SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SPECIAL FINANCIAL REPORT(1)
Annual Report under Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the Fiscal Year Ended September 30, 1998
Commission File Number 333-20525
SICKBAY.COM, INC. (FORMERLY KNOWN AS XETAL, INC.)
-------------------------------------------------
(Name of Small Business Issuer in its Charter)
UTAH 22-2223126
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
510 BROADHOLLOW ROAD, SUITE 300, MELVILLE, NEW YORK 11747
- --------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(516) 694-0040
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the 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 NO X (2)
------ --------
The Issuer's revenues for the fiscal year ended September 30, 1998 were
$33,171,000 and for the fiscal year ended September 30, 1997 were $23,501,000.
- ----------------
(1) Filed pursuant to Rule 15d-2 promulgated under the Securities Exchange Act
of 1934. As per Rule 15d-2, this Report contains only financial statements
for the fiscal year ended September 30, 1998 (along with appropriate
comparable financial information).
(2) See Introductory Note.
<PAGE>
Introductory Note
On November 16, 1998, a Registration Statement on Form SB-2 filed by the
Registrant, a Utah corporation now known as Sickbay.com, Inc. (the "Company"),
was declared effective by the Securities and Exchange Commission.
At the time of effectiveness, the Company was named Xetal, Inc.; references
herein to the Company prior to its reorganization, as described below, shall be
to Xetal. The Registration Statement related to a proposed underwritten public
offering of securities of Xetal, which was never effectuated. The Company has
only recently become aware that, since the Registration Statement was not
withdrawn, that it has been required to file periodic and other reports under
the Securities Exchange Act of 1934. Accordingly, this, and other filings
intended to be made concurrently with our subsequent hereto, are expected to
bring the Company current in its filing obligations.
On December 29, 1999, Xetal entered into a Reorganization Agreement (the
"Agreement") with Sick-Bay.Com, Inc., a Delaware corporation ("Sick-Bay
Delaware"). Pursuant to the Agreement, Xetal spun off its business operations to
the existing shareholder base of Xetal by means of a stock dividend of APO
Health, Inc. ("APO"), the operating subsidiary of Xetal. 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. Accordingly, the financial and other information contained in this
Special Financial Report are reflective of business operations of what is now
APO, a privately-held company. In December 1999, concurrently with the execution
of the Reorganization Agreement, the Company entered into a non-binding Letter
of Intent to acquire all of the assets and business of APO. By virtue of the
reorganization, the medical portal business of Sick-Bay Delaware became the
business of the Company, and Xetal's name was thereafter changed to Sickbay.com,
Inc.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
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 10, 2000 By: /s/ MARK BASILE
---------------------------------
Mark Basile, Chairman, Chief
Executive Officer and Secretary
(principal executive officer)
/s/ ALLEN MOTOLA
-----------------------------------------
Date: March 10, 2000 Dr. Allen Motola, President and Treasurer
(principal financial and accounting officer)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant in the capacities and on the
dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ MARK BASILE
- ------------------------ Director March 10, 2000
Mark Basile
/s/ ALLEN MOTOLA
- ------------------------ Director March 10, 2000
Dr. Allen Motola
- ------------------------ Director , 2000
Larry Goldman
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Sickbay.com, Inc. (formerly Xetal, Inc.) and Subsidiaries
We have audited the accompanying consolidated balance sheets of Sickbay.com,
Inc. (formerly Xetal, Inc.) and Subsidiaries as of September 30, 1998 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended September 30, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion of these financial statements on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sickbay.com, Inc.
(formerly Xetal, Inc.) and Subsidiaries at September 30, 1998 and the results of
their operations and their cash flows for each of the two years in the period
ended September 30, 1998 in conformity with generally accepted accounting
principles.
/s/ LINDER & LINDER
- -------------------
Linder & Linder
Certified Public Accountants
Dix Hills, New York
November 23, 1998
F-1
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998
ASSETS
1998
CURRENT ASSETS: ----------
Cash $ 25,936
Accounts receivable, less allowance for doubtful
accounts $94,400 2,601,474
Inventory 976,332
Due from officers 248,274
Deferred tax asset 23,000
Prepaid and other receivables 21,159
----------
TOTAL CURRENT ASSETS 3,896,175
----------
PROPERTY AND EQUIPMENT - at cost, less
accumulated depreciation of $82,818 79,519
----------
OTHER ASSETS:
Goodwill, less accumulated amortization of $30,424 152,915
Registration costs 49,523
Security deposits 24,957
----------
TOTAL OTHER ASSETS 227,395
----------
TOTAL ASSETS $4,203,089
==========
See independent auditors' report and notes to financial statement.
F-2
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL,INC.)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1998
CURRENT LIABILITIES: -----------
Cash overdraft $ 124,453
Line of credit - bank 385,000
Bankers acceptances 227,972
Accounts payable 1,812,997
Accrued expenses 654,897
Loans payable 450,000
Income taxes payable 6,000
----------
TOTAL CURRENT LIABILITIES 3,661,319
----------
LOANS PAYABLE - former shareholders 162,038
----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000 shares
authorized, -0- shares issued --
Common stock, $.001 par value, 20,000,000 shares
authorized, 928,263 issued in 1998 928
Additional paid-in capital 614,012
Retained earning (deficit) (235,208)
----------
TOTAL STOCKHOLDERS' EQUITY 379,732
----------
TOTAL ASSETS $4,203,089
==========
See independent auditors' report and notes to financial statement.
F-3
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Revenues $33,170,600 $23,500,981
Cost of revenues 29,987,343 21,027,226
----------- -----------
GROSS PROFIT 3,183,257 2,473,755
----------- -----------
OPERATING EXPENSES:
Selling expenses 1,335,930 1,049,201
General and administrative expenses 1,403,554 1,212,929
----------- -----------
TOTAL OPERATING EXPENSES 2,739,484 2,262,130
----------- -----------
Income from operations 443,773 211,625
OTHER EXPENSES:
Interest expense - net 162,083 227,290
----------- -----------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES 281,690 (15,665)
Provision (benefit) for income taxes (29,000) -
----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 310,690 (15,665)
Extraordinary item - forgiveness of debt; net of
taxes of $12,000 36,533 --
----------- -----------
NET INCOME (LOSS) $ 347,223 $ (15,665)
=========== ===========
Earnings per Common Share:
Income from continuing operations before
Extraordinary item $ 0.33 $ (0.02)
Extraordinary item 0.04 -
----------- -----------
NET INCOME $ 0.37 $ (0.02)
=========== ===========
</TABLE>
See independent auditors' report and notes to financial statements
F-4
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------ ------ ------- ---------
<S> <C> <C> <C> <C>
Balance, September 30, 1996 $ 728,263 $ 728 $ 589,212 $(566,766)
Issuance of stock in conjunction with
bridge loan 200,000 200 24,800 --
Net loss - 1997 -- -- -- (15,665)
--------- --------- --------- ---------
Balance, September 30, 1997 928,263 928 614,012 (582,431)
Reverse stock split (464,131) (464) 464 --
Retroactive rescinded reverse
stock split 464,132 464 (464) --
Net income - 1998 -- -- -- 347,223
--------- --------- --------- ---------
Balance, September 30, 1998 $ 928,263 $ 928 $ 614,012 $(235,208)
========= ========= ========= =========
</TABLE>
See independent auditors' report and notes to financial statements.
F-5
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 347,223 $ (15,665)
Adjustment to reconcile net loss to net cash flows
from operating activities
Depreciation 16,604 15,284
Amortization 12,223 12,123
Bad debts 36,580 16,820
Deferred taxes (23,000) --
Write-off of joint venture 23,800 3,047
Common stock issued with notes payable -- 25,000
Gain on forgiveness of debt (48,533) --
Write-off of registration costs -- --
Changes in operating assets and liabilities
(Increase) decrease in assets:
Accounts receivable (104,964) (1,387,208)
Inventories 24,887 287,059
Prepaids 43,840 23,579
Increase (decrease) in liabilities:
Accounts payable 225,833 522,573
Accrued expenses 348,113 11,041
Income taxes payable 6,000 --
--------- -----------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 908,626 (486,347)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in security deposits (20,000) --
Due from officers (150,325) (31,869)
Purchase of property and equipment -- (33,529)
Acquisition of registration costs -- (49,523)
Proceeds from joint venture -- 1,200
--------- -----------
CASH FLOWS (USED IN) INVESTING ACTIVITIES (170,325) (113,721)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 78,258 46,194
Borrowings under line of credit - net (579,292) (85,371)
Borrowings from acceptances payable - net (247,624) 350,938
Payment of note payable (1,042) (11,458)
Loans payable (15,000) 250,000
Payment loans payable - former shareholder -- (86,000)
Accrued salaries - net of cash -- 7,678
--------- -----------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (764,700) 471,981
--------- -----------
Net increase (decrease) in cash (26,399) (128,087)
CASH, BEGINNING 52,335 129,250
--------- -----------
CASH, ENDING $ 25,936 $ 1,163
========= ===========
</TABLE>
See independent auditors' report and notes to financial statements.
F-6
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997 (CONTINUED)
1998 1997
--------- ---------
SUPPLEMENTAL DISCLOSURE:
CASH PAID DURING THE YEAR FOR:
Interest $159,790 $155,405
======== ========
Taxes $ -- $ --
======== ========
See independent auditors' report and notes to financial statements.
F-7
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS
Insurance Kingdom Agency, Inc. ("IKA"), an inactive company, was
organized under the laws of the State of Utah. Effective September,
1994, IKA acquired Xetal, Inc., an operating company. Xetal, Inc.
changed its name to APO Health, Inc., ("APO Health). IKA changed its
name to Xetal, Inc., a Utah Corporation, ("Xetal" and collectively the
"Company"). APO Health is a wholesale distributor of medical supplies
and sells predominantly to medical distributors, dentists and doctors
throughout the United States. Approximately 80% of the Company's sales
are to distributors of medical supplies.
The acquisition has been accounted for by the purchase method under
business combinations and treated as a reverse acquisition. Such
transaction treats the acquisition as if APO Health acquired IKA and
reflects the fair market value of IKA's net assets on the date of
acquisition. In addition, APO Health changed its year end to September
30th.
Effective to the acquisition, previously taxed profits, amounting to
$248,038, due to the former shareholders of APO Health, and included
in retained earnings, were transferred to loans payable to former
shareholders. The loans are non-interest bearing and are without terms
for repayment. During fiscal year 1997, APO Health repaid $86,000 to
the former shareholders.
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned subsidiaries.
Intercompany transactions and balances have been eliminated in
consolidation.
B. INVENTORY
Merchandise inventory is stated at the lower of cost or market. Cost
is determined using the first-in, first-out method.
C. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided for
on the straight-line method over the estimated useful life.
D. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results may differ from those estimates.
E. INCOME TAXES
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets
and liabilities that will result in taxable or deductible amounts 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.
The Company and its subsidiaries file consolidated tax returns.
F-8
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. INTANGIBLES
Customer lists acquired were amortized over a three year period and
have been fully amortized. Registration costs and other costs related
to the offering are deferred and are offset against the proceeds
received from successful securities offerings. Registration costs and
other costs related to the offering for unsuccessful offerings are
charged as period costs. Costs associated with the companies acquired
are capitalized and included in the purchase price of such
acquisition. Costs associated with unsuccessful acquisitions are
expensed. Goodwill represents the excess of the cost of companies
acquired over the fair value of their net assets at the date of
acquisition and is being amortized on the straight-line method over 15
years.
G. EARNINGS 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.
NOTE 2. BUSINESS COMBINATIONS
A. UNIVERSAL MEDICAL DISTRIBUTORS, INC.
On March 31, 1996, XETAL acquired Universal Medical Distributors,
Inc., ("Universal"), in a business combination accounted for as a
purchase. Universal is primarily engaged in the business of
distributing veterinary supplies. The results of operations of
Universal are included in the accompanying financial statements since
the date of acquisition. The total cost of the acquisition, which
included cash of $65,000, issuance of 10,000 shares of the Company's
common stock and the assumption of the net liabilities of Universal
exceeded the fair value of the net assets of Universal by $179,339.
B. DENTAL ALTERNATIVES, INC.
During July, 1996, XETAL acquired Dental Alternatives, Inc.,
("Alternatives"), an inactive company owned by a major shareholder of
XETAL. The acquisition was accounted for in a business combination of
entities under common control which has been accounted for in a manner
similar to a pooling of interests. XETAL acquired trademarks and
marketing rights of products developed by Alternatives through the
exchange of 400,000 shares of the Company's common stock for all of
the outstanding stock of Alternatives.
F-9
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 3. LOANS PAYABLE
In conjunction with financing a private placement or public offering,
APO Health borrowed $50,000 from two individuals. Such borrowing is
non-interest bearing and will be repaid from the proceeds of the
placement or offering.
In January, 1996, Xetal issued an aggregate of $250,000 principal
amount of promissory notes to certain investors to provide interim
working capital to the Company. The notes bear interest at 10% per
annum and are due and payable, upon the earlier of (i) December 15,
1996 or (ii) the consummation of an offering.
In connection with the financing, Xetal retained the services of an
underwriter to obtain additional financing through a public offering.
Effective May 10, 1996, Xetal and the underwriter terminated their
agreement. As part of the termination agreement, the underwriter was
issued warrants to purchase an aggregate of 12,500 shares of common
stock at a price of $7.50 exercisable through January 3, 2003.
In June, 1996, Xetal retained the services of a new underwriter to
facilitate the public offering to provide the Company with working
capital.
During the period from November, 1997 through January 1998, Xetal
issued an aggregate of $250,000 principal amount of 8% promissory
notes to certain investors to provide the Company with interim working
capital. The promissory notes mature upon the earlier of (i) 12 months
from the date of issuance or (ii) the consummation of an offering.
Interest payable monthly commences one month from the date of the
issuance of the notes. In addition, the investors received 20,000
shares of common stock and a warrant for each $25,000 unit acquired.
Each warrant entitles the investor to purchase up to 250,000 shares of
the Xetal's common stock at a price equal to 100% of the public
offering price or $5.00 per share if the offering is not consummated.
Interest on the notes has been accrued since inception. During fiscal
1998, the Company settled its indebtedness with one investor. The
transaction resulted in an extraordinary gain of $48,533, net of
income taxes of $12,000.
NOTE 4. CREDIT FACILITY
In September 1999, APO Health renewed 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 own 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. At such
time, the bank will review the credit basis of APO Health to determine
whether to extend the facility. The facility is secured by
substantially all of the Company's assets and personally guaranteed by
its stockholders. In addition, the obligation due to the former
shareholders in the amount of $162,038 is subordinated to the bank's
borrowing. (See note 1)
F-10
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 5. 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 and direct write-off method for tax purposes.
The components of deferred taxes as of September 31, 1998 are as
follows:
1998
--------
Allowance for doubtful accounts $23,000
Depreciation --
-------
NET $23,000
=======
For the years ended September 30, 1998 and 1997 the provisions for
income taxes (benefits) consist of the following:
1998 1997
--------- -------
Current $ 151,000 $ --
Utilization of net operating loss carryover (157,000) --
Deferred (23,000) --
--------- -------
PROVISION (BENEFIT) FOR
INCOME TAXES $ (29,000) $ --
========= =======
A reconciliation of income tax at the statutory rate to the Company's
effective rate is as follows:
1998 1997
---------- --------
Computed at the expected statutory rate $ 123,000 $ --
Benefit of net operating loss carryover (157,000) --
State income tax - net of federal tax benefit 40,000 --
--------- --------
INCOME TAX EXPENCE--
EFFECTIVE RATE $ 6,000 $ --
========= ========
F-11
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 6. COMMON STOCK
In fiscal 1998, the Board of Directors of the Company authorized
a 1-for-2 stock split. A certificate of a amendment effectively
such reverse stock split was not filed until December 10, 1999,
and on December 22, 1999, a further certificate of amendment was
filed retroactively rescinding the reverse stock split.
During fiscal 1997, the Company issued 200,000 shares of its
common stock to certain investors, pursuant to the bridge
financing. (See Note 3)
NOTE 7. COMMITMENTS AND CONTINGENCY
A. DEFINED CONTINGENCY PENSION PLAN
January, 1993, APO Health established a profit sharing plan. All
full time employees, as defined in the plan, are eligible.
Contributions to the plan are discretionary. Pension expense for
the years ended September 30, 1998 and 1997 were $-0- and $-0-,
respectively.
B. LEASES
Effective November 15, 1994, an affiliated company, whose
shareholders are the officers of the Company, entered into a 5
year agreement to lease a 9800 square foot facility to house its
operations. Under the terms of the lease, the Company will pay
for all real estate tax increases and any repairs to the
property. The Company has a month to month lease with similar
terms with this affiliate. During 1999, the Company renewed the
lease for which it will expire September 30, 2004.
In October, 1999, APO Health leased a sales office from its major
shareholder. The terms of the lease provide for an annual rental
of $9,000 and the lease term expires September 30, 2001
Future minimum rental payments are as follows:
Year Ending
September 30,
-------------
1999 $51,500
2000 62,900
2001 65,300
2002 58,800
2003 61,250
2004 63,700
For the years ended September 30, 1999, 1998 and 1997, rent
expense amounted to $53,752, $56,362 and $50,212, respectively.
F-12
<PAGE>
SICKBAY.COM, INC. AND SUBSIDIARIES
(FORMERLY XETAL, INC.)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 7. COMMITMENTS AND CONTINGENCY (CONTINUED)
C. CONCENTRATION OF CREDIT RISK
APO Health maintains bank accounts in several financial
institutions. Each financial institution is insured up to
$100,000 by the Federal Depository Insurance Corporation.
D. LETTERS OF CREDIT
The Company has letters of credit outstanding of $275,323 for
purchases to be delivered after September 30, 1999.
E. EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with its
principal officers through December 31, 1998. The agreements will
automatically be renewed and extended for up to five consecutive
one year periods. The terms provide for a minimum annual salary
of $125,000 with adjustments for cost-of-living changes and
incentives based on gross revenues and development of new
products. In addition, the agreement provides for warrants to be
issued based on the incentives. At September 30, 1998 and 1997,
the officers waived certain terms of their agreement for
additional compensation based on salary and incentives.
NOTE 8. EARNINGS PER SHARE
The following data show the amounts used in computing earnings
per share and the effect on income and the weighted average
number of shares of dilutive potential common stock. The number
of shares used in the calculation reflects the elimination of the
previously authorized 1:2 reserve stock split approved by the
Board of Directors on December 23, 1999.
September 30,
-----------------------
1998 1997
-------- --------
Earnings
Income applicable to common stock $347,223 $(15,665)
======== ========
Shares
Weighted average number of common
shares outstanding 928,263 913,630
======== ========
Earnings per Share
Basic and fully dilutive $ 0.37 $ (0.02)
======== ========
F-13
<PAGE>
PART III
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE.
(a) The following documents are filed as part of this report.
PAGE
----
1. Financial statements:
Report of Independent Certified Public Accountants F-1
Balance Sheets as of September 30, 1999 and 1998 F-2--F-3
Statements of Operations for the years ended
September 30, 1999, 1998 and 1997. F-4
Statements of Changes in Stockholders' Equity
for the years ended September 30, 1999, 1998 and 1997. F-5
Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997. F-6--F-7
Notes to Consolidated Financial Statement F-8--F-13
