 30, 1996 and September 30, 1995;
5. Consolidated Statement of Cash Flows for the Periods Ended
September 30, 1996 and September 30, 1995;
6. Notes to Consolidated Financial Statements.
(b) Exhibits:
1(I). Form of Underwriting Agreement; *
1(ii). Form of Selected Dealer Agreement; *
1(iii). Form of Underwriters Warrant; *
3. Certificate of Incorporation and By-Laws, with all Amendments
thereto. *
4(I). (a) Specimen Certificate of Common Stock; *
5. Opinion of B. Bruce Freitag, Esq.*
10(I) Acquisition Agreement between Insurance Kingdom Agency,Inc.
and Xetal, Inc. dated April 27, 1994;*
10(ii) Agreement and Plan of Reorganization between Xetal, Inc.
and Universal Medical Distributors, Inc. dated April 1, 1996;
10(iii) Agreement and Plan of Reorganization between Xetal, Inc. and
Dental Alternatives, Inc. dated July 26, 1996;
10(iv) Employment Agreement between Xetal, Inc.
and Dr. Jan Stahl dated as of January 1, 1996;
10(v) Employment Agreement between Xetal, Inc. and
Mr. Peter Steil dated as of January 1, 1996;
23(I) Consent of B. Bruce Freitag, Esq. (included in the opinion
to be filed);*
23(ii) Consent of Linder & Linder, Certified Public Accountants.
________________________________
*To be filed by Amendment.
Item 27. Undertakings.
Subject to the terms and conditions of Section 15(d) of the Securities Act of
1934, the undersigned Registrant hereby undertakes to file with the Securities
and Exchange Commission (the "Commission") such supplemental and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission hereto, or hereafter duly adopted pursuant to
authority conferred in that section.
The undersigned Registrant hereby undertakes to provide to the Underwriter at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each Purchaser.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers of sales are being
made, a post-effective amendment to this Registration Statement:
I. To include any prospectus required by Section 10(a)(3) of
the Act;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, in- dividually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
2. That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities registered which remain unsold at the
termination of the offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oceanside and State of New York, on the 21th day
of January, 1997.
XETAL, INC.
By /s/Dr. Jan Stahl
Dr. Jan Stahl;
Chief Executive Officer and
Principal Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacity
and on the date stated:
/s/Dr. Jan Stahl______ Chief Executive Officer,
Dr. Jan Stahl Principal Financial Officer,
Director January 21, 1997
/s/Peter Steil _______ President, Director January 21, 1997
Peter Steil
/s/Kenneth Levanthal Director January 21, 1997
Kenneth Levanthal
As filed with the Securities and Exchange Commission on January __, 1997.
Registration No. _____________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
XETAL, INC.
[Exact Name of Registrant]
3590 Oceanside Road, Oceanside, NY 11572; Tel: 516-594-0005
[Address of Principal Place of Business and Executive Offices]
Att.: Dr. Jan Stahl, Chief Executive Officer
Xetal, Inc., 3590 Oceanside Road, Oceanside, NY 11572
[Name and Address of Agent for Service]
Copies to:
B. Bruce Freitag, Esq. Ronald J. Brescia, Esq.
39 Sackerman Avenue, Doros & Brescia, P.C.
North Haledon, New Jersey 07508 1140 Avenue of the Americas
Tel: (201) 238-1909 New York, New York 10036
Tel: (212) 921-0550
INDEX TO EXHIBITS
1(I). Form of Underwriting Agreement; *
1(ii). Form of Selected Dealer Agreement; *
1(iii). Form of Underwriters Warrant; *
3. Certificate of Incorporation and By-Laws, with all Amendments
thereto. *
4(I). (a) Specimen Certificate of Common Stock; *
5. Opinion of B. Bruce Freitag, Esq.*
10(I) Acquisition Agreement between Insurance Kingdom Agency, Inc.
and Xetal, Inc. dated April 27, 1994;*
10(ii) Agreement and Plan of Reorganization between Xetal, Inc.
and Universal Medical Distributors, Inc.
dated April 1, 1996;
10(iii) Agreement and Plan of Reorganization between Xetal, Inc.
and Dental Alternatives, Inc. dated July 26, 1996;
10(iv) Employment Agreement between Xetal, Inc. and Dr. Jan Stahl
dated as of January 1, 1996;
10(v) Employment Agreement between Xetal, Inc. and Mr. Peter Steil
dated as of January 1, 1996;
23(I) Consent of B. Bruce Freitag, Esq.
(included in the opinion to be filed);*
23(ii) Consent of Linder & Linder, Certified Public Accountants.
________________________________
*To be filed by Amendment.
Exhibit 10(ii)
Agreement and Plan of Reorganization between Xetal, Inc. and
Universal Medical Distributors, Inc. dated April 1, 1996;
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated this First day of
April, 1996 by and between: XETAL, INC., a Utah corporation, with its
principal offices at 3590 Oceanside Road, Oceanside NY 11572 ("the Company");
UNIVERSAL MEDICAL DISTRIBUTORS, INC., a New York corporation, with its
principal offices at, 170R Lauman Lane, Hicksville New York 11801 ("Acquiree");
and
DR. JAN STAHL and PETER STEIL ("Company Shareholder"), being the
principal shareholders of the Company; and
KENNETH LEVENTHAL and BRANDON CURRAN (Acquiree Shareholders), being all
of the shareholders of Acquiree;
all of whom are sometimes referred to as "the Parties."
W I T N E S S E T H :
WHEREAS, the Company confirms that (i) there is no other class of securities,
either issued and outstanding or authorized, except as specifically set forth
on Schedule A hereto and (ii) there are no warrants, options, rights or other
obligations of any nature and kind whereby the Company would be obligated to
issue any shares of common stock or of any other type or kind of security,
except as set forth on said Schedule A; and
WHEREAS, Acquiree confirms that (i) the shares of common stock of Acquiree
listed on Schedule B hereto are all the shares of common stock of Acquiree
issued and outstanding; (ii) that the Acquiree Shareholders are all of the
shareholders of Universal and that no other party has any interest, either
directly or indirectly, in the Universal shares owed by the Acquiree
Shareholders, and (iii) that no other person or entity has any right or
entitlement to receive any further shares of common stock, or of any other
class or type of security of Acquiree; and
WHEREAS, the Company desires to acquire all the outstanding Shares of capital
stock of Acquiree (the "Acquiree Shares") making Acquiree a wholly-owned
subsidiary of the Company, in exchange for the consideration set forth herein;
and
WHEREAS, the parties desire to reorganize the management and operations of
Acquiree.
NOW, THEREFORE, in consideration of the promises and mutual representations,
warranties and covenants herein contained, the parties hereto adopt this
Agreement and Plan of Reorganization (the "Agreement"), and hereby agree as
follows:
1. Plan of Reorganization. The Acquiree Shares shall be acquired by the
Company in exchange for the consideration set forth herein, Acquiree shall
become a wholly owned subsidiary of the Company, and the management and
operations of Acquiree shall be reorganized as determined by the parties.
2. Consideration. The parties agree and confirm that the consideration to be
paid by the Company for the Acquiree Shares shall consist of (i) One Hundred
Thousand (100,000) shares of the Common Stock of the Company (the "Acquiror
Shares") plus (ii) Sixty-Five Thousand ($65,000) Dollars in cash.
The consideration shall be paid to the Acquiree Shareholders in the same
proportion as their ownership of the Acquiree Shares, or as may otherwise be
designated in Schedule C annexed hereto. The Acquiree Shareholders specifically
confirm their understanding that, as a result of the cash consideration to be
paid by the Company, the transaction contemplated by this Agreement will, in
all likelihood not be deemed to be a tax free exchange pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code. Further, Acquiree
Shareholders understand and confirm that the Acquiror Shares they will
receive under this Agreement will be deemed to be "restricted securities" as
defined by Rule 144 promulgated under the Securities Act of 1933, as amended,
(the "Act") and, as such, will be subject to severe restrictions against the
sale or transfer thereof unless registered in the future under the Act or
unless an exemption from such registration is available.
3. Delivery of Acquiree Shares and Payment of Consideration. On the Closing
Date as set forth herein, Acquiree Shareholders shall deliver to the Company
all stock certificates and/or stock powers representing the Acquiree Shares,
duly endorsed, so as to make the Company the sole holder thereof, free and
clear of all claims and encumbrances; and the Company shall pay to Acquiree
Shareholders the consideration provided for under Paragraph 2 above. With
respect to the Acquiror Shares to be delivered as part of the consideration
hereunder, the Company will at the closing date deliver a certificate or
certificates representing the Acquiror Shares to Acquiree Shareholder so as
to make the Acquiree Shareholder the sole holder thereof, free and clear of
all claims and encumbrances, which shares will be subject to the restrictions
on transfer described herein.
4. Representations of Acquiree and Acquiree Shareholders. Acquiree hereby
represents and warrants, with respect to its operations and to the Acquiree
Shares, and Acquiree Shareholders hereby represent and warrant, with respect
to the matters specified in Sections 4.1, 4.2, 4.3, 4.8, 4.10 and 4.12, that
the representations listed below are true and correct as of the date hereof
and will be true and correct as of the Closing Date (as hereinafter defined),
and each of which shall be deemed to survive the closing hereof:
4.1 Acquiree is validly organized and existing in good standing under
the laws of the State of New York and has 200 shares, $0.10 par value, of
Common Stock authorized, of which 200 shares are duly issued and outstanding
and owned by the Acquiree Shareholders, which shares constitute the Acquiree
Shares to be transferred to the Company hereunder and represent all of the
issued and outstanding shares of capital stock of Acquiree;
4.2 Acquiree has taken all requisite corporate action required under
its Certificate of Incorporation, By-Laws and/or the Laws of the State of New
York, to the extent necessary to enter into this Agreement and to carry out
the terms and conditions to be performed by it. Similarly, Acquiree
Shareholders, and each of them, represent that they are not under any
impediment or constraint, legal or otherwise, which would prevent them from
entering into this Agreement;
4.3 The Acquiree Shares are duly and validly issued, fully paid and
non-assessable, and are free and clear of all voting trusts, agreements,
arrangements, liens and all other encumbrances, claims, equities and
liabilities of every nature, and Acquiree, having duly taken all corporate
action required therefore, had the unqualified right to issue the Acquiree
Shares to the Acquiree Shareholders and to deliver clear and unencumbered
title thereto. Except as otherwise described in this Agreement, there are no
outstanding options, contracts, calls, commitments or demands of any character
relating to the authorized, but previously unissued, shares of common stock of
Acquiree. Acquiree's common stock is the sole class of stock authorized by
Acquiree's Articles of Incorporation and Acquiree is under no obligation,
legal or otherwise, to establish any such other class of common stock, or any
other type of security. The Acquiree Shareholders have the unqualified right
to transfer and dispose of the Acquiree Shares as contemplated herein, and upon
the closing hereunder, clear and unencumbered title thereto shall be conveyed
to the Company;
4.4 Acquiree is, or will promptly become, duly qualified as a
foreign corporation in good standing in each state in which such qualification
is necessary, except where the failure to be so qualified would not
materially adversely affect Acquiree;
4.5 The execution of this Agreement by Acquiree, and the performance
by Acquiree of its covenants and undertakings hereunder have been duly
authorized by all requisite corporate action, and approved by the Board of
Directors and the Acquiree Shareholder; Acquiree has the corporate power and
authority to enter into this Agreement and perform the covenants and
undertakings to be performed by it hereunder, and is under no impediment
which would adversely affect its ability to consummate or prohibit it from
consummating this transaction;
4.6 Acquiree has delivered, or on or before the Closing Date will
deliver, to the Company copies of its balance sheet as at February 29, 1996,
and operating statements for the year ended September 30, 1995 such financial
statement having been certified by R. A. Eisner & Co, independent certified
public accountant. Said financial statement is complete, accurate and fairly
present the financial condition of Acquiree as of the date thereof, all in
conformity with generally accepted accounting principles applied on a
consistent basis. Acquiree has no material liabilities, either fixed or
contingent, not reflected in such financial statement, other than contracts
or obligations in the ordinary and usual course of business, and no such
contracts or obligations in the usual course of business constitute liens or
other liabilities which, if disclosed, would alter substantially the financial
condition of Acquiree as reflected in such financial statement. All liabilities
for the current and for all prior years, including any income and sales taxes
or other taxes for which Acquiree has any liability, have been paid in full or
have been adequately provided for in said financial statement in accordance
with generally accepted accounting principles;
4.7 Acquiree has filed all federal, state, county and local income,
excise, property and other tax returns, forms or reports which are due or
required to be filed by it prior to the date hereof, and has paid or made
adequate provisions for the payment of all taxes, fees or assessments which
have or may become due pursuant to such returns or pursuant to any assessments
received;
4.8 Except as set forth in Schedule D annexed hereto, Acquiree is not
involved in any pending litigation or governmental investigation or proceeding,
and to the best of Acquiree's knowledge, no material litigation, claim,
assessment or governmental investigation or proceeding is threatened which
might reasonably be expected to result in any material change in the business
or condition, financial or otherwise, of Acquiree or in any of its properties
or assets, or which might reasonably be expected to result in any material
liability on the part of Acquiree or which questions the validity of this
Agreement, or might reasonably be expected to otherwise adversely affect the
Company or Acquiree, or of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement. Acquiree Shareholders
represent that they are not involved in any pending material litigation or
governmental investigation or proceeding which would affect their ownership of
the Acquiree Shares or their ability to enter into this Agreement or to carry
out its terms and conditions or which would, in the case of officers, directors
or employees of Acquiree, impair their ability to carry out their duties as
such officers, directors or employees now or in the future. Acquiree Shareholder
further covenants that to the best of their knowledge and information, no such
material litigation, claim, assessment or gov- ernmental investigation or
proceeding of any kind exists or is threatened, except as set forth in
Schedule D annexed hereto;
4.9 Acquiree has not breached, and there are no pending or threatened
claims or any legal basis for a claim that Acquiree has breached, any of the
terms or conditions of any material agreement, contract or commitment to which
it is a party or is bound, and the execution and performance hereof will not
violate any law or any provisions of any agreement to which Acquiree is subject;
4.10 Acquiree has complied with all state, federal and local laws in
connection with its formation, issuance of securities, organization,
capitalization and operation, and no contin- gent liabilities have been
threatened, or claims made or threatened with respect thereto, including claims
for violation of any state or federal securities laws and there is no basis
for any such claim or liability except in all such cases for violations and
claims which individually or in the aggregate would not materially adversely
affect Acquiree. No consent, approval, authorization or order of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of either Acquiree or Acquiree
Shareholders in connection with the execution and delivery of this Agreement,
or the carrying out of any of the transactions contemplated hereby;
4.11 All copies of Acquiree's Certificate of Incorporation, By-laws,
and all other documents and records of Acquiree, including all Amendments
thereto, that have been furnished, or immediately upon execution of this
Agreement, will be furnished to the Company by or on behalf of Acquiree and
are or will be, as applicable, true and complete;
4.12 Acquiree and Acquiree Shareholder have full power, authority and
legal right to enter into this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the compliance by
Acquiree and Acquiree Shareholders with the provisions hereof will not:
(i) conflict with or result in a breach of any provisions of, or constitute a
material default (or an event which, with notice or lapse of time or both,
would constitute a material default) under, or result in the creation of any
material lien, security interest, charge or encumbrance upon the Acquiree
Shares or any of the material property or assets of the Acquiree under any of
the terms, conditions or provisions of the Certificate of Incorporation or
By-Laws of Acquiree or any material note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which either Acquiree or the
Acquiree Shareholders are a party, or by which they are bound; or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Acquiree or Acquiree Shareholders or any of their respective
properties or assets;
4.13 Acquiree does not have any agreement, contract, lease, commitment
or obligation (including employment agreements or labor contracts) other than
as set forth on Schedule E annexed hereto, or as may otherwise be contemplated
by this Agreement;
5. Warranties and Representations of the Company and the Company Shareholders.
The Company hereby makes the following representations and warranties to
Acquiree and Acquiree Shareholders (and the Company Shareholders hereby
represent and warrant, with respect to the matters specified in Sections 5.4,
5.9 and 5.10) each of which is true as of the date hereof and as of the
Closing Date and each of which shall be deemed to be independently material
and to have been relied upon by Acquiree and the Shareholder in connection
with this Agreement, and which representations shall be deemed to survive the
closing herein:
5.1 The Company is a corporation duly organized, validly existing by
virtue of the laws of the state of Utah, and is in good standing under the
laws thereof; and neither the nature of its business nor the character and
location of its properties requires it to be qualified or licensed to do
business in any other jurisdiction. Since its incorporation, no claim has been
asserted by any governmental authority that the nature of its business, or the
character and location of the properties owned or operated by the Company makes
qualification or licensing to do business necessary in any jurisdiction in
which it is not so qualified or licensed;
5.2 The authorized capital stock of the Company consists solely
of 20,000,000 Shares of Common Stock, $.0001 par value per Share, of which
3,200,000 Shares are currently issued and outstanding. Of said issued and
outstanding Shares, 2,200,000 are "restricted securities" and 1,000,000 Shares
are "unrestricted securities" and are freely transferable under the provisions
of the Act. All of the issued and outstanding shares are fully paid and
nonassessable shares of the Company's common stock. Except as may be specified
on Schedule F annexed hereto, as of the date hereof, there are no outstanding
subscriptions, options, warrants, calls, commitments, agreements or
convertible securities to which the Company is a party or by which it is
bound, calling for or requiring the issuance of common stock of the Company,
except as otherwise specifically authorized by this Agreement nor are there
any voting, registration rights or other agreements relating to the Common Stock
or Warrants. Attached as Schedule G is a complete listing, of all holders of
the Company's common stock as reported by the Company's transfer agent and duly
noted to indicate any affiliates or related parties of the Company, its officers
or directors;
5.3 The Company has no subsidiaries nor does it own any interest in
any corporation, partnership or proprietorship, except as may be disclosed on
Schedule H annexed hereto;
5.4 As of the date of this Agreement, the Company Shareholders
(i) own, in the aggregate 62.5% of the Company's total issued and outstanding
shares of common stock; (ii) no other shareholder not a party to this Agreement
owns more than five percent (5%) of the total shares of the Company's common
stock, without giving effect to the shares to be issued in connection with this
Agreement, and (iii) each of the Company Shareholders irrevocably warrants and
represents that he shall vote his shares to affirm and approve this Agreement
at any meeting of the Company's shareholders called for such purpose;
5.5 The Company has delivered to Acquiree copies of its balance sheet as
at the end of its most recent fiscal year, and the related operating statements
for the periods then ended, all of said financial statements having been
certified by Linder & Linder, independent certified public accountant.
All financial statements submitted to Acquiree are true, complete, accurate
and fairly present the financial condition of the Company as of the date
thereof, and the results of its operations for the periods covered, all in
conformity with generally accepted accounting principles applied on a consistent
basis.. The Company has no liabilities, obligations or claims whatsoever,
either fixed or contingent, matured or unmatured, except as described in
Exhibit C, not reflected in such financial statements. All liabilities for the
current and for all prior years, including any income and sales taxes or other
taxes for which the Company has any liability, have been paid in full or have
been adequately provided for in said financial statements in accordance with
generally accepted accounting principles;
5.6 The Company has filed all federal, state, county and local income,
franchise, property and other tax returns, forms or reports which are due or
required to be filed by it prior to the date hereof, and has paid or made
adequate provisions for the payment of all taxes, fees or assessments which
have or may become due pursuant to such returns or pursuant to any assessments
received;
5.7 The respective books of account and other records of the Company
are true, complete and correct, and accurately present or reflect all of the
transactions entered into by the Company or to which the Company has been a
party, or to which its properties and assets may be subject;
5.8 Since the date of the most recent financial statements described
in the paragraph 5.6 above, there have not been (i) any adverse changes in the
financial condition or in the operations of the Company; (ii) any damage,
destruction or loss, whether covered by insurance or not, adversely affecting
the properties and business of the Company; (iii) any declaration, setting aside
of payment of any dividend in respect of the capital stock of the Company;
(iv) any issuance of capital stock by the Company or securities exercisable
or exchangeable for capital stock, any distribution (whether by way of
reclassification, recapitalization, stock split or otherwise) in respect of
the capital stock of the Company, or any redemption or other acquisition of
any such stock; (v) any contract or transaction entered into by the Company
except this Agreement or as otherwise set forth on any Schedule annexed
hereto or as approved by Acquiree in writing; (iv) any default in any contract,
obligation or debt of the Company; or (vii) any other event or condition of
any character pertaining to and adversely affecting the assets or business of
the Company taken as a whole;
5.9 The Company has complied with all state, federal and local laws in
connection with its formation, issuance of securities, organization,
capitalization and operation, and no contingent liabilities have been
threatened, or claims made or threatened with respect to said operations,
formation or capitalization, including claims for violation of any state or
federal securities laws and, to the best of it's knowledge, no basis for any
such claim or liability exists. All filings required to be made by the Company
pursuant to federal or state securities laws have been made and are current,
comply as to form with all requirements of the securities laws and contain no
material misstatement or omit any facts required so as not to be misleading.
The Company is not required to file reports with the SEC under Section 13 or
15 of the Securities Exchange Act of 1934. All copies of any documents of the
Company either heretofore delivered to Acquiree by the Company, or which shall
upon execution hereof or at the Closing be delivered by the Company, are true
and complete copies thereof. No consent, approval, authorization or order of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company or the Company
Shareholders in connection with the execution and delivery of this Agreement,
or the carrying out of any of the transactions contemplated hereby;
5.10 Neither the Company nor the Company Shareholders are involved in
any pending litigation or governmental investigation or proceeding, and to the
best of their knowledge, no litigation, claim, assessment or governmental
investigation or proceeding is pending or threatened, except as may be
disclosed on Schedule I annexed hereto. Neither the Company nor the Company
Shareholders have breached, nor is there any pending or threatened claims or
any legal basis for a claim that either the Company or the Company Shareholders
have breached, any of the terms or conditions of any agreement, contract or
commitment to which they are a party or are bound and the execution and
performance hereof will not result in a violation of any agreement, law or
governmental regulations to which the Company or the Company Shareholders are
subject;
5.11 The Acquiror Shares to be issued to the Acquiree Shareholders have
been duly authorized, and when issued pursuant to the terms of this Agreement,
will be validly issued, non-assessable and fully paid under the laws of the
state of Utah, and will be issued in a non-public offering pursuant to
exemptions from registration under federal and state securities laws and will
have all the same dividend, voting and other rights, powers, preferences,
limitations and restrictions as all of the shares of common stock of the
Company issued and outstanding as of the date hereof, except that such
Acquiror Shares shall be deemed "restricted shares" as defined in Rule 144
promulgated under the Act and shall bear a restricted legend with stop transfer
instructions at the Company's Transfer Agent. All of the Acquiror Shares will,
when delivered, be free and clear of all voting trusts, agreements,
arrangements, liens and all other encumbrances, claims, equities and
liabilities of every nature, and the Company, having duly taken all corporate
action required therefore, has the unqualified right to issue the Acquiror
Shares and to deliver clear and unencumbered title thereto;
5.12 The execution of this Agreement by the Company, and the performance
by the Company of its covenants and undertakings hereunder have been duly
authorized by all requisite corporate action, and approved by the Board of
Directors, subject to approval by the shareholders of the Company, and the
Company has the corporate power and authority to enter into this Agreement and
perform the covenants and undertakings to be performed by it hereunder, and is
under no other impediment which would adversely affect its ability to consummate
or prohibit it from consummating the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and legally binding obligation of the Company
enforceable in accordance with its terms;
5.13 The Company has full power, authority and legal right to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the compliance by the Company with the
provisions hereof will not: (i) conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
creation of any lien, security interest, charge or encumbrance upon the
Acquiror Shares or any of the property or assets of the Company under any of
the terms, conditions or provisions of the Articles of Incorporation or
By-Laws of the Company or any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party,
or by which it is bound; or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets.
6. Interim Operations. Between the date hereof and the Closing Date
the Company and Acquiree will conduct their operations as follows:
6.1 Except as herein provided, Acquiree will carry on its business in
substantially the same manner as heretofore and the assets, properties and
rights now owned by it will be maintained, as far as practicable, in the
usual and ordinary course of business, to the same extent, under the same
insurance coverage and in the same condition as on the date of this Agreement;
except with the consent of the Company, Acquiree shall engage in no activity
or business other than as is presently conducted by Acquiree, or as may be
necessary to effect the transactions contemplated by this Agreement;
6.2 Except as herein provided, or as may hereafter be agreed to in
writing by the parties, neither the Company nor Acquiree shall sell or
dispose of any property or assets, nor will they encumber any property or
assets, other than in the normal course of their business operations or as
specifically contemplated by this Agreement;
6.3 Neither the Company nor Acquiree will, except with the written
consent of the other party, issue or sell, or issue the right to subscribe to,
any shares of capital stock or securities exchangeable or exercisable for
capital stock, or acquire for a consideration any shares of capital stock or
warrants, or declare or pay any dividend on any capital stock, other than as
may be specifically disclosed in any Schedule annexed hereto;
6.4 Except as contemplated herein, neither the Company nor Acquiree
will, absent a written consent of the other, amend their Certificates of
Incorporation or By-Laws;
6.5 The Company and Acquiree shall, at reasonable times, permit access
to their respective properties and their respective books and records for the
purpose of examination by any party and their respective officers, directors,
attorneys, accountants and representatives, and each party shall furnish to
the other, upon request, any information reasonably required in respect of
such property, assets and business;
6.6 Neither the Company nor Acquiree will incur any indebtedness or
contingent liability, or enter into any contract or agreement except in the
ordinary course of their business or in connection with any transaction
specifically disclosed herein or in any Schedule hereto;
6.7 Neither the Company nor Acquiree will acquire any business or
assets of any going business, nor will they merge or consolidate with or into
any other corporation, nor will they change the character of their respective
businesses, except as shall be specifically disclosed herein or in any
Schedule annexed hereto;
6.8 Acquiree will promptly advise the Company in writing of any
material adverse change in its financial condition, business or affairs
arising from matters occurring not in the usual course of business; the
Company will promptly advise Acquiree in writing of any adverse change in its
financial condition, business or affairs.
7.Conditions Precedent to the Acquisition.
(A) The obligations of the Company to consummate and effect the acquisition
contemplated hereunder is subject to the satisfaction, on or prior to the
Closing, of the following conditions:
7.1 Except as otherwise contemplated by this Agreement,
the representations and warranties of Acquiree and the Acquiree Shareholders
herein contained shall be true and correct as of the Closing Date with the
same effect as though made on the Closing Date and Acquiree shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to such Closing Date;
and Acquiree shall have delivered to the Company a certificate dated at such
Closing Date and signed by the Chairman of the Board of Directors, the
President, Treasurer, or any Vice President of Acquiree to the foregoing effect;
7.2 Acquiree shall have entered into employment agreements with the
principal operating officers of Acquiree upon terms and conditions which shall
be acceptable to the Company and the principal officers of Acquiree;
7.3 All transactions contemplated hereby and the form and substance of
all legal proceedings and of all papers used or delivered hereunder, shall be
acceptable to counsel for the Company;
7.4 There shall not be any litigation to restrain or invalidate the
acquisition, the defense of which would, in the judgment of the Board of
Directors of the Company made in good faith and based upon the advice of
counsel, involve expense or lapse of time that would be materially adverse to
the interests of each party;
7.5 The Company shall have received the opinion of counsel for
Acquiree, dated the Closing Date, with respect to the following matters:
(a) Acquiree is a corporation duly organized, validly existing and in
good standing under the laws of the state of New York and it has all
requisite corporate power and authority to carry on the business now conducted
and to own and operate its respective properties;
(b) The authorized capital stock of Acquiree and the number of shares
issued and outstanding immediately prior to the acquisition, all of which are
duly authorized, issued and outstanding, and are nonassessable shares of
Acquiree, are as indicated in Paragraph 4.1 hereof;
(c) All necessary corporate proceedings, including appropriate action
by the shareholders and directors of Acquiree, to approve this Agreement and
the execution, delivery and performance thereof and all other proceedings
required by law or by the provisions of this Agreement have been taken,
and Acquiree has the full right, power and authority to enter into this
Agreement and to carry out the terms thereof without further action;
(d) To the best knowledge of such counsel, except as herein indicated,
there are no suits, actions, claims or proceedings pending or threatened
against Acquiree, nor to the knowledge of such counsel is Acquiree a party to
or subject to any order, judgment, decree, agreement, stipulation or consent
of or with any court or administrative agency, nor, to the best knowledge of
such counsel, is any investigation pending or threatened against Acquiree;
(e) The execution of this Agreement by Acquiree, and the performance
by Acquiree of its covenants and undertakings hereunder have been duly
authorized by all requisite corporate action, and approved by the Board of
Directors and the Acquiree Shareholder; Acquiree has the corporate power and
authority to enter into this Agreement and perform the covenants and
undertakings to be performed by it hereunder, and is under no impediment which
would adversely affect its ability to consummate this transaction;
(f) To the effect of Sections 4.4, 4.10, 4.12 and 4.13 of this
Agreement;
7.6 The Company shall have received the tax returns, corporate minute
book and all other corporate, business and financial records of the Acquiree.
(B) The obligations of Acquiree to consummate and effect the acquisition
contemplated hereunder is subject to the satisfaction, on or prior to the
Closing, of the following conditions:
7.7 The representations and warranties of the Company herein contained
shall be true and correct as of and at the date of this Agreement and as of
the Closing Date of the acquisition; and the Company shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Closing Date; and the Company
shall have delivered to Acquiree a certificate at such date, signed by the
Chairman of the Board of Directors or the President and Treasurer to the
foregoing effect, to the best knowledge of the person giving such certificate;
7.8 All transactions contemplated hereby, and the form and substance of
all legal proceedings and of all papers used or delivered hereunder, shall be
acceptable to counsel for Acquiree;
7.9 There shall not be any litigation to restrain or invalidate the
exchange, the defense of which would, in the judgement of the Board of
Directors of Acquiree, made in good faith and based upon the advice of counsel,
involve expense or lapse of time that would be adverse to the interest of
Acquiree or its Shareholder or the Company;
7.10 There shall not be any governmental proceeding, claim or other
litigation pending or threatened to restrain or invalidate the exchange, or
which, if adversely decided, could adversely affect the Company;
7.11 Acquiree and Acquiree Shareholders shall have received the opinion
of counsel for the Company, dated the Closing Date, in form and substance
satisfactory to Acquiree and Acquiree Shareholders, with respect to the
following matters:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Utah and it has all requisite
corporate power and authority to carry on the business now conducted
(if any be so conducted) and to own and operate its respective properties
(if any) and to enter into this Agreement, and consummate the transactions
herein contemplated; the Company is not required to be qualified to conduct
business in any other jurisdiction;
(b) The authorized capital stock of the Company consists solely of
__________ Shares of Common Stock, $.0001 par value per Share,
of which ___________ Shares are currently issued and outstanding. Of said
issued and outstanding Shares, ____________ are "restricted securities"
and _____________ Shares are "unrestricted securities" and are freely
transferable under the provisions of the Act. All of the issued and outstanding
shares are fully paid and nonassessable shares of the Company's common stock.
Except as may be specified on Schedule F annexed hereto, as of the date hereof,
there are no outstanding subscriptions, options, warrants, calls, commitments,
agreements or convertible securities to which the Company is a party or by
which it is bound, calling for or requiring the issuance of common stock of
the Company, except as otherwise specifically authorized by this Agreement
nor are there any voting, registration rights or other agreements relating to
the Common Stock or Warrants. The Company is not bound by any other agreements
relating to its capital stock (including registration rights agreements);
to the best of such counsel's knowledge, there are no voting or other
agreements among the Company's shareholders relating to its capital stock;
(c) All necessary corporate proceedings, including appropriate action
by the shareholders and directors of the Company, to approve this Agreement
and the execution, delivery and performance thereof and all other proceedings
required by law or by the provisions of this Agreement have been taken,
and the Company has the full right, power and authority to enter into this
Agreement and to carry out the terms thereof without further action.
This Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and legally binding obligation of the Company
enforceable in accordance with its terms. No consent, approval, authorization
or order of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement, or the
carrying out of any of the transactions contemplated hereby;
(d) To the best knowledge of such counsel, except as herein indicated,
there are no suits, actions, claims or proceedings pending or threatened against
the Company, nor to the knowledge of such counsel is the Company a party to
or subject to any order, judgment, decree, agreement, stipulation or consent
of or with any court or administrative agency, nor, to the best knowledge of
such counsel, is any investigation pending or threatened against the Company.
(f) To the effect of Sections 5.3, 5.9, 5.10, 5.11, 5.12 and 5.13 of
this Agreement;
8. Indemnification.
8.1 In order to induce the Company to enter into this Agreement, and
for other good and valuable consideration, receipt whereof is acknowledged,
Acquiree agrees to indemnify the Company and its successors and assigns, and
to hold them harmless in respect of (i) all liabilities of Acquiree of any
nature, whether accrued, contingent, absolute or otherwise, as of the Closing
Date, which are not disclosed or provided for in the financial statements
delivered to the Company as herein provided; (ii) any damage or deficiency
arising from any misrepresentation or breach of warranty made by Acquiree
herein; and (iii) all actions, suits, proceedings, demands, assessments, fines,
judgments, costs, expenses, or reasonable attorney's fees incident to the
foregoing;
8.2 In order to induce Acquiree to enter into this Agreement, and for
other good and valuable consideration, receipt whereof is acknowledged, the
Company agrees to indemnify Acquiree and Shareholder and their successors and
assigns, and their respective officers, directors, employees, controlling
persons and agents, and to hold each of them harmless in respect of (i) all
liabilities of the Company of any nature, whether accrued, contingent,
absolute or otherwise, as of the Closing Date, which are not disclosed or
provided for in the balance sheet delivered to Acquiree as herein provided;
(ii) any damage or deficiency arising from any misrepresentation or breach of
warranty or agreement made by the Company herein; and (iii) all actions,
suits, proceedings, demands, assessments, fines, judgments, costs, expenses,
or reasonable attorney's fees, as they are incurred, incident to the foregoing.
9. Closing.
9.1 The closing of the transactions described in this Agreement
(the "Closing Date"), shall take place within 72 hours after compliance with
all conditions precedent to such Closing Date as set forth in Paragraph 8 of
this Agreement and shall take place at such specific date and place as the
parties may agree.
9.2 Each party will comply with their respective requirements at the
closing and will deliver appropriate documents as called for by this Agreement.
10. Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing Date upon the following conditions:
10.1 By the mutual consent of the Boards of Directors of the Company and
Acquiree;
10.2 By the Board of Directors of either the Company or Acquiree if
this Agreement is not duly adopted by the stockholders of both the Company
and Acquiree, or the acquisition shall not be consummated in accordance with
the terms hereof prior to 60 days from the date hereof, or such later date as
the Boards of Directors of the Company and Acquiree shall mutually approve;
10.3 By the Board of Directors of either the Company or Acquiree if,
in the bona fide judgment of such Board, there shall have been a violation
of any covenant or agreement set forth herein; or if any warranty or
representation shall be untrue; or such Board of Directors should, in its
bona fide judgment, deem the acquisition inadvisable or impractical by reason
of any defect which, in the opinion of counsel for the company whose Board of
Directors has made such a determination, constitutes a part of its assets or
there exists or there is a threat of a liability or obligation of such other
company not previously known at the time of this Agreement.
11. Effect of Termination. In the event of the termination and abandonment
of the acquisition and this Agreement as herein provided, notice shall be given
to the company or person to be notified of the termination or abandonment as
herein provided in Paragraph 14.6, and thereupon this Agreement shall become
wholly void and of no effect, and there shall be no liability on the part of
any person who is a party hereto, or any liability for the Board of Directors,
stockholders, officers or directors of either the Company or Acquiree or any
other party to this Agreement.
12. Nature and Survival of Representations. All representations,
warranties and covenants made by a party to this Agreement shall survive the
execution of this Agreement and the consummation of the transactions
contemplated hereby. All of the parties hereto are executing and carrying out
the provisions of this Agreement, and relying solely upon the representations,
warranties and covenants contained in this Agreement and not upon any
investigation upon which it might have made, or any representation, warranties,
agreements, promises or information, written or oral, made by the other party,
or by persons other than as specifically set forth herein.
13. Investment Representations of Acquiree Shareholder. The Acquiree
Shareholders warrant, represent and agree as to the Acquiror Shares to be
received pursuant to this Agreement:
13.1 That such shares are being acquired for the purpose of investment,
for the separate account of each Acquiree Shareholder, and not with a view to
distribution or resale or any present intention to divide their participation
with others;
13.2 Each Acquiree Shareholder has been informed that the shares of
the Company to be received by him are not being registered under the Act in
reliance upon the exemption provided by Section 4(2) of the Act as a
transaction not involving any public offering and/or Regulation D adopted
under said Act and that reliance upon such exemptions is predicated in part
on the representations made in Paragraph 13.1 above;
13.3 Each Acquiree Shareholder acknowledges that he is aware of the
fact that the shares being acquired by him hereunder will be highly
speculative and may only be sold or disposed of under the restrictions imposed
under the Act and the Securities Exchange Act of 1934, as amended, except
pursuant to an exemption from the registration requirements of the Act;
13.4 Each Acquiree Shareholder consents to the imposition of a legend
on the certificate or certificates of stock to be received by him hereunder
to the effect that such securities have not been registered under the Act and
such securities may not be sold, pledged or hypothecated, except in compliance
with said Act, or upon an appropriate opinion of counsel acceptable to the
Company to the effect that an exemption from the registration provisions of
said Act is available to the selling shareholder. Each Acquiree Shareholder
further consents to the imposition of "stop transfer" instructions with
respect to his respective account as recorded by the transfer agent of the
Company, to the effect that such shares may not be sold or disposed of without
evidence of compliance with the requirements of said Act, or upon an acceptable
opinion of counsel.
14. Miscellaneous.
14.1 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
14.2 Entire Agreement. This Agreement constitutes the entire
Agreement among the parties pertaining to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection herewith. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution of this Agreement.
14.3 Successors. This Agreement shall be binding upon the parties
hereto, and inure to the benefit of the parties, and their respective
successors in interest and assigns.
14.4 Further Assurances. At any time and from time to time after the
date hereof, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
14.5 Waiver. Any failure on the part of any party hereto to comply
with any of the obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
14.6 Notices. Notices and communications hereunder shall be in writing
and shall be deemed to have been given if delivered in person or sent by
prepaid, first class, registered or certified mail, return receipt requested
to the addresses indicated herein for each party.
14.7 Severability. The parties to this Agreement hereby agree and
affirm that none of the above provisions is dependent upon the validity or of
any other provisions, and if any part of this Agreement is deemed to be
unenforceable, the balance of the Agreement shall remain in full force and
effect.
14.8 Finder's Fees. The parties hereto acknowledge that there have been
no brokers, finders or other parties whomsoever which would be entitled to
receive a fee in connection with this transaction except as set forth in
Schedule J annexed hereto.
14.9 Headings. Section and subsection headings in this Agreement are
for convenience only, and shall not affect in any way the meaning or
interpretation of this Agreement.
14.10 Governing Law. This Agreement shall be governed by the laws of
New York State.
14.11 Amendment. This Agreement or any provision hereof, may not be
changed, waived, terminated or discharged except by means of a written
supplemental instrument signed by the party or parties against whom enforcement
of the change, waiver, termination or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the above
written date.
XETAL, INC. (The Company)
By:___/s/Jan Stahl________________
JAN STAHL, Its: President
UNIVERSAL MEDICAL DISTRIBUTORS, INC (Acquiree)
By:_/s/Brandon Curran_________
, Its: President
COMPANY SHAREHOLDERS: __/s/Jan Stahl________________
JAN STAHL
_/s/Peter Steil _______________
PETER STEIL
ACQUIREE SHAREHOLDERS: _/s/Kenneth Levanthal_________
_/s/Brandon Curran___________
Exhibit 10(iii)
Agreement and Plan of Reorganization between Xetal, Inc. and
and Dental Alternatives, Inc. dated July 26, 1996.
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of this 26th day of
July, 1996 by and between:
XETAL, INC., a Utah corporation, with its principal offices at
3590 Oceanside Road, Oceanside NY 11572 ("the Company");
DENTAL ALTERNATIVES, INC., a New York corporation, with its principal
offices at, C/O Dr. Jan Stahl, 3590 Oceanside Road, Oceanside NY 11572
("Acquiree"); and
DR. JAN STAHL ("Shareholder"), being the sole shareholder of Acquiree;
all of whom are sometimes referred to as "the Parties."
W I T N E S S E T H :
WHEREAS, the Company confirms that (i) there is no other class of securities,
either issued and outstanding or authorized, except as specifically set forth
on Schedule A hereto and (ii) there are no warrants, options, rights or other
obligations of any nature and kind whereby the Company would be obligated to
issue any shares of common stock or of any other type or kind of security,
except as previously disclosed to Acquiree and Shareholder; and
WHEREAS, Acquiree confirms that (i) the shares of common stock of Acquiree
listed in Paragraph 4.1 are all the shares of common stock of Acquiree issued
and outstanding; (ii) that Shareholder is the sole shareholder of Acquiree and
that no other party has any interest, either directly or indirectly, in
Acquiree's shares owed by Shareholder, and (iii) that no other person or
entity has any right or entitlement to receive any further shares of common
stock, or of any other class or type of security of Acquiree; and
WHEREAS, the Company desires to acquire all the outstanding Shares of capital
stock of Acquiree (the "Acquiree Shares") making Acquiree a wholly-owned
subsidiary of the Company, in exchange for the consideration set forth herein;
and
WHEREAS, the parties desire to reorganize the management and operations of
Acquiree.
NOW, THEREFORE, in consideration of the promises and mutual representations,
warranties and covenants herein contained, the parties hereto adopt this
Agreement and Plan of Reorganization (the "Agreement"), and hereby agree as
follows:
1. Plan of Reorganization. The Acquiree Shares shall be acquired by the
Company in exchange for the consideration set forth herein, Acquiree shall
become a wholly owned subsidiary of the Company, and the management and
operations of Acquiree shall be reorganized as determined by the parties.
2. Consideration. The parties agree and confirm that the consideration to be
paid by the Company for the Acquiree Shares shall consist solely of
Four Million (4,000,000) shares of the Common Stock of the Company
(the "Acquiror Shares") which Acquiree and Shareholder confirm their
understanding that such Acquiror Shares will be subject to a 1-for-10 reverse
split which, if approved by the Acquiror Shareholders, will then equal 400,000
post-reverse split shares. The consideration shall be paid to the Shareholder
as may be designated by him at the closing hereof. The parties confirm their
intention that the transaction contemplated by this Agreement is intended to
be deemed to be a tax free exchange pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code. Further, Shareholder understands and confirms that the
Acquiror Shares he will receive under this Agreement will be deemed to be
"restricted securities" as defined by Rule 144 promulgated under the Securities
Act of 1933, as amended, (the "Act") and, as such, will be subject to severe
restrictions against the sale or transfer thereof unless registered in the
future under the Act or unless an exemption from such registration is available.
3. Delivery of Acquiree Shares and Payment of Consideration. On the Closing
Date as set forth herein, Shareholder shall deliver to the Company all stock
certificates and/or stock powers representing the Acquiree Shares, duly
endorsed, so as to make the Company the sole holder thereof, free and clear of
all claims and encumbrances; and the Company shall deliver to Shareholder the
Acquiror Shares provided for under Paragraph 2 above. With respect to the
Acquiror Shares to be delivered, the Company will at the closing date deliver
a certificate or certificates representing the Acquiror Shares to Shareholder
so as to make Shareholder the sole holder thereof, free and clear of all claims
and encumbrances, which shares will be subject to the restrictions on transfer
described herein.
4. Representations of Acquiree and Acquiree Shareholders. Acquiree hereby
represents and warrants, with respect to its operations and to the Acquiree
Shares, and Acquiree Shareholders hereby represent and warrant, with respect
to the matters specified in Sections 4.1, 4.2, 4.3, 4.8, 4.10 and 4.12, that
the representations listed below are true and correct as of the date hereof
and will be true and correct as of the Closing Date (as hereinafter defined),
and each of which shall be deemed to survive the closing hereof:
4.1 Acquiree is validly organized and existing in good standing under
the laws of the State of New York and has 200 shares, $0.10 par value, of
Common Stock authorized, of which 200 shares are duly issued and outstanding
and owned by Shareholders, which shares constitute the Acquiree Shares to be
transferred to the Company hereunder and represent all of the issued and
outstanding shares of capital stock of Acquiree;
4.2 Acquiree has taken all requisite corporate action required under
its Certificate of Incorporation, By-Laws and/or the Laws of the State of New
York, to the extent necessary to enter into this Agreement and to carry out
the terms and conditions to be performed by it. Similarly, Acquiree
Shareholders, and each of them, represent that they are not under any
impediment or constraint, legal or otherwise, which would prevent them from
entering into this Agreement;
4.3 The Acquiree Shares are duly and validly issued, fully paid and
non-assessable, and are free and clear of all voting trusts, agreements,
arrangements, liens and all other encumbrances, claims, equities and liabilities
of every nature, and Acquiree, having duly taken all corporate action required
therefore, had the unqualified right to issue the Acquiree Shares to
Shareholders and to deliver clear and unencumbered title thereto. There are no
outstanding options, contracts, calls, commitments or demands of any character
relating to the authorized, but previously unissued, shares of common stock of
Acquiree. Acquiree's common stock is the sole class of stock authorized by
Acquiree's Articles of Incorporation and Acquiree is under no obligation,
legal or otherwise, to establish any such other class of common stock, or any
other type of security. Shareholder has the unqualified right to transfer and
dispose of the Acquiree Shares as contemplated herein, and upon the closing
hereunder, clear and unencumbered title thereto shall be conveyed to the
Company;
4.4 Acquiree is, or will promptly become, duly qualified as a foreign
corporation in good standing in each state in which such qualification is
necessary, except where the failure to be so qualified would not materially
adversely affect Acquiree;
4.5 The execution of this Agreement by Acquiree, and the performance
of its covenants and undertakings hereunder have been duly authorized by all
requisite corporate action, and approved by the Board of Directors and
Shareholder; Acquiree has the corporate power and authority to enter into this
Agreement and perform the covenants and undertakings to be performed by it
hereunder, and is under no impediment which would adversely affect its ability
to consummate or prohibit it from consummating this transaction;
4.6 Acquiree has had no operations of any kind for more than the past
three (3) years and, consequently, has not during such period had need or
occasion to have prepared for any purpose balance sheets or operating
statements. Acquiree shall make available to Acquiror, or its counsel and
auditors, all of its financial records and shall cooperate fully in the
preparation of any and financial information required by Acquiror for any
purpose. Acquiree has no material liabilities, either fixed or contingent.
All liabilities for the current and for all prior years, including any income
and sales taxes or other taxes for which Acquiree has any liability, have been
paid in full or have been adequately provided for;
4.7 Acquiree has filed all federal, state, county and local income,
excise, property and other tax returns, forms or reports which are due or
required to be filed by it prior to the date hereof, and has paid or made
adequate provisions for the payment of all taxes, fees or assessments which
have or may become due pursuant to such returns or pursuant to any assessments
received;
4.8 Acquiree is not involved in any pending litigation or governmental
investigation or proceeding, and to the best of Acquiree's knowledge,
no material litigation, claim, assessment or governmental investigation or
proceeding is threatened which might reasonably be expected to result in any
material change in the business or condition, financial or otherwise,
of Acquiree or in any of its properties or assets, or which might reasonably
be expected to result in any material liability on the part of Acquiree or
which questions the validity of this Agreement, or might reasonably be expected
to otherwise adversely affect the Company or Acquiree, or of any action taken
or to be taken pursuant to or in connection with the provisions of this
Agreement. Shareholder represents that he is not involved in any pending
material litigation or governmental investigation or proceeding which would
affect his ownership of the Acquiree Shares or his ability to enter into this
Agreement or to carry out its terms and conditions or which would, in the case
of officers, directors or employees of Acquiree, impair his ability to carry
out their duties as such officers, directors or employees now or in the future.
Shareholder further covenants that to the best of his knowledge and information,
no such material litigation, claim, assessment or governmental investigation
or proceeding of any kind exists or is threatened;
4.9 Acquiree has not breached, and there are no pending or threatened
claims or any legal basis for a claim that Acquiree has breached, any of the
terms or conditions of any material agreement, contract or commitment to which
it is a party or is bound, and the execution and performance hereof will not
violate any law or any provisions of any agreement to which Acquiree is subject;
4.10 Acquiree has complied with all state, federal and local laws in
connection with its formation, issuance of securities, organization,
capitalization and operation, and no contingent liabilities have been
threatened, or claims made or threatened with respect thereto, including
claims for violation of any state or federal securities laws and there is no
basis for any such claim or liability except in all such cases for violations
and claims which individually or in the aggregate would not materially
adversely affect Acquiree. No consent, approval, authorization or order of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of either Acquiree or
Shareholder in connection with the execution and delivery of this Agreement,
or the carrying out of any of the transactions contemplated hereby;
4.11 All copies of Acquiree's Certificate of Incorporation, By-laws,
and all other documents and records of Acquiree, including all Amendments
thereto, that have been furnished, or immediately upon execution of this
Agreement, will be furnished to the Company by or on behalf of Acquiree and
are or will be, as applicable, true and complete;
4.12 Acquiree and Shareholder have full power, authority and legal
right to enter into this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the compliance by
Acquiree and Shareholder with the provisions hereof will not: (i) conflict
with or result in a breach of any provisions of, or constitute a material
default (or an event which, with notice or lapse of time or both, would
constitute a material default) under, or result in the creation of any
material lien, security interest, charge or encumbrance upon the Acquiree
Shares or any of the material property or assets of the Acquiree under any of
the terms, conditions or provisions of the Certificate of Incorporation or
By-Laws of Acquiree or any material note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which either Acquiree or
Shareholder are a party, or by which they are bound; or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Acquiree or Share- holder or any of their respective properties or assets;
4.13 Acquiree does not have any agreement, contract, lease, commitment
or obligation (including employment agreements or labor contracts);
5. Warranties and Representations of the Company. The Company hereby makes
the following representations and warranties to Acquiree and Shareholder, each
of which is true as of the date hereof and as of the Closing Date and each of
which shall be deemed to be independently material and to have been relied upon
by Acquiree and Shareholder in connection with this Agreement, and which
representations shall be deemed to survive the closing herein:
5.1 The Company is a corporation duly organized, validly existing by
virtue of the laws of the state of Utah, and is in good standing under the laws
thereof; and neither the nature of its business nor the character and location
of its properties requires it to be qualified or licensed to do business in
any other jurisdiction. Since its incorporation, no claim has been asserted
by any governmental authority that the nature of its business, or the character
and location of the properties owned or operated by the Company makes
qualification or licensing to do business necessary in any jurisdiction in
which it is not so qualified or licensed;
5.2 The authorized capital stock of the Company consists solely of
20,000,000 Shares of Common Stock, $.0001 par value per Share of which Shares,
3,182,330 are presently issued and outstanding Shares, all of which are fully
paid and nonassessable shares of the Company's common stock. Except as
previously disclosed to Acquiree and Shareholder, as of the date hereof,
there are no outstanding subscriptions, options, warrants, calls, commitments,
agreements or convertible securities to which the Company is a party or by
which it is bound, calling for or requiring the issuance of common stock of
the Company, nor are there any voting, registration rights or other agreements
relating to the Common Stock or Warrants;
5.3 The Company has delivered to Acquiree copies of its balance sheet
as at the end of its most recent fiscal year, and the related operating
statements for the periods then ended, all of said financial statements having
been certified by Linder & Linder, independent certified public accountant.
All financial statements submitted to Acquiree are true, complete, accurate
and fairly present the financial condition of the Company as of the date
thereof, and the results of its operations for the periods covered, all in
conformity with generally accepted accounting principles applied on a
consistent basis.. The Company has no liabilities, obligations or claims
whatsoever, either fixed or contingent, matured or unmatured, not reflected
in such financial statements. All liabilities for the current and for all
prior years, including any income and sales taxes or other taxes for which the
Company has any liability, have been paid in full or have been adequately
provided for in said financial statements in accordance with generally accepted
accounting principles;
5.4 The Company has filed all federal, state, county and local income,
franchise, property and other tax returns, forms or reports which are due or
required to be filed by it prior to the date hereof, and has paid or made
adequate provisions for the payment of all taxes, fees or assessments which
have or may become due pursuant to such returns or pursuant to any assessments
received;
5.5 The respective books of account and other records of the Company
are true, complete and correct, and accurately present or reflect all of the
transactions entered into by the Company or to which the Company has been a
party, or to which its properties and assets may be subject;
5.7 Since the date of the most recent financial statements described
above, there have not been (i) any adverse changes in the financial condition
or in the operations of the Company; (ii) any damage, destruction or loss,
whether covered by insurance or not, adversely affecting the properties and
business of the Company; (iii) any declaration, setting aside of payment of
any dividend in respect of the capital stock of the Company; (iv) any issuance
of capital stock by the Company or securities exercisable or exchangeable for
capital stock, any distribution (whether by way of reclassification,
recapitalization, stock split or otherwise) in respect of the capital stock of
the Company, or any redemption or other acquisition of any such stock;
(v) any contract or transaction entered into by the Company except this
Agreement or as otherwise disclosed to Acquiree and Shareholder or as approved
by Acquiree in writing; (iv) any default in any contract, obligation or debt
of the Company; or (vii) any other event or condition of any character
pertaining to and adversely affecting the assets or business of the Company
taken as a whole;
5.8 The Company has complied with all state, federal and local laws in
connection with its formation, issuance of securities, organization,
capitalization and operation, and no contingent liabilities have been
threatened, or claims made or threatened with respect to said operations,
formation or capitalization, including claims for violation of any state or
federal securities laws and, to the best of it's knowledge, no basis for any
such claim or liability exists. All filings required to be made by the Company
pursuant to federal or state securities laws have been made and are current,
comply as to form with all requirements of the securities laws and contain no
material misstatement or omit any facts required so as not to be misleading.
The Company is not required to file reports with the SEC under Section 13 or
15 of the Securities Exchange Act of 1934. All copies of any documents of the
Company either heretofore delivered to Acquiree by the Company, or which shall
upon execution hereof or at the Closing be delivered by the Company, are true
and complete copies thereof. No consent, approval, authorization or order of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company or the Company
Shareholders in connection with the execution and delivery of this Agreement,
or the carrying out of any of the transactions contemplated hereby;
5.9 The Company is not involved in any pending litigation or
governmental investigation or proceeding, and to the best knowledge of
management, no litigation, claim, assessment or governmental investigation or
proceeding is pending or threatened. The Company has not breached, nor is
there any pending or threatened claims or any legal basis for a claim that the
Company has breached, any of the terms or conditions of any agreement, contract
or commitment to which it is a party or is bound and the execution and
performance hereof will not result in a violation of any agreement, law or
governmental regulations to which the Company is subject;
5.10 The Acquiror Shares to be issued to Shareholders have been duly
authorized, and when issued pursuant to the terms of this Agreement, will be
validly issued, non-assessable and fully paid under the laws of the state of
Utah, and will be issued in a non-public offering pursuant to exemptions from
registration under federal and state securities laws and will have all the
same dividend, voting and other rights, powers, preferences, limitations and
restrictions as all of the shares of common stock of the Company issued and
outstanding as of the date hereof, except that such Acquiror Shares shall be
deemed "restricted shares" as defined in Rule 144 promulgated under the Act
and shall bear a restricted legend with stop transfer instructions at the
Company's Transfer Agent. All of the Acquiror Shares will, when delivered, be
free and clear of all voting trusts, agreements, arrangements, liens and all
other encumbrances, claims, equities and liabilities of every nature, and the
Company, having duly taken all corporate action required therefore, has the
unqualified right to issue the Acquiror Shares and to deliver clear and
unencumbered title thereto;
5.11 The execution of this Agreement by the Company, and the performance
by the Company of its covenants and undertakings hereunder have been duly
authorized by all requisite corporate action, and approved by the Board of
Directors, subject to approval by the shareholders of the Company, and the
Company has the corporate power and authority to enter into this Agreement
and perform the covenants and undertakings to be performed by it hereunder,
and is under no other impediment which would adversely affect its ability to
consummate or prohibit it from consummating the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and legally binding obligation of the
Company enforceable in accordance with its terms;
5.12 The Company has full power, authority and legal right to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the compliance by the Company with the
provisions hereof will not: (i) conflict with or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
creation of any lien, security interest, charge or encumbrance upon the
Acquiror Shares or any of the property or assets of the Company under any of
the terms, conditions or provisions of the Articles of Incorporation or
By-Laws of the Company or any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party,
or by which it is bound; or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets.
6. Interim Operations. Between the date hereof and the Closing Date
the Company and Acquiree will conduct their operations as follows:
6.1 Except as herein provided, Acquiror and Acquiree will each carry
on their business in substantially the same manner as heretofore and the assets,
properties and rights now owned by each will be maintained, as far as
practicable, in the usual and ordinary course of business, to the same extent,
under the same insurance coverage and in the same condition as on the date of
this Agreement; except with the consent of the Company, Acquiree shall engage
in no activity or business other than as is presently conducted by Acquiree,
or as may be necessary to effect the transactions contemplated by this
Agreement;
6.2 The Company and Acquiree shall, at reasonable times, each permit
access to their respective properties and their respective books and records
for the purpose of examination by any party and their respective officers,
directors, attorneys, accountants and representatives, and each party shall
furnish to the other, upon request, any information reasonably required in
respect of such property, assets and business;
6.3 Acquiree will not incur any indebtedness or contingent liability,
or enter into any contract or agreement except in the ordinary course of their
business or in connection with any transaction specifically disclosed herein
or as approved by the Company in writing;
6.4 Acquiree will promptly advise the Company in writing of any
material adverse change in its financial condition, business or affairs
arising from matters occurring not in the usual course of business; the
Company will promptly advise Acquiree in writing of any adverse change in its
financial condition, business or affairs.
7.Conditions Precedent to the Acquisition.
(A) The obligations of the Company to consummate and effect the acquisition
contemplated hereunder is subject to the satisfaction, on or prior to the
Closing, of the following conditions:
7.1 The representations and warranties of Acquiree and the Acquiree
Shareholders herein contained shall be true and correct as of the Closing Date
with the same effect as though made on the Closing Date and Acquiree shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to such Closing Date;
7.3 All transactions contemplated hereby and the form and substance of
all legal proceedings and of all papers used or delivered hereunder, shall be
acceptable to counsel for the Company;
7.4 There shall not be any litigation to restrain or invalidate the
acquisition, the defense of which would, in the judgment of the Board of
Directors of the Company made in good faith and based upon the advice of
counsel, involve expense or lapse of time that would be materially adverse to
the interests of each party;
7.5 The Company shall have received the certificate of the President
and Shareholder of Acquiree, dated the Closing Date, with respect to the
following matters:
(a) Acquiree is a corporation duly organized, validly existing and in
good standing under the laws of the state of New York and it has all
requisite corporate power and authority to carry on the business now conducted
and to own and operate its respective properties;
(b) The authorized capital stock of Acquiree and the number of shares
issued and outstanding immediately prior to the acquisition, all of which are
duly authorized, issued and outstanding, and are nonassessable shares of
Acquiree, are as indicated in Paragraph 4.1 hereof;
(c) All necessary corporate proceedings, including appropriate action
by the shareholders and directors of Acquiree, to approve this Agreement and
the execution, delivery and performance thereof and all other proceedings
required by law or by the provisions of this Agreement have been taken, and
Acquiree has the full right, power and authority to enter into this Agreement
and to carry out the terms thereof without further action;
(d) To the best knowledge of such person, except as herein indicated,
there are no suits, actions, claims or proceedings pending or threatened
against Acquiree, nor to the knowledge of such counsel is Acquiree a party to
or subject to any order, judgment, decree, agreement, stipulation or consent
of or with any court or administrative agency, nor, to the best knowledge of
such person, is any investigation pending or threatened against Acquiree;
7.6 The Company shall have received the tax returns, corporate minute
book and all other corporate, business and financial records of the Acquiree.
(B) The obligations of Acquiree to consummate and effect the acquisition
contemplated hereunder is subject to the satisfaction, on or prior to the
Closing, of the following conditions:
7.7 The representations and warranties of the Company herein contained
shall be true and correct as of and at the date of this Agreement and as of
the Closing Date of the acquisition; and the Company shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Closing Date;
7.8 All transactions contemplated hereby, and the form and substance of
all legal proceedings and of all papers used or delivered hereunder, shall be
acceptable to counsel for Acquiree;
7.9 There shall not be any litigation to restrain or invalidate the
exchange, the defense of which would, in the judgement of the Board of
Directors of Acquiree, made in good faith and based upon the advice of counsel,
involve expense or lapse of time that would be adverse to the interest of
Acquiree or its Shareholder or the Company;
7.10 There shall not be any governmental proceeding, claim or other
litigation pending or threatened to restrain or invalidate the exchange, or
which, if adversely decided, could adverse- ly affect the Company;
7.11 Acquiree and Acquiree Shareholders shall have received the
opinion of counsel for the Company, dated the Closing Date, in form and
substance satisfactory to Acquiree and Acquiree Shareholders, with respect to
the following matters:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Utah and it has all requisite
corporate power and authority to carry on the business now conducted
(if any be so conducted) and to own and operate its respective properties
(if any) and to enter into this Agreement, and consummate the transactions
herein contemplated; the Company is not required to be qualified to conduct
business in any other jurisdiction;
(b) The authorized capital stock of the Company is as stated in this
Agreement. All of the issued and outstanding shares are fully paid and
nonassessable shares of the Company's common stock;
(c) No consent, approval, authorization or order of, or registration,
qualification, designation, declaration or filing with, any governmental
authority is required on the part of the Company in connection with the
execution and delivery of this Agreement, or the carrying out of any of the
transactions contemplated hereby;
(d) To the best knowledge of such counsel, except as herein indicated,
there are no suits, actions, claims or proceedings pending or threatened
against the Company, nor to the knowledge of such counsel is the Company a
party to or subject to any order, judgment, decree, agreement, stipulation or
consent of or with any court or administrative agency, nor, to the best
knowledge of such counsel, is any investigation pending or threatened against
the Company.
8. Closing.
8.1 The closing of the transactions described in this Agreement
(the "Closing Date"), shall take place within 72 hours after compliance with
all conditions precedent to such Closing Date as set forth in Paragraph 8 of
this Agreement and shall take place at such specific date and place as the
parties may agree.
8.2 Each party will comply with their respective requirements at the closing
and will deliver appropriate documents as called for by this Agreement.
9. Termination. This Agreement may be terminated and abandoned at any time
prior to the Closing Date upon the following conditions:
9.1 By the mutual consent of the Boards of Directors of the Company and
Acquiree;
9.2 By the Board of Directors of either the Company or Acquiree if this
Agreement is not duly adopted by both the Company and Acquiree, or the
acquisition shall not be consummated in accordance with the terms hereof
prior to 60 days from the date hereof, or such later date as the Boards of
Directors of the Company and Acquiree shall mutually approve;
9.3 By the Board of Directors of either the Company or Acquiree if, in the
bona fide judgment of such Board, there shall have been a violation of any
covenant or agreement set forth herein; or if any warranty or representation
shall be untrue; or such Board of Directors should, in its bona fide judgment,
deem the acquisition inadvisable or impractical by reason of any defect which,
in the opinion of counsel for the company whose Board of Directors has made
such a determination, constitutes a part of its assets or there exists or
there is a threat of a liability or obligation of such other company not
previously known at the time of this Agreement.
10. Effect of Termination. In the event of the termination and abandonment
of the acquisition and this Agreement as herein provided, notice shall be given
to the company or person to be notified of the termination or abandonment as
herein provided in, and thereupon this Agreement shall become wholly void and
of no effect, and there shall be no liability on the part of any person who is
a party hereto, or any liability for the Board of Directors, stockholders,
officers or directors of either the Company or Acquiree or any other party to
this Agreement.
11. Nature and Survival of Representations. All representations, warranties
and covenants made by a party to this Agreement shall survive the execution of
this Agreement and the consummation of the transactions contemplated hereby.
All of the parties hereto are executing and carrying out the provisions of
this Agreement, and relying solely upon the representations, warranties and
covenants contained in this Agreement and not upon any investigation upon which
it might have made, or any representation, warranties, agreements, promises or
information, written or oral, made by the other party, or by persons other than
as specifically set forth herein.
12. Investment Representations of Acquiree Shareholder. The Acquiree
Shareholders warrant, represent and agree as to the Acquiror Shares to be
received pursuant to this Agreement:
12.1 That such shares are being acquired for the purpose of investment,
for the account of Shareholder, and not with a view to distribution or resale
or any present intention to divide their participation with others;
12.2 Shareholder has been informed that the shares of the Company to
be received by him are not being registered under the Act in reliance upon the
exemption provided by Section 4(2) of the Act as a transaction not involving
any public offering and/or Regulation D adopted under said Act and that
reliance upon such exemptions is predicated in part on the representations
made in Paragraph 13.1 above;
12.3 Shareholder acknowledges that he is aware of the fact that the
shares being acquired by him hereunder will be highly speculative and may only
be sold or disposed of under the restrictions imposed under the Act and the
Securities Exchange Act of 1934, as amended, except pursuant to an exemption
from the registration requirements of the Act;
12.4 Shareholder consents to the imposition of a legend on the
certificate or certificates of stock to be received by him hereunder to the
effect that such securities have not been registered under the Act and such
securities may not be sold, pledged or hypothecated, except in compliance with
said Act, or upon an appropriate opinion of counsel acceptable to the Company
to the effect that an exemption from the registration provisions of said Act
is available to the selling shareholder. Shareholder further consents to the
imposition of "stop transfer" instructions with respect to his respective
account as recorded by the transfer agent of the Company, to the effect that
such shares may not be sold or disposed of without evidence of compliance with
the requirements of said Act, or upon an acceptable opinion of counsel.
13. Miscellaneous.
13.1 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.2 Entire Agreement. This Agreement constitutes the entire Agreement
among the parties pertaining to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection herewith. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution of this Agreement.
13.3 Successors. This Agreement shall be binding upon the parties
hereto, and inure to the benefit of the parties, and their respective
successors in interest and assigns.
13.4 Further Assurances. At any time and from time to time after the
date hereof, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
13.5 Waiver. Any failure on the part of any party hereto to comply with
any of the obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
13.6 Notices. Notices and communications hereunder shall be in writing
and shall be deemed to have been given if delivered in person or sent by
prepaid, first class, registered or certified mail, return receipt requested
to the addresses indicated herein for each party.
13.7 Severability. The parties to this Agreement hereby agree and
affirm that none of the above provisions is dependent upon the validity or of
any other provisions, and if any part of this Agreement is deemed to be
unenforceable, the balance of the Agreement shall remain in full force and
effect.
13.8 Finder's Fees. The parties hereto acknowledge that there have been
no brokers, finders or other parties whomsoever which would be entitled to
receive a fee in connection with this transaction except as set forth in
Schedule J annexed hereto.
13.9 Headings. Section and subsection headings in this Agreement are
for convenience only, and shall not affect in any way the meaning or
interpretation of this Agreement.
13.10 Governing Law. This Agreement shall be governed by the laws of
New York State.
13.11 Amendment. This Agreement or any provision hereof, may not be
changed, waived, terminated or discharged except by means of a written
supplemental instrument signed by the party or parties against whom
enforcement of the change, waiver, termination or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the above
written date.
XETAL, INC. (The Company)
By:_/s/Peter Steil_________________
PETER STEIL, Its: President
DENTAL ALTERNATIVES INC. (Acquiree)
By:_/s/Dr. Jan Stahl______________
DR. JAN STAHL, Its: President
SHAREHOLDER: _/s/Jan Stahl_________________
JAN STAHL
Exhibit 10(iv)
Employment Agreement between Xetal, Inc.
and Dr. Jan Stahl dated as of January 1, 1996;
AGREEMENT
This Agreement is made as of the 1st day of January 1996, between Jan Stahl
("Employee") and Xetal, Inc. ("Employer" or "Xetal"), a New York corporation
with its principal office for the conduct of business at 3590 Oceanside Avenue,
Oceanside New York 11573, who are hereinafter sometimes collectively referred
to as "the parties."
WITNESSETH
WHEREAS Employee has experience in the development and marketing of products
for the medical, dental and veterinary professions and has been an employee of
Xetal since its inception; and
WHEREAS Xetal desires to memorialize the terms and conditions of Employee's
employment by Xetal upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
l. Employment: Xetal employs Employee, and Employee accepts such employment
under the terms and conditions set forth herein. Employee shall be subject to
all the usual and customary office policies and procedures of Xetal as may from
time to time be established for employees of similar grade and position.
Specifically, Employee's grade and position with Xetal is Chief Executive
Officer and Secretary of Xetal and of its parent corporation.
2. Duties: Employee shall be responsible for sales, marketing and overall
supervision of Xetal's operations, including the performance of such duties
on behalf of Xetal's parent corporation. Employee shall also have primary
responsibility for new product development and for the establishment and
implementation of Xetal's overall marketing plan. In addition, Employee shall
be responsible for such other duties as are usual and typical for a Chief
Executive Officer of a company such as Xetal and for the faithful discharge
of such different or additional duties as may be reasonably established by
Xetal's Board of Directors.
3. Term: The term of this Agreement shall be for the three (3) year period
commencing January 1, 1996 and ending December 31, 1998 (the "Initial Term"),
unless sooner terminated pursuant to the provision of Section 6 below.
Unless notice of intention to terminate this Agreement at the end of the
Initial Term is given, in writing by Employee to Xetal, at least sixty (60)
days prior to the end of the Initial Term, or any extension period, and provided
that Employee has not breached in any material fashion any of the terms of
conditions of this Agreement, then this Agreement shall automatically be renewed
and extended for up to five (5) consecutive one (1) year periods upon the
terms and conditions set forth herein, unless different terms are agreed to
between the parties in writing.
4. Extent of Services: Employee shall devote all of his business time,
attention, skill and efforts to the performance of his duties hereunder, and
shall use his best efforts to promote the business of Xetal. During the term
of this Agreement, Employee shall not engage in any other business activities
which are either related to his work with Xetal or which would interfere with
his obligation to devote his full time efforts to his duties for Xetal,
whether or not for gain, profit or other pecuniary advantage without the
express written consent of Xetal; provided, however, that (i) Employee may
invest his assets in such manner as will not require any services to be
performed on his part in the operation or affairs of the companies in which
such investments are made, but only if such investments are consistent with
this Agreement, and (ii) Employee shall not serve as a principal, partner,
employee, officer or director of, or Consultant or contractor to any business
or entity conducting business for profit without the prior written consent of
Xetal. In consideration of the services to be rendered by Employee hereunder,
in addition to the other benefits to be received by Employee, Xetal shall
provide adequate working facilities for Employee which, subject to the
provisions of this Agreement, shall include adequate offices, for which Xetal
shall pay all rents due therefore, and Xetal shall provide all necessary
equipment and facilities to properly conduct the business of Xetal.
5. Compensation and Benefits:
I. Base Compensation. As compensation for his services hereunder, during the
term of the Agreement;
a) Xetal will pay Employee a gross salary in the sum of $125,000 per
annum, payable weekly, subject to deductions for withholding taxes and/or
other appropriate deductions as provided by all applicable federal, state and
local law, which salary shall includes 20 paid working days for vacation,
over and above all legal holidays recognized by Xetal as non-working days for
all of its employees and an additional 15 days for sick or personal leave;
plus,
b) A car lease allowance of $450. per month; plus,
c) Car expense allowance of up to $150. per month; plus,
d) Xetal will reimburse Employee for his direct expenses in the
performance of his duties hereunder including, but not limited to, reasonable
travel, entertainment and hotel expenses. However, Employee shall provide
such receipts and other documentation of his expenses as may reasonably be
requested by Xetal, in accordance with its established policy for all other
employees receiving reimbursement of expenses. Additionally, any single
expense item in excess of $750 shall be approved by Xetal prior to being
incurred, unless such pre-approval is unreasonable under the circumstances.
Xetal shall provide Employee with a corporate American Express credit card,
or similar credit card for the use of Employee on behalf of the Company; plus,
e) an Annual Cash Bonus to be computed and paid as follows:
1. An annual bonus based upon Xetal's Gross Revenues during each
fiscal year, over and above the agreed to base of $11 Million, as reported by
the Company's independent certified public accountants at the end of each such
annual period, generated during any year in which Employee is employed
hereunder, as hereafter defined. For purposes of this Agreement, Gross Revenues
shall be equal to all yearly gross sales revenues actually received and
collected during such period generated from any source by Xetal, including its
parent company, or any other subsidiary or affiliated company, provided that
such revenues are reported on a consolidated basis with those of Xetal;
2. At the end of each year of the term of this Agreement, Xetal
will pay to Employee an annual cash bonus equal to one (1%) per cent of Gross
Revenues determined as provided above;
3. Payment of the bonus earned each year, as determined above, shall
be made by a cash payment within 30 days following the delivery to Xetal of its
annual certified financial statements prepared by its independent certified
public accountants, but in no event latter than 120 days following the end of
each fiscal year; plus
f) Xetal will pay the total cost of the prevailing medical, dental or
other health insurance program offered to its employees, if any, for Employee
and his immediate family.
II. Future Salary Adjustment. The parties agree that at the end of each year
of this Agreement, including any renewal period, Employee's base salary shall
be increased by an amount determined by multiplying Employee's original base
salary hereunder of $125,000 by a fraction the numerator of which is the
Consumer Price Index for all cities ("CPI") as of January of each such year
minus the CPI as of January, 1996 and the denominator of which is the CPI as
of January, 1996.
6. Termination:
I. This Agreement shall be terminated upon the happening of any of the
following:
a) At the cessation of Xetal's business activities;
b) Upon the mutual consent of the parties hereto;
c) For cause at any time upon written notice to Employee.
Employee's termination shall be "with cause" if due to any of the following:
(I) Employee's dishonesty;
(ii) An act of defalcation committed by Employee; or
(iii) Employee's inability to perform his duties due to a
physical or mental impairment which causes Employee to be absent from the
workplace for a period of six (6) months during any year of this Agreement;
and for no other reason.
II. In the event that this Agreement and Employee's employment
hereunder shall be terminated by Xetal without cause, as defined in Paragraph
6(I)(c) above, Xetal shall continue to pay Employee the compensation provided
under the terms of this Agreement at the rate of salary and bonuses Employee
was receiving when his services were terminated by Xetal for a period equal to
the duration of the term of this Agreement, including all available renewal
period, had the Agreement not be terminated by Xetal. However, in no event shall
such payments shall continue for a period of less than six (6) months
irrespective of the actual remaining duration of this Agreement as stated
above.
III. It is understood and agreed that disability due to mental illness
or accident or any other physical or mental incapacity shall not constitute a
basis of termination for cause except to the extent and under the conditions
set forth in Paragraph 6(I)(c)(iii) above.
IV. In the event of Employee's death during the term of this Agreement,
this Agreement shall terminate and Employee's estate shall be entitled to
receive from Xetal an amount equal all payments which would have been due to
Employee under Paragraph 6(II) above, plus a lump sum payment of $25,000, which
may, at the election of Xetal, be funded by an appropriate life insurance
policy insuring the life of Employee, to be purchased by Xetal, at Xetal's sole
cost and expense, which payment shall be made to Employee's estate at such time
as the proceeds of such policy are received by Xetal. However, as a condition
of such payment to Employee's estate hereunder, the estate, through its legally
appointed representative, and by any other party necessary to carry out the
intent hereof, shall acknowledge in writing that neither the estate nor any
beneficiary of such estate has any legal right, title, interest or claim in
or to any of Employees books, records, files or other information relating to
his activities during his employment with Xetal, including lists of suppliers,
manufacturers or other business contacts as such may relate to the business
conducted by Employee during his employment hereunder, all of which shall
remain the sole and exclusive property of Xetal.
7. Covenant Not to Compete: Employee hereby covenants and agrees that,
except as provided in paragraph hereof, during the term of this Agreement and
for a period of six (6) months after termination of such Agreement hereunder:
a) Employee will not in any way, directly or indirectly, solicit,
divert, take away or accept, the business of any of the customers of Xetal for
product lines handled by Xetal which were served by Employee for Xetal during
the term of this Agreement for the purpose of selling to or servicing for any
such customer any product or service which was provided or offered by Xetal
during the term of this Agreement hereof; and
b) Employee will not, directly or indirectly, attempt or seek to cause
any of the foregoing customers of Xetal to refrain from maintaining or
acquiring from or through Xetal any product or service which was provided or
offered by Xetal during the term hereof, and will not assist any other person
or persons to do so. Employee agrees that telephonic or written communication
by him to any of the customers described above shall constitute activity by
Employee for the purposes of this Agreement.
c) Employee will not in any way, directly or indirectly, solicit,
divert, take away or accept, the business of any of the suppliers (including
manufacturers) which were handled by Xetal or which were served by Employee for
Xetal during the term of this Agreement.
d) Employee will not, directly or indirectly, attempt to seek to cause
any of the foregoing suppliers (including manufacturers) of Xetal to refrain
from selling to or supplying Xetal with any product or service which was
provided or offered to Xetal during the term hereof, and will not assist any
other person or persons to do so. Employee agrees that telephonic or written
communication by him to any of the suppliers described above shall constitute
activity by Employee for the purposes of this Agreement.
8. Nondisclosure: Employee acknowledges that, in order for Employee to
perform effectively his duties hereunder, Xetal will disclose to Employee
certain valuable trade secrets and confidential business information that have
been created, discovered, or developed by, or that otherwise have become known
to Xetal as a result of substantial effort, expense and time incurred by Xetal
or which have been assigned or otherwise conveyed. In light of such
acknowledgment, Employee hereby agrees as follows:
a) Trade Secrets: Employee hereby acknowledges that certain processes,
formulas and mechanisms used by Xetal in the operation of its business, are not
generally known to the public or to other persons engaged in businesses
similar to its business and, as such, constitute its trade secrets. Employee
hereby agrees never to directly or indirectly disclose or use, or assist anyone
else in disclosing or using such trade secrets to any person or entity other
than as authorized in the regular course of the performance of this Agreement.
b) Confidential Information: Employee hereby agrees that during the
term of this Agreement and for a period of one year following termination of
such employment, Employee will not divulge, disclose or make accessible to any
person or entity the following confidential business information of Xetal:
(I) marketing plans, strategies and forecasts; (ii) financial statements,
budgets, prices, costs and financial projections; (iii) customer names,
addresses and contact persons; and (iv) Xetal's suppliers and manufacturers and
the details of their business agreements.
9. Property of Xetal: Employee agrees that upon termination of this Agreement,
he will promptly deliver to Xetal all written and other materials in his
possession or control which contain any of the trade secrets and confidential
business information described in paragraph 8 hereof and all other property of
Xetal in his possession or control at such time, which was obtained from Xetal
or complied or produced for Xetal during the terms of this Agreement, including,
but not limited to, manuals, records, data, plans, programs, program listings,
flow charts, record layouts, computer parts, computer printouts, magnetic tapes,
diskettes, disks, card decks, letters and customer lists with the exception of
personal diaries.
10. Non-solicitation of Employees: During the term of this Agreement and for
one year thereafter, Employee shall not hire or solicit for employment,
directly or through or on behalf of any other party, any persons who are then
employees of Xetal.
11. Relations with Third Parties and Representations of The Parties;
a) Employee agrees that Xetal may make known to others, either during
or subsequent to the term of this Agreement, the existence of this Agreement
and the provisions of all or any part hereof.
b) Employee represents and warrants that:
(1) He is not in violation of any term of any employment contract,
patent or other proprietary information disclosure agreement or any other
contract, agreement or any judgment, decree or order of any court or
administrative agency relating to or affecting his right to be employed by
Xetal because of the nature of this business conducted or proposed to be
conducted by Xetal or for any other reasons;
(2) No such term, judgment, decree or order conflicts with his
obligation to use his best efforts to promote the interests of Xetal, nor does
the execution and delivery of this Agreement, nor the carrying on of Xetal's
business conflict with any such term, judgment, decree or order; and
(3) Neither he nor any of his affiliates (as that term is defined
under the Securities Act of 1933) are a party to any transaction, agreement or
understanding to which Xetal is also a party except this Agreement or any
agreement executed hereunder, nor does he or any of his affiliates have any
interest in any person or entity with whom Xetal does or intends to do business.
c) Xetal hereby makes the following representations in connection with
this Agreement;
(1) Xetal is a corporation duly organized and validly existing by
virtue of the laws of the state of New York, and is in good standing under the
laws thereof.
(2) The execution of this Agreement by Xetal, and the performance by
it of the covenants and undertakings hereunder have been duly authorized by all
requisite corporate action, and approved by the Board of Directors and Xetal
has the corporate power and authority to enter into this Agreement and
perform the covenants and undertakings to be performed by it hereunder,
and is under no other impediment which would adversely affect its ability to
consummate or prohibit it from meeting its obligation hereunder.
(3) This Agreement has been duly authorized, executed and delivered
by Xetal and constitutes a valid and legally binding obligation of Xetal
enforceable in accordance with its terms.
12. Remedies; Survival; Severability:
a) Xetal and Employee agree that in the event of a breach of any of the
covenants, agreements or obligations under Sections 6, 7, 8, 9, 10 and 11
hereof, remedies at law would be inadequate, and either party may seek
injunctive relief as well as damages.
b) The covenants, agreements, representations, warranties and obligations
contained in Sections 6, 7, 8, 9, 10 and 11 hereof shall survive the termination
of this Agreement for the periods herein set forth.
c) Each of the covenants, agreements and obligations contained in
Sections 6, 7, 8, 9, 10 and 11 hereof shall be independent and severable from
the others and should any be for any reason held illegal, invalid or
unenforceable in whole or in part, said illegality, invalidity or
unenforceability shall not affect the other covenants, agreements and
obligations in said Sections.
d) In the enforcement of their rights hereunder, Xetal and Employee
shall retain all of their rights under law or in equity to enforce the
obligations of the other party hereunder or otherwise, and to seek relief for
the acts of the other party subject to the terms of this Agreement.
13. Miscellaneous:
a) This Agreement embodies the entire agreement of the parties hereto
relating to the subject matter hereof. No amendment, modification, waiver or
attempted waiver of this Agreement or any part hereof shall be valid or
binding unless made in writing and signed by the party to be bound.
b) The validity and effect of this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
c) Any notice required or permitted to be given pursuant to this
Agreement shall be sufficiently given when delivered or, if sent by Certified
Mail, postage prepaid, return receipt requested, on the third day after such
mailing, to the following address or to such other address as a party shall
designate to writing to the other:
(I) to Employee: Jan Stahl
____________________
____________________
(ii) to Xetal: Xetal, Inc.
3590 Oceanside Avenue
Oceanside, New York 11573
d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
e) The headings of the sections and subsections hereof have been
inserted as a matter of convenience and shall not be used in the interpretation
of any provisions of this Agreement.
f) The failure of either party hereto in any one or more instances to
insist upon the performance of any of the terms or conditions of this
Agreement, or to exercise any rights or privileges conferred in this
Agreement, or the waiver by either party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as
thereafter waiving any such terms, conditions, rights, privileges or covenants,
and the same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
their seals as of the date and year first written above.
XETAL, INC.
By__/s/Peter Steil_______________
Peter Steil, President
__/s/Jan Stahl__________________
JAN STAHL, Employee
Exhibit 10(v)
Employment Agreement between Xetal, Inc.
and Peter Steil dated as of January 1, 1996;
AGREEMENT
This Agreement is made as of the 1st day of January 1996, between Peter Steil
("Employee") and Xetal, Inc. ("Employer" or "Xetal"), a New York corporation
with its principal office for the conduct of business at 3590 Oceanside Avenue,
Oceanside New York 11573, who are hereinafter sometimes collectively referred
to as "the parties."
WITNESSETH
WHEREAS Employee has experience in the development and marketing of products
for the medical, dental and veterinary professions and has been an employee of
Xetal since its inception; and
WHEREAS Xetal desires to memorialize the terms and conditions of Employee's
employment by Xetal upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
l. Employment: Xetal employs Employee, and Employee accepts such employment
under the terms and conditions set forth herein. Employee shall be subject to
all the usual and customary office policies and procedures of Xetal as may from
time to time be established for employees of similar grade and position.
Specifically, Employee's grade and position with Xetal is President of Xetal
and of its parent corporation.
2. Duties: Employee shall be jointly responsible with the Company's Chief
Executive Officer for sales, marketing and overall supervision of Xetal's
operations, including the performance of such duties on behalf of Xetal's
parent corporation. In addition, Employee shall be responsible for such other
duties as are usual and typical for a President of a company such as Xetal and
for the faithful discharge of such different or additional duties as may be
reasonably established by Xetal's Board of Directors.
3. Term: The term of this Agreement shall be for the three (3) year period
commencing January 1, 1996 and ending December 31, 1998 (the "Initial Term"),
unless sooner terminated pursuant to the provision of Section 6 below.
Unless notice of intention to terminate this Agreement at the end of the
Initial Term is given, in writing by Employee to Xetal, at least sixty (60)
days prior to the end of the Initial Term, or any extension period, and
provided that Employee has not breached in any material fashion any of the
terms of conditions of this Agreement, then this Agreement shall automatically
be renewed and extended for up to five (5) consecutive one (1) year periods
upon the terms and conditions set forth herein, unless different terms are
agreed to between the parties in writing.
4. Extent of Services: Employee shall devote all of his business time,
attention, skill and efforts to the performance of his duties hereunder, and
shall use his best efforts to promote the business of Xetal. During the term
of this Agreement, Employee shall not engage in any other business activities
which are either related to his work with Xetal or which would interfere with
his obligation to devote his full time efforts to his duties for Xetal,
whether or not for gain, profit or other pecuniary advantage without the
express written consent of Xetal; provided, however, that (i) Employee may
invest his assets in such manner as will not require any services to be
performed on his part in the operation or affairs of the companies in which
such investments are made, but only if such investments are consistent with
this Agreement, and (ii) Employee shall not serve as a principal, partner,
employee, officer or director of, or Consultant or contractor to any business
or entity conducting business for profit without the prior written consent of
Xetal. In consideration of the services to be rendered by Employee hereunder,
in addition to the other benefits to be received by Employee, Xetal shall
provide adequate working facilities for Employee which, subject to the
provisions of this Agreement, shall include adequate offices, for which Xetal
shall pay all rents due therefore, and Xetal shall provide all necessary
equipment and facilities to properly conduct the business of Xetal.
5. Compensation and Benefits:
I. Base Compensation. As compensation for his services hereunder, during the
term of the Agreement;
a) Xetal will pay Employee a gross salary in the sum of $125,000 per
annum, payable weekly, subject to deductions for withholding taxes and/or other
appropriate deductions as provided by all applicable federal, state and local
law, which salary shall includes 20 paid working days for vacation, over and
above all legal holidays recognized by Xetal as non-working days for all of its
employees and an additional 15 days for sick or personal leave; plus,
b) A car lease allowance of $450. per month; plus,
c) Car expense allowance of up to $150. per month; plus,
d) Xetal will reimburse Employee for his direct expenses in the
performance of his duties hereunder including, but not limited to, reasonable
travel, entertainment and hotel expenses. However, Employee shall provide such
receipts and other documentation of his expenses as may reasonably be requested
by Xetal, in accordance with its established policy for all other employees
receiving reimbursement of expenses. Additionally, any single expense item in
excess of $750 shall be approved by Xetal prior to being incurred, unless such
pre-approval is unreasonable under the circumstances. Xetal shall provide
Employee with a corporate American Express credit card, or similar credit card
for the use of Employee on behalf of the Company; plus,
e) an Annual Cash Bonus to be computed and paid as follows:
1. An annual bonus based upon Xetal's Gross Revenues during each
fiscal year, over and above the agreed to base of $11 Million, as reported by
the Company's independent certified public accountants at the end of each such
annual period, generated during any year in which Employee is employed
hereunder, as hereafter defined. For purposes of this Agreement, Gross
Revenues shall be equal to all yearly gross sales revenues actually received
and collected during such period generated from any source by Xetal, including
its parent company, or any other subsidiary or affiliated company, provided that
such revenues are reported on a consolidated basis with those of Xetal;
2. At the end of each year of the term of this Agreement, Xetal will
pay to Employee an annual cash bonus equal to one (1%) per cent of Gross
Revenues determined as provided above;
3. Payment of the bonus earned each year, as determined above,
shall be made by a cash payment within 30 days following the delivery to Xetal
of its annual certified financial statements prepared by its independent
certified public accountants, but in no event latter than 120 days following
the end of each fiscal year; plus
f) Xetal will pay the total cost of the prevailing medical, dental or
other health insurance program offered to its employees, if any, for Employee
and his immediate family.
II. Future Salary Adjustment. The parties agree that at the end of each year
of this Agreement, including any renewal period, Employee's base salary shall
be increased by an amount determined by multiplying Employee's original base
salary hereunder of $125,000 by a fraction the numerator of which is the
Consumer Price Index for all cities ("CPI") as of January of each such year
minus the CPI as of January, 1996 and the denominator of which is the CPI as of
January, 1996.
6. Termination:
I. This Agreement shall be terminated upon the happening of any of the
following:
a) At the cessation of Xetal's business activities;
b) Upon the mutual consent of the parties hereto;
c) For cause at any time upon written notice to Employee. Employee's
termination shall be "with cause" if due to any of the following:
(I) Employee's dishonesty;
(ii) An act of defalcation committed by Employee; or
(iii) Employee's inability to perform his duties due to a
physical or mental impairment which causes Employee to be absent from the
workplace for a period of six (6) months during any year of this Agreement;
and for no other reason.
II. In the event that this Agreement and Employee's employment
hereunder shall be terminated by Xetal without cause, as defined in Paragraph
6(I)(c) above, Xetal shall continue to pay Employee the compensation provided
under the terms of this Agreement at the rate of salary and bonuses Employee
was receiving when his services were terminated by Xetal for a period equal to
the duration of the term of this Agreement, including all available renewal
period, had the Agreement not be terminated by Xetal. However, in no event
shall such payments shall continue for a period of less than six (6) months
irrespective of the actual remaining duration of this Agreement as stated above.
III. It is understood and agreed that disability due to mental illness
or accident or any other physical or mental incapacity shall not constitute a
basis of termination for cause except to the extent and under the conditions
set forth in Paragraph 6(I)(c)(iii) above.
IV. In the event of Employee's death during the term of this Agreement,
this Agreement shall terminate and Employee's estate shall be entitled to
receive from Xetal an amount equal all payments which would have been due to
Employee under Paragraph 6(II) above, plus a lump sum payment of $25,000, which
may, at the election of Xetal, be funded by an appropriate life insurance
policy insuring the life of Employee, to be purchased by Xetal, at Xetal's
sole cost and expense, which payment shall be made to Employee's estate at such
time as the proceeds of such policy are received by Xetal. However, as a
condition of such payment to Employee's estate hereunder, the estate, through
its legally appointed representative, and by any other party necessary to
carry out the intent hereof, shall acknowledge in writing that neither the
estate nor any beneficiary of such estate has any legal right, title, interest
or claim in or to any of Employees books, records, files or other information
relating to his activities during his employment with Xetal, including lists
of suppliers, manufacturers or other business contacts as such may relate to
the business conducted by Employee during his employment hereunder, all of
which shall remain the sole and exclusive property of Xetal.
7. Covenant Not to Compete: Employee hereby covenants and agrees that, except
as provided in paragraph hereof, during the term of this Agreement and for a
period of six (6) months after termina- tion of such Agreement hereunder:
a) Employee will not in any way, directly or indirectly, solicit,
divert, take away or accept, the business of any of the customers of Xetal for
product lines handled by Xetal which were served by Employee for Xetal during
the term of this Agreement for the purpose of selling to or servicing for any
such customer any product or service which was provided or offered by Xetal
during the term of this Agreement hereof; and
b) Employee will not, directly or indirectly, attempt or seek to cause
any of the foregoing customers of Xetal to refrain from maintaining or
acquiring from or through Xetal any product or service which was provided or
offered by Xetal during the term hereof, and will not assist any other person
or persons to do so. Employee agrees that telephonic or written communication
by him to any of the customers described above shall constitute activity by
Employee for the purposes of this Agreement.
c) Employee will not in any way, directly or indirectly, solicit,
divert, take away or accept, the business of any of the suppliers (including
manufacturers) which were handled by Xetal or which were served by Employee
for Xetal during the term of this Agreement.
d) Employee will not, directly or indirectly, attempt to seek to cause
any of the foregoing suppliers (including manufacturers) of Xetal to refrain
from selling to or supplying Xetal with any product or service which was
provided or offered to Xetal during the term hereof, and will not assist any
other person or persons to do so. Employee agrees that telephonic or written
communication by him to any of the suppliers described above shall constitute
activity by Employee for the purposes of this Agreement.
8. Nondisclosure: Employee acknowledges that, in order for Employee to
perform effectively his duties hereunder, Xetal will disclose to Employee
certain valuable trade secrets and confidential business information that
have been created, discovered, or developed by, or that otherwise have become
known to Xetal as a result of substantial effort, expense and time incurred by
Xetal or which have been assigned or otherwise conveyed. In light of such
acknowledgment, Employee hereby agrees as follows:
a) Trade Secrets: Employee hereby acknowledges that certain processes,
formulas and mechanisms used by Xetal in the operation of its business, are
not generally known to the public or to other persons engaged in businesses
similar to its business and, as such, constitute its trade secrets. Employee
hereby agrees never to directly or indirectly disclose or use, or assist anyone
else in disclosing or using such trade secrets to any person or entity other
than as authorized in the regular course of the performance of this Agreement.
b) Confidential Information: Employee hereby agrees that during the term
of this Agreement and for a period of one year following termination of such
employment, Employee will not divulge, disclose or make accessible to any
person or entity the following confidential business information of Xetal:
(I) marketing plans, strategies and forecasts; (ii) financial statements,
budgets, prices, costs and financial projections; (iii) customer names,
addresses and contact persons; and (iv) Xetal's suppliers and manufacturers
and the details of their business agreements.
9. Property of Xetal: Employee agrees that upon termination of this Agreement,
he will promptly deliver to Xetal all written and other materials in his
possession or control which contain any of the trade secrets and confidential
business information described in paragraph 8 hereof and all other property of
Xetal in his possession or control at such time, which was obtained from Xetal
or complied or produced for Xetal during the terms of this Agreement, including,
but not limited to, manuals, records, data, plans, programs, program listings,
flow charts, record layouts, computer parts, computer printouts, magnetic tapes,
diskettes, disks, card decks, letters and customer lists with the exception of
personal diaries.
10. Non-solicitation of Employees: During the term of this Agreement and for
one year thereafter, Employee shall not hire or solicit for employment,
directly or through or on behalf of any other party, any persons who are then
employees of Xetal.
11. Relations with Third Parties and Representations of The Parties;
a) Employee agrees that Xetal may make known to others, either during
or subsequent to the term of this Agreement, the existence of this Agreement
and the provisions of all or any part hereof.
b) Employee represents and warrants that:
(1) He is not in violation of any term of any employment contract,
patent or other proprietary information disclosure agreement or any other
contract, agreement or any judgment, decree or order of any court or
administrative agency relating to or affecting his right to be employed by
Xetal because of the nature of this business conducted or proposed to be
conducted by Xetal or for any other reasons;
(2) No such term, judgment, decree or order conflicts with his
obligation to use his best efforts to promote the interests of Xetal, nor does
the execution and delivery of this Agreement, nor the carrying on of Xetal's
business conflict with any such term, judgment, decree or order; and
(3) Neither he nor any of his affiliates (as that term is defined
under the Securities Act of 1933) are a party to any transaction, agreement or
understanding to which Xetal is also a party except this Agreement or any
agreement executed hereunder, nor does he or any of his affiliates have any
interest in any person or entity with whom Xetal does or intends to do business.
c) Xetal hereby makes the following representations in connection with
this Agreement;
(1) Xetal is a corporation duly organized and validly existing by
virtue of the laws of the state of New York, and is in good standing under the
laws thereof.
(2) The execution of this Agreement by Xetal, and the performance by
it of the covenants and undertakings hereunder have been duly authorized by
all requisite corporate action, and approved by the Board of Directors and
Xetal has the corporate power and authority to enter into this Agreement and
perform the covenants and undertakings to be performed by it hereunder, and is
under no other impediment which would adversely affect its ability to
consummate or prohibit it from meeting its obligation hereunder.
(3) This Agreement has been duly authorized, executed and delivered
by Xetal and constitutes a valid and legally binding obligation of Xetal
enforceable in accordance with its terms.
12. Remedies; Survival; Severability:
a) Xetal and Employee agree that in the event of a breach of any of the
covenants, agreements or obligations under Sections 6, 7, 8, 9, 10 and 11
hereof, remedies at law would be inadequate, and either party may seek
injunctive relief as well as damages.
b) The covenants, agreements, representations, warranties and
obligations contained in Sections 6, 7, 8, 9, 10 and 11 hereof shall survive
the termination of this Agreement for the periods herein set forth.
c) Each of the covenants, agreements and obligations contained in
Sections 6, 7, 8, 9, 10 and 11 hereof shall be independent and severable from
the others and should any be for any reason held illegal, invalid or
unenforceable in whole or in part, said illegality, invalidity or
unenforceability shall not affect the other covenants, agreements and
obligations in said Sections.
d) In the enforcement of their rights hereunder, Xetal and Employee
shall retain all of their rights under law or in equity to enforce the
obligations of the other party hereunder or otherwise, and to seek relief for
the acts of the other party subject to the terms of this Agreement.
13. Miscellaneous:
a) This Agreement embodies the entire agreement of the parties hereto
relating to the subject matter hereof. No amendment, modification, waiver or
attempted waiver of this Agreement or any part hereof shall be valid or binding
unless made in writing and signed by the party to be bound.
b) The validity and effect of this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
c) Any notice required or permitted to be given pursuant to this
Agreement shall be sufficiently given when delivered or, if sent by Certified
Mail, postage prepaid, return receipt requested, on the third day after such
mailing, to the following address or to such other address as a party shall
designate to writing to the other:
(I) to Employee: Peter Steil
____________________
____________________
(ii) to Xetal: Xetal, Inc.
3590 Oceanside Avenue
Oceanside, New York 11573
d) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
e) The headings of the sections and subsections hereof have been
inserted as a matter of convenience and shall not be used in the
interpretation of any provisions of this Agreement.
f) The failure of either party hereto in any one or more instances to
insist upon the performance of any of the terms or conditions of this
Agreement, or to exercise any rights or privileges conferred in this
Agreement, or the waiver by either party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as
thereafter waiving any such terms, conditions, rights, privileges or
covenants, and the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
their seals as of the date and year first written above.
XETAL, INC.
By__/s/Dr. Jan Stahl_____________
Dr. Jan Stahl, Chief Executive Officer
__/s/Peter Steil________________
PETER STEIL, Employee
Exhibit 23(ii)
Consent of Linder & Linder, Certified Public Accountants.
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
and Stockholders
Xetal, Inc. and Subsidiaries
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 6, 1996 with respect to the consolidated
financial statements of Xetal, Inc. included in the Prospectus of Xetal, Inc.
that is made a part of the Registration Statement (Form SB-2).
Linder & Linder
Certified Public Accountants
Dix Hills, New York
December 23, 1996
