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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 10, 2000*
Sickbay.com, Inc.
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(Exact name as specified in Charter)
Utah 33-20525
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
510 Broadhollow Road, Melville, New York 11747
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(Address of principal executive offices)
Registrant's telephone number, including area code: 516-694-0400
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Xetal, Inc.
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(Former name of former address, if changed since last report)
*See Introductory Note.
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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"). 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 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"). 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").
Subsequent thereto, 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 properly 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. Those filings have been made as of the date hereof, and in
effect, constitute the trigger date for the filing of this form 8-K.
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Item 1. Change in Control of Registrant
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On December 29, 1999, the Company effectuated a Reorganization under the
Internal Revenue Code (IRC) Section 368 acquiring all of the business and assets
of Sick-Bay.com, Inc., a Delaware corporation ("Sick-Bay Delaware"). Prior to
the reorganization transaction, Sick- Bay Delaware owned and operated an
internet health care portal. The acquisition resulted in the owners of Sick-Bay
Delaware acquiring 96.4% of the Company's common stock.
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Item 2. Acquisition of Disposition of Assets.
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On December 29, 1999, the Company acquired substantially all of the assets
of Sick-bay Delaware. Such assets included all of the tangible and intangible
assets of Sick-Bay Delaware's Internet health portal web site and developing web
related businesses.
Immediately prior to the Reorganization, the capital stock of the Company's
operating division, APO Health, was spun-off to the pre-existing shareholders,
divesting the Company of substantially all of its pre-existing assets. Such
assets included all inventory, fixtures, shelving, hardware, furniture, trade
secrets, cash accounts receivables, and the lease to premises located at 3590
Oceanside Road, Oceanside, NY. Each shareholder of the Company prior to the
Reorganization retained their stock in the Company and also received restricted
stock in APO Health, on a share for share basis, determined by their current
holdings.
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Item 3. Bankruptcy or Receivership
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Not applicable.
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Item 4. Changes in Registrant's Certifying Accountant.
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There has been no change of the Company's certifying accountant. The firm
of Linder & Linder, which certified the September 30, 1999 year-end financial
statements of the Company, also certified the financial statements of Sick-Bay
Delaware for its fiscal year ended December 31, 1999.
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Item 5. Other Events.
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The Company has entered into a Letter of Intent to acquire (in effect
reacquire) APO Health, the company's former operating company, for the purchase
price of Six Million Dollars ($6,000,000). The Letter of Intent provides the
Company with a 75-day exclusive time period for acquiring APO Health. APO Health
is a wholesale/retail supplier of dental, veterinary and medical supplies
located in Oceanside, New York.
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Item 6. Resignations of Registrant's Directors.
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Pursuant to the Terms of the Reorganization Agreement, the directors of
Xetal, Inc. voluntarily resigned their Board positions in favor of Sick-Bay
Delaware's management. There was no disagreement between the resigning Board
Members on any matter concerning the Registrant's operations, policies, or
practices. The purpose of the resignations was to permit the direction of the
company to be managed by the new control group.
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Item 7. Financial Statements and Exhibits.
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10.1. Reorganization Agreement dated December 29, 1999.
10.2. Audited Financial Statements of Sick-Bay Delaware, as of and for the
period ended December 31, 1999.
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Item 8. Change in Fiscal Year.
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The Company's Fiscal Year has been changed to December 31. The Company
intends to file a 10-K for the year ended December 31, 1999 within the next
fifteen business days, and, in any event, before March 30, 2000.
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Item 9. Sales of Equity Securities Pursuant to Regulation S.
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Not applicable.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: March 14, 2000
SICKBAY.COM, INC.
(formerly known as Xetal, Inc.)
/s/ MARK BASILE
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Mark Basile
Chairman and Secretary
/s/ ALLEN MOTOLA
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Dr. Allen Motola
President and Treasurer
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TAX-FREE REORGANIZATION AGREEMENT
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UNDER I.R.C. SECTION.368(C)
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REORGANIZATION AGREEMENT entered into as of this 29th day of December,
1999, by and between SICK-BAY.COM. INC., a Delaware corporation having its
principal offices at 510 Broadhollow Road, Melville, New York 11746 (hereinafter
referred to as "Sick-Bay") and XETAL, INC., a Utah corporation, having its
principal offices at 3590 Oceanside Road, Oceanside, NY 11572 (hereinafter
referred to as "Xetal").
WHEREAS, it is the desire of Sick-Bay to transfer, and of Xetal to acquire,
all the assets, business and properties of Sick- Bay, including, without
limitation hereby, trademarks, trade names, franchises, licenses, leases,
contracts, goodwill, and name of Sick-Bay, subject to all of Sick-Bay's
liabilities, and solely in exchange for shares of Xetal's Common Stock; and
WHEREAS, this Agreement and the performance by Sick-Bay hereunder have been
authorized, approved, and found advisable by the Board of Directors of Sick-Bay;
and
WHEREAS, this Agreement and the performance by Xetal hereunder have been
authorized and approved by the Board of Directors of Xetal and by at least
two-thirds of its shareholders entitled to vote thereon at a meeting called for
such purpose; and
WHEREAS, the Board of Directors of Sick-Bay, as part of its approval of
this agreement, has further approved a Plan of
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Liquidation and Dissolution of Sick-Bay pursuant to which the shares of Xetal's
Common Stock received by Sick-Bay will be distributed by Sick-Bay ratably to its
shareholders in exchange for, and in complete cancellation and retirement of all
its issued and outstanding capital stock and in complete liquidation of Sick-
Bay, followed by the dissolution of Sick-Bay immediately thereafter, which Plan
of Complete Liquidation and Dissolution, will also be submitted to the
shareholders of Sick-Bay for their approval.
NOW, THEREFORE, on the terms, and subject to the conditions hereof, it is
agreed as follows:
1. Transfer of Assets and Assumption of Liabilities.
1.1 On the terms of this Agreement, subject to the conditions set forth
herein at the time and place of Closing, as hereinafter defined, Sick-Bay shall
convey, assign, transfer, and deliver to Xetal, by appropriate warranty deeds,
bills of sale, assignments, or other instruments, free and clear of all liens,
encumbrances, mortgages, chattel mortgages, all of Sick-Bay's business,
properties, and assets of every kind and description, real or personal,
including, but not being limited to, Sick-Bay's goodwill and all of its right,
title, or interest in and to the name, Sick-Bay.Com. Inc., (collectively the
"Assets") subject to all unpaid and unsatisfied liabilities and obligations of
Sick-Bay in existence at the time of closing.
1.2 On the terms of this Agreement, and subject to the conditions set
forth herein, Xetal shall purchase and pay for the
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Assets of Sick-Bay, and thereby become the sole owner and operator of the
business and properties of Sick-Bay;
1.3 Promptly after the Closing of the transactions contemplated
hereunder, Xetal shall change the name of such corporation to Sickbay.Com. Inc.,
and shall thereupon thereafter be known as Sickbay.
2. Transfer and Delivery of Stock.
2.1 On the terms of this Agreement, and subject to the conditions set
forth herein, in exchange for the Assets of Sick- Bay, Xetal (or in lieu thereof
irrevocable directions to the Xetal transfer agent to issue such Shares in the
name of Sick-Bay or of the direction of Sick-Bay) shall transfer and deliver to
Sick-Bay, at the time and place of closing, certificates representing Twenty-
Two Million Six Hundred and Fifty Thousand (22,650,000) Shares of Common Stock
of Xetal (or in lieu thereof irrevocable directions to the Xetal transfer agent
to issue such Shares in the name of Sick- Bay or at the direction of Sick-Bay)
plus Five Hundred Thousand (500,000) Shares of Preferred Stock, Series A
(collectively, the "Purchase Price Shares") which Purchase Price Shares will
constitute more than eighty per cent (80%) of the total voting Shares of Xetal
outstanding subsequent to the transaction.
2.2 The Purchase Price Shares shall be distributed pro rata to the
Stockholders of Sick-Bay on the basis of one (1) Common Share for each one (1)
Common Share of Sick-Bay's stock issued and outstanding at the time of Closing;
and one (1) Preferred Share for each one (1) Preferred Share issued and
outstanding at the time of
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Closing.
2.3 The Purchase Price Shares which are to be transferred and delivered
to Sick-Bay in exchange for its Assets, as hereinabove provided, shall bear a
legend restricting further transfer or resale, except for the redistribution to
the Shareholders of Sick-Bay expressly permitted by Section 2.2 hereof, so long
as the Sick-Bay Shareholders take the Xetal Shares subject to the foregoing
restriction. Sick-Bay will not permit the sale, transfer or re-offer thereof for
sale prior to the first annual anniversary of the Closing date, except upon a
duly filed and effective registration statement with the Securities and Exchange
Commission, or as to any specific transaction, not involving an affiliate of the
issuer, any applicable exemption from registration, provided that such exemption
is based upon the opinion of counsel to the issuer, reasonably acceptable to
counsel to Xetal herein.
2.4 Promptly following the exchange of Shares of Common Stock of Xetal
for assets of Sick-Bay, the Shares of Sick-Bay shall be canceled in the complete
liquidation of Sick-Bay, the Delaware Corporation, and the name of Xetal, the
Utah Corporation, as hereinbefore provided, shall be changed to Sickbay.
3. Time and Place of Closing.
3.1 The transactions contemplated hereunder shall be closed on December
29, 1999, at 4:00 p.m., or such other date and time as may be agreed upon in
writing by the parties, (the "Closing Date") at the offices of D. David Cohen,
Esq., 500 No. Broadway,
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Suite 133, Jericho, NY 11753, or such other place as may be agreed upon in
writing by the parties. At the closing ("Closing"), the parties shall complete
the transactions required by Sections 1 and 2 of this Reorganization Agreement,
and exchange such other documents as may be necessary or appropriate therefor.
Time shall be of the essence with respect to the Closing.
3.2 After the execution of this Agreement and prior to the time of
closing, the stock books and records of Xetal may be reviewed or inspected by
representatives of Sick-Bay at any time or from time to time during regular
business hours, and that Xetal will make the same reasonably available for such
purpose.
3.3 After the execution of this Agreement and prior to the time of
closing, the stock books and records of Sick-Bay may be reviewed or inspected by
representatives of Xetal at any time or from time to time during regular
business hours, and that Sick-Bay will make the same reasonably available for
such purpose.
4. Representations of Warranties of Sick-Bay Sick-Bay represents and
warrants to, and agrees with,
Xetal as follows:
(a) It is a Delaware Corporation, duly organized, and validly existing
and qualified to undertake and operate its businesses in the form the same are
being conducted, where they are presently conducted;
(b) It is a newly established web site for the transmission of
information and products relating to health services to health service
professionals, related parties and the
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consumer public;
(c) It has limited assets and revenues, and is essentially a start-up
business, the future prospects of which are entirely dependent upon the ability
of Sick-Bay to raise equity and debt capital from its existing security holders
and additional future security holders, of which there can be no assurance, and
as to which no promises of any kind have been made to Xetal or its shareholders;
(d) Annexed hereto as Schedule 4(d) hereof is: a) the most current
unaudited balance sheet of Sick-Bay; b) a list of substantially all of its
business assets; and c) a list of its major contracts relating to the operation
of the Sick-Bay Web Site;
(e) Except for the obligations to Xetal hereunder, it has no debts or
liabilities, other than those arising in the ordinary course of the business
activities of Sick-Bay, and such debts or liabilities, in the aggregate, do not
exceed either the Company's tangible assets or its cash on hand to meet such
obligations;
(f) It has no debts or liabilities to the Shareholders of Sick-Bay;
(g) This Agreement has been authorized and approved by the Board of
Directors of Sick-Bay and by the requisite affirmative vote of holders of not
less than a majority of the Sick-Bay Shares outstanding as of and at the time of
this Agreement; and
(h) There is no suit, action or threatened proceeding outstanding
against Sick-Bay seeking to enjoin the transactions contemplated hereunder, or
seeking any other relief which, if
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granted, would have a material adverse effect on the business or assets of
Sick-Bay.
5. Representations of Warranties of Xetal Xetal and APO jointly and
severally represent and warrant to, and agree with, Sick-Bay as follows:
(a) It is a Utah corporation, duly organized and validly existing and
duly qualified to undertake the transactions required of it hereunder, without
any further license, permit, consent or exemption whatsoever from any applicable
governmental law, rule or regulation, except as otherwise provided in Schedule
5(a) to this Agreement, and as to each such license, permit, consent or
exemption set forth on Schedule 5(a), if any, the requisite license, permit,
consent or exemption has been obtained;
(b) Immediately prior to the consummation of the transactions required
hereunder, Xetal shall have validly transferred all of Xetal's pre-existing
business and assets, subject to the debts or liabilities thereof, to APO Health,
Inc. ("APO"), and APO shall have assumed all of such debts and liabilities and
indemnified Xetal with respect thereto;
(c) Immediately prior to the consummation of the transactions
contemplated hereunder, Xetal shall have spun-off and distributed to all of its
Shareholders, as of October 30, 1999, pro rata the Common Stock of APO;
(d) After provision for the transactions relating to APO, Xetal has no
remaining debts or liabilities of any kind, whether current or long-term, actual
or contingent, either to its
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Shareholders or to any other person or party creditor of Xetal, or any other
person or party with an interest in the past and prior businesses of Xetal,
including, without limitation hereby, all federal, state, local and other taxes,
except as set forth on Schedule 5(d) hereto, and as to any items set forth on
Schedule 5(d) hereto, APO, by providing its signature hereto, shall and does
hereby further agree to indemnify and hold Sick-Bay harmless with respect
thereto;
(e) This Agreement has been authorized and approved by the Board of
Directors of Xetal and by the requisite two-thirds vote of holders of the Xetal
Shares outstanding as of and at the time of this Agreement;
(f) Attached hereto as Schedule 5(f)(i) hereof is a true and correct
certified list of the shareholders of Xetal as of a date not more than three (3)
days prior to the date of this Agreement. There are 50,000,000 shares of Common
Stock authorized and 918,263 currently issued and outstanding, and no other
securities or commitments to sell, issue or securities of the Company
outstanding as of the date hereof, except for262,500 Warrants to purchase
additional shares of Common Stock, and each of such Warrants are exercisable at
a purchase price of not less than Five Dollars ($5.00) per Share and 12,500 of
such Warrants are exercisable at Seventy-Five Cents ($.75), all as set forth in
Schedule 5f(ii) hereof.
(g) America Register & Transfer Co., 342 East 900 South, Salt Lake City,
84111, is the transfer agent for the Common Stock
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of Xetal, such transfer agent has been continuously serving as such since at
least 1994, and all debts and fees to the transfer agent billed thereon the date
hereof have been paid and extinguished in full;
(h) The Common Stock of Xetal is listed on the NASD Electronic Bulletin
Board and trades thereon under the symbol XETAL;
(i) Except as set forth in Section 11.2 hereof, Xetal, and its
successor, APO, shall be responsible for the delivery and completion of audited
financial statements of Xetal for the fiscal period commencing on October 1,
1998 to September 30, 1999 (to "last fiscal year"), and for all income,
franchise or other taxes, if any, applicable to the Interim Period; and
(j) There is no suit, action or threatened proceeding outstanding
against Xetal seeking to enjoin the transactions contemplated hereunder, or
seeking any other relief which, if granted, would have a material adverse effect
on the trading in the securities of the entity heretofore known as Xetal.
6. Consents to Assignment and Transfer.
6.1 Sick-Bay shall obtain, prior to the time of closing, all consents,
agreements, and other actions required for the transfer to Xetal of all leases,
contracts, options, licenses, permits, easements, rights of occupancy, names,
web pages and web sites, and franchises to which Sick-Bay is a party or which it
owns of holds or uses at the time of closing.
6.2 Xetal shall obtain, prior to the time of Closing
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all consents, agreements and other actions required therefor, including,
specifically, release of Xetal with respect to transfer of all of its assets and
business to APO, including all lease, contract, and debt obligations of Xetal
being assumed by APO, and Xetal being excused therefrom.
7. Conditions to Sick-Bay's Obligations to Close
The obligations of Sick-Bay to consummate the transaction to be
performed by it in connection with the closing are subject to the satisfaction
of the following conditions:
(a) The representations and warranties of Xetal contained in Section 5
hereof shall be true and correct in all material respects as though such
representations and warranties had been made on and as of the time of such
Closing;
(b) Xetal shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing;
(c) The President of Xetal shall deliver Sick-Bay, at the Closing, a
certificate stating that the conditions specified in sub-sections (a) and (b) of
this Section 7 have been fulfilled, and stating that there shall have been no
material adverse change in the state of affairs of Xetal from the date of the
audited financial statements to the date and time of the closing;
(d) The Assistant Secretary of Xetal shall have delivered to Sick-Bay at
closing, a certificate certifying as to the incumbency of the President of
Xetal, and attaching the
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certificate required by sub-section (c) of this Section 7;
(e) Sick-Bay shall have received from Allan Pullin, Esq., Counsel for
Xetal, an opinion dated as of the closing as to the matters set forth in Section
9 of this Agreement;
(f) Xetal shall have filed a Certificate of Amendment with the Secretary
of State of Utah increasing the authorized capital of the Company as set forth
in Exhibit 7(f) hereof;
(g) At, and as part of the closing of the transactions required
hereunder, Mark Basile, Esq., Dr. Allan Motola, and Dr. Eric Donnenfeld (or any
other third person recommended by Sick- Bay), shall be elected to, and
constitute the entire Board of Directors of Xetal; and
(h) Xetal and Dr. Jan Steil, and Mr. Peter Steil shall have entered into
the Lock-Up Agreement annexed hereto as Exhibit 7(h) hereof.
8. Conditions to Xetal's Obligations to Close
The obligations of Xetal to consummate the transaction to be performed
by it in connection with the closing are subject to the satisfaction of the
following conditions:
(a) The representations and warranties of Sick-Bay contained in Section
4 hereof shall be true and correct in all material respects with the same effect
as though such representations and warranties had been made on and as of the
time of such Closing;
(b) Sick-Bay shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement
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that are required to be performed or complied with by it on or before the
Closing;
(c) The President of Sick-Bay shall deliver to each Purchaser, at the
closing, a certificate stating that the conditions specified in sub-sections (a)
and (b) of this Section 7 have been fulfilled, and stating that there shall have
been no material adverse change in the state of affairs of Sick-Bay from the
date hereof to the date and time of the Closing;
(d) The Secretary of Sick-Bay shall have delivered to Xetal at Closing,
a certificate certifying as to the incumbency of the President of Sick-Bay, and
attaching the certificate required by sub-section (c) of this Section 7;
(e) Xetal shall have received from D. David Cohen, Esq. as counsel for
Sick-Bay, an opinion dated as of the closing as to the matters set forth in
Section 10 of this Agreement;
(f) Sick-Bay shall have entered into the Lock-Up Agreement annexed
hereto, and Exhibit 8(f) hereof; and
(g) Sick-Bay shall have paid or agreed to pay the sums to Xetal's
auditors in accordance with Section 11.2 hereof.
9. Opinion of Xetal's Counsel
Xetal shall furnish Sick-Bay at the time and place of closing the
opinion of Xetal's counsel, to the following effect:
(a) Xetal is duly organized, existing, and in good standing under the
laws of Utah, and is duly authorized in Utah and the other jurisdictions in
which it has qualified to do business, to conduct the business it is then
engaged in therein;
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(b) The Purchase Price Shares of Xetal's Common Stock which are to be
transferred and delivered by Xetal to Sick-Bay in exchange for the assets of
Sick-Bay constitute duly authorized, issued, fully paid and non-assessable
shares of Common Stock of Xetal and Preferred Stock of Xetal, respectively, and
that the Shareholders of Sick-Bay will acquire good title to such Shares in
exchange for, and upon the receipt by Xetal of the assets of Sick- Bay and the
delivery in exchange therefor of such Shares of Common Stock of Xetal, and upon
the liquidation of Sick-Bay;
(c) This Agreement has been properly authorized, executed, and delivered
by Xetal, and its performance by Xetal properly authorized and approved; and
(d) This Agreement constitutes the legally valid and enforceable
obligation and undertaking of Xetal in accordance with its terms and provisions,
subject to the conditions herein; and
(e) Neither this Agreement for the transfer and delivery, nor the
transfer and delivery as herein agreed, of Shares of Xetal's Common Stock and
Preferred Stock to Sick-Bay requires any qualification or authorization under
the laws of Utah applicable to the issuance or sale of stock or other securities
in Utah;
(f) Since October 1, 1998, Xetal has not authorized, declared, paid, or
effected any stock dividend or split-up of shares of its common stock or any
issuance, pro rata, to its common shareholders, or options or rights to
subscribe to shares of its common stock, or any extraordinary cash dividend upon
its shares of
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common stock, except that subsequent to September 30, 1999, Xetal shall have
authorized, issued and delivered a dividend to its shareholders payable in stock
of its wholly owned subsidiary, APO Health, Inc., pro rata to its shareholders;
and
(g) That this Agreement and any requisite related Certificate of Merger
under the laws of Utah and the execution, delivery, and performance thereof by
Xetal have been fully authorized and will not constitute a violation of any
provision of any Agreement to which Xetal is a party or of its Charter or
Bylaws.
10. Opinion of Sick-Bay's Counsel
Sick-Bay shall furnish Xetal at the time and place of closing the
opinion of Sick-Bay's counsel in form and substance reasonably acceptable to
Xetal's counsel as follows:
(a) This Agreement has been properly authorized, executed, and delivered
by Sick-Bay, and the performance by Sick- Bay of its obligations hereunder has
been properly authorized and approved; and
(b) This Agreement constitutes the legally valid and enforceable
obligation and undertaking of Sick-Bay in accordance with its terms and
provisions, subject to the conditions herein; and
(c) Upon execution and delivery of a bill of sale and other conveyance
documents, all the assets, leases, contracts (other than this contract),
franchises, permits, options, names, trademarks, trade names, copyrights,
formulas, trade secrets, and
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all other property to be transferred by Sick-Bay to Xetal as hereinabove
provided, shall have been validly and effectively transferred to Xetal.
11. Post Closing and Additional Agreements of the Parties
11.1 Prior to the time of Closing, Sick-Bay will not have changed its
name and neither Sick-Bay nor any of the shareholders will have given permission
to any corporation, firm, or organization to use the name "Sick-Bay.Com. Inc."
alone or in combination with any other word or words; and at the time of Closing
or immediately thereafter, Sick-Bay will authorize Xetal to change its name to
"Sick-Bay.Com.", or any like name agreed to.
11.2 That after the time of Closing, Sick-Bay will file and prosecute
such claims or suits for the refund of taxes, and make or file and prosecute
such other claims or suits, in each case, for the recovery or collection of any
sums which may or could be due it, "in the name of Xetal" or otherwise, as APO
may reasonably request, or permit APO to file, present, or prosecute any such
claims or suits in the name of "Xetal", in each case all for the benefit of APO,
to which all amounts recovered thereby shall be remitted; provided that as a
condition thereof, APO shall hold Sick-Bay harmless from, and advance all costs,
expenses, and liabilities of or resulting from any such claims, or suits or the
making, filing, or prosecution thereof.
11.3 That after the time of Closing, and for a period of one year
thereafter, Xetal will not issue any additional shares of its Common Stock
otherwise than (i) as expressly permitted
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hereunder; (ii) upon exercise of any warrants or convertible securities
outstanding as of the date hereof; (iii) for a consideration per share equal to
the fair value of the shares as of the date of such issuance, but not less than
twenty ($ .20) cents per common share; or (iv) a stock bonus or purchase plan or
program for new executive hires or otherwise as approved by the Board of
Directors.
11.4 That after the time of Closing, and for a period of one year
thereafter, Xetal will not sell, transfer or otherwise dispose of all or
substantially all assets, businesses and properties operating under the name
Sickbay in any "going private" transaction, such that at the conclusion of such
transaction, Xetal shall be rendered a shell corporation; provided, however,
that this limitation shall not preclude a reincorporation of Xetal in the state
of Delaware, or any other 368(f) reincorporation transaction.
11.5 "Intentionally Omitted".
[The rest of this page intentionally left blank]
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11.6 "Xetal" as used herein with respect to post-closing transactions
relates to the corporation subsequent to the reorganization with Sickbay at
which time, it will have changed its name to Sickbay, as permitted under Section
11.1 hereof.
12. Successors
This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, their heirs, representatives, successors, and
assigns; provided, however, that neither this Agreement nor the rights of either
party hereunder may be assigned by Xetal or by Sick-Bay prior to Closing.
13. Counterparts
This agreement may be executed in several counterparts, which, taken
together, shall constitute one document, which shall become binding when duly
executed and delivered to each of the parties hereto.
14. Costs and Expenses
14.1 Each party shall be responsible for, and shall pay, the
professionals retained by it, and neither party shall have any liability (except
as otherwise set forth herein) to the other for payment of the other party's
retained professionals.
14.2 Notwithstanding the provisions of Section 14.1 hereof, Sick-Bay
agrees to pay, at Closing upon billing thereof by
17
<PAGE>
the auditor, the reasonable cost of the financial audit required by Xetal/APO in
order to consummate this transaction, up to but not in excess of Fifteen
Thousand Dollars ($15,000) or, in the event the transaction contemplated
hereunder cannot be consummated due to any reason which is the fault or failure
of Sick-Bay, to reimburse to APO or its designee for such reasonable costs as
incurred. Sick- Bay's liability to the extent so provided hereinabove for the
audit costs shall survive any cancellation or closing of the transactions
contemplated herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their respective
hands and seals or have caused these presents to be executed in their respective
names and their respective corporate seals to be hereunto affixed and attested
by their respective officers thereunto duly authorized, the day and year first
hereinabove written.
SICK-BAY.COM. INC.
BY:
--------------------------------
XETAL, INC.
BY:
--------------------------------
APO HEALTH, INC.
BY:
--------------------------------
Solely as to Section 5 hereof
18
<PAGE>
STATE OF NEW YORK)
) ss:
COUNTY OF NASSAU )
On the _____ day of December , 1999, before me, the undersigned, a
Notary Public in and for said State, personally appeared personally known to me
or proved to me on the basis of satisfactory evidence to be the individual who
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the entity on
whose behalf the individual acted, authorized to do so, thereupon executed the
instrument.
------------------------------
(Notary Public)
STATE OF NEW YORK)
) ss:
COUNTY OF NASSAU )
On the _____ day of December , 1999, before me, the undersigned, a
Notary Public in and for said State, personally appeared personally known to me
or proved to me on the basis of satisfactory evidence to be the individual who
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the entity on
whose behalf the individual acted, authorized to do so, thereupon executed the
instrument.
------------------------------
(Notary Public)
STATE OF NEW YORK)
) ss:
COUNTY OF NASSAU )
On the _____ day of December , 1999, before me, the undersigned, a
Notary Public in and for said State, personally appeared personally known to me
or proved to me on the basis of satisfactory evidence to be the individual who
subscribed to the within instrument and acknowledged to me that he executed the
same in his capacity, and that by his signature on the instrument, the entity on
whose behalf the individual acted, authorized to do so, thereupon executed the
instrument.
------------------------------
(Notary Public)
19
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations 3
Changes in Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-10
<PAGE>
To the Board of Directors and Shareholders
Sick-bay.com, Inc.
(formerly BioTouch Technologies, Inc.)
(a Development Stage Company)
We have audited the accompanying balance sheet of Sick-bay.com, Inc. (formerly
BioTouch Technologies, Inc.) (a Development Stage Company) as of December 31,
1999, and the related statements of operations, changes in stockholders' equity
and cash flows for the period February 24, 1999 (inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sick-bay.com, Inc. (formerly
BioTouch Technologies, Inc.) (a Development Stage Company) at December 31, 1999
and the results of its operations, changes in stockholders' equity and its cash
flows for the period February 24, 1999 (inception) to December 31, 1999 in
conformity with generally accepted accounting principles.
As discussed in Note 1, the Company has been in the development stage since its
inception on February 24, 1999. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing requirements,
and the success of future operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
LINDER & LINDER
--------------------------------------
Linder & Linder
Certified Public Accountants
Dix Hills, NY
January 10, 2000
1
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets
Cash $ 117,250
Loans to stockholders 9,223
Prepaid expenses 8,252
---------
Total Current Assets 134,725
---------
Property and Equipment - at cost,
less accumulated depreciation of
$1,821 36,547
---------
Other Assets
Intangible assets - net of accumulated
amortization of $147 39,853
Security deposit 16,161
---------
Total Other Assets 56,014
---------
Total Assets $ 227,286
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued expenses $ 34,330
---------
Stockholders' Equity
Preferred stock, no par value; authorized, 20,000,000
shares, issued and outstanding 500,000 Series A shares,
described below
Series A 8% Cumulative Convertible Preferred Stock,
no par value; authorized 500,000 shares, issued
and outstanding 500,000 shares 225,000
Common stock, par value $.001; authorized
25,000,000 shares, issued and outstanding
19,600,000 shares 19,600
Additional paid-in capital 288,050
Deficit accumulated during the development stage (339,694)
---------
Total Stockholders' Equity 192,956
---------
Total Liabilities and
Stockholders' Equity $ 227,286
=========
See accompanying auditors' report and notes to financial statements.
2
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
Revenues
Rent $ 4,500
---------
Expenses
Consulting fees 85,000
Office salaries 54,736
Advertising 53,429
Officer salaries 33,333
Commissions 25,000
Rent 14,717
Web services 14,263
Payroll taxes 9,208
Employee Benefits 8,798
Travel and entertainment 8,408
Outside services 7,000
Office expense 6,859
Professional fees 5,799
Maintenance and repairs 5,509
Telephone 4,093
Depreciation and amortization 1,968
Insurance 1,868
Other 1,520
Convention 1,496
Automobile 1,190
---------
Total Expenses 344,194
---------
Net Loss $(339,694)
=========
See accompanying auditors' report and notes to financial statements.
3
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FEBRUARY 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Series A Additional
Preferred Paid in Deficit
Stock Common 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 -- -- -- --
Net Loss - 1999 -- -- -- -- -- (339,694)
------- ----------- ----------- ----------- ----------- -----------
Balance
Dec. 31, 1999 500,000 $ 225,000 19,600,000 $ 19,600 $ 288,050 $ (339,694)
======= =========== =========== =========== =========== ===========
</TABLE>
See accompanying auditors' report and notes to financial statements.
4
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 24, 1999 (INCEPTION) TO DECEMBER 31, 1999
Cash Flows From Operating Activities
Net loss $(339,694)
Adjustment to reconcile net income to net
cash flows from operating activities
Depreciation and amortization 1,968
Consulting fees paid with issuance of stock 85,000
Changes in operating assets and liabilities
(Increase) decrease in assets
Prepaids (8,252)
Increase (decrease) in liabilities
Accrued expenses 34,330
----------
Cash Flows Used By Operating Activities (226,648)
----------
Cash Flows From Investing Activities
Acquisition of property (38,368)
Acquisition costs (20,000)
Loans to stockholders' (9,223)
Payment of security deposit (16,161)
---------
Cash Flows Used By Investing
Activities (83,752)
---------
Cash Flows From Financing Activities
Sale of preferred stock 225,000
Sale of common stock 202,650
Cash Flows Provided By Financing ---------
Activities 427,650
---------
Net Increase In Cash 117,250
Cash, Beginning 0
---------
Cash, End $ 117,250
=========
Non Cash investing and Financing Transactions:
Acquired trade name with issuance of common stock $ 20,000
=========
Common stock issued for consulting services $ 85,000
=========
See accompanying auditors' report and notes to financial statements.
5
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Sick-bay. com, Inc.,
(the "Company")(formerly Biotouch Technologies, Inc.) (a development stage
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 Delaware in
February 1999 with the name of BioTouch Technologies, Inc. ("BioTouch"). In
July, 1999, BioTouch changed its name to Sick-bay.com, Inc. The Company 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.
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.
6
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
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 adverising costs as incurred.
Note 2 -- Property and Equipment
Property and equipment are summarized as follows:
Furniture and fixtures $ 6,857
Computer equipment 31,511
-------
$38,368
=======
7
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 3 -- Intangibles
Intangibles are summarized as follows:
Trade names $20,000
Acquisition costs 20,000
-------
$40,000
=======
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.
8
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 5 -- Commitments
Leases
- ------
Effective April 1, 1999, the Company leased office space under a
non-cancelable lease expiring March 31, 2000. The lease called for monthly
payments of $500. In September, 1999, the Company terminated the lease and
paid a termination fee of $1,500 plus the security deposit.
In September and November, 1999, the Company entered into non-cancelable
leases for office space in New York and California, respectively. The terms
of the leases call for monthly payments aggregating approximately $5,500
which expire October 31, 2002 and May 31, 2000.
In September, 1999, the Company arranged to sublet office space on a month
to month basis. For the period ended December 31, 1999, rental income
amounted to $4,500.
For the period ended December 31, 1999, rent expense amounted to $14,717.
Future minimum rental payments are as follows:
Year ended August 31, Amount
--------------------- ------
2000 $60,876
2001 58,634
2002 44,958
Employment Agreements
- ---------------------
The Company has entered into employment agreements with its chief executive
officer and president through September, 2002. The agreements will
automatically be renewed and extended for one additional year on each
anniversary of the effective date. The terms provide for a minimum annual
salary of $245,000 and $225,000, respectively. The officers have waived any
additional compensation due them within the period ending December 31,
1999.
9
<PAGE>
SICK-BAY.COM, INC.
(FORMERLY BIOTOUCH TECHNOLOGIES, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 6 -- Related Party Transactions
The Company advanced monies to officers. The advances are non-interest
bearing and are intended to be repaid in 2000.
Note 7 -- Tax-Free Reorganization
On December 29, 1999, the Company transferred all of its assets, business
and properties subject to all of the Company's liabilities in exchange for
22,650,000 shares of Xetal, Inc.'s common stock. As part of the tax-free
reorganization, the board of directors of the Company approved a plan of
liquidation and dissolution. The Company 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.
Note 8 -- Business Combination
On December 29, 1999, the Company, through its parent, Xetal, Inc. (See
Note 7), signed a letter of intent to acquire all of the assets and
business of APO Health, Inc. within seventy-five days of the execution of
the letter of intent. The anticipated purchase price for the assets and
business is $6,000,000, to be paid $3,000,000 in cash and $3,000,000 by the
issuance of voting securities of the Company.
10
<PAGE>
APO HEALTH, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
1999
-----------
(Unaudited)
CURRENT ASSETS:
Cash $ 157,084
Accounts Receivable, net of allowance of $59,200 2,506,023
Inventory 1,700,481
Deferred Tax Asset 41,500
Prepaid and Other Current Assets 62,490
----------
Total Current Assets 4,467,578
----------
Property and Equipment, net of accumulated
Depreciation of $104,418 64,144
OTHER ASSETS:
Security Deposits 24,957
Goodwill 75,385
----------
Total Other Assets 100,342
----------
Total Assets $4,632,064
==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash Overdraft $ 244,031
Line of Credit - Bank 625,000
Bankers Acceptances 657,741
Accounts Payable 1,421,893
Accrued Expenses 310,323
Loans from Officers 74,019
Income Taxes Payable 256,111
----------
Total Current Liabilities 3,589,118
----------
STOCKHOLDERS' EQUITY:
Common stock, par value $.001
Authorized 2,000,000 shares
Issued and outstanding 1,048,263 shares 1,048
Additional Paid-in Capital 562,839
Retained Earnings 479,059
----------
Total Stockholders' Equity 1,042,946
----------
Total Liabilities & Stockholders' Equity $4,632,946
==========
<PAGE>
APO HEALTH, INC. & SUBSIDIARY
CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
1999
----
(Unaudited)
Revenues $7,698,084
Costs of Goods Sold 6,675,259
----------
Gross Profit 1,022,825
----------
OPERATING EXPENSES:
Selling Expenses 180,218
General and Administrative Expenses 362,638
----------
Total Operating Expenses 542,856
----------
Operating Profit 479,969
----------
Interest & Financing Costs 46,671
----------
Net Income before Income Taxes
and Extraordinary Item 433,298
Provision for Income Taxes 177,500
----------
Net Income before Extraordinary Item 255,798
Extraordinary Item Net of Income
Taxes of $27,200 39,300
----------
Net Income $ 295,098
==========
<PAGE>
APO HEALTH, INC., & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999
NOTE 1 -- INTRODUCTION
APO Health, Inc. ("APO"), prior to December 29, 1999 was a subsidiary of
Sickbay.Com, Inc. (formerly Xetal, Inc.) Reference to the Company refers to APO
and its wholly owned subsidiary as of December 31, 1999. Reference to Parent is
to Sickbay.Com, Inc. prior to the spin-off on December 29, 1999.
APO was organized under the laws of the state of New York in 1987. In September
1994, the Parent acquired APO, a wholesale distributor of medical supplies
selling predominately to medical distributors, dentists and doctors throughout
the United States. On March 31, 1996, the Parent acquired Universal Medical
Distributors, Inc. (Universal) a distributor of veterinary supplies.
On December 29, 1999, Parent spun-off APO to the shareholders of APO in a
non-monetary stock dividend. In addition, Parent sold Universal to APO at its
amortized cost.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Consolidated Financial Statements include the accounts of APO
and its wholly owned as of December 31, 1999 and includes the operations as if
the Company was consolidated for the three months then ended. Intercompany
transactions and balances have been eliminated in consolidation.
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 is stated at cost. Depreciation is provided for on the
straight-line method over the estimated useful life.
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.
<PAGE>
APO HEALTH, INC., & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences between
the financial statement basis and the tax basis of assets and liabilities that
will result in taxable income or deductible expenses in the future based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.
INTANGIBLES
Costs associated with the companies acquired are capitalized and included in the
purchase price of such acquisition. Goodwill represents the excess of the cost
of companies acquired over the fair value of their net assets at the date of
acquisition and are being amortized on the straight line method over 15 years.
NOTE 3 -- CREDIT FACILITY
In June 1999, the Company renegotiated its credit facility with the financial
institution. The facility is for working capital and the purchase of inventory.
The credit facility provides for a $2,000,000 secured working capital facility
for letters of credit and bankers acceptances with a sub-limit of $1,000,000 for
note borrowings. Interest is payable monthly, at the bank's prime rate plus 1%.
The credit facility is scheduled to mature on March 31, 2000. The facility is
secured by substantially all of the Company's assets and personally guaranteed
by its stockholders.
NOTE 4 -- 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 primary source of temporary differences is the use of the allowance
method for bad debts for financial accounting the direct write-off method for
tax purposes.
The components of deferred taxes as of December 31, 1999, are as follows:
Allowance for doubtful accounts $41,500
<PAGE>
APO HEALTH, INC., & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
DECEMBER 31, 1999
NOTE 4 -- INCOME TAXES (CONTINUED)
For the three months ended December 31, 1999, the provisions for income taxes
(benefits) consist of the following:
Current $204,700
Deferred --
Provision (benefit) for income taxes $204,700
========
NOTE 5 -- STOCKHOLDERS' EQUITY
APO originally was organized with 200 shares of common stock with no par value.
In December 1999, APO amended its certification authorizing 2,000,000 shares of
common stock, par value $.001. Parent spun-off to its shareholders as a
dividend, one share of common stock in APO for each share held in Parent. In
addition, Dr. Jan Stahl and Mr. Peter Steil, officers and directors of the
Company, forgave the debt owed to them and were issued a total of 300,000 shares
of APO common stock.
