SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to___________
Commission file number 333-20525
SICKBAY.COM, INC. (SKBY)
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Utah 22-2223126
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
510 Broadhollow Road, Melville, New York
------------------------------------------
(Address of principal executive offices)
(631) 694-0400
--------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark, if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained herein and will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendments to
this Form 10-Q X
---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at March 31, 2000
Common Stock, par value $0.001 22,759,203 Shares
<PAGE>
TABLE OF CONTENTS
FORM 10-Q
SICKBAY.COM, INC.
Page Number
-----------
Introductory Note 3
Part I, Financial Information
- -----------------------------
Item 1 - Financial Statements 4 - 13
Auditors Review Statement
Balance Sheet
Statement of Operations
Statement of Changes
Statement of Cash Flow
Notes to Financial Statements
Item 2 - Management Discussion & Analysis 14 - 18
General
Plan of Operation/Capital Requirements
Liquidity
Pending Transactions
Part II - Other Information 19 - 20
- ---------------------------
Item 1 - Legal Proceedings
Item 2 - Changes in Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters of a Vote of
Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
INTRODUCTORY NOTE
On December 29, 1999 Sick-Bay.Com, Inc., a Delaware corporation ("Sick-Bay
Delaware") entered into a Reorganization Agreement (the "Agreement") with Xetal,
Inc., a Utah corporation ("Xetal"). After the Reorganization, the Company owned
the Internet medical portal business of Sick-Bay Delaware, changed its name to
Sickbay.com, Inc. ("Sickbay"), and also changed its Cusip number and ticker
symbol ("SKBY"). Also, pursuant to the Agreement, Xetal spun off all of its
prior business operations by a one-for-one restricted stock dividend of APO
Health, Inc. ("APO") to the then existing shareholder base of Xetal. Prior to
the spin-off, Xetal, the parent Company, had been inactive and all of the
operations had been maintained in wholly owned operating subsidiaries. Thus, the
spin-off left the remaining publicly owned entity without any remaining assets
or business. Pursuant to the Agreement, the shareholders of Xetal also retained
their shares in the Company, while the shareholders of Sick-Bay Delaware
received shares of the Company representing over 95% of the Company's Common
Stock (the "Reorganization").
Subsequent to the Reorganization, the management of Sickbay became aware
that on November 16, 1998, a Registration Statement on Form SB-2 (the "1998
Registration Statement")filed by Xetal was declared effective by the Securities
and Exchange Commission. At the time of the filing, Xetal was a publicly-owned,
Bulletin Board listed, non-reporting company. All of the operations of Xetal
were conducted through subsidiary companies. The Registration Statement related
to a proposed underwritten public offering of additional Common Stock of Xetal.
The public offering was not consummated. No securities were sold by the
Registrant pursuant thereto or otherwise. The Registrant did not previously
hereto file a Form 8-A or otherwise commence its filing of periodic and other
reports under the Securities Exchange Act of 1934. However, since the 1998 Xetal
Registration Statement was not withdrawn, the Company may be deemed to have been
required to file periodic and other reports under the Securities Exchange Act of
1934 since November of 1998. Accordingly, new management of the Registrant
requested and received the cooperation of the former management and current
auditors of the Registrant in preparing and filing the Company's 10QSB's for the
periods ended 12/31/98, 3/31/99 and 6/30/99, as well as a 10-K for the year
ended 9/30/99. In addition, the Registrant filed a Form 8-K relative to the
foregoing matters and the Registrant selected the new fiscal year of December
31, commencing with December 31, 1999.
The Registrant previously filed a 10-K for the fiscal year ended December
31, 1999.
3
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
BALANCE SHEET
March 31, December 31,
2000 1999
---------- ------------
(unaudited)
ASSETS
Current Assets
Cash ......................................... $1,058,247 $ 117,250
Loans to stockholders, related party ......... 10,832 9,223
Prepaid expenses ............................. 228,627 8,252
---------- ---------
Total Current Assets ........................... 1,297,706 134,725
---------- ---------
Property and Equipment - at cost,
less accumulated depreciation ................ 98,846 36,547
---------- ---------
Other Assets
Intangible assets - net of accumulated
amortization ................................ 1,621,034 233,728
Deferred tax asset ........................... 506,000 --
Security deposit ............................. 23,778 16,161
---------- ---------
Total Other Assets ............................. 2,150,812 249,889
---------- ---------
Total Assets .......................... $3,547,364 $ 421,161
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued expenses ............................... $ 29,413 $ 34,330
Due to Healthline ............................. 900,000 --
---------- ---------
Total Current Liabilities ...................... 929,413 34,330
---------- ---------
Stockholders' Equity
Preferred stock, $.01; authorized,
20,000,000 shares .......................... 5,000 5,000
Common stock, par value $.001; authorized
50,000,000 shares ......................... 22,759 20,498
Additional paid-in capital .................. 3,444,052 701,207
Retained deficit ............................ (853,680) (339,694)
Treasury stock, par value, 180,000 shares ... (180) (180)
---------- ---------
Total Stockholders' Equity ................ 2,617,951 386,831
---------- ---------
Total Liabilities and
Stockholders' Equity ..................... $3,547,364 $ 421,161
========== =========
See accompanying auditors' report and notes to financial statements.
4
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
Revenues
Advertising ....................................... $ 11,000
Sponsorship ....................................... 20,000
---------
Total Revenues ....................................... 31,000
---------
Operating Expenses
Production, content and product development ....... 40,858
Sales and marketing ............................... 209,286
General and administrative ........................ 294,842
---------
Total Operating Expenses ............................. 544,986
---------
Net Loss ............................................. $ 513,986
=========
Earnings per common share
Basic and fully dilutive .......................... $ (.25)
==========
The Company had no operations for the three month period ended March 31, 1999.
See accompanying auditors' report and notes to financial statements.
5
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 24, 1999 (INCEPTION) TO MARCH 31, 2000
<TABLE>
<CAPTION>
Series A Additional
Preferred Common Paid in Deficit
Stock Stock Capital Accumulated
---------- ----------------------------------------- -------- -----------
Shares Amount Shares Amount
-------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Sale Of Stock
For Cash and
Property ................ -- $ -- 1,500 $ 10,000 $ -- $ --
Stock Split .............. -- -- 17,998,500 8,000 (8,000) --
Sale Of Stock
For Cash ................ -- -- 1,000,000 1,000 191,650 --
Stock Issued
For Consulting
Services ................ -- -- 500,000 500 84,500 --
Stock Issued
For Trade Name ........... -- -- 100,000 100 19,900 --
Stock Issued
For Cash ................ 500,000 225,000 -- -- --
Conversion Of
Equity Due To
The Reverse
Acquisition ............. -- (220,000) 898,263 898 413,157 --
Net Loss -- 1999 ......... -- -- -- -- -- (339,694)
------- ----------- ---------- ----------- ----------- -----------
Balance
December 31, 1999 ....... 500,000 5,000 20,498,263 20,498 701,207 (339,694)
Stock Issued ............. -- -- 2,170,106 2,170 2,167,936 --
Stock Issued
For Purchase ............ -- -- 3,334 3 49,997 --
Stock Issued
For Purchase ............ -- -- 87,500 88 524,912 --
Net Loss -- 2000 ......... -- -- -- -- -- (513,986)
------- ----------- ---------- ----------- ----------- -----------
Balance --
(Unaudited)
March 31, 2000 .......... 500,000 $ 5,000 22,759,203 $ 22,759 $ 3,444,052 $ (853,680)
======= =========== ========== =========== =========== ===========
</TABLE>
See accompanying auditors' report and notes to financial statements.
6
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
Cash Flows From Operating Activities
Net loss .............................................. $ (513,986)
Adjustment to reconcile net income to net
cash flows from operating activities
Depreciation and amortization ..................... 3,828
Changes in operating assets and liabilities
(Increase) decrease in assets
Prepaids ....................................... (220,375)
Increase (decrease) in liabilities
Accrued expenses ............................... (4,917
-----------
Cash Flows Used By Operating Activities ........... (735,450)
-----------
Cash Flows From Investing Activities
Acquisition of property ............................... (66,127)
Acquisition of intangibles ............................ (1,893,306)
Loans to stockholders' ................................ (1,609)
Payment of security deposit ........................... (7,617)
-----------
Cash Flows Used By Investing
Activities .................................. (1,968,659)
-----------
Cash Flows From Financing Activities
Due to Healthline ..................................... 900,000
Sale of common stock .................................. 2,745,106
-----------
Cash Flows Provided By Financing
Activities .................................. 3,645,106
-----------
Net Increase In Cash ................................... 940,997
Cash, Beginning ........................................ 117,250
-----------
Cash, End .............................................. $ 1,058,247
===========
The Company had no operations for the three month period ended March 31, 1999.
See accompanying auditors' report and notes to financial statements.
7
<PAGE>
SICKBAY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
Note 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Sickbay. com, Inc., (the
"Company"), is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Nature of Operations
The Company was incorporated under the laws of the State of Utah, and was an
inactive holding company for its operating subsidiaries. On December 29, 1999,
the Company spun-off its operating subsidiaries to the shareholders of the
Company. Concurrently, the Company in acquired all the assets, business and
property subject to all the liabilities of Sick-Bay.Com, Inc., a Delaware
Corporation, (Sick-Bay"), in exchange of 19,600,000 shares of the Company's
common stock pursuant to the Reorganization Agreement. In addition, the Company
has reserved 3,050,000 shares of the Company's common stock for issuance to
certain warrant holders. As part of the tax-free reorganization, the board of
directors of Sick- Bay approved a plan of liquidation and dissolution. Sick-Bay
will distribute the shares received ratably to its shareholders in exchange for
and complete cancellation and retirement of all its issued and outstanding
capital stock.
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 Sick-Bay acquired the Company and reflects the fair market
value of the Company's net assets at the date of acquisition. In addition, in
January, 2000, the company changed its name to Sickbay.com, Inc.
Sick-Bay has been in the development stage since formation on February 24, 1999.
Operations are primarily devoted to raising capital, obtaining financing,
advertising and administrative functions. The Company intends to establish
itself as a comprehensive medical portal, providing administrative services to
healthcare professionals. Effective March 31, 2000, with the acquisition of
Healthline Publishing, Inc. ("Healthline") and Health Publishing, Inc., ("HPI"),
the Company is considered an operating company.
8
<PAGE>
SICKBAY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Property and Equipment
Property and equipment are reported at historical cost. Depreciation of property
and equipment is provided using accelerated methods over their estimated useful
lives. Expenditures for major renewals and betterment that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.
Earning Per Share
Earnings per share amounts are based on the weighted average number of shares
outstanding. Potential common stock equivalents have not been included in the
earnings per share computation because of their anti-dilutive effect.
Intangibles
Trade names acquired are being amortized over a 17 year period. Costs associated
with the raising of capital are deferred and offset against the proceeds
received from successful private placements or public offerings. Costs
associated with 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 dates of acquisition and is being
amortized on the straight line method over 5-15 years.
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
could differ from those estimates.
9
<PAGE>
SICKBAY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
The Company places its cash with a financial institution which management
considers to be of high quality; however, at times such deposits may be in
excess of the Federal Deposit Insurance Corporation insurance limit.
Advertising
The Company expenses advertising costs as incurred.
Income Taxes
Deferred income taxes arise form temporary differences resulting form income and
expense items reported for financial accounting and tax purposes in different
periods. The primary sources of temporary differences are different assets bases
in connection with business combinations and net operation loss carryovers.
Note 2 - Business Combinations
On February 23, 2000, the Company acquired all of the assets of the internet
business known and operated as NetSweat.Com, ("NetSweat"). NetSweat serves as a
directory of fitness, sports and nutrition sites on the internet. The Company
paid $50,000 in cash and 3,334 shares of the Company's common stock. In
addition, the Company granted the sellers the option to acquire an aggregate of
20,000 shares. The option is exercisable until August 23, 2001, subject to
extension under certain circumstances.
On March 31, 2000, the Company acquired all the assets of Healthline and HPI.
Healthline and HPI publish health related magazines. The purchase price for both
companies was $2,500,000, in which $750,000 is to be paid in cash and $1,750,000
in common stock of the Company. The agreement calls for 50% of the shares to be
issued at closing and the balance of the shares to be issued on the anniversary
of the closing. At March 31, 2000, the Company's obligation for the acquisition
is $900,000, which $375,000 is currently due in cash and the balance is 87,500
shares issuable on the anniversary date for the transaction. Such Shares were
valued at $525,000 based upon the market value of the Shares, after a discount
for size and restriction.
10
<PAGE>
SICKBAY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
Note 3 - Financing Arrangement
The Company has made arrangements with an investment banking/internet focused
consulting company to provide the Company with financial and marketing
assistance and legal and securities guidance. The firm has agreed to invest a
minimum of $5,000,000 with the Company. The Agreements have not been fully
consummated, but are being observed and modified by both parties in anticipation
of consummation. The Company is dependent upon the additional capital provided
and required to be provided from the firm.
Note 4 - Capital Stock Transactions
In September 1999, the board of directors authorized amending the certificate of
incorporation to increase its authorized common stock from 1500 shares, no par
value to 25,000,000 shares, par value $0.001.
Effective to the date of amendment, the board of directors authorized a stock
split of 12,000 to 1 shares of the presently outstanding common stock.
During September 1999, the Company issued 1,000,000 shares of its common stock
for consideration of $200,000. In addition, each share of stock included a
redeemable warrant allowing such shareholders to acquire three shares of common
stock.
In November, 1999, the board of directors authorized amending the certificate of
incorporation to create two classes of preferred stock as follows: (i)
authorizing 20,000,000 shares of no par value preferred and (ii) authorizing
500,000 shares of Series A 8% cumulative, convertible, no par value preferred.
During November, 1999, the Company issued 500,000 shares of its Series A 8%
cumulative convertible preferred stock for consideration of $250,000.Shares of
common stock issued for other than cash have been assigned amounts equivalent to
the fair value of the services or assets received in exchange.
The Company has reserved 50,000 shares of the Company's common stock for
issuance to certain warrant holders in conjunction with the aforementioned
private placements.
During the quarter ended March 31, 2000, the Company issued 2,170,106 shares of
common stock for consideration of $2,170,106 in conjunction with the financing
arrangement. (See note 2)
11
<PAGE>
SICKBAY.COM, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
Note 4 - Capital Stock Transactions (Continued)
In February, 2000, the Company issued 3,334 shares of common stock for
consideration of $50,000 in conjunction with the acquisition of NetSweat.Com.
On March 31, 2000, the Company issued 87,500 shares of common stock for
consideration of $525,000 in conjunction with the acquisition of Health
Publishing, Inc.
12
<PAGE>
To the Board of Directors and Shareholders
Sickbay.com, Inc.
We have reviewed the balance sheet of Sickbay.com, Inc. and Subsidiary at March
31, 2000 and the related statements of operations and cash flows for the three
months ended March 31, 2000 as set forth in the accompanying unaudited financial
statements. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for the three months ended
March 31, 2000 for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet at December 31, 1999 and the related statements of
operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated January 10, 2000, we expressed an
unqualified opinion on these financial statements.
Linder & Linder, CPAs
Dix Hills, New York
May 12, 2000
13
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
During the fiscal quarter ended March 31, 2000 and previous, the
Company was a development stage Company, since its formation on February 24,
1999. The Company's current operations are primarily focused on raising capital,
obtaining financing, and establishing affiliations and other business
relationships designed and intended to facilitate the Company's future business
activities. Effective March 31, 2000, with the acquisition of Healthline
Publishing, Inc. ("Healthline") and Health Publishing, Inc. ("HPI"), the Company
is considered an operating Company.
The Company exists as a multi-media health information company and
maintains a comprehensive medical portal providing administrative services to
healthcare professionals and related medical information to both healthcare
professionals and healthcare consumers.
The Company's website is a free-access site, through which visitors can
access an on-line magazine, on-line pharmacy, on-line bookstore, and on-line pet
shop. In addition, visitors can also submit questions to a number of
professional healthcare providers and establish secure on-line health profiles
for themselves and their family members. The Company has ample evidence that it
is attracting health professionals and health consumers/users to its site. In
the first three months of the current year, the Company has created a popular
health information destination. Data collected during the first quarter of
operations indicates that Sickbay.com has obtained 20,826,000 page views from
web visitors and is consistently ranked in the top 10 of healthcare websites by
a third party internet auditor in its listing of all healthcare websites (over
15,000). The data also demonstrates that Sickbay.com is consistently in the top
five with regard to page views per user, time spent per page, and overall hours
spent at its website. Current data indicates Sickbay.com as the #1 healthcare
site in those categories.
The Company currently is generating minimum revenues from advertising
at its website; from commissions earned on the sale of health related products
by eCommerce on-line providers which are accessed through the Sickbay.com
portal; and from affiliate partner programs that entitle Sickbay.com to a
percentage of fees collected by affiliates from visitors to the Sickbay.com site
who utilize affiliate services. The Company's marketing and sales initiatives
only commenced in early February, 2000.
On a forward-looking basis, the Company anticipates substantially
increased revenues from the foregoing sources, and
14
<PAGE>
from additional sources which have been or are being added to the Company's
revenue model. The new sources of revenue are anticipated to include revenues
derived from the publication of health care magazines distributed to health
professionals and consumers, both on-line and through traditional magazine
format distribution methods.
The Company's acquisition of Netsweat.com contributes to the expanded
offerings of the company's website and includes additional fitness and nutrition
information. The Netsweat.com acquisition accounts for strategic key word
placement in the most popular search engines. These key words drive a
significant amount of traffic to the Company's website.
The acquisitions of Healthline and HPI contribute to the company's
strategic initiative to deliver quality trusted content to an offline community
that represents almost 70% of all health consumers and providers that are not on
line. During the initial period of ownership of the Healthline entities,
Sickbay.com has substantially expanded the magazine distribution and has made
arrangements to further expand distribution to include additional pharmacies and
major airlines. More recently, the Company has initiated a content resale
program that the Company believes will contribute to its diversified revenue
business formula.
The Company anticipates revenue to be derived from the magazine
business include both off-line and on-line advertising, subscriptions and
sponsorships. The Company also expects to prepackage content and advertising
combinations for third-party usage. The Company intends to use technologically
advanced multi- media presentations on its website, and to provide advertisers
with the opportunity to showcase their products in connection with presentations
related to the subject matter thereof. See caution concerning forward-looking
statements contained below.
Finally, the Company has commenced to re-license its healthcare content
articles and information to other websites and to other off-line publication
companies.
The Company intends to increase the number of affiliates and to create
and initiate co-marketing programs that permit Sickbay.com to increase brand
awareness of both Sickbay.com and the affiliate-entity partners in connection
with such programs.
The Company is structuring itself as an on-line provider of multi-media
health information, while seeking information to position itself to be both an
on-line and off-line supplier of healthcare and related products and services
for both the healthcare
15
<PAGE>
professional and the informed healthcare consumer. As the Company introduces new
services for both consumers and healthcare providers, it anticipates significant
and imminent growth in revenues.
* * * * *
The Company is a successor to Xetal Inc. ("Xetal"). As a consequence of
a tax reorganization consummated on December 29, 1999. Prior to, and in
connection with, such transaction, Xetal spun off its operating subsidiaries to
the shareholders of Xetal prior to the acquisition of all of the assets,
business, and properties of Sick-Bay.Com., Inc., a Delaware Corporation. (See
"Introductory Note".)
* * * * *
This report on Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
statements made with respect to the results of operations and businesses of the
Company. Words such as "may," "should," "believe," "anticipate," "estimate,"
"expect," "intend," "plan," and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based upon
management's current plans, expectations, estimates and assumptions and are
subject to a number of risks and uncertainties that could significantly affect
current plans, anticipated actions and the Company's financial condition and
results of operations. Factors that may cause actual results to differ
materially from those discussed in such forward-looking statements include,
among others, the following possibilities: (i) fluctuations in foreign currency
exchange rates; (ii) heightened competition, the entry of new competitors; (iii)
the inability to carry out development plans or to do so without delays; (iv)
loss of key executives; and (v) general economic and business conditions. The
Company does not intend to update these cautionary statements.
Plan of Operation/Capital Requirements
The Company expects to require substantial additional capital in order
to facilitate its future operations. The Company has made arrangements for up to
Five Million Dollars ($5,000,000) of capital funding of which Two Million One
Hundred Seventy Thousand Dollars ($2,170,000) has been received to date. (See
"Pending Transactions - FFH")
On February 23, 2000, the Company acquired all of the assets
16
<PAGE>
of the internet business known and operated as NetSweat.Com, ("NetSweat").
NetSweat serves as a directory of fitness, sports and nutrition sites on the
internet. The Company paid $50,000 in cash and 3,334 shares of the Company's
common stock valued at an additional Fifty Thousand Dollars ($50,000). In
addition, the Company granted the Sellers options to acquire an aggregate of up
to 20,000 shares at Seventeen Dollars ($17.00) per Share. The option is
exercisable until August 23, 2001, subject to extension under certain
circumstances.
As of March 31, 2000, the Company entered into an agreement to acquire
all the assets of Healthline and HPI. Healthline and HPI publish health related
magazines. The purchase price for both companies was $2,500,000, of which
$750,000 is to be paid in cash and $1,750,000 in common stock of the Company.
The agreement calls for 50% of the shares to be issued on the anniversary of the
closing. As of March 31, 2000, the Company's obligation for the acquisition is
$900,000, of which amount Three Hundred Seventy Five Thousand Dollars ($375,000)
represents a current cash obligation and Five Hundred Twenty Five Thousand
Dollars ($525,000) represents a future obligation payable in Shares (Eight Seven
Thousand Five Hundred (87,500) Shares)).
The Company is examining into other similar transactions to leverage
the growth of its revenue producing assets through the popularity of its
website.
Liquidity
During the fiscal quarter ended March 31, 2000, the Company's total
assets increased from Four Hundred Twenty One Thousand One Hundred Sixty One
($421,161) to Three Million Five Hundred Forty Seven Thousand Three Hundred
Sixty Four Dollars ($3,547,364); and the company's current assets increased from
One Hundred Thirty Four Thousand Seven Hundred Twenty Five Dollars ($134,725) to
One Million Two Hundred Ninety Seven Thousand Seven Hundred and Six Dollars
($1,297,706). Current liabilities increased from Thirty Four Thousand Three
Hundred Thirty Dollars ($34,330) to Nine Hundred Twenty Nine Thousand Four
Hundred Thirteen Dollars ($929,413, of which amount Five Hundred Twenty Five
Thousand Dollars ($525,000) represents a liability payable in one year in equity
securities of the Company Eighty Seven Thousand Five Hundred (87,500) Shares.
See Note 2 to the Financial Statements.
Stockholders equity increased from Three Hundred Eighty Six Thousand
Eight Hundred Thirty One Dollars ($386,831) to Two Million Six Hundred One
Hundred Seventeen Thousand Nine Hundred Fifty One Dollars ($2,617,951).
17
<PAGE>
The primary source for the increases in capital is the Company's
receipt of funds from First Frontier Holdings, Inc. ("FFH") pursuant to certain
pending securities transactions. FFH provided the capital for the Company's two
business combinations during the quarter ended March 31, 2000.
It is anticipated that with the money provided and promised by FFH, the
Company will have adequate resources to conduct its operations as planned for at
least the next twelve months.
Pending Transactions
On March 6, 2000, the Company finalized a form of Stock Purchase
Agreement, Stockholders Agreement, and Registration Rights Agreement with First
Frontier Holdings, Inc. Pursuant to the FFH Agreements, the Company agreed to
sell to FFH, and FFH agreed to provide financing and other services to the
Company, with respect to an aggregate maximum of 6,400,000 Shares, of which
500,000 Shares have been delivered to date, and 1,250,000 additional Shares are
currently due. FFH also owns 500,000 Convertible Preferred Shares (convertible
share for share into Common Stock) acquired by it at $.50 per Share prior to the
combination with Xetal.
Pursuant to the FFH Agreements, FFH agreed to pay $500,000 (previously
paid), $1,250,000 (paid on March 15, 2000) and $1,250,000 (to be paid on May 1,
2000). In addition, FFH agreed to pay to the Company an additional $2,000,000
for 2,000,000 Shares based upon use of the proceeds thereof for acquisitions.
The Company has accelerated its use of part of the $2,000,000 for acquisitions
and has deferred until June 1, 2000 the last $1,250,000 of base payments due
from FFH. At the present time, the Company is dependent upon the additional
capital provided and required to be provided by FFH.
The FFH Agreements also call for substantial continuing services from
FFH to the Company in the nature of strategic planning; legal consultation;
technical support for future acquisitions; due diligence assistance; merger and
acquisition consultation; and related matters. The FFH Agreements have not been
fully consummated, but are being observed and modified by the parties in
anticipation of consummation.
FFH also has an option to acquire Four Million (4,000,000) additional
Shares at Four Dollars ($4.00) per Share.
18
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
During the fiscal quarter ended March 31, 2000, the Company issued additional
Common Stock and certain other securities for cash and in connection with
certain business transactions as follows.
The securities issuances consisted of a private placement of additional Common
Stock to First Frontier Holdings, Inc. ("FFH"), a private investment holding
corporation. The securities were placed pursuant to a series of agreements with
FFH, which contemplate the issuance of Six Million Four Hundred Thousand
(6,400,000) Shares to FFH. (See "Pending Transactions"). FFH paid Two Million
One Hundred Seventy Thousand One Hundred Six Dollars ($2,170,106) to the Company
in the current fiscal quarter of which amount Eight Hundred Thousand Dollars
($800,000) is being used to finance the Company's business combinations with
NetSweat and Healthline.
Also during the quarter ended March 31, 2000, the Company issued an aggregate of
Ninety Thousand Eight Hundred Thirty Four (90,834) Shares to a total of four
persons in connection with two business combinations completed by the Company
during such period.
The securities issuances, and the options and warrant exercises, did not involve
an underwriter or other placement agent. The Company received 100% of the
purchase price/exercise price of such securities. The Company relied under
Section 4(2) of the Securities Act of 1933 (the "Act") for its exemption from
the registration requirements with respect to such placements.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
None
19
<PAGE>
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the Company during the quarter.
The following exhibits are filed herewith:
Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sickbay.Com,Inc.
------------------------------
(Registrant)
Date May 15, 2000 /s/ Mark Basile
------------------------------
Mark Basile, Chairman
Date May 15, 2000 /s/ Allen Motola
------------------------------
Dr. Allen Motola, President
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME OF
SICKBAY.COM, INC., FOR THE QUARTER ENDED MARCH 31, 2000, AND IS QUALIFIED IN TIS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,058,274
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,297,706
<PP&E> 104,495
<DEPRECIATION> (5,649)
<TOTAL-ASSETS> 3,547,364
<CURRENT-LIABILITIES> 929,413
<BONDS> 0
0
5,000
<COMMON> 22,759
<OTHER-SE> 3,547,364
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 31,000
<TOTAL-REVENUES> 31,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 544,986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (513,986)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (513,986)
<EPS-BASIC> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
