SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] 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. (FORMERLY KNOWN AS XETAL, INC.)(SKBY)
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(Exact name of Registrant as specified in its charter)
Utah 22-2223126
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
510 Broadhollow Road, Melville, New York
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(Address of principal executive offices)
(516) 694-0400
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(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act(1):
Common Stock, Par Value $.001 per Share
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(Title of Class)
Indicate by check mark, whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No ____.
Indicate 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-K or any
amendments to this Form 10-K __X__
(1) Registration is being filed herewith.
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The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing bid price of such stock as of March 27, 2000,
amounted to $25,250,000.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 27, 2000 was 21,171,811 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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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"). 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. Those filings have been made prior to the date hereof. 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.
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SICKBAY.COM, INC.
(FORMERLY KNOWN AS XETAL, INC.)
FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PAGE
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PART I Item 1 Business 5
Item 2 Properties 11
Item 3 Legal Proceedings 12
Item 4 Submission of Matters to a Vote
Of Security Holders 13
PART II Item 5 Market for Registrant's Common Equity
And Related Stockholder Matters 14
Item 6 Selected Financial Data 15
Item 7 Management's Decision and Analysis of
Financial Condition and Results of Operation 16
Item 8 Financial Statements and Supplementary Data 18
Item 9 Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure 19
PART III Item 10 Directors and Executive Officers of the
Registrant 20
Item 11 Executive Compensation 21
Item 12 Security Ownership of Certain Beneficial
Owners and Management 22
Item 13 Certain Relationships and Related
Transactions 23
Item 14 Exhibits, Financial Statement Schedules
And Reports on Form 8-K 24
SIGNATURES
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PART I
ITEM 1 BUSINESS
HISTORY
The Company was incorporated in May, 1969, under the laws of the State of Utah.
In September, 1994, the Company entered into an acquisition agreement with
Xetal, Inc., a New York corporation (for purposes herein referred to as "APO
Health"), pursuant to which the stockholders of APO Health acquired
approximately 83% of the issued and outstanding capital stock of the Company in
exchange for all of the capital stock of APO Health. Prior to the acquisition,
Dr. Jan Stahl and Mr. Peter Steil owned 100% of the capital stock of APO Health
and served as its officers and directors. As a result of the consummation of the
transactions under the Acquisition Agreement, APO Health became a wholly owned
subsidiary of the Company and Dr. Jan Stahl and Mr. Peter Steil became principal
shareholders of the Company and officers and directors of the Company. In
January, 1995, the Company changed its name to Xetal, Inc. and APO Health,
thereafter, changed its name to APO Health, Inc.
PRIOR BUSINESS OF THE COMPANY
Under the corporate name "Xetal", APO Health served as a distributor, supplier
and manufacturer of disposable medical products principally to dental, medical
and veterinary professionals. The Company had acquired, in March, 1996, 100% of
the outstanding capital stock of Universal Medical Distributors, Inc.
("Universal"), a company principally engaged in the business of distributing
veterinary supplies. During July, 1996, the Company also acquired 100% of the
outstanding capital stock of Dental Alternatives, Inc. ("Alternatives").
Alternatives owned certain marketing rights and trademarks to products developed
by Dr. Stahl. The products distributed by Xetal through APO Health included
protective garments such as isolation gowns, face masks and gauze, as well as
other disposable items such as latex gloves, needles, syringes, health and
beauty aids and chemicals for infection control. The details of the business of
APO Health are disclosed in the Company's 10-K for the fiscal year ended
September 30, 1999. See also Introductory Note.
CURRENT BUSINESS OF THE COMPANY
The Company is a start-up comprehensive medical portal which has been in
existence on line only since November 1999. As of March, 2000, the Company's
fifth month of on-line presentation, it is, accordingly to independent
third-party internet auditors, P.C. Data, ranked the fifth most visited
healthcare website and second most-visited healthcare business to business
website. There are more than 14,000 health care websites, some specialized and
some general. The Sickbay.com site is currently receiving approximately 600,000
"hits" per day, and according to the third-party independent auditor,
Sickbay.com averages 8.3 page views per user, which amount is represented by the
data to be significantly higher than competitive sites. The Company has made an
arrangement with a New York based investment banking/internet focused consulting
company for in excess of Five Million ($5,000,000) Dollars of financing plus
substantial services and
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acquisition assistance. See, below, "Financing".
Under the name Sickbay.com, the Company provides content similar to other
existing health-related portals previously established on the internet, but
focuses on the provision of administrative services to healthcare professionals,
including on-line medical billing, on-line medical referrals, on-line insurance
dispute resolution, on-line medical transcription, on-line pharmacy, and
comprehensive medical/health resource center.
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 believes that it is attracting health
professionals and health consumers/users to its site. In particular, the Company
believes that its graphic presentations are comfortable for the average internet
consumer to use to obtain information and to secure products and services.
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. (See "Marketing & Sales".)
On a forward-looking basis, the Company anticipates substantially increased
revenues from the foregoing sources, and 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 has
entered into agreements to acquire the business and assets of Healthline
Publishing, Inc. and Health Publishing, Inc., two related companies based in
Redwood City, California (see: Acquisitions, page 9). The revenue to be derived
from the magazine business is expected to include both off-line and on-line
advertising, subscriptions and sponsorships. Sponsorships refer to the Company's
intention to combine advertising and content sections, when appropriate. The
Company also expects to be the first website 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 at page 10 hereof.
Finally the Company also intends 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 information and
access, 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 professional and the informed healthcare consumer.
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FINANCING ARRANGEMENT
The Company has made an arrangement, not yet finalized, with First Frontier
Holdings, Inc. ("FFH"), a New York based investment banking/internet focused
consulting company, for the provision of financial assistance, marketing
assistance, legal and securities guidance and related matters. FFH has agreed to
invest a minimum of Five Million ($5,000,000) Dollars in cash with the company,
to provide substantial services to the Company over a five-year period, and to
provide acquisition guidance and consultation. FFH will have the right to Board
representation and other stockholder rights, including options to invest
additional substantial sums with the Company. FFH has advanced One Million,
Eight Hundred Thousand ($1,800,000) Dollars to the Company, pursuant to the
arrangement to date. The Company has also been contacted by other well-known
investment banking firms with respect to future financing and other
alternatives. The Company has neither received nor made any commitments with any
such entities. The Company intends to present itself, formally, to the trade, at
the eHealthcare World convention scheduled for Las Vegas, Nevada, May 1-3, 2000.
EMPLOYEES
As of December 31, 1999, the Company had eight (8) full time (including two
officers) and three (3) part time employees. The Company currently has eighteen
(18) full time (including two officers) and five (5) part time employees. The
Company's work force is expected to substantially increase upon the consummation
of the Healthline acquisition, referred to below.
MARKETING & SALES
The Company's marketing and sales strategy is based on developing and continuing
a sustainable business differential which distinguishes Sickbay.com from its
competition. Sickbay.com's strategic advantage is established by its services,
products, technology and channel distribution alliances, both on-line and
off-line.
The core aspect and the appeal of Sickbay.com, is found in its charter to
provide an array of cost-savings administrative services at discounted prices to
its community of members. Sickbay.com is marketed as a Free Membership Portal
that entitles community members discounts on administrative services and
products that will help reduce the cost of delivering healthcare products and
services. Membership to the site is free, and the services offered are
discounted through membership. Consistent access to the full array of
Sickbay.com services is expected to achieve significant cost savings for
healthcare providers.
Sickbay.com partners with established healthcare service providers. Sickbay.com
is reliant in part on the integrity of its service providers. Sickbay.com
expects to continue to partner with established administrative service providers
in the medical transcription, medical billing, on-line health products, medical
waste removal, communications and resource services. All partnership
arrangements grant Sickbay.com both residual income in the form of commissions,
and advertising advantages in the form of co-branding.
Sickbay.com will continue to pursue its market niche. Sickbay.com will continue
to focus its effort on offering a cost-cutting array of services to the medical
community over the internet by accessing this community both on-line and
off-line. By focusing such efforts on this particular niche, we expect to
maintain our leadership position as a highly utilized healthcare portal by both
consumers
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and healthcare providers. Most of the competitors serving this niche now only
serve pieces of this market and do not offer comprehensive services. Emphasis
will be placed on the emergence of Sickbay.com as the premier medical portal
available and recommended by healthcare providers around the world.
Sickbay.com will continue to pursue strategic development alliances. Sickbay.com
continues to seek out, develop and maintain affiliations, alliances,
partnerships and strategic relationships with companies that have established
smaller fragmented on-line communities, developed clinical medical software
systems, claims and billing applications and appropriate hardware
manufacturer's. Establishing these relationships gives Sickbay.com a
distribution and integration advantage by partnering with those businesses that
have already established themselves in the healthcare markets.
The healthcare market is expanding at an incredible rate. Certain companies that
already provide services are entrenched in the healthcare industry and have
direct lines of communications open to the end user. Sickbay.com will seek to
tap into these established channels under its development partnership
agreements. Sickbay.com believes that a new portal that establishes actual user
savings will act as a primary sales/marketing tool, rather than an add-on to the
underlying system. Sickbay.com carefully reviews existing partner distribution
channels and controls how Sickbay.com's products are presented to the market.
Sickbay.com intends to deliver access to Sickbay.com on CD, free of charge, to
all healthcare providers by direct mail. This tactic has proven tremendously
successful for both Microsoft (Internet Explorer), Netscape (Netscape Navigator)
and a host of Internet Portal's and Service Providers.
Another target market of Sickbay.com's marketing effort will be directed to the
software applications/consulting companies (over 6,000 in the United States
alone) that have entrenched themselves in the medical industry through service
contracts and help "upgrade" accountability to their clients. Sickbay.com will
establish marketing initiatives by developing channel distribution through
development partners, component manufacturers and medical solutions-based
companies. Secondary target markets are direct-to-user medical portals and other
consumer-oriented medical portals. Marketing programs in these markets will
include exposure in trade publications and direct mail.
Sickbay.com will also reach beyond the internet through its offerings of the
"Sickbay Health Passport", and Sickbay's "Healthline Today". Both of these
services/savings/information vehicles will be used to extend the brand and
marketing reach to the consumer/patient population beyond the Internet. These
two "branding" instruments are important features to obtain market penetration.
The Sickbay Health Passport is actually a plastic card bearing the logo/brand of
Sickbay.com that is used to obtain discounts while in the mainstream of life,
not on the internet. The card is carried by the member and used within the
health industry at pharmacy's, doctor's offices, etc. Sickbay's Healthline
Today, the Company's on-line magazine, provides Sickbay.com the ability to
promote and market directly to the consumers in an actual magazine format. It is
intended that deployment will start with doctors' offices through distribution
of courtesy copies for their waiting rooms, and distribution to over one million
consumers utilizing Healthline's current deployment at over 7000 pharmacies
nationwide. Eventually, these magazines will appear on newsstands for purchase.
The World Wide Web is the core component of Sickbay.com's marketing strategy
while off-line reach shall continue to be the mainstay of the Company's
marketing and sales efforts. Sickbay.com has established a website that attracts
over 50,000 unique users a day. The Company promotes aggressively on-line,
spending
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close to 65% of its allocation of operations money on advertising initiatives to
medical communities, providers, consumers and healthcare professionals.
Sickbay's sales initiatives are divided into two categories. The first is our
business to consumer model that allows the Company to sell both products,
services and advertising designed to appeal, reach and capture this important
market segment. The second sales model focuses upon our business to business
activities, where again, Sickbay.com offers both services and products to
healthcare providers at discounted prices.
COMPETITION
As noted previously, there are innumerable healthcare websites, believed to be
in excess of 14,000 such sites. The Company has distinguished itself as a site
which attracts a very large number of visitors and users. PC Data On-line, an
external auditor of Internet users, has ranked Sickbay.com as the 5th most
visited healthcare Website with 263,000 weekly users and 8.3 page views per user
as of the week of March 11, 2000. Many of the other healthcare sites are owned
and operated by companies which have substantially greater assets and other
resources than the Company. The Company's monthly "burn rate" for executive and
administrative offices is under $120,000. In addition, the Company is currently
spending approximately $100,000 per month on marketing and advertising expenses.
The Company believes that as long as it is able to operate with a lean cost for
maintaining the headquarters and website, that it will have a competitive
advantage relative to other on-line healthcare companies. Two of the largest,
best known healthcare Websites have recently announced a merger: Onhealth.com
and Webmd.com. They have an additional relationship with CNN. AOLHealth.com is
the property of America-On-Line, which itself announced a merger with Time
Warner Corporation. The Company currently has no relationship with either a
major media company or any broadcast company. The Company will seek such
relationships in the future, and believes itself to be well positioned to do so.
The Company may be disadvantaged, competitively, by the absence of such
relationships currently.
ACQUISITIONS
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 3,600 Shares of the Company's Common Stock, current
value $39,000 for the acquisition, and in addition, granted each of two sellers
the right to purchase an aggregate of 20,000 Shares of the Company's Common
Stock at a price of $17.00 per Share. The Warrant is exercisable until August
23, 2001 subject to extension under certain circumstances.
The NetSweat business is not expected to be material to the business operation
of the Company as a whole. However, the addition of the fitness, sports and
nutrition site fills a gap in the Company's offerings to consumers on its
existing Website, and is expected to be valuable to the Company from that
prospective.
NetSweat has been established on the Internet since 1996, and in its most recent
year, was averaging approximately 50,000 unique users monthly. In addition, it
has established a top priority position with Internet key words for fitness and
nutrition search engines.
On March 30, 2000, the Company entered into agreements to acquire the business
and assets of Healthline Publishing, Inc. and Health Publishing, Inc., two
related California corporations (the "Healthline companies"). The business of
the Healthline companies is the publication of health-related magazines
distributed through traditional formats. The Healthline companies have been in
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business more than 17 years, and have distribution to approximately 1,500,000
consumers and 225,000 physicians. These companies publish both monthly and
semi-annual magazines under the titles "SkinCare Today", "Allergy and Asthma"
and "Healthline Magazine", among others.
"Healthline Magazine" is a monthly publication distributed through more than
7,000 retail pharmacies throughout the United States. "SkinCare Today" and
"Allergy and Asthma" are topic specific and reach physicians practicing in those
specified areas on a semi-annual basis.
The Healthline companies own in excess of 3,600 originally written articles
dealing with a variety of health-related articles previously unpublished. In
addition to the existing inventory, the Healthline companies have contractual
arrangements with professional writers for approximately 100 articles per month
to meet current publishing demands. The Company intends to use the inventory of
articles as well as the "new writes" in both the on-line and off-line
publications in the future.
The Company agreed to pay the aggregate consideration of $2,500,000, of which
amount $750,000 was paid in cash for the assets of Healthline Publishing, Inc.,
and $1,750,000 solely in common stock of the Company for the assets and
continuing business operations of Health Publishing, Inc.
The Company intends to keep the current employees and management of the
Healthline companies under the supervision and control of Company's management,
and to operate them substantially the same as they had been previously, except
that Healthline Publishing, Inc. was a not-for-profit corporation and will not
be continued by the Company.
The Healthline companies have seven (7) full-time employees who will immediately
become employees of the Company. None of the employees will be officers or
directors of the Company. The business will be operated at the current facility
in Redwood City, California. The Company's existing office in Woodland Hills,
California, is being closed, and the Company's only employee based there is
being reassigned to Redwood City, California.
This annual report on Form 10-K 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.
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ITEM 2 PROPERTIES
The Company owns no real estate. The Company leases its executive and
administrative offices at 510 Broadhollow Road, Suite 300, Melville, New York
11747. The lease is for a three year term expiring November 2002. The Company
also has an office located in Woodland Hills, California where it rents
approximately 600 square feet which term ends May 31, 2000.
One employee is based in Woodland Hills. The Company expects that employee
to be reassigned to the Healthline facility in Redwood City, California. See
Business - Acquisitions, page 9.
The Company has also agreed to take additional space adjacent to its
headquarters offices increasing, by approximately Fifty (50% percent, its
existing quarters. The term of the additional space is expected to coincide with
the existing lease.
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ITEM 3 LEGAL PROCEEDINGS
The Company is not subject to any legal proceedings which are expected
to have any financial or other adverse impact on the business or financial
condition of the Company.
The Company's predecessor, Xetal Inc., had certain disputes with former
note holders and others which are the responsibility of prior management.
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, the Shareholders of the Company,
when known as Xetal, were presented with the opportunity of acquiring all of the
assets of Sick-Bay.com, Inc., a Delaware Corporation, in exchange for Common
Stock of the Company which amounted to more than Ninety Five (95%) Percent in
the aggregate of voting securities of the Company.
A meeting of the Shareholders of the Company was held on November 15, 1999,
and approved. Subsequent thereto, the Company spun off, on a restricted stock
basis, all of the Common Stock of its then existing business, APO Health Inc.,
to its pre-existing Shareholder base, and on December 29, 1999, the Company
completed the acquisition of all of the assets of Sick-Bay, a Delaware Company.
See Form 10-K for the period ended September 30, 1999 filed on March 13, 2000,
and Form 8-K dated March 14, 2000.
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ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The shares of the Company's common stock commenced trading on February 28, 1995.
The principal market on which the Company's securities are traded is the
over-the-counter market on the OTC Electronic "Bulletin Board" and is currently
traded under the symbol "SKBY" and during the periods shown on the table below
under the symbol "XETX". The range of high and low bid quotations for the fiscal
years ended September 30, 1999 and 1998 are shown below. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions.
Quarter Ended
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(Traded as XETX) High Low
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December 31, 1997 $ .75 $ .75
March 31, 1998 .75 .625
June 30, 1998 .625 .625
September 30, 1998 .625 .53125
December 31, 1998 .53125 .18
March 31, 1999 .25 .18
June 30, 1999 .25 .18
September 30, 1999 .25 .18
December 31, 1999
(XETX became SKBY on 12/29/99) $ 8.00 $ .125
December 31, 1999 (to date): $24.00 $3.25
(A) Holders the number of holders of record of the Company's Common Stock as
of March 20, 2000 was approximately 270.
(B) Dividends the Company has not paid or declared any cash dividends on its
common stock since its inception, and by reason of its
contemplated financial requirements, does not anticipate paying
any cash dividends on its Common Stock in the near future.
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ITEM 6 SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the operations of
Sickbay.com from the inception of the business, February 24, 1999, to the year
ended December 31, 1999. Selected financial data as to the predecessor business
"APO Health" appear in the Company's 10-K for the fiscal year ended September
30, 1999.
December 31, 1999
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Total Assets $ 421,161
Total Stockholders' Equity 386,831
Revenue 4,500
Total Expenses 344,194
Net Earnings or [Loss] [ 339,694]
Cash Flow for Operating Activities [ 339,694]
Cash Flow from Investing Activities [ 83,752]
Cash Flow from Financing Activities 427,650
Cash End of Period 117,250
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company, through its current operations, has been a development-stage
company and has been in the development stage since its inception on February
24, 1999. The Company's ability to continue as a going concern is dependent on
the Company's ability to effectively grow its business-revenue model and its
capacity to raise additional financing to meet future financing requirements, as
further explained herein.
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 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"). See "Introductory Note". The following discussion
and analysis relates to the business of Sickbay.com, Inc., as reorganized.
At December 31, 1999, the Company had total assets of $421,161, including good
will of $193,875. All of such assets were derived from capital contributions to
the Company by its founders, subscribers to a private placement offering
completed in September 1999 ($200,000) and the issuance and sale of 500,000
Series A, 8% cumulative Convertible Preferred Stock ($225,000, net of $25,000
introduction fee) to one investor in late November, 1999.
The Company incurred total expense during the period February 24, 1999 to
December 31, 1999 of $344,194. The principal amount of such expenses were
incurred on consulting fees (relating to web development), general salaries,
advertising, and officers' salaries. The Company also paid a $25,000 commission
with respect to the introduction to First Frontier Holdings, Inc. The Company
had no income from its business operations during 1999. However, the Company
realized approximately $4,500 of rental income from a space-sharing arrangement.
The Company expects to incur losses for and during the current fiscal year. The
Company believes that current and prospective operations will be profitable, or
minimally profitable, on a cash flow basis, by the third and/or fourth quarter
of the current fiscal year and thereafter.
During the fiscal year ended December 31, 1999, the Company's stockholders'
equity increased from zero to $386,831, after accounting for a deficit
accumulated during the fiscal year [339,694].
The Company's future capital requirements will depend on many factors relating
to the changing scope of the Company's internet business. It is currently not
possible to predict the exact extent of such future capital requirements. In the
event substantial long-term capital is required, the Company intends to raise
funds through registered offerings or exempt transactions with qualified
accredited investors.
-16-
<PAGE>
The Company has no plans for the purchase of any plant and equipment or any
major capital expenses. The Company does plan to add a substantial number of
additional employees in its Healthline Publishing operation. The Company
believes that the additional costs of such employees will be offset, or at least
matched, by the continuing revenues of the acquired business.
As of December 31, 1999, the Company had cash-on-hand of approximately $117,250.
Since December 31, 1999, the Company has received an additional One Million
Eight Hundred Thousand ($1,800,000) Dollars and is expecting another cash
infusion of One Million Two Hundred and Fifty Thousand ($1,250,000) Dollars by
May 1, 2000. In addition, the Company has access to an additional Two Million
($2,000,000) Dollars for acquisition purposes, all from its pending arrangements
with FFH, which amounts exceed the Company's expected cash usage, including cash
usage for acquisitions. As of a recent date, the Company had in excess of One
Million Two Hundred Thousand ($1,200,000) Dollars on hand. Such amount is
believed to be sufficient to finance the Company's operation for at least the
next six (6) months. Additional financings have been planned. Cash sufficiency
is not expected to be an issue for the Company within the next twelve (12)
months. The Company's monthly "burn rate" is under $120,000, exclusive of
approximately $100,000 per month currently being extended on marketing and
advertisements. The Company believes that as long as it is able to operate with
a lean cost for maintaining the headquarters and website, that it will have a
competitive advantage relative to other on-line healthcare companies in the same
range of "hits" or daily visitors to the website. See BUSINESS - Competition.
The Company recognizes that it will be ultimately be valued based upon revenues
and earnings or earnings potential and is striving to ramp up revenues from both
on-line and off-line related activities. See BUSINESS - Acquisitions.
-17-
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Financial Statements as of December 31, 1999 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the period February 24, 1999 (inception) to December 31, 1999 are
attached as pages F-1 through F-14 hereof.
-18-
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-19-
<PAGE>
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages and business experience of the executive
officers and directors of the Company. All information is as of March 15, 2000.
Name Age Position
- ---- --- --------
Mark Basile 41 Chairman, Chief Executive Officer,
Secretary, Director
Dr. Allen Motola 45 President, Treasurer, Director
Larry Goldman 35 Director
MARK BASILE is one of the founders of the Company, and prior to February, 2000,
was a self-employed attorney. He is a 1988 graduate of Touro Law School on Long
Island, and holds a B.A. degree from Hofstra University. In 1997, Mr. Basile
founded and formed Incredible Card Corp., an entity which designed
technologically-advanced systems for retrieving and securing medical records
utilizing small cards. That company won a Smithsonian Award Medal in April 1998
for advances in medical technology. In 1998, the business of the company was
discontinued due to lack of current funding. Incredible Card Corp. was privately
held. It is not Mr. Basile's current intention to restructure Incredible Card
Corp., or to otherwise be involved with it.
DR. ALLEN MOTOLA is a co-founder of the Company. Dr. Motola is a graduate of
Tufts New England School of Dental Medicine. From December 31, 1986, through
December 31, 1999, Dr. Motola was a self-employed dentist specializing in
cosmetic dentistry, with a practice based on Long Island. During the first
quarter 0f 2000, Dr. Motola sold his dental practice and currently works for the
Company on an exclusive basis.
LARRY GOLDMAN is a non-employee, independent director of the Company. He first
became a director on December 29, 1999 in connection with the reorganization of
the Company with Sick-Bay.com, Inc. For the past five (5) years, he has been a
principal of Ace Payroll Services, Inc., which operates an accounting payroll
service. There is no relationship between Ace Payroll Services and the Company
except that Ace provides standard payroll services to the Company.
The Company currently has only one non-management director. The Company intends
to expand its Board of Directors to include other non-management directors,
including a representative of FFH.
-20-
<PAGE>
ITEM 11 EXECUTIVE COMPENSATION
The following table sets forth information relating to remuneration received by
executive officers and directors for the Company's most recent fiscal year.
Long Term Compensation
----------------------
Securities All
Annual Compensation Restricted Underlying Other
Name & Principal ---------------------- Stock Options of Compen-
Position Year Salary Bonus Awards SARS sation
- ---------------- ---- ------- ----- ------ ---------- -------
Mark Basile 1999 $33,333 -0- -0- -0- -0-
CEO
Dr. Allen Motola 1999 -0- -0- -0- -0- -0-
President
As of January 1, 2000
- ---------------------
The officers have waived any additional consideration for their services in
1999.
The Company has entered into employment contracts with Mark R. Basile, Chairman
and CEO, and Allen D. Motola, President and COO, at salaries of $245,000 and
$225,000 per annum, respectively, with a four (4%) percent increase to cover
cost of living allowance increases. The employment contracts are for a period of
three (3) years commencing January 1, 2000 and require the Company to pay
individual and family health insurance, provides for an auto allowance, and key
man life insurance in the amount of $2,000,000 each. There is currently no
executive stock option or stock-based compensation program, but the Company
anticipates authorizing and approving such a plan and making such plan available
to both executives and senior management. The Company has reserved One Million
(1,000,000) shares for a plan to be adopted as soon as a committee of
non-management directors can be formed. The Company currently has only one
non-management director. The Company intends to expand its Board of Directors to
include other non-management directors.
-21-
<PAGE>
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 29, 2000, certain information
regarding the beneficial ownership of the Company's Common Stock.
Number of Shares Percentage
Owned of Record Common Stock
Name and Beneficially Outstanding
- ---- ---------------- -----------
Mark Basile
500 Broadhollow Road
Ste. 300
Melville, NY 11747 9,000,000 42%
Dr. Allen Motola
500 Broadhollow Road
Ste. 300
Melville, NY 11747 9,000,000 42%
Larry Goldman
500 Broadhollow Road
Ste. 300
Melville, NY 11747 20,000 *
All Directors and Officers
as a Group 84%
* Less than one (1%) percent of the outstanding capital stock.
* On December 27, 1999, Mr. Goldman was promised a grant 20,000 of Shares at
the then current market price for the Shares in exchange for his agreement
to serve on the Board of Directors. None of such Shares have been issued to
date, but the same are expected to be issued currently.
-22-
<PAGE>
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-23-
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
PAGE
----
1. Financial Statements:
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1999
Statements of Operations for the period from
inception to December 31, 1999
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Consolidated Financial Statement
(b) Exhibits
3.1 Certificate of Incorporation with amendments through
November 16, 1998 (1)
3.2 By-laws, as amended to date (1)
3.3 Articles of Amendment to Certificate of Incorporation,
December 8, 1999 (2)
3.4 Certificate of Correction to Certificate of Incorporation,
December 22, 1999 (2)
4.1 Specimen Certificate of Common Stock (1)
10.1 Reorganization Agreement dated December 29, 1999 (3)
21 List of Subsidiaries*
23 Consent of Independent Auditors**
(c) Reports on Form 8-K
A report on Form 8-K was filed by the Company on March 14, 2000 relating to
the reorganization of Sick-Bay.com, Inc., and the late filing by Xetal, Inc., of
certain prior Exchange Act reports.
(1) Incorporated by reference to the Company's Registration Statement in Form
SB-2 (No. 333-20525), which became effective on November 16, 1998.
(2) Incorporated by reference to the Company's Form 8-A filed on
March 14, 2000.
(3) Incorporated by reference to the Company's Form 8-K, filed on
March 14, 2000.
* Attached
** Filed herewith
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(FORMERLY KNOWN AS XETAL, INC.)
Date: March 31, 2000 By: /s/ Mark Basile
--------------------------------
Mark Basile, Chairman,
Chief Executive Officer
and Secretary
(Principal Executive Officer)
Date: March 31, 2000 By: /s/ Allen Motola
--------------------------------
Dr. Allen Motola, President
and Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and in the dates indicated.
Date: March 31, 2000 By: /s/ Mark Basile
--------------------------------
Mark Basile, Director
Date: March 31, 2000 By: /s/ Allen Motola
--------------------------------
Dr. Allen Motola, Director
Date: March 31, 2000 By: /s/ Larry Goldman
--------------------------------
Larry Goldman, Director
-25-
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
(FORMERLY XETAL, INC.)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
F-1
<PAGE>
To the Board of Directors and Shareholders
Sickbay.com, Inc. and Subsidiary
(formerly Xetal, Inc.)
(a Development Stage Company)
We have audited the accompanying consolidated balance sheet of Sickbay.com, Inc.
(formerly Xetal, Inc.) and Subsidiary (a Development Stage Company) as of
December 31, 1999, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the period February 24, 1999
(inception) to December 31, 1999. These consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sickbay.com, Inc.
(formerly Xetal, Inc.) and Subsidiary (a Development Stage Company) at December
31, 1999 and the results of their operations, their changes in stockholders'
equity and their cash flows for the period February 24, 1999 (inception) to
December 31, 1999 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 10, 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.
/s/ LINDER & LINDER
---------------------------------
Linder & Linder
Certified Public Accountants
Dix Hills, NY
January 10, 2000
F-2
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
(FORMERLY XETAL, INC.)
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets
Cash $ 117,250
Loans to stockholders, related party 9,223
Prepaid expenses 8,252
---------
Total Current Assets 134,725
---------
Property and Equipment - at cost,
accumulated depreciation of $1,821 36,547
---------
Other Assets
Intangible assets - net of accumulated
amortization of $147 233,728
Security deposit 16,161
---------
Total Other Assets 249,889
---------
Total Assets $ 421,161
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued expenses $ 34,330
---------
Stockholders' Equity
Preferred stock, $.01; authorized, 20,000,000
shares, issued and outstanding 500,000 shares 5,000
Common stock, par value $.001; authorized
50,000,000 shares, issued and outstanding
20,498,263 shares 20,498
Additional paid-in capital 701,207
Deficit accumulated during the development stage (339,694)
Treasury stock, par value, 180,000 shares (180)
---------
Total Stockholders' Equity 386,831
---------
Total Liabilities and
Stockholders' Equity $ 421,161
=========
See accompanying auditors' report and notes to financial statements.
F-3
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
(FORMERLY XETAL, 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)
=========
Earnings per common share
Basic and fully dilutive $ (.34)
=========
See accompanying auditors' report and notes to financial statements.
F-4
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
(FORMERLY XETAL, 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
Preferred Common
Stock Stock Additional
------------------- -------------------- Paid in Deficit
Shares Amount Shares Amount Capital Accumulated
------- --------- ---------- ------- ---------- -----------
<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)
======= ========= ========== ======= ========= =========
</TABLE>
See accompanying auditors' report and notes to financial statements.
F-5
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARY
(FORMERLY XETAL, 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
Commons stock issued for consulting services 85,000
Purchase of subsidiary with the issuance of stock
Goodwill 193,875
Preferred stock 220,000)
Common stock (898)
Additional paid in capital (413,157)
Treasury stock 180
See accompanying auditors' report and notes to financial statements.
F-6
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, 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 Sickbay.com, Inc.,
(the "Company") (formerly Xetal, 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 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 in a non-monetary restricted stock
dividend. Concurrently, the Company acquired all the assets, business
and property subject to all the liabilities of Sick-Bay.Com, Inc., a
Delaware Corporation, ("Sick-Bay Delaware"), 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 Delaware approved a plan of liquidation and dissolution.
Sick-Bay Delaware distributed the shares received ratably to its
shareholders in exchange for and complete cancellation and retirement
of all the Sick-Bay Delaware 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 Delaware 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
F-7
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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.
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.
F-8
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
Note 2 - Property and Equipment
Property and equipment are summarized as follows:
Furniture and fixtures $ 6,857
Computer equipment 31,511
--------
$ 38,368
========
Note 3 - Intangibles
Intangibles are summarized as follows:
Trade names $ 20,000
Goodwill 193,875
Acquisition costs 20,000
--------
$223,875
========
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.
F-9
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 4 - Capital Stock Transactions (Continued)
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.
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.
F-10
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 5 - Commitments (Continued)
Leases (Continued)
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
Effective January 1, 2000, the Company has entered into employment
agreements with its chief executive officer and president through
December 31, 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. The
terms are substantially the same as such officers had with Sick-Bay
Delaware prior to the reorganization.
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 - 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 source of temporary
differences is a net operation loss carryover, which approximates
$340,000 and expires in the year 2014.
F-11
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 7 - Income Taxes (Continued)
The components of deferred income tax asset as of December 31, 1999 is
as follows:
Net operating loss carryover $ 136,000
Valuation allowance (136,000)
---------
Deferred tax asset $ --
=========
For the period February 24, 1999 (Inception) through December 31, 1999,
the provision (benefits) for income taxes consist of:
Current benefit $(136,000)
Valuation allowance 136,000
---------
Provision $ --
=========
A reconciliation of income tax at the statutory rate to the Company's
effective tax rate is as follows:
Computed at the expected statutory rate $(116,000)
State income tax - net of federal tax
benefit (20,000)
Valuation allowance 136,000
---------
Income tax expense $ --
=========
F-12
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 8 - Earnings Per Share
The following data show the amounts used in computing earnings per
share and the effect on income (loss) and the weighted average number
of shares of dilutive potential common stock for the period February
24, 1999 (Inception) through December 31, 1999.
Loss applicable to common stock $(339,694)
=========
Weighted average number of common
shares outstanding 993,160
=========
Basic and fully dilutive $ (0.34)
=========
Note 9 - Contingencies
The Company's predecessor, Xetal, Inc., had certain disputes with
former note holders and others which are the responsibility of prior
management. The Company has been named as a party in one such matter,
since resolved, and has been threatened to be named in other such
proceedings. The Company does not expect to incur any measurable loss,
cost or expense in connection with the determination thereof.
Note 10 - Subsequent Events - Unaudited
Financing Arrangement
The Company has made an arrangement 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 over a five
year period, of which amount $1,800,000 has been advanced to date,
$800,000 has been advanced for acquisitions, and $1,250,000 is
scheduled to be advanced on May 1, 2000.
F-13
<PAGE>
SICKBAY.COM, INC.
(FORMERLY XETAL, INC.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 10 - Subsequent Events (Continued)
Acquisitions
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 3,600 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 30, 2000, the Company entered into agreements to acquire the
business and assets of Healthline Publishing, Inc. and Health
Publishing, Inc., two related California corporations (the "Healthline
companies"). The business of the Healthline companies is the
publication of health-related magazines distributed through traditional
formats.
The Company agreed to pay the aggregate consideration of $2,500,000, of
which amount $750,000 was paid in cash for the assets of Healthline
Publishing, Inc., and $1,750,000 solely in common stock of the Company
for the assets and continuing business operations of Health Publishing,
Inc.
F-14
EXHIBIT 21
LIST OF SUBSIDIARIES
Sick-Bay.Com, Inc., a Delaware corporation
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
FORM 10-K
DECEMBER 31, 1999
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Sickbay.com, Inc. and Subsidiaries (formerly Xetal, Inc.)
We have audited the accompanying consolidated balance sheets of
Sickbay.com, Inc. (formerly Xetal, Inc.) and Subsidiary as of December 31, 1999,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the period February 24, 1999 (inception) to December
31, 1999. These consolidated 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 consent to the inclusion of our independent auditors report with respect
to such financial statements in the inclusion of the Company's 10-K for the
fiscal year ended December 31, 1999.
/s/ Linder & Linder
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Linder & Linder
Certified Public Accountants
Dix Hills, New York
December 15, 1999
Dated: April 4, 2000
