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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) 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
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SICKBAY HEALTH MEDIA, 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 (I.R.S. Employer Identification No.)
incorporation or organization)
510 BROADHOLLOW ROAD, MELVILLE, NEW YORK
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(Address of principal executive offices)
(631) 694-0400
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
CLASS OUTSTANDING AT OCTOBER 25, 2000
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Common Stock, par value $0.001 per share 25,712,262 Shares
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SICKBAY HEALTH MEDIA, INC.
- INDEX -
PAGE(S)
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PART I. Financial Information:
ITEM 1. Consolidated Financial Statements
Condensed Balance Sheets - September 30, 2000 (Unaudited)
and December 31, 1999 3.
Condensed Statements of Operations (Unaudited) -
Three and Nine Months Ended September 30, 2000 and 1999 4.
Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2000 and 1999 5.
Notes to Interim Condensed Financial Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Plan of Operations 8.
PART II. Other Information 11.
SIGNATURES 12.
EXHIBITS: Exhibit 27 - Financial Data Schedule
Page 2.
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PART I. FINANCIAL INFORMATION:
ITEM I. FINANCIAL STATEMENTS:
SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
September 30, December 31,
2000 1999
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(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 540,277 $ 117,250
Accounts receivable 1,240,002 --
Loans to stockholders -- 9,223
Prepaid expenses 64,200 8,252
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TOTAL CURRENT ASSETS 1,844,479 134,725
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PROPERTY AND EQUIPMENT - NET 252,832 36,547
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OTHER ASSETS:
Intangible assets - net 2,518,831 233,728
Security deposit 23,778 16,161
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2,542,609 249,889
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$4,639,920 $ 421,161
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- LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 376,653 $ 34,330
Due to seller 437,500 --
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TOTAL CURRENT LIABILITIES 814,153 34,330
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LONG-TERM LIABILITIES 437,500 --
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01; 20,000,000 shares authorized, 500,000
shares issued and outstanding 5,000 5,000
Common stock, par value $.001; authorized 50,000,000 shares;
25,371,728 and 20,498,263 issued and
outstanding in 2000 and 1999, respectively 25,372 20,498
Additional paid-in capital 5,899,617 701,207
Accumulated deficit (2,541,722) (339,694)
Treasury stock, par value, 180,000 shares -- (180)
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3,388,267 386,831
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$4,639,920 $ 421,161
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</TABLE>
See notes to condensed consolidated financial statements.
Page 3.
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SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ 1,004,696 $ -- $ 1,758,863 $ --
----------- ----------- ----------- ----------
EXPENSES (INCOME):
Production, content and product development 439,486 -- 567,207 --
Sales and marketing 343,176 -- 1,866,381 --
General and administrative 557,683 -- 1,531,754 --
Interest income (4,444) -- (4,451) --
----------- ----------- ----------- ----------
TOTAL OPERATING EXPENSES 1,335,901 -- 3,960,891 --
----------- ----------- ----------- ----------
NET LOSS $ (331,205) $ -- $(2,202,028) $ --
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Basic and fully diluted $ (.01) $ -- $ (.09) $ --
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 24,659,229 20,498,263 23,213,643 20,498,263
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4.
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SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,202,028) $ --
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization 164,258 --
Changes in operating assets and liabilities:
Accounts receivable (1,240,002) --
Prepaid expenses (55,948) --
Accounts payable and accrued expenses 378,925 --
CASH FLOWS USED BY OPERATING ACTIVITIES (2,954,795) --
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (250,403) --
Acquisition of intangibles (891,256) --
Receipt of stockholders' loans 9,223 --
Payment of security deposit (7,617) --
CASH FLOWS USED BY INVESTING ACTIVITIES (1,140,053) --
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CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 4,517,875 --
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CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 4,517,875 --
NET INCREASE IN CASH 423,027 --
CASH, BEGINNING OF YEAR 117,250 --
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CASH, END OF PERIOD $ 540,277 $ --
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</TABLE>
Page 5.
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SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - DESCRIPTION OF COMPANY AND NATURE OF OPERATIONS:
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 and changed its name to Sickbay.com, Inc.
("Sickbay"). 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 shareholders
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 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
19,600,000 shares of the Company representing over 95% of the
Company's Common Stock (the "Reorganization"). In addition, the
Company reserved 3,050,000 shares of the Company's common stock for
issuance to certain warrant holders. As part of the tax-free
reorganization, the board of directors of Sick-Bay approved a plan of
liquidation and dissolution. Accordingly, Sick-Bay distributed the
shares received ratably to its shareholders in exchange for and
complete cancellation and retirement of all its issued and outstanding
capital stock.
The acquisition was accounted for by the purchase method under
business combinations and treated as a reverse acquisition. Such
transaction treats the acquisition as if Sick-Bay acquired the Company
and reflects the fair market value of the Company's net assets at the
date of acquisition. In January 2000, the Company changed its name to
Sickbay.com, Inc. In July 2000, subsequent to the acquisition
described in Note 3, the Company changed its name to Sickbay Health
Media, Inc., to better represent its business model and product
offerings.
Sick-Bay was in the development stage since formation on February 24,
1999. Operations were primarily devoted to raising capital, obtaining
financing, advertising and administrative functions. Effective March
31, 2000, with the acquisition of Healthline Publishing, Inc.
("Healthline") and Health Publishing, Inc., ("HPI"), the Company is
considered an operating entity. See also Note 3.
In the opinion of management, the accompanying unaudited interim
condensed financial statements of the Company, contain all adjustments
necessary (consisting of normal recurring accruals or adjustments
only) to present fairly the Company's financial position as of
September 30, 2000 and the results of its operations for the three and
nine months ended September 30, 2000 and 1999 and its cash flows for
the nine month periods ended September 30, 2000 and 1999.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements included in its 1999 Annual
Report on Form 10-K and its March and June 2000 Quarterly Reports on
Form 10-Q, which reports are incorporated herein by reference.
Specific reference is made to these reports for a description of the
Company's securities and the notes to consolidated financial
statements.
Page 6.
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SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 2 - LOSS PER COMMON SHARE:
Loss per common share for the three and nine month periods were
calculated by dividing net loss for the period by the weighted average
number of shares outstanding for the periods ended September 30, 2000
and 1999.
NOTE 3 - BUSINESS COMBINATIONS:
On February 23, 2000, the Company acquired all of the assets of the
internet business known and operated as NetSweat.Com, ("NetSweat").
NetSweat serves as a directory of fitness, sports and nutrition sites
on the internet. The total purchase price of $130,000 was paid with
$50,000 in cash and 5,333 shares of the Company's common stock. In
addition, the Company granted the sellers the option to acquire an
aggregate of 10,000 shares which option is exercisable until August
23, 2001, subject to extension under certain circumstances.
On March 31, 2000, the Company acquired all the assets of Healthline
and HPI (see Note 1), both of which publish health related magazines.
The purchase price for both companies was $2,500,000, in which
$750,000 is to be paid in cash and $1,750,000 in common stock of the
Company. The agreement calls for 50% of the shares to be issued at
closing, 25% to be issued on the first anniversary and the remaining
25% to be issued on the second anniversary of the closing. At
September 30, 2000, the Company's obligation for the acquisition is
$875,000, which amount is payable in Company common stock.
NOTE 4 - FINANCING ARRANGEMENT:
The Company entered into agreements with an investment
banking/internet focused consulting firm to provide the Company with
financial and marketing assistance and legal and securities guidance.
The firm has also agreed to invest a minimum of $5,000,000 with the
Company for 5,000,000 shares of the Company's common stock. Through
September 30, 2000, this firm has already invested $4,345,000.
NOTE 5 - SUBSEQUENT EVENT:
On October 27, 2000, subsequent to the balance sheet date, the Company
signed a letter of intent to acquire all of the assets and assume all
of the liabilities of North Vermont 12, LLC, a company that specializes
in web and multi-media engineering. The proposed purchase price for
North Vermont 12, LLC is 500,000 shares of company common stock, valued
at $.75 per share.
Page 7.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
GENERAL:
Sickbay Health Media, Inc., is a leading integrated health media company with
products especially designed for the Internet, publishing, syndication and
multi-media venues. Sickbay's divisions include Sickbay Net, Sickbay
Publications, Health Publishing, Sickbay Productions and Sickbay Syndications.
Each division contributes to the broad media model which permits Sickbay to be a
leading provider of original integrated health media, offering original,
authoritative and trusted health information to both consumers and businesses.
Sickbay Internet develops and manages the Company's Internet products that
include Sickbay.com-a comprehensive health portal, Healthline.com-an
authoritative professional health content site, and Netsweat.com, one of the
most popular health, fitness and nutrition destination on the Internet.
Health Publishing develops and produces nationally recognized consumer and
professional health publications including Healthline-a monthly consumer-focused
publication, Skincare Today-a professional semi-annual publication concentrating
on dermatology, beauty and anti-aging, and Allergy and Asthma-a semi-annual
publication focusing on pulmonology, cardiology and allergy.
Sickbay Productions creates, manages and produces radio, print, video and
multi-media productions. These productions include The Heart Show-a popular one
hour talk radio show, The Medicine Cabinet-a call in talk radio show,
Cosmetically Speaking, Anti-Aging and Ancient Healing Techniques, which contain
proprietary print content for magazines and newspapers, and Healthline-a
90-second, made-for-TV, news filler on various conditions, diseases and
medications.
Sickbay Syndications packages all of the Company's media products for resale and
syndication to various media and health information aggregators including
broadcast networks and print producers.
The acquisitions of Healthline and HPI contribute to the Company's strategic
initiative to deliver quality-trusted content to an offline community that
represents almost 70% of all health consumers and providers that are not on
line. During the initial period of ownership of the Healthline entities, the
Company has substantially expanded the magazine distribution and has made
arrangements to further expand distribution to include additional pharmacies and
major airlines. More recently, the Company has initiated a content resale
program that the Company believes will contribute to its diversified revenue
business formula. The Company is currently going to a subscription base for
certain of its publications. The Company also started to produce health related
media for third parties.
The Company is structuring itself as an on-line provider of multi-media health
information, while seeking 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. The Company also produces
print, broadcast and Internet media for third parties. As the Company is able to
introduce new and expanded services for both consumers and healthcare providers,
it anticipates significant growth in revenues in the near term.
This report on Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including statements
made with respect to the results of operations and businesses of the Company.
Words such as "may," "should," "believe," "anticipate," "estimate," "expect,"
"intend," "plan," and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based upon
management's current plans, expectations, estimates and assumptions and are
subject to a number of risks and uncertainties that could significantly affect
current plans, anticipated actions and the Company's financial condition and
results of operations. Factors that may cause actual results to differ
materially from those discussed in such forward-looking statements include,
among others, the following possibilities: (i) fluctuations in foreign currency
exchange rates; (ii) heightened competition, the entry of new competitors; (iii)
the inability to carry out development plans or to do so without delays; (iv)
loss of key executives; and (v) general economic and business conditions. The
Company does not intend to update these cautionary statements.
Page 8.
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RESULTS OF OPERATIONS:
Because the Company was a development stage company prior to March 31, 2000, no
comparison is provided with respect to the Company's results of operations in
the current quarter as against the corresponding period in the prior year.
During the quarter ended September 30, 2000, the Company realized revenues of in
excess of One Million Dollars ($1,004,696) for the first time. A substantial
fraction of such revenues ($750,000) were received from a single customer for
media production services. The Company incurred a loss of $331,205 (($.01) per
Share) during the quarter as against a loss of $2,202,028 (($.09) per share) for
the nine months ended September 30, 2000.
The Company is seeking to carefully conserve its cash resources. During the nine
months ended September 30, 2000, the Company's cash position increased by
$423,027 to $540,277, after cash expenditures attributable to operating
activities ($2,954,795) and investing activities ($1,140,053). The Company
received cash from the sale of Common Stock to FFH and from the exercise of
Warrants by certain Warrant Holders, net of the cash cost of redemptions of
Warrants. The exercise and redemption removed a 3,000,000 Share Warrant
overhang. The Warrants were previously exercisable at Sixty ($.60) Cents per
Share.
PLAN OF OPERATION/CAPITAL REQUIREMENTS:
The Company is currently generating revenues from advertising at its website;
from commissions earned on ad placement and on the sale of health related
products by e-Commerce, on-line providers which are accessed through the Sickbay
portal and from affiliate partner programs that entitle Sickbay to a percentage
of fees collected by visitors to its website. During the current quarter, the
Company also earned $750,000 from a single customer for media production
services. The Company's marketing and sales initiatives only commenced during
the second quarter of 2000. The Company anticipates additional revenues to be
derived from the magazine business including both off-line and on-line
advertising, subscriptions and sponsorships. The Company also expects to produce
content and media combinations for third-party usage. The Company utilizes
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. The Company
also produces multi-media for third parties.
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 total
purchase price of $130,000 was paid with $50,000 in cash and 5,333 shares of the
Company's common stock. In addition, the Company granted the sellers the option
to acquire an aggregate of 10,000 shares which option is exercisable until
August 23, 2001, subject to extension under certain circumstances.
On March 31, 2000, the Company acquired all the assets of Healthline Publishing,
Inc. ("Healthline") and Health Publishing, Inc., ("HPI"), both of which publish
health related magazines. The aggregate purchase price for both companies was
$2,500,000, in which $750,000 was paid in cash and $1,750,000 in common stock of
the Company. The agreement calls for 50% of the shares to be issued at closing,
25% to be issued on the first anniversary and the remaining 25% to be issued on
the second anniversary of the closing. At September 30, 2000, the Company's
obligation for the acquisition is at $875,000, which amount is payable in
Company common stock only.
On October 27, 2000, subsequent to the balance sheet date, the Company signed a
letter of intent to acquire all of the assets and assume all of the liabilities
of North Vermont 12, LLC, a company that specializes in web and multi-media
engineering. The proposed purchase price is 500,000 shares of company stock,
valued at $.75 per share, payable on closing.
The Company is examining other similar transactions to leverage the growth of
its revenue producing assets through the popularity of its website and
publications.
The Company has received capital infusions pursuant to agreements entered into
with First Frontier Holdings, Inc. ("FFH"), whereby FFH has committed to invest
an aggregate of $5,000,000 in exchange for 5,000,000 shares of
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Company common stock. Through September 30, 2000, FFH has invested an aggregate
of $4,345,000 of its commitment. The agreements also call for substantial
continuing services from FFH to the Company in the nature of strategic planning;
legal consultation; technical support for future acquisitions; due diligence
assistance; merger and acquisition consultation; and related matters. FFH also
has an option to acquire an additional 4,000,000 shares of Company common stock
at $4.00 per share and is also the holder of 500,000 Convertible Preferred
Shares (convertible share for share into Common Stock) acquired by it at $.50
per share prior to the combination with Xetal. FFH has recently introduced the
Company to Third Dimension Capital, Inc. Third Dimension has expressed interest
in providing additional equity capital to the Company on terms anticipated to be
acceptable to the Company.
It is anticipated that with the money provided by FFH, future commitments by
FFH, and anticipated commitments from certain additional parties as discussed
above, together with operating revenues, the Company will have adequate
resources to conduct its operations as planned for at least the next twelve
months.
Page 10.
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PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The Company has been threatened with certain claims, including claims of
former employees, against whom the Company believes it may have counterclaims.
Although the aggregate amount of such claims may be significant in relation to
the Company's current cash position, the Company does not anticipate that the
results of such matters, individually or in the aggregate, will have any
material adverse impact on the Company or its future business operations.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SICKBAY HEALTH MEDIA, INC.
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Registrant)
/s/ MARK BASILE
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Date: November 13, 2000 Mark Basile, Chairman
/s/ ALLEN MOTOLA
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Date: November 13, 2000 Dr. Allen Motola, President
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