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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 June 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 AUGUST 4, 2000
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Common Stock, par value $0.001 per share 25,173,979 Shares
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Page 1.
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- INDEX -
Page(s)
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PART I. Financial Information:
ITEM 1. Consolidated Financial Statements
Condensed Balance Sheets - June 30, 2000 (Unaudited)
and December 31, 1999 3.
Condensed Statements of Operations (Unaudited) -
Three and Six Months Ended June 30, 2000 and 1999 4.
Condensed Statements of Cash Flows (Unaudited) -
Six Months Ended June 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 10.
SIGNATURES 11.
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
- ASSETS -
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
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(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,144,827 $ 117,250
Accounts receivable 265,513 --
Loans to stockholders -- 9,223
Prepaid expenses 116,816 8,252
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TOTAL CURRENT ASSETS 2,527,156 134,725
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PROPERTY AND EQUIPMENT - NET 181,405 36,547
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OTHER ASSETS:
Intangible assets - net 2,530,515 233,728
Security deposit 23,778 16,161
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2,554,293 249,889
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$ 5,262,854 $ 421,161
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-LIABILITIES AND STOCKHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 404,215 $ 34,330
Due to seller 812,500 --
TOTAL CURRENT LIABILITIES 1,216,715 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 $.001; authorized 50,000,000 shares
23,946,729 and 20,498,263 outstanding in 2000 and 1999,
Respectively 23,947 20,498
Additional paid-in capital 5,790,209 701,207
Accumulated deficit (2,210,517) (339,694)
Treasury stock, par value, 180,000 shares -- (180)
3,608,639 386,831
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$ 5,262,854 $ 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 Six Months Ended
June 30, June 30,
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2000 1999 2000 1999
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
REVENUES $ 723,167 $ -- $ 754,167 $ --
OPERATING EXPENSES:
Production, content and product development 70,663 -- 111,521 --
Sales and marketing 1,313,834 -- 1,523,120 --
General and administrative 695,507 -- 990,349 --
------------ ---------- ------------ ----------
TOTAL OPERATING EXPENSES 2,080,004 -- 2,624,990 --
------------ ---------- ------------ ----------
NET LOSS $ (1,356,837) $ -- $ (1,870,823) $ --
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EARNINGS (LOSS) PER COMMON SHARE:
Basic and fully diluted $ (.06) $ -- $ (.08) $ --
============ ========== ============ ==========
Weighted average shares outstanding 23,352,966 20,498,263 21,925,615 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>
Six Months Ended
June 30,
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2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,870,823) $ --
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation and amortization 72,119 --
Changes in operating assets and liabilities:
Accounts receivable (265,513) --
Prepaid expenses (108,564) --
Accounts payable and accrued expenses 369,885 --
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CASH FLOWS USED BY OPERATING ACTIVITIES (1,802,896) --
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (153,175) --
Acquisition of intangibles (425,000) --
Receipt of stockholders' loans 9,223 --
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Payment of security deposit (7,617) --
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CASH FLOWS USED BY INVESTING ACTIVITIES (576,569) --
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CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 4,407,042 --
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CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 4,407,042 --
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NET INCREASE IN CASH 2,027,577 --
CASH, BEGINNING OF YEAR 117,250 --
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CASH, END OF PERIOD $ 2,144,827 $ --
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</TABLE>
PaGE 5.
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SICKBAY HEALTH MEDIA INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 96.4% 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 June
30, 2000 and the results of its operations for the three and six
months ended June 30, 2000 and 1999 and its cash flows for the six
month periods ended June 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 2000 Quarterly Report 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
JUNE 30, 2000
(Unaudited)
NOTE 2 -- LOSS PER COMMON SHARE:
Loss per common share for the three and six month periods were
calculated by dividing net loss for the period by the weighted average
number of shares outstanding for the periods ended June 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 June 30,
2000, the Company's obligation for the Healthline and HPI acquisitions
was One Million Two Hundred Fifty Thousand ($1,250,000) Dollars of
which Three Hundred Seventy Five Thousand ($375,000) Dollars was paid
in cash in July, 2000, and the balance Eight Hundred Seventy Five
Thousand ($875,000) Dollars is payable in Shares to be issued one half
(1/2) March 31, 2001, and one half (1/2) on March 31, 2001.
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
June 30, 2000, this firm had invested $4,345,000 (which amount
includes $2,025,000 received by the Company as good funds on July 5,
2000). The Company entered into an Amending Agreement with this firm
on July 14, 2000.
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 Publishing,
Sickbay Productions and Sickbay Syndications. Each division contributes
substantially to the broad media model that makes Sickbay a leader of original
integrated health media which offers original, authoritative and trusted health
information to both consumers and businesses. Sickbay currently employs 22
people.
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-the Internet's
most popular health, fitness and nutrition destination.
Sickbay Publishing develops and produces nationally recognized consumer and
professional health publications including Sickbay Today-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, 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 Healthbeat(R)-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.
Prior to March 31, 2000, the Company was a development stage Company, since its
formation on February 24, 1999 and focused its activities on raising capital,
obtaining financing, and establishing affiliations and other business
relationships designed and intended to facilitate the Company's planned business
activities. Effective March 31, 2000, with the acquisition of Healthline
Publishing, Inc. ("Healthline") and Health Publishing, Inc. ("HPI"), the Company
is considered an operating entity.
The Company's acquisition of Netsweat.com contributes to the expanded offerings
of the Company's website and includes additional fitness and nutrition
information. The Netsweat.com acquisition accounts for strategic key word
placement in the most popular search engines. These key words drive a
significant amount of traffic to the Company's website.
The acquisitions of Healthline and HPI contribute to the Company's strategic
initiative to deliver quality-trusted content to an offline community that
represents a substantial portion of all health consumers seeking health
information. 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 structuring itself as an on-line and off-line provider of health
information, and has positioned 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. As the Company introduces new
services for both consumers and healthcare providers, it anticipates significant
and imminent growth in revenues.
The Company is a successor to Xetal Inc. ("Xetal"). As a consequence of a tax
reorganization consummated on December 29, 1999. Prior to, and in connection
with, such transaction, Xetal spun off its operating subsidiaries to the
shareholders of Xetal prior to the acquisition of all of the assets, business,
and properties of the Company.
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This report on Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including statements
made with respect to the results of operations and businesses of the Company.
Words such as "may," "should," "believe," "anticipate," "estimate," "expect,"
"intend," "plan," and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based upon
management's current plans, expectations, estimates and assumptions and are
subject to a number of risks and uncertainties that could significantly affect
current plans, anticipated actions and the Company's financial condition and
results of operations. Factors that may cause actual results to differ
materially from those discussed in such forward-looking statements include,
among others, the following possibilities: (i) fluctuations in foreign currency
exchange rates; (ii) heightened competition, the entry of new competitors; (iii)
the inability to carry out development plans or to do so without delays; (iv)
loss of key executives; and (v) general economic and business conditions. The
Company does not intend to update these cautionary statements.
Plan of Operation/Capital Requirements:
The Company is currently generating revenues from advertising at its website;
from commissions earned 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. The Company's marketing and sales
initiatives only commenced during the first 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 revenues from prepackage content and advertising
combinations for third-party usage. The Company intends 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.
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 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 June 30, 2000, the Company's obligation
for the acquisition is $1,250,000, of which $375,000 was paid in cash in July
2000.
The Company is examining other similar transactions to leverage the growth of
its revenue producing assets through the popularity of its website.
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 Company common
stock. To date, 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.
It is anticipated that with the money provided and promised by FFH, the Company
will have adequate resources to conduct its operations as planned for at least
the next twelve months.
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PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
None
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
During the quarter ended June 30, 2000, the Company filed no
reports on Form 8-K. On July 25, 2000, the Company filed a
report on Form 8-K relating to (i) a change of auditors; and
(ii) an Amending Agreement relating to the investment by FFH
in the Common Stock of the Company.
Page 10.
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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: August 14, 2000 Mark Basile, Chairman
/s/ ALLEN MOTOLA
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Date: August 14, 2000 Dr. Allen Motola, President
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